Senate BillNo. 873


Introduced by Senator Beall

January 14, 2016


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 873, as introduced, 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 unrelated parties, as described, for each taxable year in which the credit is allowed for not less than 80% of the amount of the credit to be sold, and would provide for the one-time resale of that credit, as provided. The bill would require the California Tax Credit 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
4begin delete “tax” (asend deletebegin insert “tax,end insertbegin insertend insert described by Sectionbegin delete 12201)end deletebegin insert 12201,end insert a state
5low-income housing tax credit in an amount equal to the amount
6determined in subdivision (c), computed in accordance with Section
742 of the Internal Revenue Code,begin insert relating to low-income housing
8credit,end insert
except 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
24Safety Code, that are allocated credits solely under the set-aside
25described in subdivision (c) of Section 50199.20 of the Health and
26Safety Code, the low-income housing project shall be located in
27California and shall meet either of the following requirements:

28(i) The project’s housing sponsorbegin delete shall haveend deletebegin insert hasend insert been allocated
29by the California Tax Credit Allocation Committee a credit for
30federal income tax purposes under Section 42 of the Internal
31Revenuebegin delete Code.end deletebegin insert Code, relating to low-income housing credit.end insert

32(ii) Itbegin delete shall qualifyend deletebegin insert qualifiesend insert for a credit under Section
3342(h)(4)(B) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to special
P3    1rule where 50 percent or more of building is financed with
2tax-exempt bonds subject volume cap.end insert

3(B) The California Tax Credit Allocation Committee shall not
4require fees for the credit under this section in addition to those
5fees required for applications for the tax credit pursuant to Section
642 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
7housing credit.end insert
The committee may require a fee if the application
8for the credit under this section is submitted in a calendar year
9after the year the application is submitted for the federal tax credit.

10(C) (i) For a project that receives a preliminary reservation of
11the state low-income housing tax credit, allowed pursuant to
12subdivision (a), on or after January 1, 2009,begin delete and before January 1,
132016,end delete
the credit shall be allocated to the partners of a partnership
14owning the project in accordance with the partnership agreement,
15regardless of how the federal low-income housing tax credit with
16respect to the project is allocated to the partners, or whether the
17allocation of the credit under the terms of the agreement has
18substantial economic effect, within the meaning of Section 704(b)
19of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to determination of
20distributive share.end insert

21(ii) This subparagraphbegin delete shallend deletebegin insert doesend insert not apply to a project that
22receives a preliminary reservation of state low-income housing
23tax credits under the set-aside described in subdivision (c) of
24Section 50199.20 of the Health and Safety Code unless the project
25also receives a preliminary reservation of federal low-income
26housing tax credits.

begin delete

27(iii) This subparagraph shall cease to be operative with respect
28to any project that receives a preliminary reservation of a credit
29on or after January 1, 2016.

end delete

30(2) (A) The California Tax Credit Allocation Committee shall
31certify to the housing sponsor the amount of tax credit under this
32section allocated to the housing sponsor for each credit period.

33(B) In the case of a partnership or an “S” corporation, the
34housing sponsor shall provide a copy of the California Tax Credit
35Allocation Committee certification to the taxpayer.

36(C) The taxpayer shall attach a copy of the certification to any
37return upon which a tax credit is claimed under this section.

38(D) In the case of a failure to attach a copy of the certification
39for the year to the return in which a tax credit is claimed under this
P4    1section, no credit under this section shall be allowed for that year
2until a copy of that certification is provided.

3(E) All elections made by the taxpayer pursuant to Section 42
4of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
5credit,end insert
shall apply to this section.

6(F) (i) Except as described in clause (ii), for buildings located
7in designated difficult development areas (DDAs) or qualified
8census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
9Internal Revenue Code,begin insert relating to increase in credit for buildings
10in high-cost areas,end insert
credits may be allocated under this section in
11the amounts prescribed in subdivision (c), provided that the amount
12of credit allocated under Section 42 of the Internal Revenuebegin delete Codeend delete
13begin insert Code, relating to low-income housing credit,end insert is computed on 100
14 percent of the qualified basis of the building.

15(ii) Notwithstanding clause (i), the California Tax Credit
16Allocation Committee may allocate the credit for buildings located
17in DDAs or QCTs that are restricted to having 50 percent of its
18occupants be special needs households, as defined in the California
19Code of Regulations by the California Tax Credit Allocation
20Committee, even if the taxpayer receives federal credits pursuant
21to Section 42(d)(5)(B) of the Internal Revenue Code,begin insert relating to
22increase in credit for buildings in high-cost areas,end insert
provided that
23the credit allowed under this section shall not exceed 30 percent
24of the eligible basis of the building.

25(G) (i) The California Tax Credit Allocation Committee may
26allocate a credit under this section in exchange for a credit allocated
27pursuant to Section 42(d)(5)(B) of the Internal Revenuebegin delete Codeend delete
28begin insert Code, relating to increase in credit for buildings in high-cost areas,end insert
29 in amounts up to 30 percent of the eligible basis of a building if
30the credits allowed under Section 42 of the Internal Revenuebegin delete Codeend delete
31begin insert Code, relating to low-income housing credit,end insert are reduced by an
32equivalent amount.

33(ii) An equivalent amount shall be determined by the California
34Tax Credit Allocation Committee based upon the relative amount
35required to produce an equivalent state tax credit to the taxpayer.

36(c) Section 42(b) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
37to applicable percentage,end insert
shall be modified as follows:

38(1) In the case of any qualified low-income building that receives
39an allocation after 1989 and is a new building not federally
40subsidized, the term “applicable percentage” means the following:

P5    1(A) For each of the first three years, the percentage prescribed
2by the Secretary of the Treasury for new buildings that are not
3federally subsidized for the taxable year, determined in accordance
4with the requirements of Section 42(b)(2) of the Internal Revenue
5Code,begin insert relating to temporary minimum credit rate for nonfederally
6subsidized new buildings,end insert
in lieu of the percentage prescribed in
7Section 42(b)(1)(A) of the Internal Revenue Code.

8(B) For the fourth year, the difference between 30 percent and
9the sum of the applicable percentages for the first three years.

10(2) In the case of any qualified low-income building that receives
11an allocation after 1989 and that is a new building that is federally
12subsidized or that is an existing building that is “at risk of
13conversion,” the term “applicable percentage” means the following:

14(A) For each of the first three years, the percentage prescribed
15by the Secretary of the Treasury for new buildings that are federally
16subsidized for the taxable year.

17(B) For the fourth year, the difference between 13 percent and
18the sum of the applicable percentages for the first three years.

19(3) For purposes of this section, the term “at risk of conversion,”
20with respect to an existing property means a property that satisfies
21all of the following criteria:

22(A) The property is a multifamily rental housing development
23in which at least 50 percent of the units receive governmental
24assistance pursuant to any of the following:

25(i) New construction, substantial rehabilitation, moderate
26rehabilitation, property disposition, and loan management set-aside
27programs, or any other program providing project-based assistance
28pursuant to Section 8 of the United States Housing Act of 1937,
29Section 1437f of Title 42 of the United States Code, as amended.

30(ii) The Below-Market-Interest-Rate Program pursuant to
31Section 221(d)(3) of the National Housing Act, Sections
321715l(d)(3) and (5) of Title 12 of the United States Code.

33(iii) Section 236 of the National Housing Act, Section 1715z-1
34of Title 12 of the United States Code.

35(iv) Programs for rent supplement assistance pursuant to Section
36101 of the Housing and Urban Development Act of 1965, Section
371701s of Title 12 of the United States Code, as amended.

38(v) Programs pursuant to Section 515 of the Housing Act of
391949, Section 1485 of Title 42 of the United States Code, as
40amended.

P6    1(vi) The low-income housing credit program set forth in Section
242 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
3housing credit.end insert

4(B) The restrictions on rent and income levels will terminate or
5thebegin delete federalend deletebegin insert federallyend insert insured mortgage on the property is eligible
6for prepayment any time within five years before or after the date
7of application to the California Tax Credit Allocation Committee.

8(C) The entity acquiring the property enters into a regulatory
9agreement that requires the property to be operated in accordance
10with the requirements of this section for a period equal to the
11greater of 55 years or the life of the property.

12(D) The property satisfies the requirements of Section 42(e) of
13the Internal Revenuebegin delete Code regarding rehabilitation expenditures,end delete
14begin insert Code, relating to rehabilitation expenditures treated as a separate
15new building,end insert
except that the provisions of Section
1642(e)(3)(A)(ii)(I) shall not apply.

17(d) The term “qualified low-income housing project” as defined
18in Section 42(c)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
19to qualified low-income building,end insert
is modified by adding the
20following requirements:

21(1) The taxpayer shall be entitled to receive a cash distribution
22from the operations of the project, after funding required reserves,
23begin delete which,end deletebegin insert that,end insert at the election of the taxpayer, is equal to:

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

25(i) The ownerbegin delete equityend deletebegin insert equity,end insert which shall include the amount of
26the capital contributions actually paid to the housing sponsor and
27shall not include any amounts until they are paid on an investor
28note.

29(ii) Twenty percent of the adjusted basis of the building as of
30the close of the first taxable year of the credit period.

