BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 2728|
          |Office of Senate Floor Analyses   |                              |
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                                   THIRD READING 


          Bill No:  AB 2728
          Author:   Atkins (D) 
          Amended:  8/19/16 in Senate
          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 adds to the categories of investments that  
          qualify under standards established for California Organized  
          Investment Network (COIN) program and extends the sunset date of  
          the Community Development Financial Institution (CDFI) tax  
          credit.


          Senate Floor Amendments of 8/19/16 eliminate the extension of  








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          the advisory board and move the sunset date for the tax credit  
          to January 1, 2018.


          ANALYSIS:  


          Existing law:


          1)Establishes COIN within the California Department of Insurance  
            (CDI). 





          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)Requires any insurer that writes at least $100 million in  
            California premium to report to COIN by July 1, 2016, various  
            categories of investments over the last three years ("data call"),  
            including community development investments and "green  
            investments," as defined.



          4)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.



          5)Sunsets the data call and reporting provisions on January 1, 2020.







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          6)Allows a tax credit against the gross premiums tax, personal  
            income tax, and corporation tax, ending in the 2017 taxable year,  
            of an amount equal to 20 percent of the amount of each qualified  
            investment into a CDFI up to $50 million per year.


          7)Provides that COIN must certify investments that qualify for the  
            CDFI credit.


          8)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 to 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)Declares the Legislature's intent to establish future data  
            calls once CDI complies with an existing requirement to  
            publish specified information on its Web site.


          5)Extends the sunset date on the CDFI tax credit to January 1,  
            2018.








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          6)Grants priority to insurance companies over all other tax  
            credit investors.


          7)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 that  
          includes 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 website.  Insurers  
          may identify investments on their own and submit them for  
          certification or may select investments sourced or structured by  
          COIN.  


          COIN also administers a "data call" that requires insurers to  
          submit information related to qualified investments.  This bill  
          revises the categories of investments that must be disclosed and  
          adds diverse fund managers to the reportable categories.  Under  
          existing statute, the last data call was due on July 1, 2016.   
          This bill contains intent language to establish new data calls  
          once the CDI complies with existing reporting requirements.  It  
          is anticipated that an additional data call will be considered  
          next year when the Legislature is in a better position to review  
          several reports about the program that were published after the  
          policy committee deadline.

          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 $50 million in tax  
          credits each year.  Investors receive a tax credit worth up to  
          20% of their investment in one of the CDFIs certified by COIN.   
          Investments must be in the form of non-interest bearing  
          deposits, loans, or equity investments, in an amount of at least  







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          $50,000,  and 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, 2018.


          A June report by the Legislative Analyst's Office (LAO)  
          evaluated the tax credit.   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, 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, the 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.  Due to recent  
          amendments, estimated costs for fiscal year 2017-18 and beyond  
          are not available at this time.  These estimates do not include  
          the revenue impact of tax credits allowed against the insurance  
          gross premiums tax.


          SUPPORT:   (Verified8/22/16) 


          California Department of Insurance (source)
          3CORE







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          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
          Denice Wint (individual)
          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:   (Verified8/22/16)


          None received


          ARGUMENTS IN SUPPORT:     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.  

          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,  







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                                                                    Page  7


            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
          8/22/16 20:37:58


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