Amended in Senate June 9, 2014

Amended in Senate September 6, 2013

Amended in Senate August 22, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1399

Introduced by Assembly Members Medina and V. Manuel Pérez

March 11, 2013

An act to add Section 26011.9 to the Public Resources Code, and to add and repeal Sections begin insert 12283, end insert 17053.9 and 23622.9 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 1399, as amended, Medina. Income taxation: begin insert insurance taxation: end insert credits: begin insert California end insert New Market Tax Credit.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law also creates the California begin delete Tax Credit Allocation end delete begin insert Competes Tax Credit end insert Committee, which has specified duties in regard to begin delete low-income housing credits. end delete begin insert tax credits for economic development. end insert

begin insert

The California Constitution imposes on insurers doing business in California, an annual tax in lieu of all other taxes and licenses, state, county, and municipal, upon those insurers and their property except, among others, a retaliatory tax, as specified.

end insert

This bill would allow a credit under begin delete both laws, end delete begin insert the Personal Income Tax Law and the Corporation Tax Law, and a credit against the retaliatory tax imposed on an insurer, end insert in modified conformity with a federal New Market Tax Credit, for taxable years beginning on or after January 1, 2015, and before January 1, begin delete 2021, end delete begin insert 2027, end insert in a specified amount for investments in low-income communities. The bill would limit the total annual amount of credit allowed pursuant to these provisions to an amount equal to any portion not granted under a specified sales and use tax exclusion, not to exceed $40,000,000 per calendar year, and would limit the allocation of the credit to a cumulative total of no more than $200,000,000 begin insert , as provided end insert . This bill would impose specified duties on the California begin delete Tax Credit Allocation end delete begin insert Competes Tax Credit end insert Committee with regard to the application for, and allocation of, the credit. The bill would require the committee to establish and impose reasonable fees upon entities that apply for the allocation of the credit and use the revenue to defray the cost of administering the program, as specified, thereby making an appropriation.

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert begin insert

The Legislature finds and declares the following:

end insert begin insert

(a) While many areas of California have recovered from the
economic and community development impacts of the 2006
Financial Crisis and the 2010 global recession, Californians in a
number of communities and neighborhoods are still experiencing
their lingering affects. In some cases this has resulted in small and
medium businesses in low-income areas lacking sufficient access
to capital and technical assistance. Given that the state has many
needs and limited resources, moneys from the private sector are
necessary to fill this capital and investment gap.

end insert begin insert

(b) Initially enacted in 2000, the federal government established
the New Markets Tax Credit (NMTC) Program, which uses a
market-based approach for expanding capital and technical
assistance to businesses in lower income communities. The federal
program is jointly administered by the Community Development
Financial Institutions Fund (CDFI Fund) and the Internal Revenue
Service. The NMTC Program allocates federal tax incentives to
community development entities (CDE), which they then use to
attract private investors who contribute funds that can be used to
finance and invest in businesses and develop real estate in
low-income communities. Through May 2013, the CDFI Fund had
awarded approximately $36,500,000,000 in NMTC in 749 awards
including $3,000,000,000 in American Recovery and Investment
Act of 2009 awards and $1,000,000,000 of special allocation
authority to be used for the recovery and redevelopment of the
Gulf Opportunity Zone.

end insert begin insert

(c) The federal NMTC totals 39 percent of the original
investment amount in the CDE and is claimed over a period of
seven years (5 percent for each of the first three years, and 6
percent for each of the remaining four years). The investment by
the taxpayer in the CDE redeemed before the end of the seven-year
period will be recaptured.

end insert begin insert

(d) Fourteen states in the United States have adopted state
programs using the NMTC model including Alabama, Florida,
Illinois, Nevada, and Oregon. While some of the programs
substantially mirror the federal program, others vary in both the
percentage of the credit and some of the policies that form the
foundation of the credit. One of the reasons cited for establishing
state-level programs is to make their state more attractive to CDEs,
which results in increasing the amount of federal NMTCs being
utilized in their state. Further, several studies, including a January
1, 2011, case study by Pacific Community Ventures, showed that
for every dollar of forgone tax revenue, the federal NMTC
leverages $12 to $14 of private investment.

end insert

begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

Section 26011.9 is added to the Public Resources Code,
to read:

26011.9.  

The authority shall make a determination of the
amount of the one hundred million dollars ($100,000,000) in
exclusions not granted in the assigned calendar year pursuant to
Section 26011.8. An amount equal to that amount shall be granted
in the subsequent calendar year through the begin insert California end insert New begin delete Market end delete
begin insert Markets end insert Tax Credit Program pursuant to Sections begin delete 17053.9 end delete begin insert 12283,
17053.9, end insert and 23622.9 of the Revenue and Taxation Code. This
section shall not prevent a taxpayer granted an begin delete extension end delete begin insert exclusion end insert
pursuant to Section 6010.8 of the Revenue and Taxation Code
from applying for, and receiving a refund for, taxes paid under
Part 1 (commencing with Section 6001) of Division 2 of the
Revenue and Taxation Code.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 12283 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 12283. end insert   

(a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 17053.9,
and Section 23622.9. The purpose of this program is to stimulate
private sector investment in lower income communities by
providing a tax incentive to qualified community and economic
development entities that can be leveraged by the entity to attract
private sector investment that in turn will be deployed by providing
financing and technical assistance to small and medium size
businesses and the development of commercial, industrial, and
community development projects, including, but not limited to,
facilities for nonprofit service organizations, light manufacturing,
and mixed-use and transit-oriented development. The California
Competes Tax Credit Committee shall administer this program as
provided in this section, Section 17053.9, and Section 23622.9.

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the tax described in paragraph (1) of subdivision (a) of
Section 12204, an amount determined in accordance with Section
45D of the Internal Revenue Code, as amended by Public Law
111-5, Public Law 111-312, and Public Law 112-240, as modified
as set forth in this section.

(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each
of the six following anniversary dates of that date.

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed to a partnership,
limited liability company, or “S” corporation may be allocated
to the partners, members, managers, or shareholders of such entity
in accordance with the provisions of any agreement among such
partners, members, managers, or shareholders. Such allocations
shall not be considered a sale for the purposes of this section.

(c) Section 45D of the Internal Revenue Code is modified as
follows:

(1) (A) The references to “the Secretary” in Section 45D of the
Internal Revenue Code are modified to read “the committee.”