31(B) The amount of the cashflow from those units in the building
32that are not low-income units. For purposes of computing cashflow
33under this subparagraph, operating costs shall be allocated to the
34low-income units using the “floor space fraction,” as defined in
35Section 42 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
36low-income housing credit.end insert

37(C) Any amount allowed to be distributed under subparagraph
38(A) that is not available for distribution during the first five years
39of the compliance period maybegin delete accumulate and beend deletebegin insert be accumulated
P7    1andend insert
distributed any time during the first 15 years of the compliance
2period but not thereafter.

3(2) The limitation on returnbegin delete shall applyend deletebegin insert appliesend insert in the aggregate
4to the partners if the housing sponsor is a partnership and in the
5aggregate to the shareholders if the housing sponsor is an “S”
6corporation.

7(3) The housing sponsor shall apply any cash available for
8distribution in excess of the amount eligible to be distributed under
9paragraph (1) to reduce the rent on rent-restricted units or to
10increase the number of rent-restricted units subject to the tests of
11Section 42(g)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
12 in general.end insert

13(e) The provisions of Section 42(f) of the Internal Revenuebegin delete Codeend delete
14begin insert Code, relating to definition and special rules relating to credit
15period,end insert
shall be modified as follows:

16(1) The term “credit period” as defined in Section 42(f)(1) of
17the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to credit period defined,end insert
18 is modified by substituting “four taxable years” for “10 taxable
19years.”

20(2) The special rule for the first taxable year of the credit period
21under Section 42(f)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
22to special rule for first year of credit period,end insert
shall not apply to the
23tax credit under this section.

24(3) Section 42(f)(3) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
25to determination of applicable percentage with respect to increases
26in qualified basis after first year of credit period,end insert
is modified to
27read:

28If, as of the close of any taxable year in the compliance period,
29after the first year of the credit period, the qualified basis of any
30building exceeds the qualified basis of that building as of the close
31of the first year of the credit period, the housing sponsor, to the
32extent of its tax credit allocation, shall be eligible for a credit on
33the excess in an amount equal to the applicable percentage
34determined pursuant to subdivision (c) for the four-year period
35beginning with the later of the taxable years in which the increase
36in qualified basis occurs.

37(f) The provisions of Section 42(h) of the Internal Revenue
38begin delete Codeend deletebegin insert Code, relating to limitation on aggregate credit allowable
39with respect to projects located in a state,end insert
shall be modified as
40follows:

P8    1(1) Section 42(h)(2) of the Internal Revenuebegin delete Code shall not be
2applicable and instead the following provisions shall be applicable:end delete

3begin insert Code, relating to allocated credit amount to apply to all taxable
4years ending during or after credit allocation year, does not apply
5and instead the following provisions apply:end insert

6The total amount for the four-year credit period of the housing
7credit dollars allocated in a calendar year to any building shall
8reduce the aggregate housing credit dollar amount of the California
9Tax Credit Allocation Committee for the calendar year in which
10the allocation is made.

11(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
12(7), and (8) of Section 42(h) of the Internal Revenuebegin delete Code shall
13not be applicable.end delete
begin insert Code, relating to limitation on aggregate credit
14allowable with respect to projects located in a state, do not apply
15to this section.end insert

16(g) The aggregate housing credit dollar amount that may be
17allocated annually by the California Tax Credit Allocation
18Committee pursuant to this section, Section 17058, and Section
1923610.5 shall be an amount equal to the sum of all the following:

20(1) Seventy million dollars ($70,000,000) for the 2001 calendar
21year, and, for the 2002 calendar year and each calendar year
22thereafter, seventy million dollars ($70,000,000) increased by the
23percentage, if any, by which the Consumer Price Index for the
24preceding calendar year exceeds the Consumer Price Index for the
252001 calendar year. For the purposes of this paragraph, the term
26“Consumer Price Index” means the last Consumer Price Index for
27All Urban Consumers published by the federal Department of
28Labor.

29(2) The unused housing credit ceiling, if any, for the preceding
30calendar years.

31(3) The amount of housing credit ceiling returned in the calendar
32year. For purposes of this paragraph, the amount of housing credit
33dollar amount returned in the calendar year equals the housing
34credit dollar amount previously allocated to any project that does
35not become a qualified low-income housing project within the
36period required by this section or to any project with respect to
37which an allocation is canceled by mutual consent of the California
38Tax 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 Revenuebegin delete Codeend deletebegin insert Code, relating to compliance period,end insert
11 is modified 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 Revenuebegin delete Codeend deletebegin insert Code, relating
15to recapture of credit,end insert
shall not be applicable and the provisions
16in paragraph (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,begin delete whichend deletebegin insert and thisend insert agreement
20shall be subordinated, when required, to any lien or encumbrance
21of any banks or other institutional lenders to the project. The
22regulatory agreement entered into pursuant to subdivision (f) of
23Section 50199.14 of the Health and Safety Code, shall apply,
24begin delete providingend deletebegin insert provided thatend insert the agreement includes all of the following
25provisions:

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

27(B) A requirement that the agreement be recorded in the official
28records of the county in which the qualified low-income housing
29project is located.

30(C) A provision stating which state and local agencies can
31enforce the regulatory agreement in the event the housing sponsor
32fails to satisfy any of the requirements of this section.

33(D) A provision that the regulatory agreement shall be deemed
34a contract enforceable by tenants as third-party beneficiaries thereto
35andbegin delete whichend deletebegin insert thatend insert allows individuals, whether prospective, present,
36or former occupants of the building, who meet the income
37limitation applicable to the building, the right to enforce the
38regulatory agreement in any state court.

P10   1(E) A provision incorporating the requirements of Section 42
2of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
3credit,end insert
as modified by this section.

4(F) A requirement that the housing sponsor notify the California
5Tax Credit Allocation Committee or its designee and the local
6agency that can enforce the regulatory agreement if there is a
7determination by the Internal Revenue Service that the project is
8not in compliance with Section 42(g) of the Internal Revenuebegin delete Code.end delete
9begin insert Code, relating to qualified low-income housing project.end insert

10(G) A requirement that the housing sponsor, as security for the
11performance of the housing sponsor’s obligations under the
12regulatory agreement, assign the housing sponsor’s interest in rents
13that it receives from the project, provided that until there is a
14default under the regulatory agreement, the housing sponsor is
15entitled to collect and retain the rents.

16(H) begin deleteThe end deletebegin insertA provision that the end insertremedies available in the event of
17a default under the regulatory agreement that is not cured within
18a reasonable curebegin delete period,end deletebegin insert periodend insert include, but are not limited to,
19allowing any of the parties designated to enforce the regulatory
20agreement to collect all rents with respect to the project; taking
21possession of the project and operating the project in accordance
22with the regulatory agreement until the enforcer determines the
23housing sponsor is in a position to operate the project in accordance
24with the regulatory agreement; applying to any court for specific
25performance; securing the appointment of a receiver to operate
26the project; or any other relief as may be appropriate.

27(j) (1) The committee shall allocate the housing credit on a
28regular basis consisting of two or more periods in each calendar
29year during which applications may be filed and considered. The
30committee shall establish application filing deadlines, the maximum
31percentage of federal and state low-income housing tax credit
32ceiling that may be allocated by the committee in that period, and
33the approximate date on which allocations shall be made. If the
34enactment of federal or state law, the adoption of rules or
35regulations, or other similar events prevent the use of two allocation
36periods, the committee may reduce the number of periods and
37adjust the filing deadlines, maximum percentage of credit allocated,
38and the allocation dates.

39(2) The committee shall adopt a qualified allocation plan, as
40provided in Section 42(m)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code,
P11   1relating to plans for allocation of credit among projects.end insert
In
2adopting this plan, the committee shall comply with the provisions
3of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
4begin delete Code.end deletebegin insert Code, relating to qualified allocation plan and relating to
5certain selection criteria must be used, respectively.end insert

6(3) Notwithstanding Section 42(m) of the Internal Revenue
7Code,begin insert relating to responsibilities of housing credit agencies,end insert the
8California Tax Credit Allocation Committee shall allocate housing
9credits in accordance with the qualified allocation plan and
10regulations, which shall include the following provisions:

11(A) All housing sponsors, as defined by paragraph (3) of
12subdivision (a), shall demonstrate at the time the application is
13filed with the committee that the project meets the following
14threshold requirements:

15(i) The housing sponsor shall demonstratebegin insert thatend insert there is a need
16and demand for low-income housing in the community or region
17for which it is proposed.

18(ii) The project’s proposed financing, including tax credit
19proceeds, shall be sufficient to complete the project and that the
20proposed operating income shall be adequate to operate the project
21for the extended use period.

22(iii) The project shall have enforceable financing commitments,
23either construction or permanent financing, for at least 50 percent
24of the total estimated financing of the project.

25(iv) The housing sponsor shall have and maintain control of the
26site for the project.

27(v) The housing sponsor shall demonstrate that the project
28complies with all applicable local land use and zoning ordinances.

29(vi) The housing sponsor shall demonstrate that the project
30development team has the experience and the financial capacity
31to ensure project completion and operation for the extended use
32period.

33(vii) The housing sponsor shall demonstrate the amount of tax
34credit that is necessary for the financial feasibility of the project
35and its viability as a qualified low-income housing project
36throughout the extended use period, taking into account operating
37expenses, a supportable debt service, reserves, funds set aside for
38rentalbegin delete subsidies,end deletebegin insert subsidiesend insert and required equity, and a development
39fee that does not exceed a specified percentage of the eligible basis
P12   1of the project prior to inclusion of the development fee in the
2eligible basis, as determined by the committee.

