Amended in Senate August 19, 2014

Amended in Senate August 4, 2014

Amended in Senate July 3, 2014

Amended in Senate June 18, 2014

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, begin insert and to add Section 18410.3 to, end insert and to add and repeal Sections 12283, 17053.9, and 23622.9 begin delete of end delete begin insert of, end insert the Revenue and Taxation Code, relating to begin delete taxation, and making an appropriation therefor, end delete begin insert taxation, end insert to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 1399, as amended, Medina. Income taxation: insurance taxation: credits: California New Markets Tax Credit.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law begin delete also end delete creates the California Competes Tax Credit Committee, which has specified duties in regard to tax credits for economic development. begin insert Existing law establishes the Governor’s Office of Business and Economic Development, also known as “GO-Biz,” to, among other duties, serve the Governor as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. end insert

Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates.

This bill would allow a credit under the Personal Income Tax Law and the Corporation Tax Law, and a credit against the tax imposed on an insurer, in modified conformity with a federal New Markets Tax Credit, for taxable years beginning on or after January 1, 2015, and before January 1, 2027, 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, as provided. begin delete This end delete begin insert The end insert bill would impose specified duties on the California Competes Tax Credit Committee begin insert and GO-Biz end insert with regard to the application for, and allocation of, the credit. The bill would require begin delete the committee end delete begin insert GO-Biz end insert to establish and impose reasonable fees upon entities that apply for the allocation of the credit begin insert , to be deposited in the California New Markets Tax Credit Fund established by the bill, end insert and use the revenue begin insert , upon appropriation by the Legislature, end insert to defray the cost of administering the program, as begin delete specified, thereby making an appropriation. end delete begin insert specified. The bill would specify that the credit would not be allowed unless the Legislature makes an appropriation from the fund. end insert

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation:  begin delete yes end delete begin insert no end insert . Fiscal committee: yes. State-mandated local program: no.

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

SECTION 1.  

The Legislature finds and declares the following:

(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 effects. 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.

(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 the 2013-14 funding round,
the CDFI Fund had awarded approximately $40,000,000,000 in
NMTC in 836 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.

(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.

(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.

SEC. 2.  

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 California New
Markets Tax Credit Program pursuant to Sections 12283, 17053.9,
and 23622.9 of the Revenue and Taxation Code. This section shall
not prevent a taxpayer granted an exclusion 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.

SEC. 3.  

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

12283.  

(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 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 begin delete California Competes Tax
Credit Committee end delete begin insert committee and GO-Biz end insert 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, begin insert and subject to subdivision (h), end insert there
shall be allowed as a credit against the tax described in Sections
12201, 12204, 12206, and 12209, 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, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.

begin delete

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated through
a pass-thru entity may be allocated to the partners or shareholders
of such entity for their use in accordance with the provisions of
any agreement among such partners or shareholders. Such
allocations shall not be considered a sale for the purposes of this
section.

(A) The credit shall be allocated to the partners of a partnership
in accordance with the partnership agreement, regardless of how
the federal New Markets Tax Credit is allocated to the partners,
or whether the allocation of the credit under the terms of the
agreement has substantial economic effect, within the meaning of
Section 704(b) of the Internal Revenue Code.

(B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the recapture period set forth in Section
45D(g)(1) of the Internal Revenue Code shall not be allowed in
the taxable year in which the sale or other disposition occurs, but
shall instead be deferred until and treated as if it occurred in the
first taxable year immediately following the taxable year in which
that recapture period expires.

(C) Credits awarded to an “S” corporation shall be allocated
among the shareholders of the “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of Subtitle A of the
Internal Revenue Code and the regulations promulgated thereunder.

end delete begin insert

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated to a
partnership, limited liability company, or “S” corporation may
be allocated to the partners, members, managers, or shareholders
of such entity for their use 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 begin insert

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

end insert begin insert

(B) For purposes of this section, “GO-Biz” means the
Governor’s Office of Business and Economic Development.

end insert

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

(1)  begin delete (A) end delete begin delete   end delete The references to “the Secretary” in Section 45D of the
Internal Revenue Code, other than in Sections 45D(c)(1)(C) and
45D(d)(1)(C), are modified to read begin delete “the committee.” end delete begin insert “GO-Biz.” end insert

begin delete

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

end delete

(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 3 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)(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) (A) Section 45D(c)(1) of the Internal Revenue Code is
modified to additionally include:

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

(ii) A nonprofit organization, pursuant to Section 23701,
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. begin delete The committee end delete
begin insert GO-Biz end insert shall establish guidelines for certifying nonprofit
organizations pursuant to this subparagraph. begin delete The committee end delete begin insert GO-Biz end insert
may include reasonable conditions on the certification to effectuate
the intent of this section and may suspend or revoke a certification,
after affording the nonprofit organization notice and the opportunity
to begin insert appeal and end insert be heard begin delete and appeal, end delete begin insert by the committee, end insert if begin delete the
committee end delete begin insert GO-Biz end insert finds that the nonprofit organization no longer
meets the requirements for certification. Such nonprofit
organization is not subject to the requirement of subparagraph (B).

(B) Section 45D(c)(1) of the Internal Revenue Code is modified
to only include a qualified community development entity begin insert and its
subsidiary qualified community development entities end insert that begin delete has end delete begin insert have end insert
entered into an allocation agreement with the Community
Development Financial Institutions Fund of the United States
Treasury Department, with respect to credits authorized by Section
45D of the Internal Revenue Code, that includes California within
the service area and is dated on or after January 1, 2012.

(5)  Section 45D(d)(1)(A) of the Internal Revenue Code is
modified to only include any capital or equity investment in, or
loan to, a qualified active low-income community business.

(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 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 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 in California 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 be treated as
satisfying the requirements of Section 45D(d)(2)(A)(ii) for the
duration of the investment.

(C) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code if, as calculated in subparagraph (B), it
uses 50 percent of its tangible property, whether owned or leased,
within any low-income community for any taxable year.

(D) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
modified to allow the services of employees of a service-based
qualified business to be performed outside the low-income
community. A service-based qualified business is a business that
primarily earns revenue through providing intangible products and
services.

(E) (i) A qualified active low-income community business shall
begin delete exclude end delete begin insert not include end insert any business that derives, or projects to derive,
15 percent or more of its annual revenue from the rental or sale of
real estate. This exclusion does not apply to a business that is
controlled by, or under common control with, another business if
the second business: (I) does not derive or project to derive 15
percent or more of its annual revenue from the rental or sale of
real estate; and (II) is the primary tenant of the real estate leased
from the first business.

(ii) A qualified active low-income community business shall
only include a 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 begin insert community end insert
business, except as modified by this paragraph and paragraph (7).

