Amended in Senate September 3, 2015

Amended in Assembly May 20, 2015

Amended in Assembly April 16, 2015

Amended in Assembly April 6, 2015

Amended in Assembly March 2, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 35


Introduced by Assembly Members Chiu and Atkins

(Principal coauthor: Assembly Member Wilk)

(Coauthors: Assembly Members Chau and Steinorth)

December 1, 2014


An act to amend Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 35, as amended, Chiu. Income taxes: credits: low-income housing: allocation increase.

Existing law establishes a low-income housing tax credit program pursuant to which the California Tax Credit Allocation Committee provides procedures and requirements for the allocation of state insurance, personal income, and corporation income tax credit amounts among low-income housing projects based on federal law. Existing law, in modified conformity to federal income tax law, allows the credit based upon the applicable percentage, as defined, of the qualified basis of each qualified low-income building. Existing law limits the total annual amount of the credit that the committee may allocate to $70 million per year, as specified.

This bill, for calendar years beginningbegin insert inend insert 2016, would increase the aggregate housing credit dollar amount that may be allocated among low-income housing projects by $300,000,000, as specified. The bill, under the insurance taxation law, the Personal Income Tax Law, and the Corporation Tax Law, would modify the definition of applicable percentage relating to qualified low-income buildings that meet specified criteria.begin insert The bill would require the Treasurer to submit a report to the Legislature on or before January 1, 2020, regarding the increase in use, if any, of the credit on and after the effective date of this bill.end insert

begin insert

This bill would incorporate additional changes to Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code proposed by SB 377 that would become operative if this bill and SB 377 are chaptered and this bill is chaptered last.

end insert

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:

P2    1

SECTION 1.  

Section 12206 of the Revenue and Taxation Code
2 is amended to read:

3

12206.  

(a) (1) There shall be allowed as a credit against the
4“tax,” as described by Section 12201, a state low-income housing
5tax credit in an amount equal to the amount determined in
6subdivision (c), computed in accordance with Section 42 of the
7Internal Revenue Code except as otherwise provided in this section.

8(2) “Taxpayer,” for purposes of this section, means the sole
9owner in the case of a “C” corporation, the partners in the case of
10a partnership, members in the case of a limited liability company,
11and the shareholders in the case of an “S” corporation.

12(3) “Housing sponsor,” for purposes of this section, means the
13sole owner in the case of a “C” corporation, the partnership in the
14case of a partnership, the limited liability company in the case of
15a limited liability company, and the “S” corporation in the case of
16an “S” corporation.

17(4) “Extremely low-income” has the same meaning as in Section
1850053 of the Health and Safety Code.

P3    1(5) “Very low-income” has the same meaning as in Section
250053 of the Health and Safety Code.

3(b) (1) The amount of the credit allocated to any housing
4sponsor shall be authorized by the California Tax Credit Allocation
5Committee, or any successor thereof, based on a project’s need
6for the credit for economic feasibility in accordance with the
7requirements of this section.

8(A) Except for projects to provide farmworker housing, as
9defined in subdivision (h) of Section 50199.7 of the Health and
10Safety Code, that are allocated credits solely under the set-aside
11described in subdivision (c) of Section 50199.20 of the Health and
12Safety Code, the low-income housing project shall be located in
13California and shall meet either of the following requirements:

14(i) The project’s housing sponsor has been allocated by the
15California Tax Credit Allocation Committee a credit for federal
16income tax purposes under Section 42 of the Internal Revenue
17 Code.

18(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
19Internal Revenue Code.

20(B) The California Tax Credit Allocation Committee shall not
21require fees for the credit under this section in addition to those
22fees required for applications for the tax credit pursuant to Section
2342 of the Internal Revenue Code. The committee may require a
24fee if the application for the credit under this section is submitted
25in a calendar year after the year the application is submitted for
26the federal tax credit.

27(C) (i) For a project that receives a preliminary reservation of
28the state low-income housing tax credit, allowed pursuant to
29subdivision (a), on or after January 1, 2009, and before January 1,
302016, the credit shall be allocated to the partners of a partnership
31owning the project in accordance with the partnership agreement,
32regardless of how the federal low-income housing tax credit with
33respect to the project is allocated to the partners, or whether the
34allocation of the credit under the terms of the agreement has
35substantial economic effect, within the meaning of Section 704(b)
36of the Internal Revenue Code.

37(ii) This subparagraph shall not apply to a project that receives
38a preliminary reservation of state low-income housing tax credits
39under the set-aside described in subdivision (c) of Section 50199.20
P4    1of the Health and Safety Code unless the project also receives a
2preliminary reservation of federal low-income housing tax credits.

3(iii) This subparagraph shall cease to be operative with respect
4to any project that receives a preliminary reservation of a credit
5on or after January 1, 2016.

6(2) (A) The California Tax Credit Allocation Committee shall
7certify to the housing sponsor the amount of tax credit under this
8section allocated to the housing sponsor for each credit period.

9(B) In the case of a partnership or an “S” corporation, the
10housing sponsor shall provide a copy of the California Tax Credit
11Allocation Committee certification to the taxpayer.

12(C) The taxpayer shall attach a copy of the certification to any
13return upon which a tax credit is claimed under this section.

14(D) In the case of a failure to attach a copy of the certification
15for the year to the return in which a tax credit is claimed under this
16section, no credit under this section shall be allowed for that year
17until a copy of that certification is provided.

18(E) All elections made by the taxpayer pursuant to Section 42
19of the Internal Revenue Code shall apply to this section.

20(F) (i) The California Tax Credit Allocation Committee may
21allocate a credit under this section in exchange for a credit allocated
22pursuant to Section 42(d)(5)(B) of the Internal Revenue Code in
23amounts up to 30 percent of the eligible basis of a building if the
24credits allowed under Section 42 of the Internal Revenue Code are
25reduced by an equivalent amount.

26(ii) An equivalent amount shall be determined by the California
27Tax Credit Allocation Committee based upon the relative amount
28required to produce an equivalent state tax credit to the taxpayer.

29(c) Section 42(b) of the Internal Revenue Code shall be modified
30as follows:

31(1) In the case of any qualified low-income building that is a
32new building, as defined in Section 42 of the Internal Revenue
33Code and the regulations promulgated thereunder, and not federally
34subsidized, the term “applicable percentage” means the following:

35(A) For each of the first three years, the percentage prescribed
36by the Secretary of the Treasury for new buildings that are not
37federally subsidized for the taxable year, determined in accordance
38with the requirements of Section 42(b)(1) of the Internal Revenue
39begin delete Code in lieu of the percentage prescribed in Section 42(b)(1)(A)
40of the Internal Revenue Code.end delete
begin insert Code.end insert

P5    1(B) For the fourth year, the difference between 30 percent and
2the sum of the applicable percentages for the first three years.

3(2) In the case of any qualified low-income building that (i) is
4a new building, as defined in Section 42 of the Internal Revenue
5Code and the regulations promulgated thereunder, (ii) not located
6in designated difficult development areas (DDAs) or qualified
7census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
8Internal Revenue Code, and (iii) is federally subsidized, the term
9“applicable percentage” means for the first three years, 15 percent
10of the qualified basis of the building, and for the fourth year, 5
11percent of the qualified basis of the building.

12(3) In the case of any qualified low-income building that is (i)
13an existing building, as defined in Section 42 of the Internal
14Revenue Code and the regulations promulgated thereunder, (ii)
15not located in designated difficult development areas (DDAs) or
16qualified census tracts (QCTs), as defined in Section 42(d)(5)(B)
17of the Internal Revenue Code, and (iii) is federally subsidized, the
18term applicable percentage means the following:

19(A) For each of the first three years, the percentage prescribed
20by the Secretary of the Treasury for new buildings that are federally
21subsidized for the taxable year.

22(B) For the fourth year, the difference between 13 percent and
23the sum of the applicable percentages for the first three years.

24(4) In the case of any qualified low-income building that is (i)
25a new or an existing building, (ii) located in designated difficult
26development areas (DDAs) or qualified census tracts (QCTs) as
27defined in Section 42(d)(5)(B) of the Internal Revenue Code, and
28(iii) federally subsidized, the California Tax Credit Allocation
29Committee shall reduce the amount of California credit to be
30allocated under paragraph (2) and (3) by taking into account the
31increased federal credit received due to the basis boost provided
32under Section 42(d)(5)(B) of the Internal Revenue Code.

33(5) In the case of any qualified low-income building that meets
34all of the requirements of subparagraphs (A) through (D), inclusive,
35the term “applicable percentage” means 30 percent for each of the
36first three years and 5 percent for the fourth year. A qualified
37low-income building receiving an allocation under this paragraph
38is ineligible to also receive an allocation under paragraph (3).

39(A) The qualified low-income building is at least 15 years old.

P6    1(B) The qualified low-income building is serving households
2of very low-income or extremely low-income such that the average
3maximum household income as restricted, pursuant to an existing
4regulatory agreement with a federal, state, county, local, or other
5governmental agency, is not more than 45 percent of the area
6median gross income, as determined under Section 42 of the
7Internal Revenue Code, adjusted by household size, and a tax credit
8regulatory agreement is entered into for a period of not less than
955 years restricting the average targeted household income to no
10more than 45 percent of the area median income.

11(C) The qualified low-income building would have insufficient
12credits under paragraphs (2) and (3) to complete substantial
13rehabilitation due to a low appraised value.

14(D) The qualified low-income building will complete the
15substantial rehabilitation in connection with the credit allocation
16herein.

17(d) The term “qualified low-income housing project” as defined
18in Section 42(c)(2) of the Internal Revenue Code is modified by
19adding the following requirements:

20(1) The taxpayer shall be entitled to receive a cash distribution
21from the operations of the project, after funding required reserves,
22that, at the election of the taxpayer, is equal to:

23(A) An amount not to exceed 8 percent of the lesser of:

24(i) The owner equity that shall include the amount of the capital
25contributions actually paid to the housing sponsor and shall not
26include any amounts until they are paid on an investor note.

27(ii) Twenty percent of the adjusted basis of the building as of
28the close of the first taxable year of the credit period.

29(B) The amount of the cashflow from those units in the building
30that are not low-income units. For purposes of computing cashflow
31under this subparagraph, operating costs shall be allocated to the
32low-income units using the “floor space fraction,” as defined in
33Section 42 of the Internal Revenue Code.

34(C) Any amount allowed to be distributed under subparagraph
35(A) that is not available for distribution during the first five years
36of the compliance period may be accumulated and distributed any
37time during the first 15 years of the compliance period but not
38thereafter.

P7    1(2) The limitation on return shall apply in the aggregate to the
2partners if the housing sponsor is a partnership and in the aggregate
3to the shareholders if the housing sponsor is an “S” corporation.

4(3) The housing sponsor shall apply any cash available for
5distribution in excess of the amount eligible to be distributed under
6paragraph (1) to reduce the rent on rent-restricted units or to
7increase the number of rent-restricted units subject to the tests of
8Section 42(g)(1) of the Internal Revenue Code.

9(e) The provisions of Section 42(f) of the Internal Revenue Code
10shall be modified as follows:

11(1) The term “credit period” as defined in Section 42(f)(1) of
12the Internal Revenue Code is modified by substituting “four taxable
13years” for “10 taxable years.”

14(2) The special rule for the first taxable year of the credit period
15under Section 42(f)(2) of the Internal Revenue Code shall not apply
16to the tax credit under this section.

17(3) Section 42(f)(3) of the Internal Revenue Code is modified
18to read:

19If, as of the close of any taxable year in the compliance period,
20after the first year of the credit period, the qualified basis of any
21building exceeds the qualified basis of that building as of the close
22of the first year of the credit period, the housing sponsor, to the
23extent of its tax credit allocation, shall be eligible for a credit on
24the excess in an amount equal to the applicable percentage
25determined pursuant to subdivision (c) for the four-year period
26beginning with the taxable year in which the increase in qualified
27basis occurs.

28(f) The provisions of Section 42(h) of the Internal Revenue
29 Code shall be modified as follows:

30(1) Section 42(h)(2) of the Internal Revenue Code shall not be
31applicable and instead the following provisions shall be applicable:

32The total amount for the four-year credit period of the housing
33credit dollars allocated in a calendar year to any building shall
34reduce the aggregate housing credit dollar amount of the California
35Tax Credit Allocation Committee for the calendar year in which
36the allocation is made.

37(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
38(7), and (8) of Section 42(h) of the Internal Revenue Code shall
39not be applicable.

P8    1(g) The aggregate housing credit dollar amount that may be
2allocated annually by the California Tax Credit Allocation
3Committee pursuant to this section, Section 17058, and Section
423610.5 shall be an amount equal to the sum of all the following:

5(1) (A) Seventy million dollars ($70,000,000) for the 2001
6calendar year, and, for the 2002 calendar year and each calendar
7year thereafter, seventy million dollars ($70,000,000) increased
8by the percentage, if any, by which the Consumer Price Index for
9the preceding calendar year exceeds the Consumer Price Index for
10the 2001 calendar year. For the purposes of this paragraph, the
11term “Consumer Price Index” means the last Consumer Price Index
12for All Urban Consumers published by the federal Department of
13Labor.

14(B)  An additional three hundred million dollars ($300,000,000)
15for the 2016 calendar year, and, for the 2017 calendar year and
16each calendar year thereafter, three hundred million dollars
17($300,000,000) increased by the percentage, if any, by which the
18Consumer Price Index for the preceding calendar year exceeds the
19Consumer Price Index for the 2016 calendar year. For the purposes
20of this paragraph, the term “Consumer Price Index” means the last
21Consumer Price Index for All Urban Consumers published by the
22federal Department of Labor. A housing sponsor receiving an
23allocation under paragraph (1) of subdivision (c) shall not be
24eligible for receipt of the housing credit allocated from the
25increased amount under this subparagraph. A housing sponsor
26receiving an allocation under paragraph (1) of subdivision (c) shall
27remain eligible for receipt of the housing credit allocated from the
28credit ceiling amount under subparagraph (A).

29(2) The unused housing credit ceiling, if any, for the preceding
30calendar years.

31(3) The amount of housing credit ceiling returned in the calendar
32year. For purposes of this paragraph, the amount of housing credit
33dollar amount returned in the calendar year equals the housing
34credit dollar amount previously allocated to any project that does
35not become a qualified low-income housing project within the
36period required by this section or to any project with respect to
37which an allocation is canceled by mutual consent of the California
38Tax Credit Allocation Committee and the allocation recipient.

P9    1(4) Five hundred thousand dollars ($500,000) per calendar year
2for projects to provide farmworker housing, as defined in
3subdivision (h) of Section 50199.7 of the Health and Safety Code.

4(5) The amount of any unallocated or returned credits under
5former Sections 17053.14, 23608.2, and 23608.3, as those sections
6read prior to January 1, 2009, until fully exhausted for projects to
7provide farmworker housing, as defined in subdivision (h) of
8Section 50199.7 of the Health and Safety Code.

9(h) The term “compliance period” as defined in Section 42(i)(1)
10of the Internal Revenue Code is modified to mean, with respect to
11any building, the period of 30 consecutive taxable years beginning
12with the first taxable year of the credit period with respect thereto.

13(i) (1) Section 42(j) of the Internal Revenue Code shall not be
14applicable and the provisions in paragraph (2) shall be substituted
15in its place.

16(2) The requirements of this section shall be set forth in a
17regulatory agreement between the California Tax Credit Allocation
18Committee and the housing sponsor, and the regulatory agreement
19shall be subordinated, when required, to any lien or encumbrance
20of any banks or other institutional lenders to the project. The
21regulatory agreement entered into pursuant to subdivision (f) of
22Section 50199.14 of the Health and Safety Code, shall apply,
23provided that the agreement includes all of the following
24provisions:

25(A) A term not less than the compliance period.

26(B) A requirement that the agreement be recorded in the official
27records of the county in which the qualified low-income housing
28project is located.

29(C) A provision stating which state and local agencies can
30enforce the regulatory agreement in the event the housing sponsor
31fails to satisfy any of the requirements of this section.

32(D) A provision that the regulatory agreement shall be deemed
33a contract enforceable by tenants as third-party beneficiaries thereto
34and that allows individuals, whether prospective, present, or former
35occupants of the building, who meet the income limitation
36applicable to the building, the right to enforce the regulatory
37agreement in any state court.

38(E) A provision incorporating the requirements of Section 42
39of the Internal Revenue Code as modified by this section.

P10   1(F) A requirement that the housing sponsor notify the California
2Tax Credit Allocation Committee or its designee and the local
3agency that can enforce the regulatory agreement if there is a
4determination by the Internal Revenue Service that the project is
5not in compliance with Section 42(g) of the Internal Revenue Code.

6(G) A requirement that the housing sponsor, as security for the
7performance of the housing sponsor’s obligations under the
8regulatory agreement, assign the housing sponsor’s interest in rents
9that it receives from the project, provided that until there is a
10default under the regulatory agreement, the housing sponsor is
11entitled to collect and retain the rents.

12(H) The remedies available in the event of a default under the
13regulatory agreement that is not cured within a reasonable cure
14period, include, but are not limited to, allowing any of the parties
15designated to enforce the regulatory agreement to collect all rents
16with respect to the project; taking possession of the project and
17operating the project in accordance with the regulatory agreement
18until the enforcer determines the housing sponsor is in a position
19to operate the project in accordance with the regulatory agreement;
20applying to any court for specific performance; securing the
21appointment of a receiver to operate the project; or any other relief
22as may be appropriate.

23(j) (1) The committee shall allocate the housing credit on a
24regular basis consisting of two or more periods in each calendar
25year during which applications may be filed and considered. The
26committee shall establish application filing deadlines, the maximum
27percentage of federal and state low-income housing tax credit
28ceiling that may be allocated by the committee in that period, and
29the approximate date on which allocations shall be made. If the
30enactment of federal or state law, the adoption of rules or
31regulations, or other similar events prevent the use of two allocation
32periods, the committee may reduce the number of periods and
33adjust the filing deadlines, maximum percentage of credit allocated,
34and allocation dates.

35(2) The committee shall adopt a qualified allocation plan, as
36provided in Section 42(m)(1) of the Internal Revenue Code. In
37adopting this plan, the committee shall comply with the provisions
38of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
39Code, respectively.

P11   1(3) Notwithstanding Section 42(m) of the Internal Revenue
2Code the California Tax Credit Allocation Committee shall allocate
3housing credits in accordance with the qualified allocation plan
4and regulations, which shall include the following provisions:

5(A) All housing sponsors, as defined by paragraph (3) of
6subdivision (a), shall demonstrate at the time the application is
7filed with the committee that the project meets the following
8threshold requirements:

9(i) The housing sponsor shall demonstrate there is a need and
10demand for low-income housing in the community or region for
11which it is proposed.

12(ii) The project’s proposed financing, including tax credit
13proceeds, shall be sufficient to complete the project and that the
14proposed operating income shall be adequate to operate the project
15for the extended use period.

16(iii) The project shall have enforceable financing commitments,
17either construction or permanent financing, for at least 50 percent
18of the total estimated financing of the project.

19(iv) The housing sponsor shall have and maintain control of the
20site for the project.

21(v) The housing sponsor shall demonstrate that the project
22complies with all applicable local land use and zoning ordinances.

23(vi) The housing sponsor shall demonstrate that the project
24development team has the experience and the financial capacity
25to ensure project completion and operation for the extended use
26period.

27(vii) The housing sponsor shall demonstrate the amount of tax
28credit that is necessary for the financial feasibility of the project
29and its viability as a qualified low-income housing project
30throughout the extended use period, taking into account operating
31expenses, a supportable debt service, reserves, funds set aside for
32rental subsidies, and required equity, and a development fee that
33does not exceed a specified percentage of the eligible basis of the
34project prior to inclusion of the development fee in the eligible
35basis, as determined by the committee.

36(B) The committee shall give a preference to those projects
37satisfying all of the threshold requirements of subparagraph (A)
38if both of the following apply:

39(i) The project serves the lowest income tenants at rents
40affordable to those tenants.

P12   1(ii) The project is obligated to serve qualified tenants for the
2longest period.

3(C) In addition to the provisions of subparagraphs (A) and (B),
4the committee shall use the following criteria in allocating housing
5credits:

6(i) Projects serving large families in which a substantial number,
7as defined by the committee, of all residential units are low-income
8units with three or more bedrooms.

9(ii) Projects providing single-room occupancy units serving
10very low income tenants.

11(iii) (I) Existing projects that are “at risk of conversion.”

12(II) For purposes of this section, the term “at risk of conversion,”
13with respect to an existing property means a property that satisfies
14all of the following criteria:

15(ia) The property is a multifamily rental housing development
16in which at least 50 percent of the units receive governmental
17assistance pursuant to any of the following:

18(Ia) New construction, substantial rehabilitation, moderate
19rehabilitation, property disposition, and loan management set-aside
20programs, or any other program providing project-based assistance
21pursuant to Section 8 of the United States Housing Act of 1937,
22Section 1437f of Title 42 of the United States Code, as amended.

23(Ib) The Below-Market-Interest-Rate Program pursuant to
24Section 221(d)(3) of the National Housing Act, Sections
251715l(d)(3) and (5) of Title 12 of the United States Code.

26(Ic) Section 236 of the National Housing Act, Section 1715z-1
27of Title 12 of the United States Code.

28(Id) Programs for rent supplement assistance pursuant to Section
2918 101 of the Housing and Urban Development Act of 1965,
30Section 1701s of Title 12 of the United States Code, as amended.

31(Ie) Programs pursuant to Section 515 of the Housing Act of
321949, Section 1485 of Title 42 of the United States Code, as
33 amended.

34(If) The low-income housing credit program set forth in Section
3542 of the Internal Revenue Code.

36(ib) The restrictions on rent and income levels will terminate
37or the federal insured mortgage on the property is eligible for
38prepayment any time within five years before or after the date of
39application to the California Tax Credit Allocation Committee.

