Amended in Assembly May 12, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 771

Introduced by Assembly Member Atkins

February 25, 2015

An act to add and repeal Sections 38.10, 17053.91, and 23691 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 771, as amended, Atkins. Personal income and corporation taxes: credits: rehabilitation.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill would allow to a taxpayer that receives a tax credit begin delete reservation end delete begin insert allocation end insert a credit against those taxes for each taxable year beginning on or after January 1, 2016, and before January 1, begin delete 2024, end delete begin insert 2021, end insert in an amount, determined in modified conformity with a specified section of the Internal Revenue Code, for rehabilitation of certified historic structures and, under the Personal Income Tax Law, for a qualified residence. This bill would provide for a 20% credit, or 25% credit, of qualified rehabilitation expenditures if the structure meets specified criteria, for rehabilitation of a certified historic structure or a qualified residence, as provided, within the state to be begin delete reserved and end delete allocated by the California Tax Credit Allocation Committee, which shall consult with the Office of Historic Preservation, as provided begin insert , end insert and which may adopt a reasonable fee to cover specified expenses. The aggregate amount of credit would be $50,000,000 per calendar year, plus unused allocation tax credit for the preceding year, $10,000,000 of which would be set aside for rehabilitation projects with qualified rehabilitation expenditures of less than $1,000,000, as specified. This bill would require the Legislative Analyst to, on an annual basis, collaborate with the California Tax Credit Allocation Committee to review the tax credit, as provided.

begin insert

This bill would make specified findings detailing the goals, purposes, and objectives of the above-described tax credits, performance indicators for determining whether the credits meet those goals, purposes, and objectives, and data collection requirements.

end insert

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

(a) The Legislature finds and declares that
California’s historic buildings are an important asset to
communities throughout the state, and that the preservation and
restoration of these buildings is important to enhancing civic pride,
increasing tourism, and maintaining vibrant neighborhoods.

(b) The Legislature further finds and declares all of the
following:

(1) The federal Historic Preservation Tax Incentives program,
begin insert enacted by Congress in 1986, established a 20-percent tax credit
for the rehabilitation of historic structures, which remains in effect
today. Program activity in the amount of investment dollars
reached record highs in the 1990s, before declining during the
recent recession. With the economy in general, and the real estate
market in particular, rebounding over the last several years, the
amount of rehabilitation investment in proposed projects exceeded
$5.9 billion for the second time in the program’s history. The
average investment in completed projects in the 2014 end insert begin insert -15 fiscal
year was $4.32 million, the third highest amount in the program’s
history. The program is end insert currently available to California’s income
producing historic properties, begin insert and end insert has generated nearly $1.5 billion
in investment during the last 10 years.

(2) While 35 states have similar state tax credits or incentives
for historic preservation, no such incentive exists in California.

begin insert

(3) When used with federal historic preservation tax credits,
state historic rehabilitation tax credits provide an important
financial incentive for reinvestment in the historic cores of
communities in the post-redevelopment economy. Historic
preservation tax incentives generate jobs, enhance property values,
create affordable housing, and augment revenues for federal, state,
and local governments. Through the federal program, vacant or
underutilized schools, warehouses, factories, apartments, churches,
retail stores, hotels, houses, farms, and offices throughout the
country have been restored to life in a manner that maintains their
historic character.

end insert begin delete

(3)

end delete

begin insert (4) end insert  States that have partnered a state incentive with the federal
Historic Preservation Tax Incentive begin insert program end insert have reaped
significant economic development benefits, including construction
and building industry job creation, increased state tax revenues
through increased employment and wages, increased local property
tax revenues through increased property values, and increased
local tax revenues through sales taxes and heritage tourism.

begin insert

(5) The federal rehabilitation tax credit applies specifically to
income-producing historic properties, and throughout its history
has leveraged many times its cost in private expenditures on
historic preservation. This program is the largest federal program
specifically supporting historic preservation, generating over $37
billion in historic preservation activity since 1976. During the
2014-15 fiscal year, the National Park Service approved 1,156
proposed projects, representing an estimated $5.98 billion of
investment to restore and rehabilitate historic buildings.

