Amended in Assembly April 25, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2728

Introduced by Assembly Member Atkins

February 19, 2016

An act to amend Sections 926.1 and 12939.2 of the Insurance Code, and to amend Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2728, as amended, Atkins. Insurance: community development investments.

(1) Existing law requires each admitted insurer with annual premiums written in California equal to or less than $100,000,000 to provide information to the Insurance Commissioner by July 1, 2016, on all of its community development investments, community development infrastructure investments, and green investments, as defined, in California. Existing law defines a community development investment as certain projects, developments, or activities that, among other things, benefit low- or moderate-income individuals or families. Existing law defines community development infrastructure as California public debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- or moderate-income communities consistent with the types of projects, developments, or activities specified as community development investments. Existing law defines a green investment, among other things, as specified projects offering energy efficiency improvements and renewable energy generation. Existing law requires the insurer to list investments that are begin delete high-impact, end delete begin insert high impact end insert which is an investment that is innovative, responsive to community needs, not routinely provided by an insurer, or has a high degree of positive impact on the economic welfare of low- or moderate-income individuals, families, or communities in urban or rural areas of California.

This bill would instead define a community development investment as certain projects, developments, or activities that, among other things, benefit low- to moderate-income individuals or families. The bill would include investments begin delete into end delete begin insert in end insert reservation-based communities and investments begin delete into end delete begin insert in end insert rural areas, as defined, in community development investments. The bill would instead define community development infrastructure as all California debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income communities. This bill would include water and waste management and sustainable agriculture projects in the definition of a green investment. The bill would instead define a high-impact investment as an investment that begin insert is innovative, responsive to community needs, not routinely provided by an insurer, and end insert provides at least 50% social or environmental benefit to low- to moderate-income individuals, begin delete families end delete begin insert families, end insert or communities in the state. The bill would also define “diverse begin delete fund managers” as investment management companies that are at least 51% owned by women, veterans, or minorities, or a combination of persons in those groups. end delete begin insert investment managers” as investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51% women, veterans, or minorities, or a combination of persons in those groups. end insert

(2) Existing law authorizes the commissioner, until January 1, 2020, to establish and appoint a California Organized Investment Network (COIN) Advisory Board, as specified.

This bill would extend the commissioner’s authorization to establish and appoint the advisory board until January 1, begin delete 2027. end delete begin insert 2022. end insert

(3) Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made begin delete into end delete begin insert in end insert a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer. begin insert Existing law also provides that if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, the entire amount of any credit previously allowed for that taxable year is required to be added to the tax imposed on the taxpayer. end insert

This bill would extend the provisions relating to the authorization of the credit and certification by the California Organized Investment Network until January 1, begin delete 2027. end delete begin insert 2022. end insert The bill would require priority for the tax credit to be given to insurance company investors. The bill would delete the provision described above relating to a reduction of a qualified investment begin delete before the end of the 60th month. end delete begin insert and would instead require that the provision regarding withdrawal, without reinvestment, of a qualified investment also apply when a qualified investment is reduced. end insert

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

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert It is the intent of the Legislature that, upon
fulfillment of the requirements of Section 926.2 of the Insurance
Code by the Department of Insurance related to the California
Organized Investment Network program, there shall be future
reporting requirements for insurers doing business in California
to report to the department through the Community Investment
Survey Data Call on community development investments,
community development infrastructure investments, green
investments, and investments with diverse investment managers. end insert

begin delete SECTION 1. end delete

begin insert SEC. 2. end insert   

Section 926.1 of the Insurance Code is amended to
read:

926.1.  

As used in this article, the following terms shall have
the following meanings:

(a) “Area median income” (AMI) means either of the following:

(1) The median family income for the Metropolitan Statistical
Area (MSA), if a person or geography is located in an MSA, or
for the metropolitan division, if a person or geography is located
in an MSA that has been subdivided into metropolitan divisions.

(2) The statewide nonmetropolitan median family income, if a
person or geography is located outside an MSA.

(b) “Community development investment” means an investment
where all or a portion of the investment has as its primary purpose
community development for, or that directly benefits, California
low- to moderate-income individuals, families, or communities.
“Community development investment” includes, but is not limited
to, investments in California in the following:

(1) Affordable housing, including multifamily rental and
ownership housing, for low- to moderate-income individuals or
families.

(2) Community facilities or community services providers
(including providers of education, health, or social services)
directly benefiting low- to moderate-income individuals, families,
or communities.

(3) Economic development that demonstrates benefits, including,
but not limited to, job creation, retention, or improvement, or
provision of needed capital, to low- to moderate-income
individuals, families, or communities, including urban or rural
communities, or businesses or nonprofit community service
organizations that serve these communities.

(4) Activities that revitalize or stabilize low- to moderate-income
communities.

(5) Investments in or through California Organized Investment
Network (COIN)-certified community development financial
institutions (CDFIs) and investments made pursuant to the
requirements of federal, state, or local community development
investment programs or community development investment tax
incentive programs, if these investments directly benefit low- to
moderate-income individuals, families, and communities and are
consistent with this article.

(6) Community development infrastructure investments.

(7) Investments in a commercial property or properties located
in low- to moderate-income geographical areas that are consistent
with this article.

(8) Investments begin delete into end delete begin insert in end insert reservation-based communities.
“Reservation-based” means an area of land managed by a Native
American tribe under the jurisdiction of the federal Bureau of
Indian Affairs, provided that the tribe is named on the most current
list of “Indian Entities Recognized and Eligible to Receive Services
from the Bureau of Indian Affairs,” or successor document, as
published in the Federal Register by the Bureau of Indian Affairs.

(9) Investments begin delete into end delete begin insert in end insert rural areas. “Rural area” means any open
country or any place, town, village, or city which by itself and
taken together with any other places, towns, villages, or cities that
it is part of, or associated with, has either a population not
exceeding 10,000 persons or has a population not exceeding 20,000
persons and is contained within a nonmetropolitan area. “Rural
area” also means any open country, place, town, village, or city
located within a Standard Metropolitan Statistical Area if the
population of that area does not exceed 20,000 persons and that
area is not part of, or associated with, begin insert an end insert urban area and is rural
in character.

(c) “Community development infrastructure” means California
public debt (including all debt issued by the State of California or
a California state or local government agency) where all or a
portion of the debt has as its primary purpose community
development for, or that directly benefits, low- to moderate-income
communities and is consistent with subdivision (b).

begin delete

(d) “Diverse fund managers” means investment management
companies (including corporations, partnerships, LLCs, trust, and
other special purpose vehicles) that are at least 51 percent owned
by women, veterans, minorities, or a combination of persons in
those groups.

end delete begin insert

(d) “Diverse investment managers” means investment
management organizations, including, but not limited to,
corporations, groups and persons within corporations,
partnerships, LLCs, and other special purpose vehicles that are
either located in, or actively make and hold investments in,
California and whose investment managers are comprised of at
least 51 percent women, veterans, or minorities, or a combination
of persons in those groups.

end insert

(e) “Geography” means a census tract delineated by the United
States Bureau of the Census in the most recent decennial census.

(f) “Green investments” means investments that emphasize
renewable energy projects, economic development, and affordable
housing focused on infill sites so as to reduce the degree of
automobile dependency and promote the use and reuse of existing
urbanized lands supplied with infrastructure for the purpose of
accommodating new growth and jobs. “Green investments” also
means investments that can help communities grow through new
capital investment in the maintenance and rehabilitation of existing
infrastructure so that the reuse and reinvention of city centers and
existing transportation corridors and community space, including
projects offering energy efficiency improvements and renewable
energy generation, including, but not limited to, solar and wind
power, water and waste management, sustainable agriculture,
mixed-use development, affordable housing opportunities,
multimodal transportation systems, and transit-oriented
development, can advance economic development, jobs, and
housing.

(g) “High-impact investments” means investments that begin insert are
innovative, responsive to community needs, not routinely provided
by insurers, and end insert provide at least 50 percent social or environmental
benefit to low- to moderate-income individuals, families, or
communities in California.

(h) “Insurer” means an admitted insurer as defined in Section
24, including the State Compensation Insurance Fund, or a
domestic fraternal benefit society as defined in Section 10990.

(i) “Investment” means a lawful equity or debt investment, or
loan, or deposit obligation, or other investment or investment
transaction allowed by the Insurance Code.

(j) “Low-income” means an individual income that is less than
50 percent of the AMI, or a median family income that is less than
50 percent of the AMI in the case of a geographical area.

(k) “MSA” means a metropolitan statistical area as defined by
the Director of the Office of Management and Budget.

(l) “Moderate-income” means an individual income that is at
least 50 percent but less than 80 percent of the AMI, or a median
family income that is at least 50 percent but less than 80 percent
of the AMI in the case of a geographical area.

(m) “Nonmetropolitan area” means any area that is not located
in an MSA.

begin delete SEC. 2. end delete

begin insert SEC. 3. end insert   

Section 12939.2 of the Insurance Code is amended to
read:

12939.2.  

(a) The commissioner may establish and appoint a
California Organized Investment Network Advisory Board.

(b) For purposes of this section, all of the following shall apply:

(1) “Commissioner” means the Insurance Commissioner of this
state.

(2) “Board” means the California Organized Investment
Network Advisory Board.

(3) “Licensed attorney” means an attorney who resides in this
state who has successfully passed the California bar examination
and has been admitted to practice in this state or has otherwise
been licensed to practice law in this state by the State Bar of
California.

(c) The board shall include the commissioner, or his or her
designee, three executives in the insurance investment industry,
and one volunteer from each of the following categories:

(1) A licensed attorney practicing insurance law.

