Amended in Assembly August 25, 2015

Amended in Senate June 1, 2015

Amended in Senate May 12, 2015

Amended in Senate April 29, 2015

Amended in Senate April 16, 2015

Amended in Senate April 6, 2015

Senate BillNo. 377


Introduced by Senator Beall

February 24, 2015


An act to amend Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 377, as amended, Beall. 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 based on federal law.

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 unrelatedbegin delete partiesend deletebegin insert parties, as described,end insert for each taxable year in which the credit is allowed for not less than 80% of the amountbegin insert ofend insert the credit to be sold,begin insert and would provide for the one-time resale of that credit,end insert as provided. The bill would require thebegin insert Californiaend insert Taxbegin insert Creditend insert Allocation Committee to enter into an agreement with the Franchise Tax Board to pay any costs incurred by the Franchise Tax Board in administering these provisions.

Existing law, in the case of a partnership, requires the allocation of the credits, on or after January 1, 2009, and before January 1, 2016, to partners based upon the partnership agreement, regardless of how the federal low-income housing tax credit, as provided, is allocated to the partners, or whether the allocation of the credit under the terms of the agreement has substantial economic effect, as specified.

This bill would eliminate the January 1, 2016, date.

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

P2    1

SECTION 1.  

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

3

12206.  

(a) (1) There shall be allowed as a credit against the
4“tax,” as described by Section 12201, a state low-income housing
5tax credit in an amount equal to the amount determined in
6subdivision (c), computed in accordance with Section 42 of the
7Internal Revenue Code, relating to low-income housing credit,
8except as otherwise provided in this section.

9(2) “Taxpayer,” for purposes of this section, means the sole
10owner in the case of a “C” corporation, the partners in the case of
11a partnership, and the shareholders in the case of an “S”
12corporation.

13(3) “Housing sponsor,” for purposes of this section, means the
14sole owner in the case of a “C” corporation, the partnership in the
15case of a partnership, and the “S” corporation in the case of an “S”
16corporation.

17(b) (1) The amount of the credit allocated to any housing
18sponsor shall be authorized by the California Tax Credit Allocation
19Committee, or any successor thereof, based on a project’s need
20for the credit for economic feasibility in accordance with the
21requirements of this section.

22(A) Except for projects to provide farmworker housing, as
23defined in subdivision (h) of Section 50199.7 of the Health and
P3    1Safety Code, that are allocated credits solely under the set-aside
2described in subdivision (c) of Section 50199.20 of the Health and
3Safety Code, the low-income housing project shall be located in
4California and shall meet either of the following requirements:

5(i) The project’s housing sponsor has been allocated by the
6 California Tax Credit Allocation Committee a credit for federal
7income tax purposes under Section 42 of the Internal Revenue
8Code, relating to low-income housing credit.

9(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
10Internal Revenue Code, relating to special rule where 50 percent
11or more of building is financed with tax-exempt bonds subject to
12volume cap.

13(B) The California Tax Credit Allocation Committee shall not
14require fees for the credit under this section in addition to those
15fees required for applications for the tax credit pursuant to Section
1642 of the Internal Revenue Code, relating to low-income housing
17credit. The committee may require a fee if the application for the
18credit under this section is submitted in a calendar year after the
19year the application is submitted for the federal tax credit.

20(C) (i) For a project that receives a preliminary reservation of
21the state low-income housing tax credit, allowed pursuant to
22subdivision (a), on or after January 1, 2009, the credit shall be
23allocated to the partners of a partnership owning the project in
24accordance with the partnership agreement, regardless of how the
25federal low-income housing tax credit with respect to the project
26is allocated to the partners, or whether the allocation of the credit
27under the terms of the agreement has substantial economic effect,
28within the meaning of Section 704(b) of the Internal Revenue
29Code, relating to determination of distributive share.

30(ii) This subparagraph shall not apply to a project that receives
31a preliminary reservation of state low-income housing tax credits
32under the set-aside described in subdivision (c) of Section 50199.20
33of the Health and Safety Code unless the project also receives a
34preliminary reservation of federal low-income housing tax credits.

35(2) (A) The California Tax Credit Allocation Committee shall
36certify to the housing sponsor the amount of tax credit under this
37section allocated to the housing sponsor for each credit period.

38(B) In the case of a partnership or an “S” corporation, the
39housing sponsor shall provide a copy of the California Tax Credit
40Allocation Committee certification to the taxpayer.

P4    1(C) The taxpayer shall attach a copy of the certification to any
2return upon which a tax credit is claimed under this section.

3(D) In the case of a failure to attach a copy of the certification
4for the year to the return in which a tax credit is claimed under this
5section, no credit under this section shall be allowed for that year
6until a copy of that certification is provided.

7(E) All elections made by the taxpayer pursuant to Section 42
8of the Internal Revenue Code, relating to low-income housing
9credit, shall apply to this section.

10(F) (i) Except as described in clause (ii), for buildings located
11in designated difficult development areas (DDAs) or qualified
12census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
13Internal Revenue Code, relating to increase in credit for buildings
14in high-cost areas, credits may be allocated under this section in
15the amounts prescribed in subdivision (c), provided that the amount
16of credit allocated under Section 42 of the Internal Revenue Code,
17relating to low-income housing credit, is computed on 100 percent
18of the qualified basis of the building.

19(ii) Notwithstanding clause (i), the California Tax Credit
20Allocation Committee may allocate the credit for buildings located
21in DDAs or QCTs that are restricted to having 50 percent of its
22occupants be special needs households, as defined in the California
23Code of Regulations by the California Tax Credit Allocation
24Committee, even if the taxpayer receives federal credits pursuant
25to Section 42(d)(5)(B) of the Internal Revenue Code, relating to
26increase in credit for buildings in high-cost areas, provided that
27the credit allowed under this section shall not exceed 30 percent
28of the eligible basis of the building.

29(G) (i) The California Tax Credit Allocation Committee may
30allocate a credit under this section in exchange for a credit allocated
31pursuant to Section 42(d)(5)(B) of the Internal Revenue Code,
32relating to increase in credit for buildings in high-cost areas, in
33amounts up to 30 percent of the eligible basis of a building if the
34credits allowed under Section 42 of the Internal Revenue Code,
35relating to low-income housing credit, are reduced by an equivalent
36amount.

37(ii) An equivalent amount shall be determined by the California
38Tax Credit Allocation Committee based upon the relative amount
39required to produce an equivalent state tax credit to the taxpayer.

P5    1(c) Section 42(b) of the Internal Revenue Code, relating to
2applicable percentage, shall be modified as follows:

3(1) In the case of any qualified low-income building that receives
4an allocation after 1989 and is a new building not federally
5subsidized, the term “applicable percentage” means the following:

6(A) For each of the first three years, the percentage prescribed
7by the Secretary of the Treasury for new buildings that are not
8federally subsidized for the taxable year, determined in accordance
9with the requirements of Section 42(b)(2) of the Internal Revenue
10Code, relating to temporary minimum credit rate for nonfederally
11subsidized new buildings, in lieu of the percentage prescribed in
12Section 42(b)(1)(A) of the Internal Revenue Code.

13(B) For the fourth year, the difference between 30 percent and
14the sum of the applicable percentages for the first three years.

15(2) In the case of any qualified low-income building that receives
16an allocation after 1989 and that is a new building that is federally
17subsidized or that is an existing building that is “at risk of
18conversion,” the term “applicable percentage” means the following:

19(A) For each of the first three years, the percentage prescribed
20by the Secretary of the Treasury for new buildings that are federally
21subsidized for the taxable year.

22(B) For the fourth year, the difference between 13 percent and
23the sum of the applicable percentages for the first three years.

24(3) For purposes of this section, the term “at risk of conversion,”
25with respect to an existing property means a property that satisfies
26all of the following criteria:

27(A) The property is a multifamily rental housing development
28in which at least 50 percent of the units receive governmental
29assistance pursuant to any of the following:

30(i) New construction, substantial rehabilitation, moderate
31rehabilitation, property disposition, and loan management set-aside
32programs, or any other program providing project-based assistance
33pursuant to Section 8 of the United States Housing Act of 1937,
34Section 1437f of Title 42 of the United States Code, as amended.

35(ii) The Below-Market-Interest-Rate Program pursuant to
36Section 221(d)(3) of the National Housing Act, Sections
371715l(d)(3) and (5) of Title 12 of the United States Code.

38(iii) Section 236 of the National Housing Act, Section 1715z-1
39of Title 12 of the United States Code.

P6    1(iv) Programs for rent supplement assistance pursuant to Section
2101 of the Housing and Urban Development Act of 1965, Section
31701s of Title 12 of the United States Code, as amended.

4(v) Programs pursuant to Section 515 of the Housing Act of
51949, Section 1485 of Title 42 of the United States Code, as
6amended.

7(vi) The low-income housing credit program set forth in Section
842 of the Internal Revenue Code, relating to low-income housing
9credit.

10(B) The restrictions on rent and income levels will terminate or
11the federally insured mortgage on the property is eligible for
12prepayment any time within five years before or after the date of
13application to the California Tax Credit Allocation Committee.

14(C) The entity acquiring the property enters into a regulatory
15agreement that requires the property to be operated in accordance
16with the requirements of this section for a period equal to the
17greater of 55 years or the life of the property.

18(D) The property satisfies the requirements of Section 42(e) of
19the Internal Revenue Code relating to rehabilitation expenditures
20 treated as a separate new building, except that the provisions of
21Section 42(e)(3)(A)(ii)(I) shall not apply.

22(d) The term “qualified low-income housing project” as defined
23in Section 42(c)(2) of the Internal Revenue Code, relating to
24qualified low-income building, is modified by adding the following
25requirements:

26(1) The taxpayer shall be entitled to receive a cash distribution
27from the operations of the project, after funding required reserves,
28that, at the election of the taxpayer, is equal to:

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

30(i) The owner equity, which shall include the amount of the
31capital contributions actually paid to the housing sponsor and shall
32not include any amounts until they are paid on an investor note.

33(ii) Twenty percent of the adjusted basis of the building as of
34the close of the first taxable year of the credit period.

