California Legislature—2015–16 Regular Session

Assembly BillNo. 185


Introduced by Assembly Members Eduardo Garcia and Medina

January 26, 2015


An act to add Section 26011.9 to the Public Resources Code, and to add Section 18410.3 to, and to add and repeal Sections 12283, 17053.9, and 23622.9 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 185, as introduced, Eduardo Garcia. Income taxation: insurance taxation: credits: California New Markets Tax Credit.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law creates the California Competes Tax Credit Committee, which has specified duties in regard to tax credits for economic development. Existing law establishes the Governor’s Office of Business and Economic Development, also known as “GO-Biz,” to, among other duties, serve the Governor as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth.

Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates.

This bill would allow a credit under the Personal Income Tax Law and the Corporation Tax Law, and a credit against the tax imposed on an insurer, in modified conformity with a federal New Markets Tax Credit, for taxable years beginning on or after January 1, 2016, and before January 1, 2028, in a specified amount for investments in low-income communities. The bill would limit the total annual amount of credit allowed pursuant to these provisions to an amount equal to any portion not granted under a specified sales and use tax exclusion, not to exceed $40,000,000 per calendar year, and would limit the allocation of the credit to a cumulative total of no more than $200,000,000, as provided. The bill would impose specified duties on the California Competes Tax Credit Committee and GO-Biz with regard to the application for, and allocation of, the credit. The bill would require GO-Biz to establish and impose reasonable fees upon entities that apply for the allocation of the credit, to be deposited in the California New Markets Tax Credit Fund established by the bill, and use the revenue, upon appropriation by the Legislature, to defray the cost of applying to, and administering the program, as specified. The bill would specify that the credit would not be allowed unless the Legislature makes an appropriation from the fund.

The bill would provide that its provisions are severable.

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.  

The Legislature finds and declares the following:

2(a) While many areas of California have recovered from the
3economic and community development impacts of the 2006
4Financial Crisis and the 2010 global recession, Californians in a
5number of communities and neighborhoods are still experiencing
6their lingering effects. In some cases this has resulted in small and
7medium businesses in low-income areas lacking sufficient access
8to capital and technical assistance. Given that the state has many
9needs and limited resources, moneys from the private sector are
10necessary to fill this capital and investment gap.

11(b) Initially enacted in 2000, the federal government established
12the New Markets Tax Credit (NMTC) Program, which uses a
13market-based approach for expanding capital and technical
14assistance to businesses in lower income communities. The federal
15program is jointly administered by the Community Development
16Financial Institutions Fund (CDFI Fund) and the Internal Revenue
17Service. The NMTC Program allocates federal tax incentives to
18community development entities (CDE), which they then use to
19attract private investors who contribute funds that can be used to
P3    1finance and invest in businesses and develop real estate in
2low-income communities. Through the 2013-14 funding round,
3the CDFI Fund had awarded approximately $40,000,000,000 in
4NMTC in 836 awards including $3,000,000,000 in American
5Recovery and Investment Act of 2009 awards and $1,000,000,000
6of special allocation authority to be used for the recovery and
7redevelopment of the Gulf Opportunity Zone.

8(c) The federal NMTC totals 39 percent of the original
9investment amount in the CDE and is claimed over a period of
10seven years (5 percent for each of the first three years, and 6
11percent for each of the remaining four years). Any investment by
12any taxpayer in the CDE redeemed before the end of the seven-year
13period will be recaptured.

14(d) Fourteen states in the United States have adopted state
15programs using the NMTC model including Alabama, Florida,
16Illinois, Nevada, and Oregon. While some of the programs
17substantially mirror the federal program, others vary in both the
18percentage of the credit and some of the policies that form the
19foundation of the credit. One of the reasons cited for establishing
20state-level programs is to make a state more attractive to CDEs,
21which results in increasing the amount of federal NMTCs being
22utilized in a state. Further, several studies, including a January 1,
232011, case study by Pacific Community Ventures, showed that for
24 every dollar of forgone tax revenue, the federal NMTC leverages
25$12 to $14 of private investment.

26

SEC. 2.  

Section 26011.9 is added to the Public Resources Code,
27to read:

28

26011.9.  

The authority shall make a determination of the
29amount of the one hundred million dollars ($100,000,000) in
30exclusions not granted in the assigned calendar year pursuant to
31Section 26011.8. An amount equal to that amount shall be granted
32in the subsequent calendar year through the California New
33Markets Tax Credit Program pursuant to Sections 12283, 17053.9,
34and 23622.9 of the Revenue and Taxation Code. This section shall
35not prevent a taxpayer granted an exclusion pursuant to Section
366010.8 of the Revenue and Taxation Code from applying for, and
37receiving a refund for, taxes paid under Part 1 (commencing with
38Section 6001) of Division 2 of the Revenue and Taxation Code.

39

SEC. 3.  

Section 12283 is added to the Revenue and Taxation
40Code
, to read:

P4    1

12283.  

(a) There is hereby created the California New Markets
2Tax Credit Program as provided in this section, Section 17053.9,
3and Section 23622.9. The purpose of this program is to stimulate
4private sector investment in lower income communities by
5providing a tax incentive to community and economic development
6entities that can be leveraged by the entity to attract private sector
7investment that in turn will be deployed by providing financing
8and technical assistance to small- and medium-size businesses and
9the development of commercial, industrial, and community
10development projects, including, but not limited to, facilities for
11nonprofit service organizations, light manufacturing, and mixed-use
12and transit-oriented development. The committee and GO-Biz
13shall administer this program as provided in this section, Section
1417053.9, and Section 23622.9. The Director of GO-Biz may
15delegate the administration of all or portions of the program within
16GO-Biz.

17(b) (1) For taxable years beginning on or after January 1, 2016,
18and before January 1, 2028, and subject to subdivision (h), there
19shall be allowed as a credit against the tax described in Sections
2012201, 12204, 12206, and 12209, an amount determined in
21accordance with Section 45D of the Internal Revenue Code, as
22modified as set forth in this section.

23(2) (A) For purposes of this section, “committee” means the
24California Competes Tax Credit Committee established under
25Section 18410.2.

26(B) For purposes of this section, “GO-Biz” means the
27Governor’s Office of Business and Economic Development.

28(c) Section 45D of the Internal Revenue Code is modified as
29follows:

30(1) Section 45D(a)(2) of the Internal Revenue Code, relating to
31applicable percentage, is modified by substituting for “(A) 5
32percent with respect to the first 3 credit allowance dates, and (B)
336 percent with respect to the remainder of the credit allowance
34dates” with the following:

35(A) Zero percent with respect to the first two credit allowance
36dates.

37(B) Seven percent with respect to the third credit allowance
38date.

39(C) Eight percent with respect to the remainder of the credit
40allowance dates.

P5    1(2) (A) Section 45D(c)(1) of the Internal Revenue Code is
2modified to only include a qualified community development
3entity, that is certified by the Secretary of the Treasury, and its
4subsidiary qualified community development entities that have
5entered into an allocation agreement with the Community
6Development Financial Institutions Fund of the United States
7Treasury Department, with respect to credits authorized by Section
845D of the Internal Revenue Code, that includes California within
9the service area and is dated on or after January 1, 2012.

10(B)  Section 45D(c)(2) of the Internal Revenue Code is modified
11to only include a specialized small business investment company
12or community development financial institution that entered into
13an allocation agreement with the Community Development
14Financial Institutions Fund of the United States Treasury
15Department, with respect to credits authorized by Section 45D of
16the Internal Revenue Code, that includes California within the
17service area and is dated on or after January 1, 2012.

18(3) The term “qualified active low-income community business,”
19as defined in Section 45D(d)(2) of the Internal Revenue Code, is
20modified as follows:

21(A) By substituting “any low-income community in California”
22for “any low-income community” every place it appears in Section
2345D of the Internal Revenue Code.

24(B) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
25modified to allow the services of employees of a service-based
26qualified active low-income community business to be performed
27outside the low-income community. A service-based qualified
28active low-income community business is a business that primarily
29earns revenue through providing intangible products and services
30and leases or owns real property in the low-income community
31that is used for the operation of the business.

32(C) A qualified active low-income community business shall
33not include any business that derives, or projects to derive, 15
34percent or more of its annual revenue from the rental or sale of
35real estate. This exclusion does not apply to a business that is
36controlled by, or under common control with, another business if
37the second business: (I) does not derive or project to derive 15
38percent or more of its annual revenue from the rental or sale of
39real estate; and (II) is the primary tenant of the real estate leased
40from the first business.

P6    1(D) A qualified active low-income community business shall
2only include a business that, at the time the initial investment is
3made, has 250 or fewer employees and is located in one or more
4California low-income communities. The operating business shall
5meet all other conditions of a qualified active low-income
6 community business, except as modified by this paragraph.

7(E) A qualified active low-income community business shall
8only include a business located in census tracts with a poverty rate
9greater than 30 percent, or census tracts, if located within a
10non-metropolitan area, with a median family income that does not
11exceed 60 percent of median family income for the State of
12California, or census tracts, if located within a metropolitan area,
13with a median family income that does not exceed 60 percent of
14the greater of the California median family income or the
15metropolitan area median family income, or census tracts with
16unemployment rates at least 1.5 times the national average.

17(F) A qualified active low-income community business shall
18not include any business that operates or derives revenues from
19the operation of a country club, gaming establishment, massage
20parlor, liquor store, or golf course.