(2) A member of the public, appointed by the Speaker of the
Assembly.

(3) A member of the public, appointed by the Senate Committee
on Rules.

(4) A member of a consumer advocacy group.

(5) An affordable housing practitioner.

(6) A local economic development practitioner.

(7) A member of a financial institution or a community
development financial institution.

(8) A representative with experience seeking investments for
low- to moderate-income or rural communities.

(d) The board shall elect, from among its members, a chair.

(e) The term of each member shall be for two years.

(f) The board shall have all of the following powers and duties:

(1) To advise the California Organized Investment Network, or
any successor thereof, on the best methods to increase the level of
insurance industry capital in safe and sound investments while
providing fair returns to investors and social benefits to
underserved communities.

(2) To meet a minimum of three or more times per year, or as
deemed necessary by the commissioner.

(3) To facilitate contacts among executives at insurance
companies, community-based organizations, and community
development financial institutions.

(4) To recommend programmatic guidelines, but not specific
allocations of the tax credit amount, to the California Organized
Investment Network program.

(g) The members of the board shall not receive compensation
from the state for their services under this section but, when called
to attend a meeting of the board, may be reimbursed for their actual
and necessary expenses incurred in connection with the meeting.

(h) This section shall remain in effect only until January 1, begin delete 2027, end delete
begin insert 2022, end insert and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, begin delete 2027, end delete begin insert 2022, end insert deletes or extends
that date.

begin delete SEC. 3. end delete

begin insert SEC. 4. end insert   

Section 12209 of the Revenue and Taxation Code is
amended to read:

12209.  

(a) For each year beginning on or after January 1, 1999,
and before January 1, begin delete 2027, end delete begin insert 2022, end insert there shall be allowed as a credit
against the amount of tax, as defined in Section 28 of Article XIII
of the California Constitution, an amount equal to 20 percent of
the amount of each qualified investment made by a taxpayer during
the taxable year into a community development financial institution
that is certified by the Department of Insurance, California
Organized Investment Network, or any successor thereof.

(b) For purposes of determining any tax that may be imposed
under Section 685 of the Insurance Code on a taxpayer not
organized under the laws of this state, the amount of the credit
allowed by subdivision (a) shall be treated as a tax paid under
Section 12201 or Section 28 of Article XIII of the California
Constitution.

(c) (1) Notwithstanding any other provision of this part, a credit
shall not be allowed under this section unless the California
Organized Investment Network, or its successor within the
Department of Insurance, certifies that the investment described
in subdivision (a) qualifies for the credit under this section and
certifies the total amount of the credit allocated to the taxpayer
pursuant to this section.

(2) A credit shall not be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of
Insurance, California Organized Investment Network, or any
successor thereof, that the investment is a qualified investment as
defined in paragraph (1) of subdivision (h).

(3) (A) The aggregate amount of qualified investments made
by all taxpayers pursuant to this section, Section 17053.57, and
Section 23657 shall not exceed fifty million dollars ($50,000,000)
for each calendar year. However, if the aggregate amount of
qualified investments made in any calendar year is less than fifty
million dollars ($50,000,000), the difference may be carried over
to the next year, and any succeeding year during which this section
remains in effect, and added to the aggregate amount authorized
for those years.

(B) The total amount of qualified investments certified by the
California Organized Investment Network in any calendar year to
any one community development financial institution together
with its affiliates, as defined in Section 1215 of the Insurance Code,
shall not exceed 30 percent of the annual aggregate amount of
qualified investments certified by the California Organized
Investment Network. If, after October 1, the California Organized
Investment Network has determined that the availability of tax
credits exceed their demand, then a community development
financial institution that has been allocated 30 percent of the annual
aggregate amount of qualified investments shall become eligible
to apply to be certified for any remaining tax credits in that calendar
year.

(C) Each year, 10 percent of the annual aggregate amount of
qualified investments shall be reserved for investment amounts of
less than or equal to two hundred thousand dollars ($200,000). If,
after October 1, there remains an unallocated portion of the amount
reserved for investments of less than or equal to two hundred
thousand dollars ($200,000), then qualified investments in excess
of two hundred thousand dollars ($200,000) may be eligible for
that remaining unallocated portion.

(4) Priority among housing applications shall be given to
applications that support affordable rental housing, housing for
veterans, mortgages for community-based residential programs,
and self-help housing ahead of single-family owned housing.

(5) Priority shall be given to insurance company investors over
all other tax credit investors.

(d) The community development financial institution shall do
all of the following:

(1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a community development financial institution.

(2) (A) Apply to the Department of Insurance, California
Organized Investment Network, or its successor, on behalf of the
taxpayer for certification of the amount of the investment and the
credit amount allocated to the taxpayer, obtain the certification,
and retain a copy of the certification.

(B) Provide in the application a detailed description of the
intended use of the investment funds including, but not limited to,
the following:

(i) All of the programs, projects, and services that would be
funded.

