BILL NUMBER: AB 35	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Chiu

                        DECEMBER 1, 2014

   An act to add Sections 17059 and 23610.6 to the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 35, as introduced, Chiu. Taxation: income taxes: very-low and
extremely low-income housing credit.
   The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including a
state low-income housing tax credit, administered by the California
Tax Credit Allocation Committee, which provides procedures and
requirements for the allocation of state tax credit amounts among
low-income housing projects based on federal law, which requires a 30
% present value credit for existing buildings, with the credit
claimed over a 10-year period, as modified. Existing law generally
requires the project's housing sponsor to have been allocated a
credit for federal income tax purposes, as specified.
   This bill would allow a very low-income and extremely low-income
housing credit against those taxes for each taxable year on or after
January 1, 2015, in an amount computed and allowed in accordance with
a specified section of the Internal Revenue Code, as provided. The
bill would specify that a project is not required to have been
previously or currently allocated a credit for federal or state
income tax purposes, as specified. The bill would make the aggregate
housing credit dollar amount $40,000,000 to be allocated annually by
the committee on a first-come-first-served basis subject to certain
requirements being met, including that the project will be used
exclusively for the restructuring, including the acquisition and
substantial rehabilitation, of buildings at least 20 years old that
currently serve very low-income, extremely low-income, single room
occupancy (SRO) or rural area residents. The bill would authorize the
committee and the Franchise Tax Board to adopt regulations to carry
out the purposes of this section. The bill would make findings and
declarations in this regard.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  (a) The Legislature finds and declares all of the
following:
   (1) The preservation and rehabilitation of existing affordable
housing stock initially created through public investment is a
critical strategy to address the affordable housing crisis in our
state.
   (2) It is particularly important that older single room occupancy
(SRO), special needs, and other buildings with deeply income-targeted
rents be preserved and refurbished for low-income tenants and the
public investment protected.
   (3) However, currently, most properties that are being
recapitalized and resyndicated through the California Tax Credit
Allocation Committee system for substantial rehabilitation tend to
have higher rents and shallower income targeting because they
appraise well and generate significant acquisition credits.
   (4) Unfortunately, the deeply targeted mostly SRO, special needs,
and rural projects that very much need to capitalize are largely shut
out of this opportunity precisely because they have agreed to very
deep income-targeting which excludes them from acquisition credits.
   (b) Therefore, it is the intent of the Legislature to create a new
source of investment and a pipeline for these older but very
valuable public assets, which are often in the greatest need of
rehabilitation.
  SEC. 2.  Section 17059 is added to the Revenue and Taxation Code,
to read:
   17059.  (a) For each taxable year beginning on or after January 1,
2015, there shall be allowed as a credit against the "net tax," as
defined in Section 17039, a very low-income and extremely low-income
housing credit in an amount computed in accordance with Section 42 of
the Internal Revenue Code, except as otherwise provided in this
section.
   (b) For the purposes of this section, the following definitions
shall apply:
   (1) "Taxpayer" means the sole owner in the case of an individual,
the partners in the case of a partnership, and the shareholders in
the case of an "S" corporation.
   (2) "Housing sponsor" means the sole owner in the case of an
individual, the partnership in the case of a partnership, and the "S"
corporation in the case of an "S" corporation.
   (3) "Very low-income" has the same meaning as in Section 50053 of
the Health and Safety Code.
   (4) "Extremely low-income" has the same meaning as in Section
50053 of the Health and Safety Code.
   (5) "SRO" means single room occupancy.
   (6) "Rural area resident" means a resident of a rural area as
defined in Section 50199.21 of the Health and Safety Code.
   (7) "Committee" means the California Tax Credit Allocation
Committee.
   (c) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the committee, or any successor thereof, based
on a project's need for the credit in accordance with paragraph (2)
of subdivision (e).
   (A) The very low-income or extremely low-income housing project
shall be located in California.
