BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 624|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 624
Author: John A. Pérez (D) and Blumenfield (D), et al.
Amended: 8/15/11 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 6/29/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : 9-0, 8/25/11
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Runner, Steinberg
ASSEMBLY FLOOR : 75-2, 5/31/11 - See last page for vote
SUBJECT : California Organized Investment Network
SOURCE : Department of Insurance
DIGEST : This bill extends the Community Development
Financial Institution investments tax credit until January
1, 2017. This bill also authorizes the Insurance
Commissioner to establish a California Organized Investment
Network Advisory Board until January 1, 2015, as specified.
ANALYSIS : Existing law allows a credit against the
personal income tax, corporation tax, and insurance
premiums tax for non-interest bearing investments in
community development financial institutions of at least
CONTINUED
AB 624
Page
2
$50,000 held for 60 months. The credit is equal to 20
percent of investments with the maximum amount of aggregate
investments capped at $10 million per year ($2 million in
credits). If qualified investments are less than this
amount in a calendar year, the remaining amount may be
carried forward to succeeding years. Existing law also
limits the amount that may be invested with a single
Community Development Financial Institution (CDFI) in a
single year, reserves a portion of the aggregate amount for
insurance company investments, and reserves a portion for
investments of less than $300,000. The Department of
Insurance (CDI) or the Franchise Tax Board (FTB) may
recapture the credit within the 60 month period if the
investor reduces or withdraws the investment in a CDFI.
The CDFI investment credit is scheduled to sunset at the
end of the 2011 tax year.
This bill continues this tax credit program until January
1, 2017, but prohibits the California Organized Investment
Network (COIN) from certifying investments for the credit
after January 1, 2015, and makes the following changes to
the program: (1) eliminate limits on the amount that may
be invested with a single CDFI and requirements to reserve
specified amounts for insurance companies and small
investments; (2) delete provisions that require investments
to be certified on a first-come, first-served basis; and
(3) specify that if aggregate investments exceed available
amounts, priority would be given to investments by
insurance companies for projects that benefit low-income
persons and prioritize certain types of housing over
single-family owned housing. This bill also authorizes the
Insurance Commissioner to establish a COIN Advisory Board
until
January 1, 2015 to advise COIN on methods to increase
insurance industry investments, facilitate contacts among
entities qualified for the CDFI credit, and recommend
programmatic guidelines.
This bill creates the COIN Advisory Board, composed of the
Insurance Commissioner or his/her designee, three
executives in the insurance investment industry, and at
least one voluntary member from:
A licensed attorney practicing law.
CONTINUED
AB 624
Page
3
A member of the public appointed by the Speaker of the
Assembly.
A member of the public appointed by the Senate Committee
on Rules.
A member of a consumer advocacy group.
An affordable housing practitioner.
A local economic development practitioner.
A member of a financial institution or community
development financial institution.
A representative with experience seeking investments for
low-to-moderate income or rural communities.
The board shall elect a Chair. Members serve two-year
terms, staggered by drawing lots at its first meeting so
that a simple majority serves two-year terms, with the
remaining members serving one-year terms.
The board's purpose is to advise COIN or its successor on
the best methods of increasing the level of insurance
industry capital in safe and sound investments while
providing fair returns to investors and social benefits to
underserve communities. The board shall meet quarterly, or
as directed by the Insurance Commissioner, and can be
reimbursed for actual expenses.
Background
A CDFI must be certified by COIN, an office in the CDI, by
demonstrating that it is a private financial institution
located in California, its primary mission is community
development, and that it lends in urban, rural or
reservation-based communities in California. COIN is a
collaborative effort between CDI, the insurance industry,
community economic development organizations, and community
advocates. COIN was established in 1996, at the request of
the insurance industry as an alternative to state
legislation that would have required insurance companies to
invest in underserved communities (similar to the federal
Community Reinvestment Act that applies to the banking
industry).
CDFIs may be banks, credit unions, or non-regulated
non-profit institutions organized to provide private
capital for community development or investing. CDFIs
CONTINUED
AB 624
Page
4
provide private capital for minority small businesses and
low-income borrowers who traditionally have been
underserved by conventional lending institutions. There
are almost 50 CDFIs in California, located mostly in urban
areas.
COIN certifies the amount of the investment and the credit,
which is capped at a total of $10 million each year, but
any unused amount may be carried over to future years.
COIN allocates the credits on a first-come, first-served
basis. Until October 1st of each year, the total amount of
investments in any one CDFI may not exceed the lesser of
$10 million or 40 percent of the annual aggregate amount,
although the Insurance Commissioner can specify an
alternative amount or a different date. Until July 1st of
each year, 25 percent of aggregate qualified investments
are reserved for admitted insurance companies, but again,
the Insurance Commissioner may specify an alternate
percentage or different date. Additionally, until July 1st
of each year, the amount of investment reserved for
investments of less than $300,000 is either $3 million, or
an alternative date or amount determined by the Insurance
Commissioner. The CDI or the FTB may recapture the credit
within the 60-month period if the taxpayer reduces or
withdraws the investment.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14
Fund
Credit extension up to $1,000 up to $2,000up
to $2,000 General
(revenue loss) (actual amounts may vary)
Advisory Board up to $20 up to $40 up to $40
Special*
COIN: credit $70 $140-$200 $140-$200
CONTINUED
AB 624
Page
5
Special*
administration (continued
annual staffing)
* Insurance Fund
SUPPORT : (Verified 8/25/11)
Department of Insurance (source)
3CORE
Association of Financial Development Corporations
California Association for Micro Enterprise Opportunity
Congress of California Seniors
Local Initiatives Support Corporation
Low Income Investment Fund
National Federation of Community Development Credit Unions
NCB Capital Impact
Neighborhood National Bank
Northern California Community Loan Fund
Personal Insurance Federation of California
Rural Community Assistance Corporation
San Luis Obispo County Housing Trust Fund
OPPOSITION : (Verified 8/25/11)
Department of Finance
ASSEMBLY FLOOR : 75-2, 5/31/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Galgiani,
Garrick, Gatto, Gordon, Grove, Hagman, Hall, Harkey,
Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman,
Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal,
Ma, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
Pérez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. Pérez
NOES: Donnelly, Halderman
NO VOTE RECORDED: Beth Gaines, Gorell, Mansoor
CONTINUED
AB 624
Page
6
AGB:mw 8/29/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED