BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1920| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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. AB 1920 Page 2 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 AB 1920 Page 3 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 AB 1920 Page 4 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 **** END **** AB 1920 Page 5