35(B) The amount of the cashflow from those units in the building
36that are not low-income units. For purposes of computing cashflow
37under this subparagraph, operating costs shall be allocated to the
38low-income units using the “floor space fraction,” as defined in
39Section 42 of the Internal Revenue Code, relating to low-income
40housing credit.

P7    1(C) Any amount allowed to be distributed under subparagraph
2(A) that is not available for distribution during the first five years
3of the compliance period may be accumulated and distributed any
4time during the first 15 years of the compliance period but not
5thereafter.

6(2) The limitation on return shall apply in the aggregate to the
7partners if the housing sponsor is a partnership and in the aggregate
8to the shareholders if the housing sponsor is an “S” corporation.

9(3) The housing sponsor shall apply any cash available for
10distribution in excess of the amount eligible to be distributed under
11paragraph (1) to reduce the rent on rent-restricted units or to
12increase the number of rent-restricted units subject to the tests of
13Section 42(g)(1) of the Internal Revenue Code, relating to in
14general.

15(e) The provisions of Section 42(f) of the Internal Revenue
16Code, relating to definition and special rules relating to credit
17period, shall be modified as follows:

18(1) The term “credit period” as defined in Section 42(f)(1) of
19the Internal Revenue Code, relating to credit period defined, is
20modified by substituting “four taxable years” for “10 taxable
21years.”

22(2) The special rule for the first taxable year of the credit period
23under Section 42(f)(2) of the Internal Revenue Code, relating to
24special rule for first year of credit period, shall not apply to the tax
25credit under this section.

26(3) Section 42(f)(3) of the Internal Revenue Code, relating to
27determination of applicable percentage with respect to increases
28in qualified basis after first year of credit period, is modified to
29read:

30If, as of the close of any taxable year in the compliance period,
31after the first year of the credit period, the qualified basis of any
32building exceeds the qualified basis of that building as of the close
33of the first year of the credit period, the housing sponsor, to the
34extent of its tax credit allocation, shall be eligible for a credit on
35the excess in an amount equal to the applicable percentage
36determined pursuant to subdivision (c) for the four-year period
37beginning with the later of the taxable years in which the increase
38in qualified basis occurs.

P8    1(f) The provisions of Section 42(h) of the Internal Revenue
2Code, relating to limitation on aggregate credit allowable with
3respect to projects located in a state, shall be modified as follows:

4(1) Section 42(h)(2) of the Internal Revenue Code, relating to
5allocated credit amount to apply to all taxable years ending during
6or after credit allocation year, shall not be applicable and instead
7the following provisions shall be applicable:

8The total amount for the four-year credit period of the housing
9credit dollars allocated in a calendar year to any building shall
10reduce the aggregate housing credit dollar amount of the California
11Tax Credit Allocation Committee for the calendar year in which
12the allocation is made.

13(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
14(7), and (8) of Section 42(h) of the Internal Revenue Code, relating
15to limitation on aggregate credit allowable with respect to projects
16located in a state, shall not be applicable.

17(g) The aggregate housing credit dollar amount that may be
18allocated annually by the California Tax Credit Allocation
19Committee pursuant to this section, Section 17058, and Section
2023610.5 shall be an amount equal to the sum of all the following:

21(1) Seventy million dollars ($70,000,000) for the 2001 calendar
22year, and, for the 2002 calendar year and each calendar year
23thereafter, seventy million dollars ($70,000,000) increased by the
24percentage, if any, by which the Consumer Price Index for the
25preceding calendar year exceeds the Consumer Price Index for the
262001 calendar year. For the purposes of this paragraph, the term
27“Consumer Price Index” means the last Consumer Price Index for
28All Urban Consumers published by the federal Department of
29Labor.

30(2) The unused housing credit ceiling, if any, for the preceding
31calendar years.

32(3) The amount of housing credit ceiling returned in the calendar
33year. For purposes of this paragraph, the amount of housing credit
34dollar amount returned in the calendar year equals the housing
35credit dollar amount previously allocated to any project that does
36not become a qualified low-income housing project within the
37period required by this section or to any project with respect to
38which an allocation is canceled by mutual consent of the California
39Tax Credit Allocation Committee and the allocation recipient.

P9    1(4) Five hundred thousand dollars ($500,000) per calendar year
2for projects to provide farmworker housing, as defined in
3subdivision (h) of Section 50199.7 of the Health and Safety Code.

4(5) The amount of any unallocated or returned credits under
5former Sections 17053.14, 23608.2, and 23608.3, as those sections
6read prior to January 1, 2009, until fully exhausted for projects to
7provide farmworker housing, as defined in subdivision (h) of
8Section 50199.7 of the Health and Safety Code.

9(h) The term “compliance period” as defined in Section 42(i)(1)
10of the Internal Revenue Code, relating to compliance period, is
11modified to mean, with respect to any building, the period of 30
12consecutive taxable years beginning with the first taxable year of
13the credit period with respect thereto.

14(i) (1) Section 42(j) of the Internal Revenue Code, relating to
15recapture of credit, shall not be applicable and the provisions in
16paragraph (2) shall be substituted in its place.

17(2) The requirements of this section shall be set forth in a
18regulatory agreement between the California Tax Credit Allocation
19Committee and the housing sponsor, and this agreement shall be
20subordinated, when required, to any lien or encumbrance of any
21banks or other institutional lenders to the project. The regulatory
22agreement entered into pursuant to subdivision (f) of Section
23 50199.14 of the Health and Safety Code, shall apply, provided that
24the agreement includes all of the following provisions:

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

26(B) A requirement that the agreement be recorded in the official
27records of the county in which the qualified low-income housing
28project is located.

29(C) A provision stating which state and local agencies can
30enforce the regulatory agreement in the event the housing sponsor
31fails to satisfy any of the requirements of this section.

32(D) A provision that the regulatory agreement shall be deemed
33a contract enforceable by tenants as third-party beneficiaries thereto
34and that allows individuals, whether prospective, present, or former
35occupants of the building, who meet the income limitation
36applicable to the building, the right to enforce the regulatory
37agreement in any state court.

38(E) A provision incorporating the requirements of Section 42
39of the Internal Revenue Code, relating to low-income housing
40credit, as modified by this section.

P10   1(F) A requirement that the housing sponsor notify the California
2Tax Credit Allocation Committee or its designee and the local
3agency that can enforce the regulatory agreement if there is a
4determination by the Internal Revenue Service that the project is
5not in compliance with Section 42(g) of the Internal Revenue Code,
6relating to qualified low-income housing project.

7(G) A requirement that the housing sponsor, as security for the
8performance of the housing sponsor’s obligations under the
9regulatory agreement, assign the housing sponsor’s interest in rents
10that it receives from the project, provided that until there is a
11default under the regulatory agreement, the housing sponsor is
12entitled to collect and retain the rents.

13(H) A provision that the remedies available in the event of a
14default under the regulatory agreement that is not cured within a
15reasonable cure period include, but are not limited to, allowing
16any of the parties designated to enforce the regulatory agreement
17to collect all rents with respect to the project; taking possession of
18the project and operating the project in accordance with the
19regulatory agreement until the enforcer determines the housing
20sponsor is in a position to operate the project in accordance with
21the regulatory agreement; applying to any court for specific
22performance; securing the appointment of a receiver to operate
23the project; or any other relief as may be appropriate.

24(j) (1) The committee shall allocate the housing credit on a
25regular basis consisting of two or more periods in each calendar
26year during which applications may be filed and considered. The
27committee shall establish application filing deadlines, the maximum
28percentage of federal and state low-income housing tax credit
29ceiling that may be allocated by the committee in that period, and
30the approximate date on which allocations shall be made. If the
31enactment of federal or state law, the adoption of rules or
32regulations, or other similar events prevent the use of two allocation
33periods, the committee may reduce the number of periods and
34adjust the filing deadlines, maximum percentage of credit allocated,
35and the allocation dates.

36(2) The committee shall adopt a qualified allocation plan, as
37provided in Section 42(m)(1) of the Internal Revenue Code, relating
38to plans for allocation of credit among projects. In adopting this
39plan, the committee shall comply with the provisions of Sections
4042(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code,
P11   1relating to qualified allocation plan and relating to certain selection
2criteria must be used, respectively.

3(3) Notwithstanding Section 42(m) of the Internal Revenue
4Code, relating to responsibilities of housing credit agencies, the
5California Tax Credit Allocation Committee shall allocate housing
6credits in accordance with the qualified allocation plan and
7regulations, which shall include the following provisions:

8(A) All housing sponsors, as defined by paragraph (3) of
9subdivision (a), shall demonstrate at the time the application is
10filed with the committee that the project meets the following
11threshold requirements:

12(i) The housing sponsor shall demonstrate that there is a need
13and demand for low-income housing in the community or region
14for which it is proposed.

15(ii) The project’s proposed financing, including tax credit
16proceeds, shall be sufficient to complete the project and that the
17proposed operating income shall be adequate to operate the project
18 for the extended use period.

19(iii) The project shall have enforceable financing commitments,
20either construction or permanent financing, for at least 50 percent
21of the total estimated financing of the project.

22(iv) The housing sponsor shall have and maintain control of the
23site for the project.

24(v) The housing sponsor shall demonstrate that the project
25complies with all applicable local land use and zoning ordinances.

26(vi) The housing sponsor shall demonstrate that the project
27development team has the experience and the financial capacity
28to ensure project completion and operation for the extended use
29period.

30(vii) The housing sponsor shall demonstrate the amount of tax
31credit that is necessary for the financial feasibility of the project
32and its viability as a qualified low-income housing project
33throughout the extended use period, taking into account operating
34expenses, a supportable debt service, reserves, funds set aside for
35rental subsidies and required equity, and a development fee that
36does not exceed a specified percentage of the eligible basis of the
37project prior to inclusion of the development fee in the eligible
38basis, as determined by the committee.

P12   1(B) The committee shall give a preference to those projects
2satisfying all of the threshold requirements of subparagraph (A)
3if both of the following apply:

4(i) The project serves the lowest income tenants at rents
5affordable to those tenants.