3(B) The committee shall give a preference to those projects
4satisfying all of the threshold requirements of subparagraph (A)
5if both of the following apply:

6(i) The project serves the lowest income tenants at rents
7affordable to those tenants.

8(ii) The project is obligated to serve qualified tenants for the
9longest period.

10(C) In addition to the provisions of subparagraphs (A) and (B),
11the committee shall use the following criteria in allocating housing
12credits:

13(i) Projects serving large families in which a substantial number,
14as defined by the committee, of all residential unitsbegin delete is comprised
15ofend delete
begin insert areend insert low-income units with three and more bedrooms.

16(ii) Projects providing single-room occupancy units serving
17very low income tenants.

18(iii) Existing projects that are “at risk of conversion,” as defined
19by paragraph (3) of subdivision (c).

20(iv) Projects for which a public agency provides direct or indirect
21long-term financial support for at least 15 percent of the total
22project development costs or projects for which the owner’s equity
23constitutes at least 30 percent of the total project development
24costs.

25(v) Projects that provide tenant amenities not generally available
26to residents of low-income housing projects.

27(4) For purposes of allocating credits pursuant to this section,
28the committee shall not give preference to any project by virtue
29of the date of submission of its application except to break a tie
30when two or more of the projects have an equal rating.

31(k) Section 42(l) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
32to certifications and other reports to secretary,end insert
shall be modified
33as follows:

34The term “secretary” shall be replaced by the termbegin delete “California
35Franchiseend delete
begin insert “Franchiseend insert Tax Board.”

36(l) In the casebegin delete where the stateend deletebegin insert in which theend insert credit allowed under
37this section exceeds the “tax,” the excess may be carried over to
38reduce the “tax” in the following year, and succeeding years if
39necessary, until the credit has been exhausted.

P13   1(m) The provisions of Section 11407(a) of Public Law 101-508,
2relating to the effective date of the extension of the low-income
3housing credit,begin delete shallend delete apply to calendar years after 1993.

4(n) The provisions of Section 11407(c) of Public Law 101-508,
5relating to election to accelerate credit,begin delete shallend deletebegin insert doend insert not apply.

begin insert

6(o) (1) For a project that receives a preliminary reservation
7under this section beginning on or after January 1, 2016, a
8taxpayer may make an irrevocable election in its application to
9the California Tax Credit Allocation Committee to sell all or any
10portion of any credit allowed under this section to one or more
11unrelated parties for each taxable year in which the credit is
12allowed subject to both of the following conditions:

end insert
begin insert

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

end insert
begin insert

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

end insert
begin insert

26(2) (A) The taxpayer that originally received the credit shall
27report to the California Tax Credit Allocation Committee within
2810 days of the sale of the credit, in the form and manner specified
29by the California Tax Credit Allocation Committee, all required
30information regarding the purchase and sale of the credit,
31including the social security or other taxpayer identification
32number of the unrelated party to whom the credit has been sold,
33the face amount of the credit sold, and the amount of consideration
34received by the taxpayer for the sale of the credit.

end insert
begin insert

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

end insert
begin insert

P14   1(3) (A) A credit may be sold pursuant to this subdivision to
2more than one unrelated party.

end insert
begin insert

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

end insert
begin insert

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

end insert
begin insert

9(4) Notwithstanding any other provision of law, the taxpayer
10that originally received the credit that is sold pursuant to
11paragraph (1) shall remain solely liable for all obligations and
12liabilities imposed on the taxpayer by this section with respect to
13the credit, none of which shall apply to any party to whom the
14credit has been sold or subsequently transferred. Parties who
15purchase credits pursuant to paragraph (1) shall be entitled to
16utilize the purchased credits in the same manner in which the
17taxpayer that originally received the credit could utilize them.

end insert
begin insert

18(5) A taxpayer shall not sell a credit allowed by this section if
19the taxpayer was allowed the credit on any tax return of the
20taxpayer.

end insert
begin insert

21(6) Notwithstanding paragraph (1), the taxpayer, with the
22approval of the Executive Director of the California Tax Credit
23Allocation Committee, may rescind the election to sell all or any
24portion of the credit allowed under this section if the consideration
25for the credit falls below 80 percent of the amount of the credit
26after the California Tax Credit Allocation Committee reservation.

end insert
begin insert

27(p) The California Tax Credit Allocation Committee may
28prescribe rules, guidelines, or procedures necessary or appropriate
29to carry out the purposes of this section, including any guidelines
30regarding the allocation of the credit allowed under this section.
31Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
323 of Title 2 of the Government Code shall not apply to any rule,
33guideline, or procedure prescribed by the California Tax Credit
34Allocation Committee pursuant to this section.

end insert
begin delete

35(o)

end delete

36begin insert(q)end insert This section shall remain in effect for as long as Section 42
37of the Internal Revenue Code, relating to low-income housing
38begin delete credits,end deletebegin insert credit,end insert remains in effect.

39

SEC. 2.  

Section 17058 of the Revenue and Taxation Code is
40amended to read:

P15   1

17058.  

(a) (1) There shall be allowed as a credit against the
2“netbegin delete tax” (asend deletebegin insert “tax,end insertbegin insertend insert defined in Sectionbegin delete 17039)end deletebegin insert 17039,end insert a state
3low-income housingbegin insert taxend insert credit in an amount equal to the amount
4determined in subdivision (c), computed in accordance withbegin delete the
5provisions ofend delete
Section 42 of the Internal Revenue Code,begin insert relating
6to low-income housing credit,end insert
except as otherwise provided in this
7section.

8(2) begin delete“Taxpayer” end deletebegin insert“Taxpayer,” end insertfor purposes of thisbegin delete sectionend deletebegin insert section,end insert
9 means the sole owner in the case of an individual, the partners in
10the case of a partnership, and the shareholders in the case of an
11“S” corporation.

12(3) “Housingbegin delete sponsor”end deletebegin insert sponsor,end insertbegin insertend insert for purposes of thisbegin delete sectionend delete
13begin insert section,end insert means the sole owner in the case of an individual, the
14partnership in the case of a partnership, and the “S” corporation
15in the case of an “S” corporation.

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

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

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

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

35(B) The California Tax Credit Allocation Committee shall not
36require fees for the credit under this section in addition to those
37fees required for applications for the tax credit pursuant to Section
3842 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
39housing credit.end insert
The committee may require a fee if the application
P16   1for the credit under this section is submitted in a calendar year
2after the year 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,begin delete and before January 1,
62016,end delete
the credit shall be allocated to the partners of a partnership
7owning the project in accordance with the partnership agreement,
8regardless of how the federal low-income housing tax credit with
9respect to the project is allocated to the partners, or whether the
10allocation of the credit under the terms of the agreement has
11substantial economic effect, within the meaning of Section 704(b)
12of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to determination of
13distributive share.end insert

14(ii) To the extent the allocation of the credit to a partner under
15this section lacks substantial economic effect, any loss or deduction
16otherwise allowable under this part that is attributable to the sale
17or other disposition of that partner’s partnership interest made prior
18to the expiration of the federal credit shall not be allowed in the
19taxable year in which the sale or other disposition occurs, but shall
20instead be deferred until and treated as if it occurred in the first
21taxable year immediately following the taxable year in which the
22federal credit period expires for the project described in clause (i).

23(iii) This subparagraph does not apply to a project that receives
24a preliminary reservation of state low-income housing tax credits
25under the set-aside described in subdivision (c) of Section 50199.20
26of the Health and Safety Code unless the project also receives a
27preliminary reservation of federal low-income housing tax credits.

begin delete

28(iv) This subparagraph shall cease to be operative with respect
29to any project that receives a preliminary reservation of a credit
30on or after January 1, 2016.

end delete

31(2) (A) The California Tax Credit Allocation Committee shall
32certify to the housing sponsor the amount of tax credit under this
33section allocated to the housing sponsor for each credit period.

34(B) In the case of a partnership or an “S” corporation, the
35housing sponsor shall provide a copy of the California Tax Credit
36Allocation Committee certification to the taxpayer.

37(C) The taxpayer shall, upon request, provide a copy of the
38certification to the Franchise Tax Board.

P17   1(D) All elections made by the taxpayer pursuant to Section 42
2of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
3credit,end insert
apply to this section.

4(E) (i) Except as described in clause (ii), for buildings located
5in designated difficult development areas (DDAs) or qualified
6census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
7Internal Revenue Code,begin insert relating to increase in credit for buildings
8in high-cost areas,end insert
credits may be allocated under this section in
9the amounts prescribed in subdivision (c), provided that the amount
10of credit allocated under Section 42 of the Internal Revenuebegin delete Codeend delete
11begin insert Code, relating to low-income housing credit,end insert is computed on 100
12percent of the qualified basis of the building.

13(ii) Notwithstanding clause (i), the California Tax Credit
14Allocation Committee may allocate the credit for buildings located
15in DDAs or QCTs that are restricted to having 50 percent of its
16occupants be special needs households, as defined in the California
17Code of Regulations by the California Tax Credit Allocation
18Committee, even if the taxpayer receives federal credits pursuant
19to Section 42(d)(5)(B) of the Internal Revenue Code,begin insert relating to
20increase in credit for buildings in high-cost areas,end insert
provided that
21the credit allowed under this section shall not exceed 30 percent
22of the eligible basis of the building.