(iii) A qualified active low-income community business shall
only include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of
the greater of the California median family income or the
metropolitan area median family income, or census tracts with
unemployment rates at least 1.5 times the national average.

begin insert

(iv) A qualified active low-income community business shall
not include any business that operates or derives revenues from
the operation of a country club, gaming establishment, massage
parlor, liquor store, or golf course.

end insert begin insert

(v) A qualified active low-income community business shall not
include a sexually oriented business. A “sexually oriented
business” means a nightclub, bar, restaurant, or similar
commercial enterprise that provides for an audience of two or
more individuals live nude entertainment or live nude performances
where the nudity is a function of everyday business operations and
where nudity is a planned and intentional part of the entertainment
or performance. “Nude” means clothed in a manner that leaves
uncovered or visible, through less than fully opaque clothing, any
portion of the genitals or, in the case of a female, any portion of
the breasts below the top of the areola of the breasts.

end insert begin insert

(vi) A qualified active low-income community business shall
not include a charter school.

end insert

(7) Section 45D(e)(1) of the Internal Revenue Code 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) 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 17053.9, and Section 23622.9 to a cumulative
total of no more than two hundred million dollars ($200,000,000).
Any unused credits shall be returned to the committee by March
1 of the year following allocation and the value of the unused credit
shall be available for allocation in the following calendar years in
accordance with the application process. Any recaptured credits
shall be returned to the committee by March 1 of the year following
recapture and the value of the recaptured credit shall be available
for allocation in the following calendar years in accordance with
subparagraph (B) of paragraph (9). Reallocation credits begin insert and
recapture credits end insert 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)  begin delete The committee end delete begin insert GO-Biz end insert begin insert end insert shall establish a process, in
consultation with the Department of Insurance, for the recapture
of credits allowed under this section from the entity that claimed
the credit on a return. The recapture process shall be applied if any
of the following conditions set forth occur.

(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. The qualified community development entity shall send
notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar days of being
notified by the United States Treasury that 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. The
committee shall send written acknowledgment within five calendar
days of receipt of the qualified community development entity’s
notice of potential noncompliance. In such case the recapture shall
be proportionate to the federal recapture with respect to such
qualified equity investment.

(ii) The qualified community development entity redeems begin delete or
makes principal repayment with respect to end delete a qualified equity
investment prior to the seventh anniversary of the issuance of such
qualified equity investment. The qualified community development
entity shall send notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar
days of redeeming begin delete or making principal repayments with respect
to end delete a qualified equity investment prior to the seventh anniversary
of the issuance of such qualified equity investment. begin delete The committee end delete
begin insert GO-Biz end insert shall send written acknowledgment within five calendar
days of receipt of the qualified community development entity’s
notice of potential noncompliance. In such case begin delete the committee’s end delete
begin insert GO-Biz’s end insert recapture shall be proportionate to the amount of the
redemption begin delete or repayment with respect to end delete begin insert of end insert such qualified equity
investment.

(iii) The qualified community development entity fails to invest
an amount equal to at least 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. The qualified community development entity shall send
notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar days of the
12-month deadline for the reinvestment if the entity fails to meet
any of the reinvestment requirements. begin delete The committee end delete begin insert GO-Biz end insert shall
send written acknowledgment within five calendar days of receipt
of the qualified community development entity’s notice of potential
noncompliance. begin delete 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. end delete 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.

(B) Recaptured tax credits and the related qualified equity
investment authority revert back to begin delete the committee end delete begin insert GO-Biz end insert and
shall be begin delete reissued in the following order: end delete begin insert reissued. The reissue shall
not count toward the annual allocation limitation of forty million
dollars ($40,000,000) or overall credit allocation limitation of
two hundred million dollars ($200,000,000) in paragraph (8) of
subdivision (c). The reissue shall be done in the following order: end insert

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph (B) of paragraph
(5) of subdivision (d) 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.

(C) (i) Enforcement of each of the recapture provisions shall
be subject to a six-month cure period. Recapture shall not occur
until the qualified community development entity gives notice of
potential noncompliance to begin delete the committee end delete begin insert GO-Biz end insert and is afforded
six months from the date of such notice to cure the noncompliance.
The six-month cure period shall begin on the day begin delete the committee end delete
begin insert GO-Biz end insert sends written acknowledgment of the qualified community
development entity’s notice of the potential noncompliance. The
qualified community development entity is responsible for
addressing the circumstances of the potential noncompliance and
providing all documentation to begin delete the committee end delete begin insert GO-Biz end insert necessary
to demonstrate, to begin delete the committee’s end delete begin insert GO-Biz’s end insert satisfaction, that those
conditions no longer exist.

(ii) Not more than 45 calendar days following the close of the
cure period, begin delete the committee end delete begin insert GO-Biz end insert shall make a final determination
as to whether the credit is to be recaptured. This determination
shall be based on the review of the notice, information submitted
by the qualified community development entity, and any other
information begin delete the committee end delete begin insert GO-Biz end insert deems relevant to this
determination.

(iii)  begin delete The committee end delete begin insert GO-Biz end insert shall post, and update monthly, a
tally of returned credits, pursuant to paragraph (8), and recaptured
credits pursuant to this paragraph. Within 30 calendar days of
making the final determination that the credit is to be recaptured,
begin delete the committee end delete begin insert GO-Biz end insert shall notify the Department of Insurance
of the determination including, but not limited to, the tax
identification number of the taxpayer.

(10) Section 45D(h) of the Internal Revenue Code, relating to
basis reduction, shall not apply.

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

(12)  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 Housing Tax
Credit Program, the investment or loan is not a qualified
low-income community investment under this section.

(d) (1)  begin delete The committee end delete begin insert GO-Biz end insert shall adopt guidelines necessary
or appropriate to carry out the purposes of this section and meet
the requirements of Section 45D of the Internal Revenue Code, as
modified by this section. begin insert In promulgating guidelines GO-Biz shall
look for guidance in the rules and regulations adopted under
Section 45D of the Internal Revenue Code to the extent that those
rules and regulations are consistent with this section. end insert 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)  begin delete The committee end delete begin insert (A) end insert begin insert   end insert begin insert GO-Biz end insert shall establish and impose
reasonable fees upon entities that apply for the allocation pursuant
to this subdivision begin delete and use the revenue to end delete begin insert that in the aggregate end insert
defray the cost of administering the program. begin delete 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. end delete

begin insert

(B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.

end insert

(3) In developing guidelines begin delete the committee end delete begin insert GO-Biz end insert 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
including, but not limited to, its business strategy, targeted
community outcomes, capitalization strategy, and management
capacity.

begin insert

(C) Considers the qualified community development entity’s
prior qualified low-income community investments under Section
45D of the Internal Revenue Code.

end insert begin insert

(D) Considers the qualified community development entity’s
prior qualified low-income community investments under this
section, including subparagraph (D) of paragraph (5).

end insert begin insert

(E) Does not require the qualified community development entity
to identify the qualified active low-income community businesses
in which the qualified community development entity will invest
in an application for qualified equity investment allocation.

end insert

(4) (A)  begin delete The committee end delete begin insert GO-Biz end insert shall begin accepting
applications on or before begin delete March end delete begin insert May end insert 15, 2015, and shall award
credits begin delete at least two times a year at dates set end delete annually begin delete by the
committee end delete through 2019, to the extent that allocations are available
pursuant to Section 26011.9 of the Public Resources Code. To the
extent reasonable and consistent in carrying out the purposes of
this section, begin delete the committee end delete begin insert GO-Biz end insert shall consider how the timing
of the state allocation rounds correspond with the allocation
schedule of the federal New Markets Tax Credit Program.