21(G) A qualified active low-income community business shall
22not include a sexually oriented business. A “sexually oriented
23business” means a nightclub, bar, restaurant, or similar commercial
24enterprise that provides for an audience of two or more individuals
25live nude entertainment or live nude performances where the nudity
26is a function of everyday business operations and where nudity is
27a planned and intentional part of the entertainment or performance.
28“Nude” means clothed in a manner that leaves uncovered or visible,
29through less than fully opaque clothing, any portion of the genitals
30or, in the case of a female, any portion of the breasts below the
31top of the areola of the breasts.

32(H) A qualified active low-income community business shall
33not include a charter school.

34(4) Section 45D(f) of the Internal Revenue Code, relating to
35national limitation on amount of investments designated, is
36modified as follows:

37(A)  The following shall apply in lieu of the provisions of
38Section 45D(f)(1) of the Internal Revenue Code: “The aggregate
39amount of qualified equity investments that may be allocated in
40any calendar year for purposes of this section, Section 17053.9,
P7    1and Section 23622.9 shall be an amount as determined by GO-Biz
2in consultation with the Department of Finance based upon any
3unused portion of the one hundred million dollars ($100,000,000)
4in exclusions, authorized pursuant to Section 6010.8, as determined
5by the California Alternative Energy and Advanced Transportation
6Financing Authority and reported to the committee, not to exceed
7an amount based upon a credit of forty million dollars
8($40,000,000). The committee shall limit the allocation of
9investments that may be designated under this section, Section
1017053.9, and Section 23622.9 to a cumulative total amount based
11on credits of no more than two hundred million dollars
12($200,000,000). The allocation of any undesignated qualified
13equity investments shall be returned to the committee by March
141 of the year following allocation and the value of the undesignated
15qualified equity investment shall be available for allocation in the
16following calendar years in accordance with the application
17process. Any qualified equity investment attributable to recaptured
18credits shall be available to the committee on March 1 of the year
19following recapture and shall be available for allocation in the
20following calendar years in accordance with subparagraph (B) of
21paragraph (5). Reallocated qualified equity investments attributable
22to recapture credits shall not count against the annual or the
23cumulative limit.”

24(B) The references to “the Secretary” in Section 45D(f)(2) of
25the Internal Revenue Code, relating to allocation of limitation, is
26modified to read “GO-Biz.”

27(C) The last sentence of Section 45D(f)(3) of the Internal
28Revenue Code, relating to carryover of unused limitation, shall
29not apply.

30(5) Section 45D(g)(3) of the Internal Revenue Code, relating
31to recapture event, is modified to add the following:

32(A) (i) The qualified community development entity fails to
33comply with subparagraph (D) of paragraph (5) of subdivision (d).
34In this case, recapture shall be 100 percent of the credit. The
35qualified community development entity shall send notice to
36GO-Biz within 30 calendar days of the close of any calendar year
37in which the qualified community development entity has failed
38to invest at least 15 percent of the purchase price of the qualified
39equity investment in satisfaction of the requirements of
40 subparagraph (D) of paragraph (5) of subdivision (d).

P8    1(ii) The qualified community development entity made an
2investment without performing a revenue impact assessment that
3satisfies subparagraph (J) of paragraph (5) of subdivision (d). In
4this case, recapture shall be 100 percent of the credit, unless
5GO-Biz has approved a waiver pursuant to clause (ii) of
6subparagraph (J) of paragraph (5) of subdivision (d). The qualified
7community development entity shall send notice to GO-Biz within
830 calendar days of the close of any calendar year in which the
9qualified community development entity has made an investment
10that fails to meet the requirements set forth in subparagraph (J) of
11paragraph (5) of subdivision (d).

12(B) GO-Biz shall establish a process, in consultation with the
13Department of Insurance, for the recapture of credits allowed under
14this section from the entity that claimed the credit on a return.

15(C) Recaptured qualified equity investments revert back to
16GO-Biz and shall be reissued. The reissue shall not count toward
17the annual or cumulative allocation limitation. The reissue shall
18be done in the following order:

19(i) First, pro rata to applicants whose qualified equity investment
20allocations were reduced pursuant to subparagraph (F) of paragraph
21(5) of subdivision (d) by the annual allocation limitation.

22(ii) Thereafter, in accordance with the application process.

23(D) (i) Enforcement of each of the recapture provisions shall
24be subject to a six-month cure period. Recapture shall not occur
25until the qualified community development entity gives notice of
26potential noncompliance to GO-Biz and is afforded six months
27from the date of such notice to cure the noncompliance. The
28six-month cure period shall begin on the day GO-Biz sends written
29acknowledgment of the qualified community development entity’s
30notice of the potential noncompliance. The qualified community
31development entity is responsible for addressing the circumstances
32of the potential noncompliance and providing all documentation
33to GO-Biz necessary to demonstrate, to GO-Biz’s satisfaction, that
34those conditions no longer exist.

35(ii) In an instance where a qualified community development
36entity fails to send the required notice of potential noncompliance
37or GO-Biz has information from the annual report or other sources
38that indicates that the entity is in potential noncompliance, GO-Biz
39shall send the notice. The date GO-Biz sends the notice of potential
40noncompliance shall begin the six-month cure period.

P9    1(iii) Not more than 45 calendar days following the close of the
2cure period, GO-Biz shall make a final determination as to whether
3the noncompliance has been cured. This determination shall be
4based on the review of the notice, information submitted by the
5qualified community development entity, and any other information
6GO-Biz deems relevant to this determination. Within 30 calendar
7days of making the final determination, GO-Biz shall notify the
8Department of Insurance and the Franchise Tax Board of the
9determination and other related information including, but not
10limited to, the tax identification number of the taxpayer.

11(iv) GO-Biz shall post, and update monthly, a tally of
12undesignated qualified equity investments, pursuant to paragraph
13(4), and recaptured credits pursuant to this paragraph.

14(6) Section 45D(h) of the Internal Revenue Code, relating to
15basis reduction, shall not apply.

16(7) If a qualified community development entity makes a capital
17or equity investment or a loan with respect to a qualified
18low-income building under the state Low-Income Housing Tax
19Credit Program, the investment or loan is not a qualified
20low-income community investment under this section.

21(d) (1) GO-Biz shall adopt guidelines necessary or appropriate
22to carry out its responsibilities with respect to the allocation of the
23qualified equity investments and recapture of credit allowed by
24this section. The adoption of the guidelines shall not be subject to
25the rulemaking provisions of the Administrative Procedure Act of
26Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
273 of Title 2 of the Government Code.

28(2) (A) GO-Biz shall establish and impose reasonable fees upon
29entities that apply for the allocation pursuant to this subdivision
30that in the aggregate defray the cost of reviewing applications for
31the program. GO-Biz may impose other reasonable fees upon
32entities that receive the allocation pursuant to this subdivision that
33in the aggregate defray the cost of administering the program.

34(B) The fees collected shall be deposited in the California New
35Markets Tax Credit Fund established in Section 18410.3.

36(3) In developing guidelines GO-Biz shall adopt an allocation
37process that does all of the following:

38(A) Creates an equitable distribution process that ensures that
39low-income community populations across the state are engaged
40and have an opportunity to benefit from the program.

P10   1(B) Sets minimum organizational capacity standards that
2applicants must meet in order to receive an allocation of authority
3to designate qualified equity investments including, but not limited
4to, its business strategy, targeted community outcomes,
5capitalization strategy, and management capacity.

6(C) Considers the qualified community development entity’s
7prior qualified low-income community investments under Section
845D of the Internal Revenue Code.

9(D) Considers the qualified community development entity’s
10prior qualified low-income community investments under this
11section, including subparagraph (D) of paragraph (5).

12(E) Does not require the qualified community development
13entity to identify the qualified active low-income community
14businesses in which the qualified community development entity
15will invest in an application for qualified equity investment
16allocation.

17(F) Does not disqualify a low-income community investment
18for the single reason that public or private incentives, loans, equity
19investments, technical assistance, or other forms of support have
20been or continue to be provided.

21(4) (A) GO-Biz shall begin accepting applications on or before
22May 15, 2016, and shall award authority to designate qualified
23equity investments annually through 2020, to the extent that
24allocations are available pursuant to Section 26011.9 of the Public
25Resources Code. To the extent reasonable and consistent in
26carrying out the purposes of this section, GO-Biz shall consider
27how the timing of the state allocation rounds correspond with the
28allocation schedule of the federal New Markets Tax Credit
29Program.

30(B) Within 20 calendar days after receipt of an application
31GO-Biz shall determine whether the application is complete or
32whether additional information is necessary in order to fully
33evaluate the application. If additional information is requested and
34the qualified community development entity provides that
35information within five business days, the application shall be
36considered completed as of the original date of receipt. If the
37qualified community development entity fails to provide the
38information within the five-business-day period, the application
39shall be denied and must be resubmitted in full with a new receipt
40date.

P11   1(C) Within 20 calendar days after receipt of an application
2determined to be complete by GO-Biz, the committee shall grant
3or deny the application in full or in part. If the committee denies
4any part of the application, it shall inform the qualified community
5 development entity of the grounds for the denial.

6(5) (A) In the 2016 awards cycle, the committee shall award
7authority to designate qualified equity investments to qualified
8community development entities described in paragraph (3) of
9subdivision (c) in the order applications are received by the
10committee. Applications received on the same day shall be deemed
11to have been received simultaneously.

12(B) In the 2017 to 2020 award cycles, inclusive, at least 60
13percent of the authority to designate qualified equity investments
14shall be awarded pursuant to subparagraph (A). At the committee’s
15discretion, a higher percentage of authority to designate qualified
16equity investments may be awarded pursuant to subparagraph (A).

17(C) The committee shall award up to 40 percent of the authority
18to designate qualified equity investments in the 2016 to 2020,
19inclusive, award cycles, to qualified community development
20entities on a competitive basis using blind scoring and a review
21committee that is comprised of community development finance
22practitioners and members having demonstrated experience in
23assessing organizational business strategy, community outcomes,
24capitalization strategy, and management capacity. A member of
25the review committee shall not have a financial interest, which
26includes, but is not limited to, asking, consenting, or agreeing to
27receive any commission, emolument, gratuity, money, property,
28or thing of value for his or her own use, benefit, or personal
29advantage for procuring or endeavoring to procure for any person,
30partnership, joint venture, association, or corporation any qualified
31equity investment or other assistance from any applicant.

32(D) (i) For qualified equity investments derived from the 2016
33 to 2020, inclusive, awards cycles, pursuant to subparagraphs (A),
34(B) and (C), a qualified community development entity shall invest
35at least 15 percent of the qualified equity investment in a qualified
36low-income community business in consultation or in partnership
37with either of the following:

38(I) A qualified community development entity certified under
39Section 45D of the Internal Revenue Code that has not received a
40federal New Markets Tax Credit allocation on or after January 1,
P12   12012, and has either a local service area that includes one or more
2California communities or a California statewide service area, but
3excluding qualified community development entities with a
4national service area.

5(II) A nonprofit organization certified by GO-Biz, pursuant to
6clause (iii).

7(ii) The 15-percent investment shall be calculated by multiplying
8the total purchase price of the qualified equity investments issued
9by the qualified community development entity by 15 percent.
10Each community development entity application shall indicate
11how the qualified community development entity will meet this
12requirement.

13(iii) GO-Biz shall establish guidelines for certifying a nonprofit
14organization pursuant to this subparagraph. A nonprofit
15organization shall meet the requirements of Section 23701 and be
16certified by GO-Biz as having a primary mission of serving or
17providing investment capital in low-income communities in
18California. The nonprofit organization shall maintain accountability
19to residents of low-income communities through their
20representation on any governing board or on an advisory board of
21the nonprofit organization. GO-Biz may include reasonable
22conditions on the certification to effectuate the intent of this section
23and may suspend or revoke a certification, after affording the
24nonprofit organization notice and the opportunity to appeal and
25be heard by the committee, if GO-Biz finds that the nonprofit
26organization no longer meets the requirements for certification.

27(E)  In making competitive awards of authority to designate
28qualified equity investments, priority shall be given to applications
29that can demonstrate that the qualified equity investment authority
30will allow the qualified community development entity to undertake
31qualified low-income community investments in rural, suburban,
32or urban areas that have been historically underserved and result
33in the greatest benefit to the hardest to serve and undercapitalized
34lower income populations, or in newly established businesses, or
35in activities that support neighborhood revitalization strategies
36driven by local grassroots stakeholders in multiple low-income
37communities across one or more regions or the state for the purpose
38of scaling economic development activities that compliment
39regional industry clusters that result in the greatest benefit to the
40largest number of lower income individuals.

P13   1(F) (i)  For applications described in subparagraph (A), in the
2event requests for authority to designate qualified equity
3investments exceed the applicable annual allocation limitation,
4GO-Biz shall certify, consistent with remaining qualified equity
5investment capacity, qualified equity investments of applicants in
6proportionate percentages based upon the ratio of the amount of
7qualified equity investments requested in such applications to the
8total amount of qualified equity investments requested in all such
9applications received on the same day.

10(ii) If a pending request cannot be fully certified due to this
11limit, GO-Biz shall certify the portion that may be certified unless
12the qualified community development entity elects to withdraw
13its request rather than receive partial certification.

14(G) An approved applicant may transfer all or a portion of its
15certified qualified equity investment authority to its controlling
16entity or any subsidiary qualified community development entity
17of the controlling entity, provided that the applicant and the
18transferee notify the committee within 30 calendar days of such
19transfer and include the information required in the application
20with respect to such transferee with such notice. The transferee
21shall be subject to the same rules, requirements, and limitations
22applicable to the transferor.

23(H) Within 60 calendar days of GO-Biz sending notice of
24certification, the qualified community development entity or any
25transferee, under subparagraph (G), shall issue the qualified equity
26investment and receive cash in the amount of the certified amount.
27The qualified community development entity or transferee, under
28subparagraph (G), must provide GO-Biz with evidence of the
29receipt of the cash investment within 65 calendar days of the
30applicant receiving notice of certification. If the qualified
31community development entity or any transferee, under
32subparagraph (G), does not receive the cash investment and issue
33the qualified equity investment within 60 calendar days of GO-Biz
34sending the certification notice, the certification shall lapse and
35the entity may not issue the qualified equity investment without
36reapplying to GO-Biz for certification. Lapsed certifications revert
37back to GO-Biz and shall be reissued in the following order:

38(i) First, pro rata to applicants whose qualified equity investment
39allocations were reduced pursuant to subparagraph (F) under the
P14   1annual allocation limitation of forty million dollars ($40,000,000)
2in paragraph (4) of subdivision (c).

3(ii) Thereafter, in accordance with the application process.

4(I) A qualified community development entity that issues
5qualified equity investments must notify GO-Biz of the names of
6taxpayers that are eligible to utilize tax credits pursuant to this
7section and any transfer of a qualified equity investment.

8(J) (i) A qualified community development entity shall only
9make a qualified low-income community investment that
10demonstrates a positive revenue impact on the state over a 10-year
11period against the aggregate tax credit utilization over the same
1210-year period. GO-Biz shall approve one or more nationally
13recognized revenue impact assessment models that shall be used
14by the qualified community development entity to demonstrate
15positive revenue impact. If it is demonstrated that the qualified
16low-income community investment has a positive revenue impact
17on the state at the time the investment is made, it shall be treated
18as if the investment continues to meet the requirement of this
19subparagraph for the duration of the seven-year program period.

20(ii) Upon application and approval by GO-Biz, the requirement
21of this subparagraph may be waived.

22(6) (A) A qualified community development entity that issues
23qualified equity investments shall submit a report to GO-Biz within
24the first five business days after the first anniversary of the initial
25credit allowance date that provides documentation as to the
26investment of at least 85 percent of the purchase price in qualified
27low-income community investments in qualified active low-income
28community businesses located in California. Such report shall
29include all of the following:

30(i) A bank statement of such qualified community development
31entity evidencing each qualified low-income community
32investment.

33(ii) Evidence that such business was a qualified active
34low-income community business at the time of such qualified
35low-income community investment.

36(iii) Evidence that the community development entity complied
37with subparagraph (D) of paragraph (5).

38(iv) Evidence that each qualified low-income community
39investment was determined to have a positive revenue impact on
40the state. This requirement does not apply for any qualified
P15   1low-income community investment for which GO-Biz approved
2a waiver, pursuant to clause (ii) of subparagraph (J) of paragraph
3(5) or to reinvestments of redeemed qualified low-income
4investments.

5(v) Any other information required by GO-Biz as being
6necessary to meet the requirements of this section.

7(B) Thereafter, the qualified community development entity
8shall submit an annual report to GO-Biz within 60 calendar days
9of the beginning of the calendar year during the seven years
10following submittal of the report, pursuant to subparagraph (A).
11No annual report shall be due prior to the first anniversary of the
12initial credit allowance date. The report shall include, but is not
13limited to, the following:

14(i) The social, environmental, and economic impact the credit
15had on the low-income community during the report period and
16cumulatively.

17(ii) The amount of moneys used for qualified low-income
18investments in qualified low-income community businesses.

19(iii) The number of employment positions created and retained
20as a result of qualified low-income community investments and
21the average annual salary of such positions.

22(iv) The number of operating businesses assisted as a result of
23qualified low-income community investments, by industry and
24number of employees.

25(v) Number of owner-occupied real estate projects.

26(vi) Location of each qualified low-income community business
27assisted by a qualified low-income community investment.

28(vii) Summary of the outcomes of each of the revenue impact
29assessments undertaken by the qualified community development
30entity during the year.

31(e) (1) In the case where the credit allowed by this section
32exceeds the tax described in Sections 12201, 12204, 12206, and
3312209, the excess may be carried over to reduce that tax in the
34following year, and the six succeeding years if necessary, until the
35credit is exhausted.

36(2) A taxpayer allowed a credit under this section for a qualified
37equity investment shall not be eligible for any other credit under
38this part with respect to that investment.

39(f) GO-Biz shall annually report on its Internet Web site the
40information provided by low-income community development
P16   1entities and on the geographic distribution of the qualified active
2low-income community businesses assisted.

3(g) (1) The Insurance Commissioner and the Franchise Tax
4Board may prescribe any rules or regulations that may be necessary
5or appropriate to implement this section. The Insurance
6Commissioner and the Franchise Tax Board shall have access to
7any documentation held by the committee relative to the application
8and reporting of a qualified community development entity.

9(2) A qualifying community development entity shall provide
10GO-Biz with the name, address, and tax identification number of
11each investor and entity for which a qualified equity investment
12was designated by the qualifying community development entity,
13pursuant to this section. GO-Biz shall provide this information to
14the Insurance Commissioner and the Franchise Tax Board in a
15manner determined by the Insurance Commissioner and the
16Franchise Tax Board.

17(h) GO-Biz and the committee shall only make awards pursuant
18to paragraph (4) of subdivision (d) in a calendar year in which the
19Legislature appropriates funds in the California New Markets Tax
20Credit Fund pursuant to subdivision (b) of Section 18410.3.

21(i) This section shall remain in effect only until December 1,
222028, and as of that date is repealed.

23

SEC. 4.  

Section 17053.9 is added to the Revenue and Taxation
24Code
, to read:

25

17053.9.  