(B) For purposes of this section, “committee” means the
California Competes Tax Credit Committee established under
Section 18410.2.

(2) Section 45D(a)(2) of the Internal Revenue Code, relating
to applicable percentage, is modified by substituting for “(A) 5
percent with respect to the first three credit allowance dates, and
(B) 6 percent with respect to the remainder of the credit allowance
dates” with the following:

(A) Zero percent with respect to the first two credit allowance
dates.

(B) Seven percent with respect to the third credit allowance
date.

(C) Eight percent with respect to the remainder of the credit
allowance dates.

(3) Section 45D(b) of the Internal Revenue Code, relating to
qualified equity investment, is modified as follows:

(A) Section 45D(b)(6) of the Internal Revenue Code, relating
to equity investments, is modified to also include long-term debt
securities issued by any qualified active low-income community
business that substantially supports projects within a low-income
community.

(B) Section 45D(b)(3) of the Internal Revenue Code, relating
to safe harbor for determining use of cash, is modified by
substituting “qualified low-income community investments in
California” for “qualified low-income community investments.”

(4) Section 45D(c)(1) of the Internal Revenue Code, relating to
qualified community development entities, is modified to
additionally include:

(A) A subsidiary community development entity of any such
qualified community development entity.

(B) A nonprofit organization certified by the committee as
having a primary mission of serving or providing investment
capital in low-income communities and the entity maintains
accountability to residents of low-income communities through
their representation on any governing board of the entity or on an
advisory board of the entity. The committee shall establish
guidelines for certifying nonprofit organizations pursuant to this
subparagraph.

(5) Section 45D(d)(1)(A) of the Internal Revenue Code, relating
to qualified low-income community investments, is modified to
include any capital or equity investment in, or loan to, any real
estate project located in a low-income community or any operating
business that, at the time the initial investment is made, has 250
or fewer employees and is located in a low-income community.
The real estate project or operating business shall meet all other
requirements of a qualified active low-income community business,
except as modified by paragraphs (6) and (7).

(6) The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:

(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code,
relating to qualified active low-income community businesses, is
modified by substituting “any low-income community in
California” for “any low-income community.”

(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code,
relating to qualified active low-income community businesses, is
modified as follows:

(i) Substituting “any low-income community in California” for
“any low-income community.”

(ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
“substantial portion” shall mean “at least 40 percent” as
calculated by the average value of the tangible property owned or
leased and used within a California low-income community by the
entity divided by the average value of the total tangible property
owned or leased and used by the entity during the taxable year.
The value assigned to the leased property by the entity must be
reasonable.

(iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the
time the investment is made, the business shall continue to satisfy
the requirements of Section 45D(d)(2)(A)(ii) for the duration of
the investment.

(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code,
relating to qualified active low-income community businesses
which limits the services of employees to substantially those
performed within the low-income community, shall not apply.

(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: “A ‘qualified active
low-income community business’ shall include an operating
business that, at the time the initial investment is made, has 250
or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions
of a qualified active low-income business, except as modified by
this paragraph and paragraph (7).”

(7) Section 45D(e)(1) of the Internal Revenue Code, relating to
determining the eligible low-income community, is modified to
add the following: “When the United States Census Bureau
discontinues using the decennial census to report median family
income on a census tract basis, census block group data shall be
used based on the American Community Survey.”

(8) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: “The aggregate
amount of credit that may be allocated in any calendar year
pursuant to this section, Section 17053.9, and Section 23622.9
shall be an amount equal to any unused portion of the one hundred
million dollars ($100,000,000) in exclusions, authorized pursuant
to Section 6010.8, as determined by the California Alternative
Energy and Advanced Transportation Financing Authority and
reported to the committee, not to exceed forty million dollars
($40,000,000). The committee shall limit the allocation of credits
permitted under this section, Section 170533.9, and Section
23622.9 to a cumulative total of no more than two hundred million
dollars ($200,000,000). Any unused or recaptured credits shall
be returned to the committee on March 1 of the year following
allocation and the value of the unused or recaptured credit shall
be available for reallocation in the following calendar years.
Reallocation credits shall not count against the forty million dollars
($40,000,000) annual limit or the two hundred million dollars
($200,000,000) cumulative limit.”

(9) Section 45D(g)(3) of the Internal Revenue Code, relating
to recapture event, does not apply and is replaced with the
following:

(A) (i) The committee shall recapture, from the entity that
claimed the credit on a return, the tax credit allowed under this
section if any of the following:

(I) Any amount of a federal tax credit available with respect to
a qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code. In such case the committee’s recapture shall be
proportionate to the federal recapture with respect to such
qualified equity investment.

(II) The qualified community development entity redeems or
makes principal repayment with respect to a qualified equity
investment prior to the seventh anniversary of the issuance of such
qualified equity investment. In such case the committee’s recapture
shall be proportionate to the amount of the redemption or
repayment with respect to such qualified equity investment.

(III) The qualified community development entity fails to invest
an amount equal to 85 percent of the purchase price of the qualified
equity investment in qualified low-income community investments
in California within 12 months of the issuance of the qualified
equity investment and maintain at least 85 percent of such level
of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity
even if the investment has been sold or repaid if the qualified
community development entity reinvests an amount equal to the
capital returned to, or recovered by, the qualified community
development entity from the original investment, exclusive of any
profits realized, in another qualified low-income community
investment within 12 months of the receipt of such capital. Periodic
amounts received as repayment of principal pursuant to regularly
scheduled amortization payments on a loan that is a qualified
low-income community investment shall be treated as continuously
invested in a qualified low-income community investment if the
amounts are reinvested in one or more qualified low-income
community investments by the end of the following calendar year.
A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income
community investment shall be considered held by the qualified
community development entity through the seventh anniversary of
the qualified equity investment’s issuance.

(ii) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:

(I) First, pro rata to applicants whose qualified equity
investment allocations were reduced by the allocation limitation
of forty million dollars ($40,000,000) in paragraph (8) of
subdivision (c).

(II) Thereafter, in accordance with the application process.

(iii) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period. No recapture shall occur until
the qualified community development entity shall have been given
notice of noncompliance and afforded six months from the date of
such notice to cure the noncompliance.

(10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.

(11) If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified
low-income building under the state Low Income Tax Credit
Program, the investment or loan is not a qualified low income
community investment under this section.

