BILL NUMBER: AB 1811 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Reyes
(Coauthors: Assembly Members Keeley and Wiggins)
(Principal coauthor: Senator Costa)
(Coauthor: Senator McPherson)
FEBRUARY 3, 2000
An act to amend Sections 50199.50, 50199.52, and 50199.54 of the
Health and Safety Code, and to amend Sections 12206, 17058, and
23610.5 of, and to repeal Sections 17053.14, 23608.2, and 23608.3 of,
the Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1811, as introduced, Reyes. Taxation: credit: qualified
farmworker housing.
Existing insurance tax law, the Personal Income Tax Law, and the
Bank and Corporation Tax Law allow, in modified conformity to federal
income tax laws, taxpayers a credit against the taxes imposed by
those laws for providing low-income housing, and require the
California Tax Credit Allocation Committee to allocate the credit in
accordance with specified criteria.
The Personal Income Tax Law and the Bank and Corporation Tax Law
also allow a credit against the taxes imposed by those laws in an
amount equal to 50% of the eligible costs of constructing or
rehabilitating farmworker housing. The credit is allocated pursuant
to the Farmworker Housing Assistance Program by the California Tax
Credit Allocation Committee in an amount not to exceed $500,000 per
calendar year.
This bill would revise and recast the credit for farmworker
housing under the provisions providing for the credit for low-income
housing, thereby, among other things, allowing a credit for the
entire amount of eligible costs for constructing or rehabilitating
farmworker housing. However, the $500,000 aggregate limitation would
continue to apply.
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. Section 50199.50 of the Health and Safety Code is
amended to read:
50199.50. For the purposes of this chapter:
(a) "Agricultural worker" or "farmworker" shall have the same
meaning as specified in subdivision (b) of Section 1140.4 of the
Labor Code.
(b) "Compliance period" means, with respect to any farmworker
housing, the period of 30 consecutive taxable or income years,
beginning with the taxable or income year in which the credit is
allowable.
(c) "Eligible costs" means the total finance costs, construction
costs, excavation costs, installation costs, and permit costs paid or
incurred to construct or rehabilitate farmworker housing. "Eligible
costs" include, but are not limited to, improvements to ensure
compliance with laws governing access for persons with disabilities
and costs related to reducing utility expenses. Noneligible costs
include land and those costs financed by grants and below-market
financing.
(d) "Farmworker housing" means housing for agricultural workers
and may include, but need not be limited to, conventionally
constructed units and manufactured housing.
(e) "Farmworker housing tax credits" means the tax credits
authorized by Sections 17053.14, 23608.2, and 23608.3
12206, 17058, and 23610.5 of the Revenue and
Taxation Code.
(f) "Household" has the same meaning as defined in Section 7602 of
Title 25 of the California Code of Regulations.
(g) "Committee" means the California Tax Credit Allocation
Committee as defined in Section 50199.7.
SEC. 2. Section 50199.52 of the Health and Safety Code is amended
to read:
50199.52. All housing assisted pursuant to this chapter shall
comply with the following requirements:
(a) (1) The recipient of a tax credit pursuant to Section
17053.14, 23608.2, or 23608.3 12206, 17058, or
23610.5 of the Revenue and Taxation Code, or the owner of the
farmworker housing assisted pursuant to Section 17053.14 or
23608.2 12206, 17058, or 23610.5 of the Revenue
and Taxation Code, shall enter into those agreements required by the
committee to further the purposes of this chapter and the applicable
farmworker housing tax credit sections.
(2) The owner shall agree that the farmworker housing units
assisted with the farmworker housing tax credits shall be utilized,
maintained, and operated pursuant to this chapter for the compliance
term specified by the applicable farmworker housing tax credit
statute.
(b) (1) The farmworker housing assisted pursuant to this chapter
shall be available to, and occupied by, only farmworkers and their
households. However, in the event of a natural disaster or other
critical occurrence, as determined by the committee, the housing may
be utilized at the discretion of the owner for households needing
shelter for up to 60 days if there are no farmworkers who have
submitted an application to reside, or to continue to reside, in the
housing. The occupants of the housing need not be limited to
farmworkers employed by the property owner.
(2) In addition, where the housing is designed and operated as a
dormitory, the owner and operator may restrict occupancy by sex.
However, in awarding credits pursuant to this chapter, the committee
shall give preference to proposed farmworker housing that is designed
and operated for families rather than for single sex dormitories.
(c) The expenditures upon which the amount of the farmworker
housing tax credit is based shall be eligible costs.
SEC. 3. Section 50199.54 of the Health and Safety Code is amended
to read:
50199.54. (a) In the event that the owner who receives a credit
pursuant to Section 17053.14 or 23608.2
12206, 17058, or 23610.5 of the Revenue and Taxation Code
demonstrates, to the committee's satisfaction, that there is no
further need for farmworker housing or that it is no longer
economically feasible to operate the farmworker housing, the owner
shall pay to the Franchise Tax Board a pro rata portion of the credit
previously allowed equal to the amount of any tax credit previously
allowed, multiplied by the ratio of the number of years not elapsed
in the compliance period divided by 30.
