California Legislature—2015–16 Regular Session

Assembly BillNo. 2392


Introduced by Assembly Member Nazarian

February 18, 2016


An act to add and repeal Sections 17053.50 and 23650 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 2392, as introduced, Nazarian. Income taxes: credit: seismic retrofits.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill, for taxable years beginning on or after January 1, 2017, and before January 1, 2022, would allow a tax credit under both laws in an amount equal to 30% of the qualified costs paid or incurred by a qualified taxpayer for any seismic retrofit construction on a qualified building, as provided. The bill would require a taxpayer, in order to be eligible for the credit, to obtain 2 certifications from the appropriate jurisdiction with authority for building code enforcement of the area in which the building is located: one prior to seismic retrofit construction that certifies that the building is an at-risk property, and a second subsequent to construction that certifies that the completed construction is seismic retrofit construction, as defined, and specifies a dollar amount of qualified costs. The bill would further require the taxpayer to provide the second certification to and apply for allocation of the credit with the Franchise Tax Board, and would require the board to allocate credits on a first-come-first-served basis. The bill would provide that the credit would have an aggregate cap under both laws of $12,000,000 plus the amount of previously unallocated credit for each calendar year, as provided.

Existing law requires a bill that would authorize a new credit against the tax imposed by the Personal Income Tax Law or the Corporation Tax Law to contain specific goals, purposes, and objectives that the new credit will achieve and detailed performance indicators and data collection requirements for determining whether the new credit achieves these goals, purposes, and objectives.

This bill would make findings specifying the goals, purposes, and objectives of the above-described tax credits and detailing the performance indicators and data collection requirements for determining whether the credits meet these goals, purposes, and objectives.

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 17053.50 is added to the Revenue and
2Taxation Code
, to read:

3

17053.50.  

(a) For taxable years beginning on or after January
41, 2017, and before January 1, 2022, there shall be allowed to a
5qualified taxpayer a credit against the “net tax,” as defined in
6Section 17039, in an amount equal to 30 percent of the qualified
7taxpayer’s qualified costs.

8(b) For purposes of this section:

9(1) “At-risk property” means a building that is deemed
10hazardous and in danger of collapse in the event of a catastrophic
11earthquake, including, but not limited to, soft story buildings,
12nonductile concrete residential buildings, and pre-1994 concrete
13residential buildings.

14(2) “Qualified building” means a building that has been certified
15as an at-risk property pursuant to subparagraph (A) of paragraph
16(1) of subdivision (c). A qualified building includes a mobilehome
17registered by the Department of Housing and Community
18Development.

19(3) “Qualified costs” means the costs paid or incurred by the
20qualified taxpayer for any completed seismic retrofit construction
21on a qualified building, including any engineering or architectural
22design work necessary to permit or complete the seismic retrofit
P3    1construction less the amount of any grant provided by a public
2entity for the seismic retrofit construction. “Qualified costs” do
3not include any of the following costs paid or incurred by the
4qualified taxpayer:

5(A) Maintenance, including abatement of deferred or inadequate
6maintenance, and correction of violations unrelated to the seismic
7retrofit construction.

8(B) Repair, including repair of earthquake damage.

9(C) Seismic retrofit construction required by local building
10codes as a result of addition, repair, building relocation, change
11of use, or occupancy.

12(D) Other work or improvement required by local building or
13planning codes as a result of the intended seismic retrofit
14construction.

15(E) Rent reductions or other associated compensation,
16compliance actions, or other related coordination involving the
17qualified taxpayer and any other party, including a tenant, insurer,
18or lender.

19(F) Replacement of existing building components, including
20equipment, except as needed to complete the seismic retrofit
21construction.

22(G) Bracing or securing nonpermanent building contents.

23(H) The offset of costs, reimbursements, or other costs
24transferred from the qualified taxpayers to others.

25(I) Any amount paid by the qualified taxpayer to the jurisdiction
26with authority for building code enforcement for issuing the
27certifications required pursuant to subparagraphs (A) and (B) of
28paragraph (1) of subdivision (c).

29(4) “Qualified taxpayer” means a taxpayer that is an owner of
30a qualified building located in this state. A taxpayer that owns a
31proportional share of a qualified building in this state may claim
32the credit allowed by this section based on the taxpayer’s share of
33the qualified costs.