6(ii) The project is obligated to serve qualified tenants for the
7longest period.

8(C) In addition to the provisions of subparagraphs (A) and (B),
9the committee shall use the following criteria in allocating housing
10credits:

11(i) Projects serving large families in which a substantial number,
12as defined by the committee, of all residential units are low-income
13units with three and more bedrooms.

14(ii) Projects providing single-room occupancy units serving
15very low income tenants.

16(iii) Existing projects that are “at risk of conversion,” as defined
17by paragraph (3) of subdivision (c).

18(iv) Projects for which a public agency provides direct or indirect
19long-term financial support for at least 15 percent of the total
20project development costs or projects for which the owner’s equity
21constitutes at least 30 percent of the total project development
22costs.

23(v) Projects that provide tenant amenities not generally available
24to residents of low-income housing projects.

25(4) For purposes of allocating credits pursuant to this section,
26the committee shall not give preference to any project by virtue
27of the date of submission of its application except to break a tie
28when two or more of the projects have an equal rating.

29(k) Section 42(l) of the Internal Revenue Code, relating to
30certifications and other reports to the secretary, shall be modified
31as follows:

32The term “secretary” shall be replaced by the term “Franchise
33Tax Board.”

34(l) In the case where the credit allowed under this section
35 exceeds the “tax,” the excess may be carried over to reduce the
36“tax” in the following year, and succeeding years if necessary,
37until the credit has been exhausted.

38(m) The provisions of Section 11407(a) of Public Law 101-508,
39relating to the effective date of the extension of the low-income
40housing credit, shall apply to calendar years after 1993.

P13   1(n) The provisions of Section 11407(c) of Public Law 101-508,
2relating to election to accelerate credit, shall not apply.

3(o) (1) For a project that receives a preliminary reservation
4under this section beginning on or after January 1, 2016, a taxpayer
5may make an irrevocable election in its application to the California
6Tax Credit Allocation Committee to sell all or any portion of any
7credit allowed under this section to one or more unrelated parties
8for each taxable year in which the credit is allowedbegin delete for
9consideration that is not less than 80 percent of the amount of the
10credit.end delete
begin insert subject to both of the following conditions:end insert

begin insert

11(A) The credit is sold for consideration that is not less than 80
12percent of the amount of the credit.

end insert
begin insert

13(B) The unrelated party or parties purchasing any or all of the
14credit pursuant to this subdivision is a taxpayer allowed the credit
15under this section for the taxable year of the purchase or any prior
16taxable year or is a taxpayer allowed the federal credit under
17Section 42 of the Internal Revenue Code, relating to low-income
18housing credit, for the taxable year of the purchase or any prior
19taxable year in connection with any project located in this state.
20For purposes of this subparagraph, “taxpayer allowed the credit
21under this section” means a taxpayer that is allowed the credit
22under this section without regard to the purchase of a credit
23pursuant to this subdivision.

end insert

24(2) (A) The taxpayer that originally received the credit shall
25report to the California Tax Credit Allocation Committee within
2610 days of the sale of the credit, in the form and manner specified
27by the California Tax Credit Allocation Committee, all required
28information regarding the purchase and sale of the credit, including
29the social security or other taxpayer identification number of the
30unrelated party to whom the credit has been sold, the face amount
31of the credit sold, and the amount of consideration received by the
32taxpayer for the sale of the credit.

33(B) The California Tax Credit Allocation Committee shall
34provide an annual listing to the Franchise Tax Board, in a form
35and manner agreed upon by the California Tax Credit Allocation
36Committee and the Franchise Tax Board, of the taxpayers that
37have sold or purchased a credit pursuant to this subdivision.

38(3) begin insert(A)end insertbegin insertend insert A credit may be sold pursuant to this subdivision to
39more than one unrelatedbegin delete party and shall not be resold by the
40unrelated party to another taxpayer or otherend delete
party.

begin insert

P14   1(B) (i) Except as provided in clause (ii), a credit shall not be
2resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

3(ii) All or any portion of any credit allowed under this section
4may be resold once by an original purchaser to one or more
5unrelated parties, subject to all of the requirements of this
6subdivision.

end insert

7(4) Notwithstanding any other provision of law, the taxpayer
8that originally received the credit that is sold pursuant to paragraph
9(1) shall remain solely liable for all obligations and liabilities
10imposed on the taxpayer by this section with respect to the credit,
11none of which shall apply to any party to whom the credit has been
12sold or subsequently transferred. Parties who purchase credits
13pursuant to paragraph (1) shall be entitled to utilize the purchased
14credits in the same manner in which the taxpayer that originally
15received the credit could utilize them.

16(5) A taxpayer shall not sell a credit allowed by this section if
17the taxpayer was allowed the credit on any tax return of the
18taxpayer.

19(6) Notwithstanding paragraph (1), the taxpayer, with the
20approval of the Executive Director of the California Tax Credit
21Allocation Committee, may rescind the election to sell all or any
22portion of the credit allowed under this section if the consideration
23for the credit falls below 80 percent of the amount of the credit
24after the California Tax Credit Allocation Committee reservation.

25(p) Thebegin delete Franchise Tax Boardend deletebegin insert California Tax Credit Allocation
26Committeeend insert
may prescribe rules, guidelines, or procedures necessary
27or appropriate to carry out the purposes of this section, including
28any guidelines regarding the allocation of the credit allowed under
29this section. Chapter 3.5 (commencing with Section 11340) of Part
301 of Division 3 of Title 2 of the Government Code shall not apply
31to any rule, guideline, or procedure prescribed by thebegin delete Franchise
32Tax Boardend delete
begin insert California Tax Credit Allocation Committeeend insert pursuant
33to this section.

34(q) This section shall remain in effect for as long as Section 42
35of the Internal Revenue Code, relating to low-income housing
36credit, remains in effect.

37

SEC. 2.  

Section 17058 of the Revenue and Taxation Code is
38amended to read:

39

17058.  

(a) (1) There shall be allowed as a credit against the
40“net tax,” as defined in Section 17039, a state low-income housing
P15   1tax credit in an amount equal to the amount determined in
2subdivision (c), computed in accordance with Section 42 of the
3Internal Revenue Code, relating to low-income housing credit,
4except as otherwise provided in this section.

5(2) “Taxpayer,” for purposes of this section, means the sole
6owner in the case of an individual, the partners in the case of a
7partnership, and the shareholders in the case of an “S” corporation.

8(3) “Housing sponsor,” for purposes of this section, means the
9sole owner in the case of an individual, the partnership in the case
10of a partnership, and the “S” corporation in the case of an “S”
11corporation.

12(b) (1) The amount of the credit allocated to any housing
13sponsor shall be authorized by the California Tax Credit Allocation
14Committee, or any successor thereof, based on a project’s need
15for the credit for economic feasibility in accordance with the
16requirements of this section.

17(A) The low-income housing project shall be located in
18California and shall meet either of the following requirements:

19(i) Except for projects to provide farmworker housing, as defined
20in subdivision (h) of Section 50199.7 of the Health and Safety
21Code, that are allocated credits solely under the set-aside described
22in subdivision (c) of Section 50199.20 of the Health and Safety
23Code, the project’s housing sponsor has been allocated by the
24 California Tax Credit Allocation Committee a credit for federal
25income tax purposes under Section 42 of the Internal Revenue
26Code, relating to low-income housing credit.

27(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
28Internal Revenue Code, relating to special rule where 50 percent
29or more of building is financed with tax-exempt bonds subject to
30volume cap.

31(B) The California Tax Credit Allocation Committee shall not
32require fees for the credit under this section in addition to those
33fees required for applications for the tax credit pursuant to Section
3442 of the Internal Revenue Code, relating to low-income housing
35credit. The committee may require a fee if the application for the
36credit under this section is submitted in a calendar year after the
37year the application is submitted for the federal tax credit.

38(C) (i) For a project that receives a preliminary reservation of
39the state low-income housing tax credit, allowed pursuant to
40subdivision (a), on or after January 1, 2009, the credit shall be
P16   1allocated to the partners of a partnership owning the project in
2accordance with the partnership agreement, regardless of how the
3federal low-income housing tax credit with respect to the project
4is allocated to the partners, or whether the allocation of the credit
5under the terms of the agreement has substantial economic effect,
6within the meaning of Section 704(b) of the Internal Revenue
7Code, relating to determination of distributive share.

8(ii) To the extent the allocation of the credit to a partner under
9this section lacks substantial economic effect, any loss or deduction
10otherwise allowable under this part that is attributable to the sale
11or other disposition of that partner’s partnership interest made prior
12to the expiration of the federal credit shall not be allowed in the
13taxable year in which the sale or other disposition occurs, but shall
14instead be deferred until and treated as if it occurred in the first
15taxable year immediately following the taxable year in which the
16federal credit period expires for the project described in clause (i).

17(iii) This subparagraph shall not apply to a project that receives
18a preliminary reservation of state low-income housing tax credits
19under the set-aside described in subdivision (c) of Section 50199.20
20of the Health and Safety Code unless the project also receives a
21preliminary reservation of federal low-income housing tax credits.

22(2) (A) The California Tax Credit Allocation Committee shall
23certify to the housing sponsor the amount of tax credit under this
24section allocated to the housing sponsor for each credit period.

25(B) In the case of a partnership or an “S” corporation, the
26housing sponsor shall provide a copy of the California Tax Credit
27Allocation Committee certification to the taxpayer.

28(C) The taxpayer shall, upon request, provide a copy of the
29certification to the Franchise Tax Board.

30(D) All elections made by the taxpayer pursuant to Section 42
31of the Internal Revenue Code, relating to low-income housing
32credit, shall apply to this section.

33(E) (i) Except as described in clause (ii), for buildings located
34in designated difficult development areas (DDAs) or qualified
35census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
36Internal Revenue Code, relating to increase in credit for buildings
37in high-cost areas, credits may be allocated under this section in
38the amounts prescribed in subdivision (c), provided that the amount
39of credit allocated under Section 42 of the Internal Revenue Code,
P17   1relating to low-income housing credit, is computed on 100 percent
2of the qualified basis of the building.

