BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 2728 (Atkins) - Insurance: community development investments ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 25, 2016 |Policy Vote: INS. 8 - 0, GOV. & | | | F. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Debra Cooper | | | | ----------------------------------------------------------------- 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 AB 2728 (Atkins) Page 1 of ? 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 AB 2728 (Atkins) Page 2 of ? 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. -- END --