(d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines
shall not be subject to the rulemaking provisions of the
Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.

(2) The committee shall establish and impose reasonable fees
upon entities that apply for the allocation pursuant to this
subdivision and use the revenue to defray the cost of administering
the program. The committee shall establish the fees in a manner
that ensures that (A) the total amount collected equals the amount
reasonably necessary to defray the committee’s costs in performing
its administrative duties under this section, and (B) the amount
paid by each entity reasonably corresponds with the value of the
services provided to the entity.

(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:

(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.

(B) Sets minimum organizational capacity standards that
applicants must meet in order to receive an allocation of credits.

(C) Provides for the annual return of unused credits on March
1 of year following the year the credits are awarded so that they
may be reallocated to other community development entities.

(4) (A) The committee shall begin accepting applications on
March 15, 2015, and shall award credits at least two times a year
at dates set annually by the committee through 2019, to the extent
that allocations are available pursuant to Section 26011.9 of the
Public Resources Code.

(B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested
and the qualified community development entity provides that
information within five working days, the application shall be
considered completed as of the original date of submission. If the
qualified community development entity fails to provide the
information within the five-working-day period, the application
shall be denied and must be resubmitted in full with a new
submission date.

(C) Within 20 days after receipt of an application determined
to be complete by the committee, the committee shall grant or deny
the application in full or in part. If the committee denies any part
of the application, it shall inform the qualified community
development entity of the grounds for the denial.

(5) (A) The committee shall award tax credits in the order
applications are received by the committee. Applications received
on the same day shall be deemed to have been received
simultaneously.

(B) For applications that are complete and received on the same
day, and in the event tax credit requests exceed the allocation
limitation of forty million dollars ($40,000,000) in paragraph (8)
of subdivision (c), the committee shall certify, consistent with
remaining qualified equity investment capacity, qualified equity
investments of applicants in proportionate percentages based upon
the ratio of the amount of qualified equity investments requested
in such applications to the total amount of qualified equity
investments requested in all such applications received on the
same day.

(C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to
withdraw its request rather than receive partial certification.

(D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity
of the controlling entity, provided that the applicant and the
transferee notify the committee of such transfer and include the
information required in the application with respect to such
transferee with such notice.

(E) Within 60 days of the applicant receiving notice of
certification, the qualified community development entity or any
transferee, under paragraph (3) of subdivision (b), shall issue the
qualified equity investment, receive cash in the amount of the
certified amount, and, if applicable, designate the required amount
of qualified equity investment authority as federal qualified equity
investments. The qualified community development entity or
transferee, under paragraph (3) of subdivision (b), must provide
the committee with evidence of the receipt of the cash investment
and designation of the qualified equity investment as a federal
qualified equity investment within 65 days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under paragraph (3) of
subdivision (b), does not receive the cash investment, issue the
qualified equity investment and, if applicable, designate the
required amount of qualified equity investment authority as federal
qualified equity investments within 60 days following receipt of
the certification notice, the certification shall lapse and the entity
may not issue the qualified equity investment without reapplying
to the committee for certification. Lapsed certifications revert back
to the committee and shall be reissued in the following order:

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced under the allocation limitation of forty
million dollars ($40,000,000) in paragraph (8) of subdivision (c).

(ii) Thereafter, in accordance with the application process.

(F) A qualified community development entity that issues
qualified equity investments must notify the committee of the names
of the entities that are eligible to utilize tax credits under
paragraph (3) of subdivision (b) pursuant to an allocation of tax
credits or change in allocation of tax credits or due to a transfer
of a qualified equity investment.

(6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of the
initial credit allowance date that provides documentation as to
the investment of 85 percent of the purchase price in qualified
low-income community investments in qualified active low-income
community businesses located in California. Such report shall
include all of the following:

(i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.

(ii) Evidence that such business was a qualified active
low-income community business at the time of such qualified
low-income community investment.

(iii) Any other information required by the committee.

(B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60 days of the
beginning of the calendar year during the compliance period. No
annual report shall be due prior to the first anniversary of the
initial credit allowance date. The report shall include, but is not
limited to, the following:

(i) The impact the credit had on the low-income community.

(ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.

(iii) The number of employment positions created and retained
as a result of qualified low-income community investments.

(iv) Average annual salary of positions in the projects described
in subdivision (a).

(e) In the case where the credit allowed by this section exceeds
the tax described in paragraph (1) of subdivision (a) of Section
12204, the excess may be carried over to reduce that tax in the
following year, and the six succeeding years if necessary, until the
credit is exhausted.

(f) The committee shall annually report on its Internet Web site
the information provided by low-income community development
entities and on the geographic distribution of the credits.

(g) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.

end insert

begin delete SEC. 2. end delete
begin insert SEC. 4. end insert   

Section 17053.9 is added to the Revenue and Taxation
Code, to read:

17053.9.  

(a) There is hereby created the California New
Markets Tax Credit Program as provided in this begin delete section end delete begin insert section,
Section 12283, end insert and Section 23622.9. The purpose of this program
is to stimulate begin delete economic development, and hasten California’s
economic recovery, by authorizing tax credits for investment in
California, including, but not limited to, retail businesses, real
property, financial institutions, and schools. The California Tax
Credit Allocation Committee shall have responsibility for the
administration of end delete begin insert private sector investment in lower income
communities by providing a tax incentive to qualified community
and economic development entities that can be leveraged by the
entity to attract private sector investment that in turn will be
deployed by providing financing and technical assistance to small
and medium size businesses and the development of commercial,
industrial and community development projects, including, but not
limited to, facilities for nonprofit service organizations, light
manufacturing, and mixed-use and transit-oriented development.
The California Competes Tax Credit end insert begin insert Committee shall administer end insert
this program as provided in this begin delete section end delete begin insert section, Section 12283, end insert
and Section 23622.9.

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, begin delete 2021, end delete begin insert 2027, end insert there shall be allowed as a credit
against the “net tax,” as defined in Section 17039, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, begin insert as amended by Public Law 111-5, Public Law 111-312, and
Public Law 112-240, end insert as modified as set forth in this section.