(a) There is hereby created the California New
26Markets Tax Credit Program as provided in this section, Section
2712283, and Section 23622.9. The purpose of this program is to
28stimulate private sector investment in lower income communities
29by providing a tax incentive to community and economic
30development entities that can be leveraged by the entity to attract
31private sector investment that in turn will be deployed by providing
32financing and technical assistance to small- and medium-size
33businesses and the development of commercial, industrial, and
34community development projects, including, but not limited to,
35facilities for nonprofit service organizations, light manufacturing,
36and mixed-use and transit-oriented development. The committee
37and GO-Biz shall administer this program as provided in this
38section, Section 12283, and Section 23622.9. The Director of
39GO-Biz may delegate the administration of all or portions of the
40program within GO-Biz.

P17   1(b) (1) For taxable years beginning on or after January 1, 2016,
2and before January 1, 2028, and subject to subdivision (h), there
3shall be allowed as a credit against the “net tax,” as defined in
4Section 17039, an amount determined in accordance with Section
545D of the Internal Revenue Code, as modified as set forth in this
6section.

7(2) (A) For purposes of this section, “committee” means the
8California Competes Tax Credit Committee established under
9Section 18410.2.

10(B) For purposes of this section, “GO-Biz” means the
11Governor’s Office of Business and Economic Development.

12(c) Section 45D of the Internal Revenue Code is modified as
13follows:

14(1) Section 45D(a)(2) of the Internal Revenue Code, relating to
15applicable percentage, is modified by substituting for “(A)   5
16percent with respect to the first 3 credit allowance dates, and (B)  
176 percent with respect to the remainder of the credit allowance
18dates” with the following:

19(A) Zero percent with respect to the first two credit allowance
20dates.

21(B) Seven percent with respect to the third credit allowance
22date.

23(C) Eight percent with respect to the remainder of the credit
24allowance dates.

25(2) (A) Section 45D(c)(1) of the Internal Revenue Code is
26modified to only include a qualified community development
27entity, that is certified by the Secretary of the Treasury, and its
28subsidiary qualified community development entities that have
29entered into an allocation agreement with the Community
30Development Financial Institutions Fund of the United States
31Treasury Department, with respect to credits authorized by Section
3245D of the Internal Revenue Code, that includes California within
33the service area and is dated on or after January 1, 2012.

34(B) Section 45D(c)(2) of the Internal Revenue Code is modified
35to only include a specialized small business investment company
36or community development financial institution that entered into
37an allocation agreement with the Community Development
38Financial Institutions Fund of the United States Treasury
39Department, with respect to credits authorized by Section 45D of
P18   1the Internal Revenue Code, that includes California within the
2 service area and is dated on or after January 1, 2012.

3(3) The term “qualified active low-income community business,”
4as defined in Section 45D(d)(2) of the Internal Revenue Code, is
5modified as follows:

6(A) By substituting “any low-income community in California”
7for “any low-income community” every place it appears in Section
845D of the Internal Revenue Code.

9(B) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
10modified to allow the services of employees of a service-based
11qualified active low-income community business to be performed
12outside the low-income community. A service-based qualified
13active low-income community business is a business that primarily
14earns revenue through providing intangible products and services
15and leases or owns real property in the low-income community
16that is used for the operation of the business.

17(C) A qualified active low-income community business shall
18not include any business that derives, or projects to derive, 15
19percent or more of its annual revenue from the rental or sale of
20real estate. This exclusion does not apply to a business that is
21controlled by, or under common control with, another business if
22the second business: (I) does not derive or project to derive 15
23percent or more of its annual revenue from the rental or sale of
24real estate; and (II) is the primary tenant of the real estate leased
25from the first business.

26(D) A qualified active low-income community business shall
27only include a business that, at the time the initial investment is
28made, has 250 or fewer employees and is located in one or more
29California low-income communities. The operating business shall
30meet all other conditions of a qualified active low-income
31 community business, except as modified by this paragraph.

32(E) A qualified active low-income community business shall
33only include a business located in census tracts with a poverty rate
34greater than 30 percent, or census tracts, if located within a
35non-metropolitan area, with a median family income that does not
36exceed 60 percent of median family income for the State of
37California, or census tracts, if located within a metropolitan area,
38with a median family income that does not exceed 60 percent of
39the greater of the California median family income or the
P19   1metropolitan area median family income, or census tracts with
2unemployment rates at least 1.5 times the national average.

3(F) A qualified active low-income community business shall
4not include any business that operates or derives revenues from
5the operation of a country club, gaming establishment, massage
6parlor, liquor store, or golf course.

7(G) A qualified active low-income community business shall
8not include a sexually oriented business. A “sexually oriented
9business” means a nightclub, bar, restaurant, or similar commercial
10enterprise that provides for an audience of two or more individuals
11live nude entertainment or live nude performances where the nudity
12is a function of everyday business operations and where nudity is
13a planned and intentional part of the entertainment or performance.
14“Nude” means clothed in a manner that leaves uncovered or visible,
15through less than fully opaque clothing, any portion of the genitals
16or, in the case of a female, any portion of the breasts below the
17top of the areola of the breasts.

18(H) A qualified active low-income community business shall
19not include a charter school.

20(4) Section 45D(f) of the Internal Revenue Code, relating to
21national limitation on amount of investments designated, is
22modified as follows:

23(A) The following shall apply in lieu of the provisions of Section
2445D(f)(1) of the Internal Revenue Code: “The aggregate amount
25of qualified equity investments that may be allocated in any
26calendar year for purposes of this section, Section 12283, and
27Section 23622.9 shall be an amount as determined by GO-Biz in
28consultation with the Department of Finance based upon any
29unused portion of the one hundred million dollars ($100,000,000)
30in exclusions, authorized pursuant to Section 6010.8, as determined
31by the California Alternative Energy and Advanced Transportation
32Financing Authority and reported to the committee, not to exceed
33an amount based upon a credit of forty million dollars
34($40,000,000). The committee shall limit the allocation of
35investments that may be designated under this section, Section
3612283, and Section 23622.9 to a cumulative total amount based
37on credits of no more than two hundred million dollars
38($200,000,000). The allocation of any undesignated qualified
39equity investments shall be returned to the committee by March
401 of the year following allocation and the value of the undesignated
P20   1qualified equity investment shall be available for allocation in the
2following calendar years in accordance with the application
3process. Any qualified equity investment attributable to recaptured
4credits shall be available to the committee on March 1 of the year
5following recapture and shall be available for allocation in the
6following calendar years in accordance with clause (ii) of
7subparagraph (B) of paragraph (5). Reallocated qualified equity
8investments attributable to recapture credits shall not count against
9the annual or the cumulative limit.”

10(B) The references to “the Secretary” in Section 45D(f)(2) of
11the Internal Revenue Code, relating to allocation of limitation, is
12modified to read “GO-Biz.”

13(C) The last sentence of Section 45D(f)(3) of the Internal
14Revenue Code, relating to carryover of unused limitation, shall
15not apply.

16(5) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
17relating to credit recapture amount, is modified to substitute
18“Section 19101 of this code” for “section 6621”.

19(B) Section 45D(g)(3) of the Internal Revenue Code, relating
20to recapture event, is modified to add the following:

21(i) (I) The qualified community development entity fails to
22comply with subparagraph (D) of paragraph (5) of subdivision (d).
23In this case, recapture shall be 100 percent of the credit. The
24qualified community development entity shall send notice to
25GO-Biz within 30 calendar days of the close of any calendar year
26in which the qualified community development entity has failed
27to invest at least 15 percent of the purchase price of the qualified
28equity investment in satisfaction of the requirements of
29subparagraph (D) of paragraph (5) of subdivision (d).

30(II) The qualified community development entity made an
31investment without performing a revenue impact assessment that
32satisfies subparagraph (J) of paragraph (5) of subdivision (d). In
33this case, recapture shall be 100 percent of the credit, unless
34GO-Biz has approved a waiver pursuant to clause (ii) of
35subparagraph (J) of paragraph (5) of subdivision (d). The qualified
36community development entity shall send notice to GO-Biz within
3730 calendar days of the close of any calendar year in which the
38qualified community development entity has made an investment
39that fails to meet the requirements set forth in subparagraph (J) of
40paragraph (5) of subdivision (d).

P21   1(ii) GO-Biz shall establish a process, in consultation with the
2Franchise Tax Board, for the recapture of credits allowed under
3this section from the entity that claimed the credit on a return.

4(iii)  Recaptured qualified equity investments revert back to
5GO-Biz and shall be reissued. The reissue shall not count toward
6the annual or cumulative allocation limitation. The reissue shall
7be done in the following order:

8(I)  First, pro rata to applicants whose qualified equity
9investment allocations were reduced pursuant to subparagraph (F)
10of paragraph (5) of subdivision (d) by the annual allocation
11limitation.

12(II)  Thereafter, in accordance with the application process.

13(iv) (I) Enforcement of each of the recapture provisions shall
14be subject to a six-month cure period. Recapture shall not occur
15until the qualified community development entity gives notice of
16potential noncompliance to GO-Biz and is afforded six months
17from the date of such notice to cure the noncompliance. The
18six-month cure period shall begin on the day GO-Biz sends written
19acknowledgment of the qualified community development entity’s
20notice of the potential noncompliance. The qualified community
21development entity is responsible for addressing the circumstances
22of the potential noncompliance and providing all documentation
23to GO-Biz necessary to demonstrate, to GO-Biz’s satisfaction, that
24those conditions no longer exist.

25(II) In an instance where a qualified community development
26entity fails to send the required notice of potential noncompliance
27or GO-Biz has information from the annual report or other sources
28that indicates that the entity is in potential noncompliance, GO-Biz
29shall send the notice. The date GO-Biz sends the notice of potential
30noncompliance shall begin the six-month cure period.

