BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1920 (Chau) - California Tax Credit Allocation Committee:
low-income housing credit: fines
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|Version: June 8, 2016 |Policy Vote: T. & H. 11 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 1, 2016 |Consultant: Mark McKenzie |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: AB 1920 would authorize the California Tax Credit
Allocation Committee (TCAC) to establish a schedule of fines
that may be imposed on a recipient of low-income housing tax
credits for a violation of terms and conditions, program
regulations, regulatory agreements, or other agreements, as
specified.
Fiscal
Impact:
Minor and absorbable TCAC administrative costs to amend
existing program regulations, develop a schedule of fines that
would be adopted at a public meeting, impose fees on property
owners, and to manage ministerial appeals. (Tax Credit
Allocation Fee Account)
AB 1920 (Chau) Page 1 of
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Unknown, likely minor fine revenue gains. (Housing
Rehabilitation Loan Fund)
Background: Existing federal law provides for a federal low-income housing
tax credit (LIHTC) to incentivize private development of
affordable rental housing. The tax credit enables low-income
housing sponsors and developers to raise project equity through
the allocation of tax benefits to investors. Eligible projects
must meet specified rent and income restrictions, and housing
units must generally remain affordable for at least 30 years, as
specified in regulatory agreements. During the first 15 years,
project owners must annually report to both the Internal Revenue
Service (IRS) and the state monitoring agency (TCAC). The IRS
has the authority to recapture some or all of the credits
allocated for a particular project if the taxpayer fails to meet
all of the federal program requirements during the 15-year
compliance period.
Existing law also provides for a state LIHTC to augment the
federal tax credit program. The state program is generally
patterned after the federal program, but project developers or
housing sponsors that receive a state credit allocation must
agree to a minimum of 55 years of rent and tenant income
restrictions, specified terms and conditions applicable to
federal credit allocations, and additional commitments as part
of the competitive application scoring process.
Existing law designates TCAC as the entity responsible for
administering both the federal and state LIHTC programs,
including the allocation of tax credits through a competitive
application process. While the IRS has the authority to
"claw-back" some or all federal tax credits for non-compliance
with terms and conditions and other regulatory agreements during
the first 15 years, there are few remedies available to TCAC to
enforce compliance with state program requirements, other than
bringing a lawsuit or imposing negative points on future LIHTC
applications.
Proposed Law:
AB 1920 would authorize TCAC to establish a schedule of fines
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for violations of terms and conditions, the regulatory
agreement, other agreements, and program regulations by
recipients of LIHTC allocations. Specifically, this bill would:
Specify that fines would be up to $500 per violation, or
double the amount of the financial gain resulting from the
violation, whichever is greater.
Require that first-time violators be provided a 30-day period
to correct a violation before a fine is imposed, unless it is
a serious violation, as specified by TCAC.
Specify that a violation may be subject to a recurring fine,
once discovered, if the violation is not corrected within a
reasonable period of time, as determined by TCAC.
Require TCAC to adopt and revise the schedule of fines for
specific violations, and the fine amount for each violation,
by resolution at a public meeting.
Authorize a property owner to appeal a fine to TCAC.
Require all fines received by TCAC to be deposited into the
Housing Rehabilitation Loan Fund, which is a continuously
appropriated fund.
Authorizes TCAC to record a lien against a property if a fine
assessed against a property owner is not paid within six
months from the date the fine was initially assessed, and
after reasonable notice has been provided to the property
owner.
Specify that the lien would not be superior to other liens on
the property that were previously recorded.
Staff
Comments: While the IRS provides an oversight function for
low-income housing projects that receive LIHTC allocations for
the first 15 years, it does not enforce compliance with
additional requirements imposed as a part of the state program,
or with any federal or state requirements after the 15-year
compliance period ends. According to TCAC, approximately 1,000
LIHTC projects are inspected annually, and about 120 violations
are reported to the IRS for non-compliance issues each year, but
most violations are corrected before they are reported to the
IRS. As noted above, TCAC only has limited enforcement options
available, such as imposing negative points on future LIHTC
applications, or filing a lawsuit, which is expensive and time
consuming. This bill provides additional enforcement options to
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ensure property owners comply with all conditions and agreements
related to the program.
Staff notes that the bill requires fines to be deposited into
the Housing Rehabilitation Loan Fund. All money in this fund is
continuously appropriated to the Department of Housing and
Community Development for making deferred payment loans,
primarily as part of the Multifamily Housing Program. By
depositing revenues into a continuously appropriated fund, the
bill technically makes an appropriation.
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