end insert begin insert

(6) The federal Historic Preservation Tax Incentives program
remains an outstanding means of leveraging private investment
in the adaptive reuse and preservation of historic buildings. The
program continues to help stimulate economic recovery in older
communities, both large and small, throughout the nation, and
created an estimated 77,762 jobs in 2014.

end insert begin delete

(4)

end delete

begin insert (7) end insert  Over the last 10 years, California has had 129 projects
qualify for the federal Historic Preservation Tax Incentives
program. These projects have been located in 20 different counties.

begin delete

(5)

end delete

begin insert (8) end insert  As California communities continue to adjust and adapt to
the dissolution of redevelopment agencies, proven tools are still
needed to incentivize economic development and revitalize
economically distressed areas.

SEC. 2.  

Section 38.10 is added to the Revenue and Taxation
Code, to read:

38.10.  

(a) The Legislative Analyst shall, on an annual basis
beginning January 1, 2017, collaborate with the California Tax
Credit Allocation Committee to review the effectiveness of the
tax credits allowed by Sections 17053.91 and 23691. The review
shall include, but is not limited to, an analysis of the demand for
the tax credit, the types and uses of projects receiving the tax credit,
the jobs created by the use of the tax credits, and the economic
impact of the tax credits.

begin delete

(b) It the intent of the Legislature to enact legislation to comply
with the requirements of Section 41.

end delete begin delete

(c)

end delete

begin insert (b) end insert   This section shall remain in effect only until January 1,
begin delete 2025, end delete begin insert 2022, end insert and as of that date is repealed begin delete , unless a later enacted
statute, that is enacted before January 1, 2025, deletes or extends
that date end delete .

SEC. 3.  

Section 17053.91 is added to the Revenue and Taxation
Code, to read:

17053.91.  

For each taxable year beginning on or after January
1, 2016, and before January 1, begin delete 2024, end delete begin insert 2021, end insert there shall be allowed
to a taxpayer that receives a tax credit begin delete reservation end delete begin insert allocation end insert a
credit against the “net tax,” as defined in Section 17039, an amount
determined in accordance with Section 47 of the Internal Revenue
Code, except as follows:

(a) (1) In lieu of the percentages specified in Section 47(a) of
the Internal Revenue Code, except as provided in paragraph (2),
the applicable percentage shall be 20 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure.

(2) The applicable percentage shall be 25 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure if that certified historic structure meets one of the
following criteria:

(A) The rehabilitated structure is located on federal surplus
property, if obtained by a local agency under Section 54142 of the
Government Code, on surplus state real property, as defined by
Section 11011.1 of the Government Code, or on surplus land, as
defined by subdivision (b) of Section 54221 of the Government
Code.

(B) The rehabilitated structure includes affordable housing for
lower-income households, as defined by Section 50079.5 of the
Health and Safety Code.

(C) The structure is located in a designated census tract, as
defined in paragraph (7) of subdivision (b) of Section 17053.73.

(D) The structure is a part of a military base reuse authority
established pursuant to Title 7.86 (commencing with Section
67800) of the Government Code.

(E) The structure is a transit-oriented development that is a
higher density, mixed-use development within a walking distance
of one-half mile of a transit station.

(3) (A) The credit shall be allowed for qualified rehabilitation
expenditures for a qualified residence determined by the California
Tax Credit Allocation Committee and the Office of Historic
Preservation to have a public benefit in the year of completion in
the percentages specified in paragraphs (1) and (2), as applicable,
except that the credit shall only be allowed in an amount equal to
or more than five thousand dollars ($5,000) but not exceeding
twenty-five thousand dollars ($25,000). A taxpayer shall only be
allowed a credit pursuant to this paragraph once every 10 taxable
years.

(B) Section 47(c)(1)(C)(ii) of the Internal Revenue Code,
relating to special rule for phased rehabilitation, shall not apply.

(b) For purposes of this section, the following definitions shall
apply:

(1) “Certified historic structure” has the same meaning as
defined in Section 47(c)(3) of the Internal Revenue begin delete Code and
additionally means end delete begin insert Code, that is end insert a structure in this state begin delete that end delete begin insert and end insert
is listed on the California Register of Historical Resources.

