Amended in Assembly April 12, 2016

Amended in Assembly March 18, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2842

Introduced by Assembly Member Thurmond

February 19, 2016

An act to amend begin delete Sections 12206, 17058, and 23610.5 end delete begin insert Section 214 end insert of, and to add Sections 12206.1, 17058.1, and 23610.7 to, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 2842, as amended, Thurmond. Workforce Housing Tax Credit begin delete Act: end delete begin insert Pilot: property taxes: end insert income taxes: insurance taxes: credits: low-income housing: sale of credit.

Existing law establishes a low-income housing tax credit program pursuant to which the California Tax Credit Allocation Committee provides procedures and requirements for the allocation of state insurance, income, and corporation tax credit amounts among low-income housing projects in modified conformity to federal law that have been allocated, or qualify for, a federal low-income housing tax credit and for farmworker housing.

begin delete

This bill, beginning on or after January 1, 2016, would allow a taxpayer that is allowed a low-income housing tax credit to elect to sell all or a portion of that credit to one or more unrelated parties, as described, for each taxable year in which the credit is allowed for not less than 80% of the amount of the credit to be sold, and would provide for the one-time resale of that credit, as provided.

end delete

This bill, beginning on or after January 1, 2017, would additionally allow a credit to a taxpayer with a qualified low-income building that is eligible for a federal low-income housing tax credit, in an amount begin delete determined pursuant to federal law, end delete begin insert equal to 20% of the projects unadjusted unallocated basis, not to exceed $50,000 per unit, end insert for housing projects that meet specified criteria. The bill would limit the aggregate amount of credits allocated by the California Tax Credit Allocation Committee, on a first-come-first-served basis, to begin delete $100,000,000 per fiscal year plus any unallocated credit amount from the preceding fiscal year. end delete begin insert $100,000,000, and would provide for the one-time resale of that credit, as provided. end insert

begin insert

Existing property tax law establishes a partial welfare exemption for property used exclusively for rental housing and related facilities, as defined, that are owned and operated by either of any certain types of nonprofit entities or veterans’ organizations that meet specified exemption requirements, including that the owner of the property is eligible for and receives a federal income tax credit related to low-income housing.

end insert begin insert

Ths bill would include, as a qualifying criterion for the partial welfare exemption, that the owner of the property is allowed one of the income tax credits described above.

end insert begin insert

By imposing new duties upon local tax officials with respect to the welfare exemption, this bill would impose a state-mandated local program.

end insert begin insert

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

end insert begin insert

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

end insert begin insert

Section 2229 of the Revenue and Taxation Code requires the Legislature to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

end insert begin insert

This bill would provide that, notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

end insert

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program:  begin delete no end delete begin insert yes end insert .

The people of the State of California do enact as follows:

SECTION 1.  

This act shall be known, and may be cited, as the
Workforce Housing Tax Credit begin delete Act. end delete begin insert Pilot. end insert

begin delete

SEC. 2.  

Section 12206 of the Revenue and Taxation Code is
amended to read:

12206.  

(a) (1) There shall be allowed as a credit against the
“tax,” described by Section 12201, a state low-income housing
tax credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with Section 42 of the
Internal Revenue Code, relating to low-income housing credit,
except as otherwise provided in this section.

(2) “Taxpayer,” for purposes of this section, means the sole
owner in the case of a “C” corporation, the partners in the case of
a partnership, and the shareholders in the case of an “S”
corporation.

(3) “Housing sponsor,” for purposes of this section, means the
sole owner in the case of a “C” corporation, the partnership in the
case of a partnership, and the “S” corporation in the case of an “S”
corporation.

(b) (1) The amount of the credit allocated to any housing
sponsor shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project’s need
for the credit for economic feasibility in accordance with the
requirements of this section.

(A) Except for projects to provide farmworker housing, as
defined in subdivision (h) of Section 50199.7 of the Health and
Safety Code, that are allocated credits solely under the set-aside
described in subdivision (c) of Section 50199.20 of the Health and
Safety Code, the low-income housing project shall be located in
California and shall meet either of the following requirements:

(i) The project’s housing sponsor has been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue
Code, relating to low-income housing credit.

(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code, relating to special rule where 50 percent
or more of building is financed with tax-exempt bonds subject to
volume cap.

(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code, relating to low-income housing
credit. The committee may require a fee if the application for the
credit under this section is submitted in a calendar year after the
year the application is submitted for the federal tax credit.

(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b)
of the Internal Revenue Code, relating to determination of
distributive share.

(ii) This subparagraph does not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.

(iii) This subparagraph shall cease to be operative with respect
to any project that receives a preliminary reservation of a credit
on or after January 1, 2016.

(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.

(B) In the case of a partnership or an “S” corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.

(C) The taxpayer shall attach a copy of the certification to any
return upon which a tax credit is claimed under this section.

(D) In the case of a failure to attach a copy of the certification
for the year to the return in which a tax credit is claimed under this
section, no credit under this section shall be allowed for that year
until a copy of that certification is provided.

(E) All elections made by the taxpayer pursuant to Section 42
of the Internal Revenue Code, relating to low-income housing
credit, apply to this section.

(F) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified
census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
Internal Revenue Code, relating to increase in credit for buildings
in high-cost areas, credits may be allocated under this section in
the amounts prescribed in subdivision (c), provided that the amount
of credit allocated under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, is computed on 100 percent
of the qualified basis of the building.

(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located
in DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant
to Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas, provided that
the credit allowed under this section shall not exceed 30 percent
of the eligible basis of the building.

(G) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit allocated
pursuant to Section 42(d)(5)(B) of the Internal Revenue Code,
relating to increase in credit for buildings in high-cost areas, in
amounts up to 30 percent of the eligible basis of a building if the
credits allowed under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, are reduced by an equivalent
amount.

(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.

(c) Section 42(b) of the Internal Revenue Code, relating to
applicable percentage, shall be modified as follows:

(1) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed in
Section 42(b)(1)(A) of the Internal Revenue Code.

(B) For the fourth year, the difference between 30 percent and
the sum of the applicable percentages for the first three years.

(2) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is federally
subsidized or that is an existing building that is “at risk of
conversion,” the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.

(B) For the fourth year, the difference between 13 percent and
the sum of the applicable percentages for the first three years.

(3) For purposes of this section, the term “at risk of conversion,”
with respect to an existing property means a property that satisfies
all of the following criteria:

(A) The property is a multifamily rental housing development
in which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:

(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.

(ii) The Below-Market-Interest-Rate Program pursuant to
Section 221(d)(3) of the National Housing Act, Sections
1715l(d)(3) and (5) of Title 12 of the United States Code.

(iii) Section 236 of the National Housing Act, Section 1715z-1
of Title 12 of the United States Code.

(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section
1701s of Title 12 of the United States Code, as amended.

(v) Programs pursuant to Section 515 of the Housing Act of
1949, Section 1485 of Title 42 of the United States Code, as
amended.

(vi) The low-income housing credit program set forth in Section
42 of the Internal Revenue Code, relating to low-income housing
credit.

(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.

(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.

(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code, relating to rehabilitation expenditures
treated as a separate new building, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.

(d) The term “qualified low-income housing project” as defined
in Section 42(c)(2) of the Internal Revenue Code, relating to
qualified low-income building, is modified by adding the following
requirements:

(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:

(A) An amount not to exceed 8 percent of the lesser of:

(i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.

(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.

(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the “floor space fraction,” as defined in
Section 42 of the Internal Revenue Code, relating to low-income
housing credit.

(C) Any amount allowed to be distributed under subparagraph
(A) that is not available for distribution during the first five years
of the compliance period may be accumulated and distributed any
time during the first 15 years of the compliance period but not
thereafter.

(2) The limitation on return applies in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an “S” corporation.

(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code, relating to in
general.

(e) The provisions of Section 42(f) of the Internal Revenue
Code, relating to definition and special rules relating to credit
period, shall be modified as follows:

(1) The term “credit period” as defined in Section 42(f)(1) of
the Internal Revenue Code, relating to credit period defined, is
modified by substituting “four taxable years” for “10 taxable
years.”

(2) The special rule for the first taxable year of the credit period
under Section 42(f)(2) of the Internal Revenue Code, relating to
special rule for first year of credit period, shall not apply to the tax
credit under this section.

(3) Section 42(f)(3) of the Internal Revenue Code, relating to
determination of applicable percentage with respect to increases
in qualified basis after first year of credit period, is modified to
read:

If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the close
of the first year of the credit period, the housing sponsor, to the
extent of its tax credit allocation, shall be eligible for a credit on
the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.

(f) The provisions of Section 42(h) of the Internal Revenue
Code, relating to limitation on aggregate credit allowable with
respect to projects located in a state, shall be modified as follows:

(1) Section 42(h)(2) of the Internal Revenue Code, relating to
allocated credit amount to apply to all taxable years ending during
or after credit allocation year, does not apply and instead the
following provisions apply:

The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which
the allocation is made.

(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
(7), and (8) of Section 42(h) of the Internal Revenue Code, relating
to limitation on aggregate credit allowable with respect to projects
located in a state, do not apply to this section.

(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation
Committee pursuant to this section, Section 17058, and Section
23610.5 shall be an amount equal to the sum of all the following:

(1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the
2001 calendar year. For the purposes of this paragraph, the term
“Consumer Price Index” means the last Consumer Price Index for
All Urban Consumers published by the federal Department of
Labor.

(2) The unused housing credit ceiling, if any, for the preceding
calendar years.

(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing
credit dollar amount previously allocated to any project that does
not become a qualified low-income housing project within the
period required by this section or to any project with respect to
which an allocation is canceled by mutual consent of the California
Tax Credit Allocation Committee and the allocation recipient.

(4) Five hundred thousand dollars ($500,000) per calendar year
for projects to provide farmworker housing, as defined in
subdivision (h) of Section 50199.7 of the Health and Safety Code.

(5) The amount of any unallocated or returned credits under
former Sections 17053.14, 23608.2, and 23608.3, as those sections
read prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of
Section 50199.7 of the Health and Safety Code.

(h) The term “compliance period” as defined in Section 42(i)(1)
of the Internal Revenue Code, relating to compliance period, is
modified to mean, with respect to any building, the period of 30
consecutive taxable years beginning with the first taxable year of
the credit period with respect thereto.

(i) (1) Section 42(j) of the Internal Revenue Code, relating to
recapture of credit, shall not be applicable and the provisions in
paragraph (2) shall be substituted in its place.

(2) The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any
banks or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code, shall apply, provided that
the agreement includes all of the following provisions:

(A) A term not less than the compliance period.

(B) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.