P13   1(ic) The entity acquiring the property enters into a regulatory
2agreement that requires the property to be operated in accordance
3with the requirements of this section for a period equal to the
4greater of 55 years or the life of the property.

5(id) The property satisfies the requirements of Section 42(e) of
6the Internal Revenue Code, regarding rehabilitation expenditures
7except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
8apply.

9(iv) Projects for which a public agency provides direct or indirect
10long-term financial support for at least 15 percent of the total
11project development costs or projects for which the owner’s equity
12constitutes at least 30 percent of the total project development
13costs.

14(v) Projects that provide tenant amenities not generally available
15to residents of low-income housing projects.

16(4) For purposes of allocating credits pursuant to this section,
17the committee shall not give preference to any project by virtue
18of the date of submission of its application except to break a tie
19when two or more of the projects have an equal rating.

20(k) Section 42(l) of the Internal Revenue Code shall be modified
21as follows:

22The term “secretary” shall be replaced by the term “California
23Franchise Tax Board.”

24(l) In the case where the credit allowed under this section
25exceeds the “tax,” the excess may be carried over to reduce the
26“tax” in the following year, and succeeding years if necessary,
27until the credit has been exhausted.

28(m) The provisions of Section 11407(a) of Public Law 101-508,
29relating to the effective date of the extension of the low-income
30housing credit, shall apply to calendar years after 1993.

31(n) The provisions of Section 11407(c) of Public Law 101-508,
32relating to election to accelerate credit, shall not apply.

33(o) This section shall remain in effect for as long as Section 42
34of the Internal Revenue Code, relating to low-income housing
35 credit, remains in effect.

36begin insert

begin insertSEC. 1.5.end insert  

end insert

begin insertSection 12206 of the end insertbegin insertRevenue and Taxation Codeend insertbegin insert is
37amended to read:end insert

38

12206.  

(a) (1) There shall be allowed as a credit against the
39begin delete “tax” (asend deletebegin insert “tax,” asend insert described by Sectionbegin delete 12201)end deletebegin insert 12201,end insert a state
40low-income housing tax credit in an amount equal to the amount
P14   1determined in subdivision (c), computed in accordance with Section
242 of the Internal Revenue Code,begin insert relating to low-income housing
3credit,end insert
except as otherwise provided in this section.

4(2) “Taxpayer,” for purposes of this section, means the sole
5owner in the case of a “C” corporation, the partners in the case of
6a partnership,begin insert members in the case of a limited liability company,end insert
7 and the shareholders in the case of an “S” corporation.

8(3) “Housing sponsor,” for purposes of this section, means the
9sole owner in the case of a “C” corporation, the partnership in the
10case of a partnership,begin insert the limited liability company in case of a
11limited liability company,end insert
and the “S” corporation in the case of
12an “S” corporation.

begin insert

13(4) “Extremely low-income” has the same meaning as in Section
1450053 of the Health and Safety Code.

end insert
begin insert

15(5) “Very low-income” has the same meaning as in Section
1650053 of the Health and Safety Code.

end insert

17(b) (1) The amount of the credit allocated to any housing
18sponsor shall be authorized by the California Tax Credit Allocation
19Committee, or any successor thereof, based on a project’s need
20for the credit for economic feasibility in accordance with the
21requirements of this section.

22(A) Except for projects to provide farmworker housing, as
23defined in subdivision (h) of Section 50199.7 of the Health and
24Safety Code, that are allocated credits solely under the set-aside
25described in subdivision (c) of Section 50199.20 of the Health and
26Safety Code, the low-income housing project shall be located in
27California and shall meet either of the following requirements:

28(i) The project’s housing sponsorbegin delete shall haveend deletebegin insert hasend insert been allocated
29by the California Tax Credit Allocation Committee a credit for
30federal income tax purposes under Section 42 of the Internal
31Revenuebegin delete Code.end deletebegin insert Code, relating to low-income housing credit.end insert

32(ii) Itbegin delete shall qualifyend deletebegin insert qualifiesend insert for a credit under Section
3342(h)(4)(B) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to special
34rule where 50 percent or more of building is financed with
35tax-exempt bonds subject to volume cap.end insert

36(B) The California Tax Credit Allocation Committee shall not
37require fees for the credit under this section in addition to those
38fees required for applications for the tax credit pursuant to Section
3942 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
40housing credit.end insert
The committee may require a fee if the application
P15   1 for the credit under this section is submitted in a calendar year
2after the year the application is submitted for the federal tax credit.

3(C) (i) For a project that receives a preliminary reservation of
4the state low-income housing tax credit, allowed pursuant to
5subdivision (a), on or after January 1, 2009,begin delete and before January 1,
62016,end delete
the credit shall be allocated to the partners of a partnership
7owning the project in accordance with the partnership agreement,
8regardless of how the federal low-income housing tax credit with
9respect to the project is allocated to the partners, or whether the
10allocation of the credit under the terms of the agreement has
11substantial economic effect, within the meaning of Section 704(b)
12of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to determination of
13distributive share.end insert

14(ii) This subparagraph shall not apply to a project that receives
15a preliminary reservation of state low-income housing tax credits
16under the set-aside described in subdivision (c) of Section 50199.20
17of the Health and Safety Code unless the project also receives a
18preliminary reservation of federal low-income housing tax credits.

begin delete

19(iii) This subparagraph shall cease to be operative with respect
20to any project that receives a preliminary reservation of a credit
21on or after January 1, 2016.

end delete

22(2) (A) The California Tax Credit Allocation Committee shall
23certify to the housing sponsor the amount of tax credit under this
24section allocated to the housing sponsor for each credit period.

25(B) In the case of a partnership or an “S” corporation, the
26housing sponsor shall provide a copy of the California Tax Credit
27Allocation Committee certification to the taxpayer.

28(C) The taxpayer shall attach a copy of the certification to any
29return upon which a tax credit is claimed under this section.

30(D) In the case of a failure to attach a copy of the certification
31for the year to the return in which a tax credit is claimed under this
32section, no credit under this section shall be allowed for that year
33until a copy of that certification is provided.

34(E) All elections made by the taxpayer pursuant to Section 42
35of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
36credit,end insert
shall apply to this section.

begin delete

37(F) (i) Except as described in clause (ii), for buildings located
38in designated difficult development areas (DDAs) or qualified
39census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
40Internal Revenue Code, credits may be allocated under this section
P16   1in the amounts prescribed in subdivision (c), provided that the
2amount of credit allocated under Section 42 of the Internal Revenue
3Code is computed on 100 percent of the qualified basis of the
4building.

5(ii) Notwithstanding clause (i), the California Tax Credit
6Allocation Committee may allocate the credit for buildings located
7in DDAs or QCTs that are restricted to having 50 percent of its
8occupants be special needs households, as defined in the California
9Code of Regulations by the California Tax Credit Allocation
10Committee, even if the taxpayer receives federal credits pursuant
11to Section 42(d)(5)(B) of the Internal Revenue Code, provided
12that the credit allowed under this section shall not exceed 30
13percent of the eligible basis of the building.

end delete
begin delete

14(G)

end delete

15begin insert(F)end insert (i) The California Tax Credit Allocation Committee may
16allocate a credit under this section in exchange for a credit allocated
17pursuant to Section 42(d)(5)(B) of the Internal Revenuebegin delete Codeend delete
18begin insert Code, relating to increase in credit for buildings in high-cost areas,end insert
19 in amounts up to 30 percent of the eligible basis of a building if
20the credits allowed under Section 42 of the Internal Revenuebegin delete Codeend delete
21begin insert Code, relating to low-income housing credit,end insert are reduced by an
22equivalent amount.

23(ii) An equivalent amount shall be determined by the California
24Tax Credit Allocation Committee based upon the relative amount
25required to produce an equivalent state tax credit to the taxpayer.

26(c) Section 42(b) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
27to applicable percentage,end insert
shall be modified as follows:

28(1) In the case of any qualified low-income building thatbegin delete receives
29an allocation after 1989 and is a new buildingend delete
begin insert is a new building,
30as defined in Section 42 of the Internal Revenue Code and the
31regulations promulgated thereunder, andend insert
not federally subsidized,
32the term “applicable percentage” means the following:

33(A) For each of the first three years, the percentage prescribed
34by the Secretary of the Treasury for new buildings that are not
35federally subsidized for the taxable year, determined in accordance
36with the requirements of Sectionbegin delete 42(b)(2)end deletebegin insert 42(b)(1)end insert of the Internal
37Revenue begin delete Code, in lieu of the percentage prescribed in Section
3842(b)(1)(A) of the Internal Revenue Code.end delete
begin insert Code. end insert

39(B) For the fourth year, the difference between 30 percent and
40the sum of the applicable percentages for the first three years.

P17   1(2) In the case of any qualified low-income building thatbegin delete receives
2an allocation after 1989 and that is a new building that is federally
3subsidized or that is an existing building that is “at risk of
4conversion,” the term “applicable percentage” means the following:end delete

5begin insert (i)end insertbegin insert is a new building, as defined in Section 42 of the Internal
6Revenue Code and the regulations promulgated thereunder, (ii)
7not located in designated difficult development areas (DDAs) or
8qualified census tracts (QCTs), as defined in Section 42(d)(5)(B)
9of the Internal Revenue Code, and (iii) is federally subsidized, the
10term “applicable percentage” means for the first three years, 15
11percent of the qualified basis of the building, and for the fourth
12year, 5 percent of the qualified basis of the building.end insert

begin insert

13(3) In the case of any qualified low-income building that is (i)
14an existing building, as defined in Section 42 of the Internal
15Revenue Code and the regulations promulgated thereunder, (ii)
16not located in designated difficult development areas (DDAs) or
17qualified census tracts (QCTs), as defined in Section 42(d)(5)(B)
18of the Internal Revenue Code, and (iii) is federally subsidized, the
19term applicable percentage means the following:

end insert

20(A) For each of the first three years, the percentage prescribed
21by the Secretary of the Treasury for new buildings that are federally
22subsidized for the taxable year.

23(B) For the fourth year, the difference between 13 percent and
24the sum of the applicable percentages for the first three years.

begin delete

25(3) For purposes of this section, the term “at risk of conversion,”
26with respect to an existing property means a property that satisfies
27all of the following criteria:

28(A) The property is a multifamily rental housing development
29in which at least 50 percent of the units receive governmental
30assistance pursuant to any of the following:

31(i) New construction, substantial rehabilitation, moderate
32rehabilitation, property disposition, and loan management set-aside
33programs, or any other program providing project-based assistance
34pursuant to Section 8 of the United States Housing Act of 1937,
35Section 1437f of Title 42 of the United States Code, as amended.

36(ii) The Below-Market-Interest-Rate Program pursuant to
37Section 221(d)(3) of the National Housing Act, Sections
381715l(d)(3) and (5) of Title 12 of the United States Code.

39(iii) Section 236 of the National Housing Act, Section 1715z-1
40of Title 12 of the United States Code.

P18   1(iv) Programs for rent supplement assistance pursuant to Section
2101 of the Housing and Urban Development Act of 1965, Section
31701s of Title 12 of the United States Code, as amended.

4(v) Programs pursuant to Section 515 of the Housing Act of
51949, Section 1485 of Title 42 of the United States Code, as
6amended.

7(vi) The low-income housing credit program set forth in Section
842 of the Internal Revenue Code.

9(B) The restrictions on rent and income levels will terminate or
10the federal insured mortgage on the property is eligible for
11prepayment any time within five years before or after the date of
12application to the California Tax Credit Allocation Committee.

13(C) The entity acquiring the property enters into a regulatory
14agreement that requires the property to be operated in accordance
15with the requirements of this section for a period equal to the
16greater of 55 years or the life of the property.

17(D) The property satisfies the requirements of Section 42(e) of
18the Internal Revenue Code regarding rehabilitation expenditures,
19except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
20apply.

end delete
begin insert

21(4) In the case of any qualified low-income building that is (i)
22a new or an existing building, (ii) located in designated difficult
23development areas (DDAs) or qualified census tracts (QCTs) as
24defined in Section 42(d)(5)(B) of the Internal Revenue Code, and
25(iii) federally subsidized, the California Tax Credit Allocation
26Committee shall reduce the amount of California credit to be
27allocated under paragraph (2) and (3) by taking into account the
28increased federal credit received due to the basis boost provided
29under Section 42(d)(5)(B) of the Internal Revenue Code.

end insert
begin insert

30(5) In the case of any qualified low-income building that meets
31all of the requirements of subparagraphs (A) through (D),
32inclusive, the term “applicable percentage” means 30 percent for
33each of the first three years and 5 percent for the fourth year. A
34qualified low-income building receiving an allocation under this
35paragraph is ineligible to also receive an allocation under
36paragraph (3).

end insert
begin insert

37(A) The qualified low-income building is at least 15 years old.

end insert
begin insert

38(B) The qualified low-income building is serving households of
39very low-income or extremely low-income such that the average
40maximum household income as restricted, pursuant to an existing
P19   1regulatory agreement with a federal, state, county, local, or other
2governmental agency, is not more than 45 percent of the area
3median gross income, as determined under Section 42 of the
4Internal Revenue Code, adjusted by household size, and a tax
5credit regulatory agreement is entered into for a period of not less
6than 55 years restricting the average targeted household income
7to no more than 45 percent of the area median income.

end insert
begin insert

8(C) The qualified low-income building would have insufficient
9credits under paragraphs (2) and (3) to complete substantial
10rehabilitation due to a low appraised value.

end insert
begin insert

11(D) The qualified low-income building will complete the
12substantial rehabilitation in connection with the credit allocation
13herein.

end insert

14(d) The term “qualified low-income housing project” as defined
15in Section 42(c)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
16to qualified low-income building,end insert
is modified by adding the
17following requirements:

18(1) The taxpayer shall be entitled to receive a cash distribution
19from the operations of the project, after funding required reserves,
20begin delete which,end deletebegin insert that,end insert at the election of the taxpayer, is equal to:

21(A) An amount not to exceed 8 percent of the lesser of:

22(i) The ownerbegin delete equityend deletebegin insert equity,end insert which shall include the amount of
23the capital contributions actually paid to the housing sponsor and
24shall not include any amounts until they are paid on an investor
25note.

26(ii) Twenty percent of the adjusted basis of the building as of
27the close of the first taxable year of the credit period.

28(B) The amount of the cashflow from those units in the building
29that are not low-income units. For purposes of computing cashflow
30under this subparagraph, operating costs shall be allocated to the
31low-income units using the “floor space fraction,” as defined in
32Section 42 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
33low-income housing credit.end insert

34(C) Any amount allowed to be distributed under subparagraph
35(A) that is not available for distribution during the first five years
36of the compliance period maybegin delete accumulate and beend deletebegin insert be accumulated
37andend insert
distributed any time during the first 15 years of the compliance
38period but not thereafter.

P20   1(2) The limitation on return shall apply in the aggregate to the
2partners if the housing sponsor is a partnership and in the aggregate
3to the shareholders if the housing sponsor is an “S” corporation.

4(3) The housing sponsor shall apply any cash available for
5 distribution in excess of the amount eligible to be distributed under
6paragraph (1) to reduce the rent on rent-restricted units or to
7increase the number of rent-restricted units subject to the tests of
8Section 42(g)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
9in general.end insert

10(e) The provisions of Section 42(f) of the Internal Revenuebegin delete Codeend delete
11begin insert Code, relating to definition and special rules relating to credit
12period,end insert
shall be modified as follows:

13(1) The term “credit period” as defined in Section 42(f)(1) of
14the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to credit period defined,end insert
15 is modified by substituting “four taxable years” for “10 taxable
16years.”

17(2) The special rule for the first taxable year of the credit period
18under Section 42(f)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
19to special rule for first year of credit period,end insert
shall not apply to the
20tax credit under this section.

21(3) Section 42(f)(3) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
22to determination of applicable percentage with respect to increases
23in qualified basis after first year of credit period,end insert
is modified to
24read:

25If, as of the close of any taxable year in the compliance period,
26after the first year of the credit period, the qualified basis of any
27building exceeds the qualified basis of that building as of the close
28of the first year of the credit period, the housing sponsor, to the
29extent of its tax credit allocation, shall be eligible for a credit on
30the excess in an amount equal to the applicable percentage
31determined pursuant to subdivision (c) for the four-year period
32beginning with thebegin delete later of the taxable yearsend deletebegin insert taxable yearend insert in which
33the increase in qualified basis occurs.

34(f) The provisions of Section 42(h) of the Internal Revenue
35begin delete Codeend deletebegin insert Code, relating to limitation on aggregate credit allowable
36with respect to projects located in a state,end insert
shall be modified as
37follows:

38(1) Section 42(h)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
39to allocated credit amount to apply to all taxable years ending
P21   1during or after credit allocation year,end insert
shall not be applicable and
2instead the following provisions shall be applicable:

3The total amount for the four-year credit period of the housing
4credit dollars allocated in a calendar year to any building shall
5reduce the aggregate housing credit dollar amount of the California
6Tax Credit Allocation Committee for the calendar year in which
7the allocation is made.

8(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
9(7), and (8) of Section 42(h) of the Internal Revenuebegin delete Codeend deletebegin insert Code,
10relating to limitation on aggregate credit allowable with respect
11to projects located in a state,end insert
shall not be applicable.

12(g) The aggregate housing credit dollar amount that may be
13allocated annually by the California Tax Credit Allocation
14Committee pursuant to this section, Section 17058, and Section
1523610.5 shall be an amount equal to the sum of all the following:

16(1) begin insert(A)end insertbegin insertend insert Seventy million dollars ($70,000,000) for the 2001
17calendar year, and, for the 2002 calendar year and each calendar
18year thereafter, seventy million dollars ($70,000,000) increased
19by the percentage, if any, by which the Consumer Price Index for
20the preceding calendar year exceeds the Consumer Price Index for
21the 2001 calendar year. For the purposes of this paragraph, the
22term “Consumer Price Index” means the last Consumer Price Index
23for All Urban Consumers published by the federal Department of
24Labor.

begin insert

25(B) An additional three hundred million dollars ($300,000,000)
26for the 2016 calendar year, and, for the 2017 calendar year and
27each calendar year thereafter, three hundred million dollars
28($300,000,000) increased by the percentage, if any, by which the
29Consumer Price Index for the preceding calendar year exceeds
30the Consumer Price Index for the 2016 calendar year. For the
31purposes of this paragraph, the term “Consumer Price Index”
32means the last Consumer Price Index for All Urban Consumers
33published by the federal Department of Labor. A housing sponsor
34receiving an allocation under paragraph (1) of subdivision (c)
35shall not be eligible for receipt of the housing credit allocated
36from the increased amount under this subparagraph. A housing
37sponsor receiving an allocation under paragraph (1) of subdivision
38(c) shall remain eligible for receipt of the housing credit allocated
39from the credit ceiling amount under subparagraph (A).

end insert

P22   1(2) The unused housing credit ceiling, if any, for the preceding
2calendar years.

3(3) The amount of housing credit ceiling returned in the calendar
4year. For purposes of this paragraph, the amount of housing credit
5 dollar amount returned in the calendar year equals the housing
6credit dollar amount previously allocated to any project that does
7not become a qualified low-income housing project within the
8period required by this section or to any project with respect to
9which an allocation is canceled by mutual consent of the California
10Tax Credit Allocation Committee and the allocation recipient.

11(4) Five hundred thousand dollars ($500,000) per calendar year
12for projects to provide farmworker housing, as defined in
13subdivision (h) of Section 50199.7 of the Health and Safety Code.

14(5) The amount of any unallocated or returned credits under
15former Sections 17053.14, 23608.2, and 23608.3, as those sections
16read prior to January 1, 2009, until fully exhausted for projects to
17provide farmworker housing, as defined in subdivision (h) of
18Section 50199.7 of the Health and Safety Code.

19(h) The term “compliance period” as defined in Section 42(i)(1)
20of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to compliance period,end insert
21 is modified to mean, with respect to any building, the period of 30
22consecutive taxable years beginning with the first taxable year of
23the credit period with respect thereto.

24(i) (1) Section 42(j) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
25to recapture of credit,end insert
shall not be applicable and the provisions
26in paragraph (2) shall be substituted in its place.

27(2) The requirements of this section shall be set forth in a
28regulatory agreement between the California Tax Credit Allocation
29Committee and the housing sponsor,begin delete whichend deletebegin insert and the regulatoryend insert
30 agreement shall be subordinated, when required, to any lien or
31encumbrance of any banks or other institutional lenders to the
32project. The regulatory agreement entered into pursuant to
33subdivision (f) of Section 50199.14 of the Health and Safety Code,
34shall apply,begin delete providingend deletebegin insert provided thatend insert the agreement includes all of
35the following provisions:

36(A) A term not less than the compliance period.

37(B) A requirement that the agreement be recorded in the official
38records of the county in which the qualified low-income housing
39project is located.

P23   1(C) A provision stating which state and local agencies can
2enforce the regulatory agreement in the event the housing sponsor
3fails to satisfy any of the requirements of this section.

4(D) A provision that the regulatory agreement shall be deemed
5a contract enforceable by tenants as third-party beneficiaries thereto
6andbegin delete whichend deletebegin insert thatend insert allows individuals, whether prospective, present,
7or former occupants of the building, who meet the income
8limitation applicable to the building, the right to enforce the
9regulatory agreement in any state court.

10(E) A provision incorporating the requirements of Section 42
11of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
12credit,end insert
as modified by this section.

13(F) A requirement that the housing sponsor notify the California
14Tax Credit Allocation Committee or its designee and the local
15agency that can enforce the regulatory agreement if there is a
16determination by the Internal Revenue Service that the project is
17not in compliance with Section 42(g) of the Internal Revenuebegin delete Code.end delete
18begin insert Code, relating to qualified low-income housing project.end insert

19(G) A requirement that the housing sponsor, as security for the
20performance of the housing sponsor’s obligations under the
21regulatory agreement, assign the housing sponsor’s interest in rents
22that it receives from the project, provided that until there is a
23default under the regulatory agreement, the housing sponsor is
24entitled to collect and retain the rents.

