Amended in Assembly May 16, 2016

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 amended, 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 tobegin insert,end insert and apply forbegin insert theend insert allocation of the creditbegin delete withend deletebegin insert with,end insert the Franchise Taxbegin delete Board, andend deletebegin insert Board. The billend insert would require thebegin delete boardend deletebegin insert Franchise Tax Boardend insert 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
P3    1on a qualified building, including any engineering or architectural
2design work necessary to permit or complete the seismic retrofit
3construction less the amount of any grant provided by a public
4entity for the seismic retrofit construction. “Qualified costs” do
5not include any of the following costs paid or incurred by the
6qualified taxpayer:

7(A) Maintenance, including abatement of deferred or inadequate
8maintenance, and correction of violations unrelated to the seismic
9retrofit construction.

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

11(C) Seismic retrofit construction required by local building
12codes as a result of addition, repair, building relocation, change
13of use, or occupancy.

14(D) Other work or improvement required by local building or
15planning codes as a result of the intended seismic retrofit
16construction.

17(E) Rent reductions or other associated compensation,
18compliance actions, or other related coordination involving the
19qualified taxpayer and any other party, including a tenant, insurer,
20or lender.

21(F) Replacement of existing building components, including
22equipment, except as needed to complete the seismic retrofit
23construction.

24(G) Bracing or securing nonpermanent building contents.

25(H) The offset of costs, reimbursements, or other costs
26transferred from the qualified taxpayers to others.

27(I) Any amount paid by the qualified taxpayer to the jurisdiction
28with authority for building code enforcement for issuing the
29certifications required pursuant to subparagraphs (A) and (B) of
30paragraph (1) of subdivision (c).

31(4) “Qualified taxpayer” means a taxpayer that is an owner of
32a qualified building located in this state. A taxpayer that owns a
33proportional share of a qualified building in this state may claim
34the credit allowed by this section based on the taxpayer’s share of
35the qualified costs.

36(5) (A) “Seismic retrofit construction” means alteration of a
37qualified building or its components to substantially mitigate
38seismic damage. Seismic retrofit construction shall be for work
39performed, and for which qualified costs were paid or incurred,
P4    1on or after January 1, 2017. Seismic retrofit construction shall
2include, but not be limited to, the following:

3(i) Anchoring the structure to the foundation.

4(ii) Bracing cripple walls.

5(iii) Bracing hot water heaters.

6(iv) Installing automatic gas shutoff valves.

7(v) Repairing or reinforcing the foundation to improve the
8integrity of the foundation against seismic damage.

9(vi) Anchoring fuel storage.

10(vii) Installing an earthquake resistant bracing system for
11mobilehomes that are registered with the Department of Housing
12and Community Development.

13(B) Notwithstanding subparagraph (A), seismic retrofit
14construction does not include construction performed to bring a
15building into compliance with local building codes.

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

17(1) The qualified taxpayer shall do all of the following:

18(A) Prior to the seismic retrofit construction, obtain certification
19from the appropriate jurisdiction with local building code
20enforcement authority that the building is an at-risk property.

21(B) Obtain certification from the appropriate jurisdiction with
22authority for building code enforcement, upon a review of the
23building, that the completed construction satisfies the definition
24of seismic retrofit construction. The certification shall identify
25what part of the completed construction, if any, is not seismic
26retrofit construction, and specify a dollar amount of qualified costs.

27(C) Request and be granted an allocation of the credit from the
28Franchise Tax Board. To request an allocation, the taxpayer shall
29sign and submit to the Franchise Tax Board an application to
30receive a credit for the seismic retrofit construction and provide a
31copy of the certification obtained pursuant to subparagraph (B).

32(D) Retain for his or her records a copy of the certifications
33specified in subparagraphs (A) and (B).

34(2) The jurisdiction with authority for building code enforcement
35in which a qualified building is located has entered into an
36agreement with the state to provide certifications pursuant to this
37section and to not seek reimbursement pursuant to Section 6 of
38Article XIII B of the California Constitution for any costs incurred
39in providing those certifications.

