BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: AB 2728 Hearing Date: June 22,
2016
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|Author: |Atkins |
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|Version: |April 25, 2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Hugh Slayden |
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Subject: Insurance: community development investments
SUMMARY Extends the sunset date on the California Organized
Investment Network (COIN) program within the California
Department of Insurance (CDI) and the CDFI tax credit, adds
categories of COIN qualified investments, and declares that that
Legislature intends that future data calls will be established
once the current reporting requirement has been fulfilled.
DIGEST
Existing law
1. Establishes COIN within CDI, with the purpose of encouraging
insurers to invest in community development investments and
facilitating those investments.
2. Defines "community development investments" as investments
where all or part of the investment has as its primary
purpose community development for, or that directly
benefits, California low or moderate income (LMI)
individuals, families, or communities including investments
in affordable housing, community service providers, certain
economic developments, and activities that revitalize or
stabilize LMI communities.
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3. Defines various subcategories of community development
investments that include investments made in affordable
housing, activities that revitalize or stabilize LMI
communities, and investments in a community development
financial institution (CDFI).
4. Establishes an Advisory Board, until January 1, 2020, to make
recommendations on how the program should operate; facilitate
contacts among insurance company executives, community-based
organizations, and community development financial institutions;
and make recommendations about the program.
5. Requires any insurer that writes at least $100 million in
California premium to report to COIN program by July 1,
2016, various categories of investments over the last three
years ("data call"), including community development
investments and "green investments," as defined.
6. Requires CDI to report on its website, by December 31,
2016, aggregate data relating to specific insurer
investments; insurers that make high-impact investments; and
actions taken by COIN to analyze the data in order to create
and identify potential investments opportunities.
7. Sunsets the data call and reporting provisions on January
1, 2020.
8. Provides for a tax credit, until December 1, 2017, of an amount
equal to 20 percent of the amount of each qualified investment
into a CDFI certified by CDI up to $50 million.
9. Provides that COIN allocates the CDFI credits.
10. Requires the Legislative Analyst's Office to submit a
report to the Legislature on the effects of the CDFI tax
credit by June 30, 2016.
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This bill
1. Adds to the list of defined community development
investments in certain qualified investments in rural areas,
as defined, and reservation-based communities, that is areas
managed by a Native American tribe where the tribe is
eligible to receive services from the Bureau of Indian
Affairs.
2. Defines "diverse investment managers" as investment
management organizations whose investment managers are
comprised of at least 51 percent women, veterans, or
minorities, or combination of person in those groups (does
not include any reference to the impact those investments
may have on LMI communities).
3. Revises the definitions of "high-impact" and "green"
investments.
4. Extends the sunset date on the advisory board to January 1,
2022.
5. Declares the Legislature's intent to extend the data call
once CDI complies with an existing requirement to provide
COIN-related information on its Web site.
6. Extends the sunset date on the community development
financial institution (CDFI) tax credit to January 1, 2022.
7. Grants priority to insurance company investors over all
other tax credit investors.
COMMENTS
1. Purpose of the bill According to the author, COIN is a
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collaborative effort between CDI, the insurance industry,
community affordable housing and economic development
organizations, and community advocates. COIN was
established in 1996 at the request of the insurance industry
as an alternative to state legislation that would have
required insurance companies to invest in underserved
communities, similar to the federal Community Reinvestment
Act that applies to the banking industry. This voluntary
program facilitates insurance industry investments that
benefit California's environment and its LMI and rural
communities. The program serves as a liaison between
insurers that are seeking investment opportunities and the
community organizations that are seeking investment capital
for projects.
Each year, CDI may award up to $10 million in tax credits
annually to leverage up to $50 million in community
development investments. Under the program, investors
receive a tax credit worth up to 20% of their investment in
one of the COIN Certified CDFIs and can apply the credit to
the state personal income tax, corporation tax or insurer
premium tax.
CDFIs are mission-driven community organizations, separate
from government control, dedicated to providing financial
products and services to low-income communities underserved
by traditional financial markets. All CDFIs that are
eligible to participate in the COIN CDFI Tax Credit Program
must be certified by COIN.
The COIN tax credit currently sunsets on January 1, 2017. If
the COIN tax credit is not extended, low and moderate income
communities in California will lose the support of an
effective program that incentivizes critical investments in
their communities.
2. Background The COIN Program was created in 1996 as a
public/private partnership between CDI, the insurance
industry, state government leaders, and community
development organizations. COIN's goal is to help address
unmet capital needs that support investments in economic
development and affordable housing in low-income urban and
rural communities throughout California. The program serves
as a liaison between insurers that are seeking investment
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opportunities and the community organizations that are
seeking investment capital for projects. Investments are
submitted, scrutinized by COIN, and reported on the CDI
website. Insurers may identify worthy investments on their
own and submit them for certification or may select
investments sourced or structured by COIN.
Tax Credit. Existing law sunsets the tax credit on December
1, 2017, and sunsets the program on January 1, 2020. This
bill would sunset both the tax credit and the program
elements in the same calendar year; the program would sunset
on January 1, 2022, and the tax credit on December 1, 2022.
