BILL ANALYSIS Ó
AB 1920
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CONCURRENCE IN SENATE AMENDMENTS
AB
1920 (Chau)
As Amended June 8, 2016
2/3 vote
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|ASSEMBLY: |78-0 |(May 12, 2016) |SENATE: |36-0 |(August 18, |
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Original Committee Reference: H. & C.D.
SUMMARY: 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:
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.
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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.
The Senate amendments:
1)Allow a property owner to appeal a fine levied by TCAC.
2)Gives a property owner 30 days to correct a first-time
violation, unless it is a serious violation as defined by
TCAC.
3)Provides that a serial violation that occurs prior to
discovery is considered one violation for purpose of fines,
but fines may be recurring after discovery, if the violation
is not corrected.
4)Make technical changes.
FISCAL EFFECT: According to the Senate Appropriations
Committee:
AB 1920
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1)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)
2)Unknown, likely minor fine revenue gains. (Housing
Rehabilitation Loan Fund)
COMMENTS:
Background:
In 1986, the federal government authorized the LIHTC program to
enable affordable housing developers to raise private capital
through the sale of tax credits to investors. Two types of
federal tax credits are available and are generally referred to
as 9% and 4% credits. TCAC administers the program 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.
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 targeting units to be affordable to
extremely-low income households, as part of the competitive
scoring process. The Internal Revenue Service (IRS) 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.
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TCAC can impose negative points, which only work if the owner
wants to propose new applications. TCAC can also bring a
lawsuit to seek compliance or receivership, however this
expensive and time-consuming.
This bill would provide TCAC with the legislative authority to
levy fines for non-compliance with the terms and conditions, the
regulatory agreement, covenants, or program regulations. Fines
may not exceed the greater of $500 or double the amount of the
financial gain to the violator and could be recurring if the
violations are not corrected in a reasonable amount of time.
Fines would be deposited in the Housing Rehabilitation Loan Fund
and be made available to the Multifamily Housing Program at the
Department of Housing and Community Development. TCAC could
record a lien on the property, if fines are not paid within six
months of being assessed. TCAC would adopt the fine schedule
through a public process and provide for due process through
appeals to the Committee.
Purpose of this bill: According to the author, "AB 1920 would
provide 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, covenants, or program regulations."
Analysis Prepared by:
Lisa Engel / H. & C.D. / (961) 319-2085, FN:
0003848
AB 1920
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