(B) Within 20 calendar days after receipt of an application begin delete the
committee end delete begin insert GO-Biz end insert 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 business days, the application shall
be considered completed as of the original date of receipt. If the
qualified community development entity fails to provide the
information within the five-business-day period, the application
shall be denied and must be resubmitted in full with a new receipt
date.

(C) Within 20 calendar days after receipt of an application
determined to be complete by begin delete the committee, end delete begin insert GO-Biz, end insert 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 to qualified
community development entities described in subparagraph (B)
of paragraph (4) of subdivision (c) in the order applications are
received by the committee, subject to clause (i) or on a competitive
basis, pursuant to clause (ii).

(i) (I) In 2015, the committee shall only award tax credits to a
qualified community development entity in the order applications
are received by the committee. In the 2016 to 2019 award cycles,
inclusive, at least 60 percent of the credit allocation shall be
awarded in the order applications are received by the committee
to a qualified community development entity. Applications received
on the same day shall be deemed to have been received
simultaneously. At the committee’s discretion, a higher percentage
of credits may be awarded begin delete in the order that they are received. end delete
begin insert pursuant to the first sentence in this subparagraph. end insert Qualified
community development entities that receive tax credit awards
pursuant to this clause shall commit to making investments in a
manner that engages community-based partnerships and local
grassroots stakeholders.

(II) An entity described in clause (ii) of subparagraph (A) of
paragraph (4) of subdivision (c) shall not receive a tax credit award
pursuant to this clause.

(ii) The committee shall award up to 40 percent of the credit
allocation in the 2016 to 2019, inclusive, award cycles, to a
qualified community development entity, as described in clause
(ii) of subparagraph (A) of paragraph (4) of subdivision (c) and
subparagraph (B) of paragraph (4) of subdivision (c), on a
competitive basis using blind scoring and a review committee that
is comprised of begin delete at least a majority of end delete community development
finance practitioners begin delete and at least one-third of the members end delete having
demonstrated experience in assessing organizational business
strategy, community outcomes, capitalization strategy, and
management capacity. A member of the review committee shall
not have a financial interest, which includes, but is not limited to,
asking, consenting, or agreeing to receive any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation any tax credit or other assistance from
any applicant.

(iii) In awarding credits on a competitive basis, priority shall
be given to applications that can demonstrate that the credits will
allow the entity to undertake qualified low-income community
investments in begin delete a end delete rural, suburban, or urban begin delete area end delete begin insert areas end insert that begin delete has end delete begin insert have end insert
been historically underserved and result in the greatest benefit to
the hardest to serve begin insert and undercapitalized end insert lower income begin delete populations
and most undercapitalized, end delete begin insert populations, end insert or in newly established
businesses, or in activities that support neighborhood revitalization
strategies driven by local grassroots stakeholders in multiple
low-income communities across one or more regions or the state
for the purpose of scaling economic development activities that
compliment regional industry clusters that result in the greatest
benefit to the largest number of lower income individuals. All
competitive applications shall demonstrate strong linkages with
communities and neighborhoods in California low-income
neighborhoods.

(B)  For applications described in clause (i) of subparagraph
(A), in the event tax credit requests exceed the applicable annual
allocation limitation of up to 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 within 30 calendar days of such
transfer and include the information required in the application
with respect to such transferee with such notice.

(E) Within 60 calendar days of begin delete the committee end delete begin insert GO-Biz end insert sending
notice of certification, the qualified community development entity
or any transferee, under subparagraph (D), shall issue the qualified
equity investment and receive cash in the amount of the certified
amount. The qualified community development entity or transferee,
under subparagraph (D), must provide begin delete the committee end delete begin insert GO-Biz end insert with
evidence of the receipt of the cash investment within 65 calendar
days of the applicant receiving notice of certification. If the
qualified community development entity or any transferee, under
subparagraph (D), does not receive the cash investment and issue
the qualified equity investment within 60 calendar days of begin delete the
committee end delete begin insert GO-Biz end insert sending the certification notice, the certification
shall lapse and the entity may not issue the qualified equity
investment without reapplying to begin delete the committee end delete begin insert GO-Biz end insert for
certification. Lapsed certifications revert back to begin delete the committee end delete
begin insert GO-Biz end insert and shall be reissued in the following order:

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph (B) begin delete of paragraph
(5) end delete under the annual 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 begin delete the committee end delete begin insert GO-Biz end insert
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 begin delete the committee end delete
begin insert GO-Biz end insert within the first five business days after the first anniversary
of the initial credit allowance date that provides documentation as
to the investment of at least 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 begin delete the committee. end delete begin insert GO-Biz
as being necessary to meet the requirements of this section. end insert

(B) Thereafter, the qualified community development entity
shall submit an annual report to begin delete the committee end delete begin insert GO-Biz end insert within 60
calendar days of the beginning of the calendar year during the
seven years following submittal of the report, pursuant to
subparagraph (A). 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 and
the average annual salary of such positions.

(iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and
number of employees.

(v) Number of owner-occupied real estate projects described in
subparagraph (E) of paragraph (6) of subdivision (c).

(vi) Location of the qualified low-income community businesses.

(e) In the case where the credit allowed by this section exceeds
the tax described in Sections 12201, 12204, 12206, and 12209, 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)  begin delete The committee end delete begin insert GO-Biz end insert shall annually report on its Internet
Web site the information provided by low-income community
development entities and on the geographic distribution of the
begin delete credits. end delete begin insert qualified active low-income community businesses assisted. end insert

(g) (1) The Insurance Commissioner may prescribe any rules
or regulations that may be necessary or appropriate to implement
this section. The Insurance Commissioner shall have access to any
documentation held by the committee relative to the application
and reporting of a qualified community development entity.

(2) A qualifying community development entity shall provide
begin delete the committee end delete begin insert GO-Biz end insert with the name, address, and tax
identification number of each investor and entity for which a credit
was allocated by the qualifying community development entity,
pursuant to paragraph (3) of subdivision (b). begin delete The committee end delete
begin insert GO-Biz end insert shall provide this information to the begin delete Franchise Tax Board end delete
begin insert Insurance Commissioner end insert in a manner determined by the begin delete Franchise
Tax Board. end delete begin insert Insurance Commissioner. end insert

begin insert

(h) The credit allowed under this section shall only be allowed
for taxable years in which the Legislature appropriates funds in
the California New Markets Tax Credit Fund pursuant to
subdivision (b) of Section 18410.3.

end insert begin delete

(h)

end delete

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

SEC. 4.  

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 section, Section
12283, 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 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 begin delete California
Competes Tax Credit Committee end delete begin insert committee and GO-Biz end insert shall
administer this program as provided in this section, Section 12283,
and Section 23622.9.

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, begin insert and subject to subdivision (h), 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, 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, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.

begin delete

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated through
a pass-thru entity may be allocated to the partners or shareholders
of such entity for their use in accordance with the provisions of
any agreement among such partners or shareholders. Such
allocations shall not be considered a sale for the purposes of this
section.

(A) The credit shall be allocated to the partners of a partnership
in accordance with the partnership agreement, regardless of how
the federal New Markets Tax Credit is allocated to the partners,
or whether the allocation of the credit under the terms of the
agreement has substantial economic effect, within the meaning of
Section 704(b) of the Internal Revenue Code.