23(F) (i) The California Tax Credit Allocation Committee may
24allocate a credit under this section in exchange for a credit allocated
25pursuant to Section 42(d)(5)(B) of the Internal Revenuebegin delete Codeend delete
26begin insert Code, relating to increase in credit for buildings in high-cost areas,end insert
27 in amounts up to 30 percent of the eligible basis of a building if
28the credits allowed under Section 42 of the Internal Revenuebegin delete Codeend delete
29begin insert Code, relating to low-income housing credit,end insert are reduced by an
30equivalent amount.

31(ii) An equivalent amount shall be determined by the California
32Tax Credit Allocation Committee based upon the relative amount
33required to produce an equivalent state tax credit to the taxpayer.

34(c) Section 42(b) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
35to applicable percentage,end insert
shall be modified as follows:

36(1) In the case of any qualified low-income building placed in
37service by the housing sponsor during 1987, the term “applicable
38percentage” means 9 percent for each of the first three years and
393 percent for the fourth year for new buildings (whether or not the
40building is federally subsidized) and for existing buildings.

P18   1(2) In the case of any qualified low-income building that receives
2an allocation after 1989 and is a new building not federally
3subsidized, the term “applicable percentage” means the following:

4(A) For each of the first three years, the percentage prescribed
5by the Secretary of the Treasury for new buildings that are not
6federally subsidized for the taxable year, determined in accordance
7with the requirements of Section 42(b)(2) of the Internal Revenue
8 Code,begin insert relating to temporary minimum credit rate for nonfederally
9subsidized new buildings,end insert
in lieu of the percentage prescribed in
10Sectionbegin delete 42(b)(1)(B)end deletebegin insert 42 (b)(1)(A)end insert of the Internal Revenue Code.

11(B) For the fourth year, the difference between 30 percent and
12the sum of the applicable percentages for the first three years.

13(3) In the case of any qualified low-income building that receives
14an allocation after 1989 and that is a new building that is federally
15subsidized or that is an existing building that is “at risk of
16conversion,” the term “applicable percentage” means the following:

17(A) For each of the first three years, the percentage prescribed
18by the Secretary of the Treasury for new buildings that are federally
19subsidized for the taxable year.

20(B) For the fourth year, the difference between 13 percent and
21the sum of the applicable percentages for the first three years.

22(4) For purposes of this section, the term “at risk of conversion,”
23with respect to an existing property means a property that satisfies
24all of the following criteria:

25(A) The property is a multifamily rental housing development
26in which at least 50 percent of the units receive governmental
27assistance pursuant to any of the following:

28(i) New construction, substantial rehabilitation, moderate
29rehabilitation, property disposition, and loan management set-aside
30programs, or any other program providing project-based assistance
31pursuant to Section 8 of the United States Housing Act of 1937,
32Section 1437f of Title 42 of the United States Code, as amended.

33(ii) The Below-Market-Interest-Rate Program pursuant to
34Section 221(d)(3) of the National Housing Act, Sections
351715l(d)(3) and (5) of Title 12 of the United States Code.

36(iii) Section 236 of the National Housing Act, Section 1715z-1
37of Title 12 of the United States Code.

38(iv) Programs for rent supplement assistance pursuant to Section
39101 of the Housing and Urban Development Act of 1965, Section
401701s of Title 12 of the United States Code, as amended.

P19   1(v) Programs pursuant to Section 515 of the Housing Act of
21949, Section 1485 of Title 42 of the United States Code, as
3amended.

4(vi) The low-income housing credit program set forth in Section
542 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
6housing credit.end insert

7(B) The restrictions on rent and income levels will terminate or
8thebegin delete federalend deletebegin insert federallyend insert insured mortgage on the property is eligible
9for prepayment any time within five years before or after the date
10of application to the California Tax Credit Allocation Committee.

11(C) The entity acquiring the property enters into a regulatory
12agreement that requires the property to be operated in accordance
13with the requirements of this section for a period equal to the
14greater of 55 years or the life of the property.

15(D) The property satisfies the requirements of Section 42(e) of
16the Internal Revenuebegin delete Code regarding rehabilitation expenditures,end delete
17begin insert Code, relating to rehabilitation expenditures treated as a separate
18new building,end insert
except that the provisions of Section
1942(e)(3)(A)(ii)(I)begin delete doend deletebegin insert shallend insert not apply.

20(d) The term “qualified low-income housing project” as defined
21in Section 42(c)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
22to qualified low-income building,end insert
is modified by adding the
23following requirements:

24(1) The taxpayer shall be entitled to receive a cash distribution
25from the operations of the project, after funding required reserves,
26that, at the election of the taxpayer, is equal to:

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

28(i) The ownerbegin delete equity thatend deletebegin insert equity, whichend insert shall include the amount
29of the capital contributions actually paid to the housing sponsor
30and shall not include any amounts until they are paid on an investor
31note.

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

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

P20   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 applies 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 Revenuebegin delete Code.end deletebegin insert Code, relating to
14in general.end insert

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

18(1) The term “credit period” as defined in Section 42(f)(1) of
19the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to credit period defined,end insert
20 is modified 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 begin delete Code doesend delete begin insert Code,
24relating to special rules for first year of credit period, shallend insert
not
25apply to the tax credit under this section.

26(3) Section 42(f)(3) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
27to determination of applicable percentage with respect to increases
28in qualified basis after first year of credit period,end insert
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
34 extent 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 taxable year in which the increase in qualified
38basis occurs.

39(f) The provisions of Section 42(h) of the Internal Revenue
40begin delete Codeend deletebegin insert Code, relating to limitation on aggregate credit allowable
P21   1with respect to projects located in a state,end insert
shall be modified as
2follows:

3(1) Section 42(h)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
4to allocated credit amount to apply to all taxable years ending
5during or after credit allocation year,end insert
does not apply and instead
6the following provisions apply:

7The total amount for the four-yearbegin insert creditend insert period of the housing
8credit dollars allocated in a calendar year to any building shall
9reduce the aggregate housing credit dollar amount of the California
10Tax Credit Allocation Committee for the calendar year in which
11the allocation is made.

12(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
13(7), and (8) of Section 42(h) of the Internal Revenuebegin delete Codeend deletebegin insert Code,
14relating to limitation on aggregate credit allowable with respect
15to projects located in a state,end insert
do not apply to this section.

16(g) The aggregate housing credit dollar amount that may be
17allocated annually by the California Tax Credit Allocation
18Committee pursuant to this section, Section 12206, and Section
1923610.5 shall be an amount equal to the sum of all the following:

20(1) Seventy million dollars ($70,000,000) for the 2001 calendar
21year, and, for the 2002 calendar year and each calendar year
22thereafter, seventy million dollars ($70,000,000) increased by the
23percentage, if any, by which the Consumer Price Index for the
24preceding calendar year exceeds the Consumer Price Index for the
252001 calendar year. For the purposes of this paragraph, the term
26“Consumer Price Index” means the last Consumer Price Index for
27All Urban Consumers published by the federal Department of
28Labor.

29(2) The unused housing credit ceiling, if any, for the preceding
30calendar years.

31(3) The amount of housing credit ceiling returned in the calendar
32year. For purposes of this paragraph, the amount of housing credit
33dollar amount returned in the calendar year equals the housing
34credit dollar amount previously allocated to any project that does
35not become a qualified low-income housing project within the
36period required by this section or to any project with respect to
37which an allocation is canceled by mutual consent of the California
38Tax Credit Allocation Committee and the allocation recipient.

P22   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 Revenuebegin delete Codeend deletebegin insert Code, relating to compliance period,end insert
11 is modified 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) Section 42(j) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
15to recapture of credit,end insert
does not apply and the following
16requirements of this section shall be set forth in a regulatory
17agreement between the California Tax Credit Allocation Committee
18and the housing sponsor,begin delete whichend deletebegin insert and thisend insert agreement shall be
19subordinated, when required, to any lien or encumbrance of any
20banks or other institutional lenders to the project. The regulatory
21agreement entered into pursuant to subdivision (f) of Section
2250199.14 of the Health and Safety Code shall apply, provided that
23the agreement includes all of the following provisions:

24(1) A term not less than the compliance period.

25(2) A requirement that the agreement be recorded in the official
26records of the county in which the qualified low-income housing
27project is located.

28(3) A provision stating which state and local agencies can
29enforce the regulatory agreement in the event the housing sponsor
30fails to satisfy any of the requirements of this section.

31(4) A provision that the regulatory agreement shall be deemed
32a contract enforceable by tenants as third-party beneficiaries thereto
33and that allows individuals, whether prospective, present, or former
34occupants of the building, who meet the income limitation
35applicable to the building, the right to enforce the regulatory
36agreement in any state court.

37(5) A provision incorporating the requirements of Section 42
38of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
39credit,end insert
as modified by this section.

P23   1(6) A requirement that the housing sponsor notify the California
2Tax Credit Allocation Committee or its designee if there is a
3determination by the Internal Revenue Service that the project is
4not in compliance with Section 42(g) of the Internal Revenuebegin delete Code.end delete
5begin insert Code, relating to qualified low-income housing project.end insert

6(7) A requirement that the housing sponsor, as security for the
7performance of the housing sponsor’s obligations under the
8regulatory agreement, assign the housing sponsor’s interest in rents
9that it receives from the project, provided that until there is a
10default under the regulatory agreement, the housing sponsor is
11entitled to collect and retain the rents.