(ii) The percentage of the intended use of the investment funds
that would directly benefit low-to-moderate income households.

(iii) The percentage of the intended use of the investment funds
that would directly benefit rural areas.

(iv) The percentage of the intended use of the investment funds
that is a green investment as defined in Section 926.1 of the
Insurance Code.

(3) (A) Provide in the application required in paragraph (2) the
following information to the Department of Insurance, California
Organized Investment Network, or its successor:

(i) Name of the taxpayer.

(ii) Postal address of the taxpayer, or residential address of the
taxpayer if the taxpayer is an individual.

(iii) Phone number of the taxpayer.

(iv) Email address of the taxpayer.

(v) The taxpayer’s California company identification number
for tax administration purposes.

(B) The information provided in subparagraph (A) shall be used
only for internal purposes by the Department of Insurance,
California Organized Investment Network, or its successor, and
any public disclosure of that information shall be limited to the
name of the taxpayer only.

(4) Provide an annual listing to the State Board of Equalization,
in the form and manner agreed upon by the State Board of
Equalization and the Department of Insurance, California
Organized Investment Network, or its successor, of the names and
taxpayer’s California company identification numbers of any
taxpayer who makes any withdrawal or partial withdrawal of a
qualified investment before the expiration of 60 months from the
date of the qualified investment.

(5) Submit reports to the department, California Organized
Investment Network, or any successor thereof, as required pursuant
to subdivision (a) of Section 12939.1 of the Insurance Code.

(e) The California Organized Investment Network may certify
investments for the credit allowed by this section on or before
January 1, begin delete 2027, end delete begin insert 2022, end insert but not after that date.

(f) (1) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering
the criteria for the evaluation of applications under this section.
The Insurance Commissioner may, from time to time, adopt,
amend, or repeal regulations to implement the provisions of this
section.

(2) The initial adoption of the regulations implementing this
section shall be deemed to be an emergency and necessary in order
to address a situation calling for immediate action to avoid serious
harm to the public peace, health, safety, or general welfare.

(3) Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
any emergency regulation adopted or amended by the Insurance
Commissioner pursuant to this section shall remain in effect until
amended or repealed by the department.

(g) The Department of Insurance, California Organized
Investment Network, or any successor thereof, shall do all of the
following:

(1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
community development financial institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized
Investment Network, or any successor thereof, that it meets the
specific requirements to be a community development financial
institution for this state program as defined in paragraph (2) of
subdivision (h). The certificate may be issued for a specified period
of time, and may include reasonable conditions to effectuate the
intent of this section. The Insurance Commissioner may suspend
or revoke a certification, after affording the institution notice and
the opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.

(2) Accept and evaluate applications for certification from any
community development financial institution on behalf of the
taxpayer and issue certificates to taxpayers in an aggregate amount
that shall not exceed the limit specified in subdivision (c), with
highest priority granted to those applications where the intended
use of the investments has the greatest aggregate benefit for
low-to-moderate income areas or households or rural areas or
households. The certificate shall include the amount eligible to be
made as an investment that qualifies for the credit and the total
amount of the credit to which the taxpayer is entitled for the year.
Applications for tax credits shall be accepted and evaluated
throughout the year. The Insurance Commissioner shall establish
tax credit issuance cycles throughout the year as necessary in order
to issue tax credit certificates to those applications granted the
highest priority.

(3) Provide an annual listing to the State Board of Equalization,
in the form or manner agreed upon by the State Board of
Equalization and the Department of Insurance, California
Organized Investment Network, or its successor, of the taxpayers
who were issued certificates, their respective National Association
of Insurance Commissioners company number and employer’s tax
identification number, the amount of the qualified investment made
by each taxpayer, and the total amount of qualified investments.

(4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.

(h) For purposes of this section:

(1) “Qualified investment” means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equity-like debt instrument that conforms to the specifications for
these instruments as prescribed by the United States Department
of the Treasury, Community Development Financial Institutions
Fund, or its successor, or, in the absence of that prescription, as
defined by the Insurance Commissioner. The investment must be
equal to or greater than fifty thousand dollars ($50,000) and made
for a minimum duration of 60 months. During that 60-month
period, the community development financial institution shall have
full use and control of the proceeds of the entire amount of the
investment as well as any earnings on the investment for its
community development purposes. The entire amount of the
investment shall be received by the community development
financial institution before the application for the tax credit is
submitted. The community development financial institution shall
use the proceeds of the investment for a purpose that is consistent
with its community development mission and for the benefit of
economically disadvantaged communities and low-income people
in California.

(2) “Community development financial institution” means a
private financial institution located in this state that is certified by
the Department of Insurance, California Organized Investment
Network, or its successor, that, consistent with the legislative
findings, declarations, and intent set forth in Section 12939 of the
Insurance Code, has community development as its primary
mission, and that lends in urban, rural, or reservation-based
communities in this state. A community development financial
institution may include a community development bank, a
community development loan fund, a community development
credit union, a microenterprise fund, a community development
corporation-based lender, or a community development venture
fund.

