Amended in Senate August 22, 2014

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, and to add Section 18410.3 to, and to add and repeal Sections 12283, 17053.9, and 23622.9 of, the Revenue and Taxation Code, relating to taxation, 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 creates the California Competes Tax Credit Committee, which has specified duties in regard to tax credits for economic development. 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.

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. The bill would impose specified duties on the California Competes Tax Credit Committee and GO-Biz with regard to the application for, and allocation of, the credit. The bill would require GO-Biz to establish and impose reasonable fees upon entities that apply for the allocation of the credit, to be deposited in the California New Markets Tax Credit Fund established by the bill, and use the revenue, upon appropriation by the Legislature, to defray the cost of begin insert applying to, and end insert administering the program, as specified. The bill would specify that the credit would not be allowed unless the Legislature makes an appropriation from the fund.

begin insert

The bill would provide that its provisions are severable.

end insert

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. 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). begin delete The end delete begin insert Any end insert investment
by begin delete the end delete begin insert any end insert 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 begin delete their end delete begin insert a end insert state more attractive to
CDEs, which results in increasing the amount of federal NMTCs
being utilized in begin delete their end delete begin insert a end insert 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 committee and GO-Biz
shall administer this program as provided in this section, Section
17053.9, and Section 23622.9. begin insert The Director of GO-Biz may
delegate the administration of all or portions of the program within
GO-Biz. end insert

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, and subject to subdivision (h), 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, begin delete as
amended by Public Law 111-5, Public Law 111-312, and Public
Law 112-240, end delete as modified as set forth in this section.

begin delete

(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.

(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.

(4)

end delete

begin insert (2) end insert  (A) For purposes of this section, “committee” means the
California Competes Tax Credit Committee established under
Section 18410.2.

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

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

begin delete

(1) 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 “GO-Biz.”

end delete begin delete

(2)

end delete

begin insert (1) end insert  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.

begin delete

(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. GO-Biz shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. GO-Biz 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 appeal and be heard by
the committee, if GO-Biz 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)

end delete

begin insert (2) end insert   begin insert (A) end insert begin insert   end insert Section 45D(c)(1) of the Internal Revenue Code is
modified to only include a qualified community development begin delete entity end delete
begin insert entity, that is certified by the Secretary of the Treasury, end insert and its
subsidiary qualified community development entities that have
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.

begin delete

(5)

end delete

begin insert (B) end insert  Section begin delete 45D(d)(1)(A) end delete begin insert 45D(c)(2) end insert of the Internal Revenue
Code is modified to only include begin delete any capital or equity investment
in, or loan to, a qualified active low-income community business. end delete
begin insert a specialized small business investment company or community
development financial institution that 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. end insert

begin delete

(6)

end delete

begin insert (3) end insert  The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:

(A)  begin delete Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by end delete begin insert By end insert substituting “any low-income community in
California” for “any low-income begin delete community.” end delete begin insert community” every
place it appears in Section 45D of the Internal Revenue Code. end insert

begin delete

(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)

end delete

begin insert (B) end insert  Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
modified to allow the services of employees of a service-based
qualified begin insert active low-income community end insert business to be performed
outside the low-income community. A service-based qualified
begin insert active low-income community end insert business is a business that primarily
earns revenue through providing intangible products and services
begin insert and leases or owns real property in the low-income community
that is used for the operation of the business end insert .

begin delete

(E) (i) 

end delete

begin insert (C) end insert begin insert   end insert A qualified active low-income community business shall
not include 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.

begin delete

(ii)

end delete

begin insert (D) end insert  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 begin delete a end delete begin insert one or more end insert
California low-income begin delete community end delete begin insert communities end insert . The operating
business shall meet all other conditions of a qualified active
low-income community business, except as modified by this
paragraph begin delete and paragraph (7) end delete .

begin delete

(iii) 

end delete

begin insert (E) end insert begin insert   end insert 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 delete

(iv)

end delete

begin insert (F) end insert  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.

begin delete

(v)

end delete

begin insert (G) end insert  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.

begin delete

(vi)

end delete

begin insert (H) end insert  A qualified active low-income community business shall
not include a charter school.

begin delete

(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.”

end delete begin delete

(8) The following shall apply in lieu of the provisions of Section

end delete

begin insert (4) end insert begin insert   end insert begin insert Section end insert 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments begin delete designated: “The end delete
begin insert designated, is modified as follows: end insert

begin insert (A) end insert begin insert   end insert begin insert The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: “The end insert aggregate amount
of begin delete credit end delete begin insert qualified equity investments end insert that may be allocated in any
calendar year begin delete pursuant to end delete begin insert for purposes of end insert this section, Section
17053.9, and Section 23622.9 shall be an amount begin delete equal to end delete begin insert as
determined by GO-Biz in consultation with the Department of
Finance based upon end insert 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 begin insert an amount based upon a credit of end insert
forty million dollars ($40,000,000). The committee shall limit the
allocation of begin delete credits permitted end delete begin insert investments that may be designated end insert
under this section, Section 17053.9, and Section 23622.9 to a
cumulative total begin insert amount based on credits end insert of no more than two
hundred million dollars ($200,000,000). begin delete Any unused credits end delete begin insert The
allocation of any undesignated qualified equity investments end insert shall
be returned to the committee by March 1 of the year following
allocation and the value of the begin delete unused credit end delete begin insert undesignated qualified
equity investment end insert shall be available for allocation in the following
calendar years in accordance with the application process. Any
begin insert qualified equity investment attributable to end insert recaptured credits shall
be begin delete returned end delete begin insert available end insert to the committee begin delete by end delete begin insert on end insert March 1 of the year
following recapture and begin delete the value of the recaptured credit end delete shall be
available for allocation in the following calendar years in
accordance with subparagraph (B) of paragraph begin delete (9) end delete begin insert (5) end insert .
begin delete Reallocation credits and end delete begin insert Reallocated qualified equity investments
attributable to end insert recapture credits shall not count against the begin delete forty
million dollars ($40,000,000) end delete annual begin delete limit end delete or the begin delete two hundred
million dollars ($200,000,000) end delete cumulative limit.”

begin insert

(B) The references to “the Secretary” in Section 45D(f)(2) of
the Internal Revenue Code, relating to allocation of limitation, is
modified to read “GO-Biz.”

end insert begin insert

(C) The last sentence of Section 45D(f)(3) of the Internal
Revenue Code, relating to carryover of unused limitation, shall
not apply.

end insert begin delete

(9)

end delete

begin insert (5) end insert  Section 45D(g)(3) of the Internal Revenue Code, relating
to recapture event, begin delete does not apply and is replaced with the
following: end delete begin insert is modified to add the following: end insert

begin insert

(A) (i) The qualified community development entity fails to
comply with subparagraph (D) of paragraph (5) of subdivision
(d). In this case, recapture shall be 100 percent of the credit. The
qualified community development entity shall send notice to GO-Biz
within 30 calendar days of the close of any calendar year in which
the qualified community development entity has failed to invest at
least 15 percent of the purchase price of the qualified equity
investment in satisfaction of the requirements of subparagraph
(D) of paragraph (5) of subdivision (d).