34(5) (A) “Seismic retrofit construction” means alteration of a
35qualified building or its components to substantially mitigate
36seismic damage. Seismic retrofit construction shall be for work
37performed, and for which qualified costs were paid or incurred,
38on or after January 1, 2017. Seismic retrofit construction shall
39include, but not be limited to, the following:

40(i) Anchoring the structure to the foundation.

P4    1(ii) Bracing cripple walls.

2(iii) Bracing hot water heaters.

3(iv) Installing automatic gas shutoff valves.

4(v) Repairing or reinforcing the foundation to improve the
5integrity of the foundation against seismic damage.

6(vi) Anchoring fuel storage.

7(vii) Installing an earthquake resistant bracing system for
8mobilehomes that are registered with the Department of Housing
9and Community Development.

10(B) Notwithstanding subparagraph (A), seismic retrofit
11construction does not include construction performed to bring a
12building into compliance with local building codes.

13(c) To be eligible for the credit, the following shall apply:

14(1) The qualified taxpayer shall do all of the following:

15(A) Prior to the seismic retrofit construction, obtain certification
16from the appropriate jurisdiction with local building code
17enforcement authority that the building is an at-risk property.

18(B) Obtain certification from the appropriate jurisdiction with
19authority for building code enforcement, upon a review of the
20building, that the completed construction satisfies the definition
21of seismic retrofit construction. The certification shall identify
22what part of the completed construction, if any, is not seismic
23retrofit construction, and specify a dollar amount of qualified costs.

24(C) Request and be granted an allocation of the credit from the
25Franchise Tax Board. To request an allocation, the taxpayer shall
26sign and submit to the Franchise Tax Board an application to
27receive a credit for the seismic retrofit construction and provide a
28copy of the certification obtained pursuant to subparagraph (B).

29(D) Retain for his or her records a copy of the certifications
30specified in subparagraphs (A) and (B).

31(2) The jurisdiction with authority for building code enforcement
32in which a qualified building is located has entered into an
33agreement with the state to provide certifications pursuant to this
34section and to not seek reimbursement pursuant to Section 6 of
35Article XIII B of the California Constitution for any costs incurred
36in providing those certifications.

37(d) (1) The credit amount allowed in subdivision (a) shall be
38claimed by a qualified taxpayer at the rate of one-fifth of the credit
39amount for the taxable year in which the credit is allocated, and
P5    1one-fifth of the credit amount for each of the subsequent four
2taxable years.

3(2) In the case where the credit allowed under this section
4exceeds the “net tax,” as defined in Section 17039, for a taxable
5year, the excess credit may be carried over to reduce the “net tax”
6in the following taxable year, and succeeding four taxable years,
7if necessary, until the credit has been exhausted.

8(e) (1) The total amount of credit that may be allocated pursuant
9to this section and Section 23650 shall not exceed the sum of the
10following:

11(A) Twelve million dollars ($12,000,000) for the 2017 calendar
12year and each calendar year thereafter.

13(B) The amount of previously unallocated credits allowed under
14this section.

15(2) Upon receipt of the application and certification described
16in subparagraph (C) of paragraph (1) of subdivision (c), the
17Franchise Tax Board shall notify the taxpayer of the amount, if
18any, of credit allowed and allocate the credit to a qualified taxpayer
19on a first-come-first-served basis.

20(3) (A) The taxpayer shall claim the credit on a timely filed
21original return.

22(B) The determination of the Franchise Tax Board with respect
23to the allocation of the credit, and whether a return has been timely
24filed for purposes of this subdivision, may not be reviewed in any
25administrative or judicial proceeding.

26(C) Any disallowance of a credit claimed due to a determination
27under this subdivision, including the application of the limitation
28specified in paragraph (1), shall be treated as a mathematical error
29appearing on the return. Any amount of tax resulting from that
30disallowance may be assessed by the Franchise Tax Board in the
31same manner as provided by Section 19051.

32(f) This credit shall be in lieu of any other credit or deduction
33that the qualified taxpayer may otherwise claim pursuant to this
34part with respect to qualified costs.

35(g) The Franchise Tax Board may prescribe rules, guidelines,
36or procedures necessary or appropriate to carry out the purposes
37of this section, including any guidelines regarding the allocation
38of the credit allowed under this section. Chapter 3.5 (commencing
39with Section 11340) of Part 1 of Division 3 of Title 2 of the
40Government Code does not apply to any rule, guideline, or
P6    1procedure prescribed by the Franchise Tax Board pursuant to this
2section.

3(h) This section shall remain in effect only until December 1,
42022, and as of that date is repealed.

5

SEC. 2.  