(i) If a qualified investment is begin insert reduced or end insert withdrawn before the
end of the 60th month and not reinvested in another community
development financial institution within 60 days, there shall be
added to the “tax,” as defined in Section 28 of Article XIII of the
California Constitution, for the year in which the withdrawal
occurs, the entire amount of any credit previously allowed under
this section.

(j) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” for
the next four years, or until the credit has been exhausted,
whichever occurs first.

(k) The State Board of Equalization shall, as requested by the
Department of Insurance, California Organized Investment
Network, or its successor, advise and assist in the administration
of this section.

(l) On or before June 30, 2016, the Legislative Analyst’s Office
shall submit a report to the Legislature, in compliance with Section
9795 of the Government Code, on the effects of the tax credits
allowed under this section, Section 17053.57, and Section 23657,
with a focus on employment in low-to-moderate income and rural
areas, and on the benefits of these tax credits to low-to-moderate
income and rural persons.

(m) This section shall remain in effect only until December 1,
begin delete 2027, end delete begin insert 2022, end insert and as of that date is repealed.

begin delete SEC. 4. end delete

begin insert SEC. 5. end insert   

Section 17053.57 of the Revenue and Taxation Code
is amended to read:

17053.57.  

(a) For each taxable year beginning on or after
January 1, 1997, and before January 1, begin delete 2027, end delete begin insert 2022, end insert there shall be
allowed as a credit against the amount of “net tax,” as defined in
Section 17039, an amount equal to 20 percent of the amount of
each qualified investment made by a taxpayer during the taxable
year into a community development financial institution that is
certified by the Department of Insurance, California Organized
Investment Network, or any successor thereof.

(b) (1) Notwithstanding any other provision of this part, a credit
shall not be allowed under this section unless the California
Organized Investment Network, or its successor within the
Department of Insurance, certifies that the investment described
in subdivision (a) qualifies for the credit under this section and
certifies the total amount of the credit allocated to the taxpayer
pursuant to this section.

(2) A credit shall not be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of
Insurance, California Organized Investment Network, or any
successor thereof, that the investment is a qualified investment, as
defined in paragraph (1) of subdivision (g).

(3) (A) The aggregate amount of qualified investments made
by all taxpayers pursuant to this section, Section 12209, and Section
23657 shall not exceed fifty million dollars ($50,000,000) for each
calendar year. However, if the aggregate amount of qualified
investments made in any calendar year is less than fifty million
dollars ($50,000,000), the difference may be carried over to the
next year, and any succeeding year during which this section
remains in effect, and added to the aggregate amount authorized
for those years.

(B) The total amount of qualified investments certified by the
California Organized Investment Network in any calendar year to
any one community development financial institution together
with its affiliates, as defined in Section 1215 of the Insurance Code,
shall not exceed 30 percent of the annual aggregate amount of
qualified investments certified by the California Organized
Investment Network. If, after October 1, the California Organized
Investment Network has determined that the availability of tax
credits exceed their demand, then a community development
financial institution that has been allocated 30 percent of the annual
aggregate amount of qualified investments shall become eligible
to apply to be certified for any remaining tax credits in that calendar
year.

(C) Each year, 10 percent of the annual aggregate amount of
qualified investments shall be reserved for investment amounts of
less than or equal to two hundred thousand dollars ($200,000). If,
after October 1, there remains an unallocated portion of the amount
reserved for investments of less than or equal to two hundred
thousand dollars ($200,000), then qualified investments in excess
of two hundred thousand dollars ($200,000) may be eligible for
that remaining unallocated portion.

(4) Priority among housing applications shall be given to
applications that support affordable rental housing, housing for
veterans, mortgages for community-based residential programs,
and self-help housing ahead of single-family owned housing.

(5) Priority shall be given to insurance company investors over
all other tax credit investors.

(c) The community development financial institution shall do
all of the following:

(1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a community development financial institution.

(2) (A) Apply to the Department of Insurance, California
Organized Investment Network, or its successor, on behalf of the
taxpayer, for certification of the amount of the investment and the
credit amount allocated to the taxpayer, obtain the certification,
and retain a copy of the certification.

(B) Provide in the application a detailed description of the
intended use of the investment funds including, but not limited to,
the following:

(i) All of the programs, projects, and services that would be
funded.

(ii) The percentage of the intended use of the investment funds
that would directly benefit low-to-moderate income households.

(iii) The percentage of the intended use of the investment funds
that would directly benefit rural areas.

(iv) The percentage of the intended use of the investment funds
that is a green investment as defined in Section 926.1 of the
Insurance Code.

(3) (A) Provide in the application required in paragraph (2) the
following information to the Department of Insurance, California
Organized Investment Network, or its successor:

(i) Name of the taxpayer.