3(ii) Notwithstanding clause (i), the California Tax Credit
4Allocation Committee may allocate the credit for buildings located
5in DDAs or QCTs that are restricted to having 50 percent of its
6occupants be special needs households, as defined in the California
7Code of Regulations by the California Tax Credit Allocation
8Committee, even if the taxpayer receives federal credits pursuant
9to Section 42(d)(5)(B) of the Internal Revenue Code, relating to
10increase in credit for buildings in high-cost areas, provided that
11the credit allowed under this section shall not exceed 30 percent
12of the eligible basis of the building.

13(F) (i) The California Tax Credit Allocation Committee may
14allocate a credit under this section in exchange for a credit allocated
15pursuant to Section 42(d)(5)(B) of the Internal Revenue Code,
16relating to increase in credit for buildings in high-cost areas, in
17amounts up to 30 percent of the eligible basis of a building if the
18credits allowed under Section 42 of the Internal Revenue Code,
19relating to low-income housing credit, are reduced by an equivalent
20amount.

21(ii) An equivalent amount shall be determined by the California
22Tax Credit Allocation Committee based upon the relative amount
23required to produce an equivalent state tax credit to the taxpayer.

24(c) Section 42(b) of the Internal Revenue Code, relating to
25applicable percentage, shall be modified as follows:

26(1) In the case of any qualified low-income building placed in
27service by the housing sponsor during 1987, the term “applicable
28percentage” means 9 percent for each of the first three years and
293 percent for the fourth year for new buildings (whether or not the
30building is federally subsidized) and for existing buildings.

31(2) In the case of any qualified low-income building that receives
32an allocation after 1989 and is a new building not federally
33subsidized, the term “applicable percentage” means the following:

34(A) For each of the first three years, the percentage prescribed
35by the Secretary of the Treasury for new buildings that are not
36federally subsidized for the taxable year, determined in accordance
37with the requirements of Section 42(b)(2) of the Internal Revenue
38Code, relating to temporary minimum credit rate for nonfederally
39subsidized new buildings, in lieu of the percentage prescribed in
40Section 42(b)(1)(A) of the Internal Revenue Code.

P18   1(B) For the fourth year, the difference between 30 percent and
2the sum of the applicable percentages for the first three years.

3(3) In the case of any qualified low-income building that receives
4an allocation after 1989 and that is a new building that is federally
5subsidized or that is an existing building that is “at risk of
6conversion,” the term “applicable percentage” means the following:

7(A) For each of the first three years, the percentage prescribed
8by the Secretary of the Treasury for new buildings that are federally
9subsidized for the taxable year.

10(B) For the fourth year, the difference between 13 percent and
11the sum of the applicable percentages for the first three years.

12(4) For purposes of this section, the term “at risk of conversion,”
13with respect to an existing property means a property that satisfies
14all of the following criteria:

15(A) The property is a multifamily rental housing development
16in which at least 50 percent of the units receive governmental
17assistance pursuant to any of the following:

18(i) New construction, substantial rehabilitation, moderate
19rehabilitation, property disposition, and loan management set-aside
20programs, or any other program providing project-based assistance
21pursuant to Section 8 of the United States Housing Act of 1937,
22Section 1437f of Title 42 of the United States Code, as amended.

23(ii) The Below-Market-Interest-Rate Program pursuant to
24Section 221(d)(3) of the National Housing Act, Sections
251715l(d)(3) and (5) of Title 12 of the United States Code.

26(iii) Section 236 of the National Housing Act, Section 1715z-1
27of Title 12 of the United States Code.

28(iv) Programs for rent supplement assistance pursuant to Section
29101 of the Housing and Urban Development Act of 1965, Section
301701s of Title 12 of the United States Code, as amended.

31(v) Programs pursuant to Section 515 of the Housing Act of
321949, Section 1485 of Title 42 of the United States Code, as
33amended.

34(vi) The low-income housing credit program set forth in Section
3542 of the Internal Revenue Code, relating to low-income housing
36credit.

37(B) The restrictions on rent and income levels will terminate or
38the federally insured mortgage on the property is eligible for
39prepayment any time within five years before or after the date of
40application to the California Tax Credit Allocation Committee.

P19   1(C) The entity acquiring the property enters into a regulatory
2agreement that requires the property to be operated in accordance
3with the requirements of this section for a period equal to the
4greater of 55 years or the life of the property.

5(D) The property satisfies the requirements of Section 42(e) of
6the Internal Revenue Code relating to rehabilitation expenditures
7treated as a separate new building, except that the provisions of
8Section 42(e)(3)(A)(ii)(I) shall not apply.

9(d) The term “qualified low-income housing project” as defined
10in Section 42(c)(2) of the Internal Revenue Code, relating to
11qualified low-income building, is modified by adding the following
12requirements:

13(1) The taxpayer shall be entitled to receive a cash distribution
14from the operations of the project, after funding required reserves,
15that, at the election of the taxpayer, is equal to:

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

17(i) The owner equity, which shall include the amount of the
18capital contributions actually paid to the housing sponsor and shall
19not include any amounts until they are paid on an investor note.

20(ii) Twenty percent of the adjusted basis of the building as of
21the close of the first taxable year of the credit period.

22(B) The amount of the cashflow from those units in the building
23that are not low-income units. For purposes of computing cashflow
24under this subparagraph, operating costs shall be allocated to the
25low-income units using the “floor space fraction,” as defined in
26Section 42 of the Internal Revenue Code, relating to low-income
27housing credit.

28(C) Any amount allowed to be distributed under subparagraph
29(A) that is not available for distribution during the first five years
30of the compliance period may be accumulated and distributed any
31time during the first 15 years of the compliance period but not
32thereafter.

33(2) The limitation on return shall apply in the aggregate to the
34partners if the housing sponsor is a partnership and in the aggregate
35to the shareholders if the housing sponsor is an “S” corporation.

36(3) The housing sponsor shall apply any cash available for
37distribution in excess of the amount eligible to be distributed under
38paragraph (1) to reduce the rent on rent-restricted units or to
39increase the number of rent-restricted units subject to the tests of
P20   1Section 42(g)(1) of the Internal Revenue Code, relating to in
2general.

3(e) The provisions of Section 42(f) of the Internal Revenue
4Code, relating to definition and special rules relating to credit
5period, shall be modified as follows:

6(1) The term “credit period” as defined in Section 42(f)(1) of
7the Internal Revenue Code, relating to credit period defined, is
8modified by substituting “four taxable years” for “10 taxable
9years.”

10(2) The special rule for the first taxable year of the credit period
11under Section 42(f)(2) of the Internal Revenue Code, relating to
12special rule for first year of credit period, shall not apply to the tax
13credit under this section.

14(3) Section 42(f)(3) of the Internal Revenue Code, relating to
15determination of applicable percentage with respect to increases
16in qualified basis after first year of credit period, is modified to
17read:

18If, as of the close of any taxable year in the compliance period,
19after the first year of the credit period, the qualified basis of any
20building exceeds the qualified basis of that building as of the close
21of the first year of the credit period, the housing sponsor, to the
22extent of its tax credit allocation, shall be eligible for a credit on
23the excess in an amount equal to the applicable percentage
24determined pursuant to subdivision (c) for the four-year period
25beginning with the taxable year in which the increase in qualified
26basis occurs.

27(f) The provisions of Section 42(h) of the Internal Revenue
28Code, relating to limitation on aggregate credit allowable with
29respect to projects located in a state, shall be modified as follows:

30(1) Section 42(h)(2) of the Internal Revenue Code, relating to
31allocated credit amount to apply to all taxable years ending during
32or after credit allocation year, shall not be applicable and instead
33the following provisions shall be applicable:

34The total amount for the four-year credit period of the housing
35credit dollars allocated in a calendar year to any building shall
36reduce the aggregate housing credit dollar amount of the California
37Tax Credit Allocation Committee for the calendar year in which
38the allocation is made.

39(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
40(7), and (8) of Section 42(h) of the Internal Revenue Code, relating
P21   1to limitation on aggregate credit allowable with respect to projects
2located in a state, shall not be applicable.

3(g) The aggregate housing credit dollar amount that may be
4allocated annually by the California Tax Credit Allocation
5Committee pursuant to this section, Section 12206, and Section
623610.5 shall be an amount equal to the sum of all the following:

7(1) Seventy million dollars ($70,000,000) for the 2001 calendar
8year, and, for the 2002 calendar year and each calendar year
9thereafter, seventy million dollars ($70,000,000) increased by the
10percentage, if any, by which the Consumer Price Index for the
11preceding calendar year exceeds the Consumer Price Index for the
122001 calendar year. For the purposes of this paragraph, the term
13“Consumer Price Index” means the last Consumer Price Index for
14All Urban Consumers published by the federal Department of
15Labor.

16(2) The unused housing credit ceiling, if any, for the preceding
17calendar years.

18(3) The amount of housing credit ceiling returned in the calendar
19year. For purposes of this paragraph, the amount of housing credit
20dollar amount returned in the calendar year equals the housing
21credit dollar amount previously allocated to any project that does
22not become a qualified low-income housing project within the
23period required by this section or to any project with respect to
24which an allocation is canceled by mutual consent of the California
25Tax Credit Allocation Committee and the allocation recipient.

26(4) Five hundred thousand dollars ($500,000) per calendar year
27for projects to provide farmworker housing, as defined in
28subdivision (h) of Section 50199.7 of the Health and Safety Code.

29(5) The amount of any unallocated or returned credits under
30former Sections 17053.14, 23608.2, and 23608.3, as those sections
31read prior to January 1, 2009, until fully exhausted for projects to
32provide farmworker housing, as defined in subdivision (h) of
33Section 50199.7 of the Health and Safety Code.

34(h) The term “compliance period” as defined in Section 42(i)(1)
35of the Internal Revenue Code, relating to compliance period, is
36modified to mean, with respect to any building, the period of 30
37consecutive taxable years beginning with the first taxable year of
38the credit period with respect thereto.

