BILL ANALYSIS Ó AB 2647 Page 1 Date of Hearing: May 25, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2647 (Eduardo Garcia) - As Amended May 17, 2016 ----------------------------------------------------------------- |Policy |Jobs, Economic Development, |Vote:|9 - 0 | |Committee: |and the Economy | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Revenue and Taxation | |9 - 0 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill expands California Organized Investment Network (COIN) tax credits. Specifically, this bill: AB 2647 Page 2 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. AB 2647 Page 3 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 AB 2647 Page 4 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