31(III) Not more than 45 calendar days following the close of the
32cure period, GO-Biz shall make a final determination as to whether
33the noncompliance has been cured. This determination shall be
34based on the review of the notice, information submitted by the
35qualified community development entity, and any other information
36GO-Biz deems relevant to this determination. Within 30 calendar
37days of making the final determination, GO-Biz shall notify the
38Franchise Tax Board of the determination and other related
39information including, but not limited to, the tax identification
40number of the taxpayer.

P22   1(IV) GO-Biz shall post, and update monthly, a tally of
2undesignated qualified equity investments, pursuant to paragraph
3(4), and recaptured credits pursuant to this paragraph.

4(6) If a qualified community development entity makes a capital
5or equity investment or a loan with respect to a qualified
6low-income building under the state Low-Income Housing Tax
7Credit Program, the investment or loan is not a qualified
8low-income community investment under this section.

9(d) (1) GO-Biz shall adopt guidelines necessary or appropriate
10to carry out its responsibilities with respect to the allocation of the
11qualified equity investments and recapture of credit allowed by
12this section. The adoption of the guidelines shall not be subject to
13the rulemaking provisions of the Administrative Procedure Act of
14Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
153 of Title 2 of the Government Code.

16(2) (A) GO-Biz shall establish and impose reasonable fees upon
17entities that apply for the allocation pursuant to this subdivision
18that in the aggregate defray the cost of reviewing applications for
19the program. GO-Biz may impose other reasonable fees upon
20entities that receive the allocation pursuant to this subdivision that
21in the aggregate defray the cost of administering the program.

22(B) The fees collected shall be deposited in the California New
23Markets Tax Credit Fund established in Section 18410.3.

24(3) In developing guidelines GO-Biz shall adopt an allocation
25process that does all of the following:

26(A) Creates an equitable distribution process that ensures that
27low-income community populations across the state are engaged
28and have an opportunity to benefit from the program.

29(B) Sets minimum organizational capacity standards that
30applicants must meet in order to receive an allocation of authority
31to designate qualified equity investments including, but not limited
32to, its business strategy, targeted community outcomes,
33capitalization strategy, and management capacity.

34(C) Considers the qualified community development entity’s
35prior qualified low-income community investments under Section
3645D of the Internal Revenue Code.

37(D) Considers the qualified community development entity’s
38prior qualified low-income community investments under this
39section, including subparagraph (D) of paragraph (5).

P23   1(E) Does not require the qualified community development
2entity to identify the qualified active low-income community
3 businesses in which the qualified community development entity
4will invest in an application for qualified equity investment
5allocation.

6(F) Does not disqualify a low-income community investment
7for the single reason that public or private incentives, loans, equity
8investments, technical assistance, or other forms of support have
9been or continue to be provided.

10(4) (A) GO-Biz shall begin accepting applications on or before
11May 15, 2016, and shall award authority to designate qualified
12equity investments annually through 2020, to the extent that
13allocations are available pursuant to Section 26011.9 of the Public
14Resources Code. To the extent reasonable and consistent in
15carrying out the purposes of this section, GO-Biz shall consider
16how the timing of the state allocation rounds correspond with the
17allocation schedule of the federal New Markets Tax Credit
18 Program.

19(B) Within 20 calendar days after receipt of an application
20GO-Biz shall determine whether the application is complete or
21whether additional information is necessary in order to fully
22evaluate the application. If additional information is requested and
23the qualified community development entity provides that
24information within five business days, the application shall be
25considered completed as of the original date of receipt. If the
26qualified community development entity fails to provide the
27information within the five-business-day period, the application
28shall be denied and must be resubmitted in full with a new receipt
29date.

30(C) Within 20 calendar days after receipt of an application
31determined to be complete by GO-Biz, the committee shall grant
32or deny the application in full or in part. If the committee denies
33any part of the application, it shall inform the qualified community
34development entity of the grounds for the denial.

35(5) (A) In the 2016 awards cycle, the committee shall award
36authority to designate qualified equity investments to qualified
37community development entities described in paragraph (3) of
38subdivision (c) in the order applications are received by the
39committee. Applications received on the same day shall be deemed
40to have been received simultaneously.

P24   1(B) In the 2017 to 2020 award cycles, inclusive, at least 60
2percent of the authority to designate qualified equity investments
3shall be awarded pursuant to subparagraph (A). At the committee’s
4discretion, a higher percentage of authority to designate qualified
5equity investments may be awarded pursuant to subparagraph (A).

6(C) The committee shall award up to 40 percent of the authority
7to designate qualified equity investments in the 2016 to 2020,
8inclusive, award cycles, to qualified community development
9entities on a competitive basis using blind scoring and a review
10committee that is comprised of community development finance
11practitioners and members having demonstrated experience in
12assessing organizational business strategy, community outcomes,
13capitalization strategy, and management capacity. A member of
14the review committee shall not have a financial interest, which
15includes, but is not limited to, asking, consenting, or agreeing to
16receive any commission, emolument, gratuity, money, property,
17or thing of value for his or her own use, benefit, or personal
18advantage for procuring or endeavoring to procure for any person,
19partnership, joint venture, association, or corporation any qualified
20equity investment or other assistance from any applicant.

21(D) (i) For qualified equity investments derived from the 2016
22to 2020, inclusive, awards cycles, pursuant to subparagraphs (A),
23(B) and (C), a qualified community development entity shall invest
24at least 15 percent of the qualified equity investment in a qualified
25low-income community business in consultation or in partnership
26with either of the following:

27(I) A qualified community development entity certified under
28Section 45D of the Internal Revenue Code that has not received a
29federal New Markets Tax Credit allocation on or after January 1,
302012, and has either a local service area that includes one or more
31California communities or a California statewide service area, but
32excluding qualified community development entities with a
33national service area.

34(II) A nonprofit organization certified by GO-Biz, pursuant to
35clause (iii).

36(ii) The 15-percent investment shall be calculated by multiplying
37the total purchase price of the qualified equity investments issued
38by the qualified community development entity by 15 percent.
39Each community development entity application shall indicate
P25   1how the qualified community development entity will meet this
2requirement.

3(iii) GO-Biz shall establish guidelines for certifying a nonprofit
4organization pursuant to this subparagraph. A nonprofit
5organization shall meet the requirements of Section 23701 and be
6certified by GO-Biz as having a primary mission of serving or
7providing investment capital in low-income communities in
8California. The nonprofit organization shall maintain accountability
9to residents of low-income communities through their
10representation on any governing board or on an advisory board of
11the nonprofit organization. GO-Biz may include reasonable
12conditions on the certification to effectuate the intent of this section
13and may suspend or revoke a certification, after affording the
14nonprofit organization notice and the opportunity to appeal and
15be heard by the committee, if GO-Biz finds that the nonprofit
16organization no longer meets the requirements for certification.

17(E) In making competitive awards of authority to designate
18qualified equity investments, priority shall be given to applications
19that can demonstrate that the qualified equity investment authority
20will allow the qualified community development entity to undertake
21qualified low-income community investments in rural, suburban,
22or urban areas that have been historically underserved and result
23in the greatest benefit to the hardest to serve and undercapitalized
24lower income populations, or in newly established businesses, or
25in activities that support neighborhood revitalization strategies
26driven by local grassroots stakeholders in multiple low-income
27communities across one or more regions or the state for the purpose
28 of scaling economic development activities that compliment
29regional industry clusters that result in the greatest benefit to the
30largest number of lower income individuals.

31(F) (i)  For applications described in subparagraph (A), in the
32event requests for authority to designate qualified equity
33investments exceed the applicable annual allocation limitation,
34GO-Biz shall certify, consistent with remaining qualified equity
35investment capacity, qualified equity investments of applicants in
36proportionate percentages based upon the ratio of the amount of
37qualified equity investments requested in such applications to the
38total amount of qualified equity investments requested in all such
39applications received on the same day.

P26   1(ii) If a pending request cannot be fully certified due to this
2limit, GO-Biz shall certify the portion that may be certified unless
3the qualified community development entity elects to withdraw
4its request rather than receive partial certification.

5(G) An approved applicant may transfer all or a portion of its
6certified qualified equity investment authority to its controlling
7entity or any subsidiary qualified community development entity
8of the controlling entity, provided that the applicant and the
9transferee notify the committee within 30 calendar days of such
10transfer and include the information required in the application
11with respect to such transferee with such notice. The transferee
12shall be subject to the same rules, requirements, and limitations
13applicable to the transferor.

14(H) Within 60 calendar days of GO-Biz sending notice of
15certification, the qualified community development entity or any
16transferee, under subparagraph (G), shall issue the qualified equity
17investment and receive cash in the amount of the certified amount.
18The qualified community development entity or transferee, under
19subparagraph (G), must provide GO-Biz with evidence of the
20receipt of the cash investment within 65 calendar days of the
21applicant receiving notice of certification. If the qualified
22community development entity or any transferee, under
23subparagraph (G), does not receive the cash investment and issue
24the qualified equity investment within 60 calendar days of GO-Biz
25sending the certification notice, the certification shall lapse and
26the entity may not issue the qualified equity investment without
27reapplying to GO-Biz for certification. Lapsed certifications revert
28back to GO-Biz and shall be reissued in the following order:

29(i) First, pro rata to applicants whose qualified equity investment
30allocations were reduced pursuant to subparagraph (F) under the
31annual allocation limitation of forty million dollars ($40,000,000)
32in paragraph (4) of subdivision (c).

33(ii) Thereafter, in accordance with the application process.