39(i) Section 42(j) of the Internal Revenue Code, relating to
40recapture of credit, shall not be applicable and the following
P22   1requirements of this section shall be set forth in a regulatory
2agreement between the California Tax Credit Allocation Committee
3and the housing sponsor, and this agreement shall be subordinated,
4when required, to any lien or encumbrance of any banks or other
5institutional lenders to the project. The regulatory agreement
6entered into pursuant to subdivision (f) of Section 50199.14 of the
7Health and Safety Code shall apply, provided that the agreement
8includes all of the following provisions:

9(1) A term not less than the compliance period.

10(2) A requirement that the agreement be recorded in the official
11records of the county in which the qualified low-income housing
12project is located.

13(3) A provision stating which state and local agencies can
14enforce the regulatory agreement in the event the housing sponsor
15fails to satisfy any of the requirements of this section.

16(4) A provision that the regulatory agreement shall be deemed
17a contract enforceable by tenants as third-party beneficiaries thereto
18and that allows individuals, whether prospective, present, or former
19occupants of the building, who meet the income limitation
20applicable to the building, the right to enforce the regulatory
21agreement in any state court.

22(5) A provision incorporating the requirements of Section 42
23of the Internal Revenue Code, relating to low-income housing
24credit, as modified by this section.

25(6) A requirement that the housing sponsor notify the California
26Tax Credit Allocation Committee or its designee if there is a
27determination by the Internal Revenue Service that the project is
28not in compliance with Section 42(g) of the Internal Revenue Code,
29relating to qualified low-income housing project.

30(7) A requirement that the housing sponsor, as security for the
31performance of the housing sponsor’s obligations under the
32regulatory agreement, assign the housing sponsor’s interest in rents
33that it receives from the project, provided that until there is a
34default under the regulatory agreement, the housing sponsor is
35entitled to collect and retain the rents.

36(8) A provision that the remedies available in the event of a
37default under the regulatory agreement that is not cured within a
38reasonable cure period include, but are not limited to, allowing
39any of the parties designated to enforce the regulatory agreement
40to collect all rents with respect to the project; taking possession of
P23   1the project and operating the project in accordance with the
2regulatory agreement until the enforcer determines the housing
3sponsor is in a position to operate the project in accordance with
4the regulatory agreement; applying to any court for specific
5performance; securing the appointment of a receiver to operate
6the project; or any other relief as may be appropriate.

7(j) (1) The committee shall allocate the housing credit on a
8regular basis consisting of two or more periods in each calendar
9year during which applications may be filed and considered. The
10committee shall establish application filing deadlines, the maximum
11percentage of federal and state low-income housing tax credit
12ceiling that may be allocated by the committee in that period, and
13the approximate date on which allocations shall be made. If the
14enactment of federal or state law, the adoption of rules or
15regulations, or other similar events prevent the use of two allocation
16periods, the committee may reduce the number of periods and
17adjust the filing deadlines, maximum percentage of credit allocated,
18and the allocation dates.

19(2) The committee shall adopt a qualified allocation plan, as
20provided in Section 42(m)(1) of the Internal Revenue Code, relating
21to plans for allocation of credit among projects. In adopting this
22plan, the committee shall comply with the provisions of Sections
2342(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code,
24relating to qualified allocation plan and relating to certain selection
25criteria must be used, respectively.

26(3) Notwithstanding Section 42(m) of the Internal Revenue
27Code, relating to responsibilities of housing credit agencies, the
28California Tax Credit Allocation Committee shall allocate housing
29credits in accordance with the qualified allocation plan and
30regulations, which shall include the following provisions:

31(A) All housing sponsors, as defined by paragraph (3) of
32subdivision (a), shall demonstrate at the time the application is
33filed with the committee that the project meets the following
34threshold requirements:

35(i) The housing sponsor shall demonstrate that there is a need
36and demand for low-income housing in the community or region
37for which it is proposed.

38(ii) The project’s proposed financing, including tax credit
39proceeds, shall be sufficient to complete the project and that the
P24   1proposed operating income shall be adequate to operate the project
2for the extended use period.

3(iii) The project shall have enforceable financing commitments,
4either construction or permanent financing, for at least 50 percent
5of the total estimated financing of the project.

6(iv) The housing sponsor shall have and maintain control of the
7site for the project.

8(v) The housing sponsor shall demonstrate that the project
9complies with all applicable local land use and zoning ordinances.

10(vi) The housing sponsor shall demonstrate that the project
11development team has the experience and the financial capacity
12to ensure project completion and operation for the extended use
13period.

14(vii) The housing sponsor shall demonstrate the amount of tax
15credit that is necessary for the financial feasibility of the project
16and its viability as a qualified low-income housing project
17throughout the extended use period, taking into account operating
18expenses, a supportable debt service, reserves, funds set aside for
19rental subsidies and required equity, and a development fee that
20does not exceed a specified percentage of the eligible basis of the
21project prior to inclusion of the development fee in the eligible
22basis, as determined by the committee.

23(B) The committee shall give a preference to those projects
24satisfying all of the threshold requirements of subparagraph (A)
25if both of the following apply:

26(i) The project serves the lowest income tenants at rents
27affordable to those tenants.

28(ii) The project is obligated to serve qualified tenants for the
29longest period.

30(C) In addition to the provisions of subparagraphs (A) and (B),
31the committee shall use the following criteria in allocating housing
32credits:

33(i) Projects serving large families in which a substantial number,
34as defined by the committee, of all residential units are low-income
35units with three and more bedrooms.

36(ii) Projects providing single-room occupancy units serving
37very low income tenants.

38(iii) Existing projects that are “at risk of conversion,” as defined
39by paragraph (4) of subdivision (c).

P25   1(iv) Projects for which a public agency provides direct or indirect
2long-term financial support for at least 15 percent of the total
3project development costs or projects for which the owner’s equity
4constitutes at least 30 percent of the total project development
5costs.

6(v) Projects that provide tenant amenities not generally available
7to residents of low-income housing projects.

8(4) For purposes of allocating credits pursuant to this section,
9the committee shall not give preference to any project by virtue
10of the date of submission of its application.

11(k) Section 42(l) of the Internal Revenue Code, relating to
12certifications and other reports tobegin delete theend delete secretary, shall be modified
13as follows:

14The term “secretary” shall be replaced by the term “Franchise
15Tax Board.”

16(l) In the case where the credit allowed under this section
17exceeds the net tax, the excess may be carried over to reduce the
18net tax in the following year, and succeeding years if necessary,
19until the credit has been exhausted.

20(m) A project that received an allocation of a 1989 federal
21housing credit dollar amount shall be eligible to receive an
22allocation of a 1990 state housing credit dollar amount, subject to
23all of the following conditions:

24(1) The project was not placed in service prior to 1990.

25(2) To the extent the amendments made to this section by the
26Statutes of 1990 conflict with any provisions existing in this section
27prior to those amendments, the prior provisions of law shall prevail.

28(3) Notwithstanding paragraph (2), a project applying for an
29allocation under this subdivision shall be subject to the
30requirements of paragraph (3) of subdivision (j).

31(n) The credit period with respect to an allocation of credit in
321989 by the California Tax Credit Allocation Committee of which
33any amount is attributable to unallocated credit from 1987 or 1988
34shall not begin until after December 31, 1989.

35(o) The provisions of Section 11407(a) of Public Law 101-508,
36relating to the effective date of the extension of the low-income
37housing credit, shall apply to calendar years after 1989.

38(p) The provisions of Section 11407(c) of Public Law 101-508,
39relating to election to accelerate credit, shall not apply.

P26   1(q) Any unused credit may continue to be carried forward, as
2provided in subdivision (l), until the credit has been exhausted.

3This section shall remain in effect on and after December 1,
41990, for as long as Section 42 of the Internal Revenue Code,
5relating to low-income housing credit, remains in effect.

6(r) (1) For a project that receives a preliminary reservation
7under this section beginning on or after January 1, 2016, a taxpayer
8may make an irrevocable election in its application to the California
9Tax Credit Allocation Committee to sell all or any portion of any
10credit allowed under this section to one or more unrelated parties
11for each taxable year in which the credit is allowedbegin delete for
12consideration that is not less than 80 percent of the amount of the
13credit.end delete
begin insert subject to both of the following conditions:end insert

begin insert

14(A) The credit is sold for consideration that is not less than 80
15percent of the amount of the credit.

end insert
begin insert

16(B) The unrelated party or parties purchasing any or all of the
17credit pursuant to this subdivision is a taxpayer allowed the credit
18under this section for the taxable year of the purchase or any prior
19taxable year or is a taxpayer allowed the federal credit under
20Section 42 of the Internal Revenue Code, relating to low-income
21housing credit, for the taxable year of the purchase or any prior
22taxable year in connection with any project located in this state.
23For purposes of this subparagraph, “taxpayer allowed the credit
24under this section” means a taxpayer that is allowed the credit
25under this section without regard to the purchase of a credit
26pursuant to this subdivision.

end insert

27(2) (A) The taxpayer that originally received the credit shall
28report to the California Tax Credit Allocation Committee within
2910 days of the sale of the credit, in the form and manner specified
30by the California Tax Credit Allocation Committee, all required
31information regarding the purchase and sale of the credit, including
32the social security or other taxpayer identification number of the
33unrelated party to whom the credit has been sold, the face amount
34of the credit sold, and the amount of consideration received by the
35taxpayer for the sale of the credit.

36(B) The California Tax Credit Allocation Committee shall
37provide an annual listing to the Franchise Tax Board, in a form
38and manner agreed upon by the California Tax Credit Allocation
39Committee and the Franchise Tax Board, of the taxpayers that
40have sold or purchased a credit pursuant to this subdivision.