end insert begin insert

(ii) The qualified community development entity made an
investment without performing a revenue impact assessment that
satisfies subparagraph (J) of paragraph (5) of subdivision (d). In
this case, recapture shall be 100 percent of the credit, unless
GO-Biz has approved a waiver pursuant to clause (ii) of
subparagraph (J) of paragraph (5) of subdivision (d). The qualified
community development entity shall send notice to GO-Biz within
30 calendar days of the close of any calendar year in which the
qualified community development entity has made an investment
that fails to meet the requirements set forth in subparagraph (J)
of paragraph (5) of subdivision (d).

end insert begin delete

(A)

end delete

begin insert (B) end insert  GO-Biz 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. begin delete The
recapture process shall be applied if any of the following conditions
set forth occur. end delete

begin delete

(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 GO-Biz 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 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 GO-Biz within
30 calendar days of redeeming a qualified equity investment prior
to the seventh anniversary of the issuance of such qualified equity
investment. GO-Biz shall send written acknowledgment within
five calendar days of receipt of the qualified community
development entity’s notice of potential noncompliance. In such
case GO-Biz’s recapture shall be proportionate to the amount of
the redemption of 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 GO-Biz within 30 calendar days of the 12-month deadline
for the reinvestment if the entity fails to meet any of the
reinvestment requirements. GO-Biz shall send written
acknowledgment within five calendar days of receipt of the
qualified community development entity’s notice of potential
noncompliance. 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)

end delete

begin insert (C) end insert  Recaptured begin delete tax credits and the related end delete qualified equity
begin delete investment authority end delete begin insert investments end insert revert back to GO-Biz and shall
be reissued. The reissue shall not count toward the annual
begin delete 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) end delete begin insert or cumulative
allocation limitation end insert . The reissue shall be done in the following
order:

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph begin delete (B) end delete begin insert (F) end insert of
paragraph (5) of subdivision (d) by the begin insert annual end insert allocation begin delete limitation
of forty million dollars ($40,000,000) in paragraph (8) of
subdivision (c). end delete begin insert limitation. end insert

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

begin delete

(C)

end delete

begin insert (D) end insert  (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 GO-Biz 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 GO-Biz 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 GO-Biz necessary to demonstrate, to GO-Biz’s satisfaction, that
those conditions no longer exist.

begin insert

(ii) In an instance where a qualified community development
entity fails to send the required notice of potential noncompliance
or GO-Biz has information from the annual report or other sources
that indicates that the entity is in potential noncompliance, GO-Biz
shall send the notice. The date GO-Biz sends the notice of potential
noncompliance shall begin the six-month cure period.

end insert begin delete

(ii)

end delete

begin insert (iii) end insert  Not more than 45 calendar days following the close of the
cure period, GO-Biz shall make a final determination as to whether
the begin delete credit is to be recaptured end delete begin insert noncompliance has been cured end insert . This
determination shall be based on the review of the notice,
information submitted by the qualified community development
entity, and any other information GO-Biz deems relevant to this
determination. begin insert Within 30 calendar days of making the final
determination, GO-Biz shall notify the Department of Insurance
and the Franchise Tax Board of the determination and other
related information including, but not limited to, the tax
identification number of the qualified community development
entity. end insert

begin delete

(iii) GO-Biz

end delete

begin insert (iv) end insert begin insert   end insert begin insert GO-Biz end insert shall post, and update monthly, a tally of begin delete returned
credits end delete begin insert undesignated qualified equity investments end insert , pursuant to
paragraph begin delete (8) end delete begin insert (4) end insert , and recaptured credits pursuant to this paragraph. begin delete Within 30 calendar days of making the final determination that
the credit is to be recaptured, GO-Biz shall notify the Department
of Insurance of the determination including, but not limited to, the
tax identification number of the taxpayer. end delete

begin delete

(10)

end delete

begin insert (6) end insert  Section 45D(h) of the Internal Revenue Code, relating to
basis reduction, shall not apply.

begin delete

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

end delete begin delete

(12)

end delete

begin insert (7) end insert  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) GO-Biz shall adopt guidelines necessary or appropriate
to carry out begin delete the purposes of this section and meet the requirements
of Section 45D of the Internal Revenue Code, as modified by this
section. 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. 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. end delete begin insert its responsibilities with respect to the allocation of the
qualified equity investments and recapture of credit allowed by
this section. end insert 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) (A) GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of begin delete administering end delete begin insert reviewing
applications for end insert the program. begin insert GO-Biz may impose other reasonable
fees upon entities that receive the allocation pursuant to this
subdivision that in the aggregate defray the cost of administering
the program. end insert

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

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

(A) Creates an equitable distribution process that ensures that
low-income begin delete communities end delete begin insert community populations end insert across the state
begin insert are engaged and end insert 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 begin delete credits end delete
begin insert authority to designate qualified equity investments end insert including, but
not limited to, its business strategy, targeted community outcomes,
capitalization strategy, and management capacity.

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

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

(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.

begin insert

(F) Does 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.

end insert

(4) (A) GO-Biz shall begin accepting applications on or before
May 15, 2015, and shall award begin delete credits end delete begin insert authority to designate
qualified equity investments end insert annually 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, GO-Biz 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
GO-Biz 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 GO-Biz, 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)  begin delete The end delete begin insert In the 2015 awards cycle, the end insert committee shall
award begin delete tax credits end delete begin insert authority to designate qualified equity investments end insert
to qualified community development entities described in
begin delete subparagraph (B) of paragraph (4) end delete begin insert paragraph (3) end insert of subdivision
(c) in the order applications are received by the begin delete committee, subject
to clause (i) or on a competitive basis, pursuant to clause (ii). end delete
begin insert committee. Applications received on the same day shall be deemed
to have been received simultaneously. end insert

begin delete

(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

end delete

begin insert (B) end insert begin insert   end insert begin insert In end insert the 2016 to 2019 award cycles, inclusive, at least 60
percent of the begin delete credit allocation end delete begin insert authority to designate qualified
equity investments end insert shall be awarded begin delete in the order applications are
received by the committee to a qualified community development
entity end delete begin insert pursuant to subparagraph (A) end insert . begin delete Applications received on the
same day shall be deemed to have been received simultaneously. end delete
At the committee’s discretion, a higher percentage of begin delete credits end delete
begin insert authority to designate qualified equity investments end insert may be awarded
pursuant to begin delete the first sentence in this subparagraph end delete begin insert subparagraph
(A) end insert . begin delete 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. end delete

begin delete

(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.

end delete begin delete

(ii)

end delete

begin insert (C) end insert  The committee shall award up to 40 percent of the begin delete credit
allocation end delete begin insert authority to designate qualified equity investments end insert in
the 2016 to 2019, inclusive, award cycles, to begin delete a end delete qualified community
development begin delete entity, as described in clause (ii) of subparagraph
(A) of paragraph (4) of subdivision (c) and subparagraph (B) of
paragraph (4) of subdivision (c), end delete begin insert entities end insert on a competitive basis
using blind scoring and a review committee that is comprised of
community development finance practitioners begin insert and members end insert 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 begin delete tax credit end delete begin insert qualified equity
investment end insert or other assistance from any applicant.

