BILL ANALYSIS Ó
AB 35
Page 1
(Without Reference to File)
CONCURRENCE IN SENATE AMENDMENTS
AB
35 (Chiu and Atkins)
As Amended September 10, 2015
Majority vote. Tax levy
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|ASSEMBLY: | 78-0 | (June 4, |SENATE: | | (September 11, |
| | |2015) | | |2015) |
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(vote not available)
Original Committee Reference: REV. & TAX.
SUMMARY: Modifies the existing Low-Income Housing Tax Credit
(LIHTC) program and increases the aggregate credit amount that
may be annually allocated to low-income housing projects by $100
million for calendar years 2016 through 2021, inclusive, as
provided.
AB 35
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The Senate amendments:
1)Reduce the additional amount of LIHTC that may be annually
allocated among low-income housing projects from $300 million
to $100 million (thereby increasing the amount currently
authorized to be annually allocated from $70 million, as
adjusted for inflation, to $170 million, as adjusted for
inflation).
2)Authorize the additional annual $100 million allocation of
LIHTCs only for calendar years 2016 through 2021, inclusive.
3)Incorporate additional changes to Revenue and Taxation Code
Sections 12206, 17058, and 23610.5 proposed by SB 377 (Beall)
of the current legislative session, that would become
operative if this bill and SB 377 are chaptered, and this bill
is chaptered last.
AS PASSED BY THE ASSEMBLY, this bill:
1)Beginning in 2016 and each year thereafter, increased the
amount of state LIHTC by an additional $300 million, as
adjusted for inflation starting in 2017.
2)Provided that a low-income housing building that has received
an award of 9% federal LIHTC is not eligible for an allocation
from the additional $300 million of state LIHTC, but shall
remain eligible for the existing $70 million allocation, as
annually adjusted.
3)Modified the allocation of state LIHTC that may be awarded to
a federally subsidized low-income housing project receiving
federal 4% LIHTC as follows:
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a) A new qualified low-income housing building is eligible
for a cumulative state LIHTC over four years of 50% of the
qualified basis of the building, provided that the building
is not located in a Difficult to Develop Area (DDA) or a
Qualified Census Tract (QCT).
b) An existing qualified low-income housing building that
is not located in a DDA or a QCT is eligible for a
cumulative state LIHTC over four years of 13% of the
qualified basis of the building.
c) A new or existing low-income housing building that is
located in a DDA or QCT may be awarded a cumulative state
LIHTC in an amount not to exceed 50% of the qualified basis
of the building, provided that the federal LIHTC is
replaced with state LIHTC, as specified.
d) A qualified low-income building is eligible for a
cumulative state LIHTC of 95% of the qualified basis over
four years if it meets all of the following requirement:
i) Is at least 15 years old;
ii) Serves households with very-low income or extremely
low-income residents, as specified;
iii) Is restricted, for a period of not less than 55
years, to serving residents with the average targeted
household income of no more than 45% of the area median
income; and,
iv) It would receive insufficient state credits, due to
the building's low appraised value, to complete
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substantial rehabilitation and the rehabilitation will be
completed.
4)Revised the definition of a "taxpayer" for purposes of the
state LIHTC program to include members of a limited liability
company.
5)Revised the definition of a "housing sponsor" for purposes of
the LIHTC program to include a limited liability company.
6)Added the following definitions:
a) "Extremely low-income" has the same meaning as Health
and Safety Code (H&SC) Section 50053; and,
b) "Very low-income" has the same meaning as in H&SC
Section 50053.
1)Made technical, non-substantive changes to the provisions of
the LITHC program.
2)Took effect immediately as a tax levy.
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Statement. The author has provided the following
statement in support of this bill:
California's shortfall of 1.5 million affordable
rentals impedes our state's economic growth by
slowing job creation and driving Californians into
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poverty. When housing costs are accounted for, the
proportion of people unable to meet their basic
needs - food, shelter, transportation - rises from
16 percent to 23 percent, the highest rate of
poverty in the nation.