(ii) Postal address of the taxpayer, or residential address of the
taxpayer if the taxpayer is an individual.

(iii) Phone number of the taxpayer.

(iv) Email address of the taxpayer.

(v) The taxpayer’s identification number, or in the case of a
partnership, the taxpayer identification numbers of all the partners
for tax administration purposes.

(B) The information provided in subparagraph (A) shall be used
only for internal purposes by the Department of Insurance,
California Organized Investment Network, or its successor, and
any network or its successor shall limit all public disclosure of that
information to the name of the taxpayer only.

(4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment
Network, or its successor, of the names and taxpayer identification
numbers of any taxpayer who makes any withdrawal or partial
withdrawal of a qualified investment before the expiration of 60
months from the date of the qualified investment.

(5) Submit reports to the Department of Insurance, California
Organized Investment Network, or any successor thereof, as
required pursuant to subdivision (a) of Section 12939.1 of the
Insurance Code.

(d) (1) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering
the criteria for the evaluation of applications under this section.
The Insurance Commissioner may, from time to time, adopt,
amend, or repeal regulations to implement the provisions of this
section.

(2) The initial adoption of the regulations implementing this
section shall be deemed to be an emergency and necessary in order
to address a situation calling for immediate action to avoid serious
harm to the public peace, health, safety, or general welfare.

(3) Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
any emergency regulation adopted or amended by the Insurance
Commissioner pursuant to this section shall remain in effect until
amended or repealed by the department.

(e) The California Organized Investment Network may certify
investments for the credit allowed by this section on or before
January 1, begin delete 2027, end delete begin insert 2022, end insert but not after that date.

(f) The Department of Insurance, California Organized
Investment Network, or any successor thereof, shall do all of the
following:

(1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
community development financial institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized
Investment Network, or any successor thereof, that it meets the
specific requirements to be a community development financial
institution for this state program as defined in paragraph (2) of
subdivision (g). The certificate may be issued for a specified period
of time, and may include reasonable conditions to effectuate the
intent of this section. The Insurance Commissioner may suspend
or revoke a certification, after affording the institution notice and
the opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.

(2) Accept and evaluate applications for certification from a
community development financial institution on behalf of the
taxpayer and issue certificates to taxpayers in an aggregate amount
that shall not exceed the limit specified in subdivision (b), with
highest priority granted to those applications where the intended
use of the investments has the greatest aggregate benefit for
low-to-moderate income areas or households or rural areas or
households. The certificate shall include the amount eligible to be
made as an investment that qualifies for the credit and the total
amount of the credit to which the taxpayer is entitled for the taxable
year. Applications for tax credits shall be accepted and evaluated
throughout the year. The Insurance Commissioner shall establish
tax credit issuance cycles throughout the year as necessary in order
to issue tax credit certificates to those applications granted the
highest priority.

(3) Provide an annual listing to the Franchise Tax Board, in the
form or manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment
Network, or its successor, of the taxpayers who were issued
certificates, their respective tax identification numbers, the amount
of the qualified investment made by each taxpayer, and the total
amount of qualified investments.

(4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.

(g) For purposes of this section:

(1) “Qualified investment” means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equity-like debt instrument that conforms to the specifications for
these instruments as prescribed by the United States Department
of the Treasury, Community Development Financial Institutions
Fund, or its successor, or, in the absence of that prescription, as
defined by the Insurance Commissioner. The investment must be
equal to or greater than fifty thousand dollars ($50,000) and made
for a minimum duration of 60 months. During that 60-month
period, the community development financial institution shall have
full use and control of the proceeds of the entire amount of the
investment as well as any earnings on the investment for its
community development purposes. The entire amount of the
investment shall be received by the community development
financial institution before the application for the tax credit is
submitted. The community development financial institution shall
use the proceeds of the investment for a purpose that is consistent
with its community development mission and for the benefit of
economically disadvantaged communities and low-income people
in California.

(2) “Community development financial institution” means a
private financial institution located in this state that is certified by
the Department of Insurance, California Organized Investment
Network, or its successor, that, consistent with the legislative
findings, declarations, and intent set forth in Section 12939 of the
Insurance Code, has community development as its primary
mission, and that lends in urban, rural, or reservation-based
communities in this state. A community development financial
institution may include a community development bank, a
community development loan fund, a community development
credit union, a microenterprise fund, a community development
corporation-based lender, or a community development venture
fund.

(h) If a qualified investment is begin insert reduced or end insert withdrawn before
the end of the 60th month and not reinvested in another community
development financial institution within 60 days, there shall be
added to the “net tax,” as defined in Section 17039, for the taxable
year in which the withdrawal occurs, the entire amount of any
credit previously allowed under this section.

(i) In the case where the credit allowed by this section exceeds
the “net tax,” the excess may be carried over to reduce the “net
tax” for the next four taxable years, or until the credit has been
exhausted, whichever occurs first.