34(I) A qualified community development entity that issues
35qualified equity investments must notify GO-Biz of the names of
36taxpayers that are eligible to utilize tax credits pursuant to this
37section and any transfer of a qualified equity investment.

38(J) (i) A qualified community development entity shall only
39make a qualified low-income community investment that
40demonstrates a positive revenue impact on the state over a 10-year
P27   1period against the aggregate tax credit utilization over the same
210-year period. GO-Biz shall approve one or more nationally
3recognized revenue impact assessment models that shall be used
4by the qualified community development entity to demonstrate
5positive revenue impact. If it is demonstrated that the qualified
6low-income community investment has a positive revenue impact
7on the state at the time the investment is made, it shall be treated
8as if the investment continues to meet the requirement of this
9subparagraph for the duration of the seven-year program period.

10(ii) Upon application and approval by GO-Biz, the requirement
11of this subparagraph may be waived.

12(6) (A) A qualified community development entity that issues
13qualified equity investments shall submit a report to GO-Biz within
14the first five business days after the first anniversary of the initial
15credit allowance date that provides documentation as to the
16investment of at least 85 percent of the purchase price in qualified
17low-income community investments in qualified active low-income
18community businesses located in California. Such report shall
19include all of the following:

20(i) A bank statement of such qualified community development
21entity evidencing each qualified low-income community
22investment.

23(ii) Evidence that such business was a qualified active
24low-income community business at the time of such qualified
25low-income community investment.

26(iii) Evidence that the community development entity complied
27with subparagraph (D) of paragraph (5).

28(iv) Evidence that each qualified low-income community
29investment was determined to have a positive revenue impact on
30the state. This requirement does not apply for any qualified
31low-income community investment for which GO-Biz approved
32a waiver, pursuant to clause (ii) of subparagraph (J) of paragraph
33(5) or to reinvestments of redeemed qualified low-income
34investments.

35(v) Any other information required by GO-Biz as being
36necessary to meet the requirements of this section.

37(B) Thereafter, the qualified community development entity
38shall submit an annual report to GO-Biz within 60 calendar days
39of the beginning of the calendar year during the seven years
40following submittal of the report, pursuant to subparagraph (A).
P28   1No annual report shall be due prior to the first anniversary of the
2initial credit allowance date. The report shall include, but is not
3limited to, the following:

4(i) The social, environmental, and economic impact the credit
5had on the low-income community during the report period and
6cumulatively.

7(ii) The amount of moneys used for qualified low-income
8investments in qualified low-income community businesses.

9(iii) The number of employment positions created and retained
10as a result of qualified low-income community investments and
11the average annual salary of such positions.

12(iv) The number of operating businesses assisted as a result of
13qualified low-income community investments, by industry and
14number of employees.

15(v) Number of owner-occupied real estate projects.

16(vi) Location of each qualified low-income community business
17assisted by a qualified low-income community investment.

18(vii) Summary of the outcomes of each of the revenue impact
19assessments undertaken by the qualified community development
20entity during the year.

21(e) (1) In the case where the credit allowed by this section
22exceeds the “net tax,” the excess may be carried over to reduce
23the “net tax” in the following year, and the six succeeding years
24if necessary, until the credit is exhausted.

25(2) A taxpayer allowed a credit under this section for a qualified
26equity investment shall not be eligible for any other credit under
27this part with respect to that investment.

28(f) GO-Biz shall annually report on its Internet Web site the
29information provided by low-income community development
30entities and on the geographic distribution of the qualified active
31low-income community businesses assisted.

32(g) (1) The Franchise Tax Board may prescribe any rules or
33regulations that may be necessary or appropriate to implement this
34section. The Franchise Tax Board shall have access to any
35documentation held by the committee relative to the application
36and reporting of a qualified community development entity.

37(2) A qualifying community development entity shall provide
38GO-Biz with the name, address, and tax identification number of
39each investor and entity for which a qualified equity investment
40was designated by the qualifying community development entity,
P29   1pursuant to this section. GO-Biz shall provide this information to
2the Franchise Tax Board in a manner determined by the Franchise
3Tax Board.

4(h) GO-Biz and the committee shall only make awards pursuant
5to paragraph (4) of subdivision (d) in a calendar year in which the
6Legislature appropriates funds in the California New Markets Tax
7Credit Fund pursuant to subdivision (b) of Section 18410.3.

8(i) This section shall remain in effect only until December 1,
92028, and as of that date is repealed.

10

SEC. 5.  

Section 18410.3 is added to the Revenue and Taxation
11Code
, to read:

12

18410.3.  

(a) The California New Markets Tax Credit Fund is
13hereby established in the State Treasury.

14(b) Upon appropriation, moneys in the fund shall be used for
15the purposes described in subdivision (d) of Section 12283,
16subdivision (d) of Section 17053.9, and subdivision (d) of Section
1723622.9.

18

SEC. 6.  

Section 23622.9 is added to the Revenue and Taxation
19Code
, to read:

20

23622.9.  

(a) There is hereby created the California New
21Markets Tax Credit Program as provided in this section, Section
2212283, and Section 17053.9. The purpose of this program is to
23stimulate private sector investment in lower income communities
24by providing a tax incentive to community and economic
25development entities that can be leveraged by the entity to attract
26private sector investment that in turn will be deployed by providing
27financing and technical assistance to small- and medium-size
28businesses and the development of commercial, industrial, and
29community development projects, including, but not limited to,
30facilities for nonprofit service organizations, light manufacturing,
31and mixed-use and transit-oriented development. The committee
32and GO-Biz shall administer this program as provided in this
33section, Section 12283, and Section 17053.9. The Director of
34GO-Biz may delegate the administration of all or portions of the
35program within GO-Biz.

36(b) (1) For taxable years beginning on or after January 1, 2016,
37and before January 1, 2028, and subject to subdivision (h), there
38shall be allowed as a credit against the “tax,” as defined in Section
3923036, an amount determined in accordance with Section 45D of
40the Internal Revenue Code, as modified as set forth in this section.

P30   1(2) (A) For purposes of this section, “committee” means the
2California Competes Tax Credit Committee established under
3Section 18410.2.

4(B) For purposes of this section, “GO-Biz” means the
5Governor’s Office of Business and Economic Development.

6(c) Section 45D of the Internal Revenue Code is modified as
7follows:

8(1) Section 45D(a)(2) of the Internal Revenue Code, relating to
9applicable percentage, is modified by substituting for “(A)   5
10percent with respect to the first 3 credit allowance dates, and (B)  
116 percent with respect to the remainder of the credit allowance
12dates” with the following:

13(A) Zero percent with respect to the first two credit allowance
14dates.

15(B) Seven percent with respect to the third credit allowance
16date.

17(C) Eight percent with respect to the remainder of the credit
18allowance dates.

19(2) (A) Section 45D(c)(1) of the Internal Revenue Code is
20modified to only include a qualified community development
21entity, that is certified by the Secretary of the Treasury, and its
22subsidiary qualified community development entities that have
23entered into an allocation agreement with the Community
24Development Financial Institutions Fund of the United States
25Treasury Department, with respect to credits authorized by Section
2645D of the Internal Revenue Code, that includes California within
27the service area and is dated on or after January 1, 2012.

28(B) Section 45D(c)(2) of the Internal Revenue Code is modified
29to only include a specialized small business investment company
30or community development financial institution that entered into
31an allocation agreement with the Community Development
32Financial Institutions Fund of the United States Treasury
33Department, with respect to credits authorized by Section 45D of
34the Internal Revenue Code, that includes California within the
35 service area and is dated on or after January 1, 2012.

36(3) The term “qualified active low-income community business,”
37as defined in Section 45D(d)(2) of the Internal Revenue Code, is
38modified as follows:

P31   1(A) By substituting “any low-income community in California”
2for “any low-income community” every place it appears in Section
345D of the Internal Revenue Code.

4(B) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
5modified to allow the services of employees of a service-based
6qualified active low-income community business to be performed
7outside the low-income community. A service-based qualified
8active low-income community business is a business that primarily
9earns revenue through providing intangible products and services
10and leases or owns real property in the low-income community
11that is used for the operation of the business.

12(C) A qualified active low-income community business shall
13not include any business that derives, or projects to derive, 15
14percent or more of its annual revenue from the rental or sale of
15real estate. This exclusion does not apply to a business that is
16controlled by, or under common control with, another business if
17the second business: (I) does not derive or project to derive 15
18percent or more of its annual revenue from the rental or sale of
19real estate; and (II) is the primary tenant of the real estate leased
20from the first business.

21(D) A qualified active low-income community business shall
22only include a business that, at the time the initial investment is
23made, has 250 or fewer employees and is located in one or more
24California low-income communities. The operating business shall
25meet all other conditions of a qualified active low-income
26community business, except as modified by this paragraph.

27(E) A qualified active low-income community business shall
28only include a business located in census tracts with a poverty rate
29greater than 30 percent, or census tracts, if located within a
30non-metropolitan area, with a median family income that does not
31exceed 60 percent of median family income for the State of
32California, or census tracts, if located within a metropolitan area,
33with a median family income that does not exceed 60 percent of
34the greater of the California median family income or the
35metropolitan area median family income, or census tracts with
36unemployment rates at least 1.5 times the national average.

37(F) A qualified active low-income community business shall
38not include any business that operates or derives revenues from
39the operation of a country club, gaming establishment, massage
40parlor, liquor store, or golf course.