12(8) begin deleteThe end deletebegin insertA provision that the end insertremedies available in the event of
13a default under the regulatory agreement that is not cured within
14a reasonable curebegin delete period,end deletebegin insert periodend insert include, but are not limited to,
15allowing any of the parties designated to enforce the regulatory
16agreement to collect all rents with respect to the project; taking
17possession of the project and operating the project in accordance
18with the regulatory agreement until the enforcer determines the
19housing sponsor is in a position to operate the project in accordance
20with the regulatory agreement; applying to any court for specific
21performance; securing the appointment of a receiver to operate
22the project; or any other relief as may be appropriate.

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

35(2) The committee shall adopt a qualified allocation plan, as
36provided in Section 42(m)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code,
37relating to plans for allocation of credit among projects.end insert
In
38adopting this plan, the committee shall comply with the provisions
39of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
P24   1begin delete Code.end deletebegin insert Code, relating to qualified allocation plan and relating to
2certain selection criteria must be used, respectively.end insert

3(3) Notwithstanding Section 42(m) of the Internal Revenue
4Code,begin insert relating to responsibilities of housing credit agencies,end insert 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 demonstratebegin insert thatend insert 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
18for 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.

P25   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 unitsbegin delete is comprised
13ofend delete
begin insert areend insert low-income units with three and more bedrooms.

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

16(iii) Existing projects that are “at risk of conversion,” as defined
17by paragraph (4) 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.

28(k) Section 42(l) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
29to certifications and other reports to secretary,end insert
shall be modified
30as follows:

31The term “secretary” shall be replaced by the termbegin delete “California
32Franchiseend delete
begin insert “Franchiseend insert Tax Board.”

33(l) In the case in which the credit allowed under this section
34exceeds the net tax, the excessbegin delete creditend delete may be carried over to reduce
35the net tax in the following year, and succeedingbegin delete taxableend delete years, if
36necessary, until the credit has been exhausted.

37(m) A project that received an allocation of a 1989 federal
38housing credit dollar amount shall be eligible to receive an
39allocation of a 1990 state housing credit dollar amount, subject to
40all of the following conditions:

P26   1(1) The project was not placed in service prior to 1990.

2(2) To the extent the amendments made to this section by the
3Statutes of 1990 conflict with any provisions existing in this section
4prior to those amendments, the prior provisions of law shall prevail.

5(3) Notwithstanding paragraph (2), a project applying for an
6allocation under this subdivision is subject to the requirements of
7paragraph (3) of subdivision (j).

8(n) The credit period with respect to an allocation of credit in
91989 by the California Tax Credit Allocation Committee of which
10any amount is attributable to unallocated credit from 1987 or 1988
11shall not begin until after December 31, 1989.

12(o) The provisions of Section 11407(a) of Public Law 101-508,
13relating to the effective date of the extension of the low-income
14housing credit, apply to calendar years after 1989.

15(p) The provisions of Section 11407(c) of Public Law 101-508,
16relating to election to accelerate credit, do not apply.

begin insert

17(q) (1) For a project that receives a preliminary reservation
18under this section beginning on or after January 1, 2016, a
19 taxpayer may make an irrevocable election in its application to
20the California Tax Credit Allocation Committee to sell all or any
21portion of any credit allowed under this section to one or more
22unrelated parties for each taxable year in which the credit is
23allowed subject to both of the following conditions:

end insert
begin insert

24(A) The credit is sold for consideration that is not less than 80
25percent of the amount of the credit.

end insert
begin insert

26(B) The unrelated party or parties purchasing any or all of the
27credit pursuant to this subdivision is a taxpayer allowed the credit
28under this section for the taxable year of the purchase or any prior
29taxable year or is a taxpayer allowed the federal credit under
30Section 42 of the Internal Revenue Code, relating to low-income
31housing credit, for the taxable year of the purchase or any prior
32taxable year in connection with any project located in this state.
33For purposes of this subparagraph, “taxpayer allowed the credit
34under this section” means a taxpayer that is allowed the credit
35under this section without regard to the purchase of a credit
36pursuant to this subdivision.

end insert
begin insert

37(2) (A) The taxpayer that originally received the credit shall
38report to the California Tax Credit Allocation Committee within
3910 days of the sale of the credit, in the form and manner specified
40by the California Tax Credit Allocation Committee, all required
P27   1information regarding the purchase and sale of the credit,
2including the social security or other taxpayer identification
3number of the unrelated party to whom the credit has been sold,
4the face amount of the credit sold, and the amount of consideration
5received by the taxpayer for the sale of the credit.

end insert
begin insert

6(B) The California Tax Credit Allocation Committee shall
7provide an annual listing to the Franchise Tax Board, in a form
8and manner agreed upon by the California Tax Credit Allocation
9Committee and the Franchise Tax Board, of the taxpayers that
10have sold or purchased a credit pursuant to this subdivision.

end insert
begin insert

11(3) (A) A credit may be sold pursuant to this subdivision to
12more than one unrelated party.

end insert
begin insert

13(B) (i) Except as provided in clause (ii), a credit shall not be
14resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

15(ii) All or any portion of any credit allowed under this section
16may be resold once by an original purchaser to one or more
17unrelated parties, subject to all of the requirements of this
18subdivision.

end insert
begin insert

19(4) Notwithstanding any other provision of law, the taxpayer
20that originally received the credit that is sold pursuant to
21paragraph (1) shall remain solely liable for all obligations and
22liabilities imposed on the taxpayer by this section with respect to
23the credit, none of which shall apply to any party to whom the
24credit has been sold or subsequently transferred. Parties who
25purchase credits pursuant to paragraph (1) shall be entitled to
26utilize the purchased credits in the same manner in which the
27taxpayer that originally received the credit could utilize them.

end insert
begin insert

28(5) A taxpayer shall not sell a credit allowed by this section if
29the taxpayer was allowed the credit on any tax return of the
30taxpayer.

end insert
begin insert

31(6) Notwithstanding paragraph (1), the taxpayer, with the
32approval of the Executive Director of the California Tax Credit
33Allocation Committee, may rescind the election to sell all or any
34portion of the credit allowed under this section if the consideration
35for the credit falls below 80 percent of the amount of the credit
36after the California Tax Credit Allocation Committee reservation.

end insert
begin insert

37(r) The California Tax Credit Allocation Committee may
38prescribe rules, guidelines, or procedures necessary or appropriate
39to carry out the purposes of this section, including any guidelines
40regarding the allocation of the credit allowed under this section.
P28   1Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
23 of Title 2 of the Government Code shall not apply to any rule,
3guideline, or procedure prescribed by the California Tax Credit
4Allocation Committee pursuant to this section.

end insert
begin delete

5(q)

end delete

6begin insert(s)end insert The amendments to this section made bybegin delete the act adding this
7subdivisionend delete
begin insert Chapter 1222 of the Statutes of 1993end insert apply only to
8taxable years beginning on or after January 1, 1994.

begin delete

9(r)

end delete

10begin insert(t)end insert This section shall remain in effect on and after December 1,
111990, for as long as Section 42 of the Internal Revenue Code,
12 relating to low-income housingbegin delete credits,end deletebegin insert credit,end insert remains in effect.
13Any unused credit may continue to be carried forward, as provided
14in subdivision (l), until the credit has been exhausted.

15

SEC. 3.  

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

17

23610.5.  

(a) (1) There shall be allowed as a credit against the
18begin delete “tax” (asend deletebegin insert “tax,”end insert defined by Sectionbegin delete 23036)end deletebegin insert 23036,end insert a state
19low-income housing tax credit in an amount equal to the amount
20determined in subdivision (c), computed in accordance with Section
2142 of the Internal Revenuebegin delete Code of 1986,end deletebegin insert Code, relating to
22low-income housing credit,end insert
except as otherwise provided in this
23section.

24(2) “Taxpayer,” for purposes of this section, means the sole
25owner in the case of a “C” corporation, the partners in the case of
26a partnership, and the shareholders in the case of an “S”
27corporation.

28(3) “Housing sponsor,” for purposes of this section, means the
29sole owner in the case of a “C” corporation, the partnership in the
30case of a partnership, and the “S” corporation in the case of an “S”
31corporation.

32(b) (1) The amount of the credit allocated to any housing
33sponsor shall be authorized by the California Tax Credit Allocation
34Committee, or any successor thereof, based on a project’s need
35for the credit for economic feasibility in accordance with the
36 requirements of this section.

37(A) The low-income housing project shall be located in
38California and shall meet either of the following requirements:

39(i) Except for projects to provide farmworker housing, as defined
40in subdivision (h) of Section 50199.7 of the Health and Safety
P29   1Code, that are allocated credits solely under the set-aside described
2in subdivision (c) of Section 50199.20 of the Health and Safety
3Code, the project’s housing sponsor has been allocated by the
4California Tax Credit Allocation Committee a credit for federal
5income tax purposes under Section 42 of the Internal Revenue
6begin delete Code.end deletebegin insert Code, relating to low-income housing credit.end insert

7(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
8Internal Revenuebegin delete Code.end deletebegin insert Code, relating to special rule where 50
9percent or more of building is financed with tax-exempt bonds
10subject to volume cap.end insert

11(B) The California Tax Credit Allocation Committee shall not
12require fees for the credit under this section in addition to those
13fees required for applications for the tax credit pursuant to Section
1442 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
15housing credit.end insert
The committee may require a fee if the application
16for the credit under this section is submitted in a calendar year
17after the year the application is submitted for the federal tax credit.