(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each
of the six following anniversary dates of that date.

begin insert

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed to a partnership,
limited liability company, or “S” corporation may be allocated
to the partners, members, managers, or shareholders of such entity
accordance with the provisions of any agreement among such
partners, members, managers, or shareholders. Such allocations
shall not be considered a sale for the purposes of this section.

end insert

(c) Section 45D of the Internal Revenue Code is modified as
follows:

(1) (A) The references to “the Secretary” in Section 45D of the
Internal Revenue Code are modified to read “the committee.”

(B) For purposes of this section, “committee” means the
California begin delete Tax Credit Allocation Committee as described in
subdivision (a) of Section 50199.7 of the Health and Safety Code,
or any successor thereto. end delete begin insert Competes Tax Credit Committee
established under Section 18410.2. end insert

(2) Section 45D(a)(2) of the Internal Revenue begin delete Code end delete begin insert Code,
relating to applicable percentage, end insert is modified by substituting for
“(A)   5 percent with respect to the first 3 credit allowance dates,
and (B)   6 percent with respect to the remainder of the credit
allowance begin delete dates.” end delete begin insert dates” end insert with the following:

(A) Zero percent with respect to the first two credit allowance
dates.

(B) Seven percent with respect to the third credit allowance
date.

(C) Eight percent with respect to the remainder of the credit
allowance dates.

(3)  begin delete The provisions of end delete Section 45D(b) of the Internal Revenue
Code begin insert , relating to qualified equity investment, end insert is modified as
follows:

(A) Section begin delete 45D(b)(1) end delete begin insert 45D(b)(6) end insert of the Internal Revenue Code begin insert ,
relating to equity investments, end insert is modified begin delete by substituting “3 years”
for “5 years” and “3-year period” for “5-year period.” end delete begin insert to also
include long-term debt securities issued by any qualified
low-income community business that substantially supports projects
within a low-income community. end insert

(B) Section 45D(b)(3) of the Internal Revenue Code begin insert , relating
to safe harbor for determining use of cash, end insert is modified by
substituting “qualified low-income community investments in
California” for “qualified low-income community investments.”

begin insert

(4) Section 45D(c)(1) of the Internal Revenue Code, relating to
qualified community development entities, is modified to
additionally include:

end insert begin insert

(A) A subsidiary community development entity of any such
qualified community development entity.

end insert begin insert

(B) A nonprofit organization certified by the committee as
having a primary mission of serving or providing investment
capital in low-income communities and the entity maintains
accountability to residents of low-income communities through
their representation on any governing board of the entity or on an
advisory board of the entity. The committee shall establish
guidelines for certifying nonprofit organizations pursuant to this
subparagraph.

end insert begin delete

(4)

end delete

begin insert (5) end insert  Section 45D(d)(1)(A) of the Internal Revenue Code, relating
to qualified low-income community investments, is modified to
include any capital or equity investment in, or loan to, any real
estate project located in a low-income community or any operating
business that, at the time the initial investment is made, has 250
or begin delete less end delete begin insert fewer end insert employees and is located in a low-income community.
The real estate project or operating business shall meet all other
begin delete conditions end delete begin insert requirements end insert of a qualified active low-income
community business, except as modified by paragraphs begin delete (5) end delete begin insert (6) end insert and
begin delete (6) end delete begin insert (7) end insert .

begin delete

(5)

end delete

begin insert (6) end insert  The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code is
modified as follows:

(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code begin insert ,
relating to qualified active low-income community businesses, end insert is
modified by substituting “any low-income community in
California” for “any low-income community.”

(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue begin delete Code end delete
begin insert Code, relating to qualified active low-income community
businesses, end insert is modified begin delete by substituting end delete begin insert as follows: end insert

begin insert (i) end insert begin insert   end insert begin insert Substituting end insert “any low-income community in California” for
begin delete “qualified end delete begin insert “any end insert low-income begin delete community investments.” end delete begin insert community.” end insert

begin insert

(ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
“substantial portion” shall mean “at least 40 percent” as
calculated by the average value of the tangible property owned or
leased and used within a California low-income community by the
entity divided by the average value of the total tangible property
owned or leased and used by the entity during the taxable year.
The value assigned to the leased property by the entity must be
reasonable.

end insert begin insert

(iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the
time the investment is made, the business shall continue to satisfy
the requirements of Section 45D(d)(2)(A)(ii) for the duration of
the investment.

end insert

(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue begin delete Code end delete
begin insert Code, relating to qualified active low-income community businesses
which limits the services of employees to substantially those
performed within the low-income community, end insert shall not apply.

(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: “A ‘qualified active
low-income community business’ shall include an operating
business that, at the time the initial investment is made, has 250
or begin delete less end delete begin insert fewer end insert employees and is located in a begin insert California end insert low-income
community. The operating business shall meet all other conditions
of a qualified active low-income business, except as modified by
this paragraph and paragraph begin delete (6) end delete begin insert (7) end insert .”

begin delete

(6)

end delete

begin insert (7) end insert  Section 45D(e)(1) of the Internal Revenue Code begin insert , relating
to determining the eligible low-income community, end insert is modified to
add the following: “When the United States Census Bureau
discontinues using the decennial census to report median family
income on a census tract basis, census block group data shall be
used based on the American Community Survey.”

begin delete

(7)

end delete

begin insert (8) end insert  The following shall apply in lieu of the provisions of Section
begin delete 45(D)(f)(1) end delete 45D(f)(1) of the Internal Revenue Code, relating to
national limitation on amount of investments designated: “The
aggregate amount of credit that may be allocated in any calendar
year pursuant to this section begin insert , Section 12283, end insert and Section 23622.9
shall be an amount equal to any unused portion of the one hundred
million dollars ($100,000,000) in exclusions, authorized pursuant
to Section 6010.8, as determined by the California Alternative
Energy and Advanced Transportation Financing Authority and
reported to the committee, not to exceed forty million dollars
($40,000,000). The committee shall limit the allocation of credits
permitted under this section begin insert , Section 12283, end insert and Section 23622.9
to a cumulative total of no more than two hundred million dollars
($200,000,000). Any unused begin insert or recaptured end insert credits shall be returned
to the committee begin delete at the end of the third end delete begin insert on March 1 of the end insert year
following allocation and the value of the unused begin insert or recaptured end insert
credit shall be available for begin delete allocation end delete begin insert reallocation end insert in the following
calendar years. Reallocation credits shall not count against the
forty million dollars ($40,000,000) annual limit or the two hundred
million dollars ($200,000,000) cumulative limit.”