Section 23650 is added to the Revenue and Taxation
6Code
, to read:

7

23650.  

(a) For taxable years beginning on or after January 1,
82017, and before January 1, 2022, there shall be allowed to a
9qualified taxpayer a credit against the “tax,” as defined in Section
1023036, in an amount equal to 30 percent of the qualified taxpayer’s
11qualified costs.

12(b) For purposes of this section:

13(1) “At-risk property” means a building that is deemed
14hazardous and in danger of collapse in the event of a catastrophic
15earthquake, including, but not limited to, soft story buildings,
16nonductile concrete residential buildings, and pre-1994 concrete
17residential buildings.

18(2) “Qualified building” means a building that has been certified
19as an at-risk property pursuant to subparagraph (A) of paragraph
20(1) of subdivision (c). A qualified building includes a mobilehome
21registered by the Department of Housing and Community
22Development.

23(3) “Qualified costs” means the costs paid or incurred by the
24qualified taxpayer for any completed seismic retrofit construction
25on a qualified building, including any engineering or architectural
26design work necessary to permit or complete the seismic retrofit
27construction less the amount of any grant provided by a public
28entity for the seismic retrofit construction. “Qualified costs” do
29not include any of the following costs paid or incurred by the
30qualified taxpayer:

31(A) Maintenance, including abatement of deferred or inadequate
32maintenance, and correction of violations unrelated to the seismic
33retrofit construction.

34(B) Repair, including repair of earthquake damage.

35(C) Seismic retrofit construction required by local building
36codes as a result of addition, repair, building relocation, change
37of use, or occupancy.

38(D) Other work or improvement required by local building or
39planning codes as a result of the intended seismic retrofit
40construction.

P7    1(E) Rent reductions or other associated compensation,
2compliance actions, or other related coordination involving the
3qualified taxpayer and any other party, including a tenant, insurer,
4or lender.

5(F) Replacement of existing building components, including
6equipment, except as needed to complete the seismic retrofit
7construction.

8(G) Bracing or securing nonpermanent building contents.

9(H) The offset of costs, reimbursements, or other costs
10transferred from the qualified taxpayers to others.

11(I) Any amount paid by the qualified taxpayer to the jurisdiction
12with authority for building code enforcement for issuing the
13certifications required pursuant to subparagraphs (A) and (B) of
14paragraph (1) of subdivision (c).

15(4) “Qualified taxpayer” means a taxpayer that is an owner of
16a qualified building located in this state. A taxpayer that owns a
17proportional share of a qualified building in this state may claim
18the credit allowed by this section based on the taxpayer’s share of
19the qualified costs.

20(5) (A) “Seismic retrofit construction” means alteration of a
21qualified building or its components to substantially mitigate
22seismic damage. Seismic retrofit construction shall be for work
23performed, and for which qualified costs were paid or incurred,
24on or after January 1, 2017. Seismic retrofit construction shall
25include, but not be limited to, the following:

26(i) Anchoring the structure to the foundation.

27(ii) Bracing cripple walls.

28(iii) Bracing hot water heaters.

29(iv) Installing automatic gas shutoff valves.

30(v) Repairing or reinforcing the foundation to improve the
31integrity of the foundation against seismic damage.

32(vi) Anchoring fuel storage.

33(vii) Installing an earthquake resistant bracing system for
34mobilehomes that are registered with the Department of Housing
35and Community Development.

36(B) Notwithstanding subparagraph (A), seismic retrofit
37construction does not include construction performed to bring a
38building into compliance with local building codes.

39(c) To be eligible for the credit, the following shall apply:

40(1) The qualified taxpayer shall do all of the following:

P8    1(A) Prior to the seismic retrofit construction, obtain certification
2from the appropriate jurisdiction with local building code
3enforcement authority that the building is an at-risk property.

4(B) Obtain certification from the appropriate jurisdiction with
5authority for building code enforcement, upon a review of the
6building, that the completed construction satisfies the definition
7of seismic retrofit construction. The certification shall identify
8what part of the completed construction, if any, is not seismic
9retrofit construction and specify a dollar amount of qualified costs.

10(C) Request and be granted an allocation of the credit from the
11Franchise Tax Board. To request an allocation, the taxpayer shall
12sign and submit to the Franchise Tax Board an application to
13receive a credit for the seismic retrofit construction and provide a
14copy of the certification obtained pursuant to subparagraph (B).

15(D) Retain for his or her records a copy of the certifications
16specified in subparagraphs (A) and (B).