18(C) (i) For a project that receives a preliminary reservation of
19the state low-income housing tax credit, allowed pursuant to
20subdivision (a), on or after January 1, 2009,begin delete and before January 1,
212016,end delete
the credit shall be allocated to the partners of a partnership
22owning the project in accordance with the partnership agreement,
23regardless of how the federal low-income housing tax credit with
24respect to the project is allocated to the partners, or whether the
25allocation of the credit under the terms of the agreement has
26substantial economic effect, within the meaning of Section 704(b)
27of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to determination of
28distributive share.end insert

29(ii) To the extent the allocation of the credit to a partner under
30this section lacks substantial economic effect, any loss or deduction
31otherwise allowable under this part that is attributable to the sale
32or other disposition of that partner’s partnership interest made prior
33to the expiration of the federal credit shall not be allowed in the
34taxable year in which the sale or other disposition occurs, but shall
35instead be deferred until and treated as if it occurred in the first
36taxable year immediately following the taxable year in which the
37federal credit period expires for the project described in clause (i).

38(iii) This subparagraph does not apply to a project that receives
39a preliminary reservation of state low-income housing tax credits
40under the set-aside described in subdivision (c) of Section 50199.20
P30   1of the Health and Safety Code unless the project also receives a
2preliminary reservation of federal low-income housing tax credits.

begin delete

3(iv) This subparagraph shall cease to be operative with respect
4to any project that receives a preliminary reservation of a credit
5on or after January 1, 2016.

end delete

6(2) (A) The California Tax Credit Allocation Committee shall
7certify to the housing sponsor the amount of tax credit under this
8section allocated to the housing sponsor for each credit period.

9(B) In the case of a partnership or an “S” corporation, the
10housing sponsor shall provide a copy of the California Tax Credit
11Allocation Committee certification to the taxpayer.

12(C) The taxpayer shall, upon request, provide a copy of the
13certification to the Franchise Tax Board.

14(D) All elections made by the taxpayer pursuant to Section 42
15of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
16credit,end insert
apply to this section.

17(E) (i) Except as described in clause (ii), for buildings located
18in designated difficult development areas (DDAs) or qualified
19census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
20Internal Revenue Code,begin insert relating to increase in credit for buildings
21in high-cost areas,end insert
credits may be allocated under this section in
22the amounts prescribed in subdivision (c), provided that the amount
23of credit allocated under Section 42 of the Internal Revenuebegin delete Codeend delete
24begin insert Code, relating to low-income housing credit,end insert is computed on 100
25percent of the qualified basis of the building.

26(ii) Notwithstanding clause (i), the California Tax Credit
27Allocation Committee may allocate the credit for buildings located
28in DDAs or QCTs that are restricted to having 50 percent of its
29occupants be special needs households, as defined in the California
30Code of Regulations by the California Tax Credit Allocation
31Committee, even if the taxpayer receives federal credits pursuant
32to Section 42(d)(5)(B) of the Internal Revenue Code,begin insert relating to
33increase in credit for buildings in high cost areas,end insert
provided that
34the credit allowed under this section shall not exceed 30 percent
35of the eligible basis of the building.

36(F) (i) The California Tax Credit Allocation Committee may
37allocate a credit under this section in exchange for a credit allocated
38pursuant to Section 42(d)(5)(B)begin insert, relating to increase in credit for
39buildings in high cost areas,end insert
of the Internal Revenue Code in
40amounts up to 30 percent of the eligible basis of a building if the
P31   1credits allowed under Section 42 of the Internal Revenue Codebegin insert,
2relating to low-income housing credits,end insert
are reduced by an
3equivalent amount.

4(ii) An equivalent amount shall be determined by the California
5Tax Credit Allocation Committee based upon the relative amount
6required to produce an equivalent state tax credit to the taxpayer.

7(c) Section 42(b) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
8to applicable percentage,end insert
shall be modified as follows:

9(1) In the case of any qualified low-income building placed in
10service by the housing sponsor during 1987, the term “applicable
11percentage” means 9 percent for each of the first three years and
123 percent for the fourth year for new buildings (whether or not the
13building is federally subsidized) and for existing buildings.

14(2) In the case of any qualified low-income building that receives
15an allocation after 1989 and is a new building not federally
16subsidized, the term “applicable percentage” means the following:

17(A) For each of the first three years, the percentage prescribed
18by the Secretary of the Treasury for new buildings that are not
19federally subsidized for the taxable year, determined in accordance
20 with the requirements of Section 42(b)(2) of the Internal Revenue
21Code,begin insert relating to temporary minimum credit rate for nonfederally
22subsidized new buildings,end insert
in lieu of the percentage prescribed in
23Section 42(b)(1)(A) of the Internal Revenue Code.

24(B) For the fourth year, the difference between 30 percent and
25the sum of the applicable percentages for the first three years.

26(3) In the case of any qualified low-income building that receives
27an allocation after 1989 and that is a new building that is federally
28subsidized or that is an existing building that is “at risk of
29conversion,” the term “applicable percentage” means the following:

30(A) For each of the first three years, the percentage prescribed
31by the Secretary of the Treasury for new buildings that are federally
32subsidized for the taxable year.

33(B) For the fourth year, the difference between 13 percent and
34the sum of the applicable percentages for the first three years.

35(4) For purposes of this section, the term “at risk of conversion,”
36with respect to an existing property means a property that satisfies
37all of the following criteria:

38(A) The property is a multifamily rental housing development
39in which at least 50 percent of the units receive governmental
40assistance pursuant to any of the following:

P32   1(i) New construction, substantial rehabilitation, moderate
2rehabilitation, property disposition, and loan management set-aside
3programs, or any other program providing project-based assistance
4pursuant to Section 8 of the United States Housing Act of 1937,
5Section 1437f of Title 42 of the United States Code, as amended.

6(ii) The Below-Market-Interest-Rate Program pursuant to
7Section 221(d)(3) of the National Housing Act, Sections
81715l(d)(3) and (5) of Title 12 of the United States Code.

9(iii) Section 236 of the National Housing Act, Section 1715z-1
10of Title 12 of the United States Code.

11(iv) Programs for rent supplement assistance pursuant to Section
12101 of the Housing and Urban Development Act of 1965, Section
131701s of Title 12 of the United States Code, as amended.

14(v) Programs pursuant to Section 515 of the Housing Act of
151949, Section 1485 of Title 42 of the United States Code, as
16amended.

17(vi) The low-income housing credit program set forth in Section
1842 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to low-income
19housing credit.end insert

20(B) The restrictions on rent and income levels will terminate or
21the federally insured mortgage on the property is eligible for
22prepayment any time within five years before or after the date of
23application to the California Tax Credit Allocation Committee.

24(C) The entity acquiring the property enters into a regulatory
25agreement that requires the property to be operated in accordance
26with the requirements of this section for a period equal to the
27greater of 55 years or the life of the property.

28(D) The property satisfies the requirements of Section 42(e) of
29the Internal Revenuebegin delete Code regarding rehabilitation expendituresend delete
30begin insert Code, relating to rehabilitation expenditures treated as a separate
31new buildingend insert
, except that the provisions of Section
3242(e)(3)(A)(ii)(I) shall not apply.

33(d) The term “qualified low-income housing project” as defined
34in Section 42(c)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
35to qualified low-income building,end insert
is modified by adding the
36following requirements:

37(1) The taxpayer shall be entitled to receive a cash distribution
38from the operations of the project, after funding required reserves,
39begin delete thatend deletebegin insert that,end insert at the election of the taxpayer, is equal to:

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

P33   1(i) The owner equity,begin delete thatend deletebegin insert whichend insert shall include the amount of the
2capital contributions actually paid to the housing sponsor and shall
3not include any amounts until they are paid on an investor note.

4(ii) Twenty percent of the adjusted basis of the building as of
5the close of the first taxable year of the credit period.

6(B) The amount of the cashflow from those units in the building
7that are not low-income units. For purposes of computing cashflow
8under this subparagraph, operating costs shall be allocated to the
9low-income units using the “floor space fraction,” as defined in
10Section 42 of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
11low-income housing credit.end insert

12(C) Any amount allowed to be distributed under subparagraph
13(A) that is not available for distribution during the first five years
14of the compliance period may be accumulated and distributed any
15time during the first 15 years of the compliance period but not
16thereafter.

17(2) The limitation on return applies in the aggregate to the
18partners if the housing sponsor is a partnership and in the aggregate
19to the shareholders if the housing sponsor is an “S” corporation.

20(3) The housing sponsor shall apply any cash available for
21distribution in excess of the amount eligible to be distributed under
22paragraph (1) to reduce the rent on rent-restricted units or to
23increase the number of rent-restricted units subject to the tests of
24Section 42(g)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code, relating to
25in general.end insert

26(e) The provisions of Section 42(f) of the Internal Revenuebegin delete Codeend delete
27begin insert Code, relating to definition and special rules relating to credit
28period,end insert
shall be modified as follows:

29(1) The term “credit period” as defined in Section 42(f)(1) of
30the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to credit period defined,end insert
31 is modified by substituting “four taxable years” for “10 taxable
32years.”