begin delete

(8)

end delete

begin insert (9) end insert  Section 45D(g)(3) of the Internal Revenue Code, relating
to recapture event, begin delete is modified by adding end delete begin insert does not apply and is
replaced with end insert the following: begin delete “Notwithstanding the provisions of
this paragraph, a recapture event shall not have occurred and an
investment shall be considered held by a community development
entity upon its sale or repayment, provided the qualified community
development entity reinvests an amount equal to the capital
returned to or recovered by the qualified community development
entity from the original investment, exclusive of any profits
realized, in another qualified low-income community investment
within 12 months of the receipt of that capital. A qualified
community development entity shall not be required to reinvest
capital returned from a qualified low-income community
investment after the sixth anniversary of the issuance of the
qualified equity investment, the proceeds of which were used to
make the qualified low-income community investment. The
qualified low-income community investment shall be considered
held by the qualified community development entity through the
seventh anniversary of the issuance of the qualified equity
investment.” end delete

begin insert

(A) (i) The committee shall recapture, from the entity that
claimed the credit on a return, the tax credit allowed under this
section if any of the following:

end insert begin insert

(I) Any amount of a federal tax credit available with respect to
a qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code. In such case the committee’s recapture shall be
proportionate to the federal recapture with respect to such
qualified equity investment.

end insert begin insert

(II) The qualified community development entity redeems or
makes principal repayment with respect to a qualified equity
investment prior to the seventh anniversary of the issuance of such
qualified equity investment. In such case the committee’s recapture
shall be proportionate to the amount of the redemption or
repayment with respect to such qualified equity investment.

end insert begin insert

(III) The qualified community development entity fails to invest
an amount equal to 85 percent of the purchase price of the qualified
equity investment in qualified low-income community investments
in California within 12 months of the issuance of the qualified
equity investment and maintain at least 85 percent of such level
of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity
even if the investment has been sold or repaid if the qualified
community development entity reinvests an amount equal to the
capital returned to, or recovered by, the qualified community
development entity from the original investment, exclusive of any
profits realized, in another qualified low-income community
investment within 12 months of the receipt of such capital. Periodic
amounts received as repayment of principal pursuant to regularly
scheduled amortization payments on a loan that is a qualified
low-income community investment shall be treated as continuously
invested in a qualified low-income community investment if the
amounts are reinvested in one or more qualified low-income
community investments by the end of the following calendar year.
A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income
community investment shall be considered held by the qualified
community development entity through the seventh anniversary of
the qualified equity investment’s issuance.

end insert begin insert

(ii) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:

end insert begin insert

(I) First, pro rata to applicants whose qualified equity
investment allocations were reduced by the allocation limitation
of forty million dollars ($40,000,000) in paragraph (8) of
subdivision (c).

end insert begin insert

(II) Thereafter, in accordance with the application process.

end insert begin insert

(iii) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period. No recapture shall occur until
the qualified community development entity shall have been given
notice of noncompliance and afforded six months from the date of
such notice to cure the noncompliance.

end insert begin delete

(9)

end delete

begin insert (10) end insert  Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.

begin insert

(11) If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified
low-income building under the state Low Income Tax Credit
Program, the investment or loan is not a qualified low-income
community investment under this section.

end insert

(d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines
shall not be subject to the rulemaking provisions of the
Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.

(2) The committee shall establish and impose reasonable fees
upon entities that apply for the allocation pursuant to begin insert this end insert
subdivision begin delete (d) end delete and use the revenue to defray the cost of
administering the program. The committee shall establish the fees
in a manner that ensures that (A) the total amount collected equals
the amount reasonably necessary to defray the committee’s costs
in performing its administrative duties under this section, and (B)
the amount paid by each entity reasonably corresponds with the
value of the services provided to the entity.

(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:

(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.

(B) Sets minimum organizational capacity standards that
applicants must meet in order to receive an allocation of credits.

begin delete

(C) Requires annual reporting by each community development
entity that receives an allocation. The report shall include, but is
not limited to, the impact the credit had on the low-income
community, the amount of moneys used, and the types of activities
funded through the equity investment. The reporting period shall
be for a period of eight years following the allocation of credits.

end delete begin delete

(D)

end delete

begin insert (C) end insert  Provides for the annual return of unused credits begin insert on March
1 of the year end insert following the begin delete third end delete year begin delete after being end delete begin insert the credits are end insert
awarded so that they may be reallocated to other community
development entities.

begin insert

(4) (A) The committee shall begin accepting applications on
March 15, 2015, and shall award credits at least two times a year
at dates set annually by the committee through 2015, to the extent
that allocations are available pursuant to Section 26011.9 of the
Public Resources Code.

end insert begin insert

(B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested
and the qualified community development entity provides that
information within five working days, the application shall be
considered completed as of the original date of submission. If the
qualified community development entity fails to provide the
information within the five-working-day period, the application
shall be denied and must be resubmitted in full with a new
submission date.

end insert begin insert

(C) Within 20 days after receipt of an application determined
to be complete by the committee, the committee shall grant or deny
the application in full or in part. If the committee denies any part
of the application, it shall inform the qualified community
development entity of the grounds for the denial.

end insert begin insert

(5) (A) The committee shall award tax credits in the order
applications are received by the committee. Applications received
on the same day shall be deemed to have been received
simultaneously.

end insert begin insert

(B) For applications that are complete and received on the same
day, and in the event tax credit requests exceed the allocation
limitation of forty million dollars ($40,000,000) in paragraph (8)
of subdivision (c), the committee shall certify, consistent with
remaining qualified equity investment capacity, qualified equity
investments of applicants in proportionate percentages based upon
the ratio of the amount of qualified equity investments requested
in such applications to the total amount of qualified equity
investments requested in all such applications received on the
same day.

end insert begin insert

(C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to
withdraw its request rather than receive partial certification.

end insert begin insert

(D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity
of the controlling entity, provided that the applicant and the
transferee notify the committee of such transfer and include the
information required in the application with respect to such
transferee with such notice.

