BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 1920|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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                                   THIRD READING 


          Bill No:  AB 1920
          Author:   Chau (D) 
          Amended:  6/8/16 in Senate
          Vote:     27 

           SENATE TRANS. & HOUSING COMMITTEE:  11-0, 6/14/16
           AYES:  Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva,  
            McGuire, Mendoza, Roth, Wieckowski

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 8/1/16
           AYES:  Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

           ASSEMBLY FLOOR:  78-0, 5/12/16 (Consent) - See last page for  
            vote

           SUBJECT:   California Tax Credit Allocation Committee:   
                     low-income housing credit:  fines


          SOURCE:    State Treasurer John Chiang


          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.  









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          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.  

          2)  Permits a property owner to appeal a fine to TCAC. 

          3)  Provides 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.

          4) Provides, 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.  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  







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            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 provides 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  
            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  







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            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.


          FISCAL EFFECT:   Appropriation:    Yes         Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified8/2/16)


          State Treasurer John Chiang (source)
          Arc and United Cerebral Palsy California Collaboration
          California Rural Legal Assistance Foundation
          Western Center on Law and Poverty


          OPPOSITION:   (Verified8/2/16)


          None received

          ASSEMBLY FLOOR:  78-0, 5/12/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,  
            Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Rendon
          NO VOTE RECORDED:  Burke, Jones-Sawyer

          Prepared by:Alison Dinmore / T. & H. / (916) 651-4121
          8/15/16 9:52:49


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