   (B) Nothing in this section shall be construed to require a
housing sponsor to have been previously or currently allocated a
credit for federal income tax purposes under Section 42 of the
Internal Revenue Code or for state income tax purposes under Section
17058.
   (2) (A) The committee shall certify to the housing sponsor the
amount of tax credit under this section allocated to the housing
sponsor for each credit period.
   (B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the committee certification
to the taxpayer.
   (C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
   (d) The aggregate housing credit dollar amount that may be
allocated annually by the committee pursuant to this section and
Section 23610.6 shall be an amount equal to the sum of all of the
following:
   (1) Forty million dollars ($40,000,000).
   (2) The unused allocation credit amount, if any, for the preceding
fiscal year.
   (3) The amount of housing credits returned in the calendar year.
   (e) (1) Subject to subdivision (c), the committee shall allocate
the housing credit on a regular basis consisting of two or more
periods in each calendar year during which applications may be filed
and considered. The committee shall establish application filing
deadlines, the maximum amounts of state very low-income and extremely
low-income housing tax credits that may be allocated by the
committee in that period, and the approximate date on which
allocations shall be made. If the enactment of federal or state law,
the adoption of rules or regulations, or other similar events prevent
the use of two allocation periods, the committee may reduce the
number of periods and adjust the filing deadlines, maximum percentage
of credit allocated, and the allocation dates.
   (2) The committee shall, on a first-come-first-served basis,
allocate the very low-income and extremely low-income housing credit
in accordance with the following provisions:
   (A) All housing sponsors shall demonstrate at the time the
application is filed with the committee that the project meets the
following threshold requirements:
   (B) The housing sponsor shall demonstrate that the project will be
used exclusively for the restructuring, including the acquisition
and substantial rehabilitation, of buildings at least 20 years old
and that currently serve very low-income, extremely low-income, SRO,
or rural area residents. No new construction shall be eligible for a
credit under this section.
   (C) The housing sponsor shall demonstrate that acquisition credits
that would be received as part of the restructuring through the
existing state credit program described in Section 17058 would be
insufficient to complete substantial rehabilitation due to a low
appraised fair market value.
   (D) The housing sponsor shall demonstrate that the project is
currently subsidized, but may or may not currently be "at risk" for
conversion to market rate.
   (E) There is no requirement that the project previously received
federal or state tax credits when originally constructed.
   (f) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding taxable years, if
necessary, until the credit is exhausted.
   (g) A deduction otherwise allowed under this part for any amount
paid or incurred by the qualified taxpayer upon which the credit is
based shall be reduced by the amount of the credit allowed by this
section.
   (h) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the qualified taxpayer.
   (i) (1) The committee and the Franchise Tax Board may adopt
regulations, rules, guidelines, or procedures necessary or
appropriate to carry out the purposes of this section.
   (2) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) shall apply to any regulation, rule, guideline, or procedure
adopted pursuant to this section.
  SEC. 3.  Section 23610.6 is added to the Revenue and Taxation Code,
to read:
   23610.6.  (a) For each taxable year beginning on or after January
1, 2015, there shall be allowed as a credit against the "tax," as
defined in Section 23036, a very low-income and extremely low-income
housing credit in an amount computed in accordance with Section 42 of
the Internal Revenue Code, except as otherwise provided in this
section.
   (b) For the purposes of this section, the following definitions
shall apply:
   (1) "Taxpayer" means the sole owner in the case of a "C"
corporation, the partners in the case of a partnership, and the
shareholders in the case of an "S" corporation.
   (2) "Housing sponsor" means the sole owner in the case of a "C"
corporation, the partnership in the case of a partnership, and the "S"
corporation in the case of an "S" corporation.
   (3) "Very low-income" has the same meaning as in Section 50053 of
the Health and Safety Code.
   (4) "Extremely low-income" has the same meaning as in Section
50053 of the Health and Safety Code.