end insert begin insert

(E) Within 60 days of the applicant receiving notice of
certification, the qualified community development entity or any
transferee, under paragraph (3) of subdivision (b), shall issue the
qualified equity investment, receive cash in the amount of the
certified amount, and, if applicable, designate the required amount
of qualified equity investment authority as federal qualified equity
investments. The qualified community development entity or
transferee, under paragraph (3) of subdivision (b), must provide
the committee with evidence of the receipt of the cash investment
and designation of the qualified equity investment as a federal
qualified equity investment within 65 days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under paragraph (3) of
subdivision (b), does not receive the cash investment, issue the
qualified equity investment and, if applicable, designate the
required amount of qualified equity investment authority as federal
qualified equity investments within 60 days following receipt of
the certification notice, the certification shall lapse and the entity
may not issue the qualified equity investment without reapplying
to the committee for certification. Lapsed certifications revert back
to the committee and shall be reissued in the following order:

end insert begin insert

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced under the allocation limitation of forty
million dollars ($40,000,000) in paragraph (8) of subdivision (c).

end insert begin insert

(ii) Thereafter, in accordance with the application process.

end insert begin insert

(F) A qualified community development entity that issues
qualified equity investments must notify the committee of the names
of the entities that are eligible to utilize tax credits under
paragraph (3) of subdivision (b) pursuant to an allocation of tax
credits or change in allocation of tax credits or due to a transfer
of a qualified equity investment.

end insert begin insert

(6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of the
initial credit allowance date that provides documentation as to
the investment of 85 percent of the purchase price in qualified
low-income community investments in qualified active low-income
community businesses located in California. Such report shall
include all of the following:

end insert begin insert

(i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.

end insert begin insert

(ii) Evidence that such business was a qualified active
low-income community business at the time of such qualified
low-income community investment.

end insert begin insert

(iii) Any other information required by the committee.

end insert begin insert

(B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60 days of the
beginning of the calendar year during the compliance period. No
annual report shall be due prior to the first anniversary of the
initial credit allowance date. The report shall include, but is not
limited to, the following:

end insert begin insert

(i) The impact the credit had on the low-income community.

end insert begin insert

(ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.

end insert begin insert

(iii) The number of employment positions created and retained
as a result of qualified low-income community investments.

end insert begin insert

(iv) Average annual salary of positions in the projects described
in subdivision (a).

end insert

(e) In the case where the credit allowed by this section exceeds
the “net tax,” the excess may be carried over to reduce the “net
tax” in the following year, and the begin delete seven end delete begin insert six end insert succeeding years if
necessary, until the credit is exhausted.

(f) The committee shall annually report on its Internet Web site
the information provided by low-income community development
entities and on the geographic distribution of the credits.

(g) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.

begin delete SEC. 3. end delete
begin insert SEC. 5. end insert   

Section 23622.9 is added to the Revenue and Taxation
Code, to read:

23622.9.  

(a) There is hereby created the California New
Markets Tax Credit Program as provided in this section begin insert , Section
12283, end insert and Section 17053.9. The purpose of this program is to
stimulate economic development, and hasten California’s economic
recovery, by authorizing tax credits for investment in California,
including, but not limited to, retail businesses, real property,
financial institutions, and schools begin delete . end delete begin insert private sector investment in
lower income communities by providing a tax incentive to qualified
community and economic development entities that can be
leveraged by the entity to attract private sector investment that in
turn will be deployed by providing financing and technical
assistance to small end insert begin insert - and medium end insert begin insert -size businesses and the
development of commercial, industrial and community development
projects, including, but not limited to, facilities for nonprofit service
organizations, light manufacturing, and mixed-use and
transit-oriented development. end insert The California begin delete Tax Credit Allocation end delete
begin insert Competes Tax Credit end insert Committee shall begin delete have responsibility for the
administration of end delete begin insert administer end insert this program as provided in this
begin delete section end delete begin insert section, Section 12283, end insert and Section 17053.9.

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, begin delete 2021, end delete begin insert 2027, end insert there shall be allowed as a credit
against the “tax,” as defined in Section 23036, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, begin insert as amended by Public Law 111-5, Public Law 111-312, and
Public Law 112-240, end insert as modified as set forth in this section.

(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each
of the six following anniversary dates of that date.

begin insert

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed to a partnership,
limited liability company, or “S” corporation may be allocated
to the partners, members, managers, or shareholders of such entity
in accordance with the provisions of any agreement among such
partners, members, managers, or shareholders. Such allocations
shall not be considered a sale for the purposes of this section.

end insert

(c) Section 45D of the Internal Revenue Code is modified as
follows:

(1) (A) The references to “the Secretary” in Section 45D of the
Internal Revenue Code are modified to read “the committee.”

(B) For purposes of this section, “committee” means the
California begin delete Tax Credit Allocation Committee as described in
subdivision (a) of Section 50199.7 of the Health and Safety Code,
or any successor thereto. end delete begin insert Competes Tax Credit Committee
established under Section 18410.2. end insert

(2) Section 45D(a)(2) of the Internal Revenue Code begin insert , relating
to applicable percentage, end insert is modified by substituting for “(A)   5
percent with respect to the first 3 credit allowance dates, and (B)  
6 percent with respect to the remainder of the credit allowance
begin delete dates.” end delete begin insert dates” end insert with the following:

(A) Zero percent with respect to the first two credit allowance
dates.

(B) Seven percent with respect to the third credit allowance
date.

(C) Eight percent with respect to the remainder of the credit
allowance dates.

(3)  begin delete The provisions of end delete Section 45D(b) of the Internal Revenue
Code begin insert , relating to qualified equity investment, end insert is modified as
follows:

(A) Section begin delete 45D(b)(1) end delete begin insert 45D(b)(6) end insert of the Internal Revenue Code begin insert ,
relating to equity investments, end insert is modified begin delete by substituting “3 years”
for “5 years” and “3-year period” for “5-year period.” end delete begin insert to also
include long-term debt securities issued by any qualified
low-income community business that substantially supports projects
within a low-income community. end insert

(B) Section 45D(b)(3) of the Internal Revenue Code begin insert , relating
to safe harbor for determining use of cash, end insert is modified by
substituting “qualified low-income community investments in
California” for “qualified low-income community investments.”

begin insert

(4) Section 45D(c)(1) of the Internal Revenue Code, relating to
qualified community development entities, is modified to
additionally include:

end insert begin insert

(A) A subsidiary community development entity of any such
qualified community development entity.

end insert begin insert

(B) A nonprofit organization certified by the committee as
having a primary mission of serving or providing investment
capital in low-income communities and the entity maintains
accountability to residents of low-income communities through
their representation on any governing board of the entity or on an
advisory board of the entity. The committee shall establish
guidelines for certifying nonprofit organizations pursuant to this
subparagraph.