(C) A provision stating which state and local agencies can
enforce the regulatory agreement in the event the housing sponsor
fails to satisfy any of the requirements of this section.

(D) A provision that the regulatory agreement shall be deemed
a contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation
applicable to the building, the right to enforce the regulatory
agreement in any state court.

(E) A provision incorporating the requirements of Section 42
of the Internal Revenue Code, relating to low-income housing
credit, as modified by this section.

(F) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee and the local
agency that can enforce the regulatory agreement if there is a
determination by the Internal Revenue Service that the project is
not in compliance with Section 42(g) of the Internal Revenue Code,
relating to qualified low-income housing project.

(G) A requirement that the housing sponsor, as security for the
performance of the housing sponsor’s obligations under the
regulatory agreement, assign the housing sponsor’s interest in rents
that it receives from the project, provided that until there is a
default under the regulatory agreement, the housing sponsor is
entitled to collect and retain the rents.

(H) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing
any of the parties designated to enforce the regulatory agreement
to collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate
the project; or any other relief as may be appropriate.

(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar
year during which applications may be filed and considered. The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit
ceiling that may be allocated by the committee in that period, and
the approximate date on which allocations shall be made. If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two allocation
periods, the committee may reduce the number of periods and
adjust the filing deadlines, maximum percentage of credit allocated,
and the allocation dates.

(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code, relating
to plans for allocation of credit among projects. In adopting this
plan, the committee shall comply with the provisions of Sections
42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code,
relating to qualified allocation plan and relating to certain selection
criteria must be used, respectively.

(3) Notwithstanding Section 42(m) of the Internal Revenue
Code, relating to responsibilities of housing credit agencies, the
California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:

(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:

(i) The housing sponsor shall demonstrate that there is a need
and demand for low-income housing in the community or region
for which it is proposed.

(ii) The project’s proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.

(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.

(iv) The housing sponsor shall have and maintain control of the
site for the project.

(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.

(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity
to ensure project completion and operation for the extended use
period.

(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.

(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A)
if both of the following apply:

(i) The project serves the lowest income tenants at rents
affordable to those tenants.

(ii) The project is obligated to serve qualified tenants for the
longest period.

(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:

(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.

(ii) Projects providing single-room occupancy units serving
very low income tenants.

(iii) Existing projects that are “at risk of conversion,” as defined
by paragraph (3) of subdivision (c).

(iv) Projects for which a public agency provides direct or indirect
long-term financial support for at least 15 percent of the total
project development costs or projects for which the owner’s equity
constitutes at least 30 percent of the total project development
costs.

(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.

(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue
of the date of submission of its application except to break a tie
when two or more of the projects have an equal rating.

(k) Section 42(l) of the Internal Revenue Code, relating to
certifications and other reports to secretary, shall be modified as
follows:

The term “secretary” shall be replaced by the term “Franchise
Tax Board.”

(l) In the case in which the credit allowed under this section
exceeds the “tax,” the excess may be carried over to reduce the
“tax” in the following year, and succeeding years if necessary,
until the credit has been exhausted.

(m) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, apply to calendar years after 1993.

(n) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, do not apply.

(o) (1) For a project that receives a preliminary reservation
under this section beginning on or after January 1, 2016, a taxpayer
may make an irrevocable election in its application to the California
Tax Credit Allocation Committee to sell all or any portion of any
credit allowed under this section to one or more unrelated parties
for each taxable year in which the credit is allowed subject to both
of the following conditions:

(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.

(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision is a taxpayer allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, “taxpayer allowed the credit
under this section” means a taxpayer that is allowed the credit
under this section without regard to the purchase of a credit
pursuant to this subdivision.

(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within
10 days of the sale of the credit, in the form and manner specified
by the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party to whom the credit has been sold, the face amount
of the credit sold, and the amount of consideration received by the
taxpayer for the sale of the credit.

(B) The California Tax Credit Allocation Committee shall
provide an annual listing to the Franchise Tax Board, in a form
and manner agreed upon by the California Tax Credit Allocation
Committee and the Franchise Tax Board, of the taxpayers that
have sold or purchased a credit pursuant to this subdivision.

(3) (A) A credit may be sold pursuant to this subdivision to
more than one unrelated party.

(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.

(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more
unrelated parties, subject to all of the requirements of this
subdivision.

(4) Notwithstanding any other provision of law, the taxpayer
that originally received the credit that is sold pursuant to paragraph
(1) shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.

(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.

(6) Notwithstanding paragraph (1), the taxpayer, with the
approval of the Executive Director of the California Tax Credit
Allocation Committee, may rescind the election to sell all or any
portion of the credit allowed under this section if the consideration
for the credit falls below 80 percent of the amount of the credit
after the California Tax Credit Allocation Committee reservation.

(p) The California Tax Credit Allocation Committee may
prescribe rules, guidelines, or procedures necessary or appropriate
to carry out the purposes of this section, including any guidelines
regarding the allocation of the credit allowed under this section.
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code shall not apply to any rule,
guideline, or procedure prescribed by the California Tax Credit
Allocation Committee pursuant to this section.

(q) This section shall remain in effect for as long as Section 42
of the Internal Revenue Code, relating to low-income housing
credit, remains in effect.

end delete

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 214 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

214.  

(a) Property used exclusively for religious, hospital,
scientific, or charitable purposes owned and operated by
community chests, funds, foundations, limited liability companies,
or corporations organized and operated for religious, hospital,
scientific, or charitable purposes is exempt from taxation, including
ad valorem taxes to pay the interest and redemption charges on
any indebtedness approved by the voters prior to July 1, 1978, or
any bonded indebtedness for the acquisition or improvement of
real property approved on or after July 1, 1978, by two-thirds of
the votes cast by the voters voting on the proposition, if:

(1) The owner is not organized or operated for profit. However,
in the case of hospitals, the organization shall not be deemed to
be organized or operated for profit if, during the immediately
preceding fiscal year, operating revenues, exclusive of gifts,
endowments and grants-in-aid, did not exceed operating expenses
by an amount equivalent to 10 percent of those operating expenses.
As used herein, operating expenses include depreciation based on
cost of replacement and amortization of, and interest on,
indebtedness.

(2) No part of the net earnings of the owner inures to the benefit
of any private shareholder or individual.

(3) The property is used for the actual operation of the exempt
activity, and does not exceed an amount of property reasonably
necessary to the accomplishment of the exempt purpose.

(A) For the purposes of determining whether the property is
used for the actual operation of the exempt activity, consideration
shall not be given to use of the property for either or both of the
following described activities if that use is occasional:

(i) The owner conducts fundraising activities on the property
and the proceeds derived from those activities are not unrelated
business taxable income, as defined in Section 512 of the Internal
Revenue Code, of the owner and are used to further the exempt
activity of the owner.

(ii) The owner permits any other organization that meets all of
the requirements of this subdivision, other than ownership of the
property, to conduct fundraising activities on the property and the
proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the organization, are not subject to the tax on unrelated
business taxable income that is imposed by Section 511 of the
Internal Revenue Code, and are used to further the exempt activity
of the organization.

(B) For purposes of subparagraph (A):

(i) “Occasional use” means use of the property on an irregular
or intermittent basis by the qualifying owner or any other qualifying
organization described in clause (ii) of subparagraph (A) that is
incidental to the primary activities of the owner or the other
organization.

(ii) “Fundraising activities” means both activities involving the
direct solicitation of money or other property and the anticipated
exchange of goods or services for money between the soliciting
organization and the organization or person solicited.

(C) Subparagraph (A) shall have no application in determining
whether paragraph (3) has been satisfied unless the owner of the
property and any other organization using the property as provided
in subparagraph (A) have filed with the assessor a valid
organizational clearance certificate issued pursuant to Section
254.6.

(D) For the purposes of determining whether the property is
used for the actual operation of the exempt activity, consideration
shall not be given to the use of the property for meetings conducted
by any other organization if the meetings are incidental to the other
organization’s primary activities, are not fundraising meetings or
activities as defined in subparagraph (B), are held no more than
once per week, and the other organization and its use of the
property meet all other requirements of paragraphs (1) to (5),
inclusive, of this subdivision. The owner or the other organization
also shall file with the assessor a copy of a valid, unrevoked letter
or ruling from the Internal Revenue Service or the Franchise Tax
Board stating that the other organization, or the national
organization of which it is a local chapter or affiliate, qualifies as
an exempt organization under Section 501(c)(3) or 501(c)(4) of
the Internal Revenue Code or Section 23701d, 23701f, or 23701w.

(E) Nothing in subparagraph (A), (B), (C), or (D) shall be
construed to either enlarge or restrict the exemption provided for
in subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.

(4) The property is not used or operated by the owner or by any
other person so as to benefit any officer, trustee, director,
shareholder, member, employee, contributor, or bondholder of the
owner or operator, or any other person, through the distribution
of profits, payment of excessive charges or compensations, or the
more advantageous pursuit of their business or profession.

(5) The property is not used by the owner or members thereof
for fraternal or lodge purposes, or for social club purposes except
where that use is clearly incidental to a primary religious, hospital,
scientific, or charitable purpose.

(6) The property is irrevocably dedicated to religious, charitable,
scientific, or hospital purposes and upon the liquidation,
dissolution, or abandonment of the owner will not inure to the
benefit of any private person except a fund, foundation, or
corporation organized and operated for religious, hospital,
scientific, or charitable purposes.

(7) The property, if used exclusively for scientific purposes, is
used by a foundation or institution that, in addition to complying
with the foregoing requirements for the exemption of charitable
organizations in general, has been chartered by the Congress of
the United States (except that this requirement shall not apply
when the scientific purposes are medical research), and whose
objects are the encouragement or conduct of scientific
investigation, research, and discovery for the benefit of the
community at large.

The exemption provided for herein shall be known as the
“welfare exemption.” This exemption shall be in addition to any
other exemption now provided by law, and the existence of the
exemption provision in paragraph (2) of subdivision (a) of Section
202 shall not preclude the exemption under this section for museum
or library property. Except as provided in subdivision (e), this
section shall not be construed to enlarge the college exemption.

(b) Property used exclusively for school purposes of less than
collegiate grade and owned and operated by religious, hospital, or
charitable funds, foundations, limited liability companies, or
corporations, which property and funds, foundations, limited
liability companies, or corporations meet all of the requirements
of subdivision (a), shall be deemed to be within the exemption
provided for in subdivision (b) of Section 4 and Section 5 of Article
XIII of the California Constitution and this section.

(c) Property used exclusively for nursery school purposes and
owned and operated by religious, hospital, or charitable funds,
foundations, limited liability companies, or corporations, which
property and funds, foundations, limited liability companies, or
corporations meet all the requirements of subdivision (a), shall be
deemed to be within the exemption provided for in subdivision
(b) of Section 4 and Section 5 of Article XIII of the California
Constitution and this section.