begin insert

(D) (i) For qualified equity investments derived from the 2015
to 2019, inclusive, awards cycles, pursuant to subparagraphs (A),
(B) and (C), a qualified community development entity shall invest
at least 15 percent of the qualified equity investment in a qualified
low-income community business in consultation or in partnership
with either of the following:

end insert begin insert

(I) A qualified community development entity certified under
Section 45D of the Internal Revenue Code that has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area,
but excluding qualified community development entities with a
national service area.

end insert begin insert

(II) A nonprofit organization certified by GO-Biz, pursuant to
clause (iii).

end insert begin insert

(ii) The 15-percent investment shall be calculated by multiplying
the total purchase price of the qualified equity investments issued
by the qualified community development entity by 15 percent. Each
community development entity application shall indicate how the
qualified community development entity will meet this requirement.

end insert begin insert

(iii) GO-Biz shall establish guidelines for certifying a nonprofit
organization pursuant to this subparagraph. A nonprofit
organization shall meet the requirements of Section 23701 and be
certified by GO-Biz as having a primary mission of serving or
providing investment capital in low-income communities in
California. The nonprofit organization shall maintain
accountability to residents of low-income communities through
their representation on any governing board or on an advisory
board of the nonprofit organization. GO-Biz 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 appeal and be heard by the committee, if GO-Biz finds that the
nonprofit organization no longer meets the requirements for
certification.

end insert begin delete

(iii) In awarding credits on a

end delete

begin insert (E) end insert begin insert   end insert begin insert In making end insert competitive begin delete basis, end delete begin insert awards of authority to
designate qualified equity investments, end insert priority shall be given to
applications that can demonstrate that the begin delete credits end delete begin insert qualified equity
investment authority end insert will allow the begin insert qualified community
development end insert entity to undertake qualified low-income community
investments in rural, suburban, or urban areas that have been
historically underserved and result in the greatest benefit to the
hardest to serve and undercapitalized lower income populations,
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. begin delete All competitive applications shall demonstrate
strong linkages with communities and neighborhoods in California
low-income neighborhoods. end delete

begin delete

(B)

end delete

begin insert (F) end insert   begin insert (i) end insert begin insert   end insert For applications described in begin delete clause (i) of end delete subparagraph
(A), in the event begin delete tax credit end delete requests begin insert for authority to designate
qualified equity investments end insert exceed the applicable annual allocation
begin delete limitation of up to forty million dollars ($40,000,000) in paragraph
(8) of subdivision (c), the committee end delete begin insert limitation, GO-Biz end insert 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.

begin delete

(C)

end delete

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

begin delete

(D)

end delete

begin insert (G) end insert  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. begin insert The transferee
shall be subject to the same rules, requirements, and limitations
applicable to the transferor. end insert

begin delete

(E)

end delete

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

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph begin delete (B) end delete begin insert (F) end insert under
the annual allocation limitation of forty million dollars
($40,000,000) in paragraph begin delete (8) end delete begin insert (5) end insert of subdivision (c).

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

begin delete

(F)

end delete

begin insert (I) end insert  A qualified community development entity that issues
qualified equity investments must notify GO-Biz of the names of
begin delete the entities end delete begin insert taxpayers end insert that are eligible to utilize tax credits begin delete under
paragraph (3) of subdivision (b) pursuant to an allocation of tax
credits or change in allocation of tax credits or due to a end delete begin insert pursuant
to this section and any end insert transfer of a qualified equity investment.

begin insert

(J) (i) A qualified community development entity shall only
make a qualified low-income community investment that
demonstrates a positive revenue impact on the state over a 10-year
period against the aggregate tax credit utilization over the same
10-year period. GO-Biz shall approve one or more nationally
recognized revenue impact assessment models that shall be used
by the qualified community development entity to demonstrate
positive revenue impact. If it is demonstrated that the qualified
low-income community investment has a positive revenue impact
on the state at the time the investment is made, it shall be treated
as if the investment continues to meet the requirement of this
subparagraph for the duration of the seven-year program period.

end insert begin insert

(ii) Upon application and approval by GO-Biz, the requirement
of this subparagraph may be waived.

end insert

(6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to GO-Biz 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.

begin insert

(iii) Evidence that the community development entity complied
with subparagraph (D) of paragraph (5).

end insert begin insert

(iv) Evidence that each qualified low-income community
investment was determined to have a positive revenue impact on
the state. This requirement does not apply for any qualified
low-income community investment for which GO-Biz approved a
waiver, pursuant to clause (ii) of subparagraph (J) of paragraph
(5) or to reinvestments of redeemed qualified low-income
investments.

end insert begin delete

(iii) Any

end delete

begin insert (v) end insert begin insert   end insert begin insert Any end insert other information required by GO-Biz as being necessary
to meet the requirements of this section.

(B) Thereafter, the qualified community development entity
shall submit an annual report to GO-Biz 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 begin insert social, environmental, and economic end insert impact the credit
had on the low-income community begin insert during the report period and
cumulatively end insert .

(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 begin delete described in
subparagraph (E) of paragraph (6) of subdivision (c) end delete .

(vi) Location of begin delete the end delete begin insert each end insert qualified low-income community
begin delete businesses end delete begin insert business assisted by a qualified low-income community
investment end insert .

begin insert

(vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development
entity during the year.

end insert

(e)  begin insert (1) end insert begin insert   end insert 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.

begin insert

(2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment.

end insert

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

(g) (1) The Insurance Commissioner begin insert and the Franchise Tax
Board end insert may prescribe any rules or regulations that may be necessary
or appropriate to implement this section. The Insurance
Commissioner begin insert and the Franchise Tax Board end insert 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
GO-Biz with the name, address, and tax identification number of
each investor and entity for which a begin delete credit end delete begin insert qualified equity
investment end insert was begin delete allocated end delete begin insert designated end insert by the qualifying community
development entity, pursuant to begin delete paragraph (3) of subdivision (b) end delete
begin insert this section end insert . GO-Biz shall provide this information to the Insurance
Commissioner begin insert and the Franchise Tax Board end insert in a manner
determined by the Insurance Commissioner begin insert and the Franchise Tax
Board end insert .

(h)  begin delete The credit allowed under this section shall only be allowed
for taxable years end delete begin insert GO-Biz and the committee shall only make awards
pursuant to paragraph (4) of subdivision (d) in a calendar year end insert
in which the Legislature appropriates funds in the California New
Markets Tax Credit Fund pursuant to subdivision (b) of Section
18410.3.

(i) 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 committee
and GO-Biz shall administer this program as provided in this
section, Section 12283, and Section 23622.9. begin insert The Director of
GO-Biz may delegate the administration of all or portions of the
program within GO-Biz. end insert

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

begin delete

(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.

(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 delete begin insert

(2) (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:

begin delete

(1) 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 “GO-Biz.”

