BILL ANALYSIS Ó
AB 2817
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Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2817 (Chiu) - As Amended May 16, 2016
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|Policy |Housing and Community |Vote:|7 - 0 |
|Committee: |Development | | |
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|-------------+-------------------------------+-----+-------------|
| |Revenue and Taxation | |9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill expands the existing Low-Income Housing Tax Credit
(LIHTC) program. Specifically, this bill:
1)Increases the aggregate credit amount that may be allocated to
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low-income housing projects by $300 million for the 2017
calendar year, and by $300 million, adjusted for inflation,
each year thereafter. These increases are subject to annual
approval in a budget measure, and only projects that qualify
for the 4% federal LIHTC will qualify for this additional
allocation.
2)Allows up to $25 million in tax credits per calendar year for
qualified farmworker housing, from $500,000.
3)Modifies the allocation of state LIHTC that may be awarded to
a project that has received an award of 4% federal LIHTC based
on whether a project is new construction or the acquisition of
an existing low-income housing building, and whether a project
is located in a "difficult to develop area."
FISCAL EFFECT:
Annual GF cost pressures of $17 million, $50 million, and $90
million in FY 2018-19, FY 2019-20, and FY 2020-21, respectively.
COMMENTS:
1)Purpose. According to the author, the LIHTC program is the
only major source of funding available for affordable
development in the state, making it competitive and
overprescribed. In 2014, only 49 percent of applicants were
awarded credits - leaving many qualified projects without a
secure source of funding or any incentive to build additional
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affordable housing units. This bill will address the state's
affordable housing shortfall by increasing the annual state
tax credit allocation and help the state leverage additional
federal dollars that would otherwise go unclaimed.
2)Federal LIHT Credit Program. The LIHT credit is an indirect
federal subsidy developed in 1986 to incentivize the private
development of affordable rental housing for low-income
households. The federal LIHT credit program replaced
traditional housing tax incentives, such as accelerated
depreciation, with a tax credit that enables low-income
housing sponsors and developers to raise project equity
through the allocation of tax benefits to investors.
Two types of federal tax credits are available: the 9% and 4%
credits. These terms refer to the approximate percentage of a
project's "qualified basis" a taxpayer may deduct from his/her
annual federal tax liability in each of 10 years. For projects
that are not financed with a federal subsidy, the applicable
rate is 9%. For projects that are federally subsidized
(including projects financed with more than 50% with
tax-exempt bonds), the applicable rate is 4%.
3)State LIHT Credit Program. In 1987, the Legislature
authorized a state LIHT credit program to augment the federal
program. While the state LIHT credit program is patterned
after the federal program, there are several differences,
including a provision allowing investors to claim the state
LIHT credit over a four-year, rather than the federal 10-year,
allocation period. Furthermore, unlike the federal LIHT
credit program, the California LIHT credit law requires
project developers or housing sponsors to agree to a minimum
of 55 years of rent and income restrictions.
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State tax credits can only be awarded to projects that have
also received, or are concurrently receiving, an allocation of
the federal LIHT credits. Federal law specifies that each
state must designate a "housing credit agency" to administer
the federal LIHT credit program. In California,
responsibility for administering the federal program is
assigned to the California TCAC, which is comprised of the
State Treasurer, the State Controller, the Director of
Finance, and three non-voting members. TCAC allocates both
federal and state LIHT credits through a competitive
application process.
The amount of state LIHT credit that may be annually allocated
by the TCAC is limited to $70 million, adjusted for inflation,
plus any unallocated or unused credits from previous years.
In 2015, the total state credit amount available for
allocation was approximately $90 million (representing all
four years of allocation), plus $5.5 million in farmworker
state credit available for agricultural worker housing. The
TCAC awarded approximately $123.1 million in state tax credits
to 47 projects in 2015, including one farmworker state credit
award of almost 1 million.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
AB 2817
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