33(2) The special rule for the first taxable year of the credit period
34under Section 42(f)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
35to special rule for first year of credit period,end insert
shall not apply to the
36tax credit under this section.

37(3) Section 42(f)(3) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
38to determination of applicable percentage with respect to increases
39in qualified basis after first year of credit period,end insert
is modified to
40read:

P34   1If, as of the close of any taxable year in the compliance period,
2after the first year of the credit period, the qualified basis of any
3building exceeds the qualified basis of that building as of the close
4of the first year of the credit period, the housing sponsor, to the
5extent of its tax credit allocation, shall be eligible for a credit on
6the excess in an amount equal to the applicable percentage
7determined pursuant to subdivision (c) for the four-year period
8beginning with the later of the taxable years in which the increase
9in qualified basis occurs.

10(f) The provisions of Section 42(h) of the Internal Revenue
11begin delete Codeend deletebegin insert Code, relating to limitation on aggregate credit allowable
12with respect to projects located in a state,end insert
shall be modified as
13follows:

14(1) Section 42(h)(2) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
15to allocated credit amount to apply to all taxable years ending
16 during or after credit allocation year,end insert
does not apply and instead
17the following provisions apply:

18The total amount for the four-year credit period of the housing
19credit dollars allocated in a calendar year to any building shall
20reduce the aggregate housing credit dollar amount of the California
21Tax Credit Allocation Committee for the calendar year in which
22the allocation is made.

23(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
24(7), and (8) of Section 42(h) of the Internal Revenuebegin delete Codeend deletebegin insert Code,
25relating to limitation on aggregate credit allowable with respect
26to projects located in a state,end insert
do not applybegin insert to this sectionend insert.

27(g) The aggregate housing credit dollar amount that may be
28allocated annually by the California Tax Credit Allocation
29Committee pursuant to this section, Section 12206, and Section
3017058 shall be an amount equal to the sum of all the following:

31(1) Seventy million dollars ($70,000,000) for the 2001 calendar
32year, and, for the 2002 calendar year and each calendar year
33thereafter, seventy million dollars ($70,000,000) increased by the
34percentage, if any, by which the Consumer Price Index for the
35preceding calendar year exceeds the Consumer Price Index for the
362001 calendar year. For the purposes of this paragraph, the term
37“Consumer Price Index” means the last Consumer Price Index for
38All Urban Consumers published by the federal Department of
39Labor.

P35   1(2) The unused housing credit ceiling, if any, for the preceding
2calendar years.

3(3) The amount of housing credit ceiling returned in the calendar
4year. For purposes of this paragraph, the amount of housing credit
5dollar amount returned in the calendar year equals the housing
6credit dollar amount previously allocated to any project that does
7not become a qualified low-income housing project within the
8period required by this section or to any project with respect to
9which an allocation is canceled by mutual consent of the California
10Tax Credit Allocation Committee and the allocation recipient.

11(4) Five hundred thousand dollars ($500,000) per calendar year
12for projects to provide farmworker housing, as defined in
13subdivision (h) of Section 50199.7 of the Health and Safety Code.

14(5) The amount of any unallocated or returned credits under
15 former Sections 17053.14, 23608.2, and 23608.3, as those sections
16read prior to January 1, 2009, until fully exhausted for projects to
17provide farmworker housing, as defined in subdivision (h) of
18Section 50199.7 of the Health and Safety Code.

19(h) The term “compliance period” as defined in Section 42(i)(1)
20of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to compliance period,end insert
21 is modified to mean, with respect to any building, the period of 30
22consecutive taxable years beginning with the first taxable year of
23the credit period with respect thereto.

24(i) Section 42(j) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
25to recapture of credit,end insert
does not apply and the following shall be
26substituted in its place:

27The requirements of this section shall be set forth in a regulatory
28agreement between the California Tax Credit Allocation Committee
29and the housing sponsor, and this agreement shall be subordinated,
30when required, to any lien or encumbrance of any banks or other
31institutional lenders to the project. The regulatory agreement
32entered into pursuant to subdivision (f) of Section 50199.14 of the
33Health and Safety Code shall apply, provided that the agreement
34includes all of the following provisions:

35(1) A term not less than the compliance period.

36(2) A requirement that the agreement be recorded in the official
37records of the county in which the qualified low-income housing
38project is located.

P36   1(3) A provision stating which state and local agencies can
2enforce the regulatory agreement in the event the housing sponsor
3fails to satisfy any of the requirements of this section.

4(4) A provision that the regulatory agreement shall be deemed
5a contract enforceable by tenants as third-party beneficiaries
6begin delete thereto,end deletebegin insert theretoend insert and that allows individuals, whether prospective,
7present, or former occupants of the building, who meet the income
8limitation applicable to the building, the right to enforce the
9regulatory agreement in any state court.

10(5) A provision incorporating the requirements of Section 42
11of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating to low-income housing
12credit,end insert
as modified by this section.

13(6) A requirement that the housing sponsor notify the California
14Tax Credit Allocation Committee or its designee if there is a
15determination by the Internal Revenue Service that the project is
16not in compliance with Section 42(g) of the Internal Revenuebegin delete Code.end delete
17begin insert Code, relating to qualified low-income housing project.end insert

18(7) A requirement that the housing sponsor, as security for the
19performance of the housing sponsor’s obligations under the
20regulatory agreement, assign the housing sponsor’s interest in rents
21that it receives from the project, provided that until there is a
22default under the regulatory agreement, the housing sponsor is
23entitled to collect and retain the rents.

24(8) A provision that the remedies available in the event of a
25default under the regulatory agreement that is not cured within a
26reasonable cure period include, but are not limited to, allowing
27any of the parties designated to enforce the regulatory agreement
28to collect all rents with respect to the project; taking possession of
29the project and operating the project in accordance with the
30regulatory agreement until the enforcer determines the housing
31sponsor is in a position to operate the project in accordance with
32the regulatory agreement; applying to any court for specific
33performance; securing the appointment of a receiver to operate
34the project; or any other relief as may be appropriate.

35(j) (1) The committee shall allocate the housing credit on a
36regular basis consisting of two or more periods in each calendar
37year during which applications may be filed and considered. The
38committee shall establish application filing deadlines, the maximum
39percentage of federal and state low-income housing tax credit
40ceiling that may be allocated by the committee in that period, and
P37   1the approximate date on which allocations shall be made. If the
2enactment of federal or state law, the adoption of rules or
3regulations, or other similar events prevent the use of two allocation
4periods, the committee may reduce the number of periods and
5adjust the filing deadlines, maximum percentage of credit allocated,
6andbegin insert theend insert allocation dates.

7(2) The committee shall adopt a qualified allocation plan, as
8provided in Section 42(m)(1) of the Internal Revenuebegin delete Code.end deletebegin insert Code,
9relating to plans for allocation of credit among projects.end insert
In
10adopting this plan, the committee shall comply with the provisions
11of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
12begin delete Code.end deletebegin insert Code, relating to qualified allocation plan and relating to
13certain selection criteria must be used, respectively.end insert

14(3) Notwithstanding Section 42(m) of the Internal Revenue
15Code,begin insert relating to responsibilities of housing credit agencies,end insert the
16California Tax Credit Allocation Committee shall allocate housing
17credits in accordance with the qualified allocation plan and
18regulations, which shall include the following provisions:

19(A) All housing sponsors, as defined by paragraph (3) of
20subdivision (a), shall demonstrate at the time the application is
21filed with the committee that the project meets the following
22threshold requirements:

23(i) The housing sponsor shall demonstrate that there is a need
24for low-income housing in the community or region for which it
25is proposed.

26(ii) The project’s proposed financing, including tax credit
27proceeds, shall be sufficient to complete the project and shall be
28adequate to operate the project for the extended use period.

29(iii) The project shall have enforceable financing commitments,
30either construction or permanent financing, for at least 50 percent
31of the total estimated financing of the project.

32(iv) The housing sponsor shall have and maintain control of the
33site for the project.

34(v) The housing sponsor shall demonstrate that the project
35complies with all applicable local land use and zoning ordinances.

36(vi) The housing sponsor shall demonstrate that the project
37development team has the experience and the financial capacity
38to ensure project completion and operation for the extended use
39period.

P38   1(vii) The housing sponsor shall demonstrate the amount of tax
2credit that is necessary for the financial feasibility of the project
3and its viability as a qualified low-income housing project
4throughout the extended use period, taking into account operating
5expenses, a supportable debt service, reserves, funds set aside for
6rental subsidies and required equity, and a development fee that
7does not exceed a specified percentage of the eligible basis of the
8project prior to inclusion of the development fee in the eligible
9basis, as determined by the committee.

10(B) The committee shall give a preference to those projects
11satisfying all of the threshold requirements of subparagraph (A)
12if both of the following apply:

13(i) The project serves the lowest income tenants at rents
14affordable to those tenants.

15(ii) The project is obligated to serve qualified tenants for the
16longest period.

17(C) In addition to the provisions of subparagraphs (A) and (B),
18the committee shall use the following criteria in allocating housing
19credits:

20(i) Projects serving large families in which a substantial number,
21as defined by the committee, of all residential units are low-income
22units with three and more bedrooms.