P27   1(3) begin insert(A)end insertbegin insertend insert A credit may be sold pursuant to this subdivision to
2more than one unrelatedbegin delete party and shall not be resold by the
3unrelated party to another taxpayer or otherend delete
party.

begin insert

4(B) (i) Except as provided in clause (ii), a credit shall not be
5resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

6(ii) All or any portion of any credit allowed under this section
7may be resold once by an original purchaser to one or more
8unrelated parties, subject to all of the requirements of this
9subdivision.

end insert

10(4) Notwithstanding any other provision of law, the taxpayer
11that originally received the credit that is sold pursuant to paragraph
12(1) shall remain solely liable for all obligations and liabilities
13imposed on the taxpayer by this section with respect to the credit,
14none of which shall apply to any party to whom the credit has been
15sold or subsequently transferred. Parties who purchase credits
16pursuant to paragraph (1) shall be entitled to utilize the purchased
17credits in the same manner in which the taxpayer that originally
18received the credit could utilize them.

19(5) A taxpayer shall not sell a credit allowed by this section if
20the taxpayer was allowed the credit on any tax return of the
21taxpayer.

22(6) Notwithstanding paragraph (1), the taxpayer, with the
23approval of the Executive Director of the California Tax Credit
24Allocation Committee, may rescind the election to sell all or any
25portion of the credit allowed under this section if the consideration
26for the credit falls below 80 percent of the amount of the credit
27after the California Tax Credit Allocation Committee reservation.

28(s) Thebegin delete Franchise Tax Boardend deletebegin insert California Tax Credit Allocation
29Committeeend insert
may prescribe rules, guidelines, or procedures necessary
30or appropriate to carry out the purposes of this section, including
31any guidelines regarding the allocation of the credit allowed under
32this section. Chapter 3.5 (commencing with Section 11340) of Part
331 of Division 3 of Title 2 of the Government Code shall not apply
34to any rule, guideline, or procedure prescribed by thebegin delete Franchise
35Tax Boardend delete
begin insert California Tax Credit Allocation Committeeend insert pursuant
36to this section.

37(t) The amendments to this section made by Chapter 1222 of
38the Statutes of 1993 shall apply only to taxable years beginning
39on or after January 1, 1994.

P28   1

SEC. 3.  

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

3

23610.5.  

(a) (1) There shall be allowed as a credit against the
4“tax,” as defined by Section 23036, a state low-income housing
5tax credit in an amount equal to the amount determined in
6subdivision (c), computed in accordance with Section 42 of the
7Internal Revenue Code, relating to low-income housing credit,
8except as otherwise provided in this section.

9(2) “Taxpayer,” for purposes of this section, means the sole
10owner in the case of a “C” corporation, the partners in the case of
11a partnership, and the shareholders in the case of an “S”
12corporation.

13(3) “Housing sponsor,” for purposes of this section, means the
14 sole owner in the case of a “C” corporation, the partnership in the
15case of a partnership, and the “S” corporation in the case of an “S”
16corporation.

17(b) (1) The amount of the credit allocated to any housing
18sponsor shall be authorized by the California Tax Credit Allocation
19Committee, or any successor thereof, based on a project’s need
20for the credit for economic feasibility in accordance with the
21requirements of this section.

22(A) The low-income housing project shall be located in
23California and shall meet either of the following requirements:

24(i) Except for projects to provide farmworker housing, as defined
25in subdivision (h) of Section 50199.7 of the Health and Safety
26Code, that are allocated credits solely under the set-aside described
27in subdivision (c) of Section 50199.20 of the Health and Safety
28Code, the project’s housing sponsor has been allocated by the
29 California Tax Credit Allocation Committee a credit for federal
30income tax purposes under Section 42 of the Internal Revenue
31Code, relating to low-income housing credit.

32(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
33Internal Revenue Code, relating to special rule where 50 percent
34or more of building is financed with tax-exempt bonds subject to
35volume cap.

36(B) The California Tax Credit Allocation Committee shall not
37require fees for the credit under this section in addition to those
38fees required for applications for the tax credit pursuant to Section
3942 of the Internal Revenue Code, relating to low-income housing
40credit. The committee may require a fee if the application for the
P29   1credit under this section is submitted in a calendar year after the
2year the application is submitted for the federal tax credit.

3(C) (i) For a project that receives a preliminary reservation of
4the state low-income housing tax credit, allowed pursuant to
5subdivision (a), on or after January 1, 2009, the credit shall be
6allocated to the partners of a partnership owning the project in
7accordance with the partnership agreement, regardless of how the
8federal low-income housing tax credit with respect to the project
9is allocated to the partners, or whether the allocation of the credit
10under the terms of the agreement has substantial economic effect,
11within the meaning of Section 704(b) of the Internal Revenue
12Code, relating to determination of distributive share.

13(ii) To the extent the allocation of the credit to a partner under
14this section lacks substantial economic effect, any loss or deduction
15otherwise allowable under this part that is attributable to the sale
16or other disposition of that partner’s partnership interest made prior
17to the expiration of the federal credit shall not be allowed in the
18taxable year in which the sale or other disposition occurs, but shall
19instead be deferred until and treated as if it occurred in the first
20taxable year immediately following the taxable year in which the
21federal credit period expires for the project described in clause (i).

22(iii) This subparagraph shall not apply to a project that receives
23a preliminary reservation of state low-income housing tax credits
24under the set-aside described in subdivision (c) of Section 50199.20
25of the Health and Safety Code unless the project also receives a
26preliminary reservation of federal low-income housing tax credits.

27(2) (A) The California Tax Credit Allocation Committee shall
28certify to the housing sponsor the amount of tax credit under this
29section allocated to the housing sponsor for each credit period.

30(B) In the case of a partnership or an “S” corporation, the
31housing sponsor shall provide a copy of the California Tax Credit
32Allocation Committee certification to the taxpayer.

33(C) The taxpayer shall, upon request, provide a copy of the
34certification to the Franchise Tax Board.

35(D) All elections made by the taxpayer pursuant to Section 42
36of the Internal Revenue Code, relating to low-income housing
37credit, shall apply to this section.

38(E) (i) Except as described in clause (ii), for buildings located
39in designated difficult development areas (DDAs) or qualified
40census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
P30   1Internal Revenue Code, relating to increase in credit for buildings
2in high-cost areas, credits may be allocated under this section in
3the amounts prescribed in subdivision (c), provided that the amount
4of credit allocated under Section 42 of the Internal Revenue Code,
5relating to low-income housing credit, is computed on 100 percent
6of the qualified basis of the building.

7(ii) Notwithstanding clause (i), the California Tax Credit
8Allocation Committee may allocate the credit for buildings located
9in DDAs or QCTs that are restricted to having 50 percent of its
10occupants be special needs households, as defined in the California
11Code of Regulations by the California Tax Credit Allocation
12Committee, even if the taxpayer receives federal credits pursuant
13to Section 42(d)(5)(B) of the Internal Revenue Code, relating to
14increase in credit for buildings in high-cost areas, provided that
15the credit allowed under this section shall not exceed 30 percent
16of the eligible basis of the building.

17(F) (i) The California Tax Credit Allocation Committee may
18allocate a credit under this section in exchange for a credit allocated
19pursuant to Section 42(d)(5)(B) of the Internal Revenue Code,
20relating to increase in credit for buildings in high-cost areas, in
21amounts up to 30 percent of the eligible basis of a building if the
22credits allowed under Section 42 of the Internal Revenue Code,
23relating to low-income housing credit, are reduced by an equivalent
24amount.

25(ii) An equivalent amount shall be determined by the California
26Tax Credit Allocation Committee based upon the relative amount
27required to produce an equivalent state tax credit to the taxpayer.

28(c) Section 42(b) of the Internal Revenue Code, relating to
29applicable percentage, shall be modified as follows:

30(1) In the case of any qualified low-income building placed in
31service by the housing sponsor during 1987, the term “applicable
32percentage” means 9 percent for each of the first three years and
333 percent for the fourth year for new buildings (whether or not the
34building is federally subsidized) and for existing buildings.

35(2) In the case of any qualified low-income building that receives
36an allocation after 1989 and is a new building not federally
37subsidized, the term “applicable percentage” means the following:

38(A) For each of the first three years, the percentage prescribed
39by the Secretary of the Treasury for new buildings that are not
40federally subsidized for the taxable year, determined in accordance
P31   1with the requirements of Section 42(b)(2) of the Internal Revenue
2Code, relating to temporary minimum credit rate for nonfederally
3subsidized new buildings, in lieu of the percentage prescribed in
4Section 42(b)(1)(A) of the Internal Revenue Code.

5(B) For the fourth year, the difference between 30 percent and
6the sum of the applicable percentages for the first three years.

7(3) In the case of any qualified low-income building that receives
8an allocation after 1989 and that is a new building that is federally
9subsidized or that is an existing building that is “at risk of
10conversion,” the term “applicable percentage” means the following:

11(A) For each of the first three years, the percentage prescribed
12by the Secretary of the Treasury for new buildings that are federally
13subsidized for the taxable year.

14(B) For the fourth year, the difference between 13 percent and
15the sum of the applicable percentages for the first three years.

16(4) For purposes of this section, the term “at risk of conversion,”
17with respect to an existing property means a property that satisfies
18all of the following criteria:

19(A) The property is a multifamily rental housing development
20in which at least 50 percent of the units receive governmental
21assistance pursuant to any of the following:

22(i) New construction, substantial rehabilitation, moderate
23rehabilitation, property disposition, and loan management set-aside
24programs, or any other program providing project-based assistance
25pursuant to Section 8 of the United States Housing Act of 1937,
26Section 1437f of Title 42 of the United States Code, as amended.

27(ii) The Below-Market-Interest-Rate Program pursuant to
28Section 221(d)(3) of the National Housing Act, Sections
291715l(d)(3) and (5) of Title 12 of the United States Code.

30(iii) Section 236 of the National Housing Act, Section 1715z-1
31of Title 12 of the United States Code.

32(iv) Programs for rent supplement assistance pursuant to Section
33101 of the Housing and Urban Development Act of 1965, Section
341701s of Title 12 of the United States Code, as amended.

35(v) Programs pursuant to Section 515 of the Housing Act of
361949, Section 1485 of Title 42 of the United States Code, as
37amended.

38(vi) The low-income housing credit program set forth in Section
3942 of the Internal Revenue Code, relating to low-income housing
40credit.

P32   1(B) The restrictions on rent and income levels will terminate or
2the federally insured mortgage on the property is eligible for
3prepayment any time within five years before or after the date of
4application to the California Tax Credit Allocation Committee.