17(2) The jurisdiction with authority for building code enforcement
18in which a qualified building is located has entered into an
19agreement with the state to provide certifications pursuant to this
20section and to not seek reimbursement pursuant to Section 6 of
21Article XIII B of the California Constitution for any costs incurred
22in providing those certifications.

23(d) (1) The credit amount allowed in subdivision (a) shall be
24claimed by a qualified taxpayer at the rate of one-fifth of the credit
25amount for the taxable year in which the credit is allocated, and
26one-fifth of the credit amount for each of the subsequent four
27taxable years.

28(2) In the case where the credit allowed under this section
29exceeds the “tax,” as defined in Section 23036, for a taxable year,
30the excess credit may be carried over to reduce the “tax” in the
31following taxable year, and succeeding four taxable years, if
32necessary, until the credit has been exhausted.

33(e) (1) The total amount of credit that may be allocated pursuant
34to this section and Section 17053.50 shall not exceed the sum of
35the following:

36(A) Twelve million dollars ($12,000,000) for the 2017 calendar
37year and each calendar year thereafter.

38(B) The amount of previously unallocated credits allowed under
39this section.

P9    1(2) Upon receipt of the application and certification described
2in subparagraph (C) of paragraph (1) of subdivision (c), the
3Franchise Tax Board shall notify the taxpayer of the amount, if
4any, of credit allowed and allocate the credit to a qualified taxpayer
5on a first-come-first-served basis.

6(3) (A) The taxpayer shall claim the credit on a timely filed
7original return.

8(B) The determination of the Franchise Tax Board with respect
9to the allocation of the credit, and whether a return has been timely
10filed for purposes of this subdivision, may not be reviewed in any
11administrative or judicial proceeding.

12(C) Any disallowance of a credit claimed due to a determination
13under this subdivision, including the application of the limitation
14specified in paragraph (1), shall be treated as a mathematical error
15appearing on the return. Any amount of tax resulting from that
16disallowance may be assessed by the Franchise Tax Board in the
17same manner as provided by Section 19051.

18(f) This credit shall be in lieu of any other credit or deduction
19that the qualified taxpayer may otherwise claim pursuant to this
20part with respect to qualified costs.

21(g) The Franchise Tax Board may prescribe rules, guidelines,
22or procedures necessary or appropriate to carry out the purposes
23of this section, including any guidelines regarding the allocation
24of the credit allowed under this section. Chapter 3.5 (commencing
25with Section 11340) of Part 1 of Division 3 of Title 2 of the
26Government Code does not apply to any rule, guideline, or
27procedure prescribed by the Franchise Tax Board pursuant to this
28section.

29(h) This section shall remain in effect only until December 1,
302022, and as of that date is repealed.

31

SEC. 3.  

For the purposes of complying with Section 41 of the
32Revenue and Taxation Code, the Legislature finds and declares
33all of the following with respect to Sections 17053.50 and 23650
34 of the Revenue and Taxation Code:

35(a) The specific goals, purposes, and objectives that the tax
36credits will achieve are as follows:

37(1) Leveraging sixty million dollars ($60,000,000) in private
38investment.

39(2) Creating thousands of engineering or construction jobs.

40(3) Mitigating seismic damage to save lives.

P10   1(b) The detailed performance indicators for the Legislature to
2use when measuring whether the tax credits meet those specific
3goals, purposes, and objectives are as follows:

4(1) The amount of private sector investment enabled by
5allocation of the tax credits.

6(2) The number of engineering and construction jobs created
7as a result of this investment.

8(3) The estimated number of lives saved by the seismic
9retrofitting of buildings facilitated by the tax credits.

10(c) The data collection requirements to enable the Legislature
11to determine whether the tax credits are meeting, failing to meet,
12or exceeding those specific goals, purposes, and objectives are as
13follows:

14(1) To assist the Legislature in measuring whether the tax credits
15meet the goals, purposes, and objectives specified in subdivision
16(a), the Legislative Analyst shall review the effectiveness of the
17tax credits and may request information from the Franchise Tax
18Board and any state governmental entity with authority relating
19to the seismic retrofit construction of at-risk properties.

20(2) The Franchise Tax Board and any state governmental entity
21with authority relating to the seismic retrofit construction of at-risk
22properties shall provide to the Legislative Analyst any data
23requested by the Legislative Analyst pursuant to this subdivision.

24

SEC. 4.  

This act provides for a tax levy within the meaning
25of Article IV of the Constitution and shall go into immediate effect.



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