23(ii) Projects providing single-room occupancy units serving
24very low income tenants.

25(iii) Existing projects that are “at risk of conversion,” as defined
26by paragraph (4) of subdivision (c).

27(iv) Projects for which a public agency provides direct or indirect
28long-term financial support for at least 15 percent of the total
29project development costs or projects for which the owner’s equity
30constitutes at least 30 percent of the total project development
31costs.

32(v) Projects that provide tenant amenities not generally available
33to residents of low-income housing projects.

34(4) For purposes of allocating credits pursuant to this section,
35the committee shall not give preference to any project by virtue
36of the date of submission of its application except to break a tie
37when two or more of the projects have an equal rating.

38(5) Not less than 20 percent of the low-income housing tax
39credits available annually under this section, Section 12206, and
40Section 17058 shall be set aside for allocation to rural areas as
P39   1defined in Section 50199.21 of the Health and Safety Code. Any
2amount of credit set aside for rural areas remaining on or after
3October 31 of any calendar year shall be available for allocation
4to any eligible project. No amount of credit set aside for rural areas
5shall be considered available for any eligible project so long as
6there are eligible rural applications pending on October 31.

7(k) Section 42(l) of the Internal Revenuebegin delete Codeend deletebegin insert Code, relating
8to certifications and other reports to secretary,end insert
shall be modified
9as follows:

10The term “secretary” shall be replaced by the termbegin delete “California
11Franchiseend delete
begin insert “Franchiseend insert Tax Board.”

12(l) In the case in which thebegin delete stateend delete credit allowed under this section
13exceeds the “tax,” the excess may be carried over to reduce the
14“tax” in the following year, and succeeding years if necessary,
15until the credit has been exhausted.

16(m) A project that received an allocation of a 1989 federal
17housing credit dollar amount shall be eligible to receive an
18allocation of a 1990 state housing credit dollar amount, subject to
19all of the following conditions:

20(1) The project was not placed in service prior to 1990.

21(2) To the extent the amendments made to this section by the
22Statutes of 1990 conflict with any provisions existing in this section
23prior to those amendments, the prior provisions of law shall prevail.

24(3) Notwithstanding paragraph (2), a project applying for an
25allocation under this subdivisionbegin delete shall beend deletebegin insert isend insert subject to the
26requirements of paragraph (3) of subdivision (j).

27(n) The credit period with respect to an allocation of credit in
281989 by the California Tax Credit Allocation Committee of which
29any amount is attributable to unallocated credit from 1987 or 1988
30shall not begin until after December 31, 1989.

31(o) The provisions of Section 11407(a) of Public Law 101-508,
32relating to the effective date of the extension of the low-income
33housing credit, apply to calendar years after 1989.

34(p) The provisions of Section 11407(c) of Public Law 101-508,
35relating to election to accelerate credit, do not apply.

36(q) (1) A corporation may elect to assign any portion of any
37credit allowed under this section to one or more affiliated
38corporations for each taxable year in which the credit is allowed.
39For purposes of this subdivision, “affiliated corporation” has the
40meaning provided in subdivision (b) of Section 25110, as that
P40   1section was amended by Chapter 881 of the Statutes of 1993, as
2of the last day of the taxable year in which the credit is allowed,
3except that “100 percent” is substituted for “more than 50 percent”
4wherever it appears in the section, as that section was amended by
5Chapter 881 of the Statutes of 1993, and “voting common stock”
6is substituted for “voting stock” wherever it appears in the section,
7as that section was amended by Chapter 881 of the Statutes of
81993.

9(2) The election provided in paragraph (1):

10(A) May be based on any method selected by the corporation
11that originally receives the credit.

12(B) Shall be irrevocable for the taxable year the credit is allowed,
13once made.

14(C) May be changed for any subsequent taxable year if the
15election to make the assignment is expressly shown on each of the
16returns of the affiliated corporations that assign and receive the
17credits.

begin insert

18(r) (1) For a project that receives a preliminary reservation
19under this section beginning on or after January 1, 2016, a
20taxpayer may make an irrevocable election in its application to
21the California Tax Credit Allocation Committee to sell all or any
22portion of any credit allowed under this section to one or more
23unrelated parties for each taxable year in which the credit is
24allowed subject to both of the following conditions:

end insert
begin insert

25(A) The credit is sold for consideration that is not less than 80
26percent of the amount of the credit.

end insert
begin insert

27(B) (i) The unrelated party or parties purchasing any or all of
28the credit pursuant to this subdivision is a taxpayer allowed the
29credit under this section for the taxable year of the purchase or
30any prior taxable year or is a taxpayer allowed the federal credit
31under Section 42 of the Internal Revenue Code, relating to
32low-income housing credit, for the taxable year of the purchase
33or any prior taxable year in connection with any project located
34in this state.

end insert
begin insert

35(ii) For purposes of this subparagraph, “taxpayer allowed the
36credit under this section” means a taxpayer that is allowed the
37credit under this section without regard to the purchase of a credit
38pursuant to this subdivision without regard to any of the following:

end insert
begin insert

39(I) The purchase of a credit under this section pursuant to this
40subdivision.

end insert
begin insert

P41   1(II) The assignment of a credit under this section pursuant to
2subdivision (q).

end insert
begin insert

3(III) The assignment of a credit under this section pursuant to
4Section 23363.

end insert
begin insert

5(2) (A) The taxpayer that originally received the credit shall
6report to the California Tax Credit Allocation Committee within
710 days of the sale of the credit, in the form and manner specified
8by the California Tax Credit Allocation Committee, all required
9information regarding the purchase and sale of the credit,
10including the social security or other taxpayer identification
11number of the unrelated party to whom the credit has been sold,
12the face amount of the credit sold, and the amount of consideration
13received by the taxpayer for the sale of the credit.

end insert
begin insert

14(B) The California Tax Credit Allocation Committee shall
15provide an annual listing to the Franchise Tax Board, in a form
16and manner agreed upon by the California Tax Credit Allocation
17Committee and the Franchise Tax Board, of the taxpayers that
18have sold or purchased a credit pursuant to this subdivision.

end insert
begin insert

19(3) (A) A credit may be sold pursuant to this subdivision to
20more than one unrelated party.

end insert
begin insert

21(B) (i) Except as provided in clause (ii), a credit shall not be
22resold by the unrelated party to another taxpayer or other party.

end insert
begin insert

23(ii) All or any portion of any credit allowed under this section
24may be resold once by an original purchaser to one or more
25unrelated parties, subject to all of the requirements of this
26subdivision.

end insert
begin insert

27(4) Notwithstanding any other provision of law, the taxpayer
28that originally received the credit that is sold pursuant to
29paragraph (1) shall remain solely liable for all obligations and
30liabilities imposed on the taxpayer by this section with respect to
31the credit, none of which shall apply to any party to whom the
32credit has been sold or subsequently transferred. Parties who
33purchase credits pursuant to paragraph (1) shall be entitled to
34utilize the purchased credits in the same manner in which the
35taxpayer that originally received the credit could utilize them.

end insert
begin insert

36(5) A taxpayer shall not sell a credit allowed by this section if
37the taxpayer was allowed the credit on any tax return of the
38taxpayer.

end insert
begin insert

39(6) Notwithstanding paragraph (1), the taxpayer, with the
40approval of the Executive Director of the California Tax Credit
P42   1Allocation Committee, may rescind the election to sell all or any
2portion of the credit allowed under this section if the consideration
3for the credit falls below 80 percent of the amount of the credit
4after the California Tax Credit Allocation Committee reservation.

end insert
begin insert

5(s) The California Tax Credit Allocation Committee may
6prescribe rules, guidelines, or procedures necessary or appropriate
7to carry out the purposes of this section, including any guidelines
8regarding the allocation of the credit allowed under this section.
9Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
103 of Title 2 of the Government Code shall not apply to any rule,
11guideline, or procedure prescribed by the California Tax Credit
12Allocation Committee pursuant to this section.

end insert
begin delete

13(r)

end delete

14begin insert(t)end insert Any unused credit may continue to be carried forward, as
15provided in subdivision (l), until the credit has been exhausted.

16begin insert(u)end insertbegin insertend insert This section shall remain in effect on and after December
171, 1990, for as long as Section 42 of the Internal Revenue Code,
18relating to low-income housingbegin delete credits,end deletebegin insert credit,end insert remains in effect.

begin delete

19(s)

end delete

20begin insert(v)end insert The amendments to this section made bybegin delete the act adding this
21subdivisionend delete
begin insert Chapter 1222 of the Statutes of 1993end insert shall apply only
22to taxable years beginning on or after January 1, 1994, except that
23paragraph (1) of subdivision (q), as amended, shall apply to taxable
24years beginning on or after January 1, 1993.

25

SEC. 4.  

The California Tax Credit Allocation Committee shall
26enter into an agreement with the Franchise Tax Board to pay any
27costs incurred by the Franchise Tax Board in the administration
28of subdivision (o) of Section 12206, subdivision (q) of Section
2917058, and subdivision (r) of Section 23610.5 of the Revenue and
30Taxation Code.

31

SEC. 5.  

This act provides for a tax levy within the meaning of
32Article IV of the Constitution and shall go into immediate effect.



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