BILL ANALYSIS Ó
AB 624
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CONCURRENCE IN SENATE AMENDMENTS
AB 624 (John A. Pérez and Blumenfield)
As Amended August 15, 2011
Majority vote
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|ASSEMBLY: |75-2 |(May 31, 2011) |SENATE: |37-1 |(August 30, |
| | | | | |2011) |
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Original Committee Reference: INS.
SUMMARY : Extends the sunset date on the laws allowing tax
credits for insurers and other taxpayers making qualified
investments in community development financial institutions that
invest in community development, and authorizes the Insurance
Commissioner (IC) to appoint an advisory board.
The Senate amendments:
1)Authorize, rather than require, the IC to appoint an advisory
board to the California Organized Investment Network (COIN).
2)Add two executives from the insurance investment industry and
a person with experience investing for low and moderate-income
or rural communities to the COIN advisory board.
3)Sunset the COIN advisory board on December 1, 2015.
4)Eliminate two calendar dates that limit and prioritize
investments by individuals, insurers, and community
development financial institutions.
5)Provide that if COIN determines that total qualified
investments will exceed the aggregate amount of qualified
investments made by all taxpayers (individuals, corporations,
and insurance companies), priority shall be granted to the
applications that meet any or all of the following criteria:
a) Directly benefit low-income persons;
b) Prioritize rental housing, mortgages for community-based
residential programs, and self-help housing ahead of
single-family owned housing; and,
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c) Represent investments from insurance companies subject
to the insurance tax.
6)Specify that COIN may certify investments for the tax credit
until January 1, 2015.
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.
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 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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Extended from January 1, 2012, until January 1, 2017, the
effective date on the laws that allow insurance companies,
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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 Program of the
Department of Insurance.
2)Required 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 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.
FISCAL EFFECT : The Franchise Tax Board estimates that the
income tax provisions of this bill will result in an annual
revenue loss of $200,000 in fiscal year 2011-12 and $420,000 in
fiscal year 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.
The Department of Insurance estimates that the cost of staffing
the COIN Advisory Board would be minor, likely less than $40,000
annually, and absorbable within existing resources.
COMMENTS :
1)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
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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 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.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN: 0002450
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