(d) Property used exclusively for a noncommercial educational
FM broadcast station or an educational television station, and
owned and operated by religious, hospital, scientific, or charitable
funds, foundations, limited liability companies, or corporations
meeting all of the requirements of subdivision (a), shall be deemed
to be within the exemption provided for in subdivision (b) of
Section 4 and Section 5 of Article XIII of the California
Constitution and this section.

(e) Property used exclusively for religious, charitable, scientific,
or hospital purposes and owned and operated by religious, hospital,
scientific, or charitable funds, foundations, limited liability
companies, or corporations or educational institutions of collegiate
grade, as defined in Section 203, which property and funds,
foundations, limited liability companies, corporations, or
educational institutions meet all of the requirements of subdivision
(a), shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section. As to educational
institutions of collegiate grade, as defined in Section 203, the
requirements of paragraph (6) of subdivision (a) shall be deemed
to be met if both of the following are met:

(1) The property of the educational institution is irrevocably
dedicated in its articles of incorporation to charitable and
educational purposes, to religious and educational purposes, or to
educational purposes.

(2) The articles of incorporation of the educational institution
provide for distribution of its property upon its liquidation,
dissolution, or abandonment to a fund, foundation, or corporation
organized and operated for religious, hospital, scientific, charitable,
or educational purposes meeting the requirements for exemption
provided by Section 203 or this section.

(f) Property used exclusively for housing and related facilities
for elderly or handicapped families and financed by, including,
but not limited to, the federal government pursuant to Section 202
of Public Law 86-372 (12 U.S.C. Sec. 1701q), as amended, Section
231 of Public Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of
Public Law 90-448 (12 U.S.C. Sec. 1715z), or Section 811 of
Public Law 101-625 (42 U.S.C. Sec. 8013), and owned and
operated by religious, hospital, scientific, or charitable funds,
foundations, limited liability companies, or corporations meeting
all of the requirements of this section shall be deemed to be within
the exemption provided for in subdivision (b) of Section 4 and
Section 5 of Article XIII of the California Constitution and this
section.

The amendment of this paragraph made by Chapter 1102 of the
Statutes of 1984 does not constitute a change in, but is declaratory
of, existing law. However, no refund of property taxes shall be
required as a result of this amendment for any fiscal year prior to
the fiscal year in which the amendment takes effect.

Property used exclusively for housing and related facilities for
elderly or handicapped families at which supplemental care or
services designed to meet the special needs of elderly or
handicapped residents are not provided, or that is not financed by
the federal government pursuant to Section 202 of Public Law
86-372 (12 U.S.C. Sec. 1701q), as amended, Section 231 of Public
Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of Public Law
90-448 (12 U.S.C. Sec. 1715z), or Section 811 of Public Law
101-625 (42 U.S.C. Sec. 8013), shall not be entitled to exemption
pursuant to this subdivision unless the property is used for housing
and related facilities for low- and moderate-income elderly or
handicapped families. Property that would otherwise be exempt
pursuant to this subdivision, except that it includes some housing
and related facilities for other than low- or moderate-income elderly
or handicapped families, shall be entitled to a partial exemption.
The partial exemption shall be equal to that percentage of the value
of the property that is equal to the percentage that the number of
low- and moderate-income elderly and handicapped families
represents of the total number of families occupying the property.

As used in this subdivision, “low and moderate income” has the
same meaning as the term “persons and families of low or moderate
income” as defined by Section 50093 of the Health and Safety
Code.

(g) (1) Property used exclusively for rental housing and related
facilities and owned and operated by religious, hospital, scientific,
or charitable funds, foundations, limited liability companies, or
corporations, including limited partnerships in which the managing
general partner is an eligible nonprofit corporation or eligible
limited liability company, meeting all of the requirements of this
section, or by veterans’ organizations, as described in Section
215.1, meeting all the requirements of paragraphs (1) to (7),
inclusive, of subdivision (a), shall be deemed to be within the
exemption provided for in subdivision (b) of Section 4 and Section
5 of Article XIII of the California Constitution and this section
and shall be entitled to a partial exemption equal to that percentage
of the value of the property that is equal to the percentage that the
number of units serving lower income households represents of
the total number of residential units in any year in which any of
the following criteria applies:

(A) The acquisition, rehabilitation, development, or operation
of the property, or any combination of these factors, is financed
with tax-exempt mortgage revenue bonds or general obligation
bonds, or is financed by local, state, or federal loans or grants and
the rents of the occupants who are lower income households do
not exceed those prescribed by deed restrictions or regulatory
agreements pursuant to the terms of the financing or financial
assistance.

(B) The owner of the property is eligible for and receives
low-income housing tax credits pursuant to Section 42 of the
Internal Revenue begin delete Code of 1986, as added by Public Law 99-514. end delete

begin insert Code, relating to low-income housing tax credit, or is allowed a
workforce housing tax credit pursuant to Section 12206.1, 17058.1,
or 23610.7. end insert

(C) In the case of a claim, other than a claim with respect to
property owned by a limited partnership in which the managing
general partner is an eligible nonprofit corporation, that is filed
for the 2000-01 fiscal year or any fiscal year thereafter, 90 percent
or more of the occupants of the property are lower income
households whose rent does not exceed the rent prescribed by
Section 50053 of the Health and Safety Code. The total exemption
amount allowed under this subdivision to a taxpayer, with respect
to a single property or multiple properties for any fiscal year on
the sole basis of the application of this subparagraph, may not
exceed twenty thousand dollars ($20,000) of tax.

(D) (i) The property was previously purchased and owned by
the Department of Transportation pursuant to a consent decree
requiring housing mitigation measures relating to the construction
of a freeway and is now solely owned by an organization that
qualifies as an exempt organization under Section 501(c)(3) of the
Internal Revenue Code.

(ii) This subparagraph shall not apply to property owned by a
limited partnership in which the managing partner is an eligible
nonprofit corporation.

(2) In order to be eligible for the exemption provided by this
subdivision, the owner of the property shall do both of the
following:

(A) (i) For any claim filed for the 2000-01 fiscal year or any
fiscal year thereafter, certify and ensure, subject to the limitation
in clause (ii), that there is an enforceable and verifiable agreement
with a public agency, a recorded deed restriction, or other legal
document that restricts the project’s usage and that provides that
the units designated for use by lower income households are
continuously available to or occupied by lower income households
at rents that do not exceed those prescribed by Section 50053 of
the Health and Safety Code, or, to the extent that the terms of
federal, state, or local financing or financial assistance conflicts
with Section 50053, rents that do not exceed those prescribed by
the terms of the financing or financial assistance.

(ii) In the case of a limited partnership in which the managing
general partner is an eligible nonprofit corporation, the restriction
and provision specified in clause (i) shall be contained in an
enforceable and verifiable agreement with a public agency, or in
a recorded deed restriction to which the limited partnership
certifies.

(B) Certify that the funds that would have been necessary to
pay property taxes are used to maintain the affordability of, or
reduce rents otherwise necessary for, the units occupied by lower
income households.

(3) As used in this subdivision:

(A)  begin delete “Lower end delete begin insert (i) end insert begin insert   end insert begin insert Except as provided in paragraph (2), end insert income
households” has the same meaning as the term “lower income
households” as defined by Section 50079.5 of the Health and Safety
Code.

begin insert

(ii) “Lower income households,” for purposes of subparagraph
(B) of paragraph (1), has the same meaning as “low-income
household” as defined by Sections 12206.1, 17058.1, and 23610.7.

end insert

(B) “Related facilities” means any manager’s units and any and
all common area spaces that are included within the physical
boundaries of the rental housing development, including, but not
limited to, common area space, walkways, balconies, patios,
clubhouse space, meeting rooms, laundry facilities and parking
areas, except any portions of the overall development that are
nonexempt commercial space.

(C) “Units serving lower income households” shall mean units
that are occupied by lower income households at an affordable
rent, as defined in Section 50053 of the Health and Safety Code
or, to the extent that the terms of federal, state, or local financing
or financial assistance conflicts with Section 50053, rents that do
not exceed those prescribed by the terms of the financing or
financial assistance. Units reserved for lower income households
at an affordable rent that are temporarily vacant due to tenant
turnover or repairs shall be counted as occupied.

(h) Property used exclusively for an emergency or temporary
shelter and related facilities for homeless persons and families and
owned and operated by religious, hospital, scientific, or charitable
funds, foundations, limited liability companies, or corporations
meeting all of the requirements of this section shall be deemed to
be within the exemption provided for in subdivision (b) of Section
4 and Section 5 of Article XIII of the California Constitution and
this section. Property that otherwise would be exempt pursuant to
this subdivision, except that it includes housing and related
facilities for other than an emergency or temporary shelter, shall
be entitled to a partial exemption.

As used in this subdivision, “emergency or temporary shelter”
means a facility that would be eligible for funding pursuant to
Chapter begin delete 11 end delete begin insert 11.5 end insert (commencing with Section 50800) of Part 2 of
Division 31 of the Health and Safety Code.

(i) Property used exclusively for housing and related facilities
for employees of religious, charitable, scientific, or hospital
organizations that meet all the requirements of subdivision (a) and
owned and operated by funds, foundations, limited liability
companies, or corporations that meet all the requirements of
subdivision (a) shall be deemed to be within the exemption
provided for in subdivision (b) of Section 4 and Section 5 of Article
XIII of the California Constitution and this section to the extent
the residential use of the property is institutionally necessary for
the operation of the organization.

(j) For purposes of this section, charitable purposes include
educational purposes. For purposes of this subdivision,
“educational purposes” means those educational purposes and
activities for the benefit of the community as a whole or an
unascertainable and indefinite portion thereof, and do not include
those educational purposes and activities that are primarily for the
benefit of an organization’s shareholders. Educational activities
include the study of relevant information, the dissemination of that
information to interested members of the general public, and the
participation of interested members of the general public.

(k) In the case of property used exclusively for the exempt
purposes specified in this section, owned and operated by limited
liability companies that are organized and operated for those
purposes, the State Board of Equalization shall adopt regulations
to specify the ownership, organizational, and operational
requirements for those companies to qualify for the exemption
provided by this section.

(l) The amendments made by Chapter 354 of the Statutes of
2004 shall apply with respect to lien dates occurring on and after
January 1, 2005.

SEC. 3.  

Section 12206.1 is added to the Revenue and Taxation
Code, to read:

12206.1.  