(j) The Franchise Tax Board shall, as requested by the
Department of Insurance, California Organized Investment
Network, or its successor, advise and assist in the administration
of this section.

(k) On or before June 30, 2016, the Legislative Analyst’s Office
shall submit a report to the Legislature, in compliance with Section
9795 of the Government Code, on the effects of the tax credits
allowed under this section, Section 12209, and Section 23657,
with a focus on employment in low-to-moderate income and rural
areas, and on the benefits of these tax credits to low-to-moderate
income and rural persons.

(l) This section shall remain in effect only until December 1,
begin delete 2027, end delete begin insert 2022, end insert and as of that date is repealed.

begin delete SEC. 5. end delete

begin insert SEC. 6. end insert   

Section 23657 of the Revenue and Taxation Code is
amended to read:

23657.  

(a) For each taxable year beginning on or after January
1, 1997, and before January 1, begin delete 2027, end delete begin insert 2022, end insert there shall be allowed
as a credit against the amount of “tax,” as defined in Section 23036,
an amount equal to 20 percent of the amount of each qualified
investment made by a taxpayer during the taxable year into a
community development financial institution that is certified by
the Department of Insurance, California Organized Investment
Network, or any successor thereof.

(b) (1) Notwithstanding any other provision of this part, a credit
shall not be allowed under this section unless the California
Organized Investment Network, or its successor within the
Department of Insurance, certifies that the investment described
in subdivision (a) qualifies for the credit under this section and
certifies the total amount of the credit allocated to the taxpayer
pursuant to this section.

(2) A credit shall not be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of
Insurance, California Organized Investment Network, or any
successor thereof, that the investment is a qualified investment, as
defined in paragraph (1) of subdivision (g).

(3) (A) The aggregate amount of qualified investments made
by all taxpayers pursuant to this section, Section 12209, and Section
17053.57 shall not exceed fifty million dollars ($50,000,000) for
each calendar year. However, if the aggregate amount of qualified
investments made in any calendar year is less than fifty million
dollars ($50,000,000), the difference may be carried over to the
next year, and any succeeding year during which this section
remains in effect, and added to the aggregate amount authorized
for those years.

(B) The total amount of qualified investments certified by the
California Organized Investment Network in any calendar year to
any one community development financial institution together
with its affiliates, as defined in Section 1215 of the Insurance Code,
shall not exceed 30 percent of the annual aggregate amount of
qualified investments certified by the California Organized
Investment Network. If, after October 1, the California Organized
Investment Network has determined that the availability of tax
credits exceed their demand, then a community development
financial institution that has been allocated 30 percent of the annual
aggregate amount of qualified investments shall become eligible
to apply to be certified for any remaining tax credits in that calendar
year.

(C) Each year, 10 percent of the annual aggregate amount of
qualified investments shall be reserved for investment amounts of
less than or equal to two hundred thousand dollars ($200,000). If,
after October 1, there remains an unallocated portion of the amount
reserved for investments of less than or equal to two hundred
thousand dollars ($200,000), then qualified investments in excess
of two hundred thousand dollars ($200,000) may be eligible for
that remaining unallocated portion.

(4) Priority among housing applications shall be given to
applications that support affordable rental housing, housing for
veterans, mortgages for community-based residential programs,
and self-help housing ahead of single-family owned housing.

(5) Priority shall be given to insurance company investors over
all other tax credit investors.

(c) The community development financial institution shall do
all of the following:

(1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a community development financial institution.

(2) (A) Apply to the Department of Insurance, California
Organized Investment Network, or its successor, on behalf of the
taxpayer, for certification of the amount of the investment and the
credit amount allocated to the taxpayer, obtain the certification,
and retain a copy of the certification.

(B) Provide in the application a detailed description of the
intended use of the investment funds including, but not limited to,
the following:

(i) All of the programs, projects, and services that would be
funded.

(ii) The percentage of the intended use of the investment funds
that would directly benefit low-to-moderate income households.

(iii) The percentage of the intended use of the investment funds
that would directly benefit rural areas.

(iv) The percentage of the intended use of the investment funds
that is a green investment as defined in Section 926.1 of the
Insurance Code.

(3) (A) Provide in the application required in paragraph (2) the
following information to the Department of Insurance, California
Organized Investment Network, or its successor:

(i) Name of the taxpayer.

(ii) Postal address of the taxpayer, or residential address of the
taxpayer if the taxpayer is an individual.

(iii) Phone number of the taxpayer.

(iv) Email address of the taxpayer.

(v) The taxpayer’s California company identification number
for tax administration purposes, or in the case of an “S”
corporation, the taxpayer identification numbers of all the
shareholders for tax administration purposes.

(B) The information provided in subparagraph (A) shall be used
only for internal purposes by the Department of Insurance,
California Organized Investment Network, or its successor, and
any public disclosure of that information shall be limited to the
name of the taxpayer only.