A recent report from the California Housing
Partnership depicts a growing statewide crisis
driven by a growing divide between incomes and
rents. Statewide, median incomes have fallen 8
percent since 2000; meanwhile, rental prices have
soared by 21 percent in the same timeframe. There
isn't a single county in California with enough
affordable rentals for families struggling to make
ends meet.
Rising rents are locking broad swaths of
Californians - people who are key contributors to
our communities - out of San Francisco, San Diego
and many other California cities and crowding their
families into unsafe housing. Twenty-one of the
nation's least affordable cities are in California;
our home-health aides, child-care workers, and
teachers' assistants have virtually nowhere to live
in the communities where they work, even if they
work full-time.
Small businesses and creators of entry-level jobs
face particular difficulties recruiting employees.
Closing our communities to struggling workers
reverberates through our entire economy and impacts
all taxpayers.'
California leaders must act to replace the $1.5
billion annual state investment wiped out when
voter-approved housing bonds were expended and
redevelopment funding was eliminated. AB 35 would
take a step in the right direction by increasing the
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California Low-Income Housing Tax Credit, a proven
public-private-partnership model, by $300 million
per year, and enable the state to attract $600
million in additional federal funding that would
otherwise not come to California.
2)State LIHTC Program. In 1987, the Legislature authorized a
state LIHTC Program to augment the federal tax credit program.
State tax credits can only be awarded to projects that have
also received, or are concurrently receiving, an allocation of
the federal LIHTCs. The amount of state LIHTC that may be
annually allocated by the California Tax Credit Allocation
Committee (TCAC) is limited to $70 million, adjusted for
inflation. In 2014, the total credit amount available for
allocation was $103 million (representing all four years of
allocation) plus any unused or returned credit allocations
from previous years.
Current state tax law generally conforms to federal law with
respect to the LIHTC, except that it is limited to projects
located in California. While the state LIHTC program is
patterned after the federal LIHTC program, there are several
differences. First, investors may claim the state LIHTC over
four years rather than the 10-year federal allocation period.
Second, the rates used to determine the total amount of the
state tax credit (representing all four years of allocation)
are 30% of the qualified basis of a project that is not
federally subsidized and 13% of the qualified basis of a
project that is federally subsidized, in contrast to 70% and
30% (representing all 10 years of allocation on a
present-value basis), respectively, for purposes of the
federal LIHTCs. Furthermore, state tax credits are not
available for acquisition costs, except for previously
subsidized projects that qualify as "at-risk" of being
converted to market rate.
TCAC is authorized to replace federal LIHTC with state LIHTC
of up to 30% of a project's eligible basis if the federal
LIHTC is reduced in an equivalent amount. This provision
allows TCAC to increase the number of projects funded with the
limited federal credits in a given year. As discussed, the
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maximum federal tax credit that can be awarded (the 9% credit)
is generally equal to 70% (on a present-value basis) of a
taxpayer's qualified basis in the project, spread over a
10-year period. Thus, a project that receives the maximum in
both state and federal credits receives an amount equal to
100% of the taxpayer's qualified basis over a 10-year period.
3)SB 377 Proposes Additional Changes to the LIHTC Program. SB
377 would allow taxpayers to sell LIHTCs to existing investors
in any low-income housing project in California and would
remove the sunset date on provisions relating to the
bifurcation of federal and state LIHTCs. Both SB 377 and this
bill, if enacted, would amend the same Revenue and Taxation
Code sections. Generally, in the absence of "any express
provision to the contrary in a bill which is chaptered last,
the last (higher) chapter law prevails. Consequently, unless
some consideration is made for the earlier chaptered bill, the
last chaptered bill will eliminate any changes proposed by the
earlier bill." [George H. Murphy, Legislative Counsel,
Legislative Drafting Manual (1975).] To avoid this so-called
"chaptering out" problem, this bill incorporates the changes
proposed to the LIHTC program by SB 377.
Analysis Prepared by:
Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN:
0002426