P5    1(d) (1) The credit amount allowed in subdivision (a) shall be
2claimed by a qualified taxpayer at the rate of one-fifth of the credit
3amount for the taxable year in which the credit is allocated, and
4one-fifth of the credit amount for each of the subsequent four
5taxable years.

6(2) In the case where the credit allowed under this section
7exceeds the “net tax,” as defined in Section 17039, for a taxable
8year, the excess credit may be carried over to reduce the “net tax”
9in the following taxable year, and succeeding four taxable years,
10if necessary, until the credit has been exhausted.

11(e) (1) The total amount of credit that may be allocated pursuant
12to this section and Section 23650 shall not exceed the sum of the
13following:

14(A) Twelve million dollars ($12,000,000) for the 2017 calendar
15year and each calendar year thereafter.

16(B) The amount of previously unallocated credits allowed under
17thisbegin delete section.end deletebegin insert section and Section 23650.end insert

18(2) Upon receipt of the application and certification described
19in subparagraph (C) of paragraph (1) of subdivision (c), the
20Franchise Tax Board shall notify the taxpayer of the amount, if
21any, of credit allowed and allocate the credit to a qualified taxpayer
22on a first-come-first-served basis.

23(3) (A) Thebegin insert qualifiedend insert taxpayer shall claim the credit on a timely
24filed original return.

25(B) The determination of the Franchise Tax Board with respect
26to the allocation of the credit, and whether a return has been timely
27filed for purposes of this subdivision, may not be reviewed in any
28administrative or judicial proceeding.

29(C) Any disallowance of a credit claimed due to a determination
30under this subdivision, including the application of the limitation
31specified in paragraph (1), shall be treated as a mathematical error
32appearing on the return. Any amount of tax resulting from that
33disallowance may be assessed by the Franchise Tax Board in the
34same manner as provided by Section 19051.

35(f) This credit shall be in lieu of any other credit or deduction
36that the qualified taxpayer may otherwise claim pursuant to this
37part with respect to qualified costs.

38(g) The Franchise Tax Board may prescribe rules, guidelines,
39or procedures necessary or appropriate to carry out the purposes
40of this section, including any guidelines regarding the allocation
P6    1of the credit allowed under this section. Chapter 3.5 (commencing
2with Section 11340) of Part 1 of Division 3 of Title 2 of the
3Government Code does not apply to any rule, guideline, or
4procedure prescribed by the Franchise Tax Board pursuant to this
5section.

6(h) This section shall remain in effect only until December 1,
72022, and as of that date is repealed.

8

SEC. 2.  

Section 23650 is added to the Revenue and Taxation
9Code
, to read:

10

23650.  

(a) For taxable years beginning on or after January 1,
112017, and before January 1, 2022, there shall be allowed to a
12qualified taxpayer a credit against the “tax,” as defined in Section
1323036, in an amount equal to 30 percent of the qualified taxpayer’s
14qualified costs.

15(b) For purposes of this section:

16(1) “At-risk property” means a building that is deemed
17hazardous and in danger of collapse in the event of a catastrophic
18earthquake, including, but not limited to, soft story buildings,
19nonductile concrete residential buildings, and pre-1994 concrete
20residential buildings.

21(2) “Qualified building” means a building that has been certified
22as an at-risk property pursuant to subparagraph (A) of paragraph
23(1) of subdivision (c). A qualified building includes a mobilehome
24registered by the Department of Housing and Community
25Development.

26(3) “Qualified costs” means the costs paid or incurred by the
27qualified taxpayer for any completed seismic retrofit construction
28on a qualified building, including any engineering or architectural
29design work necessary to permit or complete the seismic retrofit
30construction less the amount of any grant provided by a public
31entity for the seismic retrofit construction. “Qualified costs” do
32not include any of the following costs paid or incurred by the
33qualified taxpayer:

34(A) Maintenance, including abatement of deferred or inadequate
35maintenance, and correction of violations unrelated to the seismic
36retrofit construction.

