BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2647


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          Date of Hearing:  May 25, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2647 (Eduardo Garcia) - As Amended May 17, 2016


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          |Policy       |Jobs, Economic Development,    |Vote:|9 - 0        |
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          |             |Revenue and Taxation           |     |9 - 0        |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill expands California Organized Investment Network (COIN)  
          tax credits. Specifically, this bill:  










                                                                    AB 2647


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          1)Extends the January 1, 2017, sunset date on the COIN tax  
            credits to January 1, 2027. 



          2)Increases the aggregate amount of qualified investments that  
            may be made by taxpayers from $50 million to $120 million.



          FISCAL EFFECT:


          1)Annual GF revenue loss in the range of $6 million, $10.5  
            million, and $15 million in calendar years 2017, 2018, and  
            2019. 


          2)Minor and absorbable administrative costs to the Department of  
            Insurance (DOI). 


          COMMENTS:


          1)Background. The COIN program was created in 1996 as a  
            public-private partnership by DOI, the insurance industry,  
            state government leaders, and community development  
            organizations with the goal of helping to address the unmet  
            capital needs for economic development and affordable housing  
            in low-income urban and rural communities throughout  
            California. This voluntary program was established at the  
            request of the insurance industry as a potential alternative  
            to state legislation that would create a system similar to the  
            federal Community Reinvestment Act. 









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            The COIN program serves as a liaison between insurers that are  
            seeking investment opportunities and the community  
            organizations that are seeking investment capital for  
            projects. Community Development Financial Institutions (CDFIs)  
            work with COIN - an office within the California Department of  
            Insurance - as financial intermediaries providing access to  
            credit, loans, and investments to small businesses and  
            non-profits that serve economically disadvantaged communities.  
             CDFIs also offer administrative and technical assistance in  
            these low-income communities.  Generally, CDFIs lend to  
            borrowers that do not satisfy the criteria for conventional  
            lenders and focus on a particular community or certain groups  
            of people





          2)CDFI tax credit: Under this program, investors receive a tax  
            credit worth 20 percent of their investment in one of the  
            CDFIs certified by the California Organized Investment  
            Network. The credit can be applied against the corporation  
            tax, personal income tax, or insurer premium tax.



          3)Purpose. According to the author's office and supporters, this  
            bill will help address some of the fundamental challenges  
            facing California's lower income and disadvantaged  
            communities. Programs like COIN are crucial to address  
            California's growing income inequality.  



          4)Recent amendments. As introduced, AB 2647 established the  
            California New Markets Tax Credit Program, with the stated  
            purpose of stimulating private sector investment in lower  








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            income communities. However, the bill was amended in the  
            Assembly Committee on Revenue and Taxation to instead make the  
            focus of the bill the COIN program. This makes the bill  
            similar to AB 2728 (Atkins), which would extend the COIN tax  
            credit program to January 1, 2022. 



          Analysis Prepared by:Luke Reidenbach / APPR. / (916)  
          319-2081