(a) (1) For taxable years beginning on or after
January 1, 2017, there shall be allowed to a taxpayer a credit
against the “tax,” as defined by Section 12201, for a qualified
low-income building in begin delete an amount equal to the amount computed
in end delete accordance with Section 42 of the Internal Revenue Code,
relating to low-income housing credit as modified by this section.

begin delete

(2) In determining the amount of credit allowed pursuant to this
section, the following shall apply:

end delete begin delete

(A) The eligible basis of a building shall be equal to the project’s
total cost basis.

end delete begin delete

(B) The applicable percentage shall be:

end delete begin delete

(1) For a project with units for low-income households, 130
percent.

end delete begin delete

(2) For a project with units for median-income households with
incomes between 80 percent and 99 percent of the area median
income, 108 percent.

end delete begin delete

(3) For a project with units for median-income households with
incomes of 100 percent of the area median income, 76 percent.

end delete begin insert

(2) The amount of credit shall be equal to 20 percent of the
project’s unadjusted allocated basis, as defined by the California
Tax Credit Allocation Committee by regulation, not to exceed fifty
thousand dollars ($50,000) per unit.

end insert

(b) For purposes of this section:

(1) “Low-income household” means a household with an income
that is greater than 60 percent and not higher than 80 percent of
the area median household income.

begin delete

(2) “Median-income household” means a household with an
income that is greater than 80 percent but not higher than 100
percent of the area median household income.

end delete begin delete

(3)

end delete

begin insert (2) end insert  “Qualified low-income building” has the same meaning as
in Section 42(c)(2) of the Internal Revenue Code, relating to
qualified low-income housing building, and also means the
qualified low-income building is eligible for a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating to low-income
housing credit, except that Section 42(g) of the Internal Revenue
Code, relating to qualified low-income housing project, shall not
apply and instead the following requirements shall be met:

(A) The project is for the acquisition or substantial rehabilitation
of a building at least 20 years old or is a new development.

(B) The project includes no more than 50 percent of its units
that are eligible for the tax credit allowed pursuant to Section
12206.

(C) Any units reserved for a tax credit allowed pursuant to this
section shall not supplant existing affordable housing units not
eligible for a tax credit pursuant to this section, including any units
for households with an income that is less than that of a low-income

begin delete household. end delete begin insert household, and the rent for those units is at least 20
percent below market rate at the time the tax credit is allocated. end insert

(D) The project will allocate at least begin delete 20 end delete begin insert 40 end insert percent of its units
to low-income begin delete households and median-income end delete households.

begin insert

(E) The project is located, in the year of the application for the
tax credit, in one of the 12 counties within this state identified by
the United State Department of Housing and Urban Development
as having the highest fair market rents in the state. The California
Tax Credit Allocation Committee shall annually publish those
counties on its Internet Web site.

end insert

(c) (1) This section shall not be construed to require a taxpayer
to have been previously or currently allocated a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating low-income
housing credit.

(2) This section shall not be construed to preclude a taxpayer,
allowed a credit pursuant to this section, from being allocated a
credit pursuant to Section 12206 or Section 42 of the Internal
Revenue Code, relating to low-income housing credit.

begin insert

(3) A credit shall not be allowed pursuant to this section if a
taxpayer has been allocated a credit pursuant to Section 42 of the
Internal Revenue Code, relating to low-income housing credit, for
units for a household with a household income that is greater than
60 percent of the area median household income.

end insert

(d) An applicant for the credit allowed pursuant to this section
must demonstrate to the California Tax Credit Allocation
Committee that, within the city in which the project is situated,
the area median income for the average rental unit is above the
area median income for the project.

(e) (1) In the case where the credit allowed under this section
exceeds the “tax,” the excess may be carried over to reduce the
“tax” in the following year, and succeeding 14 years if necessary,
until the credit has been exhausted.

(2) The credit shall be claimed in the same manner, with regard
to the credit period, as a credit claimed pursuant to Section 12206.

(3) The credit allowed pursuant to this section shall have a
compliance period of 55 consecutive taxable years at the affordable
rate or at substantially below-market rate beginning with the first
taxable year of the credit period with respect thereto, administered
in the same manner as under Section 12206.

(f) The California Tax Credit Allocation Committee shall
allocate, on a first-come-first-served basis, the credit allowed by
this section. The aggregate amount of credit that may be allocated
begin delete in any fiscal year end delete pursuant to this section and Sections 17058.1
and 23610.7 shall be an amount equal to begin delete the sum of paragraphs
(1) and (2). end delete begin insert one hundred million dollars ($100,000,000). end insert

begin delete

(1) One hundred million dollars ($100,000,000) for the 2016-17
fiscal year, and for each fiscal year thereafter.

(2) The unallocated credit amount, if any, from the preceding
fiscal year.

end delete begin insert

(g) (1) For a project that is allocated a credit under this section,
a taxpayer may make an irrevocable election in its application to
the California Tax Credit Allocation Committee to sell all or any
portion of any credit allowed under this section to one or more
unrelated parties for each taxable year in which the credit is
allowed, subject to both of the following conditions:

end insert begin insert

(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.

end insert begin insert

(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision are taxpayers allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, “taxpayer allowed the credit
under this section” means a taxpayer that is allowed the credit
under this section without regard to the purchase of a credit
pursuant to this subdivision.

end insert begin insert

(2) (A)   The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within
10 days of the sale of the credit, in the form and manner specified
by the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit,
including the social security or other taxpayer identification
number of the unrelated party or parties to whom the credit has
been sold, the face amount of the credit sold, and the amount of
consideration received by the taxpayer for the sale of the credit.

end insert begin insert

(B) The California Tax Credit Allocation Committee shall
provide an annual listing to the Franchise Tax Board, in a form
and manner agreed upon by the California Tax Credit Allocation
Committee and the Franchise Tax Board, of the taxpayers that
have sold or purchased a credit pursuant to this subdivision.

end insert begin insert

(3) (A)   A credit may be sold pursuant to this subdivision to more
than one unrelated party.

end insert begin insert

(B) (i)   Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.

end insert begin insert

(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more
unrelated parties, subject to all of the requirements of this
subdivision.

end insert begin insert

(4) Notwithstanding any other provision of law, the taxpayer
that originally received the credit that is sold pursuant to
paragraph (1) shall remain solely liable for all obligations and
liabilities imposed on the taxpayer by this section with respect to
the credit, none of which shall apply to any party to whom the
credit has been sold or subsequently transferred. Parties who
purchase credits pursuant to paragraph (1) shall be entitled to
utilize the purchased credits in the same manner in which the
taxpayer that originally received the credit could utilize them.

end insert begin insert

(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.

end insert begin insert

(6) Notwithstanding paragraph (1), the taxpayer, with the
approval of the Executive Director of the California Tax Credit
Allocation Committee, may rescind the election to sell all or any
portion of the credit allowed under this section if the consideration
for the credit falls below 80 percent of the amount of the credit
after the California Tax Credit Allocation Committee reservation.

end insert begin delete

(g)

end delete

begin insert (h) end insert  (1) The California Tax Credit Allocation Committee shall
establish guidelines to specify that a taxpayer may be allowed a
tax credit pursuant to this section, Section 12206, and Section 42
of the Internal Revenue Code, relating to low-income housing
credit, subject to the requirements of these begin delete sections. end delete begin insert sections and
paragraph (3) of subdivision (c). end insert

(2) The California Tax Credit Allocation Committee begin delete and the
Department of Insurance end delete may adopt regulations, rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including guidelines to conform the credit allowed
by this section to any procedures established pursuant to Section
12206.

(3) The Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) does not apply to this subdivision.

begin delete

(h) Section 41 does not apply to the credit allowed by this
section.

end delete

begin delete

SEC. 4.  

Section 17058 of the Revenue and Taxation Code is
amended to read:

17058.  

(a) (1) There shall be allowed as a credit against the
“net “tax,” defined in Section 17039, a state low-income housing
tax credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with Section 42 of the
Internal Revenue Code, relating to low-income housing credit,
except as otherwise provided in this section.

(2) “Taxpayer,” for purposes of this section, means the sole
owner in the case of an individual, the partners in the case of a
partnership, and the shareholders in the case of an “S” corporation.

(3) “Housing sponsor,” for purposes of this section, means the
sole owner in the case of an individual, the partnership in the case
of a partnership, and the “S” corporation in the case of an “S”
corporation.

(b) (1) The amount of the credit allocated to any housing
sponsor shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project’s need
for the credit for economic feasibility in accordance with the
requirements of this section.

(A) The low-income housing project shall be located in
California and shall meet either of the following requirements:

(i) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety
Code, that are allocated credits solely under the set-aside described
in subdivision (c) of Section 50199.20 of the Health and Safety
Code, the project’s housing sponsor has been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue
Code, relating to low-income housing credit.

(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code, relating to special rule where 50 percent
or more of building is financed with tax-exempt bonds subject to
volume cap.

(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code, relating to low-income housing
credit. The committee may require a fee if the application for the
credit under this section is submitted in a calendar year after the
year the application is submitted for the federal tax credit.

(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b)
of the Internal Revenue Code, relating to determination of
distributive share.

(ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the federal credit shall not be allowed in the
taxable year in which the sale or other disposition occurs, but shall
instead be deferred until and treated as if it occurred in the first
taxable year immediately following the taxable year in which the
federal credit period expires for the project described in clause (i).

(iii) This subparagraph does not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.

(iv) This subparagraph shall cease to be operative with respect
to any project that receives a preliminary reservation of a credit
on or after January 1, 2016.

(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.

(B) In the case of a partnership or an “S” corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.

(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.

(D) All elections made by the taxpayer pursuant to Section 42
of the Internal Revenue Code, relating to low-income housing
credit, apply to this section.

(E) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified
census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
Internal Revenue Code, relating to increase in credit for buildings
in high-cost areas, credits may be allocated under this section in
the amounts prescribed in subdivision (c), provided that the amount
of credit allocated under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, is computed on 100 percent
of the qualified basis of the building.

(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located
in DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant
to Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas, provided that
the credit allowed under this section shall not exceed 30 percent
of the eligible basis of the building.

(F) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit allocated
pursuant to Section 42(d)(5)(B) of the Internal Revenue Code,
relating to increase in credit for buildings in high-cost areas, in
amounts up to 30 percent of the eligible basis of a building if the
credits allowed under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, are reduced by an equivalent
amount.

(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.

(c) Section 42(b) of the Internal Revenue Code, relating to
applicable percentage, shall be modified as follows:

(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term “applicable
percentage” means 9 percent for each of the first three years and
3 percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.

(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed in
Section 42 (b)(1)(A) of the Internal Revenue Code.

(B) For the fourth year, the difference between 30 percent and
the sum of the applicable percentages for the first three years.

