BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1920


                                                                    Page  1


          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1920 (Chau)


          As Amended  June 8, 2016


          2/3 vote


           -------------------------------------------------------------------- 
          |ASSEMBLY:  |78-0  |(May 12, 2016) |SENATE: |36-0  |(August 18,      |
          |           |      |               |        |      |2016)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |
           -------------------------------------------------------------------- 


          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.










                                                                    AB 1920


                                                                    Page  2


          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


                                                                    Page  3




          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.   








                                                                    AB 1920


                                                                    Page  4


          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


                                                                    Page  5