(2) “Qualified residence” has the same meaning as that term is
defined in Section 163(h)(4) of the Internal Revenue Code, that
will be owned and occupied by an individual taxpayer who has a
modified adjusted gross income, as defined by Section 86(b)(2)
of the Internal Revenue Code, of two hundred thousand dollars
($200,000) or less, as the taxpayer’s principal residence or what
will be the taxpayer’s principal residence within two years after
the rehabilitation of the residence.

(3) (A) “Qualified rehabilitation expenditure” has the same
meaning as that term is defined in Section begin delete 47(c) end delete begin insert 47(c)(2) end insert of the
Internal Revenue Code, except that qualified rehabilitation
expenditures may include expenditures in connection with the
rehabilitation of a building without regard to whether any portion
of the building is or is reasonably expected to be tax-exempt use
property.

(B) “Qualified rehabilitation expenditure” begin insert has the same meaning
as that term is defined in Section 47(c)(2) of the Internal Revenue
Code and end insert also means rehabilitation expenditures incurred by the
taxpayer with respect to a qualified residence for the rehabilitation
of the exterior of the building or rehabilitation necessary for the
functioning of the home, including, but not limited to, rehabilitation
of the electrical, plumbing, or foundation of the qualified residence.

(c) (1) To be eligible for the credit allowed by this section, a
taxpayer shall request a tax credit begin delete reservation end delete begin insert allocation end insert from the
California Tax Credit Allocation Committee, in the form and
manner prescribed by the California Tax Credit Allocation
Committee.

(2) To obtain a tax credit begin delete reservation, end delete begin insert allocation, end insert the taxpayer
shall provide necessary information, as determined by the
California Tax Credit Allocation Committee.

(3) A tax credit begin delete reservation end delete begin insert allocation end insert provided to a taxpayer
shall not constitute a determination by the California Tax Credit
Allocation Committee with respect to any of the requirements of
this section regarding a taxpayer’s eligibility for the credit
authorized by this section.

(4) If a taxpayer receives a tax credit begin delete reservation end delete begin insert allocation end insert but
rehabilitation has not commenced within 18 months of the issuance
of the tax credit begin delete reservation, end delete begin insert allocation, end insert the tax credit begin delete reservation end delete
begin insert allocation end insert shall be forfeited and the credit amount associated with
the tax credit begin delete reservation end delete begin insert allocation end insert shall be treated as an unused
allocation tax credit amount.

(d) A deduction shall not be allowed under this part for any
expense for which a credit is allowed by this section.

(e) If a credit is allowed under this section with respect to any
property, the basis of that property shall be reduced by the amount
of the credit allowed.

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

(g) For purposes of this section, the California Tax Credit
Allocation Committee shall do the following:

(1) On and after January 1, 2016, and before January 1, begin delete 2024,
reserve and end delete begin insert 2021, end insert allocate tax credits to applicants.

(2) Establish a procedure for applicants to file with the California
Tax Credit Allocation Committee a written application, on a form
jointly prescribed by that office and the Office of Historic
Preservation for the begin delete reservation end delete begin insert allocation end insert of the tax credit.

(3)  Establish criteria consistent with the requirements of this
section, for begin delete reserving end delete begin insert allocating end insert tax credits. A taxpayer shall not
receive a tax credit begin delete reservation end delete begin insert allocation end insert unless the following
criteria are met. Criteria shall include, but are not limited to, the
following:

(A) The number of jobs created by the rehabilitation project,
both during and after the rehabilitation of the structure.

(B) The expected increase in state and local tax revenues derived
from the rehabilitation project, including those from increased
wages and property taxes.

(C) Any additional incentives or contributions included in the
rehabilitation project from federal, state, or local governments.

(D) For the qualified rehabilitation expenditures with respect
to a qualified residence, the rehabilitation has a public benefit, as
determined jointly with the Office of Historic Preservation.

(4) Determine and designate, in consultation with the Office of
Historic Preservation, applicants that meet the requirements of this
section to ensure that the rehabilitation project meets the Secretary
of the Interior’s Standards for Rehabilitation, as found in Part 67
of Title 36 of the Code of Federal Regulations.