(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is federally
subsidized or that is an existing building that is “at risk of
conversion,” the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.

(B) For the fourth year, the difference between 13 percent and
the sum of the applicable percentages for the first three years.

(4) For purposes of this section, the term “at risk of conversion,”
with respect to an existing property means a property that satisfies
all of the following criteria:

(A) The property is a multifamily rental housing development
in which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:

(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.

(ii) The Below-Market-Interest-Rate Program pursuant to
Section 221(d)(3) of the National Housing Act, Sections
1715l(d)(3) and (5) of Title 12 of the United States Code.

(iii) Section 236 of the National Housing Act, Section 1715z-1
of Title 12 of the United States Code.

(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section
1701s of Title 12 of the United States Code, as amended.

(v) Programs pursuant to Section 515 of the Housing Act of
1949, Section 1485 of Title 42 of the United States Code, as
amended.

(vi) The low-income housing credit program set forth in Section
42 of the Internal Revenue Code, relating to low-income housing
credit.

(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.

(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.

(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code, relating to rehabilitation expenditures
treated as a separate new building, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.

(d) The term “qualified low-income housing project” as defined
in Section 42(c)(2) of the Internal Revenue Code, relating to
qualified low-income building, is modified by adding the following
requirements:

(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:

(A) An amount not to exceed 8 percent of the lesser of:

(i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.

(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.

(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the “floor space fraction,” as defined in
Section 42 of the Internal Revenue Code, relating to low-income
housing credit.

(C) Any amount allowed to be distributed under subparagraph
(A) that is not available for distribution during the first five years
of the compliance period may be accumulated and distributed any
time during the first 15 years of the compliance period but not
thereafter.

(2) The limitation on return applies in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an “S” corporation.

(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code, relating to in
general.

(e) The provisions of Section 42(f) of the Internal Revenue
Code, relating to definition and special rules relating to credit
period, shall be modified as follows:

(1) The term “credit period” as defined in Section 42(f)(1) of
the Internal Revenue Code, relating to credit period defined, is
modified by substituting “four taxable years” for “10 taxable
years.”

(2) The special rule for the first taxable year of the credit period
under Section 42(f)(2) of the Internal Revenue Code, relating to
special rule for first year of credit period, shall not apply to the tax
credit under this section.

(3) Section 42(f)(3) of the Internal Revenue Code, relating to
determination of applicable percentage with respect to increases
in qualified basis after first year of credit period, is modified to
read:

If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the close
of the first year of the credit period, the housing sponsor, to the
extent of its tax credit allocation, shall be eligible for a credit on
the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the taxable year in which the increase in qualified
basis occurs.

(f) The provisions of Section 42(h) of the Internal Revenue
Code, relating to limitation on aggregate credit allowable with
respect to projects located in a state, shall be modified as follows:

(1) Section 42(h)(2) of the Internal Revenue Code, relating to
allocated credit amount to apply to all taxable years ending during
or after credit allocation year, does not apply and instead the
following provisions apply:

The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which
the allocation is made.

(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
(7), and (8) of Section 42(h) of the Internal Revenue Code, relating
to limitation on aggregate credit allowable with respect to projects
located in a state, do not apply to this section.

(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation
Committee pursuant to this section, Section 12206, and Section
23610.5 shall be an amount equal to the sum of all the following:

(1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the
2001 calendar year. For the purposes of this paragraph, the term
“Consumer Price Index” means the last Consumer Price Index for
All Urban Consumers published by the federal Department of
Labor.

(2) The unused housing credit ceiling, if any, for the preceding
calendar years.

(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing
credit dollar amount previously allocated to any project that does
not become a qualified low-income housing project within the
period required by this section or to any project with respect to
which an allocation is canceled by mutual consent of the California
Tax Credit Allocation Committee and the allocation recipient.

(4) Five hundred thousand dollars ($500,000) per calendar year
for projects to provide farmworker housing, as defined in
subdivision (h) of Section 50199.7 of the Health and Safety Code.

(5) The amount of any unallocated or returned credits under
former Sections 17053.14, 23608.2, and 23608.3, as those sections
read prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of
Section 50199.7 of the Health and Safety Code.

(h) The term “compliance period” as defined in Section 42(i)(1)
of the Internal Revenue Code, relating to compliance period, is
modified to mean, with respect to any building, the period of 30
consecutive taxable years beginning with the first taxable year of
the credit period with respect thereto.

(i) Section 42(j) of the Internal Revenue Code, relating to
recapture of credit, does not apply and the following requirements
of this section shall be set forth in a regulatory agreement between
the California Tax Credit Allocation Committee and the housing
sponsor, and this agreement shall be subordinated, when required,
to any lien or encumbrance of any banks or other institutional
lenders to the project. The regulatory agreement entered into
pursuant to subdivision (f) of Section 50199.14 of the Health and
Safety Code shall apply, provided that the agreement includes all
of the following provisions:

(1) A term not less than the compliance period.

(2) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.

(3) A provision stating which state and local agencies can
enforce the regulatory agreement in the event the housing sponsor
fails to satisfy any of the requirements of this section.

(4) A provision that the regulatory agreement shall be deemed
a contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation
applicable to the building, the right to enforce the regulatory
agreement in any state court.

(5) A provision incorporating the requirements of Section 42
of the Internal Revenue Code, relating to low-income housing
credit, as modified by this section.

(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is
not in compliance with Section 42(g) of the Internal Revenue Code,
relating to qualified low-income housing project.

(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor’s obligations under the
regulatory agreement, assign the housing sponsor’s interest in rents
that it receives from the project, provided that until there is a
default under the regulatory agreement, the housing sponsor is
entitled to collect and retain the rents.

(8) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing
any of the parties designated to enforce the regulatory agreement
to collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate
the project; or any other relief as may be appropriate.

(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar
year during which applications may be filed and considered. The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit
ceiling that may be allocated by the committee in that period, and
the approximate date on which allocations shall be made. If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two allocation
periods, the committee may reduce the number of periods and
adjust the filing deadlines, maximum percentage of credit allocated,
and the allocation dates.

(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code, relating
to plans for allocation of credit among projects. In adopting this
plan, the committee shall comply with the provisions of Sections
42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code,
relating to qualified allocation plan and relating to certain selection
criteria must be used, respectively.

(3) Notwithstanding Section 42(m) of the Internal Revenue
Code, relating to responsibilities of housing credit agencies, the
California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:

(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:

(i) The housing sponsor shall demonstrate that there is a need
and demand for low-income housing in the community or region
for which it is proposed.

(ii) The project’s proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.

(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.

(iv) The housing sponsor shall have and maintain control of the
site for the project.

(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.

(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity
to ensure project completion and operation for the extended use
period.

(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.

(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A)
if both of the following apply:

(i) The project serves the lowest income tenants at rents
affordable to those tenants.

(ii) The project is obligated to serve qualified tenants for the
longest period.

(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:

(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.

(ii) Projects providing single-room occupancy units serving
very low income tenants.

(iii) Existing projects that are “at risk of conversion,” as defined
by paragraph (4) of subdivision (c).

(iv) Projects for which a public agency provides direct or indirect
long-term financial support for at least 15 percent of the total
project development costs or projects for which the owner’s equity
constitutes at least 30 percent of the total project development
costs.

(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.

(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue
of the date of submission of its application.

(k) Section 42(l) of the Internal Revenue Code, relating to
certifications and other reports to secretary, shall be modified as
follows:

The term “secretary” shall be replaced by the term “Franchise
Tax Board.”

(l) In the case in which the credit allowed under this section
exceeds the net tax, the excess may be carried over to reduce the
net tax in the following year, and succeeding years, if necessary,
until the credit has been exhausted.

(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:

(1) The project was not placed in service prior to 1990.

(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this section
prior to those amendments, the prior provisions of law shall prevail.

(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision is subject to the requirements of
paragraph (3) of subdivision (j).

(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which
any amount is attributable to unallocated credit from 1987 or 1988
shall not begin until after December 31, 1989.

(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, apply to calendar years after 1989.

(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, do not apply.

(q) (1) For a project that receives a preliminary reservation
under this section beginning on or after January 1, 2016, a taxpayer
may make an irrevocable election in its application to the California
Tax Credit Allocation Committee to sell all or any portion of any
credit allowed under this section to one or more unrelated parties
for each taxable year in which the credit is allowed subject to both
of the following conditions:

(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.

(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision is a taxpayer allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, “taxpayer allowed the credit
under this section” means a taxpayer that is allowed the credit
under this section without regard to the purchase of a credit
pursuant to this subdivision.

(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within
10 days of the sale of the credit, in the form and manner specified
by the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party to whom the credit has been sold, the face amount
of the credit sold, and the amount of consideration received by the
taxpayer for the sale of the credit.

(B) The California Tax Credit Allocation Committee shall
provide an annual listing to the Franchise Tax Board, in a form
and manner agreed upon by the California Tax Credit Allocation
Committee and the Franchise Tax Board, of the taxpayers that
have sold or purchased a credit pursuant to this subdivision.

(3) (A) A credit may be sold pursuant to this subdivision to
more than one unrelated party.

(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.

(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more
unrelated parties, subject to all of the requirements of this
subdivision.

(4) Notwithstanding any other provision of law, the taxpayer
that originally received the credit that is sold pursuant to paragraph
(1) shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.

(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.

(6) Notwithstanding paragraph (1), the taxpayer, with the
approval of the Executive Director of the California Tax Credit
Allocation Committee, may rescind the election to sell all or any
portion of the credit allowed under this section if the consideration
for the credit falls below 80 percent of the amount of the credit
after the California Tax Credit Allocation Committee reservation.

(r) The California Tax Credit Allocation Committee may
prescribe rules, guidelines, or procedures necessary or appropriate
to carry out the purposes of this section, including any guidelines
regarding the allocation of the credit allowed under this section.
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code shall not apply to any rule,
guideline, or procedure prescribed by the California Tax Credit
Allocation Committee pursuant to this section.

(s) The amendments to this section made by Chapter 1222 of
the Statutes of 1993 apply only to taxable years beginning on or
after January 1, 1994.

(t) This section shall remain in effect on and after December 1,
1990, for as long as Section 42 of the Internal Revenue Code,
relating to low-income housing credit, remains in effect. Any
unused credit may continue to be carried forward, as provided in
subdivision (l), until the credit has been exhausted.

end delete

begin delete SEC. 5. end delete

begin insert SEC. 4. end insert   

Section 17058.1 is added to the Revenue and Taxation
Code, to read:

17058.1.  