P32   1(G) A qualified active low-income community business shall
2not include a sexually oriented business. A “sexually oriented
3business” means a nightclub, bar, restaurant, or similar commercial
4enterprise that provides for an audience of two or more individuals
5live nude entertainment or live nude performances where the nudity
6is a function of everyday business operations and where nudity is
7a planned and intentional part of the entertainment or performance.
8“Nude” means clothed in a manner that leaves uncovered or visible,
9through less than fully opaque clothing, any portion of the genitals
10or, in the case of a female, any portion of the breasts below the
11top of the areola of the breasts.

12(H) A qualified active low-income community business shall
13not include a charter school.

14(4) Section 45D(f) of the Internal Revenue Code, relating to
15national limitation on amount of investments designated, is
16modified as follows:

17(A) The following shall apply in lieu of the provisions of Section
1845D(f)(1) of the Internal Revenue Code: “The aggregate amount
19of qualified equity investments that may be allocated in any
20calendar year for purposes of this section, Section 12283, and
21Section 17053.9 shall be an amount as determined by GO-Biz in
22consultation with the Department of Finance based upon any
23unused portion of the one hundred million dollars ($100,000,000)
24in exclusions, authorized pursuant to Section 6010.8, as determined
25by the California Alternative Energy and Advanced Transportation
26Financing Authority and reported to the committee, not to exceed
27an amount based upon a credit of forty million dollars
28($40,000,000). The committee shall limit the allocation of
29investments that may be designated under this section, Section
3012283, and Section 17053.9 to a cumulative total amount based
31on credits of no more than two hundred million dollars
32($200,000,000). The allocation of any undesignated qualified
33equity investments shall be returned to the committee by March
341 of the year following allocation and the value of the undesignated
35qualified equity investment shall be available for allocation in the
36following calendar years in accordance with the application
37process. Any qualified equity investment attributable to recaptured
38credits shall be available to the committee on March 1 of the year
39following recapture and shall be available for allocation in the
40following calendar years in accordance with clause (ii) of
P33   1subparagraph (B) of paragraph (5). Reallocated qualified equity
2investments attributable to recapture credits shall not count against
3the annual or the cumulative limit.”

4(B) The references to “the Secretary” in Section 45D(f)(2) of
5the Internal Revenue Code, relating to allocation of limitation, is
6modified to read “GO-Biz.”

7(C) The last sentence of Section 45D(f)(3) of the Internal
8Revenue Code, relating to carryover of unused limitation, shall
9not apply.

10(5) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
11relating to credit recapture amount, is modified to substitute
12“Section 19101 of this code” for “section 6621”.

13(B) Section 45D(g)(3) of the Internal Revenue Code, relating
14to recapture event, is modified to add the following:

15(i) (I) The qualified community development entity fails to
16comply with subparagraph (D) of paragraph (5) of subdivision (d).
17In this case, recapture shall be 100 percent of the credit. The
18qualified community development entity shall send notice to
19GO-Biz within 30 calendar days of the close of any calendar year
20in which the qualified community development entity has failed
21to invest at least 15 percent of the purchase price of the qualified
22equity investment in satisfaction of the requirements of
23subparagraph (D) of paragraph (5) of subdivision (d).

24(II) The qualified community development entity made an
25investment without performing a revenue impact assessment that
26satisfies subparagraph (J) of paragraph (5) of subdivision (d). In
27this case, recapture shall be 100 percent of the credit, unless
28GO-Biz has approved a waiver pursuant to clause (ii) of
29subparagraph (J) of paragraph (5) of subdivision (d). The qualified
30community development entity shall send notice to GO-Biz within
3130 calendar days of the close of any calendar year in which the
32qualified community development entity has made an investment
33that fails to meet the requirements set forth in subparagraph (J) of
34paragraph (5) of subdivision (d).

35(ii) GO-Biz shall establish a process, in consultation with the
36Franchise Tax Board, for the recapture of credits allowed under
37this section from the entity that claimed the credit on a return.

38(iii) Recaptured qualified equity investments revert back to
39GO-Biz and shall be reissued. The reissue shall not count toward
P34   1the annual or cumulative allocation limitation. The reissue shall
2be done in the following order:

3(I) First, pro rata to applicants whose qualified equity investment
4allocations were reduced pursuant to subparagraph (F) of paragraph
5(5) of subdivision (d) by the annual allocation limitation.

6(II) Thereafter, in accordance with the application process.

7(iv) (I) Enforcement of each of the recapture provisions shall
8be subject to a six-month cure period. Recapture shall not occur
9until the qualified community development entity gives notice of
10potential noncompliance to GO-Biz and is afforded six months
11from the date of such notice to cure the noncompliance. The
12six-month cure period shall begin on the day GO-Biz sends written
13acknowledgment of the qualified community development entity’s
14notice of the potential noncompliance. The qualified community
15development entity is responsible for addressing the circumstances
16of the potential noncompliance and providing all documentation
17to GO-Biz necessary to demonstrate, to GO-Biz’s satisfaction, that
18those conditions no longer exist.

19(II) In an instance where a qualified community development
20entity fails to send the required notice of potential noncompliance
21or GO-Biz has information from the annual report or other sources
22that indicates that the entity is in potential noncompliance, GO-Biz
23shall send the notice. The date GO-Biz sends the notice of potential
24noncompliance shall begin the six-month cure period.

25(III) Not more than 45 calendar days following the close of the
26cure period, GO-Biz shall make a final determination as to whether
27the noncompliance has been cured. This determination shall be
28based on the review of the notice, information submitted by the
29qualified community development entity, and any other information
30GO-Biz deems relevant to this determination. Within 30 calendar
31days of making the final determination, GO-Biz shall notify the
32Franchise Tax Board of the determination and other related
33information including, but not limited to, the tax identification
34number of the taxpayer.

35(IV) GO-Biz shall post, and update monthly, a tally of
36undesignated qualified equity investments, pursuant to paragraph
37(4), and recaptured credits pursuant to this paragraph.

38(6) If a qualified community development entity makes a capital
39or equity investment or a loan with respect to a qualified
40low-income building under the state Low-Income Housing Tax
P35   1Credit Program, the investment or loan is not a qualified
2low-income community investment under this section.

3(d) (1)  GO-Biz shall adopt guidelines necessary or appropriate
4to carry out its responsibilities with respect to the allocation of the
5qualified equity investments and recapture of credit allowed by
6this section. The adoption of the guidelines shall not be subject to
7the rulemaking provisions of the Administrative Procedure Act of
8Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
93 of Title 2 of the Government Code.

10(2) (A) GO-Biz shall establish and impose reasonable fees upon
11entities that apply for the allocation pursuant to this subdivision
12that in the aggregate defray the cost of reviewing applications for
13the program. GO-Biz may impose other reasonable fees upon
14entities that receive the allocation pursuant to this subdivision that
15in the aggregate defray the cost of administering the program.

16(B) The fees collected shall be deposited in the California New
17Markets Tax Credit Fund established in Section 18410.3.

18(3) In developing guidelines GO-Biz shall adopt an allocation
19process that does all of the following:

20(A) Creates an equitable distribution process that ensures that
21low-income community populations across the state are engaged
22and have an opportunity to benefit from the program.

23(B) Sets minimum organizational capacity standards that
24applicants must meet in order to receive an allocation of authority
25to designate qualified equity investments including, but not limited
26to, its business strategy, targeted community outcomes,
27capitalization strategy, and management capacity.

28(C) Considers the qualified community development entity’s
29prior qualified low-income community investments under Section
3045D of the Internal Revenue Code.

31(D) Considers the qualified community development entity’s
32prior qualified low-income community investments under this
33section, including subparagraph (D) of paragraph (5).

34(E) Does not require the qualified community development
35entity to identify the qualified active low-income community
36 businesses in which the qualified community development entity
37will invest in an application for qualified equity investment
38allocation.

39(F) Does not disqualify a low-income community investment
40for the single reason that public or private incentives, loans, equity
P36   1investments, technical assistance, or other forms of support have
2been or continue to be provided.

3(4) (A) GO-Biz shall begin accepting applications on or before
4May 15, 2016, and shall award authority to designate qualified
5equity investments annually through 2020, to the extent that
6allocations are available pursuant to Section 26011.9 of the Public
7Resources Code. To the extent reasonable and consistent in
8carrying out the purposes of this section, GO-Biz shall consider
9how the timing of the state allocation rounds correspond with the
10allocation schedule of the federal New Markets Tax Credit
11 Program.

12(B) Within 20 calendar days after receipt of an application
13GO-Biz shall determine whether the application is complete or
14whether additional information is necessary in order to fully
15evaluate the application. If additional information is requested and
16the qualified community development entity provides that
17information within five business days, the application shall be
18considered completed as of the original date of receipt. If the
19qualified community development entity fails to provide the
20information within the five-business-day period, the application
21shall be denied and must be resubmitted in full with a new receipt
22date.

23(C) Within 20 calendar days after receipt of an application
24determined to be complete by GO-Biz, the committee shall grant
25or deny the application in full or in part. If the committee denies
26any part of the application, it shall inform the qualified community
27development entity of the grounds for the denial.

28(5) (A) In the 2016 awards cycle, the committee shall award
29authority to designate qualified equity investments to qualified
30community development entities described in paragraph (3) of
31subdivision (c) in the order applications are received by the
32committee. Applications received on the same day shall be deemed
33to have been received simultaneously.

34(B) In the 2017 to 2020 award cycles, inclusive, at least 60
35percent of the authority to designate qualified equity investments
36shall be awarded pursuant to subparagraph (A). At the committee’s
37discretion, a higher percentage of authority to designate qualified
38equity investments may be awarded pursuant to subparagraph (A).