(2)

end delete

begin insert (1) end insert  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.

begin delete

(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 GO-Biz 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. GO-Biz shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. GO-Biz 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 appeal and be heard by
the committee, if GO-Biz 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)

end delete

begin insert (2) end insert   begin insert (A) end insert begin insert   end insert Section 45D(c)(1) of the Internal Revenue Code is
modified to only include a qualified community development begin delete entity end delete
begin insert entity, that is certified by the Secretary of the Treasury, end insert and its
subsidiary qualified community development entities that have
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.

begin delete

(5)

end delete

begin insert (B) end insert  Section begin delete 45D(d)(1)(A) end delete begin insert 45D(c)(2) end insert of the Internal Revenue
Code is modified to only include begin delete any capital or equity investment
in, or loan to, a qualified active low-income community business. end delete begin insert end insert
begin insert a specialized small business investment company or community
development financial institution that 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. end insert

begin delete

(6)

end delete

begin insert (3) end insert  The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:

(A)  begin delete Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by end delete begin insert By end insert substituting “any low-income community in
California” for “any low-income begin delete community.” end delete begin insert community” every
place it appears in Section 45D of the Internal Revenue Code. end insert

begin delete

(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)

end delete

begin insert (B) end insert  Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
modified to allow the services of employees of a service-based
qualified begin insert active low-income community end insert business to be performed
outside the low-income community. A service-based qualified
begin insert active low-income community end insert business is a business that primarily
earns revenue through providing intangible products and services
begin insert and leases or owns real property in the low-income community
that is used for the operation of the business end insert .

begin delete

(E) (i) 

end delete

begin insert (C) end insert begin insert   end insert A qualified active low-income community business shall
not include 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.

begin delete

(ii)

end delete

begin insert (D) end insert  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 begin delete a end delete begin insert one or more end insert
California low-income begin delete community end delete begin insert communities end insert . The operating
business shall meet all other conditions of a qualified active
low-income community business, except as modified by this
paragraph begin delete and paragraph (7) end delete .

begin delete

(iii) A

end delete

begin insert ( end insert begin insert E) end insert begin insert   end insert begin insert A end insert 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 delete

(iv)

end delete

begin insert (F) end insert  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.

begin delete

(v)

end delete

begin insert (G) end insert  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.

begin delete

(vi)

end delete

begin insert (H) end insert  A qualified active low-income community business shall
not include a charter school.

begin delete

(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.”

end delete begin delete

(8) The following shall apply in lieu of the provisions of Section

end delete

begin insert (4) end insert begin insert   end insert begin insert Section end insert 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments begin delete designated: “The end delete
begin insert designated, is modified as follows: end insert

begin insert (A) end insert begin insert   end insert begin insert The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: “The end insert aggregate amount
of begin delete credit end delete begin insert qualified equity investments end insert that may be allocated in any
calendar year begin delete pursuant to end delete begin insert for purposes of end insert this section, Section
12283, and Section 23622.9 shall be an amount begin delete equal to end delete begin insert as
determined by GO-Biz in consultation with the Department of
Finance based upon end insert 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 begin insert an amount based upon a credit of end insert
forty million dollars ($40,000,000). The committee shall limit the
allocation of begin delete credits permitted end delete begin insert investments that may be designated end insert
under this section, Section 12283, and Section 23622.9 to a
cumulative total begin insert amount based on credits end insert of no more than two
hundred million dollars ($200,000,000). begin delete Any unused credits end delete begin insert The
allocation of any undesignated qualified equity investments end insert shall
be returned to the committee by March 1 of the year following
allocation and the value of the begin delete unused credit end delete begin insert undesignated qualified
equity investment end insert shall be available for allocation in the following
calendar years in accordance with the application process. Any
begin insert qualified equity investment attributable to end insert recaptured credits shall
be begin delete returned end delete begin insert available end insert to the committee begin delete by end delete begin insert on end insert March 1 of the year
following recapture and begin delete the value of the recaptured credit end delete shall be
available for allocation in the following calendar years in
accordance with clause (ii) of subparagraph (B) of paragraph begin delete (9) end delete
begin insert (5) end insert . begin delete Reallocation credits and end delete begin insert Reallocated qualified equity
investments attributable to end insert recapture credits shall not count against
the begin delete forty million dollars ($40,000,000) end delete annual begin delete limit end delete or the begin delete two
hundred million dollars ($200,000,000) end delete cumulative limit.”

begin insert

(B) The references to “the Secretary” in Section 45D(f)(2) of
the Internal Revenue Code, relating to allocation of limitation, is
modified to read “GO-Biz.”

end insert begin insert

(C) The last sentence of Section 45D(f)(3) of the Internal
Revenue Code, relating to carryover of unused limitation, shall
not apply.

end insert begin delete

(9)

end delete

begin insert (5) end insert  (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, begin delete does not apply and is replaced with the
following: end delete begin insert is modified to add the following: end insert

begin insert

(i) (I) The qualified community development entity fails to
comply with subparagraph (D) of paragraph (5) of subdivision
(d). In this case, recapture shall be 100 percent of the credit. The
qualified community development entity shall send notice to GO-Biz
within 30 calendar days of the close of any calendar year in which
the qualified community development entity has failed to invest at
least 15 percent of the purchase price of the qualified equity
investment in satisfaction of the requirements of subparagraph
(D) of paragraph (5) of subdivision (d).

end insert begin insert

(II) The qualified community development entity made an
investment without performing a revenue impact assessment that
satisfies subparagraph (J) of paragraph (5) of subdivision (d). In
this case, recapture shall be 100 percent of the credit, unless
GO-Biz has approved a waiver pursuant to clause (ii) of
subparagraph (J) of paragraph (5) of subdivision (d). The qualified
community development entity shall send notice to GO-Biz within
30 calendar days of the close of any calendar year in which the
qualified community development entity has made an investment
that fails to meet the requirements set forth in subparagraph (J)
of paragraph (5) of subdivision (d).

end insert begin delete

(i)

end delete

begin insert (ii) end insert  GO-Biz 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. begin delete The
recapture process shall be applied if any of the following conditions
set forth occur. end delete

begin delete

(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 GO-Biz 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. GO-Biz 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 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 GO-Biz within
30 calendar days of redeeming a qualified equity investment prior
to the seventh anniversary of the issuance of such qualified equity
investment. GO-Biz shall send written acknowledgment within
five calendar days of receipt of the qualified community
development entity’s notice of potential noncompliance. In such
case GO-Biz’s recapture shall be proportionate to the amount of
the redemption of 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 GO-Biz within 30 calendar days of the 12-month deadline
for the reinvestment if the entity fails to meet any of the
reinvestment requirements. GO-Biz shall send written
acknowledgment within five calendar days of receipt of the
qualified community development entity’s notice of potential
noncompliance. 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)

end delete

begin insert (iii) end insert  Recaptured begin delete tax credits and the related end delete qualified equity
investment begin delete authority end delete begin insert investments end insert revert back to GO-Biz and shall
be reissued. The reissue shall not count toward the annual begin delete 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) end delete begin insert or cumulative
allocation limitation end insert . The reissue shall be done in the following
order:

(I)  First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph begin delete (B) end delete
begin insert (F) end insert of paragraph (5) of subdivision (d) by the begin insert annual end insert allocation
begin delete limitation of forty million dollars ($40,000,000) in paragraph (8)
of subdivision (c). end delete begin insert limitation. end insert

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

begin delete

(iii) (I)  Enforcement

end delete

begin insert (iv) end insert begin insert   end insert begin insert (I) end insert begin insert   end insert begin insert Enforcement end insert 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 GO-Biz 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 GO-Biz 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 GO-Biz necessary to demonstrate, to GO-Biz’s satisfaction, that
those conditions no longer exist.

begin insert

(II) In an instance where a qualified community development
entity fails to send the required notice of potential noncompliance
or GO-Biz has information from the annual report or other sources
that indicates that the entity is in potential noncompliance, GO-Biz
shall send the notice. The date GO-Biz sends the notice of potential
noncompliance shall begin the six-month cure period.

end insert begin delete

(II)

end delete

begin insert (III) end insert  Not more than 45 calendar days following the close of the
cure period, GO-Biz shall make a final determination as to whether
the begin delete credit is to be recaptured end delete begin insert noncompliance has been cured end insert . This
determination shall be based on the review of the notice,
information submitted by the qualified community development
entity, and any other information GO-Biz deems relevant to this
determination. begin insert Within 30 calendar days of making the final
determination, GO-Biz shall notify the Franchise Tax Board of
the determination and other related information including, but not
limited to, the tax identification number of the qualified community
development entity. end insert

begin delete

(III) GO-Biz

end delete

begin insert (IV) end insert begin insert   end insert begin insert GO-Biz end insert shall post, and update monthly, a tally of begin delete returned
credits end delete begin insert undesignated qualified equity investments end insert , pursuant to
paragraph begin delete (8) end delete begin insert (4) end insert , and recaptured credits pursuant to this paragraph.
begin delete Within 30 calendar days of making the final determination that
the credit is to be recaptured, GO-Biz shall notify the Department
of Insurance of the determination including, but not limited to, the
tax identification number of the taxpayer. end delete

begin delete

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

end delete begin delete

(11)

end delete

begin insert (6) end insert  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) GO-Biz shall adopt guidelines necessary or appropriate
to carry out begin delete the purposes of this section and meet the requirements
of Section 45D of the Internal Revenue Code, as modified by this
section. 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. 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. end delete begin insert its responsibilities with respect to the allocation of the
qualified equity investments and recapture of credit allowed by
this section. end insert 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) (A) GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of begin delete administering end delete begin insert reviewing
applications for end insert the program. begin insert GO-Biz may impose other reasonable
fees upon entities that receive the allocation pursuant to this
subdivision that in the aggregate defray the cost of administering
the program. end insert

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

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

(A) Creates an equitable distribution process that ensures that
low-income begin delete communities end delete begin insert community populations end insert across the state
begin insert are engaged and end insert 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 begin delete credits end delete
begin insert authority to designate qualified equity investments end insert including, but
not limited to, its business strategy, targeted community outcomes,
capitalization strategy, and management capacity.

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

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

(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.

begin insert

(F) Does 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.

end insert

(4) (A) GO-Biz shall begin accepting applications on or before
May 15, 2015, and shall award begin delete credits end delete begin insert authority to designate
qualified equity investments end insert annually 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, GO-Biz 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
GO-Biz 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 GO-Biz, 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)  begin delete The end delete begin insert In the 2015 awards cycle, the end insert committee shall
award begin delete tax credits end delete begin insert authority to designate qualified equity investments end insert
to qualified community development entities described in
begin delete subparagraph (B) of paragraph (4) end delete begin insert paragraph (3) end insert of subdivision
(c) in the order applications are received by the begin delete committee, subject
to clause (i) or on a competitive basis, pursuant to clause (ii). end delete
begin insert committee. Applications received on the same day shall be deemed
to have been received simultaneously. end insert

begin delete

(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

end delete

begin insert (B) end insert begin insert   end insert begin insert In end insert the 2016 to 2019 award cycles, inclusive, at least 60
percent of the begin delete credit allocation end delete begin insert authority to designate qualified
equity investments end insert shall be awarded begin delete 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. end delete begin insert pursuant to subparagraph (A). end insert
At the committee’s discretion, a higher percentage of begin delete credits end delete
begin insert authority to designate qualified equity investments end insert may be awarded
pursuant to begin delete the first sentence in this subparagraph. 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. end delete begin insert subparagraph (A). end insert

begin delete

(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.

end delete begin delete

(ii)

end delete

begin insert (C) end insert  The committee shall award up to 40 percent of the begin delete credit
allocation end delete begin insert authority to designate qualified equity investments end insert in
the 2016 to 2019, inclusive, award cycles, to begin delete a end delete qualified community
development begin delete entity, as described in clause (ii) of subparagraph
(A) of paragraph (4) of subdivision (c) and subparagraph (B) of
paragraph (4) of subdivision (c), end delete begin insert entities end insert on a competitive basis
using blind scoring and a review committee that is comprised of
community development finance practitioners begin insert and members end insert 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 begin delete tax credit end delete begin insert qualified equity
investment end insert or other assistance from any applicant.

begin insert

(D) (i) For qualified equity investments derived from the 2015
to 2019, inclusive, awards cycles, pursuant to subparagraphs (A),
(B) and (C), a qualified community development entity shall invest
at least 15 percent of the qualified equity investment in a qualified
low-income community business in consultation or in partnership
with either of the following:

end insert begin insert

(I) A qualified community development entity certified under
Section 45D of the Internal Revenue Code that has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area,
but excluding qualified community development entities with a
national service area.

end insert begin insert

(II) A nonprofit organization certified by GO-Biz, pursuant to
clause (iii).

end insert begin insert

(ii) The 15-percent investment shall be calculated by multiplying
the total purchase price of the qualified equity investments issued
by the qualified community development entity by 15 percent. Each
community development entity application shall indicate how the
qualified community development entity will meet this requirement.

end insert begin insert

(iii) GO-Biz shall establish guidelines for certifying a nonprofit
organization pursuant to this subparagraph. A nonprofit
organization shall meet the requirements of Section 23701 and be
certified by GO-Biz as having a primary mission of serving or
providing investment capital in low-income communities in
California. The nonprofit organization shall maintain
accountability to residents of low-income communities through
their representation on any governing board or on an advisory
board of the nonprofit organization. GO-Biz 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 appeal and be heard by the committee, if GO-Biz finds that the
nonprofit organization no longer meets the requirements for
certification.

end insert begin delete

(iii) In awarding credits on a

end delete

begin insert (E) end insert begin insert   end insert begin insert In making end insert competitive begin delete basis, end delete begin insert awards of authority to
designate qualified equity investments, end insert priority shall be given to
applications that can demonstrate that the begin delete credits end delete begin insert qualified equity
investment authority end insert will allow the begin insert qualified community
development end insert entity to undertake qualified low-income community
investments in rural, suburban, or urban areas that have been
historically underserved and result in the greatest benefit to the
hardest to serve and undercapitalized lower income populations,
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. begin delete All competitive applications shall demonstrate
strong linkages with communities and neighborhoods in California
low-income neighborhoods. end delete

begin delete

(B)

end delete

begin insert (F) end insert   begin insert (i) end insert begin insert   end insert For applications described in begin delete clause (i) end delete of subparagraph
(A), in the event begin delete tax credit end delete requests begin insert for authority to designate
qualified equity investments end insert exceed the applicable annual allocation
begin delete limitation of up to forty million dollars ($40,000,000) in paragraph
(8) of subdivision (c), the committee end delete begin insert limitation, GO-Biz end insert 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.

begin delete

(C)

end delete

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

begin delete

(D)

end delete

begin insert (G) end insert  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. begin insert The transferee
shall be subject to the same rules, requirements, and limitations
applicable to the transferor. end insert

begin delete

(E)

end delete

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

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph begin delete (B) end delete begin insert (F) end insert under
the annual allocation limitation of forty million dollars
($40,000,000) in paragraph begin delete (8) end delete begin insert (5) end insert of subdivision (c).