(B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the recapture period set forth in Section
45D(g)(1) of the Internal Revenue Code shall not be allowed in
the taxable year in which the sale or other disposition occurs, but
shall instead be deferred until and treated as if it occurred in the
first taxable year immediately following the taxable year in which
that recapture period expires.

(C) Credits awarded to an “S” corporation shall be allocated
among the shareholders of the “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of Subtitle A of the
Internal Revenue Code and the regulations promulgated thereunder.

end delete begin insert

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated to a
partnership, limited liability company, or “S” corporation may
be allocated to the partners, members, managers, or shareholders
of such entity for their use 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)  begin delete (A) end delete begin delete   end delete The references to “the Secretary” in Section 45D of the
Internal Revenue Code, other than in Sections 45D(c)(1)(C) and
45D(d)(1)(C), are modified to read begin delete “the committee.” end delete begin insert “GO-Biz. end insert begin insert ” end insert

begin delete

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

end delete

(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 3 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)(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) (A) Section 45D(c)(1) of the Internal Revenue Code is
modified to additionally include:

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

(ii) A nonprofit organization, pursuant to Section 23701,
certified by begin delete the committee end delete begin insert GO-Biz end insert 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.
begin delete The committee end delete begin insert GO-Biz end insert shall establish guidelines for certifying
nonprofit organizations pursuant to this subparagraph. begin delete The
committee end delete begin insert GO-Biz end insert may include reasonable conditions on the
certification to effectuate the intent of this section and may suspend
or revoke a certification, after affording the nonprofit organization
notice and the opportunity to begin insert appeal and end insert be heard begin delete and appeal, end delete begin insert by
the committee, end insert if begin delete the committee end delete begin insert GO-Biz end insert finds that the nonprofit
organization no longer meets the requirements for certification.
Such nonprofit organization is not subject to the requirement of
subparagraph (B).

(B) Section 45D(c)(1) of the Internal Revenue Code is modified
to only include a qualified community development entity begin insert and its
subsidiary qualified community development entities end insert that begin delete has end delete begin insert have end insert
entered into an allocation agreement with the Community
Development Financial Institutions Fund of the United States
Treasury Department, with respect to credits authorized by Section
45D of the Internal Revenue Code, that includes California within
the service area and is dated on or after January 1, 2012.

(5) Section 45D(d)(1)(A) of the Internal Revenue Code is
modified to only include any capital or equity investment in, or
loan to, a qualified active low-income community business.

(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 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 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 in California 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 be treated as
satisfying the requirements of Section 45D(d)(2)(A)(ii) for the
duration of the investment.

(C) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code if, as calculated in subparagraph (B), it
uses 50 percent of its tangible property, whether owned or leased,
within any low-income community for any taxable year.

(D) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
modified to allow the services of employees of a service-based
qualified business to be performed outside the low-income
community. A service-based qualified business is a business that
primarily earns revenue through providing intangible products and
services.

(E) (i) A qualified active low-income community business shall
begin delete exclude end delete begin insert not include end insert any business that derives, or projects to derive,
15 percent or more of its annual revenue from the rental or sale of
real estate. This exclusion does not apply to a business that is
controlled by, or under common control with, another business if
the second business: (I) does not derive or project to derive 15
percent or more of its annual revenue from the rental or sale of
real estate; and (II) is the primary tenant of the real estate leased
from the first business.

(ii) A qualified active low-income community business shall
only include a 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 begin insert community end insert
business, except as modified by this paragraph and paragraph (7).

(iii) A qualified active low-income community business shall
only include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of
the greater of the California median family income or the
metropolitan area median family income, or census tracts with
unemployment rates at least 1.5 times the national average.

begin insert

(iv) A qualified active low-income community business shall
not include any business that operates or derives revenues from
the operation of a country club, gaming establishment, massage
parlor, liquor store, or golf course.

end insert begin insert

(v) A qualified active low-income community business shall not
include a sexually oriented business. A “sexually oriented
business” means a nightclub, bar, restaurant, or similar
commercial enterprise that provides for an audience of two or
more individuals live nude entertainment or live nude performances
where the nudity is a function of everyday business operations and
where nudity is a planned and intentional part of the entertainment
or performance. “Nude” means clothed in a manner that leaves
uncovered or visible, through less than fully opaque clothing, any
portion of the genitals or, in the case of a female, any portion of
the breasts below the top of the areola of the breasts.

end insert begin insert

(vi) A qualified active low-income community business shall
not include a charter school.

end insert

(7) Section 45D(e)(1) of the Internal Revenue Code 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) 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 12283, 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 12283, and Section 23622.9 to a cumulative total
of no more than two hundred million dollars ($200,000,000). Any
unused credits shall be returned to the committee by March 1 of
the year following allocation and the value of the unused credit
shall be available for allocation in the following calendar years in
accordance with the application process. Any recaptured credits
shall be returned to the committee by March 1 of the year following
recapture and the value of the recaptured credit shall be available
for allocation in the following calendar years in accordance with
clause (ii) of subparagraph (B) of paragraph (9). Reallocation
credits begin insert and recapture credits end insert 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) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
“Section 19101 of this code” for “section 6621”.

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

(i)  begin delete The committee end delete begin insert GO-Biz end insert shall establish a process, in
consultation with the Franchise Tax Board, for the recapture of
credits allowed under this section from the entity that claimed the
credit on a return. The recapture process shall be applied if any of
the following conditions set forth occur.

(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. The qualified community development entity shall send
notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar days of being
notified by the United States Treasury that 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. begin delete The
committee end delete begin insert GO-Biz end insert shall send written acknowledgment within five
calendar days of receipt of the qualified community development
entity’s notice of potential noncompliance. In such case the
recapture shall be proportionate to the federal recapture with respect
to such qualified equity investment.

(II)  The qualified community development entity redeems begin delete or
makes principal repayment with respect to end delete a qualified equity
investment prior to the seventh anniversary of the issuance of such
qualified equity investment. The qualified community development
entity shall send notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar
days of redeeming begin delete or making principal repayments with respect
to end delete a qualified equity investment prior to the seventh anniversary
of the issuance of such qualified equity investment. begin delete The committee end delete
begin insert GO-Biz end insert shall send written acknowledgment within five calendar
days of receipt of the qualified community development entity’s
notice of potential noncompliance. In such case begin delete the committee’s end delete
begin insert GO-Biz’s end insert recapture shall be proportionate to the amount of the
redemption begin delete or repayment with respect to end delete begin insert of end insert such qualified equity
investment.