25(H) begin deleteThe end deletebegin insertA provision that the end insertremedies available in the event of
26a default under the regulatory agreement that is not cured within
27a reasonable curebegin delete period,end deletebegin insert periodend insert include, but are not limited to,
28allowing any of the parties designated to enforce the regulatory
29agreement to collect all rents with respect to the project; taking
30possession of the project and operating the project in accordance
31with the regulatory agreement until the enforcer determines the
32housing sponsor is in a position to operate the project in accordance
33with the regulatory agreement; applying to any court for specific
34performance; securing the appointment of a receiver to operate
35the project; or any other relief as may be appropriate.

36(j) (1) The committee shall allocate the housing credit on a
37regular basis consisting of two or more periods in each calendar
38year during which applications may be filed and considered. The
39committee shall establish application filing deadlines, the maximum
40percentage of federal and state low-income housing tax credit
P24   1ceiling that may be allocated by the committee in that period, and
2the approximate date on which allocations shall be made. If the
3enactment of federal or state law, the adoption of rules or
4regulations, or other similar events prevent the use of two allocation
5periods, the committee may reduce the number of periods and
6adjust the filing deadlines, maximum percentage of credit allocated,
7andbegin delete theend delete allocation dates.

8(2) The committee shall adopt a qualified allocation plan, as
9provided in Section 42(m)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code,
10relating to plans for allocation of credit among projects.end insert
In
11adopting this plan, the committee shall comply with the provisions
12of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
13begin delete Code.end deletebegin insert Code, relating to qualified allocation plan and relating to
14certain selection criteria must be used, respectively.end insert

15(3) Notwithstanding Section 42(m) of the Internal Revenue
16Code,begin insert relating to responsibilities of housing credit agencies,end insert the
17California Tax Credit Allocation Committee shall allocate housing
18credits in accordance with the qualified allocation plan and
19regulations, which shall include the following provisions:

20(A) All housing sponsors, as defined by paragraph (3) of
21subdivision (a), shall demonstrate at the time the application is
22filed with the committee that the project meets the following
23threshold requirements:

24(i) The housing sponsor shall demonstratebegin insert thatend insert there is a need
25and demand for low-income housing in the community or region
26for which it is proposed.

27(ii) The project’s proposed financing, including tax credit
28proceeds, shall be sufficient to complete the project and that the
29proposed operating income shall be adequate to operate the project
30for the extended use period.

31(iii) The project shall have enforceable financing commitments,
32either construction or permanent financing, for at least 50 percent
33of the total estimated financing of the project.

34(iv) The housing sponsor shall have and maintain control of the
35site for the project.

36(v) The housing sponsor shall demonstrate that the project
37complies with all applicable local land use and zoning ordinances.

38(vi) The housing sponsor shall demonstrate that the project
39development team has the experience and the financial capacity
P25   1to ensure project completion and operation for the extended use
2period.

3(vii) The housing sponsor shall demonstrate the amount of tax
4credit that is necessary for the financial feasibility of the project
5and its viability as a qualified low-income housing project
6throughout the extended use period, taking into account operating
7expenses, a supportable debt service, reserves, funds set aside for
8rentalbegin delete subsidies,end deletebegin insert subsidiesend insert and required equity, and a development
9fee that does not exceed a specified percentage of the eligible basis
10of the project prior to inclusion of the development fee in the
11eligible basis, as determined by the committee.

12(B) The committee shall give a preference to those projects
13satisfying all of the threshold requirements of subparagraph (A)
14if both of the following apply:

15(i) The project serves the lowest income tenants at rents
16affordable to those tenants.

17(ii) The project is obligated to serve qualified tenants for the
18longest period.

19(C) In addition to the provisions of subparagraphs (A) and (B),
20the committee shall use the following criteria in allocating housing
21credits:

22(i) Projects serving large families in which a substantial number,
23as defined by the committee, of all residential unitsbegin delete is comprised
24ofend delete
begin insert areend insert low-income units with threebegin delete andend deletebegin insert orend insert more bedrooms.

25(ii) Projects providing single-room occupancy units serving
26very low income tenants.

27(iii)begin insert(I)end insertbegin insertend insert Existing projects that are “at risk ofbegin delete conversion,” as
28defined by paragraph (3) of subdivision (c).end delete
begin insert conversion.end insertbegin insertend insert

begin insert

29(II) For purposes of this section, the term “at risk of
30conversion,” with respect to an existing property means a property
31that satisfies all of the following criteria:

end insert
begin insert

32(ia) The property is a multifamily rental housing development
33in which at least 50 percent of the units receive governmental
34assistance pursuant to any of the following:

end insert
begin insert

35(Ia) New construction, substantial rehabilitation, moderate
36rehabilitation, property disposition, and loan management set-aside
37programs, or any other program providing project-based
38assistance pursuant to Section 8 of the United States Housing Act
39of 1937, Section 1437f of Title 42 of the United States Code, as
40amended.

end insert
begin insert

P26   1(Ib) The Below-Market-Interest-Rate Program pursuant to
2Section 221(d)(3) of the National Housing Act, Sections 1715l(d)(3)
3and (5) of Title 12 of the United States Code.

end insert
begin insert

4(Ic) Section 236 of the National Housing Act, Section 1715z-1
5of Title 12 of the United States Code.

end insert
begin insert

6(Id) Programs for rent supplement assistance pursuant to
7Section 18 101 of the Housing and Urban Development Act of
81965, Section 1701s of Title 12 of the United States Code, as
9amended.

end insert
begin insert

10(Ie) Programs pursuant to Section 515 of the Housing Act of
111949, Section 1485 of Title 42 of the United States Code, as
12amended.

end insert
begin insert

13(If) The low-income housing credit program set forth in Section
1442 of the Internal Revenue Code.

end insert
begin insert

15(ib) The restrictions on rent and income levels will terminate
16or the federal insured mortgage on the property is eligible for
17prepayment any time within five years before or after the date of
18application to the California Tax Credit Allocation Committee.

end insert
begin insert

19(ic) The entity acquiring the property enters into a regulatory
20agreement that requires the property to be operated in accordance
21with the requirements of this section for a period equal to the
22 greater of 55 years or the life of the property.

end insert
begin insert

23(id) The property satisfies the requirements of Section 42(e) of
24the Internal Revenue Code, regarding rehabilitation expenditures
25except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
26apply.

end insert

27(iv) Projects for which a public agency provides direct or indirect
28long-term financial support for at least 15 percent of the total
29project development costs or projects for which the owner’s equity
30constitutes at least 30 percent of the total project development
31costs.

32(v) Projects that provide tenant amenities not generally available
33to residents of low-income housing projects.

34(4) For purposes of allocating credits pursuant to this section,
35the committee shall not give preference to any project by virtue
36of the date of submission of its application except to break a tie
37when two or more of the projects have an equal rating.

38(k) Section 42(l) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
39to certifications and other reports to the secretary,end insert
shall be
40modified as follows:

P27   1The term “secretary” shall be replaced by the termbegin delete “California
2Franchiseend delete
begin insert “Franchiseend insert Tax Board.”

3(l) In the case where thebegin delete stateend delete credit allowed under this section
4exceeds the “tax,” the excess may be carried over to reduce the
5“tax” in the following year, and succeeding years if necessary,
6until the credit has been exhausted.

7(m) The provisions of Section 11407(a) of Public Law 101-508,
8relating to the effective date of the extension of the low-income
9housing credit, shall apply to calendar years after 1993.

10(n) The provisions of Section 11407(c) of Public Law 101-508,
11relating to election to accelerate credit, shall not apply.

begin insert

12(o) (1) For a project that receives a preliminary reservation
13under this section beginning on or after January 1, 2016, a
14taxpayer may make an irrevocable election in its application to
15the California Tax Credit Allocation Committee to sell all or any
16portion of any credit allowed under this section to one or more
17unrelated parties for each taxable year in which the credit is
18allowed subject to both of the following conditions:

end insert
begin insert

19(A) The credit is sold for consideration that is not less than 80
20percent of the amount of the credit.

end insert
begin insert

21(B) The unrelated party or parties purchasing any or all of the
22credit pursuant to this subdivision is a taxpayer allowed the credit
23under this section for the taxable year of the purchase or any prior
24taxable year or is a taxpayer allowed the federal credit under
25Section 42 of the Internal Revenue Code, relating to low-income
26housing credit, for the taxable year of the purchase or any prior
27taxable year in connection with any project located in this state.
28For purposes of this subparagraph, “taxpayer allowed the credit
29under this section” means a taxpayer that is allowed the credit
30under this section without regard to the purchase of a credit
31pursuant to this subdivision.

end insert
begin insert

32(2) (A) The taxpayer that originally received the credit shall
33report to the California Tax Credit Allocation Committee within
3410 days of the sale of the credit, in the form and manner specified
35by the California Tax Credit Allocation Committee, all required
36information regarding the purchase and sale of the credit,
37including the social security or other taxpayer identification
38number of the unrelated party to whom the credit has been sold,
39the face amount of the credit sold, and the amount of consideration
40received by the taxpayer for the sale of the credit.

end insert
begin insert

P28   1(B) The California Tax Credit Allocation Committee shall
2provide an annual listing to the Franchise Tax Board, in a form
3and manner agreed upon by the California Tax Credit Allocation
4Committee and the Franchise Tax Board, of the taxpayers that
5have sold or purchased a credit pursuant to this subdivision.

end insert
begin insert

6(3) (A) A credit may be sold pursuant to this subdivision to
7more than one unrelated party.

end insert
begin insert

8(B) (i) Except as provided in clause (ii), a credit shall not be
9resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

10(ii) All or any portion of any credit allowed under this section
11may be resold once by an original purchaser to one or more
12unrelated parties, subject to all of the requirements of this
13subdivision.

end insert
begin insert

14(4) Notwithstanding any other provision of law, the taxpayer
15that originally received the credit that is sold pursuant to
16paragraph (1) shall remain solely liable for all obligations and
17liabilities imposed on the taxpayer by this section with respect to
18the credit, none of which shall apply to any party to whom the
19credit has been sold or subsequently transferred. Parties who
20purchase credits pursuant to paragraph (1) shall be entitled to
21utilize the purchased credits in the same manner in which the
22taxpayer that originally received the credit could utilize them.

end insert
begin insert

23(5) A taxpayer shall not sell a credit allowed by this section if
24the taxpayer was allowed the credit on any tax return of the
25taxpayer.

end insert
begin insert

26(6) Notwithstanding paragraph (1), the taxpayer, with the
27approval of the Executive Director of the California Tax Credit
28Allocation Committee, may rescind the election to sell all or any
29portion of the credit allowed under this section if the consideration
30for the credit falls below 80 percent of the amount of the credit
31after the California Tax Credit Allocation Committee reservation.

end insert
begin insert

32(p) The California Tax Credit Allocation Committee may
33prescribe rules, guidelines, or procedures necessary or appropriate
34to carry out the purposes of this section, including any guidelines
35regarding the allocation of the credit allowed under this section.
36Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
373 of Title 2 of the Government Code shall not apply to any rule,
38guideline, or procedure prescribed by the California Tax Credit
39Allocation Committee pursuant to this section.

end insert
begin delete

40(o)

end delete

P29   1begin insert(q)end insert This section shall remain in effect for as long as Section 42
2of the Internal Revenue Code, relating to low-income housing
3begin delete credits,end deletebegin insert credit,end insert remains in effect.

4

SEC. 2.  

Section 17058 of the Revenue and Taxation Code is
5amended to read:

6

17058.  

(a) (1) There shall be allowed as a credit against the
7“net tax,” as defined in Section 17039, a state low-income housing
8tax credit in an amount equal to the amount determined in
9subdivision (c), computed in accordance with Section 42 of the
10Internal Revenue Code except as otherwise provided in this section.

11(2) “Taxpayer” for purposes of this section means the sole owner
12in the case of an individual, the partners in the case of a partnership,
13members in the case of a limited liability company, and the
14shareholders in the case of an “S” corporation.

15(3) “Housing sponsor” for purposes of this section means the
16sole owner in the case of an individual, the partnership in the case
17 of a partnership, the limited liability company in the case of a
18limited liability company, and the “S” corporation in the case of
19an “S” corporation.

20(4) “Extremely low-income” has the same meaning as in Section
2150053 of the Health and Safety Code.

22(5) “Very low-income” has the same meaning as in Section
2350053 of the Health and Safety Code.

24(b) (1) The amount of the credit allocated to any housing
25sponsor shall be authorized by the California Tax Credit Allocation
26Committee, or any successor thereof, based on a project’s need
27for the credit for economic feasibility in accordance with the
28requirements of this section.

29(A) The low-income housing project shall be located in
30California and shall meet either of the following requirements:

31(i) Except for projects to provide farmworker housing, as defined
32in subdivision (h) of Section 50199.7 of the Health and Safety
33Code, that are allocated credits solely under the set-aside described
34in subdivision (c) of Section 50199.20 of the Health and Safety
35Code, the project’s housing sponsor has been allocated by the
36California Tax Credit Allocation Committee a credit for federal
37income tax purposes under Section 42 of the Internal Revenue
38Code.

39(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
40Internal Revenue Code.

P30   1(B) The California Tax Credit Allocation Committee shall not
2require fees for the credit under this section in addition to those
3fees required for applications for the tax credit pursuant to Section
442 of the Internal Revenue Code. The committee may require a
5fee if the application for the credit under this section is submitted
6in a calendar year after the year the application is submitted for
7the federal tax credit.

8(C) (i) For a project that receives a preliminary reservation of
9the state low-income housing tax credit, allowed pursuant to
10subdivision (a), on or after January 1, 2009, and before January 1,
112016, the credit shall be allocated to the partners of a partnership
12owning the project in accordance with the partnership agreement,
13regardless of how the federal low-income housing tax credit with
14respect to the project is allocated to the partners, or whether the
15allocation of the credit under the terms of the agreement has
16substantial economic effect, within the meaning of Section 704(b)
17of the Internal Revenue Code.

18(ii) To the extent the allocation of the credit to a partner under
19this section lacks substantial economic effect, any loss or deduction
20otherwise allowable under this part that is attributable to the sale
21or other disposition of that partner’s partnership interest made prior
22to the expiration of the federal credit shall not be allowed in the
23taxable year in which the sale or other disposition occurs, but shall
24instead be deferred until and treated as if it occurred in the first
25taxable year immediately following the taxable year in which the
26federal credit period expires for the project described in clause (i).

27(iii) This subparagraph shall not apply to a project that receives
28a preliminary reservation of state low-income housing tax credits
29under the set-aside described in subdivision (c) of Section 50199.20
30of the Health and Safety Code unless the project also receives a
31preliminary reservation of federal low-income housing tax credits.

32(iv) This subparagraph shall cease to be operative with respect
33to any project that receives a preliminary reservation of a credit
34on or after January 1, 2016.

35(2) (A) The California Tax Credit Allocation Committee shall
36certify to the housing sponsor the amount of tax credit under this
37section allocated to the housing sponsor for each credit period.

38(B) In the case of a partnership, limited liability company, or
39an “S” corporation, the housing sponsor shall provide a copy of
P31   1the California Tax Credit Allocation Committee certification to
2the taxpayer.

3(C) The taxpayer shall, upon request, provide a copy of the
4certification to the Franchise Tax Board.

5(D) All elections made by the taxpayer pursuant to Section 42
6of the Internal Revenue Code shall apply to this section.

7(E) (i) The California Tax Credit Allocation Committee may
8allocate a credit under this section in exchange for a credit allocated
9pursuant to Section 42(d)(5)(B) of the Internal Revenue Code in
10amounts up to 30 percent of the eligible basis of a building if the
11credits allowed under Section 42 of the Internal Revenue Code are
12reduced by an equivalent amount.

13(ii) An equivalent amount shall be determined by the California
14Tax Credit Allocation Committee based upon the relative amount
15required to produce an equivalent state tax credit to the taxpayer.

16(c) Section 42(b) of the Internal Revenue Code shall be modified
17as follows:

18(1) In the case of any qualified low-income building that is a
19new building, as defined in Section 42 of the Internal Revenue
20Code and the regulations promulgated thereunder, and not federally
21subsidized, the term “applicable percentage” means the following:

22(A) For each of the first three years, the percentage prescribed
23by the Secretary of the Treasury for new buildings that are not
24federally subsidized for the taxable year, determined in accordance
25with the requirements of Section 42(b)(1) of the Internal Revenue
26begin delete Code in lieu of the percentage prescribed in Section 42(b)(1)(A)
27of the Internal Revenue Code.end delete
begin insert Code.end insert

28(B) For the fourth year, the difference between 30 percent and
29the sum of the applicable percentages for the first three years.

30(2) In the case of any qualified low-income building that (i) is
31a new building, as defined in Section 42 of the Internal Revenue
32Code and the regulations promulgated thereunder, (ii) not located
33in designated difficult development areas (DDAs) or qualified
34census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
35Internal Revenue Code, and (iii) is federally subsidized, the term
36“applicable percentage” means for the first three years, 15 percent
37of the qualified basis of the building, and for the fourth year, 5
38percent of the qualified basis of the building.

39(3) In the case of any qualified low-income building that is (i)
40an existing building, as defined in Section 42 of the Internal
P32   1Revenue Code and the regulations promulgated thereunder, (ii)
2not located in designated difficult development areas (DDAs) or
3qualified census tracts (QCTs), as defined in Section 42(d)(5)(B)
4of the Internal Revenue Code, and (iii) is federally subsidized, the
5term applicable percentage means the following:

6(A) For each of the first three years, the percentage prescribed
7by the Secretary of the Treasury for new buildings that are federally
8subsidized for the taxable year.

9(B) For the fourth year, the difference between 13 percent and
10the sum of the applicable percentages for the first three years.

11(4) In the case of any qualified low-income building that is (i)
12a new or an existing building, (ii) located in designated difficult
13development areas (DDAs) or qualified census tracts (QCTs) as
14defined in Section 42(d)(5)(B) of the Internal Revenue Code, and
15(iii) federally subsidized, the California Tax Credit Allocation
16Committee shall reduce the amount of California credit to be
17allocated under subparagraph (2) and (3) by taking into account
18the increased federal credit received due to the basis boost provided
19under Section 42(d)(5)(B) of the Internal Revenue Code.

20(5) In the case of any qualified low-income building that meets
21all of the requirements of subparagraphs (A) through (D), inclusive,
22the term “applicable percentage” means 30 percent for each of the
23first three years and 5 percent for the fourth year. A qualified
24low-income building receiving an allocation under this paragraph
25is ineligible to also receive an allocation under paragraph (3).

26(A) The qualified low-income building is at least 15 years old.

27(B) The qualified low-income building is serving households
28of very low-income or extremely low-income such that the average
29maximum household income as restricted, pursuant to an existing
30regulatory agreement with a federal, state, county, local, or other
31governmental agency, is not more than 45 percent of the area
32median gross income, as determined under Section 42 of the
33Internal Revenue Code, adjusted by household size, and a tax credit
34regulatory agreement is entered into for a period of not less than
3555 years restricting the average targeted household income to no
36more than 45 percent of the area median income.

37(C) The qualified low-income building would have insufficient
38credits under paragraphs (2) and (3) to complete substantial
39rehabilitation due to a low appraised value.

P33   1(D) The qualified low-income building will complete the
2substantial rehabilitation in connection with the credit allocation
3herein.

4(d) The term “qualified low-income housing project” as defined
5in Section 42(c)(2) of the Internal Revenue Code is modified by
6 adding the following requirements:

7(1) The taxpayer shall be entitled to receive a cash distribution
8from the operations of the project, after funding required reserves,
9that, at the election of the taxpayer, is equal to:

10(A) An amount not to exceed 8 percent of the lesser of:

11(i) The owner equity that shall include the amount of the capital
12contributions actually paid to the housing sponsor and shall not
13include any amounts until they are paid on an investor note.

14(ii) Twenty percent of the adjusted basis of the building as of
15the close of the first taxable year of the credit period.

16(B) The amount of the cashflow from those units in the building
17that are not low-income units. For purposes of computing cashflow
18under this subparagraph, operating costs shall be allocated to the
19low-income units using the “floor space fraction,” as defined in
20Section 42 of the Internal Revenue Code.

21(C) Any amount allowed to be distributed under subparagraph
22(A) that is not available for distribution during the first five years
23of the compliance period may be accumulated and distributed any
24time during the first 15 years of the compliance period but not
25 thereafter.

26(2) The limitation on return shall apply in the aggregate to the
27partners if the housing sponsor is a partnership and in the aggregate
28to the shareholders if the housing sponsor is an “S” corporation.

29(3) The housing sponsor shall apply any cash available for
30distribution in excess of the amount eligible to be distributed under
31paragraph (1) to reduce the rent on rent-restricted units or to
32increase the number of rent-restricted units subject to the tests of
33Section 42(g)(1) of the Internal Revenue Code.

34(e) The provisions of Section 42(f) of the Internal Revenue Code
35shall be modified as follows:

36(1) The term “credit period” as defined in Section 42(f)(1) of
37the Internal Revenue Code is modified by substituting “four taxable
38years” for “10 taxable years.”

P34   1(2) The special rule for the first taxable year of the credit period
2under Section 42(f)(2) of the Internal Revenue Code shall not apply
3to the tax credit under this section.

4(3) Section 42(f)(3) of the Internal Revenue Code is modified
5to read:

6If, as of the close of any taxable year in the compliance period,
7 after the first year of the credit period, the qualified basis of any
8building exceeds the qualified basis of that building as of the close
9of the first year of the credit period, the housing sponsor, to the
10extent of its tax credit allocation, shall be eligible for a credit on
11the excess in an amount equal to the applicable percentage
12determined pursuant to subdivision (c) for the four-year period
13beginning with the taxable year in which the increase in qualified
14basis occurs.