(5)  Process and approve, or reject, all tax credit begin delete reservation end delete
begin insert allocation end insert applications.

(6) (A) Subject to the annual cap established as provided in
subdivision (h), allocate an aggregate amount of credits under this
section and Section 23691, and allocate any carryover of
unallocated credits from prior years.

(B) A taxpayer shall be allocated a tax credit pursuant to the
taxpayer’s tax credit begin delete reservation end delete begin insert allocation end insert upon receipt by the
California Tax Credit Allocation Committee of a cost certification
for the qualified rehabilitation expenditures. For projects with
qualified rehabilitation expenditures in excess of two hundred fifty
thousand dollars ($250,000), the cost certification shall be issued
by a licensed certified public accountant.

(7) Certify tax credits allocated to taxpayers.

(8) Provide the Franchise Tax Board an annual list of the
taxpayers that were allocated a credit pursuant to this section and
Section 23691, including each taxpayer’s taxpayer identification
number, and the amount allocated to each taxpayer.

begin insert

(9) Establish procedures for the recapture of amounts allocated
for a tax credit allowed to a taxpayer for the rehabilitation of a
qualified residence if the taxpayer does not use the qualified
residence as his or her principal residence within two years after
the rehabilitation of the residence.

end insert

(h) (1) The aggregate amount of credits that may be allocated
in any calendar year pursuant to this section and Section 23691
shall be an amount equal to the sum of all of the following:

(A) Fifty million dollars ($50,000,000) in tax credits for the
2016 calendar year and each calendar year thereafter, through and
including the begin delete 2023 end delete begin insert 2020 end insert calendar year.

(B) The unused allocation tax credit amount, if any, for the
preceding calendar year.

(2) Notwithstanding the foregoing, the California Tax Credit
Allocation Committee shall set aside ten million dollars
($10,000,000) of tax credits begin insert that may be allocated end insert each calendar
year for taxpayers begin insert in the aggregate, pursuant to this paragraph
and paragraph (2) of subdivision (h) of Section 23691, end insert with
qualified rehabilitation expenditures of less than one million dollars
($1,000,000). To the extent that this amount is not fully begin delete reserved end delete
begin insert allocated end insert in any calendar year, the unused portion shall become
available for begin delete reservation end delete begin insert allocation end insert to other taxpayers.

(i) In the case of any application for tax credits by an entity
treated as a partnership begin delete or “S” corporation end delete for income tax purposes:

(1)  begin delete (A) end delete begin delete   end delete Credits awarded to a partnership shall be allocated to
the partners of that partnership in accordance with the partnership
agreement, regardless of how the federal historic rehabilitation tax
credit with respect to the project is allocated to the partners, or
whether the allocation of the credit under the terms of the
partnership agreement has substantial economic effect, within the
meaning of Section 704(b) of the Internal Revenue Code.

begin delete

(B)

end delete

begin insert (2) end insert  To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the tax credit recapture period for the project
described in subparagraph (A) shall not be allowed in the taxable
year in which the sale or other disposition occurs, but shall instead
be deferred until, and treated as if, it occurred in the first taxable
year immediately following the taxable year in which the tax credit
recapture period expires for the project described in subparagraph
(A). The credits awarded to a partnership shall be allocated to the
partners of that partnership in accordance with the partnership
agreement.

begin delete

(2) Credits awarded to an “S” corporation shall be allocated
among the shareholders of that “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of the Internal Revenue
Code and the regulations promulgated thereunder.

end delete begin delete

(j) Section 183 of the Internal Revenue Code shall not apply
with respect to the credit allowed by this section.

end delete begin delete

(k)

end delete

begin insert (j) end insert  For purposes of this section, the provisions of subsection (a)
of Section 50 of the Internal Revenue Code shall apply.

begin delete

(l)

end delete

begin insert (k) end insert  Notwithstanding any other provision of this part, a credit
allowed pursuant to this section may reduce the tax imposed under
Section 17041 or 17048 plus the tax imposed under Section 17504,
relating to the separate tax on lump-sum distributions, below the
tentative minimum tax.