(III)  The qualified community development entity fails to invest
an amount equal to at least 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. The qualified community development entity shall send
notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar days of the
12-month deadline for the reinvestment if the entity fails to meet
any of the reinvestment requirements. begin delete The committee end delete begin insert GO-Biz end insert shall
send written acknowledgment within five calendar days of receipt
of the qualified community development entity’s notice of potential
noncompliance. begin delete 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. end delete 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 begin delete the committee end delete begin insert GO-Biz end insert and
shall be begin delete reissued in the following order: end delete begin insert reissued. The reissue shall
not count toward the annual allocation limitation of forty million
dollars ($40,000,000) or overall credit allocation limitation of
two hundred million dollars ($200,000,000) in paragraph (8) of
subdivision (c). The reissue shall be done in the following order: end insert

(I)  First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B)
of paragraph (5) of subdivision (d) 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) (I) Enforcement of each of the recapture provisions shall
be subject to a six-month cure period. Recapture shall not occur
until the qualified community development entity gives notice of
potential noncompliance to begin delete the committee end delete begin insert GO-Biz end insert and is afforded
six months from the date of such notice to cure the noncompliance.
The six-month cure period shall begin on the day begin delete the committee end delete
begin insert GO-Biz end insert sends written acknowledgment of the qualified community
development entity’s notice of the potential noncompliance. The
qualified community development entity is responsible for
addressing the circumstances of the potential noncompliance and
providing all documentation to begin delete the committee end delete begin insert GO-Biz end insert necessary
to demonstrate, to begin delete the committee’s end delete begin insert GO-Biz’s end insert satisfaction, that those
conditions no longer exist.

(II) Not more than 45 calendar days following the close of the
cure period, begin delete the committee end delete begin insert GO-Biz end insert shall make a final determination
as to whether the credit is to be recaptured. This determination
shall be based on the review of the notice, information submitted
by the qualified community development entity, and any other
information begin delete the committee end delete begin insert GO-Biz end insert deems relevant to this
determination.

(III)  begin delete The committee end delete begin insert GO-Biz end insert shall post, and update monthly, a
tally of returned credits, pursuant to paragraph (8), and recaptured
credits pursuant to this paragraph. Within 30 calendar days of
making the final determination that the credit is to be recaptured,
begin delete the committee end delete begin insert GO-Biz end insert shall notify the Department of Insurance
of the determination including, but not limited to, the tax
identification number of the taxpayer.

(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 Housing Tax
Credit Program, the investment or loan is not a qualified
low-income community investment under this section.

(d) (1)  begin delete The committee end delete begin insert GO-Biz end insert shall adopt guidelines necessary
or appropriate to carry out the purposes of this section and meet
the requirements of Section 45D of the Internal Revenue Code, as
modified by this section. begin insert In promulgating guidelines GO-Biz shall
look for guidance in the rules and regulations adopted under
Section 45D of the Internal Revenue Code to the extent that those
rules and regulations are consistent with this section. end insert 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)  begin insert (A) end insert begin insert   end insert begin delete The committee end delete begin insert GO-Biz end insert begin insert end insert shall establish and impose
reasonable fees upon entities that apply for the allocation pursuant
to this subdivision begin delete and use the revenue to end delete begin insert that in the aggregate end insert
defray the cost of administering the program. begin delete 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. end delete

begin insert

(B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.

end insert

(3) In developing guidelines begin delete the committee end delete begin insert GO-Biz end insert 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
including, but not limited to, its business strategy, targeted
community outcomes, capitalization strategy, and management
capacity.

begin insert

(C) Considers the qualified community development entity’s
prior qualified low-income community investments under Section
45D of the Internal Revenue Code.

end insert begin insert

(D) Considers the qualified community development entity’s
prior qualified low-income community investments under this
section, including subparagraph (D) of paragraph (5).

end insert begin insert

(E) Does not require the qualified community development entity
to identify the qualified active low-income community businesses
in which the qualified community development entity will invest
in an application for qualified equity investment allocation.

end insert

(4) (A)  begin delete The committee end delete begin insert GO-Biz end insert begin insert end insert shall begin accepting
applications on or before begin delete March end delete begin insert May end insert 15, 2015, and shall award
credits begin delete at least two times a year at dates set end delete annually begin delete by the
committee end delete through 2019, to the extent that allocations are available
pursuant to Section 26011.9 of the Public Resources Code. To the
extent reasonable and consistent in carrying out the purposes of
this section, begin delete the committee end delete begin insert GO-Biz end insert shall consider how the timing
of the state allocation rounds correspond with the allocation
schedule of the federal New Markets Tax Credit Program.

(B) Within 20 calendar days after receipt of an application begin delete the
committee end delete begin insert GO-Biz end insert 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 business days, the application shall
be considered completed as of the original date of receipt. If the
qualified community development entity fails to provide the
information within the five-business-day period, the application
shall be denied and must be resubmitted in full with a new receipt
date.

(C) Within 20 calendar days after receipt of an application
determined to be complete by begin delete the committee, end delete begin insert GO-Biz, end insert 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 to qualified
community development entities described in subparagraph (B)
of paragraph (4) of subdivision (c) in the order applications are
received by the committee, subject to clause (i) or on a competitive
basis, pursuant to clause (ii).

(i) (I) In 2015, the committee shall only award tax credits to a
qualified community development entity in the order applications
are received by the committee. In the 2016 to 2019 award cycles,
inclusive, at least 60 percent of the credit allocation shall be
awarded in the order applications are received by the committee
to a qualified community development entity. Applications received
on the same day shall be deemed to have been received
simultaneously. At the committee’s discretion, a higher percentage
of credits may be awarded begin delete in the order that they are received. end delete
begin insert pursuant to the first sentence in this subparagraph. end insert Qualified
community development entities that receive tax credit awards
pursuant to this clause shall commit to making investments in a
manner that engages community-based partnerships and local
grassroots stakeholders.

(II) An entity described in clause (ii) of subparagraph (A) of
paragraph (4) of subdivision (c) shall not receive a tax credit award
pursuant to this clause.

(ii) The committee shall award up to 40 percent of the credit
allocation in the 2016 to 2019, inclusive, award cycles, to a
qualified community development entity, as described in clause
(ii) of subparagraph (A) of paragraph (4) of subdivision (c) and
subparagraph (B) of paragraph (4) of subdivision (c), on a
competitive basis using blind scoring and a review committee that
is comprised of begin delete at least a majority of end delete community development
finance practitioners begin delete and at least one-third of the members end delete having
demonstrated experience in assessing organizational business
strategy, community outcomes, capitalization strategy, and
management capacity. A member of the review committee shall
not have a financial interest, which includes, but is not limited to,
asking, consenting, or agreeing to receive any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation any tax credit or other assistance from
any applicant.

(iii) In awarding credits on a competitive basis, priority shall
be given to applications that can demonstrate that the credits will
allow the entity to undertake qualified low-income community
investments in begin delete a end delete rural, suburban, or urban begin delete area end delete begin insert areas end insert that begin delete has end delete begin insert have end insert
been historically underserved and result in the greatest benefit to
the hardest to serve begin insert and undercapitalized end insert lower income begin delete populations
and most undercapitalized, end delete begin insert populations, end insert or in newly established
businesses, or in activities that support neighborhood revitalization
strategies driven by local grassroots stakeholders in multiple
low-income communities across one or more regions or the state
for the purpose of scaling economic development activities that
compliment regional industry clusters that result in the greatest
benefit to the largest number of lower income individuals. All
competitive applications shall demonstrate strong linkages with
communities and neighborhoods in California low-income
neighborhoods.

(B)  For applications described in clause (i) of subparagraph
(A), in the event tax credit requests exceed the applicable annual
allocation limitation of up to 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 within 30 calendar days of such
transfer and include the information required in the application
with respect to such transferee with such notice.