(4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment
Network, or its successor, of the names and taxpayer identification
numbers of any taxpayer who makes any withdrawal or partial
withdrawal of a qualified investment before the expiration of 60
months from the date of the qualified investment.

(5) Submit reports to the department, California Organized
Investment Network, or any successor thereof, as required pursuant
to subdivision (a) of Section 12939.1 of the Insurance Code.

(d) The California Organized Investment Network may certify
investments for the credit allowed by this section on or before
January 1, begin delete 2027, end delete begin insert 2022, end insert but not after that date.

(e) (1) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering
the criteria for the evaluation of applications under this section.
The Insurance Commissioner may, from time to time, adopt,
amend, or repeal regulations to implement the provisions of this
section.

(2) The initial adoption of the regulations implementing this
section shall be deemed to be an emergency and necessary in order
to address a situation calling for immediate action to avoid serious
harm to the public peace, health, safety, or general welfare.

(3) Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
any emergency regulation adopted or amended by the Insurance
Commissioner pursuant to this section shall remain in effect until
amended or repealed by the department.

(f) The Department of Insurance, California Organized
Investment Network, or any successor thereof, shall do all of the
following:

(1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
community development financial institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized
Investment Network, or any successor thereof, that it meets the
specific requirements to be a community development financial
institution for this state program as defined in paragraph (2) of
subdivision (g). The certificate may be issued for a specified period
of time, and may include reasonable conditions to effectuate the
intent of this section. The Insurance Commissioner may suspend
or revoke a certification, after affording the institution notice and
the opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.

(2) Accept and evaluate applications for certification from any
community development financial institution on behalf of the
taxpayer and issue certificates to taxpayers in an aggregate amount
that shall not exceed the limit specified in subdivision (b), with
highest priority granted to those applications where the intended
use of the investments has the greatest aggregate benefit for
low-to-moderate income areas or households or rural areas or
households. The certificate shall include the amount eligible to be
made as an investment that qualifies for the credit and the total
amount of the credit to which the taxpayer is entitled for the taxable
year. Applications for tax credits shall be accepted and evaluated
throughout the year. The Insurance Commissioner shall establish
tax credit issuance cycles throughout the year as necessary in order
to issue tax credit certificates to those applications granted the
highest priority.

(3) Provide an annual listing to the Franchise Tax Board, in the
form or manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment
Network, or its successor, of the taxpayers who were issued
certificates, their respective tax identification numbers, the amount
of the qualified investment made by each taxpayer, and the total
amount of qualified investments.

(4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.

(g) For purposes of this section:

(1) “Qualified investment” means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equity-like debt instrument that conforms to the specifications for
these instruments as prescribed by the United States Department
of the Treasury, Community Development Financial Institutions
Fund, or its successor, or, in the absence of that prescription, as
defined by the Insurance Commissioner. The investment must be
equal to or greater than fifty thousand dollars ($50,000) and made
for a minimum duration of 60 months. During that 60-month
period, the community development financial institution shall have
full use and control of the proceeds of the entire amount of the
investment as well as any earnings on the investment for its
community development purposes. The entire amount of the
investment shall be received by the community development
financial institution before the application for the tax credit is
submitted. The community development financial institution shall
use the proceeds of the investment for a purpose that is consistent
with its community development mission and for the benefit of
economically disadvantaged communities and low-income people
in California.

(2) “Community development financial institution” means a
private financial institution located in this state that is certified by
the Department of Insurance, California Organized Investment
Network, or its successor, that, consistent with the legislative
findings, declarations, and intent set forth in Section 12939 of the
Insurance Code, has community development as its primary
mission, and that lends in urban, rural, or reservation-based
communities in this state. A community development financial
institution may include a community development bank, a
community development loan fund, a community development
credit union, a microenterprise fund, a community development
corporation-based lender, or a community development venture
fund.

(h) If a qualified investment is begin insert reduced or end insert withdrawn before
the end of the 60th month and not reinvested in another community
development financial institution within 60 days, there shall be
added to the “tax,” as defined in Section 23036, for the taxable
year in which the withdrawal occurs, the entire amount of any
credit previously allowed under this section.

(i) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” for
the next four taxable years, or until the credit has been exhausted,
whichever occurs first.

(j) The Franchise Tax Board shall, as requested by the
Department of Insurance, California Organized Investment
Network, or its successor, advise and assist in the administration
of this section.

(k) On or before June 30, 2016, the Legislative Analyst’s Office
shall submit a report to the Legislature, in compliance with Section
9795 of the Government Code, on the effects of the tax credits
allowed under this section, Section 12209, and Section 17053.57,
with a focus on employment in low-to-moderate income and rural
areas, and on the benefits of these tax credits to low-to-moderate
income and rural persons.

(l) This section shall remain in effect only until December begin delete 1,
2027, end delete begin insert 1 2022, end insert and as of that date is repealed.