15(f) The provisions of Section 42(h) of the Internal Revenue
16Code shall be modified as follows:

17(1) Section 42(h)(2) of the Internal Revenue Code shall not be
18applicable and instead the following provisions shall be applicable:

19The total amount for the four-year credit period of the housing
20credit dollars allocated in a calendar year to any building shall
21reduce the aggregate housing credit dollar amount of the California
22Tax Credit Allocation Committee for the calendar year in which
23the allocation is made.

24(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
25(7), and (8) of Section 42(h) of the Internal Revenue Code shall
26not be applicable.

27(g) The aggregate housing credit dollar amount that may be
28allocated annually by the California Tax Credit Allocation
29Committee pursuant to this section, Section 12206, and Section
3023610.5 shall be an amount equal to the sum of all the following:

31(1) (A) Seventy million dollars ($70,000,000) for the 2001
32calendar year, and, for the 2002 calendar year and each calendar
33year thereafter, seventy million dollars ($70,000,000) increased
34by the percentage, if any, by which the Consumer Price Index for
35the preceding calendar year exceeds the Consumer Price Index for
36the 2001 calendar year. For the purposes of this paragraph, the
37term “Consumer Price Index” means the last Consumer Price Index
38for All Urban Consumers published by the federal Department of
39Labor.

P35   1(B)  An additional three hundred million dollars ($300,000,000)
2for the 2016 calendar year, and, for the 2017 calendar year and
3each calendar year thereafter, three hundred million dollars
4($300,000,000) increased by the percentage, if any, by which the
5Consumer Price Index for the preceding calendar year exceeds the
6Consumer Price Index for the 2016 calendar year. For the purposes
7of this paragraph, the term “Consumer Price Index” means the last
8Consumer Price Index for All Urban Consumers published by the
9federal Department of Labor. A housing sponsor receiving an
10allocation under paragraph (1) of subdivision (c) shall not be
11eligible for receipt of the housing credit allocated from the
12increased amount under this subparagraph. A housing sponsor
13receiving an allocation under paragraph (1) of subdivision (c) shall
14remain eligible for receipt of the housing credit allocated from the
15credit ceiling amount under subparagraph (A).

16(2) The unused housing credit ceiling, if any, for the preceding
17calendar years.

18(3) The amount of housing credit ceiling returned in the calendar
19year. For purposes of this paragraph, the amount of housing credit
20dollar amount returned in the calendar year equals the housing
21credit dollar amount previously allocated to any project that does
22not become a qualified low-income housing project within the
23period required by this section or to any project with respect to
24which an allocation is canceled by mutual consent of the California
25Tax Credit Allocation Committee and the allocation recipient.

26(4) Five hundred thousand dollars ($500,000) per calendar year
27for projects to provide farmworker housing, as defined in
28subdivision (h) of Section 50199.7 of the Health and Safety Code.

29(5) The amount of any unallocated or returned credits under
30former Sections 17053.14, 23608.2, and 23608.3, as those sections
31read prior to January 1, 2009, until fully exhausted for projects to
32provide farmworker housing, as defined in subdivision (h) of
33Section 50199.7 of the Health and Safety Code.

34(h) The term “compliance period” as defined in Section 42(i)(1)
35of the Internal Revenue Code is modified to mean, with respect to
36any building, the period of 30 consecutive taxable years beginning
37with the first taxable year of the credit period with respect thereto.

38(i) Section 42(j) of the Internal Revenue Code shall not be
39applicable and the following requirements of this section shall be
40set forth in a regulatory agreement between the California Tax
P36   1Credit Allocation Committee and the housing sponsor, and the
2regulatory agreement shall be subordinated, when required, to any
3lien or encumbrance of any banks or other institutional lenders to
4the project. The regulatory agreement entered into pursuant to
5subdivision (f) of Section 50199.14 of the Health and Safety Code
6shall apply, provided that the agreement includes all of the
7following provisions:

8(1) A term not less than the compliance period.

9(2) A requirement that the agreement be recorded in the official
10records of the county in which the qualified low-income housing
11project is located.

12(3) A provision stating which state and local agencies can
13enforce the regulatory agreement in the event the housing sponsor
14fails to satisfy any of the requirements of this section.

15(4) A provision that the regulatory agreement shall be deemed
16a contract enforceable by tenants as third-party beneficiaries thereto
17and that allows individuals, whether prospective, present, or former
18occupants of the building, who meet the income limitation
19applicable to the building, the right to enforce the regulatory
20agreement in any state court.

21(5) A provision incorporating the requirements of Section 42
22of the Internal Revenue Code as modified by this section.

23(6) A requirement that the housing sponsor notify the California
24Tax Credit Allocation Committee or its designee if there is a
25determination by the Internal Revenue Service that the project is
26not in compliance with Section 42(g) of the Internal Revenue Code.

27(7) A requirement that the housing sponsor, as security for the
28performance of the housing sponsor’s obligations under the
29regulatory agreement, assign the housing sponsor’s interest in rents
30that it receives from the project, provided that until there is a
31default under the regulatory agreement, the housing sponsor is
32entitled to collect and retain the rents.

33(8) The remedies available in the event of a default under the
34regulatory agreement that is not cured within a reasonable cure
35period, include, but are not limited to, allowing any of the parties
36designated to enforce the regulatory agreement to collect all rents
37with respect to the project; taking possession of the project and
38operating the project in accordance with the regulatory agreement
39until the enforcer determines the housing sponsor is in a position
40to operate the project in accordance with the regulatory agreement;
P37   1 applying to any court for specific performance; securing the
2appointment of a receiver to operate the project; or any other relief
3as may be appropriate.

4(j) (1) The committee shall allocate the housing credit on a
5regular basis consisting of two or more periods in each calendar
6year during which applications may be filed and considered. The
7committee shall establish application filing deadlines, the maximum
8percentage of federal and state low-income housing tax credit
9ceiling that may be allocated by the committee in that period, and
10the approximate date on which allocations shall be made. If the
11enactment of federal or state law, the adoption of rules or
12regulations, or other similar events prevent the use of two allocation
13periods, the committee may reduce the number of periods and
14adjust the filing deadlines, maximum percentage of credit allocated,
15and allocation dates.

16(2) The committee shall adopt a qualified allocation plan, as
17provided in Section 42(m)(1) of the Internal Revenue Code. In
18adopting this plan, the committee shall comply with the provisions
19of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
20Code, respectively.

21(3) Notwithstanding Section 42(m) of the Internal Revenue
22Code the California Tax Credit Allocation Committee shall allocate
23housing credits in accordance with the qualified allocation plan
24and regulations, which shall include the following provisions:

25(A) All housing sponsors, as defined by paragraph (3) of
26subdivision (a), shall demonstrate at the time the application is
27filed with the committee that the project meets the following
28threshold requirements:

29(i) The housing sponsor shall demonstrate there is a need and
30demand for low-income housing in the community or region for
31which it is proposed.

32(ii) The project’s proposed financing, including tax credit
33proceeds, shall be sufficient to complete the project and that the
34proposed operating income shall be adequate to operate the project
35for the extended use period.

36(iii) The project shall have enforceable financing commitments,
37either construction or permanent financing, for at least 50 percent
38of the total estimated financing of the project.

39(iv) The housing sponsor shall have and maintain control of the
40site for the project.

P38   1(v) The housing sponsor shall demonstrate that the project
2complies with all applicable local land use and zoning ordinances.

3(vi) The housing sponsor shall demonstrate that the project
4development team has the experience and the financial capacity
5to ensure project completion and operation for the extended use
6period.

7(vii) The housing sponsor shall demonstrate the amount of tax
8credit that is necessary for the financial feasibility of the project
9and its viability as a qualified low-income housing project
10throughout the extended use period, taking into account operating
11expenses, a supportable debt service, reserves, funds set aside for
12rental subsidies and required equity, and a development fee that
13does not exceed a specified percentage of the eligible basis of the
14project prior to inclusion of the development fee in the eligible
15basis, as determined by the committee.

16(B) The committee shall give a preference to those projects
17satisfying all of the threshold requirements of subparagraph (A)
18if both of the following apply:

19(i) The project serves the lowest income tenants at rents
20affordable to those tenants.

21(ii) The project is obligated to serve qualified tenants for the
22longest period.

23(C) In addition to the provisions of subparagraphs (A) and (B),
24the committee shall use the following criteria in allocating housing
25credits:

26(i) Projects serving large families in which a substantial number,
27as defined by the committee, of all residential units are low-income
28units with three or more bedrooms.

29(ii) Projects providing single-room occupancy units serving
30very low income tenants.

31(iii) (I) Existing projects that are “at risk of conversion.”

32(II) For purposes of this section, the term “at risk of conversion,”
33with respect to an existing property means a property that satisfies
34all of the following criteria:

35(ia) The property is a multifamily rental housing development
36in which at least 50 percent of the units receive governmental
37assistance pursuant to any of the following:

38(Ia) New construction, substantial rehabilitation, moderate
39rehabilitation, property disposition, and loan management set-aside
40programs, or any other program providing project-based assistance
P39   1pursuant to Section 8 of the United States Housing Act of 1937,
2Section 1437f of Title 42 of the United States Code, as amended.

3(Ib) The Below-Market-Interest-Rate Program pursuant to
4Section 221(d)(3) of the National Housing Act, Sections
51715l(d)(3) and (5) of Title 12 of the United States Code.

6(Ic) Section 236 of the National Housing Act, Section 1715z-1
7of Title 12 of the United States Code.

8(Id) Programs for rent supplement assistance pursuant to Section
918 101 of the Housing and Urban Development Act of 1965,
10Section 1701s of Title 12 of the United States Code, as amended.

11(Ie) Programs pursuant to Section 515 of the Housing Act of
121949, Section 1485 of Title 42 of the United States Code, as
13amended.

14(If) The low-income housing credit program set forth in Section
1542 of the Internal Revenue Code.

16(ib) The restrictions on rent and income levels will terminate
17or the federal insured mortgage on the property is eligible for
18prepayment any time within five years before or after the date of
19application to the California Tax Credit Allocation Committee.

20(ic) The entity acquiring the property enters into a regulatory
21agreement that requires the property to be operated in accordance
22with the requirements of this section for a period equal to the
23greater of 55 years or the life of the property.

24(id) The property satisfies the requirements of Section 42(e) of
25the Internal Revenue Code, regarding rehabilitation expenditures
26except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
27apply.

28(iv) Projects for which a public agency provides direct or indirect
29long-term financial support for at least 15 percent of the total
30project development costs or projects for which the owner’s equity
31constitutes at least 30 percent of the total project development
32costs.

33(v) Projects that provide tenant amenities not generally available
34to residents of low-income housing projects.

35(4) For purposes of allocating credits pursuant to this section,
36the committee shall not give preference to any project by virtue
37of the date of submission of its application.

38(k) Section 42(l) of the Internal Revenue Code shall be modified
39as follows:

P40   1The term “secretary” shall be replaced by the term “California
2Franchise Tax Board.”

3(l) In the case where the credit allowed under this section
4exceeds the net tax, the excess may be carried over to reduce the
5net tax in the following year, and succeeding taxable years, if
6necessary, until the credit has been exhausted.

7(m) A project that received an allocation of a 1989 federal
8housing credit dollar amount shall be eligible to receive an
9allocation of a 1990 state housing credit dollar amount, subject to
10all of the following conditions:

11(1) The project was not placed in service prior to 1990.

12(2) To the extent the amendments made to this section by the
13 Statutes of 1990 conflict with any provisions existing in this section
14prior to those amendments, the prior provisions of law shall prevail.

15(3) Notwithstanding paragraph (2), a project applying for an
16allocation under this subdivision shall be subject to the
17requirements of paragraph (3) of subdivision (j).

18(n) The credit period with respect to an allocation of credit in
191989 by the California Tax Credit Allocation Committee of which
20any amount is attributable to unallocated credit from 1987 or 1988
21shall not begin until after December 31, 1989.

22(o) The provisions of Section 11407(a) of Public Law 101-508,
23relating to the effective date of the extension of the low-income
24housing credit, shall apply to calendar years after 1989.

25(p) The provisions of Section 11407(c) of Public Law 101-508,
26relating to election to accelerate credit, shall not apply.

27(q) Any unused credit may continue to be carried forward, as
28provided in subdivision (l), until the credit has been exhausted.

29(r) This section shall remain in effect on and after December 1,
301990, for as long as Section 42 of the Internal Revenue Code,
31relating to low-income housing credit, remains in effect.

32(s) The amendments to this section made by Chapter 1222 of
33the Statutes of 1993 shall apply only to taxable years beginning
34on or after January 1, 1994.

35begin insert

begin insertSEC. 2.5.end insert  

end insert

begin insertSection 17058 of the end insertbegin insertRevenue and Taxation Codeend insertbegin insert is
36amended to read:end insert

37

17058.  

(a) (1) There shall be allowed as a credit against the
38“netbegin delete tax” (asend deletebegin insert tax,” asend insert definedbegin delete inend deletebegin insert byend insert Sectionbegin delete 17039)end deletebegin insert 17039,end insert a state
39low-income housingbegin insert taxend insert credit in an amount equal to the amount
40determined in subdivision (c), computed in accordance withbegin delete the
P41   1provisions ofend delete
Section 42 of the Internal Revenue Code,begin insert relating
2to low-income housing end insert
begin insertcredit,end insert except as otherwise provided in this
3section.

4(2) begin delete“Taxpayer” end deletebegin insert“Taxpayer,” end insertfor purposes of thisbegin delete sectionend deletebegin insert section,end insert
5 means the sole owner in the case of an individual, the partners in
6the case of a partnership,begin insert members in the case of a limited liability
7company,end insert
and the shareholders in the case of an “S” corporation.

8(3) “Housingbegin delete sponsor”end deletebegin insert sponsor,end insert for purposes of thisbegin delete sectionend delete
9begin insert section,end insert means the sole owner in the case of an individual, the
10partnership in the case of a partnership,begin insert the limited liability
11company in the case of a limited liability company,end insert
and the “S”
12corporation in the case of an “S” corporation.

begin insert

13(4) “Extremely low-income” has the same meaning as in Section
1450053 of the Health and Safety Code.

end insert
begin insert

15(5)  “Very low-income” has the same meaning as in Section
1650053 of the Health and Safety Code.

end insert

17(b) (1) The amount of the credit allocated to any housing
18sponsor shall be authorized by the California Tax Credit Allocation
19Committee, or any successor thereof, based on a project’s need
20for the credit for economic feasibility in accordance with the
21requirements of this section.

22(A) The low-income housing project shall be located in
23California and shall meet either of the following requirements:

24(i) Except for projects to provide farmworker housing, as defined
25in subdivision (h) of Section 50199.7 of the Health and Safety
26Code, that are allocated credits solely under the set-aside described
27in subdivision (c) of Section 50199.20 of the Health and Safety
28Code, the project’s housing sponsor has been allocated by the
29California Tax Credit Allocation Committee a credit for federal
30income tax purposes under Section 42 of the Internal Revenue
31begin delete Code.end deletebegin insert Code, relating to low-income housing credit.end insert

32(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
33Internal Revenuebegin delete Code.end deletebegin insert Code, relating to special rule where 50
34percent or more of building is financed with tax-exempt bonds
35subject to volume cap.end insert

36(B) The California Tax Credit Allocation Committee shall not
37require fees for the credit under this section in addition to those
38fees required for applications for the tax credit pursuant to Section
3942 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
40housing credit.end insert
The committee may require a fee if the application
P42   1for the credit under this section is submitted in a calendar year
2after the year the application is submitted for the federal tax credit.

3(C) (i) For a project that receives a preliminary reservation of
4the state low-income housing tax credit, allowed pursuant to
5subdivision (a), on or after January 1, 2009,begin delete and before January 1,
62016,end delete
the credit shall be allocated to the partners of a partnership
7owning the project in accordance with the partnership agreement,
8regardless of how the federal low-income housing tax credit with
9respect to the project is allocated to the partners, or whether the
10allocation of the credit under the terms of the agreement has
11substantial economic effect, within the meaning of Section 704(b)
12of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to determination of
13distributive share.end insert

14(ii) To the extent the allocation of the credit to a partner under
15this section lacks substantial economic effect, any loss or deduction
16otherwise allowable under this part that is attributable to the sale
17or other disposition of that partner’s partnership interest made prior
18to the expiration of the federal credit shall not be allowed in the
19taxable year in which the sale or other disposition occurs, but shall
20instead be deferred until and treated as if it occurred in the first
21taxable year immediately following the taxable year in which the
22federal credit period expires for the project described in clause (i).

23(iii) This subparagraph shall not apply to a project that receives
24a preliminary reservation of state low-income housing tax credits
25under the set-aside described in subdivision (c) of Section 50199.20
26of the Health and Safety Code unless the project also receives a
27preliminary reservation of federal low-income housing tax credits.

begin delete

28(iv) This subparagraph shall cease to be operative with respect
29to any project that receives a preliminary reservation of a credit
30on or after January 1, 2016.

end delete

31(2) (A) The California Tax Credit Allocation Committee shall
32certify to the housing sponsor the amount of tax credit under this
33section allocated to the housing sponsor for each credit period.

34(B) In the case of abegin delete partnershipend deletebegin insert partnership, limited liability
35company,end insert
or an “S” corporation, the housing sponsor shall provide
36a copy of the California Tax Credit Allocation Committee
37certification to the taxpayer.

38(C) The taxpayer shall, upon request, provide a copy of the
39certification to the Franchise Tax Board.

P43   1(D) All elections made by the taxpayer pursuant to Section 42
2of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
3credit,end insert
shall apply to this section.

begin delete

4(E) (i) Except as described in clause (ii), for buildings located
5in designated difficult development areas (DDAs) or qualified
6census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
7Internal Revenue Code, credits may be allocated under this section
8in the amounts prescribed in subdivision (c), provided that the
9amount of credit allocated under Section 42 of the Internal Revenue
10Code is computed on 100 percent of the qualified basis of the
11building.

12(ii) Notwithstanding clause (i), the California Tax Credit
13 Allocation Committee may allocate the credit for buildings located
14in DDAs or QCTs that are restricted to having 50 percent of its
15occupants be special needs households, as defined in the California
16Code of Regulations by the California Tax Credit Allocation
17Committee, even if the taxpayer receives federal credits pursuant
18to Section 42(d)(5)(B) of the Internal Revenue Code, provided
19that the credit allowed under this section shall not exceed 30
20percent of the eligible basis of the building.

end delete
begin delete

21(G)

end delete

22begin insert(E)end insert (i) The California Tax Credit Allocation Committee may
23allocate a credit under this section in exchange for a credit allocated
24pursuant to Section 42(d)(5)(B) of the Internal Revenuebegin delete Codeend delete
25begin insert Code, relating to increase in credit for buildings in high-cost areas,end insert
26 in amounts up to 30 percent of the eligible basis of a building if
27the credits allowed under Section 42 of the Internal Revenuebegin delete Codeend delete
28begin insert Code, relating to low-income housing credit,end insert are reduced by an
29equivalent amount.

30(ii) An equivalent amount shall be determined by the California
31Tax Credit Allocation Committee based upon the relative amount
32required to produce an equivalent state tax credit to the taxpayer.

33(c) Section 42(b) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
34to applicable percentage,end insert
shall be modified as follows:

begin delete

35(1) In the case of any qualified low-income building placed in
36service by the housing sponsor during 1987, the term “applicable
37percentage” means 9 percent for each of the first three years and
383 percent for the fourth year for new buildings (whether or not the
39building is federally subsidized) and for existing buildings.

end delete
begin delete

P44   1(2) In the case of any qualified low-income building that receives
2an allocation after 1989 and is a new building not federally
3subsidized, the term “applicable percentage” means the following:

end delete
begin insert

4(1) In the case of any qualified low-income building that is a
5new building, as defined in Section 42 of the Internal Revenue
6Code and the regulations promulgated thereunder, and not
7federally subsidized, the term “applicable percentage” means the
8following:

end insert

9(A) For each of the first three years, the percentage prescribed
10by the Secretary of the Treasury for new buildings that are not
11federally subsidized for the taxable year, determined in accordance
12with the requirements of Sectionbegin delete 42(b)(2)end deletebegin insert 42(b)(1)end insert of the Internal
13Revenuebegin delete Code, in lieu of the percentage prescribed in Section
1442(b)(1)(A) of the Internal Revenue Code.end delete
begin insert Code. end insert

15(B) For the fourth year, the difference between 30 percent and
16the sum of the applicable percentages for the first three years.

begin delete

17(3) In the case of any qualified low-income building that receives
18an allocation after 1989 and that is a new building that is federally
19subsidized or that is an existing building that is “at risk of
20conversion,” the term “applicable percentage” means the following:

end delete
begin insert

21(2) In the case of any qualified low-income building that (i) is
22a new building, as defined in Section 42 of the Internal Revenue
23Code and the regulations promulgated thereunder, (ii) not located
24in designated difficult development areas (DDAs) or qualified
25census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
26Internal Revenue Code, and (iii) is federally subsidized, the term
27“applicable percentage” means for the first three years, 15 percent
28of the qualified basis of the building, and for the fourth year, 5
29percent of the qualified basis of the building.

end insert
begin insert

30(3) In the case of any qualified low-income building that is (i)
31an existing building, as defined in Section 42 of the Internal
32Revenue Code and the regulations promulgated thereunder, (ii)
33not located in designated difficult development areas (DDAs) or
34qualified census tracts (QCTs), as defined in Section 42(d)(5)(B)
35of the Internal Revenue Code, and (iii) is federally subsidized, the
36term applicable percentage means the following:

end insert

37(A) For each of the first three years, the percentage prescribed
38by the Secretary of the Treasury for new buildings that are federally
39subsidized for the taxable year.

