BILL ANALYSIS Ó
AB 624
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ASSEMBLY THIRD READING
AB 624 (John A. Pérez)
As Amended March 31, 2011
Majority vote
INSURANCE 10-0 REVENUE & TAXATION 7-0
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|Ayes:|Solorio, Hagman, Charles |Ayes:|Perea, Beall, Charles |
| |Calderon, Carter, Feuer, | |Calderon, Cedillo, Alejo, |
| |Grove, Hayashi, Alejo, | |Gordon, Harkey |
| |Torres, Wieckowski | | |
| | | | |
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APPROPRIATIONS 17-0
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|Ayes:|Fuentes, Harkey, | | |
| |Blumenfield, Bradford, | | |
| |Charles Calderon, Campos, | | |
| |Davis, Donnelly, Gatto, | | |
| |Hall, Hill, Lara, | | |
| |Mitchell, Nielsen, Norby, | | |
| |Solorio, Wagner | | |
| | | | |
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SUMMARY : Extends the effective date on 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 laws that allow insurance companies,
corporations, and other taxpayers to receive a tax credit
equal to 20% 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
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Advisory Board would consist of the IC or his or her designee,
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, an affordable housing practitioner, a
local economic development practitioner, and a representative
of a financial institution or a community development
financial institution.
EXISTING LAW :
1)Allows insurance companies, corporations, and other taxpayers
to receive a tax credit equal to 20% 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 (DOI).
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
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 DOI, 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 : The Franchise Tax Board estimates that the
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income tax provisions of this bill will result in an annual
revenue loss of $200,000 in fiscal year (FY) 2011-12 and
$420,000 in FY 2012-13. The tax credit is equal to 20% of the
invested amount, up to $10 million, for a statewide total tax
credit capped at $2 million. State law provides that if the
aggregate amount of these investments is less than $10 million
in one year, the amount of the difference may be carried over to
future years. As of February of this year, $4.75 million in
Community Development Financial Institutions (CDFI) tax credits
were available.
The DOI estimates that the cost of staffing the COIN Advisory
Board would be minor and absorbable within existing resources.
COMMENTS :
1)The COIN Program was created in 1996 as a public/private
partnership by the DOI, 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
disadvantaged communities. There are currently 81 CDFIs
certified by COIN and eligible to participate in the
tax-credit program.
2)According to the author and the DOI, 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)
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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.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN: 0000922