(b) In the event that the farmworker housing is damaged or
destroyed by a casualty not caused by the owner, the compliance
period has not expired, and the owner commences reasonable action to
repair or replace the farmworker housing, the taxpayer may continue
to claim the credit as if no destruction had taken place.
SEC. 4. Section 12206 of the Revenue and Taxation Code is amended
to read:
12206. (a) (1) There shall be allowed as a credit against the
"tax" (as defined by Section 12201) a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code, except as otherwise provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a C corporation, the partners in the case of a
partnership, and the shareholders in the case of an S corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a C corporation, the partnership in the
case of a partnership, and the S corporation in the case of an S
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) The project's housing sponsor shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
(ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code. The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an S corporation, the housing
sponsor shall provide a copy of the California Tax Credit Allocation
Committee certification to the taxpayer.
(C) The taxpayer shall attach a copy of the certification to any
return upon which a tax credit is claimed under this section.
(D) In the case of a failure to attach a copy of the certification
for the year to the return in which a tax credit is claimed under
this section, no credit under this section shall be allowed for that
year until a copy of that certification is provided.
(E) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
(F) No credit shall be allocated under this section to buildings
located in a difficult development area or a qualified census tract
as defined in Section 42 of the Internal Revenue Code for which the
eligible basis of a new building or the rehabilitation expenditure of
an existing building is 130 percent of that amount pursuant to
Section 42(d)(5)(C) of the Internal Revenue Code, unless the
committee reduces the amount of federal credit, with the approval of
the applicant, so that the combined amount of federal and state
credit shall not exceed the total credit allowable pursuant to this
section and Section 42(b) of the Internal Revenue Code, computed
without regard to Section 42(d)(5)(C) of the Internal Revenue Code.
(c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
(1) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A) of
the Internal Revenue Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(3) For purposes of this section, the term "at risk of conversion,"
with respect to an existing building means a building that satisfies
all of the following criteria:
(A) The building is presently owned by a housing sponsor other
than a qualified nonprofit organization.
(B) The building is a federally assisted building for which the
low-income use restrictions will terminate or the mortgage on the
building is eligible for incentives under Subtitle 13 of the
Emergency Low Income Housing Assistance Act of 1987 or under Section
502(c) of the Housing Act of 1949, anytime in the two calendar years
after the year of application to the California Tax Credit Allocation
Committee, and the purchaser has received preliminary approval from
the applicable federal agency for a maximum level of incentives
through a plan of action.
(C) The person acquiring the building enters into a regulatory
agreement that requires the building to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the building.
(D) The building satisfies the requirements of Section 42(e) of
the Internal Revenue Code regarding rehabilitation expenditures,
except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
which, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity which shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note; or
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first income year of the credit period; or
(B) The amount of the cash-flow from those units in the building
that are not low-income units. For purposes of computing cash-flow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may accumulate and be distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an S corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
(e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four income years"
for "10 taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
If, as of the close of any income year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the income years in which the increase in
qualified basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 17058, and Section 23610.5 shall be
an amount equal to the sum of the following:
(1) (A) Except as provided in subparagraph (B),
thirty-five To be allocated for qualified low-income
housing projects, including farmworker housing:
(A) Thirty-five million dollars ($35,000,000) for
the 1997 calendar year, and each calendar year thereafter .
(B) Fifty million dollars ($50,000,000) for each of the
calendar years 1998 and 1999.
(2) The unused housing credit ceiling, if any, for the
preceding calendar years.
(3)
(C) The amount of housing credit ceiling returned in the
calendar year. For purposes of this paragraph
subparagraph , the amount of housing credit dollar amount
returned in the calendar year equals the housing credit dollar amount
previously allocated to any project that does not become a qualified
low-income housing project within the period required by this
section or to any project with respect to which an allocation is
canceled by mutual consent of the California Tax Credit Allocation
Committee and the allocation recipient.
(2) To be specifically designated for the construction or
rehabilitation of qualified farmworker housing, all of the following:
(A) Five hundred thousand dollars ($500,000).
(B) The unused qualified farmworker housing credits, if any, for
the preceding calendar year or years.
(C) The amount of qualified farmworker housing credit ceiling
returned in the calendar year. For purposes of this subparagraph,
the amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income farmworker housing project within the
period required by this section or to any project with respect to
which an allocation is canceled by mutual consent of the California
Tax Credit Allocation Committee and the allocation recipient.
"Qualified farmworker housing" means housing located within this
state which satisfies the requirements of the Farmworker Housing
Assistance Program. The housing may be vacant or occupied, and it
need not be licensed pursuant to the Employee Housing Act at the time
of the initiation of construction or rehabilitation.