P45   1(B) For the fourth year, the difference between 13 percent and
2the sum of the applicable percentages for the first three years.

begin delete

3(4) For purposes of this section, the term “at risk of conversion,”
4with respect to an existing property means a property that satisfies
5all of the following criteria:

6(A) The property is a multifamily rental housing development
7in which at least 50 percent of the units receive governmental
8assistance pursuant to any of the following:

9(i) New construction, substantial rehabilitation, moderate
10rehabilitation, property disposition, and loan management set-aside
11programs, or any other program providing project-based assistance
12pursuant to Section 8 of the United States Housing Act of 1937,
13Section 1437f of Title 42 of the United States Code, as amended.

14(ii) The Below-Market-Interest-Rate Program pursuant to
15Section 221(d)(3) of the National Housing Act, Sections
161715l(d)(3) and (5) of Title 12 of the United States Code.

17(iii) Section 236 of the National Housing Act, Section 1715z-1
18of Title 12 of the United States Code.

19(iv) Programs for rent supplement assistance pursuant to Section
20101 of the Housing and Urban Development Act of 1965, Section
211701s of Title 12 of the United States Code, as amended.

22(v) Programs pursuant to Section 515 of the Housing Act of
231949, Section 1485 of Title 42 of the United States Code, as
24 amended.

25(vi) The low-income housing credit program set forth in Section
2642 of the Internal Revenue Code.

27(B) The restrictions on rent and income levels will terminate or
28the federal insured mortgage on the property is eligible for
29prepayment any time within five years before or after the date of
30application to the California Tax Credit Allocation Committee.

31(C) The entity acquiring the property enters into a regulatory
32agreement that requires the property to be operated in accordance
33with the requirements of this section for a period equal to the
34greater of 55 years or the life of the property.

35(D) The property satisfies the requirements of Section 42(e) of
36the Internal Revenue Code regarding rehabilitation expenditures,
37except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
38apply.

end delete
begin insert

39(4) In the case of any qualified low-income building that is (i)
40a new or an existing building, (ii) located in designated difficult
P46   1development areas (DDAs) or qualified census tracts (QCTs) as
2defined in Section 42(d)(5)(B) of the Internal Revenue Code, and
3(iii) federally subsidized, the California Tax Credit Allocation
4Committee shall reduce the amount of California credit to be
5allocated under paragraphs (2) and (3) by taking into account the
6increased federal credit received due to the basis boost provided
7under Section 42(d)(5)(B) of the Internal Revenue Code.

end insert
begin insert

8(5) In the case of any qualified low-income building that meets
9all of the requirements of subparagraphs (A) through (D),
10inclusive, the term “applicable percentage” means 30 percent for
11each of the first three years and 5 percent for the fourth year. A
12qualified low-income building receiving an allocation under this
13paragraph is ineligible to also receive an allocation under
14paragraph (3).

end insert
begin insert

15(A) The qualified low-income building is at least 15 years old.

end insert
begin insert

16(B) The qualified low-income building is serving households of
17very low-income or extremely low-income such that the average
18maximum household income as restricted, pursuant to an existing
19regulatory agreement with a federal, state, county, local, or other
20governmental agency, is not more than 45 percent of the area
21median gross income, as determined under Section 42 of the
22Internal Revenue Code, adjusted by household size, and a tax
23credit regulatory agreement is entered into for a period of not less
24than 55 years restricting the average targeted household income
25to no more than 45 percent of the area median income.

end insert
begin insert

26(C) The qualified low-income building would have insufficient
27credits under paragraphs (2) and (3) to complete substantial
28rehabilitation due to a low appraised value.

end insert
begin insert

29(D) The qualified low-income building will complete the
30substantial rehabilitation in connection with the credit allocation
31herein.

end insert

32(d) The term “qualified low-income housing project” as defined
33in Section 42(c)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
34to qualified low-income building,end insert
is modified by adding the
35following requirements:

36(1) The taxpayer shall be entitled to receive a cash distribution
37from the operations of the project, after funding required reserves,
38that, at the election of the taxpayer, is equal to:

39(A) An amount not to exceed 8 percent of the lesser of:

P47   1(i) The ownerbegin delete equity thatend deletebegin insert equity, whichend insert shall include the amount
2of the capital contributions actually paid to the housing sponsor
3and shall not include any amounts until they are paid on an investor
4note.

5(ii) Twenty percent of the adjusted basis of the building as of
6the close of the first taxable year of the credit period.

7(B) The amount of the cashflow from those units in the building
8that are not low-income units. For purposes of computing cashflow
9under this subparagraph, operating costs shall be allocated to the
10low-income units using the “floor space fraction,” as defined in
11Section 42 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
12low-income housing credit.end insert

13(C) Any amount allowed to be distributed under subparagraph
14(A) that is not available for distribution during the first five years
15of the compliance period may be accumulated and distributed any
16time during the first 15 years of the compliance period but not
17thereafter.

18(2) The limitation on return shall apply in the aggregate to the
19partners if the housing sponsor is a partnership and in the aggregate
20to the shareholders if the housing sponsor is an “S” corporation.

21(3) The housing sponsor shall apply any cash available for
22distribution in excess of the amount eligible to be distributed under
23paragraph (1) to reduce the rent on rent-restricted units or to
24increase the number of rent-restricted units subject to the tests of
25 Section 42(g)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
26in general.end insert

27(e) The provisions of Section 42(f) of the Internal Revenuebegin delete Codeend delete
28begin insert Code, relating to definition and special rules relating to credit
29period,end insert
shall be modified as follows:

30(1) The term “credit period” as defined in Section 42(f)(1) of
31the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to credit period defined,end insert
32 is modified by substituting “four taxable years” for “10 taxable
33years.”

34(2) The special rule for the first taxable year of the credit period
35under Section 42(f)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
36to special rule for first year of credit period,end insert
shall not apply to the
37tax credit under this section.

38(3) Section 42(f)(3) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
39to determination of applicable percentage with respect to increases
P48   1in qualified basis after first year of credit period,end insert
is modified to
2read:

3If, as of the close of any taxable year in the compliance period,
4after the first year of the credit period, the qualified basis of any
5building exceeds the qualified basis of that building as of the close
6of the first year of the credit period, the housing sponsor, to the
7extent of its tax credit allocation, shall be eligible for a credit on
8the excess in an amount equal to the applicable percentage
9determined pursuant to subdivision (c) for the four-year period
10beginning with the taxable year in which the increase in qualified
11basis occurs.

12(f) The provisions of Section 42(h) of the Internal Revenue
13begin delete Codeend deletebegin insert Code, relating to limitation on aggregate credit allowable
14with respect to projects located in a state,end insert
shall be modified as
15follows:

16(1) Section 42(h)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
17to allocated credit amount to apply to all taxable years ending
18during or after credit allocation year,end insert
shall not be applicable and
19instead the following provisions shall be applicable:

20The total amount for the four-yearbegin insert creditend insert period of the housing
21credit dollars allocated in a calendar year to any building shall
22reduce the aggregate housing credit dollar amount of the California
23Tax Credit Allocation Committee for the calendar year in which
24the allocation is made.

25(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
26(7), and (8) of Section 42(h) of the Internal Revenuebegin delete Codeend deletebegin insert Code,
27relating to limitation on aggregate credit allowable with respect
28to projects located in a state,end insert
shall not bebegin delete applicable to this section.end delete
29begin insert applicable.end insert

30(g) The aggregate housing credit dollar amount that may be
31allocated annually by the California Tax Credit Allocation
32Committee pursuant to this section, Section 12206, and Section
3323610.5 shall be an amount equal to the sum of all the following:

34(1) begin insert(A)end insertbegin insertend insert Seventy million dollars ($70,000,000) for the 2001
35calendar year, and, for the 2002 calendar year and each calendar
36year thereafter, seventy million dollars ($70,000,000) increased
37by the percentage, if any, by which the Consumer Price Index for
38the preceding calendar year exceeds the Consumer Price Index for
39the 2001 calendar year. For the purposes of this paragraph, the
40term “Consumer Price Index” means the last Consumer Price Index
P49   1for All Urban Consumers published by the federal Department of
2Labor.

begin insert

3(B) An additional three hundred million dollars ($300,000,000)
4for the 2016 calendar year, and, for the 2017 calendar year and
5each calendar year thereafter, three hundred million dollars
6($300,000,000) increased by the percentage, if any, by which the
7Consumer Price Index for the preceding calendar year exceeds
8the Consumer Price Index for the 2016 calendar year. For the
9purposes of this paragraph, the term “Consumer Price Index”
10means the last Consumer Price Index for All Urban Consumers
11published by the federal Department of Labor. A housing sponsor
12receiving an allocation under paragraph (1) of subdivision (c)
13shall not be eligible for receipt of the housing credit allocated
14from the increased amount under this subparagraph. A housing
15sponsor receiving an allocation under paragraph (1) of subdivision
16(c) shall remain eligible for receipt of the housing credit allocated
17from the credit ceiling amount under subparagraph (A).

end insert

18(2) The unused housing credit ceiling, if any, for the preceding
19calendar years.

20(3) The amount of housing credit ceiling returned in the calendar
21year. For purposes of this paragraph, the amount of housing credit
22dollar amount returned in the calendar year equals the housing
23credit dollar amount previously allocated to any project that does
24not become a qualified low-income housing project within the
25period required by this section or to any project with respect to
26which an allocation is canceled by mutual consent of the California
27Tax Credit Allocation Committee and the allocation recipient.

28(4) Five hundred thousand dollars ($500,000) per calendar year
29for projects to provide farmworker housing, as defined in
30subdivision (h) of Section 50199.7 of the Health and Safety Code.

31(5) The amount of any unallocated or returned credits under
32former Sections 17053.14, 23608.2, and 23608.3, as those sections
33read prior to January 1, 2009, until fully exhausted for projects to
34provide farmworker housing, as defined in subdivision (h) of
35Section 50199.7 of the Health and Safety Code.

36(h) The term “compliance period” as defined in Section 42(i)(1)
37of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to compliance period,end insert
38 is modified to mean, with respect to any building, the period of 30
39consecutive taxable years beginning with the first taxable year of
40the credit period with respect thereto.

P50   1(i) Section 42(j) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
2to recapture of credit,end insert
shall not be applicable and the following
3requirements of this section shall be set forth in a regulatory
4agreement between the California Tax Credit Allocation Committee
5and the housing sponsor,begin delete whichend deletebegin insert and the regulatoryend insert agreement shall
6be subordinated, when required, to any lien or encumbrance of
7any banks or other institutional lenders to the project. The
8regulatory agreement entered into pursuant to subdivision (f) of
9Section 50199.14 of the Health and Safety Code shall apply,
10provided that the agreement includes all of the following
11provisions:

12(1) A term not less than the compliance period.

13(2) A requirement that the agreement be recorded in the official
14records of the county in which the qualified low-income housing
15project is located.

16(3) A provision stating which state and local agencies can
17enforce the regulatory agreement in the event the housing sponsor
18fails to satisfy any of the requirements of this section.

19(4) A provision that the regulatory agreement shall be deemed
20a contract enforceable by tenants as third-party beneficiaries thereto
21and that allows individuals, whether prospective, present, or former
22occupants of the building, who meet the income limitation
23applicable to the building, the right to enforce the regulatory
24agreement in any state court.

25(5) A provision incorporating the requirements of Section 42
26of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
27credit,end insert
as modified by this section.

28(6) A requirement that the housing sponsor notify the California
29Tax Credit Allocation Committee or its designee if there is a
30determination by the Internal Revenue Service that the project is
31not in compliance with Section 42(g) of the Internal Revenuebegin delete Code.end delete
32begin insert Code, relating to qualified low-income housing project.end insert

33(7) A requirement that the housing sponsor, as security for the
34performance of the housing sponsor’s obligations under the
35regulatory agreement, assign the housing sponsor’s interest in rents
36that it receives from the project, provided that until there is a
37default under the regulatory agreement, the housing sponsor is
38entitled to collect and retain the rents.

39(8) begin deleteThe end deletebegin insertA provision that the end insertremedies available in the event of
40a default under the regulatory agreement that is not cured within
P51   1a reasonable curebegin delete period,end deletebegin insert periodend insert include, but are not limited to,
2allowing any of the parties designated to enforce the regulatory
3agreement to collect all rents with respect to the project; taking
4possession of the project and operating the project in accordance
5with the regulatory agreement until the enforcer determines the
6housing sponsor is in a position to operate the project in accordance
7with the regulatory agreement; applying to any court for specific
8performance; securing the appointment of a receiver to operate
9the project; or any other relief as may be appropriate.

10(j) (1) The committee shall allocate the housing credit on a
11regular basis consisting of two or more periods in each calendar
12year during which applications may be filed and considered. The
13committee shall establish application filing deadlines, the maximum
14percentage of federal and state low-income housing tax credit
15ceiling that may be allocated by the committee in that period, and
16the approximate date on which allocations shall be made. If the
17enactment of federal or state law, the adoption of rules or
18regulations, or other similar events prevent the use of two allocation
19periods, the committee may reduce the number of periods and
20adjust the filing deadlines, maximum percentage of credit allocated,
21andbegin delete theend delete allocation dates.

22(2) The committee shall adopt a qualified allocation plan, as
23provided in Section 42(m)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code,
24relating to plans for allocation of credit among projects.end insert
In
25adopting this plan, the committee shall comply with the provisions
26of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
27begin delete Code.end deletebegin insert Code, relating to qualified allocation plan and relating to
28certain selection criteria must be used, respectively.end insert

29(3) Notwithstanding Section 42(m) of the Internal Revenue
30Code,begin insert relating to responsibilities of housing credit agencies,end insert the
31California Tax Credit Allocation Committee shall allocate housing
32credits in accordance with the qualified allocation plan and
33regulations, which shall include the following provisions:

34(A) All housing sponsors, as defined by paragraph (3) of
35subdivision (a), shall demonstrate at the time the application is
36filed with the committee that the project meets the following
37threshold requirements:

38(i) The housing sponsor shall demonstratebegin insert thatend insert there is a need
39and demand for low-income housing in the community or region
40for which it is proposed.

P52   1(ii) The project’s proposed financing, including tax credit
2proceeds, shall be sufficient to complete the project and that the
3proposed operating income shall be adequate to operate the project
4for the extended use period.

5(iii) The project shall have enforceable financing commitments,
6either construction or permanent financing, for at least 50 percent
7of the total estimated financing of the project.

8(iv) The housing sponsor shall have and maintain control of the
9site for the project.

10(v) The housing sponsor shall demonstrate that the project
11complies with all applicable local land use and zoning ordinances.

12(vi) The housing sponsor shall demonstrate that the project
13development team has the experience and the financial capacity
14to ensure project completion and operation for the extended use
15period.

16(vii) The housing sponsor shall demonstrate the amount of tax
17credit that is necessary for the financial feasibility of the project
18and its viability as a qualified low-income housing project
19throughout the extended use period, taking into account operating
20expenses, a supportable debt service, reserves, funds set aside for
21rental subsidies and required equity, and a development fee that
22does not exceed a specified percentage of the eligible basis of the
23project prior to inclusion of the development fee in the eligible
24basis, as determined by the committee.

25(B) The committee shall give a preference to those projects
26satisfying all of the threshold requirements of subparagraph (A)
27if both of the following apply:

28(i) The project serves the lowest income tenants at rents
29affordable to those tenants.

30(ii) The project is obligated to serve qualified tenants for the
31longest period.

32(C) In addition to the provisions of subparagraphs (A) and (B),
33the committee shall use the following criteria in allocating housing
34credits:

35(i) Projects serving large families in which a substantial number,
36as defined by the committee, of all residential unitsbegin delete is comprised
37ofend delete
begin insert areend insert low-income units with threebegin delete andend deletebegin insert orend insert more bedrooms.

38(ii) Projects providing single-room occupancy units serving
39very low income tenants.

P53   1(iii) begin insert(I)end insertbegin insertend insert Existing projects that are “at risk ofbegin delete conversion,” as
2defined by paragraph (4) of subdivision (c).end delete
begin insert conversion.end insertbegin insertend insert

begin insert

3(II) For purposes of this section, the term “at risk of
4conversion,” with respect to an existing property means a property
5that satisfies all of the following criteria:

end insert
begin insert

6(ia) The property is a multifamily rental housing development
7in which at least 50 percent of the units receive governmental
8assistance pursuant to any of the following:

end insert
begin insert

9(Ia) New construction, substantial rehabilitation, moderate
10rehabilitation, property disposition, and loan management set-aside
11programs, or any other program providing project-based
12assistance pursuant to Section 8 of the United States Housing Act
13of 1937, Section 1437f of Title 42 of the United States Code, as
14amended.

end insert
begin insert

15(Ib) The Below-Market-Interest-Rate Program pursuant to
16Section 221(d)(3) of the National Housing Act, Sections 1715l(d)(3)
17and (5) of Title 12 of the United States Code.

end insert
begin insert

18(Ic) Section 236 of the National Housing Act, Section 1715z-1
19of Title 12 of the United States Code.

end insert
begin insert

20(Id) Programs for rent supplement assistance pursuant to
21Section 18 101 of the Housing and Urban Development Act of
221965, Section 1701s of Title 12 of the United States Code, as
23amended.

end insert
begin insert

24(Ie) Programs pursuant to Section 515 of the Housing Act of
251949, Section 1485 of Title 42 of the United States Code, as
26amended.

end insert
begin insert

27(If) The low-income housing credit program set forth in Section
2842 of the Internal Revenue Code.

end insert
begin insert

29(ib) The restrictions on rent and income levels will terminate
30or the federal insured mortgage on the property is eligible for
31prepayment any time within five years before or after the date of
32application to the California Tax Credit Allocation Committee.

end insert
begin insert

33(ic) The entity acquiring the property enters into a regulatory
34agreement that requires the property to be operated in accordance
35with the requirements of this section for a period equal to the
36greater of 55 years or the life of the property.

end insert
begin insert

37(id) The property satisfies the requirements of Section 42(e) of
38the Internal Revenue Code, regarding rehabilitation expenditures
39except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
40apply.

end insert

P54   1(iv) Projects for which a public agency provides direct or indirect
2long-term financial support for at least 15 percent of the total
3project development costs or projects for which the owner’s equity
4constitutes at least 30 percent of the total project development
5costs.

6(v) Projects that provide tenant amenities not generally available
7to residents of low-income housing projects.

8(4) For purposes of allocating credits pursuant to this section,
9the committee shall not give preference to any project by virtue
10of the date of submission of its application.

11(k) Section 42(l) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
12to certifications and other reports to secretary,end insert
shall be modified
13as follows:

14The term “secretary” shall be replaced by the termbegin delete “California
15Franchiseend delete
begin insert “Franchiseend insert Tax Board.”

16(l) In the case where the credit allowed under this section
17exceeds the net tax, the excessbegin delete creditend delete may be carried over to reduce
18the net tax in the following year, and succeedingbegin delete taxableend delete years, if
19necessary, until the credit has been exhausted.

20(m) A project that received an allocation of a 1989 federal
21housing credit dollar amount shall be eligible to receive an
22allocation of a 1990 state housing credit dollar amount, subject to
23all of the following conditions:

24(1) The project was not placed in service prior to 1990.

25(2) To the extent the amendments made to this section by the
26Statutes of 1990 conflict with any provisions existing in this section
27prior to those amendments, the prior provisions of law shall prevail.

28(3) Notwithstanding paragraph (2), a project applying for an
29allocation under this subdivision shall be subject to the
30requirements of paragraph (3) of subdivision (j).

31(n) The credit period with respect to an allocation of credit in
321989 by the California Tax Credit Allocation Committee of which
33any amount is attributable to unallocated credit from 1987 or 1988
34shall not begin until after December 31, 1989.

35(o) The provisions of Section 11407(a) of Public Law 101-508,
36relating to the effective date of the extension of the low-income
37housing credit, shall apply to calendar years after 1989.

38(p) The provisions of Section 11407(c) of Public Law 101-508,
39relating to election to accelerate credit, shall not apply.

P55   1(q) Any unused credit may continue to be carried forward, as
2provided in subdivision (l), until the credit has been exhausted.

