BILL ANALYSIS Ó
AB 2140
Page 1
Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2140 (Roger Hernández) - As Amended May 16, 2016
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|Policy |Housing and Community |Vote:|7 - 0 |
|Committee: |Development | | |
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|-------------+-------------------------------+-----+-------------|
| |Revenue and Taxation | |9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill modifies the Farmworker Housing Assistance (FHA) tax
credit program. Specifically, this bill:
1)Redefines "farmworker housing" as housing in which at least
50% of the units are available to farmworkers, instead of
100%.
AB 2140
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2)Authorizes the California Tax Credit Allocation Committee
(TCAC) to award a state Low Income Housing Tax (LIHT) credit
to projects located in a qualified census tract or a
designated development area and has received a federal 4% LIHT
Credit.
3)Revises the state applicable state LIHT credit percentage
relating to farmworker housing to provide that a farmworker
housing building, which is federally subsidized, is eligible
for the state LIHT credit equal to 75% of the qualified basis
of the building over four years.
4)States that it is the intent of the Legislature to transfer
$4.5 million in unused farmworker housing credits to the Joe
Serna Jr. Farmworker Housing Grant Program (Joe Serna Jr.
Program). This would be done by prohibiting TCAC from
allocating $4.5 million of unused credits and then passing
legislation that appropriates $4.5 million from the General
Fund (GF) to the Joe Serna Jr. Program.
FISCAL EFFECT:
1)No additional loss in state revenues would occur as a result
of this bill. While the farmworker housing credit program has
been underutilized, this has not meant these dollars return to
the GF. Instead, those unused dollars are rolled forward for
future use. This bill attempts to increase utilization of the
credit, but no additional dollars are provided to the program.
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2)Minor and absorbable administrative costs to TCAC to review
additional number of potential projects and to update
application documents.
3)GF cost pressures of $4.5 million as a result of the stated
intent to transfer unallocated TCAC credits to the Joe Serna
Jr. Program
COMMENTS:
1)Purpose. According to the author, this program aims to
increase utilization of the Farmworker Housing Assistance
(FHA) tax credit program. Currently, the program is being
underutilized, and not one single farmworker housing project
was awarded an FHA tax credit between 2008 and 2015, with more
than $4.5 million in farmworker state credit funds remaining
available for future project applicants in 2016.
2)Federal LIHT credit program. The LIHT credit is an indirect
federal subsidy developed in 1986 to incentivize the private
development of affordable rental housing for low-income
households. The federal LIHT credit program replaced
traditional housing tax incentives, such as accelerated
depreciation, with a tax credit that enables low-income
housing sponsors and developers to raise project equity
through the allocation of tax benefits to investors.
Two types of federal tax credits are available: the 9% and 4%
credits. These terms refer to the approximate percentage of a
project's "qualified basis" a taxpayer may deduct from his/her
annual federal tax liability in each of 10 years. For
projects that are not financed with a federal subsidy, the
applicable rate is 9%. For projects that are federally
subsidized (including projects financed with more than 50%
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with tax-exempt bonds), the applicable rate is 4%.
3)State LIHT credit program. In 1987, the Legislature
authorized a state LIHT credit program to augment the federal
program. While the state LIHT credit program is patterned
after the federal program, there are several differences,
including a provision allowing investors to claim the state
LIHT credit over a four-year, rather than the federal 10-year,
allocation period. Furthermore, unlike the federal LIHT
credit program, the California LIHT credit law requires
project developers or housing sponsors to agree to a minimum
of 55 years of rent and income restrictions.
State tax credits can only be awarded to projects that have
also received, or are concurrently receiving, an allocation of
the federal LIHT credits. Federal law specifies that each
state must designate a "housing credit agency" to administer
the federal LIHT credit program. In California,
responsibility for administering the federal program is
assigned to the California TCAC, which is comprised of the
State Treasurer, the State Controller, the Director of
Finance, and three non-voting members. TCAC allocates both
federal and state LIHT credits through a competitive
application process.
The amount of state LIHT credit that may be annually allocated
by the TCAC is limited to $70 million, adjusted for inflation,
plus any unallocated or unused credits from previous years.
In 2015, the total state credit amount available for
allocation was approximately $90 million (representing all
four years of allocation), plus $5.5 million in farmworker
state credit available for agricultural worker housing. The
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TCAC awarded approximately $123.1 million in state tax credits
to 47 projects in 2015, including one farmworker state credit
award of almost 1 million.
4)Farmworker housing allocation. 1996, the Legislature created
the Farmworker Housing Assistance Tax Credit Program and set
aside $500,000 a year from the LIHT credit allocation for
farmworker housing projects. In an effort to streamline
administration and make the farmworker program more
user-friendly, SB 1247 (Lowenthal), Chapter 521, Statutes of
2008, eliminated the FHA Tax Credit Program as a separate
program, consolidated it into the state LIHT credit program,
and established an annual set-aside of state LIHT credits for
farmworker housing developments (Farmworker State Credits).
The amount of funding dedicated to farmworker housing remained
the same - $500,000 each year, available for projects
dedicating 100% of their affordable units to agricultural
workers and their families. The funding may be carried forward
into future years if not allocated.
Farmworker housing tax credit applicants apply in California
TCAC's competitive rounds using TCAC application documents.
Farmworker state tax credits can be requested in combination
with nine percent (9%) or four percent (4%) federal tax
credits, or can be requested without federal tax credits.
Beyond the ability to receive state credit without federal tax
credit, farmworker state credit program requirements are
identical to all other LIHT credit program requirements.
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5)Joe Serna Jr. Program. This bill was amended in policy
committee to include intent language about reallocating unused
farmworker credit dollars ($4.5 million) to the Joe Serna Jr.
Program. The bill specifies that in order for this to occur,
TCAC would first be prohibited from allocating the $4.5
million in unallocated credits and the Joe Serna Jr. Program
would be given a GF appropriation of that same amount.
Like the farmworker housing tax credit, the Joe Serna Jr.
Program aims to address the affordable housing needs of
farmworker. It finances new construction, rehabilitation, and
acquisition of owner-occupied and rental units for
farmworkers, with a priority for lower income households.
The intent to provide additional funding to the Joe Serna Jr.
Program is a laudable goal, but it is beyond the scope of this
bill. Both the Joe Serna Jr. Program and the farmworker
housing tax credit attack the same problem from different
angles, and this bill aims to make the tax credit a more
effective tool. Given that there haven't been many efforts to
try to make the credit more effective, it seems premature to
strip the program of its unallocated credits.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081