(E) Within 60 calendar days of begin delete the committee end delete begin insert GO-Biz end insert sending
notice of certification, the qualified community development entity
or any transferee, under subparagraph (D), shall issue the qualified
equity investment and receive cash in the amount of the certified
amount. The qualified community development entity or transferee,
under subparagraph (D), must provide begin delete the committee end delete begin insert GO-Biz end insert with
evidence of the receipt of the cash investment within 65 calendar
days of the applicant receiving notice of certification. If the
qualified community development entity or any transferee, under
subparagraph (D), does not receive the cash investment and issue
the qualified equity investment within 60 calendar days of begin delete the
committee end delete begin insert GO-Biz end insert sending the certification notice, the certification
shall lapse and the entity may not issue the qualified equity
investment without reapplying to begin delete the committee end delete begin insert GO-Biz end insert for
certification. Lapsed certifications revert back to begin delete the committee end delete
begin insert GO-Biz end insert and shall be reissued in the following order:

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph (B) begin delete of paragraph
(5) end delete under the annual 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 begin delete the committee end delete begin insert GO-Biz end insert
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 begin delete the committee end delete
begin insert GO-Biz end insert within the first five business days after the first anniversary
of the initial credit allowance date that provides documentation as
to the investment of at least 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 begin delete the committee. end delete begin insert GO-Biz
as being necessary to meet the requirements of this section. end insert

(B) Thereafter, the qualified community development entity
shall submit an annual report to begin delete the committee end delete begin insert GO-Biz end insert within 60
calendar days of the beginning of the calendar year during the
seven years following submittal of the report, pursuant to
subparagraph (A). 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 and
the average annual salary of such positions.

(iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and
number of employees.

(v) Number of owner-occupied real estate projects described in
subparagraph (E) of paragraph (6) of subdivision (c).

(vi) Location of the qualified low-income community businesses.

(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 six succeeding years if
necessary, until the credit is exhausted.

(f)  begin delete The committee end delete begin insert GO-Biz end insert shall annually report on its Internet
Web site the information provided by low-income community
development entities and on the geographic distribution of the
begin delete credits. end delete begin insert qualified active low-income community businesses assisted. end insert

(g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application
and reporting of a qualified community development entity.

(2) A qualifying community development entity shall provide
begin delete the committee end delete begin insert GO-Biz end insert with the name, address, and tax
identification number of each investor and entity for which a credit
was allocated by the qualifying community development entity,
pursuant to paragraph (3) of subdivision (b). begin delete The committee end delete
begin insert GO-Biz end insert shall provide this information to the Franchise Tax Board
in a manner determined by the Franchise Tax Board.

begin insert

(h) The credit allowed under this section shall only be allowed
for taxable years in which the Legislature appropriates funds in
the California New Markets Tax Credit Fund pursuant to
subdivision (b) of Section 18410.3.

end insert begin delete

(h)

end delete

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

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 18410.3 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 18410.3. end insert   

(a) The California New Markets Tax Credit Fund is
hereby established in the State Treasury.

(b) Upon appropriation, moneys in the fund shall be used for
the purposes described in subdivision (d) of Section 12283,
subdivision (d) of Section 17053.9, and subdivision (d) of Section
23622.9.

end insert

begin delete SEC. 5. end delete
begin insert SEC. 6. 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, Section
12283, and Section 17053.9. The purpose of this program is to
stimulate private sector investment in lower income communities
by providing a tax incentive to 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 begin delete California
Competes Tax Credit Committee end delete begin insert committee and GO-Biz end insert shall
administer this program as provided in this section, Section 12283,
and Section 17053.9.

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, begin insert and subject to subdivision (h), 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, 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, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.

begin delete

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated through
a pass-thru entity may be allocated to the partners or shareholders
of such entity for their use in accordance with the provisions of
any agreement among such partners or shareholders. Such
allocations shall not be considered a sale for the purposes of this
section.

(A) The credit shall be allocated to the partners of a partnership
in accordance with the partnership agreement, regardless of how
the federal New Markets Tax Credit is allocated to the partners,
or whether the allocation of the credit under the terms of the
agreement has substantial economic effect, within the meaning of
Section 704(b) of the Internal Revenue Code.

(B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the recapture period set forth in Section
45D(g)(1) of the Internal Revenue Code shall not be allowed in
the taxable year in which the sale or other disposition occurs, but
shall instead be deferred until and treated as if it occurred in the
first taxable year immediately following the taxable year in which
that recapture period expires.

(C) Credits awarded to an “S” corporation shall be allocated
among the shareholders of the “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of Subtitle A of the
Internal Revenue Code and the regulations promulgated thereunder.

end delete begin insert

(3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated to a
partnership, limited liability company, or “S” corporation may
be allocated to the partners, members, managers, or shareholders
of such entity for their use 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)  begin delete (A) end delete begin delete   end delete The references to “the Secretary” in Section 45D of the
Internal Revenue Code, other than in Sections 45D(c)(1)(C) and
45D(d)(1)(C), are modified to read begin delete “the committee.” end delete begin insert “GO-Biz end insert begin insert . end insert begin insert ” end insert

begin delete

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

end delete

(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 3 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)(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) (A) Section 45D(c)(1) of the Internal Revenue Code is
modified to additionally include:

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

(ii) A nonprofit organization, pursuant to Section 23701,
certified by begin delete the committee end delete begin insert GO-Biz end insert 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.
begin delete The committee end delete begin insert GO-Biz end insert shall establish guidelines for certifying
nonprofit organizations pursuant to this subparagraph. begin delete The
committee end delete begin insert GO-Biz end insert may include reasonable conditions on the
certification to effectuate the intent of this section and may suspend
or revoke a certification, after affording the nonprofit organization
notice and the opportunity to begin insert appeal and end insert be heard begin delete and appeal, end delete begin insert by
the committee, end insert if begin delete the committee end delete begin insert GO-Biz end insert finds that the nonprofit
organization no longer meets the requirements for certification.
Such nonprofit organization is not subject to the requirement of
subparagraph (B).

(B) Section 45D(c)(1) of the Internal Revenue Code is modified
to only include a qualified community development entity begin insert and its
subsidiary qualified community development entities end insert that begin delete has end delete begin insert have end insert
entered into an allocation agreement with the Community
Development Financial Institutions Fund of the United States
Treasury Department, with respect to credits authorized by Section
45D of the Internal Revenue Code, that includes California within
the service area and is dated on or after January 1, 2012.

(5) Section 45D(d)(1)(A) of the Internal Revenue Code is
modified to only include any capital or equity investment in, or
loan to, a qualified active low-income community business.

(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 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 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 in California 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 be treated as
satisfying the requirements of Section 45D(d)(2)(A)(ii) for the
duration of the investment.

(C) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code if, as calculated in subparagraph (B), it
uses 50 percent of its tangible property, whether owned or leased,
within any low-income community for any taxable year.

(D) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
modified to allow the services of employees of a service-based
qualified business to be performed outside the low-income
community. A service-based qualified business is a business that
primarily earns revenue through providing intangible products and
services.