begin delete

(m)

end delete

begin insert (l) end insert  This section shall remain in effect regardless of the expiration
or repeal of Section 47 of the Internal Revenue Code, relating to
rehabilitation credit.

begin delete

(n)

end delete

begin insert (m) end insert  The California Tax Credit Allocation Committee may adopt
a reasonable fee in an amount sufficient to cover the expenses
incurred by the California Tax Credit Allocation Committee and
the Office of Historic Preservation in fulfilling the responsibilities
described in paragraphs (4) and (5) of subdivision (g) and
paragraphs (4) and (5) of subdivision (g) of Section 23691

begin delete

(o)

end delete

begin insert (n) end insert  This section shall remain in effect only until December 1,
begin delete 2024, end delete begin insert 2021, end insert and as of that date is repealed.

SEC. 4.  

Section 23691 is added to the Revenue and Taxation
Code, to read:

23691.  

For each taxable year beginning on or after January 1,
2016, and before January 1, begin delete 2024, end delete begin insert 2021, end insert there shall be allowed to
a taxpayer that receives a tax credit begin delete reservation end delete begin insert allocation end insert a credit
against the “tax,” as defined in Section 23036, an amount
determined in accordance with Section 47 of the Internal Revenue
Code, except as follows:

(a) (1) In lieu of the percentages specified in Section 47(a) of
the Internal Revenue Code, except as provided in paragraph (2),
the applicable percentage shall be 20 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure.

(2) The applicable percentage shall be 25 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure if that certified historic structure meets one of the
following criteria:

(A) The rehabilitated structure is located on federal surplus
property, if obtained by a local agency under Section 54142 of the
Government Code, on surplus state real property, as defined by
Section 11011.1 of the Government Code, or on surplus land, as
defined by subdivision (b) of Section 54221 of the Government
Code.

(B) The rehabilitated structure includes affordable housing for
lower-income households, as defined by Section 50079.5 of the
Health and Safety Code.

(C) The structure is located in a designated census tract, as
defined in paragraph (7) of subdivision (b) of Section 17053.73.

(D) The structure is a part of a military base reuse authority
established pursuant to Title 7.86 (commencing with Section
67800) of the Government Code.

(E) The structure is a transit-oriented development that is a
higher density, mixed-use development within a walking distance
of one-half mile of a transit station.

(b) For purposes of this section, the following definitions shall
apply:

(1) “Certified historic structure” has the same meaning as
defined in Section 47(c)(3) of the Internal Revenue begin delete Code and
additionally means end delete begin insert Code, that is end insert a structure in this state begin delete that end delete begin insert and end insert
is listed on the California Register of Historical Resources.

(2) “Qualified rehabilitation expenditure” has the same meaning
as that term is defined in Section begin delete 47(c) end delete begin insert 47(c)(2) end insert of the Internal
Revenue Code, except that qualified rehabilitation expenditures
may include expenditures in connection with the rehabilitation of
a building without regard to whether any portion of the building
is or is reasonably expected to be tax exempt use property.

(c) (1) To be eligible for the credit allowed by this section, a
taxpayer shall request a tax credit begin delete reservation end delete begin insert allocation end insert from the
California Tax Credit Allocation Committee, in the form and
manner prescribed by the California Tax Credit Allocation
Committee.

(2) To obtain a tax credit begin delete reservation, end delete begin insert allocation, end insert the taxpayer
shall provide necessary information, as determined by the
California Tax Credit Allocation Committee.

(3) A tax credit begin delete reservation end delete begin insert allocation end insert provided to a taxpayer
shall not constitute a determination by the California Tax Credit
Allocation Committee with respect to any of the requirements of
this section regarding a taxpayer’s eligibility for the credit
authorized by this section.

(4) If a taxpayer receives a tax credit begin delete reservation end delete begin insert allocation end insert but
rehabilitation has not commenced within 18 months of the issuance
of the tax credit begin delete reservation, end delete begin insert allocation, end insert the tax credit begin delete reservation end delete
begin insert allocation end insert shall be forfeited and the credit amount associated with
the tax credit begin delete reservation end delete begin insert allocation end insert shall be treated as an unused
allocation tax credit amount.

