BILL NUMBER: SB 16 AMENDED
BILL TEXT
AMENDED IN SENATE
INTRODUCED BY Senator Lowenthal
DECEMBER 1, 2008
An act to amend Section 19611 of, and to add Sections
17058.6 and 23610.6 12206.5, 17058.5, 17058.6,
23610.6, and 23610.8 to, the Revenue and Taxation Code,
relating to taxation, making an appropriation therefor, and declaring
the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 16, as amended, Lowenthal. Low-income housing tax credits.
Existing law establishes a low-income housing tax credit program,
administered by the California Tax Credit Allocation Committee, which
provides procedures and requirements for the allocation of state tax
credit amounts among low-income housing projects based on federal
law.
This bill would, in the case of a project that has received or
receives preliminary reservation of state low-income housing tax
credit on or after July 1, 2008, and before January 1, 2010
2011 , allow the credit to be refundable
pursuant to specified laws , and make an appropriation
therefor, as provided.
Existing law, in the case of a partnership, requires the
allocation of the state low-income housing tax 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 extend those requirements to a project that
receives a preliminary reservation of the state low-income housing
tax credit during calendar year 2008, as specified.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12206.5 is added to the
Revenue and Taxation Code , to read:
12206.5. (a) (1) Notwithstanding the dates specified in
subdivision (b) of Section 12206, for a project that receives a
preliminary reservation of the state low-income housing tax credit,
allowed pursuant to subdivision (a) of Section 12206, during calendar
year 2008, the credit shall be allocated to the partners of a
partnership owning the project in accordance with the partnership
agreement, regardless of how the federal low-income housing tax
credit with respect to the project is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, within the meaning of Section 704
(b) of the Internal Revenue Code.
(2) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner's partnership interest made
prior to the expiration of the federal credit shall not be allowed in
the taxable year in which the sale or other disposition occurs, but
shall instead be deferred until and treated as if it occurred in the
first taxable year immediately following the taxable year in which
the federal credit period expires for the project described in
paragraph (1).
(b) This section shall not apply to any state low-income housing
credit reservation for which financial closing has occurred prior to
the effective date of the act adding this section. For purposes of
this section, "financial closing" shall mean the date on which deeds
of trust for all construction financing have been recorded or, if no
construction lender is involved, the equity partner has been admitted
to the ownership entity.
SEC. 2. Section 17058.5 is added to the
Revenue and Taxation Code , to read:
17058.5. (a) (1) Notwithstanding the dates specified in
subdivision (b) of Section 17058, for a project that receives a
preliminary reservation of the state low-income housing tax credit,
allowed pursuant to subdivision (a) of Section 17058, during calendar
year 2008, the credit shall be allocated to the partners of a
partnership owning the project in accordance with the partnership
agreement, regardless of how the federal low-income housing tax
credit with respect to the project is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, within the meaning of Section 704
(b) of the Internal Revenue Code.
(2) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner's partnership interest made
prior to the expiration of the federal credit shall not be allowed in
the taxable year in which the sale or other disposition occurs, but
shall instead be deferred until and treated as if it occurred in the
first taxable year immediately following the taxable year in which
the federal credit period expires for the project described in
paragraph (1).
(b) This section shall not apply to any state low-income housing
credit reservation for which financial closing has occurred prior to
the effective date of the act adding this section. For purposes of
this section, "financial closing" shall mean the date on which deeds
of trust for all construction financing have been recorded or, if no
construction lender is involved, the equity partner has been admitted
to the ownership entity.
SECTION 1. SEC. 3. Section 17058.6
is added to the Revenue and Taxation Code, to read:
17058.6. (a) (1) For purposes of Section 17058, in the case of a
project that has received or receives a preliminary reservation of
state low-income housing tax credit on or after July 1, 2008, and
before January 1, 2010 2011 , and the
amount allowable as a credit under Section 17058 exceeds the tax
liability computed under this part, the excess shall be credited
against other amounts due, if any, and the balance, if any, shall be
refunded to the taxpayer.
(2) For purposes of applying paragraph (1), Section 17039 shall be
applied by first reducing the "net tax" to the extent allowed under
that section by any other credits, and then any remaining "net tax"
shall first be offset by the amount described in paragraph (1) and
any remaining amount described in paragraph (1) shall then be
refunded to the taxpayer.
(b) This section shall not apply to any state low-income housing
credit reservation for which financial closing occurs on or
after July 1, 2008, and before December 31, 2008 has
occurred prior to the effective date of the act adding this section.
For purposes of this section, "financial closing" shall mean the date
on which deeds of trust for all construction financing have been
recorded or, if no construction lender is involved, the equity
partner has been admitted to the ownership entity .
SEC. 2. SEC. 4. Section 19611 of the
Revenue and Taxation Code is amended to read:
19611. (a) The Tax Relief and Refund Account is hereby created in
the General Fund. Notwithstanding Section 13340 of the Government
Code, all moneys in the Tax Relief and Refund Account are hereby
continuously appropriated, without regard to fiscal year, to the
Franchise Tax Board for purposes of making all payments as provided
in this section.