end insert begin delete

(4)

end delete

begin insert (5) end insert  Section 45D(d)(1)(A) of the Internal Revenue Code, relating
to qualified low-income community investments, is modified to
include any capital or equity investment in, or loan to, any real
estate project located in a low-income community or any operating
business that, at the time the initial investment is made, has 250
or begin delete less end delete begin insert fewer end insert employees and is located in a low-income community.
The real estate project or operating business shall meet all other
begin delete conditions end delete begin insert requirements end insert of a qualified active low-income
community business, except as modified by paragraphs begin delete (5) end delete begin insert (6) end insert and
begin delete (6) end delete begin insert (7) end insert .

begin delete

(5)

end delete

begin insert (6) end insert  The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code is
modified as follows:

(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code begin insert ,
relating to qualified active low-income community businesses, end insert is
modified by substituting “any low-income community in
California” for “any low-income community.”

(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code begin insert ,
relating to qualified active low-income community businesses, end insert is
modified begin delete by substituting end delete begin insert as follows: end insert

begin insert (i) end insert begin insert   end insert begin insert Substituting end insert “any low-income community in California” for
begin delete “qualified end delete begin insert “any end insert low-income begin delete community investments.” end delete begin insert community.” end insert

begin insert

(ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
“substantial portion” shall mean “at least 40 percent” as
calculated by the average value of the tangible property owned or
leased and used within a California low-income community by the
entity divided by the average value of the total tangible property
owned or leased and used by the entity during the taxable year.
The value assigned to the leased property by the entity must be
reasonable.

end insert begin insert

(iii) Adding the provision that if the business meets the
requirements of a qualified low income community business at the
time the investment is made, the business shall continue to satisfy
the requirements of Section 45D(d)(2)(A)(ii) for the duration of
the investment.

end insert

(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code begin insert ,
relating to qualified active low-income community businesses that
limits the services of employees to substantially those performed
within the low-income community, end insert shall not apply.

(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: “A ‘qualified active
low-income community business’ shall include an operating
business that, at the time the initial investment is made, has 250
or begin delete less end delete begin insert fewer end insert employees and is located in a begin insert California end insert low-income
community. The operating business shall meet all other conditions
of a qualified active low-income business, except as modified by
this paragraph and paragraph begin delete (6) end delete begin insert (7) end insert .”

begin delete

(6)

end delete

begin insert (7) end insert  Section 45D(e)(1) of the Internal Revenue Code begin insert , relating
to determining the eligible low-income community end insert is modified to
add the following: “When the United States Census Bureau
discontinues using the decennial census to report median family
income on a census tract basis, census block group data shall be
used based on the American Community Survey.”

begin delete

(7)

end delete

begin insert (8) end insert  The following shall apply in lieu of the provisions of Section
45(D)(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: “The aggregate
amount of credit that may be allocated in any calendar year
pursuant to this section begin insert , and Section 12283, end insert and Section 17053.9
shall be an amount equal to any unused portion of the one hundred
million dollars ($100,000,000) in exclusions, authorized pursuant
to Section 6010.8, as determined by the California Alternative
Energy and Advanced Transportation Financing Authority and
reported to the committee, not to exceed forty million dollars
($40,000,000). The committee shall limit the allocation of credits
permitted under this section begin insert , and Section 12283, end insert and Section
23622.9 to a cumulative total of no more than two hundred million
dollars ($200,000,000). Any unused begin insert or recaptured end insert credits shall be
returned to the committee begin delete at the end of the third end delete begin insert on March 1 of the end insert
year following allocation and the value of the unused begin insert or recaptured end insert
credit shall be available for begin delete allocation end delete begin insert reallocation end insert in the following
calendar years. Reallocation credits shall not count against the
forty million dollars ($40,000,000) annual limit or the two hundred
million dollars ($200,000,000) cumulative limit.”

begin delete

(8)

end delete

begin insert (9) end insert  Section 45D(g)(3) of the Internal Revenue Code, relating
to recapture event, begin delete is modified by adding end delete begin insert does not apply and is
replaced with end insert the following: begin delete “Notwithstanding the provisions of
this paragraph, a recapture event shall not have occurred and an
investment shall be considered held by a community development
entity upon its sale or repayment, provided the qualified community
development entity reinvests an amount equal to the capital
returned to or recovered by the qualified community development
entity from the original investment, exclusive of any profits
realized, in another qualified low-income community investment
within 12 months of the receipt of that capital. A qualified
community development entity shall not be required to reinvest
capital returned from a qualified low-income community
investment after the sixth anniversary of the issuance of the
qualified equity investment, the proceeds of which were used to
make the qualified low-income community investment. The
qualified low-income community investment shall be considered
held by the qualified community development entity through the
seventh anniversary of the issuance of the qualified equity
investment.” end delete

begin insert

(A) (i) The committee shall recapture, from the entity that
claimed the credit on a return, the tax credit allowed under this
section if any of the following:

end insert begin insert

(I) Any amount of a federal tax credit available with respect to
a qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code. In such case the committee’s recapture shall be
proportionate to the federal recapture with respect to such
qualified equity investment.

end insert begin insert

(II) The qualified community development entity redeems or
makes principal repayment with respect to a qualified equity
investment prior to the seventh anniversary of the issuance of such
qualified equity investment. In such case the committee’s recapture
shall be proportionate to the amount of the redemption or
repayment with respect to such qualified equity investment.

end insert begin insert

(III) The qualified community development entity fails to invest
an amount equal to 85 percent of the purchase price of the qualified
equity investment in qualified low-income community investments
in California within 12 months of the issuance of the qualified
equity investment and maintain at least 85 percent of such level
of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity
even if the investment has been sold or repaid if the qualified
community development entity reinvests an amount equal to the
capital returned to, or recovered by, the qualified community
development entity from the original investment, exclusive of any
profits realized, in another qualified low-income community
investment within 12 months of the receipt of such capital. Periodic
amounts received as repayment of principal pursuant to regularly
scheduled amortization payments on a loan that is a qualified
low-income community investment shall be treated as continuously
invested in a qualified low-income community investment if the
amounts are reinvested in one or more qualified low-income
community investments by the end of the following calendar year.
A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income
community investment shall be considered held by the qualified
community development entity through the seventh anniversary of
the qualified equity investment’s issuance.