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

begin delete

(F)

end delete

begin insert (I) end insert  A qualified community development entity that issues
qualified equity investments must notify GO-Biz of the names of
begin delete the entities end delete begin insert taxpayers end insert that are eligible to utilize tax credits begin delete under
paragraph (3) of subdivision (b) pursuant to an allocation of tax
credits or change in allocation of tax credits or due to a end delete begin insert pursuant
to this section and any end insert transfer of a qualified equity investment.

begin insert

(J) (i) A qualified community development entity shall only
make a qualified low-income community investment that
demonstrates a positive revenue impact on the state over a 10-year
period against the aggregate tax credit utilization over the same
10-year period. GO-Biz shall approve one or more nationally
recognized revenue impact assessment models that shall be used
by the qualified community development entity to demonstrate
positive revenue impact. If it is demonstrated that the qualified
low-income community investment has a positive revenue impact
on the state at the time the investment is made, it shall be treated
as if the investment continues to meet the requirement of this
subparagraph for the duration of the seven-year program period.

end insert begin insert

(ii) Upon application and approval by GO-Biz, the requirement
of this subparagraph may be waived.

end insert

(6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to GO-Biz 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.

begin insert

(iii) Evidence that the community development entity complied
with subparagraph (D) of paragraph (5).

end insert begin insert

(iv) Evidence that each qualified low-income community
investment was determined to have a positive revenue impact on
the state. This requirement does not apply for any qualified
low-income community investment for which GO-Biz approved a
waiver, pursuant to clause (ii) of subparagraph (J) of paragraph
(5) or to reinvestments of redeemed qualified low-income
investments.

end insert begin delete

(iii) Any

end delete

begin insert (v) end insert begin insert   end insert begin insert Any end insert other information required by GO-Biz as being necessary
to meet the requirements of this section.

(B) Thereafter, the qualified community development entity
shall submit an annual report to GO-Biz 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 begin insert social, environmental, and economic end insert impact the credit
had on the low-income community begin insert during the report period and
cumulatively end insert .

(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 begin delete described in
subparagraph (E) of paragraph (6) of subdivision (c) end delete .

(vi) Location of begin delete the end delete begin insert each end insert qualified low-income community
begin delete businesses end delete begin insert business assisted by a qualified low-income community
investment end insert .

begin insert

(vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development
entity during the year.

end insert

(e)  begin insert (1) end insert begin insert   end insert 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.

begin insert

(2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment.

end insert

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

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

(h)  begin delete The credit allowed under this section shall only be allowed
for taxable years end delete begin insert GO-Biz and the committee shall only make awards
pursuant to paragraph (4) of subdivision (d) in a calendar year end insert
in which the Legislature appropriates funds in the California New
Markets Tax Credit Fund pursuant to subdivision (b) of Section
18410.3.

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

SEC. 5.  

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

18410.3.  

(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.

SEC. 6.  

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 committee
and GO-Biz shall administer this program as provided in this
section, Section 12283, and Section 17053.9. begin insert The Director of
GO-Biz may delegate the administration of all or portions of the
program within GO-Biz. end insert

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

begin delete

(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.

(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 delete begin insert

(2) (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:

begin delete

(1) 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 “GO-Biz.”

(2)

end delete

begin insert (1) end insert  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.

begin delete

(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 GO-Biz 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. GO-Biz shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. GO-Biz 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 appeal and be heard by
the committee, if GO-Biz 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)

end delete

begin insert (2) end insert   begin insert (A) end insert begin insert   end insert Section 45D(c)(1) of the Internal Revenue Code is
modified to only include a qualified community development begin delete entity end delete
begin insert entity, that is certified by the Secretary of the Treasury, end insert and its
subsidiary qualified community development entities that have
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.

begin delete

(5)

end delete

begin insert (B) end insert  Section begin delete 45D(d)(1)(A) end delete begin insert 45D(c)(2) end insert of the Internal Revenue
Code is modified to only include begin delete any capital or equity investment
in, or loan to, a qualified active low-income community business. end delete
begin insert a specialized small business investment company or a community
development financial institution that have 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. end insert

begin delete

(6)

end delete

begin insert (3) end insert  The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:

(A)  begin delete Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by end delete begin insert By end insert substituting “any low-income community in
California” for “any low-income begin delete community.” end delete begin insert community” every
place it appears in Section 45D of the Internal Revenue Code. end insert

begin delete

(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)

end delete

begin insert (B) end insert  Section 45D(d)(2)(A)(iii) of the Internal Revenue Code is
modified to allow the services of employees of a service-based
qualified begin insert active low-income community end insert business to be performed
outside the low-income community. A service-based qualified
begin insert active low-income community end insert business is a business that primarily
earns revenue through providing intangible products and services
begin insert and leases or owns real property in the low-income community
that is used for the operation of the business end insert .

begin delete

(E) (i) 

end delete

begin insert (C) end insert begin insert   end insert A qualified active low-income community business shall
not include 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.

begin delete

(ii)

end delete

begin insert (D) end insert  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 begin delete a end delete begin insert one or more end insert
California low-income begin delete community end delete begin insert communities end insert . The operating
business shall meet all other conditions of a qualified active
low-income community business, except as modified by this
paragraph begin delete and paragraph (7) end delete .

begin delete

(iii) A

end delete

begin insert (E) end insert begin insert   end insert begin insert A end insert 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 delete

(iv)

end delete

begin insert (F) end insert  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.

begin delete

(v)

end delete

begin insert (G) end insert  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.

begin delete

(vi)

end delete

begin insert (H) end insert  A qualified active low-income community business shall
not include a charter school.

begin delete

(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

end delete

begin insert (4) end insert begin insert   end insert begin insert Section end insert 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments begin delete designated: “The end delete
begin insert designated, is modified as follows: end insert

begin insert (A) end insert begin insert   end insert begin insert The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: “The end insert aggregate amount
of begin delete credit end delete begin insert qualified equity investments end insert that may be allocated in any
calendar year begin delete pursuant to end delete begin insert for purposes of end insert this section, Section
12283, and Section 17053.9 shall be an amount begin delete equal to end delete begin insert as
determined by GO-Biz in consultation with the Department of
Finance based upon end insert 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 begin insert an amount based upon a credit of end insert
forty million dollars ($40,000,000). The committee shall limit the
allocation of begin delete credits permitted end delete begin insert investments that may be designated end insert
under this section, Section 12283, and Section 17053.9 to a
cumulative total begin insert amount based on credits end insert of no more than two
hundred million dollars ($200,000,000). begin delete Any unused credits end delete begin insert The
allocation of any undesignated qualified equity investments end insert shall
be returned to the committee by March 1 of the year following
allocation and the value of the begin delete unused credit end delete begin insert undesignated qualified
equity investment end insert shall be available for allocation in the following
calendar years in accordance with the application process. Any
begin insert qualified equity investment attributable to end insert recaptured credits shall
be begin delete returned end delete begin insert available end insert to the committee begin delete by end delete begin insert on end insert March 1 of the year
following recapture and begin delete the value of the recaptured credit end delete shall be
available for allocation in the following calendar years in
accordance with clause (ii) of subparagraph (B) of paragraph begin delete (9) end delete
begin insert (5) end insert . begin delete Reallocation credits and end delete begin insert Reallocated qualified equity
investments attributable to end insert recapture credits shall not count against
begin delete the forty million dollars ($40,000,000) end delete annual begin delete limit end delete or the begin delete two
hundred million dollars ($200,000,000) end delete cumulative limit.”