3begin insert(r)end insertbegin insertend insert This section shall remain in effect on and after December
41, 1990, for as long as Section 42 of the Internal Revenue Code,
5relating to low-income housingbegin delete credits,end deletebegin insert credit,end insert remains in effect.

begin insert

6(s) (1) For a project that receives a preliminary reservation
7under this section beginning on or after January 1, 2016, a
8 taxpayer may make an irrevocable election in its application to
9the California Tax Credit Allocation Committee to sell all or any
10portion of any credit allowed under this section to one or more
11unrelated parties for each taxable year in which the credit is
12allowed subject to both of the following conditions:

end insert
begin insert

13(A) The credit is sold for consideration that is not less than 80
14percent of the amount of the credit.

end insert
begin insert

15(B) The unrelated party or parties purchasing any or all of the
16credit pursuant to this subdivision is a taxpayer allowed the credit
17under this section for the taxable year of the purchase or any prior
18taxable year or is a taxpayer allowed the federal credit under
19Section 42 of the Internal Revenue Code, relating to low-income
20housing credit, for the taxable year of the purchase or any prior
21taxable year in connection with any project located in this state.
22For purposes of this subparagraph, “taxpayer allowed the credit
23under this section” means a taxpayer that is allowed the credit
24under this section without regard to the purchase of a credit
25pursuant to this subdivision.

end insert
begin insert

26(2) (A) The taxpayer that originally received the credit shall
27report to the California Tax Credit Allocation Committee within
2810 days of the sale of the credit, in the form and manner specified
29by the California Tax Credit Allocation Committee, all required
30information regarding the purchase and sale of the credit,
31including the social security or other taxpayer identification
32number of the unrelated party to whom the credit has been sold,
33the face amount of the credit sold, and the amount of consideration
34received by the taxpayer for the sale of the credit.

end insert
begin insert

35(B) The California Tax Credit Allocation Committee shall
36provide an annual listing to the Franchise Tax Board, in a form
37and manner agreed upon by the California Tax Credit Allocation
38Committee and the Franchise Tax Board, of the taxpayers that
39have sold or purchased a credit pursuant to this subdivision.

end insert
begin insert

P56   1(3) (A) A credit may be sold pursuant to this subdivision to
2more than one unrelated party.

end insert
begin insert

3(B) (i) Except as provided in clause (ii), a credit shall not be
4resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

5(ii) All or any portion of any credit allowed under this section
6may be resold once by an original purchaser to one or more
7unrelated parties, subject to all of the requirements of this
8subdivision.

end insert
begin insert

9(4) Notwithstanding any other provision of law, the taxpayer
10that originally received the credit that is sold pursuant to
11paragraph (1) shall remain solely liable for all obligations and
12liabilities imposed on the taxpayer by this section with respect to
13the credit, none of which shall apply to any party to whom the
14credit has been sold or subsequently transferred. Parties who
15purchase credits pursuant to paragraph (1) shall be entitled to
16utilize the purchased credits in the same manner in which the
17taxpayer that originally received the credit could utilize them.

end insert
begin insert

18(5) A taxpayer shall not sell a credit allowed by this section if
19the taxpayer was allowed the credit on any tax return of the
20taxpayer.

end insert
begin insert

21(6) Notwithstanding paragraph (1), the taxpayer, with the
22 approval of the Executive Director of the California Tax Credit
23Allocation Committee, may rescind the election to sell all or any
24portion of the credit allowed under this section if the consideration
25for the credit falls below 80 percent of the amount of the credit
26after the California Tax Credit Allocation Committee reservation.

end insert
begin insert

27(t) The California Tax Credit Allocation Committee may
28prescribe rules, guidelines, or procedures necessary or appropriate
29to carry out the purposes of this section, including any guidelines
30regarding the allocation of the credit allowed under this section.
31Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
323 of Title 2 of the Government Code shall not apply to any rule,
33guideline, or procedure prescribed by the California Tax Credit
34Allocation Committee pursuant to this section.

end insert
begin delete

35(r)

end delete

36begin insert(u)end insert The amendments to this section made bybegin delete the act adding this
37subdivisionend delete
begin insert Chapter 1222 of the Statutes of 1993end insert shall apply only
38to taxable years beginning on or after January 1, 1994.

39

SEC. 3.  

Section 23610.5 of the Revenue and Taxation Code
40 is amended to read:

P57   1

23610.5.  

(a) (1) There shall be allowed as a credit against the
2“tax,” as defined by Section 23036, a state low-income housing
3tax credit in an amount equal to the amount determined in
4subdivision (c), computed in accordance with Section 42 of the
5Internal Revenue Code except as otherwise provided in this section.

6(2) “Taxpayer,” for purposes of this section, means the sole
7owner in the case of a “C” corporation, the partners in the case of
8a partnership, members in the case of a limited liability company,
9and the shareholders in the case of an “S” corporation.

10(3) “Housing sponsor,” for purposes of this section, means the
11sole owner in the case of a “C” corporation, the partnership in the
12case of a partnership, the limited liability company in the case of
13a limited liability company, and the “S” corporation in the case of
14an “S” corporation.

15(4) “Extremely low-income” has the same meaning as in Section
1650053 of the Health and Safety Code.

17(5) “Very low-income” has the same meaning as in Section
1850053 of the Health and Safety Code.

19(b) (1) The amount of the credit allocated to any housing
20sponsor shall be authorized by the California Tax Credit Allocation
21Committee, or any successor thereof, based on a project’s need
22for the credit for economic feasibility in accordance with the
23requirements of this section.

24(A) The low-income housing project shall be located in
25California and shall meet either of the following requirements:

26(i) Except for projects to provide farmworker housing, as defined
27in subdivision (h) of Section 50199.7 of the Health and Safety
28Code, that are allocated credits solely under the set-aside described
29in subdivision (c) of Section 50199.20 of the Health and Safety
30Code, the project’s housing sponsor has been allocated by the
31California Tax Credit Allocation Committee a credit for federal
32income tax purposes under Section 42 of the Internal Revenue
33Code.

34(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
35Internal Revenue Code.

36(B) The California Tax Credit Allocation Committee shall not
37require fees for the credit under this section in addition to those
38fees required for applications for the tax credit pursuant to Section
3942 of the Internal Revenue Code. The committee may require a
40fee if the application for the credit under this section is submitted
P58   1in a calendar year after the year the application is submitted for
2the federal tax credit.

3(C) (i) For a project that receives a preliminary reservation of
4the state low-income housing tax credit, allowed pursuant to
5subdivision (a), on or after January 1, 2009, and before January 1,
62016, the credit shall be allocated to the partners of a partnership
7owning the project in accordance with the partnership agreement,
8regardless of how the federal low-income housing tax credit with
9respect to the project is allocated to the partners, or whether the
10allocation of the credit under the terms of the agreement has
11substantial economic effect, within the meaning of Section 704(b)
12of the Internal Revenue Code.

13(ii) To the extent the allocation of the credit to a partner under
14this section lacks substantial economic effect, any loss or deduction
15otherwise allowable under this part that is attributable to the sale
16or other disposition of that partner’s partnership interest made prior
17to the expiration of the federal credit shall not be allowed in the
18taxable year in which the sale or other disposition occurs, but shall
19instead be deferred until and treated as if it occurred in the first
20taxable year immediately following the taxable year in which the
21federal credit period expires for the project described in clause (i).

22(iii) This subparagraph shall not apply to a project that receives
23a preliminary reservation of state low-income housing tax credits
24under the set-aside described in subdivision (c) of Section 50199.20
25of the Health and Safety Code unless the project also receives a
26preliminary reservation of federal low-income housing tax credits.

27(iv) This subparagraph shall cease to be operative with respect
28to any project that receives a preliminary reservation of a credit
29on or after January 1, 2016.

30(2) (A) The California Tax Credit Allocation Committee shall
31certify to the housing sponsor the amount of tax credit under this
32section allocated to the housing sponsor for each credit period.

33(B) In the case of a partnership, limited liability company, or
34an “S” corporation, the housing sponsor shall provide a copy of
35the California Tax Credit Allocation Committee certification to
36the taxpayer.

37(C) The taxpayer shall, upon request, provide a copy of the
38certification to the Franchise Tax Board.

39(D) All elections made by the taxpayer pursuant to Section 42
40of the Internal Revenue Code shall apply to this section.

P59   1(E) (i) The California Tax Credit Allocation Committee may
2allocate a credit under this section in exchange for a credit allocated
3pursuant to Section 42(d)(5)(B) of the Internal Revenue Code in
4amounts up to 30 percent of the eligible basis of a building if the
5credits allowed under Section 42 of the Internal Revenue Code are
6reduced by an equivalent amount.

7(ii) An equivalent amount shall be determined by the California
8Tax Credit Allocation Committee based upon the relative amount
9required to produce an equivalent state tax credit to the taxpayer.

10(c) Section 42(b) of the Internal Revenue Code shall be modified
11as follows:

12(1) In the case of any qualified low-income building that is a
13new building, as defined in Section 42 of the Internal Revenue
14Code and the regulations promulgated thereunder, and not federally
15subsidized, the term “applicable percentage” means the following:

16(A) For each of the first three years, the percentage prescribed
17by the Secretary of the Treasury for new buildings that are not
18federally subsidized for the taxable year, determined in accordance
19with the requirements of Section 42(b)(1) of the Internal Revenue
20begin delete Code in lieu of the percentage prescribed in Section 42(b)(1)(A)
21of the Internal Revenue Code.end delete
begin insert Code. end insert

22(B) For the fourth year, the difference between 30 percent and
23the sum of the applicable percentages for the first three years.

24(2) In the case of any qualified low-income building that (i) is
25a new building, as defined in Section 42 of the Internal Revenue
26Code and the regulations promulgated thereunder, (ii) not located
27in designated difficult development areas (DDAs) or qualified
28census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
29Internal Revenue Code, and (iii) is federally subsidized, the term
30“applicable percentage” means for the first three years, 15 percent
31of the qualified basis of the building, and for the fourth year, 5
32percent of the qualified basis of the building.

33(3) In the case of any qualified low-income building that is (i)
34an existing building, as defined in Section 42 of the Internal
35Revenue Code and the regulations promulgated thereunder, (ii)
36not located in designated difficult development areas (DDAs) or
37qualified census tracts (QCTs), as defined in Section 42(d)(5)(B)
38of the Internal Revenue Code, and (iii) is federally subsidized, the
39term applicable percentage means the following:

P60   1(A) For each of the first three years, the percentage prescribed
2by the Secretary of the Treasury for new buildings that are federally
3subsidized for the taxable year.

4(B) For the fourth year, the difference between 13 percent and
5the sum of the applicable percentages for the first three years.

6(4) In the case of any qualified low-income building that is (i)
7a new or an existing building, (ii) located in designated difficult
8development areas (DDAs) or qualified census tracts (QCTs) as
9defined in Section 42(d)(5)(B) of the Internal Revenue Code, and
10(iii) federally subsidized, the California Tax Credit Allocation
11Committee shall determine the amount of credit to be allocated
12under subparagraph (E) of paragraph (2) of subdivision (b) required
13to produce an equivalent state tax credit to the taxpayer, as
14produced in paragraph (2), taking into account the basis boost
15provided under Section 42(d)(5)(B) of the Internal Revenue Code.

16(5) In the case of any qualified low-income building that meets
17all of the requirements of subparagraphs (A) through (D), inclusive,
18the term “applicable percentage” means 30 percent for each of the
19first three years and 5 percent for the fourth year. A qualified
20low-income building receiving an allocation under this paragraph
21is ineligible to also receive an allocation under paragraph (3).

22(A) The qualified low-income building is at least 15 years old.

23(B) The qualified low-income building is serving households
24of very low-income or extremely low-income such that the average
25maximum household income as restricted, pursuant to an existing
26regulatory agreement with a federal, state, county, local, or other
27governmental agency, is not more than 45 percent of the area
28median gross income, as determined under Section 42 of the
29Internal Revenue Code, adjusted by household size, and a tax credit
30regulatory agreement is entered into for a period of not less than
3155 years restricting the average targeted household income to no
32more than 45 percent of the area median income.

33(C) The qualified low-income building would have insufficient
34credits under paragraphs (2) and (3) to complete substantial
35rehabilitation due to a low appraised value.

36(D) The qualified low-income building will complete the
37substantial rehabilitation in connection with the credit allocation
38herein.

P61   1(d) The term “qualified low-income housing project” as defined
2in Section 42(c)(2) of the Internal Revenue Code is modified by
3adding the following requirements:

4(1) The taxpayer shall be entitled to receive a cash distribution
5from the operations of the project, after funding required reserves,
6that at the election of the taxpayer, is equal to:

7(A) An amount not to exceed 8 percent of the lesser of:

8(i) The owner equity, that shall include the amount of the capital
9contributions actually paid to the housing sponsor and shall not
10include any amounts until they are paid on an investor note.

11(ii) Twenty percent of the adjusted basis of the building as of
12the close of the first taxable year of the credit period.

13(B) The amount of the cashflow from those units in the building
14that are not low-income units. For purposes of computing cashflow
15under this subparagraph, operating costs shall be allocated to the
16low-income units using the “floor space fraction,” as defined in
17Section 42 of the Internal Revenue Code.

18(C) Any amount allowed to be distributed under subparagraph
19(A) that is not available for distribution during the first five years
20of the compliance period may be accumulated and distributed any
21time during the first 15 years of the compliance period but not
22thereafter.

23(2) The limitation on return shall apply in the aggregate to the
24partners if the housing sponsor is a partnership and in the aggregate
25to the shareholders if the housing sponsor is an “S” corporation.

26(3) The housing sponsor shall apply any cash available for
27distribution in excess of the amount eligible to be distributed under
28paragraph (1) to reduce the rent on rent-restricted units or to
29increase the number of rent-restricted units subject to the tests of
30Section 42(g)(1) of the Internal Revenue Code.

31(e) The provisions of Section 42(f) of the Internal Revenue Code
32shall be modified as follows:

33(1) The term “credit period” as defined in Section 42(f)(1) of
34the Internal Revenue Code is modified by substituting “four taxable
35years” for “10 taxable years.”

36(2) The special rule for the first taxable year of the credit period
37under Section 42(f)(2) of the Internal Revenue Code shall not apply
38to the tax credit under this section.

39(3) Section 42(f)(3) of the Internal Revenue Code is modified
40to read:

P62   1If, as of the close of any taxable year in the compliance period,
2after the first year of the credit period, the qualified basis of any
3building exceeds the qualified basis of that building as of the close
4of the first year of the credit period, the housing sponsor, to the
5extent of its tax credit allocation, shall be eligible for a credit on
6the excess in an amount equal to the applicable percentage
7determined pursuant to subdivision (c) for the four-year period
8beginning with the later of the taxable years in which the increase
9in qualified basis occurs.

10(f) The provisions of Section 42(h) of the Internal Revenue
11Code shall be modified as follows:

12(1) Section 42(h)(2) of the Internal Revenue Code shall not be
13applicable and instead the following provisions shall be applicable:

14The total amount for the four-year credit period of the housing
15credit dollars allocated in a calendar year to any building shall
16reduce the aggregate housing credit dollar amount of the California
17Tax Credit Allocation Committee for the calendar year in which
18the allocation is made.

19(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
20(7), and (8) of Section 42(h) of the Internal Revenue Code shall
21not be applicable.

22(g) The aggregate housing credit dollar amount that may be
23allocated annually by the California Tax Credit Allocation
24Committee pursuant to this section, Section 12206, and Section
2517058 shall be an amount equal to the sum of all the following:

26(1) (A) Seventy million dollars ($70,000,000) for the 2001
27calendar year, and, for the 2002 calendar year and each calendar
28year thereafter, seventy million dollars ($70,000,000) increased
29by the percentage, if any, by which the Consumer Price Index for
30the preceding calendar year exceeds the Consumer Price Index for
31the 2001 calendar year. For the purposes of this paragraph, the
32term “Consumer Price Index” means the last Consumer Price Index
33for All Urban Consumers published by the federal Department of
34Labor.

35(B)  An additional three hundred million dollars ($300,000,000)
36for the 2016 calendar year, and, for the 2017 calendar year and
37each calendar year thereafter, three hundred million dollars
38($300,000,000) increased by the percentage, if any, by which the
39Consumer Price Index for the preceding calendar year exceeds the
40Consumer Price Index for the 2016 calendar year. For the purposes
P63   1of this paragraph, the term “Consumer Price Index” means the last
2Consumer Price Index for All Urban Consumers published by the
3federal Department of Labor. A housing sponsor receiving an
4allocation under paragraph (1) of subdivision (c) shall not be
5eligible for receipt of the housing credit allocated from the
6increased amount under this subparagraph. A housing sponsor
7receiving an allocation under paragraph (1) of subdivision (c) shall
8remain eligible for receipt of the housing credit allocated from the
9credit ceiling amount under subparagraph (A).

10(2) The unused housing credit ceiling, if any, for the preceding
11calendar years.

12(3) The amount of housing credit ceiling returned in the calendar
13year. For purposes of this paragraph, the amount of housing credit
14dollar amount returned in the calendar year equals the housing
15credit dollar amount previously allocated to any project that does
16not become a qualified low-income housing project within the
17period required by this section or to any project with respect to
18which an allocation is canceled by mutual consent of the California
19Tax Credit Allocation Committee and the allocation recipient.

20(4) Five hundred thousand dollars ($500,000) per calendar year
21for projects to provide farmworker housing, as defined in
22subdivision (h) of Section 50199.7 of the Health and Safety Code.

23(5) The amount of any unallocated or returned credits under
24former Sections 17053.14, 23608.2, and 23608.3, as those sections
25read prior to January 1, 2009, until fully exhausted for projects to
26provide farmworker housing, as defined in subdivision (h) of
27Section 50199.7 of the Health and Safety Code.

28(h) The term “compliance period” as defined in Section 42(i)(1)
29of the Internal Revenue Code is modified to mean, with respect to
30any building, the period of 30 consecutive taxable years beginning
31with the first taxable year of the credit period with respect thereto.

32(i) Section 42(j) of the Internal Revenue Code shall not be
33applicable and the following shall be substituted in its place:

34The requirements of this section shall be set forth in a regulatory
35agreement between the California Tax Credit Allocation Committee
36and the housing sponsor, and the regulatory agreement shall be
37subordinated, when required, to any lien or encumbrance of any
38banks or other institutional lenders to the project. The regulatory
39agreement entered into pursuant to subdivision (f) of Section
P64   150199.14 of the Health and Safety Code shall apply, provided that
2the agreement includes all of the following provisions:

3(1) A term not less than the compliance period.

4(2) A requirement that the agreement be recorded in the official
5records of the county in which the qualified low-income housing
6project is located.

7(3) A provision stating which state and local agencies can
8enforce the regulatory agreement in the event the housing sponsor
9fails to satisfy any of the requirements of this section.

10(4) A provision that the regulatory agreement shall be deemed
11a contract enforceable by tenants as third-party beneficiaries
12thereto, and that allows individuals, whether prospective, present,
13or former occupants of the building, who meet the income
14limitation applicable to the building, the right to enforce the
15regulatory agreement in any state court.

16(5) A provision incorporating the requirements of Section 42
17of the Internal Revenue Code as modified by this section.

18(6) A requirement that the housing sponsor notify the California
19Tax Credit Allocation Committee or its designee if there is a
20determination by the Internal Revenue Service that the project is
21not in compliance with Section 42(g) of the Internal Revenue Code.

22(7) A requirement that the housing sponsor, as security for the
23performance of the housing sponsor’s obligations under the
24regulatory agreement, assign the housing sponsor’s interest in rents
25that it receives from the project, provided that until there is a
26default under the regulatory agreement, the housing sponsor is
27entitled to collect and retain the rents.

28(8) The remedies available in the event of a default under the
29regulatory agreement that is not cured within a reasonable cure
30period include, but are not limited to, allowing any of the parties
31designated to enforce the regulatory agreement to collect all rents
32with respect to the project; taking possession of the project and
33operating the project in accordance with the regulatory agreement
34until the enforcer determines the housing sponsor is in a position
35to operate the project in accordance with the regulatory agreement;
36applying to any court for specific performance; securing the
37appointment of a receiver to operate the project; or any other relief
38as may be appropriate.

39(j) (1) The committee shall allocate the housing credit on a
40regular basis consisting of two or more periods in each calendar
P65   1year during which applications may be filed and considered. The
2committee shall establish application filing deadlines, the maximum
3percentage of federal and state low-income housing tax credit
4ceiling that may be allocated by the committee in that period, and
5the approximate date on which allocations shall be made. If the
6enactment of federal or state law, the adoption of rules or
7regulations, or other similar events prevent the use of two allocation
8periods, the committee may reduce the number of periods and
9adjust the filing deadlines, maximum percentage of credit allocated,
10and allocation dates.

11(2) The committee shall adopt a qualified allocation plan, as
12provided in Section 42(m)(1) of the Internal Revenue Code. In
13adopting this plan, the committee shall comply with the provisions
14of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
15Code, respectively.

16(3) Notwithstanding Section 42(m) of the Internal Revenue
17Code the California Tax Credit Allocation Committee shall allocate
18housing credits in accordance with the qualified allocation plan
19and regulations, which shall include the following provisions:

20(A) All housing sponsors, as defined by paragraph (3) of
21subdivision (a), shall demonstrate at the time the application is
22filed with the committee that the project meets the following
23threshold requirements:

24(i) The housing sponsor shall demonstrate there is a need for
25low-income housing in the community or region for which it is
26proposed.

27(ii) The project’s proposed financing, including tax credit
28proceeds, shall be sufficient to complete the project and shall be
29adequate to operate the project for the extended use period.

30(iii) The project shall have enforceable financing commitments,
31either construction or permanent financing, for at least 50 percent
32of the total estimated financing of the project.

33(iv) The housing sponsor shall have and maintain control of the
34site for the project.

35(v) The housing sponsor shall demonstrate that the project
36complies with all applicable local land use and zoning ordinances.

37(vi) The housing sponsor shall demonstrate that the project
38development team has the experience and the financial capacity
39 to ensure project completion and operation for the extended use
40period.

P66   1(vii) The housing sponsor shall demonstrate the amount of tax
2credit that is necessary for the financial feasibility of the project
3and its viability as a qualified low-income housing project
4throughout the extended use period, taking into account operating
5expenses, a supportable debt service, reserves, funds set aside for
6rental subsidies and required equity, and a development fee that
7does not exceed a specified percentage of the eligible basis of the
8project prior to inclusion of the development fee in the eligible
9basis, as determined by the committee.

10(B) The committee shall give a preference to those projects
11satisfying all of the threshold requirements of subparagraph (A)
12if both of the following apply:

13(i) The project serves the lowest income tenants at rents
14affordable to those tenants.

15(ii) The project is obligated to serve qualified tenants for the
16longest period.

17(C) In addition to the provisions of subparagraphs (A) and (B),
18the committee shall use the following criteria in allocating housing
19credits:

20(i) Projects serving large families in which a substantial number,
21as defined by the committee, of all residential units are low-income
22units with three or more bedrooms.

23(ii) Projects providing single-room occupancy units serving
24very low income tenants.

25(iii) (I) Existing projects that are “at risk of conversion.”