(a) (1) For taxable years beginning on or after
January 1, 2017, there shall be allowed to a taxpayer a credit
against the “net tax,” as defined by Section 17039, for a qualified
low-income building in begin delete an amount equal to the amount computed
in end delete accordance with Section 42 of the Internal Revenue Code,
relating to low-income housing credit as modified by this section.

begin delete

(2) In determining the amount of credit allowed pursuant to this
section, the following shall apply:

(A) The eligible basis of a building shall be equal to the project’s
total cost basis.

(B) The applicable percentage shall be:

(1) For a project with units for low-income households, 130
percent.

(2) For a project with units for median-income households with
incomes between 80 percent and 99 percent of the area median
income, 108 percent.

(3) For a project with units for median-income households with
incomes of 100 percent of the area median income, 76 percent.

end delete begin insert

(2) The amount of credit shall be equal to 20 percent of the
project’s unadjusted allocated basis, as defined by the California
Tax Credit Allocation Committee by regulation, not to exceed fifty
thousand dollars ($50,000) per unit.

end insert

(b) For purposes of this section:

(1) “Low-income household” means a household with an income
that is greater than 60 percent and not higher than 80 percent of
the area median household income.

begin delete

(2) “Median-income household” means a household with an
income that is greater than 80 percent but not higher than 100
percent of the area median household income.

end delete begin delete

(3)

end delete

begin insert (2) end insert  “Qualified low-income building” has the same meaning as
in Section 42(c)(2) of the Internal Revenue Code, relating to
qualified low-income housing building, and also means the
qualified low-income building is eligible for a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating to low-income
housing credit, except that Section 42(g) of the Internal Revenue
Code, relating to qualified low-income housing project, shall not
apply and instead the following requirements shall be met:

(A) The project is for the acquisition or substantial rehabilitation
of a building at least 20 years old or is a new development.

(B) The project includes no more than 50 percent of its units
that are eligible for the tax credit allowed pursuant to Section
17058.

(C) Any units reserved for a tax credit allowed pursuant to this
section shall not supplant existing affordable housing units not
eligible for a tax credit pursuant to this section, including any units
for households with an income that is less than that of a low-income

begin delete household. end delete begin insert household, and the rent for those units is at least 20
percent below market rate at the time the tax credit is allocated. end insert

(D) The project will allocate at least begin delete 20 end delete begin insert 40 end insert percent of its units
to low-income begin delete households and median-income end delete households.

begin insert

(E) The project is located, in the year of the application for the
tax credit, in one of the 12 counties within this state identified by
the United State Department of Housing and Urban Development
as having the highest fair market rents in the state. The California
Tax Credit Allocation Committee shall annually publish those
counties on its Internet Web site.

end insert

(c) (1) This section shall not be construed to require a taxpayer
to have been previously or currently allocated a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating low-income
housing credit.

(2) This section shall not be construed to preclude a taxpayer,
allowed a credit pursuant to this section, from being allocated a
credit pursuant to Section 17058 or Section 42 of the Internal
Revenue Code, relating to low-income housing credit.

begin insert

(3) A credit shall not be allowed pursuant to this section if a
taxpayer has been allocated a credit pursuant to Section 42 of the
Internal Revenue Code, relating to low-income housing credit, for
units for a household with a household income that is greater than
60 percent of the area median household income.

end insert

(d) An applicant for the credit allowed pursuant to this section
must demonstrate to the California Tax Credit Allocation
Committee that, within the city in which the project is situated,
the area median income for the average rental unit is above the
area median income for the project.

(e) (1) In the case where the credit allowed under this section
exceeds the “net tax,” the excess may be carried over to reduce
the “net tax” in the following year, and succeeding 14 years if
necessary, until the credit has been exhausted.

(2) The credit shall be claimed in the same manner, with regard
to the credit period, as a credit claimed pursuant to Section 17058.

(3) The credit allowed pursuant to this section shall have a
compliance period of 55 consecutive taxable years at the affordable
rate or at substantially below-market rate beginning with the first
taxable year of the credit period with respect thereto, administered
in the same manner as under Section 17058.

(f) The California Tax Credit Allocation Committee shall
allocate, on a first-come-first-served basis, the credit allowed by
this section. The aggregate amount of credit that may be allocated
begin delete in any fiscal year end delete pursuant to this section and Sections 12206.1
and 23610.7 shall be an amount equal to begin delete the sum of paragraphs
(1) and (2). end delete begin insert one hundred million dollars ($100,000,000). end insert

begin delete

(1) One hundred million dollars ($100,000,000) for the 2016-17
fiscal year, and for each fiscal year thereafter.

(2) The unallocated credit amount, if any, from the preceding
fiscal year.

end delete begin insert

(g) (1) For a project that is allocated a credit under this section,
a taxpayer may make an irrevocable election in its application to
the California Tax Credit Allocation Committee to sell all or any
portion of any credit allowed under this section to one or more
unrelated parties for each taxable year in which the credit is
allowed, subject to both of the following conditions:

end insert begin insert

(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.

end insert begin insert

(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision are taxpayers allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, “taxpayer allowed the credit
under this section” means a taxpayer that is allowed the credit
under this section without regard to the purchase of a credit
pursuant to this subdivision.

end insert begin insert

(2) (A)   The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within
10 days of the sale of the credit, in the form and manner specified
by the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit,
including the social security or other taxpayer identification
number of the unrelated party or parties to whom the credit has
been sold, the face amount of the credit sold, and the amount of
consideration received by the taxpayer for the sale of the credit.

end insert begin insert

(B) The California Tax Credit Allocation Committee shall
provide an annual listing to the Franchise Tax Board, in a form
and manner agreed upon by the California Tax Credit Allocation
Committee and the Franchise Tax Board, of the taxpayers that
have sold or purchased a credit pursuant to this subdivision.

end insert begin insert

(3) (A)   A credit may be sold pursuant to this subdivision to more
than one unrelated party.

end insert begin insert

(B) (i)   Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.

end insert begin insert

(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more
unrelated parties, subject to all of the requirements of this
subdivision.

end insert begin insert

(4) Notwithstanding any other provision of law, the taxpayer
that originally received the credit that is sold pursuant to
paragraph (1) shall remain solely liable for all obligations and
liabilities imposed on the taxpayer by this section with respect to
the credit, none of which shall apply to any party to whom the
credit has been sold or subsequently transferred. Parties who
purchase credits pursuant to paragraph (1) shall be entitled to
utilize the purchased credits in the same manner in which the
taxpayer that originally received the credit could utilize them.

end insert begin insert

(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.

end insert begin insert

(6) Notwithstanding paragraph (1), the taxpayer, with the
approval of the Executive Director of the California Tax Credit
Allocation Committee, may rescind the election to sell all or any
portion of the credit allowed under this section if the consideration
for the credit falls below 80 percent of the amount of the credit
after the California Tax Credit Allocation Committee reservation.

end insert begin delete

(g)

end delete

begin insert (h) end insert  (1) The California Tax Credit Allocation Committee shall
establish guidelines to specify that a taxpayer may be allowed a
tax credit pursuant to this section, Section 17058, and Section 42
of the Internal Revenue Code, relating to low-income housing
credit, subject to the requirements of these begin delete sections. end delete begin insert sections and
paragraph (3) of subdivision (c). end insert

(2) The California Tax Credit Allocation Committee begin delete and the
Department of Insurance end delete may adopt regulations, rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including guidelines to conform the credit allowed
by this section to any procedures established pursuant to Section
17058.

(3) The Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) does not apply to this subdivision.

begin delete

(h) Section 41 does not apply to the credit allowed by this
section.

end delete

begin delete

SEC. 6.  

Section 23610.5 of the Revenue and Taxation Code
is amended to read:

23610.5.  

(a) (1) There shall be allowed as a credit against the
“tax,” defined by Section 23036, a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal
Revenue Code, relating to low-income housing credit, except as
otherwise provided in this section.

(2) “Taxpayer,” for purposes of this section, means the sole
owner in the case of a “C” corporation, the partners in the case of
a partnership, and the shareholders in the case of an “S”
corporation.

(3) “Housing sponsor,” for purposes of this section, means the
sole owner in the case of a “C” corporation, the partnership in the
case of a partnership, and the “S” corporation in the case of an “S”
corporation.

(b) (1) The amount of the credit allocated to any housing
sponsor shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project’s need
for the credit for economic feasibility in accordance with the
requirements of this section.

(A) The low-income housing project shall be located in
California and shall meet either of the following requirements:

(i) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety
Code, that are allocated credits solely under the set-aside described
in subdivision (c) of Section 50199.20 of the Health and Safety
Code, the project’s housing sponsor has been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue
Code, relating to low-income housing credit.

(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code, relating to special rule where 50 percent
or more of building is financed with tax-exempt bonds subject to
volume cap.

(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code, relating to low-income housing
credit. The committee may require a fee if the application for the
credit under this section is submitted in a calendar year after the
year the application is submitted for the federal tax credit.

(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b)
of the Internal Revenue Code, relating to determination of
distributive share.

(ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the federal credit shall not be allowed in the
taxable year in which the sale or other disposition occurs, but shall
instead be deferred until and treated as if it occurred in the first
taxable year immediately following the taxable year in which the
federal credit period expires for the project described in clause (i).

(iii) This subparagraph does not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.

(iv) This subparagraph shall cease to be operative with respect
to any project that receives a preliminary reservation of a credit
on or after January 1, 2016.

(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.

(B) In the case of a partnership or an “S” corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.

(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.

(D) All elections made by the taxpayer pursuant to Section 42
of the Internal Revenue Code, relating to low-income housing
credit, apply to this section.

(E) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified
census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
Internal Revenue Code, relating to increase in credit for buildings
in high-cost areas, credits may be allocated under this section in
the amounts prescribed in subdivision (c), provided that the amount
of credit allocated under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, is computed on 100 percent
of the qualified basis of the building.

(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located
in DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant
to Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high cost areas, provided that
the credit allowed under this section shall not exceed 30 percent
of the eligible basis of the building.

(F) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit allocated
pursuant to Section 42(d)(5)(B) of the Internal Revenue Code,
relating to increase in credit for buildings in high cost areas, in
amounts up to 30 percent of the eligible basis of a building if the
credits allowed under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, are reduced by an equivalent
amount.

(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.

(c) Section 42(b) of the Internal Revenue Code, relating to
applicable percentage, shall be modified as follows:

(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term “applicable
percentage” means 9 percent for each of the first three years and
3 percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.

(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed in
Section 42(b)(1)(A) of the Internal Revenue Code.

(B) For the fourth year, the difference between 30 percent and
the sum of the applicable percentages for the first three years.

(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is federally
subsidized or that is an existing building that is “at risk of
conversion,” the term “applicable percentage” means the following:

(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.