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

38(C) Seismic retrofit construction required by local building
39codes as a result of addition, repair, building relocation, change
40of use, or occupancy.

P7    1(D) Other work or improvement required by local building or
2planning codes as a result of the intended seismic retrofit
3construction.

4(E) Rent reductions or other associated compensation,
5compliance actions, or other related coordination involving the
6qualified taxpayer and any other party, including a tenant, insurer,
7or lender.

8(F) Replacement of existing building components, including
9equipment, except as needed to complete the seismic retrofit
10construction.

11(G) Bracing or securing nonpermanent building contents.

12(H) The offset of costs, reimbursements, or other costs
13transferred from the qualified taxpayers to others.

14(I) Any amount paid by the qualified taxpayer to the jurisdiction
15with authority for building code enforcement for issuing the
16certifications required pursuant to subparagraphs (A) and (B) of
17paragraph (1) of subdivision (c).

18(4) “Qualified taxpayer” means a taxpayer that is an owner of
19a qualified building located in this state. A taxpayer that owns a
20proportional share of a qualified building in this state may claim
21the credit allowed by this section based on the taxpayer’s share of
22the qualified costs.

23(5) (A) “Seismic retrofit construction” means alteration of a
24qualified building or its components to substantially mitigate
25seismic damage. Seismic retrofit construction shall be for work
26performed, and for which qualified costs were paid or incurred,
27on or after January 1, 2017. Seismic retrofit construction shall
28include, but not be limited to, the following:

29(i) Anchoring the structure to the foundation.

30(ii) Bracing cripple walls.

31(iii) Bracing hot water heaters.

32(iv) Installing automatic gas shutoff valves.

33(v) Repairing or reinforcing the foundation to improve the
34integrity of the foundation against seismic damage.

35(vi) Anchoring fuel storage.

36(vii) Installing an earthquake resistant bracing system for
37mobilehomes that are registered with the Department of Housing
38and Community Development.

P8    1(B) Notwithstanding subparagraph (A), seismic retrofit
2construction does not include construction performed to bring a
3building into compliance with local building codes.

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

5(1) The qualified taxpayer shall do all of the following:

6(A) Prior to the seismic retrofit construction, obtain certification
7from the appropriate jurisdiction with local building code
8enforcement authority that the building is an at-risk property.

9(B) Obtain certification from the appropriate jurisdiction with
10authority for building code enforcement, upon a review of the
11building, that the completed construction satisfies the definition
12of seismic retrofit construction. The certification shall identify
13what part of the completed construction, if any, is not seismic
14retrofit construction and specify a dollar amount of qualified costs.

15(C) Request and be granted an allocation of the credit from the
16Franchise Tax Board. To request an allocation, the taxpayer shall
17sign and submit to the Franchise Tax Board an application to
18receive a credit for the seismic retrofit construction and provide a
19copy of the certification obtained pursuant to subparagraph (B).

20(D) Retain forbegin delete his or herend deletebegin insert itsend insert records a copy of the certifications
21specified in subparagraphs (A) and (B).

22(2) The jurisdiction with authority for building code enforcement
23in which a qualified building is located has entered into an
24agreement with the state to provide certifications pursuant to this
25section and to not seek reimbursement pursuant to Section 6 of
26Article XIII B of the California Constitution for any costs incurred
27in providing those certifications.

28(d) (1) The credit amount allowed in subdivision (a) shall be
29claimed by a qualified taxpayer at the rate of one-fifth of the credit
30amount for the taxable year in which the credit is allocated, and
31one-fifth of the credit amount for each of the subsequent four
32taxable years.

