BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: AB 1920 Hearing Date: 6/14/2016
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|Author: |Chau |
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|Version: |6/8/2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Alison Dinmore |
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SUBJECT: California Tax Credit Allocation Committee:
low-income housing credit: fines
DIGEST: This bill permits the Tax Credit Allocation Committee
(TCAC) to establish a schedule of fines for violations of the
terms and conditions, the regulatory agreement, other
agreements, or program regulations.
ANALYSIS:
Existing law designates the TCAC as the state's low-income
housing tax credit (LIHTC) agency and requires TCAC to review
applications for and administer federal and state housing tax
credit applicants.
This bill:
1) Permits TCAC to establish a schedule of fines for violations
of the terms and conditions, the regulatory agreement,
covenants, or program regulations. TCAC shall establish the
fines for violations up to $500 per violation or double the
amount of the financial gain, whichever is greater. Except
for serious violations, which shall be defined by the
committee, a first-time property owner violator shall be given
at least 30 days to correct the violation before a fine is
imposed. A violation that has occurred for some time prior to
discovery is one violation, but fines may be a recurring
amount if the violation is not corrected within a reasonable
period of time thereafter, as determined by TCAC.
AB 1920 (Chau) Page 2 of ?
2) Permits a property owner to appeal a fine to TCAC.
3) TCAC shall adopt and may revise the schedule of fines at a
public general committee meeting. The schedule may include
specific violations of the terms and conditions, the
regulatory agreement, other agreements, or program regulations
and fine amounts. All fines received by the TCAC shall be
deposited in the Housing Rehabilitation Loan Fund.
3) If a fine assessed against a property owner is not paid
within six months from the date of the initial fine assessment
and after TCAC provides reasonable notice to the property
owner, TCAC may record a lien against the property.
COMMENTS:
1) Purpose of the bill. According to the author, rental housing
developments that receive low-income housing tax credits from
TCAC are required to rent to income-eligible applicants, limit
rents, and maintain the physical condition of the units for 55
years. Owners agree to further commitments, such as more
deeply targeted units to be affordable to extremely low-income
households as part of the competitive scoring. The Internal
Revenue Service enforces the basic program requirements for 15
years, but does not enforce deeper affordability or other
requirements imposed by TCAC during the first 15 years, or any
requirements after year 15. TCAC has few enforcement remedies
for an owner's failure to comply with program requirements
that the IRS does not enforce. These remedies include
imposing negative points on future applications (which only
work if the owner wants to propose new applications), or
bringing a lawsuit to seek compliance or receivership (which
is expensive and time consuming).
AB 1920 would provide the TCAC with a more efficient and
effective enforcement tool by giving TCAC the legislative
authority to levy fines for non-compliance with the terms and
conditions, the regulatory agreement, other agreements, or
program regulations.
2) Background of the LIHTC Program. The LIHTC is an indirect
federal subsidy developed in 1986 to incentivize the private
development of affordable rental housing for low-income
households. The federal LIHTC program enables low-income
AB 1920 (Chau) Page 3 of ?
housing sponsors and developers to raise project equity
through the allocation of tax benefits to investors. In 1987,
the Legislature authorized a state LIHTC program to augment
the federal tax credit program. State tax credits can only be
awarded to projects that have also received, or are
concurrently receiving, an allocation of the federal LIHTCs.
TCAC administers the program for both federal and state LIHTCs
and awards credits to qualified developers who can then sell
those credits to private investors who use the credits to
reduce their federal tax liability. The developer in turn
invests the capital into the affordable housing project.
3) Enforcing program requirements. This bill will provide TCAC
with the legislative authority to levy fines against a
property owner for non-compliance with the terms and
conditions, the regulatory agreement, other agreements, or
program regulations. The fine schedule would be adopted
through a public process and would provide due process through
appeals to the Committee. Except for serious violations, a
first-time property owner violator shall be given at least 30
days to correct the violation before a fine is imposed. A
violation that has occurred for some time prior to discovery
is one violation, but fines may be a recurring amount if the
violation is not corrected within a reasonable period of time.
These fines may not exceed $500 per violation or double the
amount of the financial gain to the housing credit applicant
and could be recurring if the violations are not corrected in
a reasonable amount of time. Fines must be deposited in the
Housing Rehabilitation Loan Fund and made available to the
Multifamily Housing Program at the Department of Housing and
Community Development. TCAC may record a lien on the property
if fines are not paid within six months of being assessed.
Assembly Votes:
Floor: 78-0
Appr: 20-0
Rev&Tax: 9-0
H&CD: 7-0
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
AB 1920 (Chau) Page 4 of ?
Wednesday,
June 8, 2016.)
SUPPORT:
State Treasurer John Chiang (sponsor)
California Rural Legal Assistance Foundation
Arc and United Cerebral Palsy California Collaboration
Western Center on Law and Poverty
OPPOSITION:
None received
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