5(C) The entity acquiring the property enters into a regulatory
6agreement that requires the property to be operated in accordance
7with the requirements of this section for a period equal to the
8greater of 55 years or the life of the property.

9(D) The property satisfies the requirements of Section 42(e) of
10the Internal Revenue Code relating to rehabilitation expenditures
11treated as a separate new building, except that the provisions of
12Section 42(e)(3)(A)(ii)(I) shall not apply.

13(d) The term “qualified low-income housing project” as defined
14in Section 42(c)(2) of the Internal Revenue Code, relating to
15qualified low-income building, is modified by adding the following
16requirements:

17(1) The taxpayer shall be entitled to receive a cash distribution
18from the operations of the project, after funding required reserves,
19that, at the election of the taxpayer, is equal to:

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

21(i) The owner equity, which shall include the amount of the
22capital contributions actually paid to the housing sponsor and shall
23not include any amounts until they are paid on an investor note.

24(ii) Twenty percent of the adjusted basis of the building as of
25the close of the first taxable year of the credit period.

26(B) The amount of the cashflow from those units in the building
27that are not low-income units. For purposes of computing cashflow
28under this subparagraph, operating costs shall be allocated to the
29low-income units using the “floor space fraction,” as defined in
30Section 42 of the Internal Revenue Code, relating to low-income
31housing credit.

32(C) Any amount allowed to be distributed under subparagraph
33(A) that is not available for distribution during the first five years
34of the compliance period may be accumulated and distributed any
35time during the first 15 years of the compliance period but not
36thereafter.

37(2) The limitation on return shall apply in the aggregate to the
38partners if the housing sponsor is a partnership and in the aggregate
39to the shareholders if the housing sponsor is an “S” corporation.

P33   1(3) The housing sponsor shall apply any cash available for
2distribution in excess of the amount eligible to be distributed under
3paragraph (1) to reduce the rent on rent-restricted units or to
4increase the number of rent-restricted units subject to the tests of
5Section 42(g)(1) of the Internal Revenue Code, relating to in
6general.

7(e) The provisions of Section 42(f) of the Internal Revenue
8Code, relating to definition and special rules relating to credit
9period, shall be modified as follows:

10(1) The term “credit period” as defined in Section 42(f)(1) of
11the Internal Revenue Code, relating to credit period defined, is
12modified by substituting “four taxable years” for “10 taxable
13years.”

14(2) The special rule for the first taxable year of the credit period
15under Section 42(f)(2) of the Internal Revenue Code, relating to
16special rule for first year of credit period, shall not apply to the tax
17credit under this section.

18(3) Section 42(f)(3) of the Internal Revenue Code, relating to
19determination of applicable percentage with respect to increases
20in qualified basis after first year of credit period, is modified to
21read:

22If, as of the close of any taxable year in the compliance period,
23after the first year of the credit period, the qualified basis of any
24building exceeds the qualified basis of that building as of the close
25of the first year of the credit period, the housing sponsor, to the
26extent of its tax credit allocation, shall be eligible for a credit on
27the excess in an amount equal to the applicable percentage
28determined pursuant to subdivision (c) for the four-year period
29beginning with the later of the taxable years in which the increase
30in qualified basis occurs.

31(f) The provisions of Section 42(h) of the Internal Revenue
32Code, relating to limitation on aggregate credit allowable with
33respect to projects located in a state, shall be modified as follows:

34(1) Section 42(h)(2) of the Internal Revenue Code, relating to
35allocated credit amount to apply to all taxable years ending during
36or after credit allocation year, shall not be applicable and instead
37the following provisions shall be applicable:

38The total amount for the four-year credit period of the housing
39credit dollars allocated in a calendar year to any building shall
40reduce the aggregate housing credit dollar amount of the California
P34   1Tax Credit Allocation Committee for the calendar year in which
2the allocation is made.

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

7(g) The aggregate housing credit dollar amount that may be
8allocated annually by the California Tax Credit Allocation
9Committee pursuant to this section, Section 12206, and Section
1017058 shall be an amount equal to the sum of all the following:

11(1) Seventy million dollars ($70,000,000) for the 2001 calendar
12year, and, for the 2002 calendar year and each calendar year
13thereafter, seventy million dollars ($70,000,000) increased by the
14percentage, if any, by which the Consumer Price Index for the
15preceding calendar year exceeds the Consumer Price Index for the
162001 calendar year. For the purposes of this paragraph, the term
17“Consumer Price Index” means the last Consumer Price Index for
18All Urban Consumers published by the federal Department of
19Labor.

20(2) The unused housing credit ceiling, if any, for the preceding
21calendar years.

22(3) The amount of housing credit ceiling returned in the calendar
23year. For purposes of this paragraph, the amount of housing credit
24dollar amount returned in the calendar year equals the housing
25credit dollar amount previously allocated to any project that does
26not become a qualified low-income housing project within the
27period required by this section or to any project with respect to
28which an allocation is canceled by mutual consent of the California
29Tax Credit Allocation Committee and the allocation recipient.

30(4) Five hundred thousand dollars ($500,000) per calendar year
31for projects to provide farmworker housing, as defined in
32subdivision (h) of Section 50199.7 of the Health and Safety Code.

33(5) The amount of any unallocated or returned credits under
34former Sections 17053.14, 23608.2, and 23608.3, as those sections
35read prior to January 1, 2009, until fully exhausted for projects to
36provide farmworker housing, as defined in subdivision (h) of
37Section 50199.7 of the Health and Safety Code.

38(h) The term “compliance period” as defined in Section 42(i)(1)
39of the Internal Revenue Code, relating to compliance period, is
40modified to mean, with respect to any building, the period of 30
P35   1consecutive taxable years beginning with the first taxable year of
2the credit period with respect thereto.

3(i) Section 42(j) of the Internal Revenue Code, relating to
4recapture of credit, shall not be applicable and the following shall
5be substituted in its place:

6The requirements of this section shall be set forth in a regulatory
7agreement between the California Tax Credit Allocation Committee
8and the housing sponsor, and this agreement shall be subordinated,
9when required, to any lien or encumbrance of any banks or other
10institutional lenders to the project. The regulatory agreement
11entered into pursuant to subdivision (f) of Section 50199.14 of the
12Health and Safety Code shall apply, provided that the agreement
13includes all of the following provisions:

14(1) A term not less than the compliance period.

15(2) A requirement that the agreement be recorded in the official
16records of the county in which the qualified low-income housing
17project is located.

18(3) A provision stating which state and local agencies can
19enforce the regulatory agreement in the event the housing sponsor
20fails to satisfy any of the requirements of this section.

21(4) A provision that the regulatory agreement shall be deemed
22a contract enforceable by tenants as third-party beneficiaries thereto
23and that allows individuals, whether prospective, present, or former
24occupants of the building, who meet the income limitation
25applicable to the building, the right to enforce the regulatory
26agreement in any state court.

27(5) A provision incorporating the requirements of Section 42
28of the Internal Revenue Code, relating to low-income housing
29credit, as modified by this section.

30(6) A requirement that the housing sponsor notify the California
31Tax Credit Allocation Committee or its designee if there is a
32determination by the Internal Revenue Service that the project is
33not in compliance with Section 42(g) of the Internal Revenue Code,
34relating to qualified low-income housing project.

35(7) A requirement that the housing sponsor, as security for the
36performance of the housing sponsor’s obligations under the
37regulatory agreement, assign the housing sponsor’s interest in rents
38that it receives from the project, provided that until there is a
39default under the regulatory agreement, the housing sponsor is
40entitled to collect and retain the rents.

P36   1(8) A provision that the remedies available in the event of a
2default under the regulatory agreement that is not cured within a
3reasonable cure period include, but are not limited to, allowing
4any of the parties designated to enforce the regulatory agreement
5to collect all rents with respect to the project; taking possession of
6the project and operating the project in accordance with the
7regulatory agreement until the enforcer determines the housing
8sponsor is in a position to operate the project in accordance with
9the regulatory agreement; applying to any court for specific
10performance; securing the appointment of a receiver to operate
11the project; or any other relief as may be appropriate.

12(j) (1) The committee shall allocate the housing credit on a
13regular basis consisting of two or more periods in each calendar
14year during which applications may be filed and considered. The
15committee shall establish application filing deadlines, the maximum
16percentage of federal and state low-income housing tax credit
17ceiling that may be allocated by the committee in that period, and
18the approximate date on which allocations shall be made. If the
19enactment of federal or state law, the adoption of rules or
20regulations, or other similar events prevent the use of two allocation
21periods, the committee may reduce the number of periods and
22adjust the filing deadlines, maximum percentage of credit allocated,
23and the allocation dates.

24(2) The committee shall adopt a qualified allocation plan, as
25provided in Section 42(m)(1) of the Internal Revenue Code, relating
26to plans for allocation of credit among projects. In adopting this
27plan, the committee shall comply with the provisions of Sections
2842(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code,
29relating to qualified allocation plan and relating to certain selection
30criteria must be used, respectively.

31(3) Notwithstanding Section 42(m) of the Internal Revenue
32Code, relating to responsibilities of housing credit agencies, the
33California Tax Credit Allocation Committee shall allocate housing
34credits in accordance with the qualified allocation plan and
35regulations, which shall include the following provisions:

36(A) All housing sponsors, as defined by paragraph (3) of
37subdivision (a), shall demonstrate at the time the application is
38filed with the committee that the project meets the following
39threshold requirements:

P37   1(i) The housing sponsor shall demonstrate that there is a need
2for low-income housing in the community or region for which it
3is proposed.

4(ii) The project’s proposed financing, including tax credit
5proceeds, shall be sufficient to complete the project and shall be
6adequate to operate the project for the extended use period.

7(iii) The project shall have enforceable financing commitments,
8either construction or permanent financing, for at least 50 percent
9of the total estimated financing of the project.

10(iv) The housing sponsor shall have and maintain control of the
11site for the project.

12(v) The housing sponsor shall demonstrate that the project
13complies with all applicable local land use and zoning ordinances.