end insert begin insert

(ii) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:

end insert begin insert

(I) First, pro rata to applicants whose qualified equity
investment allocations were reduced by the allocation limitation
of forty million dollars ($40,000,000) in paragraph (8) of
subdivision (c).

end insert begin insert

(II) Thereafter, in accordance with the application process.

end insert begin insert

(iii) Enforcement of each of the recapture provisions shall be
subject to a six month cure period. No recapture shall occur until
the qualified community development entity shall have been given
notice of noncompliance and afforded six months from the date of
such notice to cure the noncompliance.

end insert begin delete

(9)

end delete

begin insert (10) end insert  Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.

begin insert

(11) If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified
low-income building under the state Low Income Tax Credit
Program, the investment or loan is not a qualified low-income
community investment under this section.

end insert

(d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines
shall not be subject to the rulemaking provisions of the
Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.

(2) The committee shall establish and impose reasonable fees
upon entities that apply for the allocation pursuant to begin insert this end insert
subdivision begin delete (d) end delete and use the revenue to defray the cost of
administering the program. The committee shall establish the fees
in a manner that ensures that (A) the total amount collected equals
the amount reasonably necessary to defray the committee’s costs
in performing its administrative duties under this section, and (B)
the amount paid by each entity reasonably corresponds with the
value of the services provided to the entity.

(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:

(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.

(B) Sets minimum organizational capacity standards that
applicants must meet in order to receive an allocation of credits.

begin delete

(C) Requires annual reporting by each community development
entity that receives an allocation. The report shall include, but is
not limited to, the impact the credit had on the low-income
community, the amount of moneys used, and the types of activities
funded through the equity investment. The reporting period shall
be for a period of eight years following the allocation of credits.

(D)

end delete

begin insert (C) end insert  Provides for the annual return of unused credits begin insert on March
1 of the year end insert following the begin delete third year after being end delete begin insert year the credits
are end insert awarded so that they may be reallocated to other community
development entities.

begin insert

(4) (A) The committee shall begin accepting applications on
March 15, 2019, and shall award credits at least two times a year
at dates set annually by the committee through 2025, to the extent
that allocations are available pursuant to Section 26011.9 of the
Public Resources Code.

end insert begin insert

(B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested
and the qualified community development entity provides that
information within five working days, the application shall be
considered completed as of the original date of submission. If the
qualified community development entity fails to provide the
information within the five-working-day period, the application
shall be denied and must be resubmitted in full with a new
submission date.

end insert begin insert

(C) Within 20 days after receipt of an application determined
to be complete by the committee, the committee shall grant or deny
the application in full or in part. If the committee denies any part
of the application, it shall inform the qualified community
development entity of the grounds for the denial.

end insert begin insert

(5) (A) The committee shall award tax credits in the order
applications are received by the committee. Applications received
on the same day shall be deemed to have been received
simultaneously.

end insert begin insert

(B) For applications that are complete and received on the same
day, and in the event tax credit requests exceed the allocation
limitation of forty million dollars ($40,000,000) in paragraph (8)
of subdivision (c), the committee shall certify, consistent with
remaining qualified equity investment capacity, qualified equity
investments of applicants in proportionate percentages based upon
the ratio of the amount of qualified equity investments requested
in such applications to the total amount of qualified equity
investments requested in all such applications received on the
same day.

end insert begin insert

(C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to
withdraw its request rather than receive partial certification.

end insert begin insert

(D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity
of the controlling entity, provided that the applicant and the
transferee notify the committee of such transfer and include the
information required in the application with respect to such
transferee with such notice.

end insert begin insert

(E) Within 60 days of the applicant receiving notice of
certification, the qualified community development entity or any
transferee, under paragraph (3) of subdivision (b), shall issue the
qualified equity investment, receive cash in the amount of the
certified amount, and, if applicable, designate the required amount
of qualified equity investment authority as federal qualified equity
investments. The qualified community development entity or
transferee, under paragraph (3) of subdivision (b), must provide
the committee with evidence of the receipt of the cash investment
and designation of the qualified equity investment as a federal
qualified equity investment within 65 days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under paragraph (3) of
subdivision (b), does not receive the cash investment, issue the
qualified equity investment and, if applicable, designate the
required amount of qualified equity investment authority as federal
qualified equity investments within 60 days following receipt of
the certification notice, the certification shall lapse and the entity
may not issue the qualified equity investment without reapplying
to the committee for certification. Lapsed certifications revert back
to the committee and shall be reissued in the following order:

end insert begin insert

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced under the allocation limitation of forty
million dollars ($40,000,000) in paragraph (8) of subdivision (c).

end insert begin insert

(ii) Thereafter, in accordance with the application process.

end insert begin insert

(F) A qualified community development entity that issues
qualified equity investments must notify the committee of the names
of the entities that are eligible to utilize tax credits under
paragraph (3) of subdivision (b) pursuant to an allocation of tax
credits or change in allocation of tax credits or due to a transfer
of a qualified equity investment.

end insert begin insert

(6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of the
initial credit allowance date that provides documentation as to
the investment of 85 percent of the purchase price in qualified
low-income community investments in qualified active low-income
community businesses located in California. Such report shall
include all of the following:

end insert begin insert

(i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.

end insert begin insert

(ii) Evidence that such business was a qualified active
low-income community business at the time of such qualified
low-income community investment.

end insert begin insert

(iii) Any other information required by the committee.

end insert begin insert

(B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60 days of the
beginning of the calendar year during the compliance period. No
annual report shall be due prior to the first anniversary of the
initial credit allowance date. The report shall include, but is not
limited to, the following:

end insert begin insert

(i) The impact the credit had on the low-income community.

end insert begin insert

(ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.

end insert begin insert

(iii) The number of employment positions created and retained
as a result of qualified low-income community investments.

end insert begin insert

(iv) Average annual salary of positions in the projects described
in subdivision (a).

end insert

(e) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and the begin delete seven end delete begin insert six end insert succeeding years if necessary,
until the credit is exhausted.

(f) The committee shall annually report on its Internet Web site
the information provided by low-income community development
entities and on the geographic distribution of the credits.

(g) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.

begin delete SEC. 4. end delete
begin insert SEC. 6. end insert   

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.