(E) (i) A qualified active low-income community business shall
begin delete exclude end delete begin insert not include end insert any business that derives, or projects to derive,
15 percent or more of its annual revenue from the rental or sale of
real estate. This exclusion does not apply to a business that is
controlled by, or under common control with, another business if
the second business: (I) does not derive or project to derive 15
percent or more of its annual revenue from the rental or sale of
real estate; and (II) is the primary tenant of the real estate leased
from the first business.

(ii) A qualified active low-income community business shall
only include a 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 begin insert community end insert
business, except as modified by this paragraph and paragraph (7).

(iii) A qualified active low-income community business shall
only include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of
the greater of the California median family income or the
metropolitan area median family income, or census tracts with
unemployment rates at least 1.5 times the national average.

begin insert

(iv) A qualified active low-income community business shall
not include any business that operates or derives revenues from
the operation of a country club, gaming establishment, massage
parlor, liquor store, or golf course.

end insert begin insert

(v) A qualified active low-income community business shall not
include a sexually oriented business. A “sexually oriented
business” means a nightclub, bar, restaurant, or similar
commercial enterprise that provides for an audience of two or
more individuals live nude entertainment or live nude performances
where the nudity is a function of everyday business operations and
where nudity is a planned and intentional part of the entertainment
or performance. “Nude” means clothed in a manner that leaves
uncovered or visible, through less than fully opaque clothing, any
portion of the genitals or, in the case of a female, any portion of
the breasts below the top of the areola of the breasts.

end insert begin insert

(vi) A qualified active low-income community business shall
not include a charter school.

end insert

(7) Section 45D(e)(1) of the Internal Revenue Code 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) 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 12283, 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, Section 12283, and Section 17053.9 to a cumulative total
of no more than two hundred million dollars ($200,000,000). Any
unused credits shall be returned to the committee by March 1 of
the year following allocation and the value of the unused credit
shall be available for allocation in the following calendar years in
accordance with the application process. Any recaptured credits
shall be returned to the committee by March 1 of the year following
recapture and the value of the recaptured credit shall be available
for allocation in the following calendar years in accordance with
clause (ii) of subparagraph (B) of paragraph (9). Reallocation
credits begin insert and recapture credits end insert 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) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
“Section 19101 of this code” for “section 6621”.

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

(i)  begin delete The committee end delete begin insert GO-Biz end insert shall establish a process, in
consultation with the Franchise Tax Board, for the recapture of
credits allowed under this section from the entity that claimed the
credit on a return. The recapture process shall be applied if any of
the following conditions set forth occur.

(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. The qualified community development entity shall send
notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar days of being
notified by the United States Treasury that 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. begin delete The
committee end delete begin insert GO-Biz end insert shall send written acknowledgment within five
calendar days of receipt of the qualified community development
entity’s notice of potential noncompliance. In such case the
recapture shall be proportionate to the federal recapture with respect
to such qualified equity investment.

(II) The qualified community development entity redeems begin delete or
makes principal repayment with respect to end delete a qualified equity
investment prior to the seventh anniversary of the issuance of such
qualified equity investment. The qualified community development
entity shall send notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar
days of redeeming begin delete or making principal repayments with respect
to end delete a qualified equity investment prior to the seventh anniversary
of the issuance of such qualified equity investment. begin delete The committee end delete
begin insert GO-Biz end insert shall send written acknowledgment within five calendar
days of receipt of the qualified community development entity’s
notice of potential noncompliance. In such case begin delete the committee’s end delete
begin insert GO-Biz’s end insert recapture shall be proportionate to the amount of the
redemption begin delete or repayment with respect to end delete begin insert of end insert such qualified equity
investment.

(III) The qualified community development entity fails to invest
an amount equal to at least 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. The qualified community development entity shall send
notice to begin delete the committee end delete begin insert GO-Biz end insert within 30 calendar days of the
12-month deadline for the reinvestment if the entity fails to meet
any of the reinvestment requirements. begin delete The committee end delete begin insert GO-Biz end insert shall
send written acknowledgment within five calendar days of receipt
of the qualified community development entity’s notice of potential
noncompliance. begin delete 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. end delete 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 begin delete the committee end delete begin insert GO-Biz end insert and
shall be begin delete reissued in the following order: end delete begin insert reissued. The reissue shall
not count toward the annual allocation limitation of forty million
dollars ($40,000,000) or overall credit allocation limitation of
two hundred million dollars ($200,000,000) in paragraph (8) of
subdivision (c). The reissue shall be done in the following order: end insert

(I) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph (B) of paragraph
(5) of subdivision (d) 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) (I) Enforcement of each of the recapture provisions shall
be subject to a six month cure period. Recapture shall not occur
until the qualified community development entity begin delete shall end delete gives notice
of potential noncompliance to begin delete the committee end delete begin insert GO-Biz end insert and is
afforded six months from the date of such notice to cure the
noncompliance. The six-month cure period shall begin on the day
begin delete the committee end delete begin insert GO-Biz end insert sends written acknowledgment of the
qualified community development entity’s notice of the potential
noncompliance. The qualified community development entity is
responsible for addressing the circumstances of the potential
noncompliance and providing all documentation to begin delete the committee end delete
begin insert GO-Biz end insert necessary to demonstrate, to the begin delete committee’s end delete begin insert GO-Biz’s end insert
satisfaction, that those conditions no longer exist.

(II) Not more than 45 calendar days following the close of the
cure period, begin delete the committee end delete begin insert GO-Biz end insert shall make a final determination
as to whether the credit is to be recaptured. This determination
shall be based on the review of the notice, information submitted
by the qualified community development entity, and any other
information begin delete the committee end delete begin insert GO-Biz end insert deems relevant to this
determination.

(III)  begin delete The committee end delete begin insert GO-Biz end insert shall post, and update monthly, a
tally of returned credits, pursuant to paragraph (8), and recaptured
credits pursuant to this paragraph. Within 30 calendar days of
making the final determination that the credit is to be recaptured,
begin delete the committee end delete begin insert GO-Biz end insert shall notify the Department of Insurance
of the determination including, but not limited to, the tax
identification number of the taxpayer.

(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 Housing Tax
Credit Program, the investment or loan is not a qualified
low-income community investment under this section.

(d) (1)  begin delete The committee end delete begin insert GO-Biz end insert shall adopt guidelines necessary
or appropriate to carry out the purposes of this section and meet
the requirements of Section 45D of the Internal Revenue Code, as
modified by this section. begin insert In promulgating guidelines GO-Biz shall
look for guidance in the rules and regulations adopted under
Section 45D of the Internal Revenue Code to the extent that those
rules and regulations are consistent with this section. end insert 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)  begin insert (A) end insert begin insert   end insert begin delete The committee end delete begin insert GO-Biz end insert begin insert end insert shall establish and impose
reasonable fees upon entities that apply for the allocation pursuant
to this subdivision begin delete and use the revenue to end delete begin insert that in the aggregate end insert
defray the cost of administering the program. begin delete 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. end delete

begin insert

(B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.

end insert

(3) In developing guidelines begin delete the committee end delete begin insert GO-Biz end insert 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
including, but not limited to, its business strategy, targeted
community outcomes, capitalization strategy, and management
capacity.

begin insert

(C) Considers the qualified community development entity’s
prior qualified low-income community investments under Section
45D of the Internal Revenue Code.

end insert begin insert

(D) Considers the qualified community development entity’s
prior qualified low-income community investments under this
section, including subparagraph (D) of paragraph (5).

end insert begin insert

(E) Does not require the qualified community development entity
to identify the qualified active low-income community businesses
in which the qualified community development entity will invest
in an application for qualified equity investment allocation.

end insert

(4) (A)  begin delete The committee end delete begin insert GO-Biz end insert begin insert end insert shall begin accepting
applications on or before begin delete March end delete begin insert May end insert 15, 2015, and shall award
credits begin delete at least two times a year at dates set end delete annually begin delete by the
committee end delete through 2019, to the extent that allocations are available
pursuant to Section 26011.9 of the Public Resources Code. To the
extent reasonable and consistent in carrying out the purposes of
this section, begin delete the committee end delete begin insert GO-Biz end insert shall consider how the timing
of the state allocation rounds correspond with the allocation
schedule of the federal New Markets Tax Credit Program.