begin insert

(B) The references to “the Secretary” in Section 45D(f)(2) of
the Internal Revenue Code, relating to allocation of limitation, is
modified to read “GO-Biz.”

end insert begin insert

(C) The last sentence of Section 45D(f)(3) of the Internal
Revenue Code, relating to carryover of unused limitation, shall
not apply.

end insert begin delete

(9)

end delete

begin insert (5) end insert  (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, begin delete does not apply and is replaced with the
following: end delete begin insert is modified to add the following: end insert

begin insert

(i) (I) The qualified community development entity fails to
comply with subparagraph (D) of paragraph (5) of subdivision
(d). In this case, recapture shall be 100 percent of the credit. The
qualified community development entity shall send notice to GO-Biz
within 30 calendar days of the close of any calendar year in which
the qualified community development entity has failed to invest at
least 15 percent of the purchase price of the qualified equity
investment in satisfaction of the requirements of subparagraph
(D) of paragraph (5) of subdivision (d).

end insert begin insert

(II) The qualified community development entity made an
investment without performing a revenue impact assessment that
satisfies subparagraph (J) of paragraph (5) of subdivision (d). In
this case, recapture shall be 100 percent of the credit, unless
GO-Biz has approved a waiver pursuant to clause (ii) of
subparagraph (J) of paragraph (5) of subdivision (d). The qualified
community development entity shall send notice to GO-Biz within
30 calendar days of the close of any calendar year in which the
qualified community development entity has made an investment
that fails to meet the requirements set forth in subparagraph (J)
of paragraph (5) of subdivision (d).

end insert begin delete

(i)

end delete

begin insert (ii) end insert  GO-Biz 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. begin delete The
recapture process shall be applied if any of the following conditions
set forth occur. end delete

begin delete

(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 GO-Biz 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. GO-Biz 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 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 GO-Biz within
30 calendar days of redeeming a qualified equity investment prior
to the seventh anniversary of the issuance of such qualified equity
investment. GO-Biz shall send written acknowledgment within
five calendar days of receipt of the qualified community
development entity’s notice of potential noncompliance. In such
case GO-Biz’s recapture shall be proportionate to the amount of
the redemption of 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 GO-Biz within 30 calendar days of the 12-month deadline
for the reinvestment if the entity fails to meet any of the
reinvestment requirements. GO-Biz shall send written
acknowledgment within five calendar days of receipt of the
qualified community development entity’s notice of potential
noncompliance. 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) 

end delete

begin insert (iii) end insert begin insert   end insert Recaptured begin delete tax credits and the related qualified equity
investment authority end delete begin insert investments end insert revert back to GO-Biz and shall
be reissued. The reissue shall not count toward the annual
begin delete 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) end delete begin insert or cumulative
allocation limitation end insert . The reissue shall be done in the following
order:

(I) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph begin delete (B) end delete begin insert (F) end insert of
paragraph (5) of subdivision (d) by the begin insert annual end insert allocation begin delete limitation
of forty million dollars ($40,000,000) in paragraph (8) of
subdivision (c). end delete begin insert limitation. end insert

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

begin delete

(iii) (I) Enforcement

end delete

begin insert (iv) end insert begin insert   end insert begin insert (I) end insert begin insert   end insert begin insert Enforcement end insert 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 GO-Biz 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 GO-Biz 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 GO-Biz necessary to demonstrate, to begin delete the end delete GO-Biz’s satisfaction,
that those conditions no longer exist.

begin insert

(II) In an instance where a qualified community development
entity fails to send the required notice of potential noncompliance
or GO-Biz has information from the annual report or other sources
that indicates that the entity is in potential noncompliance, GO-Biz
shall send the notice. The date GO-Biz sends the notice of potential
noncompliance shall begin the six-month cure period.

end insert begin delete

(II)

end delete

begin insert (III) end insert  Not more than 45 calendar days following the close of the
cure period, GO-Biz shall make a final determination as to whether
the begin delete credit is to be recaptured end delete begin insert noncompliance has been cured end insert . This
determination shall be based on the review of the notice,
information submitted by the qualified community development
entity, and any other information GO-Biz deems relevant to this
determination. begin insert Within 30 calendar days of making the final
determination, GO-Biz shall notify end insert begin insert the Franchise Tax Board of
the determination and other related information including, but not
limited to, the tax identification number of the taxpayer. end insert

begin delete

(III) GO-Biz

end delete

begin insert (I end insert begin insert V) end insert begin insert   end insert begin insert GO-Biz end insert shall post, and update monthly, a tally of begin delete returned
credits end delete begin insert undesignated qualified equity investments end insert , pursuant to
paragraph begin delete (8) end delete begin insert (4) end insert , and recaptured credits pursuant to this paragraph.
begin delete Within 30 calendar days of making the final determination that
the credit is to be recaptured, GO-Biz shall notify the Department
of Insurance of the determination including, but not limited to, the
tax identification number of the taxpayer. end delete

begin delete

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

end delete begin delete

(11)

end delete

begin insert (6) end insert  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)  GO-Biz shall adopt guidelines necessary or appropriate
to carry out begin delete the purposes of this section and meet the requirements
of Section 45D of the Internal Revenue Code, as modified by this
section. 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. 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. end delete begin insert its responsibilities with respect to the allocation of the
qualified equity investments and recapture of credit allowed by
this section. end insert 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) (A) GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of begin delete administering end delete begin insert reviewing
applications for end insert the program. begin insert GO-Biz may impose other reasonable
fees upon entities that receive the allocation pursuant to this
subdivision that in the aggregate defray the cost of administering
the program. end insert

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

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

(A) Creates an equitable distribution process that ensures that
low-income begin delete communities end delete begin insert community populations end insert across the state
begin insert are engaged and end insert 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 begin delete credits end delete
begin insert authority to designate qualified equity investments end insert including, but
not limited to, its business strategy, targeted community outcomes,
capitalization strategy, and management capacity.