(d) A deduction shall not be allowed under this part for any
expense for which a credit is allowed by this section.

(e) If a credit is allowed under this section with respect to any
property, the basis of that property shall be reduced by the amount
of the credit allowed.

(f) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and the seven succeeding years, if necessary,
until the credit is exhausted.

(g) For purposes of this section, the California Tax Credit
Allocation Committee shall do the following:

(1) On and after January 1, 2016, and before January 1, begin delete 2024, end delete
begin insert 2021, end insert begin delete reserve and end delete allocate tax credits to applicants.

(2) Establish a procedure for applicants to file with the California
Tax Credit Allocation Committee a written application, on a form
jointly prescribed by that office and the Office of Historic
Preservation for the begin delete reservation end delete begin insert allocation end insert of the tax credit.

(3)  Establish criteria consistent with the requirements of this
section, for begin delete reserving end delete begin insert allocating end insert tax credits. A taxpayer shall not
receive a tax credit begin delete reservation end delete begin insert allocation end insert unless the following
criteria are met. Criteria shall include, but are not limited to, the
following:

(A) The number of jobs created by the rehabilitation project,
both during and after the rehabilitation of the structure.

(B) The expected increase in state and local tax revenues derived
from the rehabilitation project, including those from increased
wages and property taxes.

(C) Any additional incentives or contributions included in the
rehabilitation project from federal, state, or local governments.

(4) Determine and designate, in consultation with the Office of
Historic Preservation, applicants that meet the requirements of this
section to ensure that the rehabilitation project meets the Secretary
of the Interior’s Standards for Rehabilitation, as found in Part 67
of Title 36 of the Code of Federal Regulations.

(5)  Process and approve, or reject, all tax credit begin delete reservation end delete
begin insert allocation end insert applications.

(6) (A) Subject to the annual cap established as provided in
subdivision (h), allocate an aggregate amount of credits under this
section and Section 17053.91, and allocate any carryover of
unallocated credits from prior years.

(B) A taxpayer shall be allocated a tax credit pursuant to the
taxpayer’s tax credit begin delete reservation end delete begin insert allocation end insert upon receipt by the
California Tax Credit Allocation Committee of a cost certification
for the qualified rehabilitation expenditures. For projects with
qualified rehabilitation expenditures in excess of two hundred fifty
thousand dollars ($250,000), the cost certification shall be issued
by a licensed certified public accountant.

(7) Certify tax credits allocated to taxpayers.

(8) Provide the Franchise Tax Board an annual list of the
taxpayers that were allocated a credit pursuant to this section and
Section 17053.91 including each taxpayer’s taxpayer identification
number, and the amount allocated to each taxpayer.

(h) (1) The aggregate amount of credits that may be allocated
in any calendar year pursuant to this section and Section 17053.91
shall be an amount equal to the sum of all of the following:

(A) Fifty million dollars ($50,000,000) in tax credits for the
2016 calendar year and each calendar year thereafter, through and
including the begin delete 2023 end delete begin insert 2020 end insert calendar year.

(B) The unused allocation tax credit amount, if any, for the
preceding calendar year.

(2) Notwithstanding the foregoing, the California Tax Credit
Allocation Committee shall set aside ten million dollars
($10,000,000) of tax credits begin insert that may be allocated end insert each calendar
year for taxpayers begin insert in the aggregate, pursuant to this paragraph
and paragraph (2) of subdivision (h) of Section 17053.91, end insert with
qualified rehabilitation expenditures of less than one million dollars
($1,000,000). To the extent that this amount is not fully begin delete reserved end delete
begin insert allocated end insert in any calendar year, the unused portion shall become
available for begin delete reservation end delete begin insert allocation end insert to other taxpayers.