26(II) For purposes of this section, the term “at risk of conversion,”
27with respect to an existing property means a property that satisfies
28all of the following criteria:

29(ia) The property is a multifamily rental housing development
30in which at least 50 percent of the units receive governmental
31assistance pursuant to any of the following:

32(Ia) New construction, substantial rehabilitation, moderate
33rehabilitation, property disposition, and loan management set-aside
34programs, or any other program providing project-based assistance
35pursuant to Section 8 of the United States Housing Act of 1937,
36Section 1437f of Title 42 of the United States Code, as amended.

37(Ib) The Below-Market-Interest-Rate Program pursuant to
38Section 221(d)(3) of the National Housing Act, Sections
391715l(d)(3) and (5) of Title 12 of the United States Code.

P67   1(Ic) Section 236 of the National Housing Act, Section 1715z-1
2of Title 12 of the United States Code.

3(Id) Programs for rent supplement assistance pursuant to Section
418 101 of the Housing and Urban Development Act of 1965,
5Section 1701s of Title 12 of the United States Code, as amended.

6(Ie) Programs pursuant to Section 515 of the Housing Act of
71949, Section 1485 of Title 42 of the United States Code, as
8amended.

9(If) The low-income housing credit program set forth in Section
1042 of the Internal Revenue Code.

11(ib) The restrictions on rent and income levels will terminate
12or the federal insured mortgage on the property is eligible for
13prepayment any time within five years before or after the date of
14application to the California Tax Credit Allocation Committee.

15(ic) The entity acquiring the property enters into a regulatory
16agreement that requires the property to be operated in accordance
17with the requirements of this section for a period equal to the
18greater of 55 years or the life of the property.

19(id) The property satisfies the requirements of Section 42(e) of
20the Internal Revenue Code, regarding rehabilitation expenditures
21except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
22apply.

23(iv) Projects for which a public agency provides direct or indirect
24long-term financial support for at least 15 percent of the total
25project development costs or projects for which the owner’s equity
26constitutes at least 30 percent of the total project development
27costs.

28(v) Projects that provide tenant amenities not generally available
29to residents of low-income housing projects.

30(4) For purposes of allocating credits pursuant to this section,
31the committee shall not give preference to any project by virtue
32of the date of submission of its application except to break a tie
33when two or more of the projects have an equal rating.

34(5) Not less than 20 percent of the low-income housing tax
35credits available annually under this section, Section 12206, and
36Section 17058 shall be set aside for allocation to rural areas as
37defined in Section 50199.21 of the Health and Safety Code. Any
38amount of credit set aside for rural areas remaining on or after
39October 31 of any calendar year shall be available for allocation
40 to any eligible project. No amount of credit set aside for rural areas
P68   1shall be considered available for any eligible project so long as
2there are eligible rural applications pending on October 31.

3(k) Section 42(l) of the Internal Revenue Code shall be modified
4as follows:

5The term “secretary” shall be replaced by the term “California
6Franchise Tax Board.”

7(l) In the case where the credit allowed under this section
8exceeds the “tax,” the excess may be carried over to reduce the
9 “tax” in the following year, and succeeding taxable years if
10necessary, until the credit has been exhausted.

11(m) A project that received an allocation of a 1989 federal
12housing credit dollar amount shall be eligible to receive an
13allocation of a 1990 state housing credit dollar amount, subject to
14all of the following conditions:

15(1) The project was not placed in service prior to 1990.

16(2) To the extent the amendments made to this section by the
17Statutes of 1990 conflict with any provisions existing in this section
18prior to those amendments, the prior provisions of law shall prevail.

19(3) Notwithstanding paragraph (2), a project applying for an
20allocation under this subdivision shall be subject to the
21requirements of paragraph (3) of subdivision (j).

22(n) The credit period with respect to an allocation of credit in
231989 by the California Tax Credit Allocation Committee of which
24any amount is attributable to unallocated credit from 1987 or 1988
25shall not begin until after December 31, 1989.

26(o) The provisions of Section 11407(a) of Public Law 101-508,
27relating to the effective date of the extension of the low-income
28housing credit, shall apply to calendar years after 1989.

29(p) The provisions of Section 11407(c) of Public Law 101-508,
30relating to election to accelerate credit, shall not apply.

31(q) (1) A corporation may elect to assign any portion of any
32credit allowed under this section to one or more affiliated
33corporations for each taxable year in which the credit is allowed.
34For purposes of this subdivision, “affiliated corporation” has the
35meaning provided in subdivision (b) of Section 25110, as that
36section was amended by Chapter 881 of the Statutes of 1993, as
37of the last day of the taxable year in which the credit is allowed,
38except that “100 percent” is substituted for “more than 50 percent”
39wherever it appears in the section, as that section was amended by
40Chapter 881 of the Statutes of 1993, and “voting common stock”
P69   1is substituted for “voting stock” wherever it appears in the section,
2as that section was amended by Chapter 881 of the Statutes of
31993.

4(2) The election provided in paragraph (1):

5(A) May be based on any method selected by the corporation
6that originally receives the credit.

7(B) Shall be irrevocable for the taxable year the credit is allowed,
8once made.

9(C) May be changed for any subsequent taxable year if the
10election to make the assignment is expressly shown on each of the
11returns of the affiliated corporations that assign and receive the
12credits.

13(r) Any unused credit may continue to be carried forward, as
14provided in subdivision (l), until the credit has been exhausted.

15(s) This section shall remain in effect on and after December 1,
161990, for as long as Section 42 of the Internal Revenue Code,
17relating to low-income housing credit, remains in effect.

18(t) The amendments to this section made by Chapter 1222 of
19the Statutes of 1993 shall apply only to taxable years beginning
20on or after January 1, 1994, except that paragraph (1) of subdivision
21(q), as amended, shall apply to taxable years beginning on or after
22January 1, 1993.

23begin insert

begin insertSEC. 3.5.end insert  

end insert

begin insertSection 23610.5 of the end insertbegin insertRevenue and Taxation Codeend insert
24begin insert is amended to read:end insert

25

23610.5.  

(a) (1) There shall be allowed as a credit against the
26begin delete “tax” (asend deletebegin insert “tax,” asend insert defined by Sectionbegin delete 23036)end deletebegin insert 23036,end insert a state
27low-income housing tax credit in an amount equal to the amount
28determined in subdivision (c), computed in accordance with Section
2942 of the Internal Revenuebegin delete Code of 1986,end deletebegin insert Code, relating to
30low-income housing credit,end insert
except as otherwise provided in this
31section.

32(2) “Taxpayer,” for purposes of this section, means the sole
33owner in the case of a “C” corporation, the partners in the case of
34a partnership,begin insert members in the case of a limited liability company,end insert
35 and the shareholders in the case of an “S” corporation.

36(3) “Housing sponsor,” for purposes of this section, means the
37sole owner in the case of a “C” corporation, the partnership in the
38case of a partnership,begin insert the limited liability company in the case of
39a limited liability company,end insert
and the “S” corporation in the case of
40an “S” corporation.

begin insert

P70   1(4) “Extremely low-income” has the same meaning as in Section
250053 of the Health and Safety Code.

end insert
begin insert

3(5) “Very low-income” has the same meaning as in Section
450053 of the Health and Safety Code.

end insert

5(b) (1) The amount of the credit allocated to any housing
6sponsor shall be authorized by the California Tax Credit Allocation
7Committee, or any successor thereof, based on a project’s need
8for the credit for economic feasibility in accordance with the
9requirements of this section.

10(A) The low-income housing project shall be located in
11California and shall meet either of the following requirements:

12(i) Except for projects to provide farmworker housing, as defined
13in subdivision (h) of Section 50199.7 of the Health and Safety
14Code, that are allocated credits solely under the set-aside described
15in subdivision (c) of Section 50199.20 of the Health and Safety
16Code, the project’s housing sponsor has been allocated by the
17California Tax Credit Allocation Committee a credit for federal
18income tax purposes under Section 42 of the Internal Revenue
19begin delete Code.end deletebegin insert Code, relating to low-income housing credit.end insert

20(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
21Internal Revenuebegin delete Code.end deletebegin insert Code, relating to special rule where 50
22percent or more of building is financed with tax-exempt bonds
23subject to volume cap.end insert

24(B) The California Tax Credit Allocation Committee shall not
25require fees for the credit under this section in addition to those
26fees required for applications for the tax credit pursuant to Section
2742 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
28housing credit.end insert
The committee may require a fee if the application
29for the credit under this section is submitted in a calendar year
30after the year the application is submitted for the federal tax credit.

31(C) (i) For a project that receives a preliminary reservation of
32the state low-income housing tax credit, allowed pursuant to
33subdivision (a), on or after January 1, 2009,begin delete and before January 1,
342016,end delete
the credit shall be allocated to the partners of a partnership
35owning the project in accordance with the partnership agreement,
36regardless of how the federal low-income housing tax credit with
37respect to the project is allocated to the partners, or whether the
38allocation of the credit under the terms of the agreement has
39substantial economic effect, within the meaning of Section 704(b)
P71   1of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to determination of
2distributive share.end insert

3(ii) To the extent the allocation of the credit to a partner under
4this section lacks substantial economic effect, any loss or deduction
5otherwise allowable under this part that is attributable to the sale
6or other disposition of that partner’s partnership interest made prior
7to the expiration of the federal credit shall not be allowed in the
8taxable year in which the sale or other disposition occurs, but shall
9instead be deferred until and treated as if it occurred in the first
10taxable year immediately following the taxable year in which the
11federal credit period expires for the project described in clause (i).

12(iii) This subparagraph shall not apply to a project that receives
13a preliminary reservation of state low-income housing tax credits
14under the set-aside described in subdivision (c) of Section 50199.20
15of the Health and Safety Code unless the project also receives a
16preliminary reservation of federal low-income housing tax credits.

begin delete

17(iv) This subparagraph shall cease to be operative with respect
18to any project that receives a preliminary reservation of a credit
19on or after January 1, 2016.

end delete

20(2) (A) The California Tax Credit Allocation Committee shall
21certify to the housing sponsor the amount of tax credit under this
22section allocated to the housing sponsor for each credit period.

23(B) In the case of abegin delete partnershipend deletebegin insert partnership, limited liability
24company,end insert
or an “S” corporation, the housing sponsor shall provide
25a copy of the California Tax Credit Allocation Committee
26certification to the taxpayer.

27(C) The taxpayer shall, upon request, provide a copy of the
28certification to the Franchise Tax Board.

29(D) All elections made by the taxpayer pursuant to Section 42
30of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
31credit,end insert
shall apply to this section.

begin delete

32(E) (i) Except as described in clause (ii), for buildings located
33in designated difficult development areas (DDAs) or qualified
34census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
35Internal Revenue Code, credits may be allocated under this section
36in the amounts prescribed in subdivision (c), provided that the
37amount of credit allocated under Section 42 of the Internal Revenue
38Code is computed on 100 percent of the qualified basis of the
39building.

P72   1(ii) Notwithstanding clause (i), the California Tax Credit
2 Allocation Committee may allocate the credit for buildings located
3in DDAs or QCTs that are restricted to having 50 percent of its
4occupants be special needs households, as defined in the California
5Code of Regulations by the California Tax Credit Allocation
6Committee, even if the taxpayer receives federal credits pursuant
7to Section 42(d)(5)(B) of the Internal Revenue Code, provided
8that the credit allowed under this section shall not exceed 30
9percent of the eligible basis of the building.

end delete
begin delete

10(G)

end delete

11begin insert(E)end insert (i) The California Tax Credit Allocation Committee may
12allocate a credit under this section in exchange for a credit allocated
13pursuant to Section 42(d)(5)(B) of the Internal Revenuebegin delete Codeend delete
14begin insert Code, relating to increase in credit for buildings in high-cost areas,end insert
15 in amounts up to 30 percent of the eligible basis of a building if
16the credits allowed under Section 42 of the Internal Revenuebegin delete Codeend delete
17begin insert Code, relating to low-income housing credit,end insert are reduced by an
18equivalent amount.

19(ii) An equivalent amount shall be determined by the California
20Tax Credit Allocation Committee based upon the relative amount
21required to produce an equivalent state tax credit to the taxpayer.

22(c) Section 42(b) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
23to applicable percentage,end insert
shall be modified as follows:

begin delete

24(1) In the case of any qualified low-income building placed in
25service by the housing sponsor during 1987, the term “applicable
26percentage” means 9 percent for each of the first three years and
273 percent for the fourth year for new buildings (whether or not the
28building is federally subsidized) and for existing buildings.

end delete
begin delete

29(2) In the case of any qualified low-income building that receives
30an allocation after 1989 and is a new building not federally
31subsidized, the term “applicable percentage” means the following:

end delete
begin insert

32(1)  In the case of any qualified low-income building that is a
33new building, as defined in Section 42 of the Internal Revenue
34Code and the regulations promulgated thereunder, and not
35federally subsidized, the term “applicable percentage” means the
36following:

end insert

37(A) For each of the first three years, the percentage prescribed
38by the Secretary of the Treasury for new buildings that are not
39federally subsidized for the taxable year, determined in accordance
40with the requirements of Sectionbegin delete 42(b)(2)end deletebegin insert 42(b)(1)end insert of the Internal
P73   1Revenuebegin delete Code, in lieu of the percentage prescribed in Section
242(b)(1)(A) of the Internal Revenue Code.end delete
begin insert Code.end insert

3(B) For the fourth year, the difference between 30 percent and
4the sum of the applicable percentages for the first three years.

begin insert

5(2) In the case of any qualified low-income building that (i) is
6a new building, as defined in Section 42 of the Internal Revenue
7Code and the regulations promulgated thereunder, (ii) not located
8in designated difficult development areas (DDAs) or qualified
9census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
10Internal Revenue Code, and (iii) is federally subsidized, the term
11“applicable percentage” means for the first three years, 15 percent
12of the qualified basis of the building, and for the fourth year, 5
13percent of the qualified basis of the building.

end insert

14(3) In the case of any qualified low-income buildingbegin delete that receives
15an allocation after 1989 and that is a new building that is federally
16subsidized or that is an existing building that is “at risk of
17conversion,” the term “applicable percentage” means the following:end delete

18begin insert that is (i) an existing building, as defined in Section 42 of the
19Internal Revenue Code and the regulations promulgated
20thereunder, (ii) not located in designated difficult development
21areas (DDAs) or qualified census tracts (QCTs), as defined in
22Section 42(d)(5)(B) of the Internal Revenue Code, and (iii) is
23federally subsidized, the term applicable percentage means the
24following: end insert

25(A) For each of the first three years, the percentage prescribed
26by the Secretary of the Treasury for new buildings that are federally
27subsidized for the taxable year.

28(B) For the fourth year, the difference between 13 percent and
29the sum of the applicable percentages for the first three years.

begin delete

30(4) For purposes of this section, the term “at risk of conversion,”
31with respect to an existing property means a property that satisfies
32all of the following criteria:

33(A) The property is a multifamily rental housing development
34in which at least 50 percent of the units receive governmental
35assistance pursuant to any of the following:

36(i) New construction, substantial rehabilitation, moderate
37rehabilitation, property disposition, and loan management set-aside
38programs, or any other program providing project-based assistance
39pursuant to Section 8 of the United States Housing Act of 1937,
40Section 1437f of Title 42 of the United States Code, as amended.

P74   1(ii) The Below-Market-Interest-Rate Program pursuant to
2Section 221(d)(3) of the National Housing Act, Sections
31715l(d)(3) and (5) of Title 12 of the United States Code.

4(iii) Section 236 of the National Housing Act, Section 1715z-1
5of Title 12 of the United States Code.

6(iv) Programs for rent supplement assistance pursuant to Section
7101 of the Housing and Urban Development Act of 1965, Section
81701s of Title 12 of the United States Code, as amended.

9(v) Programs pursuant to Section 515 of the Housing Act of
101949, Section 1485 of Title 42 of the United States Code, as
11 amended.

12(vi) The low-income housing credit program set forth in Section
1342 of the Internal Revenue Code.

14(B) The restrictions on rent and income levels will terminate or
15the federally insured mortgage on the property is eligible for
16prepayment any time within five years before or after the date of
17application to the California Tax Credit Allocation Committee.

18(C) The entity acquiring the property enters into a regulatory
19agreement that requires the property to be operated in accordance
20with the requirements of this section for a period equal to the
21greater of 55 years or the life of the property.

22(D) The property satisfies the requirements of Section 42(e) of
23the Internal Revenue Code regarding rehabilitation expenditures,
24except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
25apply.

end delete
begin insert

26(4) In the case of any qualified low-income building that is (i)
27a new or an existing building, (ii) located in designated difficult
28development areas (DDAs) or qualified census tracts (QCTs) as
29defined in Section 42(d)(5)(B) of the Internal Revenue Code, and
30(iii) federally subsidized, the California Tax Credit Allocation
31Committee shall determine the amount of credit to be allocated
32under subparagraph (E) of paragraph (2) of subdivision (b)
33required to produce an equivalent state tax credit to the taxpayer,
34as produced in paragraph (2), taking into account the basis boost
35provided under Section 42(d)(5)(B) of the Internal Revenue Code.

end insert
begin insert

36(5) In the case of any qualified low-income building that meets
37all of the requirements of subparagraphs (A) through (D),
38inclusive, the term “applicable percentage” means 30 percent for
39each of the first three years and 5 percent for the fourth year. A
40qualified low-income building receiving an allocation under this
P75   1paragraph is ineligible to also receive an allocation under
2paragraph (3).

end insert
begin insert

3(A) The qualified low-income building is at least 15 years old.

end insert
begin insert

4(B) The qualified low-income building is serving households of
5very low-income or extremely low-income such that the average
6maximum household income as restricted, pursuant to an existing
7regulatory agreement with a federal, state, county, local, or other
8governmental agency, is not more than 45 percent of the area
9median gross income, as determined under Section 42 of the
10Internal Revenue Code, adjusted by household size, and a tax
11credit regulatory agreement is entered into for a period of not less
12than 55 years restricting the average targeted household income
13to no more than 45 percent of the area median income.

end insert
begin insert

14(C) The qualified low-income building would have insufficient
15credits under paragraphs (2) and (3) to complete substantial
16rehabilitation due to a low appraised value.

end insert
begin insert

17(D) The qualified low-income building will complete the
18substantial rehabilitation in connection with the credit allocation
19herein.

end insert

20(d) The term “qualified low-income housing project” as defined
21in Section 42(c)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
22to qualified low-income building,end insert
is modified by adding the
23following requirements:

24(1) The taxpayer shall be entitled to receive a cash distribution
25from the operations of the project, after funding required reserves,
26begin delete thatend deletebegin insert that,end insert at the election of the taxpayer, is equal to:

27(A) An amount not to exceed 8 percent of the lesser of:

28(i) The owner equity,begin delete thatend deletebegin insert whichend insert shall include the amount of the
29capital contributions actually paid to the housing sponsor and shall
30not include any amounts until they are paid on an investor note.

31(ii) Twenty percent of the adjusted basis of the building as of
32the close of the first taxable year of the credit period.

33(B) The amount of the cashflow from those units in the building
34that are not low-income units. For purposes of computing cashflow
35under this subparagraph, operating costs shall be allocated to the
36low-income units using the “floor space fraction,” as defined in
37Section 42 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
38low-income housing credit.end insert

39(C) Any amount allowed to be distributed under subparagraph
40(A) that is not available for distribution during the first five years
P76   1of the compliance period may be accumulated and distributed any
2time during the first 15 years of the compliance period but not
3thereafter.

4(2) The limitation on return shall apply in the aggregate to the
5partners if the housing sponsor is a partnership and in the aggregate
6to the shareholders if the housing sponsor is an “S” corporation.

7(3) The housing sponsor shall apply any cash available for
8distribution in excess of the amount eligible to be distributed under
9paragraph (1) to reduce the rent on rent-restricted units or to
10increase the number of rent-restricted units subject to the tests of
11Section 42(g)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
12in general.end insert

13(e) The provisions of Section 42(f) of the Internal Revenuebegin delete Codeend delete
14begin insert Code, relating to definition and special rules relating to credit
15period,end insert
shall be modified as follows:

16(1) The term “credit period” as defined in Section 42(f)(1) of
17the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to credit period defined,end insert
18 is modified by substituting “four taxable years” for “10 taxable
19years.”

20(2) The special rule for the first taxable year of the credit period
21under Section 42(f)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
22to special rule for first year of credit period,end insert
shall not apply to the
23tax credit under this section.

24(3) Section 42(f)(3) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
25to determination of applicable percentage with respect to increases
26in qualified basis after first year of credit period,end insert
is modified to
27read:

28If, as of the close of any taxable year in the compliance period,
29after the first year of the credit period, the qualified basis of any
30building exceeds the qualified basis of that building as of the close
31of the first year of the credit period, the housing sponsor, to the
32extent of its tax credit allocation, shall be eligible for a credit on
33the excess in an amount equal to the applicable percentage
34determined pursuant to subdivision (c) for the four-year period
35beginning with the later of the taxable years in which the increase
36in qualified basis occurs.

37(f) The provisions of Section 42(h) of the Internal Revenue
38begin delete Codeend deletebegin insert Code, relating to limitation on aggregate credit allowable
39with respect to projects located in a state,end insert
shall be modified as
40follows:

P77   1(1) Section 42(h)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
2to allocated credit amount to apply to all taxable years ending
3during or after credit allocation year,end insert
shall not be applicable and
4instead the following provisions shall be applicable:

5The total amount for the four-year credit period of the housing
6credit dollars allocated in a calendar year to any building shall
7reduce the aggregate housing credit dollar amount of the California
8Tax Credit Allocation Committee for the calendar year in which
9the allocation is made.

10(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
11(7), and (8) of Section 42(h) of the Internal Revenuebegin delete Codeend deletebegin insert Code,
12relating to limitation on aggregate credit allowable with respect
13to projects located in a state,end insert
shall not be applicable.

