BILL ANALYSIS Ó
AB 624
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Date of Hearing: March 30, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 624 (Perez) - As Introduced: February 16, 2011
SUBJECT : Insurance investments: tax credits and advisory board
SUMMARY : Extends the effective date on the laws that allow tax
credits for insurers and other taxpayers that make qualified
investments in community development financial institutions that
invest in community development. Specifically, this bill:
1)Extends from January 1, 2012 until January 1, 2017 the
effective date on the laws that allow insurance companies,
corporations, and other taxpayers to receive a tax credit
equal to 20 percent of the amount of the qualified investment
made during the taxable year into a community development
financial institution that is certified by the California
Organized Investment Network (COIN) of the Department of
Insurance.
2)Requires the Insurance Commissioner (IC) to create and appoint
a COIN Advisory Board with the duty to advise on the best
methods to increase the level of insurance industry capital in
safe and sound investments while providing fair returns to
investors and social benefits to underserved communities. The
advisory board would consist of the IC, an executive in the
insurance investment community, a licensed attorney practicing
insurance law, a member of the State Assembly, a member of the
State Senate, a member from a consumer advocacy group, and an
affordable housing practitioner.
EXISTING LAW :
1)Allows insurance companies, corporations, and other taxpayers
to receive a tax credit equal to 20 percent of the amount of
the qualified investment made during the taxable year into a
community development financial institution that is certified
by the COIN Office of the Department of Insurance.
2)Specifies that the aggregate amount of qualified investments
by all insurance companies, corporations, and other taxpayers
shall not exceed $10 million for each calendar year, but if
the qualified investments are less than that amount in one
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year, the difference may be carried over to future years.
3)Defines "qualified investment" as an investment that is a
deposit or loan that does not earn interest, or an equity
investment, or an equity-like debt instrument meeting federal
or state agency standards. The duration of the investment
must be for 60 months or more and the amount must equal
$50,000 or more.
4)Defines "community development financial institution" as a
private financial institution located in California that is
certified by the COIN Office of the Department of Insurance,
that has community development as its primary mission, and
that lends in urban, rural, or reservation communities in this
state. A community development financial institution may
include a community development bank, a community development
loan fund, a community development credit union, a
microenterprise fund, a community development
corporation-based lender, or a community development venture
fund.
5)Sunsets this tax credit on January 1, 2012.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Background. The COIN Program was created in 1996 as a
public/private partnership by the Department of Insurance, the
insurance industry, state government leaders, and community
development organizations with the goal of helping to address
the unmet capital needs for economic development and
affordable housing in low-income urban and rural communities
throughout California. COIN serves as a liaison between
insurers that are seeking investment opportunities and the
community organizations that are seeking investment capital
for projects.
Community Development Financial Institutions (CDFIs) help bridge
the gap between the services available to the economic
mainstream and those available to low-income communities by
providing access to credit, loans, and investments in these
communities and offering administrative and technical
assistance. CDFIs work with COIN to provide loans to small
businesses and non-profits that serve economically
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disadvantaged communities. There are currently 81 CDFIs
certified by COIN and eligible to participate in the
tax-credit program.
2)Arguments in support. According to the Author and the
Department of Insurance, CDFIs have invested, through the CDFI
Tax Credit and Certification Program, more than $100 million
into California's underserved communities from 1997 through
2009. The following are a few examples of these investments:
a) loans for six child care centers that serve 500 low-income
children; b) a mortgage loan for a nonprofit residential
alcohol treatment facility; c) micro-loans of $500 to $5,000
to self-employed business owners; d) pre-development loans to
Habit for Humanity to construct affordable homes; e) a loan to
a church to build a child care center for low-income
residents; f) a loan for 953 water hook-ups in two small rural
communities; and g) a short-term loan to close escrow on
housing for low-income foster youth.
The San Luis Obispo County Housing Trust Fund (HTF) states that
it received a $100,000 investment at 0% interest from a donor.
HTF combined this investment with other investments and
grants to create a $6.2 million revolving fund and has loaned
nearly $7 million to create or preserve 218 units of
affordable housing. HTF reports that projects that it helped
to finance accounted for nearly 30% of all the housing starts
in the entire county during 2010.
3)Appointments to Advisory Board. The author requests the
following amendments for the reasons specified:
a) Insurance Commissioner designee. Since the
Insurance Commissioner is not able to attend all meetings
of various advisory groups to the Department of
Insurance, it is recommended that the bill be amended to
authorize the Commissioner to appoint a designee if that
is necessary.
b) Financial institution representative. This tax
credit program extends to insurers, corporations, and
other individuals, but the advisory board does not
include a representative from a financial institution or
a community development financial institution. It is
recommended that this bill be amended to include a
representative of a financial institution or a community
development financial institution.
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c) Legislative appointments. The bill does not clarify
how a Member of the Assembly or the State Senate would be
appointed to serve on this advisory board. It is
recommended that the bill be amended to specify that the
Speaker of the Assembly would appoint the Member of the
Assembly and that the Senate Rules Committee would
appoint the Member of the Senate.
4)Technical corrections . The following technical only changes
are recommended:
a) Word correction. Correct a misspelled word
("equitylike") that should be spelled "equity-like" in
three places (page 6, line 27; page 11, line 17; and page
16, line 4).
b) Date correction. Correct the sunset date on the
laws governing the tax credit for corporations and
individuals to December 31, 2017, rather than December 1,
2017. Specifically, make this change on page 12, line
26, and on page 17, line 14. With this change, the bill
will contain the same sunset date on the laws for
corporations and individuals as would apply to insurers.
REGISTERED SUPPORT / OPPOSITION :
Support
Department of Insurance (Sponsor)
Opportunity Fund Northern California, a CDFI
San Luis Obispo County Housing Trust Fund, a CDFI
Support, if Amended
Personal Insurance Federation of California
Opposition
None received
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
AB 624
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