(i) In the case of any application for tax credits by an entity
treated as a partnership begin delete or “S” corporation end delete for income tax purposes:

(1)  begin delete (A) end delete begin delete   end delete Credits awarded to a partnership shall be allocated to
the partners of that partnership in accordance with the partnership
agreement, regardless of how the federal historic rehabilitation tax
credit with respect to the project is allocated to the partners, or
whether the allocation of the credit under the terms of the
partnership agreement has substantial economic effect, within the
meaning of Section 704(b) of the Internal Revenue Code.

begin delete

(B)

end delete

begin insert (2) end insert  To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the tax credit recapture period for the project
described in subparagraph (A) shall not be allowed in the taxable
year in which the sale or other disposition occurs, but shall instead
be deferred until, and treated as if, it occurred in the first taxable
year immediately following the taxable year in which the tax credit
recapture period expires for the project described in subparagraph
(A). The credits awarded to a partnership shall be allocated to the
partners of that partnership in accordance with the partnership
agreement.

begin delete

(2) Credits awarded to an “S” corporation shall be allocated
among the shareholders of that “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of the Internal Revenue
Code and the regulations promulgated thereunder.

end delete begin delete

(j) Section 183 of the Internal Revenue Code shall not apply
with respect to the credit allowed by this section.

end delete begin delete

(k)

end delete

begin insert (j) end insert  For purposes of this section, the provisions of subsection (a)
of Section 50 of the Internal Revenue Code shall apply.

begin delete

(l)

end delete

begin insert (k) end insert  Notwithstanding any other provision of this part, a credit
allowed pursuant to this section may reduce the “tax” below the
tentative minimum tax, as defined by paragraph (1) of subdivision
(a) of Section 23455.

begin delete

(m)

end delete

begin insert (l) end insert  This section shall remain in effect regardless of the expiration
or repeal of Section 47 of the Internal Revenue Code, relating to
rehabilitation credit.

begin delete

(n)

end delete

begin insert (m) end insert  The California Tax Credit Allocation Committee may adopt
a reasonable fee in an amount sufficient to cover the expenses
incurred by the California Tax Credit Allocation Committee and
the Office of Historic Preservation in fulfilling the responsibilities
described in paragraphs (4) and (5) of subdivision (g) and
paragraphs (4) and (5) of subdivision (g) of Section 17053.91.

begin delete

(o)

end delete

begin insert (n) end insert  This section shall remain in effect only until December 1,
begin delete 2024, end delete begin insert 2021, end insert and as of that date is repealed.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert For the purposes of complying with Section 41 of the
Revenue and Taxation Code, the Legislature finds and declares
as follows: end insert

begin insert

(a) The specific goals, purposes, and objectives that the tax
credits allowed by this act will achieve are as follows:

end insert begin insert

(1) Leveraging two hundred million dollars ($200,000,000) in
private investment.

end insert begin insert

(2) Creating 1,600 construction jobs and an additional 1,250
ongoing jobs.

end insert begin insert

(3) Creating four hundred million dollars ($400,000,000) in
economic activity.

end insert begin insert

(b) Detailed performance indicators for the Legislature to use
in determining whether the tax credits allowed by this act meet
those goals, purposes, and objectives:

end insert begin insert

(1) The amount of private sector investment enabled by
allocation of the credits allowed by this act.

end insert begin insert

(2) The number of construction jobs created as a result of this
investment.

end insert begin insert

(3) The projected number of long-term jobs associated with the
use of rehabilitated historic buildings and the overall economic
activity associated with the rehabilitation of historic buildings
facilitated by the credits allowed by this act.

end insert begin insert

(c) The data collection requirements for determining whether
the tax credit is meeting, failing to meet, or exceeding those specific
goals, purposes, and objectives are as follows:

end insert begin insert

(1) To assist the Legislature in measuring the determining
whether the tax credits allowed by this act meet the goals,
purposes, and objectives specified in subdivision (a), and in
carrying out his or her duties under Section 38.10 of the Revenue
and Taxation Code, the Legislative Analyst may request
information from the California Tax Credit Allocation Committee
and the Office of Historic Preservation relating to projects
approved for the tax credits allowed by this act.

end insert begin insert

(2) The California Tax Credit Allocation Committee and the
Office of Historic Preservation shall provide any data requested
by the Legislative Analyst pursuant to this subdivision.

end insert

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

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