14(g) The aggregate housing credit dollar amount that may be
15allocated annually by the California Tax Credit Allocation
16Committee pursuant to this section, Section 12206, and Section
1717058 shall be an amount equal to the sum of all the following:

18(1) begin insert(A)end insertbegin insertend insert Seventy million dollars ($70,000,000) for the 2001
19calendar year, and, for the 2002 calendar year and each calendar
20year thereafter, seventy million dollars ($70,000,000) increased
21by the percentage, if any, by which the Consumer Price Index for
22the preceding calendar year exceeds the Consumer Price Index for
23the 2001 calendar year. For the purposes of this paragraph, the
24term “Consumer Price Index” means the last Consumer Price Index
25for All Urban Consumers published by the federal Department of
26Labor.

begin insert

27(B) An additional three hundred million dollars ($300,000,000)
28for the 2016 calendar year, and, for the 2017 calendar year and
29each calendar year thereafter, three hundred million dollars
30($300,000,000) increased by the percentage, if any, by which the
31Consumer Price Index for the preceding calendar year exceeds
32the Consumer Price Index for the 2016 calendar year. For the
33purposes of this paragraph, the term “Consumer Price Index”
34means the last Consumer Price Index for All Urban Consumers
35published by the federal Department of Labor. A housing sponsor
36receiving an allocation under paragraph (1) of subdivision (c)
37shall not be eligible for receipt of the housing credit allocated
38from the increased amount under this subparagraph. A housing
39sponsor receiving an allocation under paragraph (1) of subdivision
P78   1(c) shall remain eligible for receipt of the housing credit allocated
2from the credit ceiling amount under subparagraph (A).

end insert

3(2) The unused housing credit ceiling, if any, for the preceding
4calendar years.

5(3) The amount of housing credit ceiling returned in the calendar
6year. For purposes of this paragraph, the amount of housing credit
7dollar amount returned in the calendar year equals the housing
8credit dollar amount previously allocated to any project that does
9not become a qualified low-income housing project within the
10period required by this section or to any project with respect to
11which an allocation is canceled by mutual consent of the California
12Tax Credit Allocation Committee and the allocation recipient.

13(4) Five hundred thousand dollars ($500,000) per calendar year
14for projects to provide farmworker housing, as defined in
15subdivision (h) of Section 50199.7 of the Health and Safety Code.

16(5) The amount of any unallocated or returned credits under
17former Sections 17053.14, 23608.2, and 23608.3, as those sections
18read prior to January 1, 2009, until fully exhausted for projects to
19provide farmworker housing, as defined in subdivision (h) of
20Section 50199.7 of the Health and Safety Code.

21(h) The term “compliance period” as defined in Section 42(i)(1)
22of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to compliance period,end insert
23 is modified to mean, with respect to any building, the period of 30
24consecutive taxable years beginning with the first taxable year of
25the credit period with respect thereto.

26(i) Section 42(j) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
27to recapture of credit,end insert
shall not be applicable and the following
28shall be substituted in its place:

29The requirements of this section shall be set forth in a regulatory
30agreement between the California Tax Credit Allocation Committee
31and the housing sponsor, andbegin delete thisend deletebegin insert the regulatoryend insert agreement shall
32be subordinated, when required, to any lien or encumbrance of
33any banks or other institutional lenders to the project. The
34regulatory agreement entered into pursuant to subdivision (f) of
35Section 50199.14 of the Health and Safety Code shall apply,
36provided that the agreement includes all of the following
37provisions:

38(1) A term not less than the compliance period.

P79   1(2) A requirement that the agreement be recorded in the official
2records of the county in which the qualified low-income housing
3project is located.

4(3) A provision stating which state and local agencies can
5enforce the regulatory agreement in the event the housing sponsor
6fails to satisfy any of the requirements of this section.

7(4) A provision that the regulatory agreement shall be deemed
8a contract enforceable by tenants as third-party beneficiaries
9begin delete thereto,end deletebegin insert theretoend insert and that allows individuals, whether prospective,
10present, or former occupants of the building, who meet the income
11limitation applicable to the building, the right to enforce the
12regulatory agreement in any state court.

13(5) A provision incorporating the requirements of Section 42
14of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
15credit,end insert
as modified by this section.

16(6) A requirement that the housing sponsor notify the California
17Tax Credit Allocation Committee or its designee if there is a
18determination by the Internal Revenue Service that the project is
19not in compliance with Section 42(g) of the Internal Revenuebegin delete Code.end delete
20begin insert Code, relating to qualified low-income housing project.end insert

21(7) A requirement that the housing sponsor, as security for the
22performance of the housing sponsor’s obligations under the
23regulatory agreement, assign the housing sponsor’s interest in rents
24that it receives from the project, provided that until there is a
25default under the regulatory agreement, the housing sponsor is
26entitled to collect and retain the rents.

27(8) A provision that the remedies available in the event of a
28default under the regulatory agreement that is not cured within a
29reasonable cure period include, but are not limited to, allowing
30any of the parties designated to enforce the regulatory agreement
31to collect all rents with respect to the project; taking possession of
32the project and operating the project in accordance with the
33regulatory agreement until the enforcer determines the housing
34sponsor is in a position to operate the project in accordance with
35the regulatory agreement; applying to any court for specific
36performance; securing the appointment of a receiver to operate
37the project; or any other relief as may be appropriate.

38(j) (1) The committee shall allocate the housing credit on a
39regular basis consisting of two or more periods in each calendar
40year during which applications may be filed and considered. The
P80   1committee shall establish application filing deadlines, the maximum
2percentage of federal and state low-income housing tax credit
3ceiling that may be allocated by the committee in that period, and
4the approximate date on which allocations shall be made. If the
5enactment of federal or state law, the adoption of rules or
6regulations, or other similar events prevent the use of two allocation
7periods, the committee may reduce the number of periods and
8adjust the filing deadlines, maximum percentage of credit allocated,
9and allocation dates.

10(2) The committee shall adopt a qualified allocation plan, as
11provided in Section 42(m)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code,
12relating to plans for allocation of credit among projects.end insert
In
13adopting this plan, the committee shall comply with the provisions
14of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
15begin delete Code.end deletebegin insert Code, relating to qualified allocation plan and relating to
16certain selection criteria must be used, respectively.end insert

17(3) Notwithstanding Section 42(m) of the Internal Revenue
18Code,begin insert relating to responsibilities of housing credit agencies,end insert the
19California Tax Credit Allocation Committee shall allocate housing
20credits in accordance with the qualified allocation plan and
21regulations, which shall include the following provisions:

22(A) All housing sponsors, as defined by paragraph (3) of
23subdivision (a), shall demonstrate at the time the application is
24filed with the committee that the project meets the following
25threshold requirements:

26(i) The housing sponsor shall demonstratebegin delete thatend delete there is a need
27for low-income housing in the community or region for which it
28is proposed.

29(ii) The project’s proposed financing, including tax credit
30proceeds, shall be sufficient to complete the project and shall be
31adequate to operate the project for the extended use period.

32(iii) The project shall have enforceable financing commitments,
33either construction or permanent financing, for at least 50 percent
34of the total estimated financing of the project.

35(iv) The housing sponsor shall have and maintain control of the
36site for the project.

37(v) The housing sponsor shall demonstrate that the project
38complies with all applicable local land use and zoning ordinances.

39(vi) The housing sponsor shall demonstrate that the project
40development team has the experience and the financial capacity
P81   1to ensure project completion and operation for the extended use
2period.

3(vii) The housing sponsor shall demonstrate the amount of tax
4credit that is necessary for the financial feasibility of the project
5and its viability as a qualified low-income housing project
6throughout the extended use period, taking into account operating
7expenses, a supportable debt service, reserves, funds set aside for
8rental subsidies and required equity, and a development fee that
9does not exceed a specified percentage of the eligible basis of the
10project prior to inclusion of the development fee in the eligible
11basis, as determined by the committee.

12(B) The committee shall give a preference to those projects
13satisfying all of the threshold requirements of subparagraph (A)
14if both of the following apply:

15(i) The project serves the lowest income tenants at rents
16affordable to those tenants.

17(ii) The project is obligated to serve qualified tenants for the
18longest period.

19(C) In addition to the provisions of subparagraphs (A) and (B),
20the committee shall use the following criteria in allocating housing
21credits:

22(i) Projects serving large families in which a substantial number,
23as defined by the committee, of all residential units are low-income
24units with threebegin delete andend deletebegin insert orend insert more bedrooms.

25(ii) Projects providing single-room occupancy units serving
26very low income tenants.

27(iii) begin insert(I)end insertbegin insertend insert Existing projects that are “at risk ofbegin delete conversion,” as
28defined by paragraph (4) of subdivision (c).end delete
begin insert conversion.end insertbegin insertend insert

begin insert

29(II) For purposes of this section, the term “at risk of
30conversion,” with respect to an existing property means a property
31that satisfies all of the following criteria:

end insert
begin insert

32(ia) The property is a multifamily rental housing development
33in which at least 50 percent of the units receive governmental
34assistance pursuant to any of the following:

end insert
begin insert

35(Ia) New construction, substantial rehabilitation, moderate
36rehabilitation, property disposition, and loan management set-aside
37programs, or any other program providing project-based
38 assistance pursuant to Section 8 of the United States Housing Act
39of 1937, Section 1437f of Title 42 of the United States Code, as
40amended.

end insert
begin insert

P82   1(Ib) The Below-Market-Interest-Rate Program pursuant to
2Section 221(d)(3) of the National Housing Act, Sections 1715l(d)(3)
3and (5) of Title 12 of the United States Code.

end insert
begin insert

4(Ic) Section 236 of the National Housing Act, Section 1715z-1
5of Title 12 of the United States Code.

end insert
begin insert

6(Id) Programs for rent supplement assistance pursuant to
7Section 18 101 of the Housing and Urban Development Act of
81965, Section 1701s of Title 12 of the United States Code, as
9amended.

end insert
begin insert

10(Ie) Programs pursuant to Section 515 of the Housing Act of
111949, Section 1485 of Title 42 of the United States Code, as
12amended.

end insert
begin insert

13(If) The low-income housing credit program set forth in Section
1442 of the Internal Revenue Code.

end insert
begin insert

15(ib) The restrictions on rent and income levels will terminate
16or the federal insured mortgage on the property is eligible for
17prepayment any time within five years before or after the date of
18application to the California Tax Credit Allocation Committee.

end insert
begin insert

19(ic) The entity acquiring the property enters into a regulatory
20agreement that requires the property to be operated in accordance
21with the requirements of this section for a period equal to the
22greater of 55 years or the life of the property.

end insert
begin insert

23(id) The property satisfies the requirements of Section 42(e) of
24the Internal Revenue Code, regarding rehabilitation expenditures
25except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
26apply.

end insert

27(iv) Projects for which a public agency provides direct or indirect
28long-term financial support for at least 15 percent of the total
29project development costs or projects for which the owner’s equity
30constitutes at least 30 percent of the total project development
31costs.

32(v) Projects that provide tenant amenities not generally available
33to residents of low-income housing projects.

34(4) For purposes of allocating credits pursuant to this section,
35the committee shall not give preference to any project by virtue
36of the date of submission of its application except to break a tie
37when two or more of the projects have an equal rating.

38(5) Not less than 20 percent of the low-income housing tax
39credits available annually under this section, Section 12206, and
40Section 17058 shall be set aside for allocation to rural areas as
P83   1defined in Section 50199.21 of the Health and Safety Code. Any
2amount of credit set aside for rural areas remaining on or after
3October 31 of any calendar year shall be available for allocation
4to any eligible project. No amount of credit set aside for rural areas
5shall be considered available for any eligible project so long as
6there are eligible rural applications pending on October 31.

7(k) Section 42(l) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
8to certifications and other reports to secretary,end insert
shall be modified
9as follows:

10The term “secretary” shall be replaced by the termbegin delete “California
11Franchiseend delete
begin insert “Franchiseend insert Tax Board.”

12(l) In the case where thebegin delete stateend delete credit allowed under this section
13exceeds the “tax,” the excess may be carried over to reduce the
14“tax” in the following year, and succeedingbegin insert taxableend insert years if
15necessary, until the credit has been exhausted.

16(m) A project that received an allocation of a 1989 federal
17housing credit dollar amount shall be eligible to receive an
18allocation of a 1990 state housing credit dollar amount, subject to
19all of the following conditions:

20(1) The project was not placed in service prior to 1990.

21(2) To the extent the amendments made to this section by the
22Statutes of 1990 conflict with any provisions existing in this section
23prior to those amendments, the prior provisions of law shall prevail.

24(3) Notwithstanding paragraph (2), a project applying for an
25allocation under this subdivision shall be subject to the
26requirements of paragraph (3) of subdivision (j).

27(n) The credit period with respect to an allocation of credit in
281989 by the California Tax Credit Allocation Committee of which
29any amount is attributable to unallocated credit from 1987 or 1988
30shall not begin until after December 31, 1989.

31(o) The provisions of Section 11407(a) of Public Law 101-508,
32relating to the effective date of the extension of the low-income
33housing credit, shall apply to calendar years after 1989.

34(p) The provisions of Section 11407(c) of Public Law 101-508,
35relating to election to accelerate credit, shall not apply.

36(q) (1) A corporation may elect to assign any portion of any
37credit allowed under this section to one or more affiliated
38corporations for each taxable year in which the credit is allowed.
39For purposes of this subdivision, “affiliated corporation” has the
40meaning provided in subdivision (b) of Section 25110, as that
P84   1section was amended by Chapter 881 of the Statutes of 1993, as
2of the last day of the taxable year in which the credit is allowed,
3except that “100 percent” is substituted for “more than 50 percent”
4wherever it appears in the section, as that section was amended by
5Chapter 881 of the Statutes of 1993, and “voting common stock”
6is substituted for “voting stock” wherever it appears in the section,
7as that section was amended by Chapter 881 of the Statutes of
81993.

9(2) The election provided in paragraph (1):

10(A) May be based on any method selected by the corporation
11that originally receives the credit.

12(B) Shall be irrevocable for the taxable year the credit is allowed,
13once made.

14(C) May be changed for any subsequent taxable year if the
15election to make the assignment is expressly shown on each of the
16returns of the affiliated corporations that assign and receive the
17credits.

18(r) Any unused credit may continue to be carried forward, as
19provided in subdivision (l), until the credit has been exhausted.

20begin insert(s)end insertbegin insertend insert This section shall remain in effect on and after December
211, 1990, for as long as Section 42 of the Internal Revenue Code,
22relating to low-income housingbegin delete credits,end deletebegin insert credit,end insert remains in effect.

begin insert

23(t) (1) For a project that receives a preliminary reservation
24under this section beginning on or after January 1, 2016, a
25taxpayer may make an irrevocable election in its application to
26the California Tax Credit Allocation Committee to sell all or any
27portion of any credit allowed under this section to one or more
28unrelated parties for each taxable year in which the credit is
29allowed subject to both of the following conditions:

end insert
begin insert

30(A) The credit is sold for consideration that is not less than 80
31percent of the amount of the credit.

end insert
begin insert

32(B) (i) The unrelated party or parties purchasing any or all of
33the credit pursuant to this subdivision is a taxpayer allowed the
34credit under this section for the taxable year of the purchase or
35any prior taxable year or is a taxpayer allowed the federal credit
36under Section 42 of the Internal Revenue Code, relating to
37low-income housing credit, for the taxable year of the purchase
38or any prior taxable year in connection with any project located
39in this state.

end insert
begin insert

P85   1(ii) For purposes of this subparagraph, “taxpayer allowed the
2credit under this section” means a taxpayer that is allowed the
3credit under this section without regard to the purchase of a credit
4pursuant to this subdivision without regard to any of the following:

end insert
begin insert

5(I) The purchase of a credit under this section pursuant to this
6subdivision.

end insert
begin insert

7(II) The assignment of a credit under this section pursuant to
8subdivision (q).

end insert
begin insert

9(III) The assignment of a credit under this section pursuant to
10Section 23363.

end insert
begin insert

11(2) (A) The taxpayer that originally received the credit shall
12report to the California Tax Credit Allocation Committee within
1310 days of the sale of the credit, in the form and manner specified
14by the California Tax Credit Allocation Committee, all required
15information regarding the purchase and sale of the credit,
16including the social security or other taxpayer identification
17number of the unrelated party to whom the credit has been sold,
18the face amount of the credit sold, and the amount of consideration
19received by the taxpayer for the sale of the credit.

end insert
begin insert

20(B) The California Tax Credit Allocation Committee shall
21provide an annual listing to the Franchise Tax Board, in a form
22and manner agreed upon by the California Tax Credit Allocation
23Committee and the Franchise Tax Board, of the taxpayers that
24have sold or purchased a credit pursuant to this subdivision.

end insert
begin insert

25(3) (A) A credit may be sold pursuant to this subdivision to
26more than one unrelated party.

end insert
begin insert

27(B) (i) Except as provided in clause (ii), a credit shall not be
28resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

29(ii) All or any portion of any credit allowed under this section
30may be resold once by an original purchaser to one or more
31unrelated parties, subject to all of the requirements of this
32subdivision.

end insert
begin insert

33(4) Notwithstanding any other provision of law, the taxpayer
34that originally received the credit that is sold pursuant to
35paragraph (1) shall remain solely liable for all obligations and
36liabilities imposed on the taxpayer by this section with respect to
37the credit, none of which shall apply to any party to whom the
38credit has been sold or subsequently transferred. Parties who
39purchase credits pursuant to paragraph (1) shall be entitled to
P86   1utilize the purchased credits in the same manner in which the
2taxpayer that originally received the credit could utilize them.

end insert
begin insert

3(5) A taxpayer shall not sell a credit allowed by this section if
4the taxpayer was allowed the credit on any tax return of the
5taxpayer.

end insert
begin insert

6(6) Notwithstanding paragraph (1), the taxpayer, with the
7approval of the Executive Director of the California Tax Credit
8Allocation Committee, may rescind the election to sell all or any
9portion of the credit allowed under this section if the consideration
10for the credit falls below 80 percent of the amount of the credit
11after the California Tax Credit Allocation Committee reservation.

end insert
begin insert

12(u) The California Tax Credit Allocation Committee may
13prescribe rules, guidelines, or procedures necessary or appropriate
14to carry out the purposes of this section, including any guidelines
15regarding the allocation of the credit allowed under this section.
16Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
173 of Title 2 of the Government Code shall not apply to any rule,
18guideline, or procedure prescribed by the California Tax Credit
19Allocation Committee pursuant to this section.

end insert
begin delete

20(s)

end delete

21begin insert(v)end insert The amendments to this section made bybegin delete the act adding this
22subdivisionend delete
begin insert Chapter 1222 of the Statutes of 1993end insert shall apply only
23to taxable years beginning on or after January 1, 1994, except that
24paragraph (1) of subdivision (q), as amended, shall apply to taxable
25years beginning on or after January 1, 1993.

26begin insert

begin insertSEC. 4.end insert  

end insert

begin insertNotwithstanding Section 10231.5 of the Government
27Code, on or before January 1, 2020, the Treasurer shall issue a
28report to the Legislature describing the increase, if any, of the use
29of the 4 percent low-income housing credit, allocated pursuant to
30paragraphs (2) to (5), inclusive, of subdivision (c) of Sections
3112206, 17058, and 23610.5 of the Revenue and Taxation Code.
32The report shall compare the use of those credits before the
33effective date of this act to the use of those credits after the effective
34date of this act. The report shall be submitted in compliance with
35Section 9795 of the Government Code.end insert

36begin insert

begin insertSEC. 5.end insert  

end insert

begin insertThe California Tax Credit Allocation Committee shall
37enter into an agreement with the Franchise Tax Board to pay any
38costs incurred by the Franchise Tax Board in the administration
39of subdivision (o) of Section 12206, subdivision (s) of Section
P87   117058, and subdivision (t) of Section 23610.5 of the Revenue and
2Taxation Code. end insert

3begin insert

begin insertSEC. 6.end insert  

end insert
begin insert

(a) Section 1.5 of this bill incorporates amendments
4to Section 12206 of the Revenue and Taxation Code proposed by
5both this bill and Senate Bill 377. It shall only become operative
6if (1) both bills are enacted and become effective on or before
7January 1, 2016, (2) each bill amends Section 12206 of the
8Revenue and Taxation Code, and (3) this bill is enacted after
9Senate Bill 377, in which case Section 1 of this bill shall not
10become operative.

end insert
begin insert

11(b) Section 2.5 of this bill incorporates amendments to Section
1217058 of the Revenue and Taxation Code proposed by both this
13bill and Senate Bill 377. It shall only become operative if (1) both
14bills are enacted and become effective on or before January 1,
152016, (2) each bill amends Section 17058 of the Revenue and
16Taxation Code, and (3) this bill is enacted after Senate Bill 377,
17in which case Section 2 of this bill shall not become operative.

end insert
begin insert

18(c) Section 3.5 of this bill incorporates amendments to Section
1923610.5 of the Revenue and Taxation Code proposed by both this
20bill and Senate Bill 377. It shall only become operative if (1) both
21bills are enacted and become effective on or before January 1,
222016, (2) each bill amends Section 23610.5 of the Revenue and
23Taxation Code, and (3) this bill is enacted after Senate Bill 377,
24in which case Section 3 of this bill shall not become operative.

end insert
begin insert

25(d) Section 5 of this bill, which adds an uncodified provision
26that requires the California Tax Credit Allocation Committee to
27enter a specified agreement with the Franchise Tax Board.
28proposed by both this bill and Senate Bill 377, shall only become
29operative if (1) both bills are enacted and become effective on or
30before January 1, 2016, (2) each bill amends Sections 12206,
3117058, and 23610.5 of the Revenue and Taxation Code, (3) each
32bill adds the uncodified provision set forth in Section 5, and (4)
33this bill is enacted after Senate Bill 377.

end insert
34

begin deleteSEC. 4.end delete
35begin insert SEC. 7.end insert  

This act provides for a tax levy within the meaning
36of Article IV of the Constitution and shall go into immediate effect.



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