This bill is double-referred to the Committee on Governance
and Finance that will consider the extension of the tax
credit.
COIN Program. The bill extends the sunset date on the
COIN's advisory board. The board is one way of matching the
industry to the community building a network among insurance
company executives, community-based organizations, and
community development financial institutions in order to
facilitate interest in COIN targeted investments.
This bill adds specific definitions intended to benefit
Native American and rural communities to categories of
community development investment designed to benefit LMI
communities. This bill also adds investments made with
diverse investment fund managers as another category of
COIN-qualified investments (although they are not
necessarily qualified for the tax credit); similar to green
investments, this category of investment is not targeted at
LMIs.
Data Calls. In order to track insurer COIN investments,
insurers have been required to report data on their
investments. CDI posts processes the data and posts the
results on its website. However, the usefulness of data for
the purpose of improving the program is still in question.
AB 2128 (Gordon, 2014) extended the sunset date for the COIN
program from January 1, 2015, to January 1, 2020. However,
CDI's June 2014 report did little to justify further data
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calls. The data was reported without much analysis and was
not helpful in determining how the data was used to improve
the program. CDI withdrew the first version of that report
and posted a revised report in September. An agreement was
reached and AB 2128 was amended to limit the data call to
only larger insurers and specifically required COIN to
report on ways it used the data to improve the program.
Under AB 2128, insurers must submit the data by July 1,
2016, and CDI must post the information by December 31,
2016. This timeline gave the committees in both houses
plenty of opportunity to examine the data and other
information and consider a proposal to extend the data calls
during the normal hearing process.
In 2015, CDI and the advisory board moved the data call
deadline to March 2016. That data has been submitted and
CDI is working to publish the results in July. At that
time, the author intends to review the reported information
and possibly amend the bill to include one or more data
calls as provided in the intent language of the bill.
Several insurance industry stakeholders have expressed
support for the bill in its current form, but have not taken
a position on the bill if the author adds one or more data
calls.
3. Support CDI supports extending the sunset date on the COIN
advisory board because the board provides focus and guidance
to COIN, ensuring that its policies and procedures are
keeping with its mission statement.
The Pacific Association of Domestic Insurance Companies and
the National Association of Mutual Insurance Companies
supports the bill because it is consistent with the laudable
public policy objective of promoting insurers to deposit
funds into CDFIs and would ensure that insurance company
investors receive priority for the allocation of the CDFI
tax credit.
United Native Housing Development Corporation notes that
legislation like AB 2728 will eliminate regulatory barriers
which will allow direly needed affordable housing services
be extended to disadvantaged communities that have
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historically been underserved.
Many of the supporters of this bill, explain that since
1997, $57 million in state tax credits have generated more
than $285 million in investments and that the economic
impact of this program is exponentially greater than the sum
of the deposits.
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4. Prior and Related Legislation
AB 2647 (E. Garcia, 2016) would have expanded COIN tax
credits from $50 million to $120 million and extended the
sunset date to January 1, 2027. Held by the Assembly
Committee on Appropriations.
Chapter 384, Statutes of 2014 (AB 2128, Gordon) reauthorized
and revised provisions requiring insurers to submit
information to COIN regarding their community investment
activity.
Chapter 608, Statutes 2013 (AB 32, J. Perez), increased the
COIN tax credit from $10 million to $50 million.
Chapter 436, Statutes 2011 (AB 624, J. Perez) authorized the
establishment of the COIN Advisory Board.
Chapter 418, Statutes 2010 (AB 1011, Jones) expanded
definitions to include green investments and added the green
investment posting requirement.
Chapter 340, Statutes 2010 (AB 41, Solorio) established the
requirement on insurers to submit a policy statement on
community development investments. Also, extended the
sunset date on the requirement that insurers submit
information to the CDI regarding their community investment
activities.
AB 1910 (Coto, 2008) would have established the requirement
on insurers to submit a policy statement on community
development investments. Vetoed.
Chapter 456, Statutes 2006 (AB 925, Ridley-Thomas) required
insurers to submit information to CDI regarding their
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community investment activities.
POSITIONS
Support
California Department of Insurance (sponsor)
3CORE
Association of California Life and Health Insurance Companies
Bankers Small Business CDC of California
Burbank Housing Development Corporation
California Apartment Association
CDC Small Business Finance
California LISC
Century Housing
Clearinghouse Community Development Financial Institution
CSAA Insurance Group
Enterprise Community Investments
First General Bank
Genesis LA Economic Growth Corporation
Housing Trust Silicon Valley
Mercy Loan Fund
National Association of Mutual Insurance Companies
Neighborhood Housing Services of the Inland Empire
NeighborWorks HomeOwnership Center Sacramento
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Prudential Financial, Inc.
Redwood Valley Little River Bank of Pomo Indians
Roxborough, Pomerance, Nye & Adreani, LLP
Rural Community Assistance Corporation
Small Business Investor Alliance
United Native Housing Development Corporation
VEDC
WNC & Associates
Oppose
None received
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