BILL NUMBER: AB 2728 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 25, 2016
PASSED THE ASSEMBLY AUGUST 30, 2016
AMENDED IN SENATE AUGUST 19, 2016
AMENDED IN ASSEMBLY APRIL 25, 2016
INTRODUCED BY Assembly Member Atkins
FEBRUARY 19, 2016
An act to amend Section 926.1 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, 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 high impact 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 in reservation-based communities and
investments in 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 is
innovative, responsive to community needs, not routinely provided by
an insurer, and provides at least 50% social or environmental benefit
to low-to-moderate income individuals, families, or communities in
the state. The bill would also define "diverse 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.
(2) 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 in 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. 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.
This bill would extend the provisions relating to the
authorization of the credit and certification by the California
Organized Investment Network until January 1, 2018. 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 and would instead
require that the provision regarding withdrawal, without
reinvestment, of a qualified investment also apply when a qualified
investment is reduced.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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.
SEC. 2. 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 in 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 in 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, an 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).
(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.
(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 are
innovative, responsive to community needs, not routinely provided by
insurers, and 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.
SEC. 3. 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, 2018, 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, 2018, 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 reduced or 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,
2018, and as of that date is repealed.
SEC. 4. 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, 2018, 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, 2018, 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 reduced or 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, 2018, and as of that date is repealed.
SEC. 5. 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, 2018, 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, 2018, 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 reduced or 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 1, 2018, and as of that date is repealed.