14(vi) The housing sponsor shall demonstrate that the project
15development team has the experience and the financial capacity
16to ensure project completion and operation for the extended use
17period.

18(vii) The housing sponsor shall demonstrate the amount of tax
19credit that is necessary for the financial feasibility of the project
20and its viability as a qualified low-income housing project
21throughout the extended use period, taking into account operating
22expenses, a supportable debt service, reserves, funds set aside for
23rental subsidies and required equity, and a development fee that
24does not exceed a specified percentage of the eligible basis of the
25project prior to inclusion of the development fee in the eligible
26basis, as determined by the committee.

27(B) The committee shall give a preference to those projects
28satisfying all of the threshold requirements of subparagraph (A)
29if both of the following apply:

30(i) The project serves the lowest income tenants at rents
31affordable to those tenants.

32(ii) The project is obligated to serve qualified tenants for the
33longest period.

34(C) In addition to the provisions of subparagraphs (A) and (B),
35the committee shall use the following criteria in allocating housing
36credits:

37(i) Projects serving large families in which a substantial number,
38as defined by the committee, of all residential units are low-income
39units with three and more bedrooms.

P38   1(ii) Projects providing single-room occupancy units serving
2very low income tenants.

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

5(iv) Projects for which a public agency provides direct or indirect
6long-term financial support for at least 15 percent of the total
7project development costs or projects for which the owner’s equity
8constitutes at least 30 percent of the total project development
9costs.

10(v) Projects that provide tenant amenities not generally available
11to residents of low-income housing projects.

12(4) For purposes of allocating credits pursuant to this section,
13the committee shall not give preference to any project by virtue
14of the date of submission of its application except to break a tie
15when two or more of the projects have an equal rating.

16(5) Not less than 20 percent of the low-income housing tax
17credits available annually under this section, Section 12206, and
18Section 17058 shall be set aside for allocation to rural areas as
19defined in Section 50199.21 of the Health and Safety Code. Any
20amount of credit set aside for rural areas remaining on or after
21October 31 of any calendar year shall be available for allocation
22to any eligible project. No amount of credit set aside for rural areas
23shall be considered available for any eligible project so long as
24there are eligible rural applications pending on October 31.

25(k) Section 42(l) of the Internal Revenue Code, relating to
26certifications and other reports tobegin delete theend delete secretary, shall be modified
27as follows:

28The term “secretary” shall be replaced by the term “Franchise
29Tax Board.”

30(l) In the case where the credit allowed under this section
31exceeds the “tax,” the excess may be carried over to reduce the
32“tax” in the following year, and succeeding years if necessary,
33until the credit has been exhausted.

34(m) A project that received an allocation of a 1989 federal
35housing credit dollar amount shall be eligible to receive an
36allocation of a 1990 state housing credit dollar amount, subject to
37all of the following conditions:

38(1) The project was not placed in service prior to 1990.

P39   1(2) To the extent the amendments made to this section by the
2Statutes of 1990 conflict with any provisions existing in this section
3prior to those amendments, the prior provisions of law shall prevail.

4(3) Notwithstanding paragraph (2), a project applying for an
5allocation under this subdivision shall be subject to the
6requirements of paragraph (3) of subdivision (j).

7(n) The credit period with respect to an allocation of credit in
81989 by the California Tax Credit Allocation Committee of which
9any amount is attributable to unallocated credit from 1987 or 1988
10shall not begin until after December 31, 1989.

11(o) The provisions of Section 11407(a) of Public Law 101-508,
12relating to the effective date of the extension of the low-income
13housing credit, shall apply to calendar years after 1989.

14(p) The provisions of Section 11407(c) of Public Law 101-508,
15relating to election to accelerate credit, shall not apply.

16(q) (1) A corporation may elect to assign any portion of any
17credit allowed under this section to one or more affiliated
18corporations for each taxable year in which the credit is allowed.
19For purposes of this subdivision, “affiliated corporation” has the
20meaning provided in subdivision (b) of Section 25110, as that
21section was amended by Chapter 881 of the Statutes of 1993, as
22of the last day of the taxable year in which the credit is allowed,
23except that “100 percent” is substituted for “more than 50 percent”
24wherever it appears in the section, as that section was amended by
25Chapter 881 of the Statutes of 1993, and “voting common stock”
26is substituted for “voting stock” wherever it appears in the section,
27as that section was amended by Chapter 881 of the Statutes of
281993.

29(2) The election provided in paragraph (1):

30(A) May be based on any method selected by the corporation
31that originally receives the credit.

32(B) Shall be irrevocable for the taxable year the credit is allowed,
33once made.

34(C) May be changed for any subsequent taxable year if the
35election to make the assignment is expressly shown on each of the
36returns of the affiliated corporations that assign and receive the
37credits.

38(r) Any unused credit may continue to be carried forward, as
39provided in subdivision (l), until the credit has been exhausted.

P40   1This section shall remain in effect on and after December 1,
21990, for as long as Section 42 of the Internal Revenue Code,
3relating to low-income housing credit, remains in effect.

4(s) (1) For a project that receives a preliminary reservation
5under this section beginning on or after January 1, 2016, a taxpayer
6may make an irrevocable election in its application to the California
7Tax Credit Allocation Committee to sell all or any portion of any
8credit allowed under this section to one or more unrelated parties
9for each taxable year in which the credit is allowedbegin delete for
10consideration that is not less than 80 percent of the amount of the
11credit.end delete
begin insert subject to both of the following conditions:end insert

begin insert

12(A) The credit is sold for consideration that is not less than 80
13percent of the amount of the credit.

end insert
begin insert

14(B) (i) The unrelated party or parties purchasing any or all of
15the credit pursuant to this subdivision is a taxpayer allowed the
16credit under this section for the taxable year of the purchase or
17any prior taxable year or is a taxpayer allowed the federal credit
18under Section 42 of the Internal Revenue Code, relating to
19low-income housing credit, for the taxable year of the purchase
20or any prior taxable year in connection with any project located
21in this state.

end insert
begin insert

22(ii) For purposes of this subparagraph, “taxpayer allowed the
23credit under this section” means a taxpayer that is allowed the
24credit under this section without regard to the purchase of a credit
25pursuant to this subdivision without regard to any of the following:

end insert
begin insert

26(I) The purchase of a credit under this section pursuant to this
27subdivision.

end insert
begin insert

28(II) The assignment of a credit under this section pursuant to
29subdivision (q).

end insert
begin insert

30(III) The assignment of a credit under this section pursuant to
31Section 23363.

end insert

32(2) (A) The taxpayer that originally received the credit shall
33report to the California Tax Credit Allocation Committee within
3410 days of the sale of the credit, in the form and manner specified
35by the California Tax Credit Allocation Committee, all required
36information regarding the purchase and sale of the credit, including
37the social security or other taxpayer identification number of the
38unrelated party to whom the credit has been sold, the face amount
39of the credit sold, and the amount of consideration received by the
40taxpayer for the sale of the credit.

P41   1(B) The California Tax Credit Allocation Committee shall
2provide an annual listing to the Franchise Tax Board, in a form
3and manner agreed upon by the California Tax Credit Allocation
4Committee and the Franchise Tax Board, of the taxpayers that
5have sold or purchased a credit pursuant to this subdivision.

6(3) begin insert(A)end insertbegin insertend insert A credit may be sold pursuant to this subdivision to
7more than one unrelatedbegin delete party and shall not be resold by the
8unrelated party to another taxpayer or otherend delete
party.

begin insert

9(B) (i) Except as provided in clause (ii), a credit shall not be
10resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

11(ii) All or any portion of any credit allowed under this section
12may be resold once by an original purchaser to one or more
13unrelated parties, subject to all of the requirements of this
14subdivision.

end insert

15(4) Notwithstanding any other provision of law, the taxpayer
16that originally received the credit that is sold pursuant to paragraph
17(1) shall remain solely liable for all obligations and liabilities
18imposed on the taxpayer by this section with respect to the credit,
19none of which shall apply to any party to whom the credit has been
20sold or subsequently transferred. Parties who purchase credits
21pursuant to paragraph (1) shall be entitled to utilize the purchased
22credits in the same manner in which the taxpayer that originally
23received the credit could utilize them.

24(5) A taxpayer shall not sell a credit allowed by this section if
25the taxpayer was allowed the credit on any tax return of the
26taxpayer.

27(6) Notwithstanding paragraph (1), the taxpayer, with the
28approval of the Executive Director of the California Tax Credit
29Allocation Committee, may rescind the election to sell all or any
30portion of the credit allowed under this section if the consideration
31for the credit falls below 80 percent of the amount of the credit
32after the California Tax Credit Allocation Committee reservation.

33(t) Thebegin delete Franchise Tax Boardend deletebegin insert California Tax Credit Allocation
34Committeeend insert
may prescribe rules, guidelines, or procedures necessary
35or appropriate to carry out the purposes of this section, including
36any guidelines regarding the allocation of the credit allowed under
37this section. Chapter 3.5 (commencing with Section 11340) of Part
381 of Division 3 of Title 2 of the Government Code shall not apply
39to any rule, guideline, or procedure prescribed by thebegin delete Franchise
P42   1Tax Boardend delete
begin insert California Tax Credit Allocation Committeeend insert pursuant
2to this section.

3(u) The amendments to this section made by Chapter 1222 of
4the Statutes of 1993 shall apply only to taxable years beginning
5on or after January 1, 1994, except that paragraph (1) of subdivision
6(q), as amended, shall apply to taxable years beginning on or after
7January 1, 1993.

8

SEC. 4.  

Thebegin insert Californiaend insert Taxbegin insert Creditend insert Allocation Committee shall
9enter into an agreement with the Franchise Tax Board to pay any
10costs incurred by the Franchise Taxbegin delete boardend deletebegin insert Boardend insert in the
11administration of subdivision (o) of Section 12206, subdivision
12(r) of Section 17058, and subdivision (s) of Section 23610.5 of the
13Revenue and Taxation Code.

14

SEC. 5.  

This act provides for a tax levy within the meaning of
15Article IV of the Constitution and shall go into immediate effect.



O

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