   (5) "SRO" means single room occupancy.
   (6) "Rural area resident" means a resident of a rural area as
defined in Section 50199.21 of the Health and Safety Code.
   (7) "Committee" means the California Tax Credit Allocation
Committee.
   (c) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the committee, or any successor thereof, based
on a project's need for the credit in accordance with paragraph (2)
of subdivision (e).
   (A) The very low-income or extremely low-income housing project
shall be located in California.
   (B) Nothing in this section shall be construed to require a
housing sponsor to have been previously or currently allocated a
credit for federal income tax purposes under Section 42 of the
Internal Revenue Code or for state income tax purposes under Section
23610.5.
   (2) (A) The committee shall certify to the housing sponsor the
amount of tax credit under this section allocated to the housing
sponsor for each credit period.
   (B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the committee certification
to the taxpayer.
   (C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
   (d) (1) The aggregate housing credit dollar amount that may be
allocated annually by the committee pursuant to this section and
Section 17059 shall be an amount equal to the sum of all of the
following:
   (1) Forty million dollars ($40,000,000).
   (2) The unused allocation credit amount, if any, for the preceding
fiscal year.
   (3) The amount of housing credits returned in the calendar year.
   (e) (1) Subject to subdivision (c), the committee shall allocate
the housing credit on a regular basis consisting of two or more
periods in each calendar year during which applications may be filed
and considered. The committee shall establish application filing
deadlines, the maximum amounts of state very low-income and extremely
low-income housing tax credits that may be allocated by the
committee in that period, and the approximate date on which
allocations shall be made. If the enactment of federal or state law,
the adoption of rules or regulations, or other similar events prevent
the use of two allocation periods, the committee may reduce the
number of periods and adjust the filing deadlines, maximum percentage
of credit allocated, and the allocation dates.
   (2) The committee shall, on a first-come-first-served basis,
allocate the very low-income and extremely low-income housing credit
in accordance with the following provisions:
   (A) All housing sponsors shall demonstrate at the time the
application is filed with the committee that the project meets the
following threshold requirements:
   (B) The housing sponsor shall demonstrate that the project will be
used exclusively for the restructuring, including the acquisition
and substantial rehabilitation, of buildings at least 20 years old
and that currently serve very low-income, extremely low-income, SRO,
or rural area residents. No new construction shall be eligible for a
credit under this section.
   (C) The housing sponsor shall demonstrate that acquisition credits
that would be received as part of the restructuring through the
existing state credit program described in Section 23610.5 would be
insufficient to complete substantial rehabilitation due to a low
appraised fair market value.
   (D) The housing sponsor shall demonstrate that the project is
currently subsidized, but may or may not currently be "at risk" for
conversion to market rate.
   (E) There is no requirement that the project previously received
federal or state tax credits when originally constructed.
   (f) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as of the last
day of the taxable year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section.
   (2) The election provided in paragraph (1):
   (A) May be based on any method selected by the corporation that
originally receives the credit.
   (B) Shall be irrevocable for the taxable year the credit is
allowed, once made.
   (C) May be changed for any subsequent taxable year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
   (g) In the case where the credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding taxable years, if necessary,
until the credit is exhausted.
   (h) A deduction otherwise allowed under this part for any amount
paid or incurred by the qualified taxpayer upon which the credit is
based shall be reduced by the amount of the credit allowed by this
section.
   (i) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the qualified taxpayer.
   (j) (1) The committee and the Franchise Tax Board may adopt
regulations, rules, guidelines, or procedures necessary or
appropriate to carry out the purposes of this section.
   (2) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) shall apply to any regulation, rule, guideline, or procedure
adopted pursuant to this section.
  SEC. 4.  In order to comply with the requirements of Section 41 of
the Revenue and Taxation Code, it is the intent of the Legislature
that the California Tax Credit Allocation Committee provide the
information required by that section to the Legislature.
  SEC. 5.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.