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: 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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Page 2
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 certify up to $50 million in
investments 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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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
8/24/16 11:39:17
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