(B) For the fourth year, the difference between 13 percent and
the sum of the applicable percentages for the first three years.

(4) For purposes of this section, the term “at risk of conversion,”
with respect to an existing property means a property that satisfies
all of the following criteria:

(A) The property is a multifamily rental housing development
in which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:

(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.

(ii) The Below-Market-Interest-Rate Program pursuant to
Section 221(d)(3) of the National Housing Act, Sections
1715l(d)(3) and (5) of Title 12 of the United States Code.

(iii) Section 236 of the National Housing Act, Section 1715z-1
of Title 12 of the United States Code.

(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section
1701s of Title 12 of the United States Code, as amended.

(v) Programs pursuant to Section 515 of the Housing Act of
1949, Section 1485 of Title 42 of the United States Code, as
amended.

(vi) The low-income housing credit program set forth in Section
42 of the Internal Revenue Code, relating to low-income housing
credit.

(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.

(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.

(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code, relating to rehabilitation expenditures
treated as a separate new building, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.

(d) The term “qualified low-income housing project” as defined
in Section 42(c)(2) of the Internal Revenue Code, relating to
qualified low-income building, is modified by adding the following
requirements:

(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:

(A) An amount not to exceed 8 percent of the lesser of:

(i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.

(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.

(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the “floor space fraction,” as defined in
Section 42 of the Internal Revenue Code, relating to low-income
housing credit.

(C) Any amount allowed to be distributed under subparagraph
(A) that is not available for distribution during the first five years
of the compliance period may be accumulated and distributed any
time during the first 15 years of the compliance period but not
thereafter.

(2) The limitation on return applies in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an “S” corporation.

(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code, relating to in
general.

(e) The provisions of Section 42(f) of the Internal Revenue
Code, relating to definition and special rules relating to credit
period, shall be modified as follows:

(1) The term “credit period” as defined in Section 42(f)(1) of
the Internal Revenue Code, relating to credit period defined, is
modified by substituting “four taxable years” for “10 taxable
years.”

(2) The special rule for the first taxable year of the credit period
under Section 42(f)(2) of the Internal Revenue Code, relating to
special rule for first year of credit period, shall not apply to the tax
credit under this section.

(3) Section 42(f)(3) of the Internal Revenue Code, relating to
determination of applicable percentage with respect to increases
in qualified basis after first year of credit period, is modified to
read:

If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the close
of the first year of the credit period, the housing sponsor, to the
extent of its tax credit allocation, shall be eligible for a credit on
the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.

(f) The provisions of Section 42(h) of the Internal Revenue
Code, relating to limitation on aggregate credit allowable with
respect to projects located in a state, shall be modified as follows:

(1) Section 42(h)(2) of the Internal Revenue Code, relating to
allocated credit amount to apply to all taxable years ending during
or after credit allocation year, does not apply and instead the
following provisions apply:

The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which
the allocation is made.

(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
(7), and (8) of Section 42(h) of the Internal Revenue Code, relating
to limitation on aggregate credit allowable with respect to projects
located in a state, do not apply to this section.

(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation
Committee pursuant to this section, Section 12206, and Section
17058 shall be an amount equal to the sum of all the following:

(1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the
2001 calendar year. For the purposes of this paragraph, the term
“Consumer Price Index” means the last Consumer Price Index for
All Urban Consumers published by the federal Department of
Labor.

(2) The unused housing credit ceiling, if any, for the preceding
calendar years.

(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing
credit dollar amount previously allocated to any project that does
not become a qualified low-income housing project within the
period required by this section or to any project with respect to
which an allocation is canceled by mutual consent of the California
Tax Credit Allocation Committee and the allocation recipient.

(4) Five hundred thousand dollars ($500,000) per calendar year
for projects to provide farmworker housing, as defined in
subdivision (h) of Section 50199.7 of the Health and Safety Code.

(5) The amount of any unallocated or returned credits under
former Sections 17053.14, 23608.2, and 23608.3, as those sections
read prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of
Section 50199.7 of the Health and Safety Code.

(h) The term “compliance period” as defined in Section 42(i)(1)
of the Internal Revenue Code, relating to compliance period, is
modified to mean, with respect to any building, the period of 30
consecutive taxable years beginning with the first taxable year of
the credit period with respect thereto.

(i) Section 42(j) of the Internal Revenue Code, relating to
recapture of credit, does not apply and the following shall be
substituted in its place:

The requirements of this section shall be set forth in a regulatory
agreement between the California Tax Credit Allocation Committee
and the housing sponsor, and this agreement shall be subordinated,
when required, to any lien or encumbrance of any banks or other
institutional lenders to the project. The regulatory agreement
entered into pursuant to subdivision (f) of Section 50199.14 of the
Health and Safety Code shall apply, provided that the agreement
includes all of the following provisions:

(1) A term not less than the compliance period.

(2) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.

(3) A provision stating which state and local agencies can
enforce the regulatory agreement in the event the housing sponsor
fails to satisfy any of the requirements of this section.

(4) A provision that the regulatory agreement shall be deemed
a contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation
applicable to the building, the right to enforce the regulatory
agreement in any state court.

(5) A provision incorporating the requirements of Section 42
of the Internal Revenue Code, relating to low-income housing
credit, as modified by this section.

(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is
not in compliance with Section 42(g) of the Internal Revenue Code,
relating to qualified low-income housing project.

(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor’s obligations under the
regulatory agreement, assign the housing sponsor’s interest in rents
that it receives from the project, provided that until there is a
default under the regulatory agreement, the housing sponsor is
entitled to collect and retain the rents.

(8) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing
any of the parties designated to enforce the regulatory agreement
to collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate
the project; or any other relief as may be appropriate.

(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar
year during which applications may be filed and considered. The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit
ceiling that may be allocated by the committee in that period, and
the approximate date on which allocations shall be made. If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two allocation
periods, the committee may reduce the number of periods and
adjust the filing deadlines, maximum percentage of credit allocated,
and the allocation dates.

(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code, relating
to plans for allocation of credit among projects. In adopting this
plan, the committee shall comply with the provisions of Sections
42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code,
relating to qualified allocation plan and relating to certain selection
criteria must be used, respectively.

(3) Notwithstanding Section 42(m) of the Internal Revenue
Code, relating to responsibilities of housing credit agencies, the
California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:

(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:

(i) The housing sponsor shall demonstrate that there is a need
for low-income housing in the community or region for which it
is proposed.

(ii) The project’s proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and shall be
adequate to operate the project for the extended use period.

(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.

(iv) The housing sponsor shall have and maintain control of the
site for the project.

(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.

(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity
to ensure project completion and operation for the extended use
period.

(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.

(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A)
if both of the following apply:

(i) The project serves the lowest income tenants at rents
affordable to those tenants.

(ii) The project is obligated to serve qualified tenants for the
longest period.

(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:

(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.

(ii) Projects providing single-room occupancy units serving
very low income tenants.

(iii) Existing projects that are “at risk of conversion,” as defined
by paragraph (4) of subdivision (c).

(iv) Projects for which a public agency provides direct or indirect
long-term financial support for at least 15 percent of the total
project development costs or projects for which the owner’s equity
constitutes at least 30 percent of the total project development
costs.

(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.

(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue
of the date of submission of its application except to break a tie
when two or more of the projects have an equal rating.

(5) Not less than 20 percent of the low-income housing tax
credits available annually under this section, Section 12206, and
Section 17058 shall be set aside for allocation to rural areas as
defined in Section 50199.21 of the Health and Safety Code. Any
amount of credit set aside for rural areas remaining on or after
October 31 of any calendar year shall be available for allocation
to any eligible project. No amount of credit set aside for rural areas
shall be considered available for any eligible project so long as
there are eligible rural applications pending on October 31.

(k) Section 42(l) of the Internal Revenue Code, relating to
certifications and other reports to secretary, shall be modified as
follows:

The term “secretary” shall be replaced by the term “Franchise
Tax Board.”

(l) In the case in which the credit allowed under this section
exceeds the “tax,” the excess may be carried over to reduce the
“tax” in the following year, and succeeding years if necessary,
until the credit has been exhausted.

(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:

(1) The project was not placed in service prior to 1990.

(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this section
prior to those amendments, the prior provisions of law shall prevail.

(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision is subject to the requirements of
paragraph (3) of subdivision (j).

(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which
any amount is attributable to unallocated credit from 1987 or 1988
shall not begin until after December 31, 1989.

(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, apply to calendar years after 1989.

(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, do not apply.

(q) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, “affiliated corporation” has the
meaning provided in subdivision (b) of Section 25110, as that
section was amended by Chapter 881 of the Statutes of 1993, as
of the last day of the taxable year in which the credit is allowed,
except that “100 percent” is substituted for “more than 50 percent”
wherever it appears in the section, as that section was amended by
Chapter 881 of the Statutes of 1993, and “voting common stock”
is substituted for “voting stock” wherever it appears in the section,
as that section was amended by Chapter 881 of the Statutes of
1993.

(2) The election provided in paragraph (1):

(A) May be based on any method selected by the corporation
that originally receives the credit.

(B) Shall be irrevocable for the taxable year the credit is allowed,
once made.

(C) May be changed for any subsequent taxable year if the
election to make the assignment is expressly shown on each of the
returns of the affiliated corporations that assign and receive the
credits.

(r) (1) For a project that receives a preliminary reservation
under this section beginning on or after January 1, 2016, a taxpayer
may make an irrevocable election in its application to the California
Tax Credit Allocation Committee to sell all or any portion of any
credit allowed under this section to one or more unrelated parties
for each taxable year in which the credit is allowed, subject to both
of the following conditions:

(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.

(B) (i) The unrelated party or parties purchasing any or all of
the credit pursuant to this subdivision is a taxpayer allowed the
credit under this section for the taxable year of the purchase or any
prior taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.

(ii) For purposes of this subparagraph, “taxpayer allowed the
credit under this section” means a taxpayer that is allowed the
credit under this section without regard to the purchase of a credit
pursuant to this subdivision without regard to any of the following:

(I) The purchase of a credit under this section pursuant to this
subdivision.

(II) The assignment of a credit under this section pursuant to
subdivision (q).

(III) The assignment of a credit under this section pursuant to
Section 23363.

(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within
10 days of the sale of the credit, in the form and manner specified
by the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party to whom the credit has been sold, the face amount
of the credit sold, and the amount of consideration received by the
taxpayer for the sale of the credit.

(B) The California Tax Credit Allocation Committee shall
provide an annual listing to the Franchise Tax Board, in a form
and manner agreed upon by the California Tax Credit Allocation
Committee and the Franchise Tax Board, of the taxpayers that
have sold or purchased a credit pursuant to this subdivision.