33(2) In the case where the credit allowed under this section
34exceeds the “tax,” as defined in Section 23036, for a taxable year,
35the excess credit may be carried over to reduce the “tax” in the
36following taxable year, and succeeding four taxable years, if
37necessary, until the credit has been exhausted.

38(e) (1) The total amount of credit that may be allocated pursuant
39to this section and Section 17053.50 shall not exceed the sum of
40the following:

P9    1(A) Twelve million dollars ($12,000,000) for the 2017 calendar
2year and each calendar year thereafter.

3(B) The amount of previously unallocated credits allowed under
4thisbegin delete section.end deletebegin insert section and Section 17053.50.end insert

5(2) Upon receipt of the application and certification described
6in subparagraph (C) of paragraph (1) of subdivision (c), the
7Franchise Tax Board shall notify the taxpayer of the amount, if
8any, of credit allowed and allocate the credit to a qualified taxpayer
9on a first-come-first-served basis.

10(3) (A) Thebegin insert qualifiedend insert taxpayer shall claim the credit on a timely
11filed original return.

12(B) The determination of the Franchise Tax Board with respect
13to the allocation of the credit, and whether a return has been timely
14filed for purposes of this subdivision, may not be reviewed in any
15administrative or judicial proceeding.

16(C) Any disallowance of a credit claimed due to a determination
17under this subdivision, including the application of the limitation
18specified in paragraph (1), shall be treated as a mathematical error
19appearing on the return. Any amount of tax resulting from that
20disallowance may be assessed by the Franchise Tax Board in the
21same manner as provided by Section 19051.

22(f) This credit shall be in lieu of any other credit or deduction
23that the qualified taxpayer may otherwise claim pursuant to this
24part with respect to qualified costs.

25(g) The Franchise Tax Board may prescribe rules, guidelines,
26or procedures necessary or appropriate to carry out the purposes
27of this section, including any guidelines regarding the allocation
28of the credit allowed under this section. Chapter 3.5 (commencing
29with Section 11340) of Part 1 of Division 3 of Title 2 of the
30Government Code does not apply to any rule, guideline, or
31procedure prescribed by the Franchise Tax Board pursuant to this
32section.

33(h) This section shall remain in effect only until December 1,
342022, and as of that date is repealed.

35

SEC. 3.  

For the purposes of complying with Section 41 of the
36Revenue and Taxation Code, the Legislature finds and declares
37all of the following with respect to Sections 17053.50 and 23650
38of the Revenue and Taxation Code:

39(a) The specific goals, purposes, and objectives that the tax
40credits will achieve are as follows:

P10   1(1) Leveraging sixty million dollars ($60,000,000) in private
2investment.

3(2) Creating thousands of engineering or construction jobs.

4(3) Mitigating seismic damage to save lives.

5(b) The detailed performance indicators for the Legislature to
6use when measuring whether the tax credits meet those specific
7goals, purposes, and objectives are as follows:

8(1) The amount of private sector investment enabled by
9allocation of the tax credits.

10(2) The number of engineering and construction jobs created
11as a result of this investment.

12(3) The estimated number of lives saved by the seismic
13retrofitting of buildings facilitated by the tax credits.

14(c) The data collection requirements to enable the Legislature
15to determine whether the tax credits are meeting, failing to meet,
16or exceeding those specific goals, purposes, and objectives are as
17follows:

18(1) To assist the Legislature in measuring whether the tax credits
19meet the goals, purposes, and objectives specified in subdivision
20(a), the Legislative Analyst shall review the effectiveness of the
21tax credits and may request information from the Franchise Tax
22Board and any state governmental entity with authority relating
23to the seismic retrofit construction of at-risk properties.

24(2) The Franchise Tax Board and any state governmental entity
25with authority relating to the seismic retrofit construction of at-risk
26properties shall provide to the Legislative Analyst any data
27requested by the Legislative Analyst pursuant to this subdivision.

28

SEC. 4.  

This act provides for a tax levy within the meaning
29of Article IV of the Constitution and shall go into immediate effect.



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