39(C) The committee shall award up to 40 percent of the authority
40to designate qualified equity investments in the 2016 to 2020,
P37   1inclusive, award cycles, to qualified community development
2entities on a competitive basis using blind scoring and a review
3committee that is comprised of community development finance
4practitioners and members having demonstrated experience in
5assessing organizational business strategy, community outcomes,
6capitalization strategy, and management capacity. A member of
7the review committee shall not have a financial interest, which
8includes, but is not limited to, asking, consenting, or agreeing to
9receive any commission, emolument, gratuity, money, property,
10or thing of value for his or her own use, benefit, or personal
11advantage for procuring or endeavoring to procure for any person,
12partnership, joint venture, association, or corporation any qualified
13equity investment or other assistance from any applicant.

14(D) (i) For qualified equity investments derived from the 2016
15to 2020, inclusive, awards cycles, pursuant to subparagraphs (A),
16(B) and (C), a qualified community development entity shall invest
17at least 15 percent of the qualified equity investment in a qualified
18low-income community business in consultation or in partnership
19with either of the following:

20(I) A qualified community development entity certified under
21Section 45D of the Internal Revenue Code that has not received a
22federal New Markets Tax Credit allocation on or after January 1,
232012, and has either a local service area that includes one or more
24California communities or a California statewide service area, but
25excluding qualified community development entities with a
26national service area.

27(II) A nonprofit organization certified by GO-Biz, pursuant to
28clause (iii).

29(ii) The 15-percent investment shall be calculated by multiplying
30the total purchase price of the qualified equity investments issued
31by the qualified community development entity by 15 percent.
32Each community development entity application shall indicate
33how the qualified community development entity will meet this
34requirement.

35(iii) GO-Biz shall establish guidelines for certifying a nonprofit
36organization pursuant to this subparagraph. A nonprofit
37organization shall meet the requirements of Section 23701 and be
38certified by GO-Biz as having a primary mission of serving or
39providing investment capital in low-income communities in
40California. The nonprofit organization shall maintain accountability
P38   1to residents of low-income communities through their
2representation on any governing board or on an advisory board of
3the nonprofit organization. GO-Biz may include reasonable
4conditions on the certification to effectuate the intent of this section
5and may suspend or revoke a certification, after affording the
6nonprofit organization notice and the opportunity to appeal and
7be heard by the committee, if GO-Biz finds that the nonprofit
8organization no longer meets the requirements for certification.

9(E) In making competitive awards of authority to designate
10qualified equity investments, priority shall be given to applications
11that can demonstrate that the qualified equity investment authority
12will allow the qualified community development entity to undertake
13qualified low-income community investments in rural, suburban,
14or urban areas that have been historically underserved and result
15in the greatest benefit to the hardest to serve and undercapitalized
16lower income populations, or in newly established businesses, or
17in activities that support neighborhood revitalization strategies
18driven by local grassroots stakeholders in multiple low-income
19communities across one or more regions or the state for the purpose
20 of scaling economic development activities that compliment
21regional industry clusters that result in the greatest benefit to the
22largest number of lower income individuals.

23(F) (i) For applications described in subparagraph (A), in the
24event requests for authority to designate qualified equity
25investments exceed the applicable annual allocation limitation,
26GO-Biz shall certify, consistent with remaining qualified equity
27investment capacity, qualified equity investments of applicants in
28proportionate percentages based upon the ratio of the amount of
29qualified equity investments requested in such applications to the
30total amount of qualified equity investments requested in all such
31applications received on the same day.

32(ii) If a pending request cannot be fully certified due to this
33limit, GO-Biz shall certify the portion that may be certified unless
34the qualified community development entity elects to withdraw
35its request rather than receive partial certification.

36(G) An approved applicant may transfer all or a portion of its
37certified qualified equity investment authority to its controlling
38entity or any subsidiary qualified community development entity
39of the controlling entity, provided that the applicant and the
40transferee notify the committee within 30 calendar days of such
P39   1transfer and include the information required in the application
2with respect to such transferee with such notice. The transferee
3shall be subject to the same rules, requirements, and limitations
4applicable to the transferor.

5(H) Within 60 calendar days of GO-Biz sending notice of
6certification, the qualified community development entity or any
7transferee, under subparagraph (G), shall issue the qualified equity
8investment and receive cash in the amount of the certified amount.
9The qualified community development entity or transferee, under
10subparagraph (G), must provide GO-Biz with evidence of the
11receipt of the cash investment within 65 calendar days of the
12applicant receiving notice of certification. If the qualified
13community development entity or any transferee, under
14subparagraph (G), does not receive the cash investment and issue
15the qualified equity investment within 60 calendar days of GO-Biz
16sending the certification notice, the certification shall lapse and
17the entity may not issue the qualified equity investment without
18reapplying to GO-Biz for certification. Lapsed certifications revert
19back to GO-Biz and shall be reissued in the following order:

20(i) First, pro rata to applicants whose qualified equity investment
21allocations were reduced pursuant to subparagraph (F) under the
22annual allocation limitation of forty million dollars ($40,000,000)
23in paragraph (4) of subdivision (c).

24(ii) Thereafter, in accordance with the application process.

25(I) A qualified community development entity that issues
26qualified equity investments must notify GO-Biz of the names of
27taxpayers that are eligible to utilize tax credits pursuant to this
28section and any transfer of a qualified equity investment.

29(J) (i) A qualified community development entity shall only
30make a qualified low-income community investment that
31demonstrates a positive revenue impact on the state over a 10-year
32period against the aggregate tax credit utilization over the same
3310-year period. GO-Biz shall approve one or more nationally
34recognized revenue impact assessment models that shall be used
35by the qualified community development entity to demonstrate
36positive revenue impact. If it is demonstrated that the qualified
37low-income community investment has a positive revenue impact
38on the state at the time the investment is made, it shall be treated
39as if the investment continues to meet the requirement of this
40subparagraph for the duration of the seven-year program period.

P40   1(ii) Upon application and approval by GO-Biz, the requirement
2of this subparagraph may be waived.

3(6) (A) A qualified community development entity that issues
4qualified equity investments shall submit a report to GO-Biz within
5the first five business days after the first anniversary of the initial
6credit allowance date that provides documentation as to the
7investment of at least 85 percent of the purchase price in qualified
8low-income community investments in qualified active low-income
9community businesses located in California. Such report shall
10include all of the following:

11(i) A bank statement of such qualified community development
12entity evidencing each qualified low-income community
13investment.

14(ii) Evidence that such business was a qualified active
15low-income community business at the time of such qualified
16low-income community investment.

17(iii) Evidence that the community development entity complied
18with subparagraph (D) of paragraph (5).

19(iv) Evidence that each qualified low-income community
20investment was determined to have a positive revenue impact on
21the state. This requirement does not apply for any qualified
22low-income community investment for which GO-Biz approved
23a waiver, pursuant to clause (ii) of subparagraph (J) of paragraph
24(5) or to reinvestments of redeemed qualified low-income
25investments.

26(v) Any other information required by GO-Biz as being
27necessary to meet the requirements of this section.

28(B) Thereafter, the qualified community development entity
29shall submit an annual report to GO-Biz within 60 calendar days
30of the beginning of the calendar year during the seven years
31following submittal of the report, pursuant to subparagraph (A).
32No annual report shall be due prior to the first anniversary of the
33initial credit allowance date. The report shall include, but is not
34limited to, the following:

35(i) The social, environmental, and economic impact the credit
36had on the low-income community during the report period and
37cumulatively.

38(ii) The amount of moneys used for qualified low-income
39investments in qualified low-income community businesses.

P41   1(iii) The number of employment positions created and retained
2as a result of qualified low-income community investments and
3the average annual salary of such positions.

4(iv) The number of operating businesses assisted as a result of
5qualified low-income community investments, by industry and
6number of employees.

7(v) Number of owner-occupied real estate projects.

8(vi) Location of each qualified low-income community business
9assisted by a qualified low-income community investment.

10(vii) Summary of the outcomes of each of the revenue impact
11assessments undertaken by the qualified community development
12entity during the year.

13(e) (1) In the case where the credit allowed by this section
14exceeds the “tax,” the excess may be carried over to reduce the
15“tax” in the following year, and the six succeeding years if
16necessary, until the credit is exhausted.

17(2) A taxpayer allowed a credit under this section for a qualified
18equity investment shall not be eligible for any other credit under
19this part with respect to that investment.

20(f) GO-Biz shall annually report on its Internet Web site the
21information provided by low-income community development
22entities and on the geographic distribution of the qualified active
23low-income community businesses assisted.

24(g) (1) The Franchise Tax Board may prescribe any rules or
25regulations that may be necessary or appropriate to implement this
26section. The Franchise Tax Board shall have access to any
27documentation held by the committee relative to the application
28and reporting of a qualified community development entity.

29(2) A qualifying community development entity shall provide
30GO-Biz with the name, address, and tax identification number of
31each investor and entity for which a qualified equity investment
32was designated by the qualifying community development entity,
33pursuant to this section. GO-Biz shall provide this information to
34the Franchise Tax Board in a manner determined by the Franchise
35Tax Board.

36(h) GO-Biz and the committee shall only make awards pursuant
37to paragraph (4) of subdivision (d) in a calendar year in which the
38Legislature appropriates funds in the California New Markets Tax
39Credit Fund pursuant to subdivision (b) of Section 18410.3.

P42   1(i) This section shall remain in effect only until December 1,
22028, and as of that date is repealed.

3

SEC. 7.  

The provisions of this act are severable. If any
4provision of this act or its application is held invalid, that invalidity
5shall not affect other provisions or applications that can be given
6effect without the invalid provision or application.

7

SEC. 8.  

This act provides for a tax levy within the meaning of
8Article IV of the Constitution and shall go into immediate effect.



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