(b) Notwithstanding any other law, all payments required to be
made to taxpayers or other persons from the Personal Income Tax Fund
shall be paid from the Tax Relief and Refund Account.
(c) The Controller shall transfer, as needed, to the Tax Relief
and Refund Account:
(1) From the unexpended balance of the annual Budget Act
appropriation for Item 9100-101-001, Schedule 80-Renter's Tax Relief,
an amount determined by the Franchise Tax Board to be equivalent to
the total amount of renters' assistance credits and refunds allowed
under Section 17053.5.
(A) If there is no unexpended balance of the appropriation, as
provided for in paragraph (1), the Controller shall transfer
sufficient moneys from the Personal Income Tax Fund to make the
renters' assistance credits and refunds until there is an unexpended
balance.
(B) Subsequent to there being no unexpended balance of the
appropriation, as provided for in paragraph (1), and there being a
transfer of moneys from the Personal Income Tax Fund to make the
renters' assistance credits and refunds, reimbursement shall be made
from the unexpended balance of the appropriation as provided for in
paragraph (1) to the Personal Income Tax Fund. However, if no such
appropriation is subsequently made, reimbursement shall be made from
the General Fund.
(2) From the disability fund, the amount transferable to the
General Fund pursuant to subdivision (a) of Section 1176.5 of the
Unemployment Insurance Code.
(3) From the Personal Income Tax Fund, those additional amounts as
determined by the Franchise Tax Board to be necessary to make the
payments required under this section.
(4) From the Personal Income Tax Fund, those amounts as determined
by the Franchise Tax Board to be necessary to make the refunds
required under Section 17058.6.
(5) From the Corporation Income Tax Fund, those amounts as
determined by the Franchise Tax Board to be necessary to make the
refunds required under Section 23610.6.
SEC. 3. SEC. 5. Section 23610.6 is
added to the Revenue and Taxation Code, to read:
23610.6. (a) (1) For purposes of Section 23610.5, in the case of
a project that has received or receives a preliminary reservation of
state low-income housing tax credit on or after July 1, 2008, and
before January 1, 2010 2011 , and the
amount allowable as a credit under Section 23610.5 exceeds the tax
liability computed under this part, the excess shall be credited
against other amounts due, if any, and the balance, if any, shall be
refunded to the taxpayer.
(2) For purposes of applying paragraph (1), Section 23036 shall be
applied by first reducing the "tax" to the extent allowed under that
section by any other credits, and then any remaining "tax" shall
first be offset by the amount described in paragraph (1) and any
remaining amount described in paragraph (1) shall then be refunded to
the taxpayer.
(b) This section shall not apply to any state low-income housing
credit reservation for which financial closing occurs on or
after July 1, 2008, and before December 31, 2008 has
occurred prior to the effective date of the act adding this section.
For purposes of this section, "financial closing" shall mean the date
on which deeds of trust for all construction financing have been
recorded or, if no construction lender is involved, the equity
partner has been admitted to the ownership entity .
SEC. 6. Section 23610.8 is added to the
Revenue and Taxation Code , to read:
23610.8. (a) (1) Notwithstanding the dates specified in
subdivision (b) of Section 23610.5, for a project that receives a
preliminary reservation of the state low-income housing tax credit,
allowed pursuant to subdivision (a) of Section 23610.5, during
calendar year 2008, the credit shall be allocated to the partners of
a partnership owning the project in accordance with the partnership
agreement, regardless of how the federal low-income housing tax
credit with respect to the project is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, within the meaning of Section 704
(b) of the Internal Revenue Code.
(2) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner's partnership interest made
prior to the expiration of the federal credit shall not be allowed in
the taxable year in which the sale or other disposition occurs, but
shall instead be deferred until and treated as if it occurred in the
first taxable year immediately following the taxable year in which
the federal credit period expires for the project described in
paragraph (1).
(b) This section shall not apply to any state low-income housing
credit reservation for which financial closing has occurred prior to
the effective date of the act adding this section. For purposes of
this section, "financial closing" shall mean the date on which deeds
of trust for all construction financing have been recorded or, if no
construction lender is involved, the equity partner has been admitted
to the ownership entity.
SEC. 4. SEC. 7. This act is an
urgency statute necessary for the immediate preservation of the
public peace, health, or safety within the meaning of Article IV of
the Constitution and shall go into immediate effect. The facts
constituting the necessity are:
The state low-income housing tax credit is a critical source of
funding for the development of affordable rental housing. Because of
the financial downturn and the disruption to global capital markets,
the ability of affordable housing developers, who have been awarded
credits to obtain private equity investment in return for the
credits, has decreased precipitously and, in some cases, disappeared
altogether. Some developers have been forced to return tax credit
awards unused, others are struggling to arrange investors, and those
projects that have found investors have had to seek additional public
funding to offset the decline in pricing and to maintain the
financial feasibility of projects, severely jeopardizing the state's
goal of providing decent, safe, and sanitary housing for all
Californians. An immediate and short-term change to make state
low-income housing tax credits refundable will entice investors back
into affordable housing until global financial markets stabilize.