BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2728|
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THIRD READING
Bill No: AB 2728
Author: Atkins (D)
Amended: 4/25/16 in Assembly
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez,
Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/29/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 80-0, 5/31/16 - See last page for vote
SUBJECT: Insurance: community development investments
SOURCE: California Department of Insurance
DIGEST: This bill extends the sunset date on the advisory board
to the California Organized Investment Network (COIN) program
within the California Department of Insurance (CDI) and the
Community Development Financial Institution (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.
AB 2728
Page 2
ANALYSIS:
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, 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.
3) Establishes an advisory board, until January 1, 2020, to
facilitate contacts among insurance company executives,
community-based organizations, and community development
financial institutions, and to make recommendations about the
program.
4) 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.
5) Requires CDI to report on its Web site, by December 31,
2016, aggregate data from the data call, specific insurers
that make high-impact investments, and actions taken by COIN
to analyze the data in order to create and identify
potential investments opportunities.
AB 2728
Page 3
6) Sunsets the data call and reporting provisions on January
1, 2020.
7) 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 total.
8) Provides that COIN allocates the CDFI credits.
9) 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.
This bill:
1) Adds investments in reservation-based communities and rural
area investments onto the list of community development
investments for purposes potential future data calls.
2) Defines, for the purposes of potential future data calls,
"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.
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 establish future data
calls once CDI complies with an existing requirement to
publish COIN-related information on its Web site.
AB 2728
Page 4
6) Extends the sunset date on the CDFI tax credit to January
1, 2022.
7) Grants priority to insurance companies over all other tax
credit investors.
8) Provides that investment reductions of less than $50,000
trigger a clawback of the total amount of the credit.
Background
COIN was created in 1996 as a public/private partnership among
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
opportunities and the community organizations that are seeking
investment capital for projects. Investments are submitted,
scrutinized by COIN, and reported on the CDI Web site. Insurers
may identify worthy investments on their own and submit them for
certification or may select investments sourced or structured by
COIN.
CDI sponsored this bill intending to renew the data call
requirement. The bill declares that it is the intention of the
Legislature to add a data call once CDI fulfills its requirement
to report aggregate data and other information based on the data
submitted this year. Although the statute required insurers
to submit the data by July 1, CDI administratively moved that
deadline to March and published its report in July. The
committees have not reviewed CDI's report against reporting
requirements or whether the results justify additional data
calls. At this time, the bill only contains intent language and
does not establish any new data calls.
COIN also administers the CDFI tax credit program. Those tax
credits are available to any qualified taxpayer, not just
insurers. Each year, CDI may allocate up to $10 million in
credits annually to leverage up to $50 million total in
AB 2728
Page 5
community development investments. Under the tax credit program,
investors receive a tax credit worth up to 20 percent 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. This bill
extends the tax credit to January 1, 2022.
A recently released report by the Legislative Analyst's Office
(LAO) evaluated the tax credit. The LAO notes that, as of 2015,
the tax credit has been fully utilized and that small- to
medium-sized CDFIs have likely benefited the most. However, few
insurance companies participate in the program. In 2015, only
three insurance companies participated in the program, investing
a total of $22.3 million in CDFIs (less than a third of total
qualified investments). Based on information provided by COIN,
CDFI investments between 2011 and 2015 could result in 1,400
jobs in low-to-moderate income areas. However, the LAO expects
that the total statewide net increase in employment may be
significantly less, or even negative, due to opportunity costs.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According the Senate Appropriations Committee analysis this bill
would result in ongoing costs to the Insurance Fund 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. 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
estimates do not include the revenue impact of tax credits
allowed against the insurance gross premiums tax.
SUPPORT: (Verified8/12/16)
AB 2728
Page 6
California Department of Insurance (source)
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
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
WNC & Associates
OPPOSITION: (Verified8/12/16)
None received
ARGUMENTS IN SUPPORT: 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 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.
AB 2728
Page 7
ASSEMBLY FLOOR: 80-0, 5/31/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,
Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,
Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
Prepared by:Hugh Slayden / INS. / (916) 651-4110
8/15/16 19:39:56
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