(B) Within 20 calendar days after receipt of an application begin delete the
committee end delete begin insert GO-Biz end insert 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 business days, the application shall
be considered completed as of the original date of receipt. If the
qualified community development entity fails to provide the
information within the five-business-day period, the application
shall be denied and must be resubmitted in full with a new receipt
date.

(C) Within 20 calendar days after receipt of an application
determined to be complete by begin delete the committee, end delete begin insert GO-Biz, end insert 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 to qualified
community development entities described in subparagraph (B)
of paragraph (4) of subdivision (c) in the order applications are
received by the committee, subject to clause (i) or on a competitive
basis, pursuant to clause (ii).

(i)  begin insert (I) end insert begin insert   end insert In 2015, the committee shall only award tax credits to a
qualified community development entity in the order applications
are received by the committee. In the 2016 to 2019 award cycles,
inclusive, at least 60 percent of the credit allocation shall be
awarded in the order applications are received by the committee
to a qualified community development entity. Applications received
on the same day shall be deemed to have been received
simultaneously. At the committee’s discretion, a higher percentage
of credits may be awarded begin delete in the order that they are received. end delete
begin insert pursuant to the first sentence in this end insert begin insert subparagraph. end insert Qualified
community development entities that receive tax credit awards
pursuant to this clause shall commit to making investments in a
manner that engages community-based partnerships and local
grassroots stakeholders.

(II) An entity described in clause (ii) of subparagraph (A) of
paragraph (4) of subdivision (c) shall not receive a tax credit award
pursuant to this clause.

(ii) The committee shall award up to 40 percent of the credit
allocation in the 2016 to 2019, inclusive, award cycles, to a
qualified community development entity, as described in clause
(ii) of subparagraph (A) of paragraph (4) of subdivision (c) and
subparagraph (B) of paragraph (4) of subdivision (c), on a
competitive basis using blind scoring and a review committee that
is comprised of begin delete at least a majority of end delete community development
finance practitioners begin delete and at least one-third of the members end delete having
demonstrated experience in assessing organizational business
strategy, community outcomes, capitalization strategy, and
management capacity. A member of the review committee shall
not have a financial interest, which includes, but is not limited to,
asking, consenting, or agreeing to receive any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation any tax credit or other assistance from
any applicant.

(iii) In awarding credits on a competitive basis, priority shall
be given to applications that can demonstrate that the credits will
allow the entity to undertake qualified low-income community
investments in begin delete a end delete rural, suburban, or urban begin delete area end delete begin insert areas end insert that begin delete has end delete begin insert have end insert
been historically underserved and result in the greatest benefit to
the hardest to serve begin insert and undercapitalized end insert lower income begin delete populations
and most undercapitalized, end delete begin insert populations, end insert or in newly established
businesses, or in activities that support neighborhood revitalization
strategies driven by local grassroots stakeholders in multiple
low-income communities across one or more regions or the state
for the purpose of scaling economic development activities that
compliment regional industry clusters that result in the greatest
benefit to the largest number of lower income individuals. All
competitive applications shall demonstrate strong linkages with
communities and neighborhoods in California low-income
neighborhoods.

(B)  For applications described in clause (i) of subparagraph
(A), in the event tax credit requests exceed the applicable annual
allocation limitation of up to 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 within 30 calendar days of such
transfer and include the information required in the application
with respect to such transferee with such notice.

(E) Within 60 calendar days of begin delete the committee end delete begin insert GO-Biz end insert sending
notice of certification, the qualified community development entity
or any transferee, under subparagraph (D), shall issue the qualified
equity investment and receive cash in the amount of the certified
amount. The qualified community development entity or transferee,
under subparagraph (D), must provide begin delete the committee end delete begin insert GO-Biz end insert with
evidence of the receipt of the cash investment within 65 calendar
days of the applicant receiving notice of certification. If the
qualified community development entity or any transferee, under
subparagraph (D), does not receive the cash investment and issue
the qualified equity investment within 60 calendar days of begin delete the
committee end delete begin insert GO-Biz end insert sending the certification notice, the certification
shall lapse and the entity may not issue the qualified equity
investment without reapplying to begin delete the committee end delete begin insert GO-Biz end insert for
certification. Lapsed certifications revert back to begin delete the committee end delete
begin insert GO-Biz end insert and shall be reissued in the following order:

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph (B) of paragraph
(5) under the annual 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 begin delete the committee end delete begin insert GO-Biz end insert
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 begin delete the committee end delete
begin insert GO-Biz end insert within the first five business days after the first anniversary
of the initial credit allowance date that provides documentation as
to the investment of at least 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 begin delete the committee. end delete begin insert GO-Biz
as being necessary to meet the requirements of this section. end insert

(B) Thereafter, the qualified community development entity
shall submit an annual report to begin delete the committee end delete begin insert GO-Biz end insert within 60
calendar days of the beginning of the calendar year during the
seven years following submittal of the report, pursuant to
subparagraph (A). 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 and
the average annual salary of such positions.

(iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and
number of employees.

(v) Number of owner-occupied real estate projects described in
subparagraph (E) of paragraph (6) of subdivision (c).

(vi) Location of the qualified low-income community businesses.

(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 six succeeding years if necessary, until
the credit is exhausted.

(f)  begin delete The committee end delete begin insert GO-Biz end insert shall annually report on its Internet
Web site the information provided by low-income community
development entities and on the geographic distribution of the
begin delete credits. end delete begin insert qualified active low-income community businesses assisted. end insert

(g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application
and reporting of a qualified community development entity.

(2) A qualifying community development entity shall provide
begin delete the committee end delete begin insert GO-Biz end insert with the name, address, and tax
identification number of each investor and entity for which a credit
was allocated by the qualifying community development entity,
pursuant to paragraph (3) of subdivision (b). begin delete The committee end delete
begin insert GO-Biz end insert shall provide this information to the Franchise Tax Board
in a manner determined by the Franchise Tax Board.

begin insert

(h) The credit allowed under this section shall only be allowed
for taxable years in which the Legislature appropriates funds in
the California New Markets Tax Credit Fund pursuant to
subdivision (b) of Section 18410.3.

end insert begin delete

(h)

end delete

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

begin delete SEC. 6. end delete
begin insert SEC. 7. end insert   

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