(3) (A) A credit may be sold pursuant to this subdivision to
more than one unrelated party.

(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.

(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more
unrelated parties, subject to all of the requirements of this
subdivision.

(4) Notwithstanding any other provision of law, the taxpayer
that originally received the credit that is sold pursuant to paragraph
(1) shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.

(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.

(6) Notwithstanding paragraph (1), the taxpayer, with the
approval of the Executive Director of the California Tax Credit
Allocation Committee, may rescind the election to sell all or any
portion of the credit allowed under this section if the consideration
for the credit falls below 80 percent of the amount of the credit
after the California Tax Credit Allocation Committee reservation.

(s) The California Tax Credit Allocation Committee may
prescribe rules, guidelines, or procedures necessary or appropriate
to carry out the purposes of this section, including any guidelines
regarding the allocation of the credit allowed under this section.
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code shall not apply to any rule,
guideline, or procedure prescribed by the California Tax Credit
Allocation Committee pursuant to this section.

(t) Any unused credit may continue to be carried forward, as
provided in subdivision (l), until the credit has been exhausted.

(u) This section shall remain in effect on and after December
1, 1990, for as long as Section 42 of the Internal Revenue Code,
relating to low-income housing credit, remains in effect.

(v) The amendments to this section made by Chapter 1222 of
the Statutes of 1993 shall apply only to taxable years beginning
on or after January 1, 1994, except that paragraph (1) of subdivision
(q), as amended, shall apply to taxable years beginning on or after
January 1, 1993.

end delete

begin delete SEC. 7. end delete

begin insert SEC. 5. end insert   

Section 23610.7 is added to the Revenue and Taxation
Code, to read:

23610.7.  

(a) (1) For taxable years beginning on or after
January 1, 2017, there shall be allowed to a taxpayer a credit
against the “tax,” as defined by Section 23036, for a qualified
low-income building in begin delete an amount equal to the amount computed
in end delete accordance with Section 42 of the Internal Revenue Code,
relating to low-income housing credit as modified by this section.

begin delete

(2) In determining the amount of credit allowed pursuant to this
section, the following shall apply:

end delete begin delete

(A) The eligible basis of a building shall be equal to the project’s
total cost basis.

end delete begin delete

(B) The applicable percentage shall be:

end delete begin delete

(1) For a project with units for low-income households, 130
percent.

end delete begin delete

(2) For a project with units for median-income households with
incomes between 80 percent and 99 percent of the area median
income, 108 percent.

end delete begin delete

(3) For a project with units for median-income households with
incomes of 100 percent of the area median income, 76 percent.

end delete begin insert

(2) The amount of credit shall be equal to 20 percent of the
project’s unadjusted allocated basis, as defined by the California
Tax Credit Allocation Committee by regulation, not to exceed fifty
thousand dollars ($50,000) per unit.

end insert

(b) For purposes of this section:

(1) “Low-income household” means a household with an income
that is greater than 60 percent and not higher than 80 percent of
the area median household income.

begin delete

(2) “Median-income household” means a household with an
income that is greater than 80 percent but not higher than 100
percent of the area median household income.

end delete begin delete

(3)

end delete

begin insert (2) end insert  “Qualified low-income building” has the same meaning as
in Section 42(c)(2) of the Internal Revenue Code, relating to
qualified low-income housing building, and also means the
qualified low-income building is eligible for a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating to low-income
housing credit, except that Section 42(g) of the Internal Revenue
Code, relating to qualified low-income housing project, shall not
apply and instead the following requirements shall be met:

(A) The project is for the acquisition or substantial rehabilitation
of a building at least 20 years old or is a new development.

(B) The project includes no more than 50 percent of its units
that are eligible for the tax credit allowed pursuant to Section
23610.5.

(C) Any units reserved for a tax credit allowed pursuant to this
section shall not supplant existing affordable housing units not
eligible for a tax credit pursuant to this section, including any units
for households with an income that is less than that of a low-income

begin delete household. end delete begin insert household, and the rent for those units is at least 20
percent below market rate at the time the tax credit is allocated. end insert

(D) The project will allocate at least begin delete 20 end delete begin insert 40 end insert percent of its units
to low-income begin delete households and median-income end delete households.

begin insert

(E) The project is located, in the year of the application for the
tax credit, in one of the 12 counties within this state identified by
the United State Department of Housing and Urban Development
as having the highest fair market rents in the state. The California
Tax Credit Allocation Committee shall annually publish those
counties on its Internet Web site.

end insert

(c) (1) This section shall not be construed to require a taxpayer
to have been previously or currently allocated a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating low-income
housing credit.

(2) This section shall not be construed to preclude a taxpayer,
allowed a credit pursuant to this section, from being allocated a
credit pursuant to Section 23610.5 or Section 42 of the Internal
Revenue Code, relating to low-income housing credit.

begin insert

(3) A credit shall not be allowed pursuant to this section if a
taxpayer has been allocated a credit pursuant to Section 42 of the
Internal Revenue Code, relating to low-income housing credit, for
units for a household with a household income that is greater than
60 percent of the area median household income.

end insert

(d) An applicant for the credit allowed pursuant to this section
must demonstrate to the California Tax Credit Allocation
Committee that, within the city in which the project is situated,
the area median income for the average rental unit is above the
area median income for the project.

(e) (1) In the case where the credit allowed under this section
exceeds the “tax,” the excess may be carried over to reduce the
“tax” in the following year, and succeeding 14 years if necessary,
until the credit has been exhausted.

(2) The credit shall be claimed in the same manner, with regard
to the credit period, as a credit claimed pursuant to Section 23610.5.

(3) The credit allowed pursuant to this section shall have a
compliance period of 55 consecutive taxable years at the affordable
rate or at substantially below-market rate beginning with the first
taxable year of the credit period with respect thereto, administered
in the same manner as under Section 23610.5.

(f) The California Tax Credit Allocation Committee shall
allocate, on a first-come-first-served basis, the credit allowed by
this section. The aggregate amount of credit that may be allocated
begin delete in any fiscal year end delete pursuant to this section and Sections 12206.1
and 17058.1 shall be an amount equal to begin delete the sum of paragraphs
(1) and (2). end delete begin insert one hundred million dollars ($100,000,000). end insert

begin delete

(1) One hundred million dollars ($100,000,000) for the 2016-17
fiscal year, and for each fiscal year thereafter.

(2) The unallocated credit amount, if any, from the preceding
fiscal year.

end delete begin insert

(g) (1) For a project that is allocated a credit under this section,
a taxpayer may make an irrevocable election in its application to
the California Tax Credit Allocation Committee to sell all or any
portion of any credit allowed under this section to one or more
unrelated parties for each taxable year in which the credit is
allowed, subject to both of the following conditions:

end insert begin insert

(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.

end insert begin insert

(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision are taxpayers allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, “taxpayer allowed the credit
under this section” means a taxpayer that is allowed the credit
under this section without regard to the purchase of a credit
pursuant to this subdivision.

end insert begin insert

(2) (A)   The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within
10 days of the sale of the credit, in the form and manner specified
by the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit,
including the social security or other taxpayer identification
number of the unrelated party or parties to whom the credit has
been sold, the face amount of the credit sold, and the amount of
consideration received by the taxpayer for the sale of the credit.

end insert begin insert

(B) The California Tax Credit Allocation Committee shall
provide an annual listing to the Franchise Tax Board, in a form
and manner agreed upon by the California Tax Credit Allocation
Committee and the Franchise Tax Board, of the taxpayers that
have sold or purchased a credit pursuant to this subdivision.

end insert begin insert

(3) (A)   A credit may be sold pursuant to this subdivision to more
than one unrelated party.

end insert begin insert

(B) (i)   Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.

end insert begin insert

(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more
unrelated parties, subject to all of the requirements of this
subdivision.

end insert begin insert

(4) Notwithstanding any other provision of law, the taxpayer
that originally received the credit that is sold pursuant to
paragraph (1) shall remain solely liable for all obligations and
liabilities imposed on the taxpayer by this section with respect to
the credit, none of which shall apply to any party to whom the
credit has been sold or subsequently transferred. Parties who
purchase credits pursuant to paragraph (1) shall be entitled to
utilize the purchased credits in the same manner in which the
taxpayer that originally received the credit could utilize them.

end insert begin insert

(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.

end insert begin insert

(6) Notwithstanding paragraph (1), the taxpayer, with the
approval of the Executive Director of the California Tax Credit
Allocation Committee, may rescind the election to sell all or any
portion of the credit allowed under this section if the consideration
for the credit falls below 80 percent of the amount of the credit
after the California Tax Credit Allocation Committee reservation.

end insert begin delete

(g)

end delete

begin insert (h) end insert  (1) The California Tax Credit Allocation Committee shall
establish guidelines to specify that a taxpayer may be allowed a
tax credit pursuant to this section, Section 23610.5, and Section
42 of the Internal Revenue Code, relating to low-income housing
credit, subject to the requirements of these begin delete sections. end delete begin insert sections and
paragraph (3) of subdivision (c). end insert

(2) The California Tax Credit Allocation Committee begin delete and the
Department of Insurance end delete may adopt regulations, rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including guidelines to conform the credit allowed
by this section to any procedures established pursuant to Section
23610.5.

(3) The Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) does not apply to this subdivision.

begin delete

(h) Section 41 does not apply to the credit allowed by this
section.

end delete

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert (a) end insert begin insert   end insert begin insert In accordance with Section 41 of the Revenue and
Taxation Code, to measure whether the Sections 12206.1, 17058.1,
and 23610.7 of the Revenue and Taxation Code, as added by
Sections 3, 4, and 5 of this act, achieve their intended purpose, on
the January 1 after the final allocation of tax credits allowed
pursuant to those sections, the California Tax Credit Allocation
Committee shall prepare a written report to the Legislature which
shall include, but is not limited to, the following: end insert

begin insert

(1) The total number of units for which the tax credits were
allowed.

end insert begin insert

(2) The geographic areas of the tax credit allocations.

end insert begin insert

(3) A recommendation as to whether the tax credits should
continue to be allowed.

end insert begin insert

(b) A report submitted pursuant to subdivision (a) shall be
submitted in compliance with Section 9795 of the Government
Code.

end insert

begin insert

begin insert SEC. 7. end insert   

end insert begin insert

If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.

end insert

begin insert

begin insert SEC. 8. end insert   

end insert begin insert

Notwithstanding Section 2229 of the Revenue and
Taxation Code, no appropriation is made by this act and the state
shall not reimburse any local agency for any property tax revenues
lost by it pursuant to this act.

end insert

begin delete SEC. 8. end delete

begin insert SEC. 9. end insert   

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.