BILL ANALYSIS Ó
AB 1920
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Date of Hearing: May 4, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
1920 (Chau) - As Amended March 18, 2016
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|Policy |Housing and Community |Vote:|7 - 0 |
|Committee: |Development | | |
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| | | | |
|-------------+-------------------------------+-----+-------------|
| |Revenue and Taxation | |9 - 0 |
| | | | |
| | | | |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill allows the California Tax Credit Allocation Committee
(TCAC) to establish a schedule of fines for violations of the
terms and conditions, the regulatory agreement, covenants, or
program regulations for affordable housing developments that
received low-income housing tax credits (LIHTC). Specifically,
this bill:
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1)Allows TCAC to charge up to $500 per violation or double the
amount of the financial gain to the housing credit application
because of the violation, whichever is greater.
2)Allows the fine to be reoccurring if the violation is not
corrected within a reasonable period of time, as determined by
TCAC.
3)Requires TCAC to adopt and revise, by resolution at a public
meeting, the schedule of fines for specific violations and the
fine amounts for each violation.
4)Requires all fines collected to be deposited into the Housing
Rehabilitation Loan Fund.
5)Provides that if a fine is not paid within six months from the
date when the fine was initially assessed by TCAC and
reasonable notice is given to the housing credit applicant,
the committee may record a lien against the property.
6)Provides that any lien recorded by TCAC against a property, to
secure fines, shall be junior to any liens recorded before it.
FISCAL EFFECT:
1)Minor and absorbable administrative costs to TCAC to adopt a
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fine schedule at a public meeting.
2)Minor and absorbable administrative costs to administer new
fines because TCAC already has a system for collecting fees
and for issuing negative points to applicants.
3)Possible state savings due to collection in fines and reduced
litigation costs.
COMMENTS:
1)Purpose. According to the author, TCAC has few enforcement
remedies for an owner's failure to comply with program
requirements that the IRS does not enforce. TCAC needs a more
efficient and effective enforcement tool to ensure correction
of violations that do not merit litigation or a receivership.
This bill would provide TCAC with the legislative authority to
levy fines for violations of the terms and conditions, the
regulatory agreement, covenants, or LIHT credit program
regulations.
2)Federal LIHT Credit Program. The LIHT credit is an indirect
federal subsidy developed in 1986 to incentivize the private
development of affordable rental housing for low-income
households. The federal LIHT credit program replaced
traditional housing tax incentives, such as accelerated
depreciation, with a tax credit that enables low-income
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housing sponsors and developers to raise project equity
through the allocation of tax benefits to investors.
3)State LIHT Credit Program. In 1987, the Legislature
authorized a state LIHT credit program to augment the federal
program. While the state LIHT credit program is patterned
after the federal program, there are several differences,
including a provision allowing investors to claim the state
LIHT credit over a four-year, rather than the federal 10-year,
allocation period. Furthermore, unlike the federal LIHT
credit program, the California LIHT credit law requires
project developers or housing sponsors to agree to a minimum
of 55 years of rent and income restrictions.
State tax credits can only be awarded to projects that have
also received, or are concurrently receiving, an allocation of
the federal LIHT credits. Federal law specifies that each
state must designate a "housing credit agency" to administer
the federal LIHT credit program. In California,
responsibility for administering the federal program is
assigned to the California TCAC, which is comprised of the
State Treasurer, the State Controller, the Director of
Finance, and three non-voting members. TCAC allocates both
federal and state LIHT credits through a competitive
application process.
The amount of state LIHT credit that may be annually allocated
by the TCAC is limited to $70 million, adjusted for inflation,
plus any unallocated or unused credits from previous years.
In 2015, the total state credit amount available for
allocation was approximately $90 million (representing all
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four years of allocation), plus $5.5 million in farmworker
state credit available for agricultural worker housing. The
TCAC awarded approximately $123.1 million in state tax credits
to 47 projects in 2015, including one farmworker state credit
award of almost 1 million.
4)Current enforcement tools. Supporters of this bill contend
that TCAC has limited options to enforce program requirements.
Current tools include:
a) Imposing negative points, which means TCAC can deduct
points from the overall score during the application
process for a new credit.
b) Bringing a lawsuit, which supporters say is expensive
and time-consuming.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
AB 1920
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