BILL ANALYSIS                                                                                                                                                                                                    Ó



           SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 2728 (Atkins) - Insurance:  community development investments
          
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          |Version: April 25, 2016         |Policy Vote: INS. 8 - 0, GOV. & |
          |                                |          F. 7 - 0              |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 1, 2016    |Consultant: Debra Cooper        |
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          This bill meets the criteria for referral to the Suspense File.


          Bill  
          Summary:  AB 2728 would extend the sunset date for the  
          California Organized Investment Network (COIN) program and the  
          California Developmental Financial Institution (CDFI) tax  
          credit.


          Fiscal  
          Impact:  
           Ongoing costs to the Department of Insurance (CDI) of $630,000  
            per year starting in fiscal year 2017-18 to retain five  
            limited term positions associated with the tax credit program  
            that will expire on June 30, 2017. (Insurance Fund)


           The Franchise Tax Board estimates that the tax credit  
            extension will result in an annual revenue loss of $0.6  
            million in fiscal year 2016-17, $1.9 million in fiscal year  
            2017-18, and $3.2 million in fiscal year 2018-19. These  







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            estimates do not include the revenue impact of tax credits  
            allowed against the insurance gross premiums tax.


          Background:  COIN, within CDI, is a "collaborative effort between the  
          California Department of Insurance, 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." This program  
          serves as a liaison between insurers that are seeking investment  
          opportunities and community organizations that are seeking  
          investment capital for projects. 
          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." 


          Each year, CDI may allocate up to $10 million in tax credits  
          annually to leverage up to $50 million in community development  
          investments. Under the CDFI tax credit program, investors  
          receive a tax credit worth up to 20% of their investment in one  
          of the COIN certified CDFIs in the form of non-interest bearing  
          deposits, loans, or equity investments of at least $50,000 held  
          for at least 60 months. Investors can claim a credit against the  
          state personal income tax, corporation tax, or insurance gross  
          premium tax. Existing law sunsets the tax credit on December 1,  
          2017 and sunsets the program on January 1, 2020.


          Existing law requires insurers to report data on the investments  
          in order to track insurer COIN investments. In 2015, CDI and the  
          COIN advisory board moved the data call deadline to March 2016.  
          Those data have been submitted and CDI is currently working to  
          publish the results. 




          Proposed Law:  
            This bill would:
           Add definitions for qualified COIN investments in Native  








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            American and rural communities, investments made by diverse  
            investment managers, and make technical and clarifying changes  
            to definitions of other COIN-qualified investments.
           Extend the sunset date on the COIN Advisory Board and the CDFI  
            tax credit program until January 1, 2022.
           Prioritize insurance company investors in the allocation of  
            the tax credit.
           State the Legislature's intent to extend the sunset date on  
            the Community Investment Survey Data Call upon CDI complying  
            with an existing requirement to provide COIN-related  
            information on its Internet Web site.




          Related  
          Legislation:  
          AB 2647 (E. Garcia, 2016) would have expanded the COIN tax  
          credit from $50 million to $120 million and extended the sunset  
          date to January 1, 2027. This bill was held in the Assembly  
          Committee on Appropriations.


          AB 32 (Perez, Chapter 608, Statutes of 2013) increased the COIN  
          tax credit from $10 million to $50 million.


          AB 624 (Perez, Chapter 436, Statutes of 2011) authorized the  
          establishment of the COIN Advisory Board. 




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