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

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

(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.

begin insert

(F) Does 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.

end insert

(4) (A) GO-Biz shall begin accepting applications on or before
May 15, 2015, and shall award begin delete credits end delete begin insert authority to designate
qualified equity investments end insert annually 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, GO-Biz 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
GO-Biz 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 GO-Biz, 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)  begin delete The end delete begin insert In the 2015 awards cycle, the end insert committee shall
award begin delete tax credits end delete begin insert authority to designate qualified equity investments end insert
to qualified community development entities described in
begin delete subparagraph (B) of paragraph (4) end delete begin insert paragraph (3) end insert of subdivision
(c) in the order applications are received by the begin delete committee, subject
to clause (i) or on a competitive basis, pursuant to clause (ii) end delete
begin insert committee. Applications received on the same day shall be deemed
to have been received simultaneously end insert .

begin delete

(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

end delete

begin insert (B) end insert begin insert   end insert begin insert In end insert the 2016 to 2019 award cycles, inclusive, at least 60
percent of the begin delete credit allocation end delete begin insert authority to designate qualified
equity investments end insert shall be awarded begin delete 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. end delete begin insert pursuant to subparagraph (A). end insert
At the committee’s discretion, a higher percentage of begin delete credits end delete
begin insert authority to designate qualified equity investments end insert may be awarded
pursuant to begin delete the first sentence in this subparagraph. 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. end delete begin insert subparagraph (A). end insert

begin delete

(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.

end delete begin delete

(ii)

end delete

begin insert (C) end insert  The committee shall award up to 40 percent of the begin delete credit
allocation end delete begin insert authority to designate qualified equity investments end insert in
the 2016 to 2019, inclusive, award cycles, to begin delete a end delete qualified community
development begin delete entity, as described in clause (ii) of subparagraph
(A) of paragraph (4) of subdivision (c) and subparagraph (B) of
paragraph (4) of subdivision (c), end delete begin insert entities end insert on a competitive basis
using blind scoring and a review committee that is comprised of
community development finance practitioners begin insert and members end insert 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 begin delete tax credit end delete begin insert qualified equity
investment end insert or other assistance from any applicant.

begin insert

(D) (i) For qualified equity investments derived from the 2015
to 2019, inclusive, awards cycles, pursuant to subparagraphs (A),
(B) and (C), a qualified community development entity shall invest
at least 15 percent of the qualified equity investment in a qualified
low-income community business in consultation or in partnership
with either of the following:

end insert begin insert

(I) A qualified community development entity certified under
Section 45D of the Internal Revenue Code that has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area,
but excluding qualified community development entities with a
national service area.

end insert begin insert

(II) A nonprofit organization certified by GO-Biz, pursuant to
clause (iii).

end insert begin insert

(ii) The 15-percent investment shall be calculated by multiplying
the total purchase price of the qualified equity investments issued
by the qualified community development entity by 15 percent. Each
community development entity application shall indicate how the
qualified community development entity will meet this requirement.

end insert begin insert

(iii) GO-Biz shall establish guidelines for certifying a nonprofit
organization pursuant to this subparagraph. A nonprofit
organization shall meet the requirements of Section 23701 and be
certified by GO-Biz as having a primary mission of serving or
providing investment capital in low-income communities in
California. The nonprofit organization shall maintain
accountability to residents of low-income communities through
their representation on any governing board or on an advisory
board of the nonprofit organization. GO-Biz 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 appeal and be heard by the committee, if GO-Biz finds that the
nonprofit organization no longer meets the requirements for
certification.

end insert begin delete

(iii) In awarding credits on a

end delete

begin insert (E) end insert begin insert   end insert begin insert In making end insert competitive begin delete basis, end delete begin insert awards of authority to
designate qualified equity investments, end insert priority shall be given to
applications that can demonstrate that the begin delete credits end delete begin insert qualified equity
investment authority end insert will allow the begin insert qualified community
development end insert entity to undertake qualified low-income community
investments in rural, suburban, or urban areas that have been
historically underserved and result in the greatest benefit to the
hardest to serve and undercapitalized lower income populations,
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. begin delete All competitive applications shall demonstrate
strong linkages with communities and neighborhoods in California
low-income neighborhoods. end delete

begin delete

(B)

end delete

begin insert (F) end insert   begin insert (i) end insert begin insert   end insert For applications described in begin delete clause (i) of end delete subparagraph
(A), in the event begin delete tax credit end delete requests begin insert for authority to designate
qualified equity investments end insert exceed the applicable annual allocation
begin delete limitation of up to forty million dollars ($40,000,000) in paragraph
(8) of subdivision (c), the committee end delete begin insert limitation, GO-Biz end insert 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.

begin delete

(C)

end delete

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

begin delete

(D)

end delete

begin insert (G) end insert  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. begin insert The transferee
shall be subject to the same rules, requirements, and limitations
applicable to the transferor. end insert

begin delete

(E)

end delete

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

(i) First, pro rata to applicants whose qualified equity investment
allocations were reduced pursuant to subparagraph begin delete (B) of paragraph
(5) end delete begin insert (F) end insert under the annual allocation limitation of forty million
dollars ($40,000,000) in paragraph begin delete (8) end delete begin insert (5) end insert of subdivision (c).

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

begin delete

(F)

end delete

begin insert (I) end insert  A qualified community development entity that issues
qualified equity investments must notify GO-Biz of the names of
the begin delete entities end delete begin insert taxpayers end insert that are eligible to utilize tax credits begin delete under
paragraph (3) of subdivision (b) pursuant to an allocation of tax
credits or change in allocation of tax credits or due to a end delete begin insert pursuant
to this section and any end insert transfer of a qualified equity investment.

begin insert

(J) (i) A qualified community development entity shall only
make a qualified low-income community investment that
demonstrates a positive revenue impact on the state over a 10-year
period against the aggregate tax credit utilization over the same
10-year period. GO-Biz shall approve one or more nationally
recognized revenue impact assessment models that shall be used
by the qualified community development entity to demonstrate
positive revenue impact. If it is demonstrated that the qualified
low-income community investment has a positive revenue impact
on the state at the time the investment is made, it shall be treated
as if the investment continues to meet the requirement of this
subparagraph for the duration of the seven-year program period.

end insert begin insert

(ii) Upon application and approval by GO-Biz, the requirement
of this subparagraph may be waived.

end insert

(6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to GO-Biz 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.

begin insert

(iii) Evidence that the community development entity complied
with subparagraph (D) of paragraph (5).

end insert begin insert

(iv) Evidence that each qualified low-income community
investment was determined to have a positive revenue impact on
the state. This requirement does not apply for any qualified
low-income community investment for which GO-Biz approved a
waiver, pursuant to clause (ii) of subparagraph (J) of paragraph
(5) or to reinvestments of redeemed qualified low-income
investments.

end insert begin delete

(iii) Any

end delete

begin insert (v) end insert begin insert   end insert begin insert Any end insert other information required by GO-Biz as being necessary
to meet the requirements of this section.

(B) Thereafter, the qualified community development entity
shall submit an annual report to GO-Biz 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 begin insert social, environmental, and economic end insert impact the credit
had on the low-income community begin insert during the report period and
cumulatively end insert .

(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 begin delete described in
subparagraph (E) of paragraph (6) of subdivision (c) end delete .

(vi) Location of begin delete the end delete begin insert each end insert qualified low-income community
begin delete businesses end delete begin insert business assisted by a qualified low-income community
investment end insert .

begin insert

(vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development
entity during the year.

end insert

(e)  begin insert (1) end insert begin insert   end insert 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.

begin insert

(2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment.

end insert

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

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

(h)  begin delete The credit allowed under this section shall only be allowed
for taxable years end delete begin insert GO-Biz and the committee shall only make awards
pursuant to paragraph (4) of subdivision (d) in a calendar year end insert
in which the Legislature appropriates funds in the California New
Markets Tax Credit Fund pursuant to subdivision (b) of Section
18410.3.

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

begin insert

begin insert SEC. 7. end insert   

end insert begin insert

The provisions of this act are severable. If any
provision of this act or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.

end insert

begin delete SEC. 7. end delete
begin insert SEC. 8. end insert   

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