The farmworker housing tax credit shall not be allowed unless the
taxpayer constructs or rehabilitates the property subject to the
covenants, conditions, and restrictions imposed by this section and
pursuant to the Farmworker Housing Assistance Program, which shall
include, but not necessarily be limited to, a requirement that the
taxpayer obtain, for approval by the committee, a construction cost
audit and certification of eligible costs from a qualified
accountant; and, subsequent to the construction or rehabilitation of
the farmworker housing, owns or operates the farmworker housing
pursuant to the requirements of this section, or ensures the
ownership and operation of the farmworker housing pursuant to the
requirements of this section.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30-consecutive income years beginning with
the first income year of the credit period with respect thereto.
(i) (1) Section 42(j) of the Internal Revenue Code shall not be
applicable and the provisions in paragraph (2) shall be substituted
in its place.
(2) The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, which agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code, shall apply, providing the
agreement includes all of the following provisions:
(A) A term not less than the compliance period.
(B) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
(C) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(D) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and which allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in
any state court.
(E) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
(F) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee and the local agency
that can enforce the regulatory agreement if there is a determination
by the Internal Revenue Service that the project is not in
compliance with Section 42(g) of the Internal Revenue Code.
(G) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(H) The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit ceiling
which may be allocated by the committee in that period, and the
approximate date on which allocations shall be made. If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two
allocation periods, the committee may reduce the number of periods
and adjust the filing deadlines, maximum percentage of credit
allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code. In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate there is a need and
demand for low-income housing in the community or region for which it
is proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if:
(i) The project serves the lowest income tenants at rents
affordable to those tenants; and
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units is comprised
of low-income units with three and more bedrooms.
(ii) Projects providing single room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
(k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
(l) In the case where the state credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding years if necessary, until the
credit has been exhausted.
(m) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1993.
(n) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(o) This section shall remain in effect for as long as Section 42
of the Internal Revenue Code, relating to low-income housing credits,
remains in effect.
SEC. 5. Section 17053.14 of the Revenue and Taxation Code is
repealed.
17053.14. (a) (1) For taxable years beginning on or after January
1, 1997, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, an amount equal to the lesser of 50
percent of the eligible costs, as determined under subdivision (b),
or the amount allocated under paragraph (2) of subdivision (e).
(2)
Notwithstanding paragraph (1), no credit shall be allowed until the
qualified year, as defined in paragraph (3).
(3) For purposes of this section, the "qualified year" is the
first taxable year during which the construction or rehabilitation of
the qualified farmworker housing is completed and there is occupancy
of the qualified farmworker housing by eligible farmworkers.
(b) (1) For purposes of this section, the "eligible costs" shall
be equal to the total finance costs, construction costs, excavation
costs, installation costs, and permit costs paid or incurred to
construct or rehabilitate farmworker housing. "Eligible costs"
include, but are not limited to, improvements to ensure compliance
with laws governing access for persons with disabilities and costs
related to reducing utility expenses. Noneligible costs include land
and those costs financed by grants and below-market financing.
(2) For purposes of paragraph (1), construction or rehabilitation
of the farmworker housing shall have commenced on or after January 1,
1997.
(3) Notwithstanding any other provision of this part, eligible
costs shall not include any costs paid or incurred prior to January
1, 1997.
(c) Notwithstanding any other provision of this part, no credit
shall be allowed under this section unless the taxpayer first obtains
a certification from the committee that the amounts described in
subdivision (b) qualify for the credit under this section and the
total amount of the credit allocated to the taxpayer pursuant to the
Farmworker Housing Assistance Program.
(d) The taxpayer shall do all of the following:
(1) Apply to the committee for credit certification prior to the
payment or incurrence of costs described in paragraph (1) of
subdivision (b).
(2) Retain a copy of the certification.
(3) Make the certification available to the Franchise Tax Board
upon request.
(e) The committee shall do all of the following:
(1) Provide forms and instructions for applications for credit
certification, as specified pursuant to the Farmworker Housing
Assistance Program.
(2) Accept applications and issue a certificate to the taxpayer
that includes a certification as to the eligible costs described in
subdivision (b) that qualify for the credit and the total amount of
the credit to which the taxpayer is entitled for the taxable year.
Credit in excess of the amount necessary to make the project feasible
shall not be allocated. Credits shall be allocated through a minimum
of one competitive funding round per year.
(3) Obtain the taxpayer's taxpayer identification number, and each
partner's taxpayer identification number in the case of a
partnership, for tax administration purposes.
(4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
committee, containing the names, taxpayer identification numbers
pursuant to paragraph (3), eligible costs, and total amount of credit
certified to each taxpayer.
(f) For purposes of this section:
(1) "Compliance period" means, with respect to any farmworker
housing, the period of 30 consecutive taxable years, beginning with
the taxable year in which the credit is allowable.
(2) "Construct or rehabilitate" includes reconstruction, but does
not include any costs related to acquisition or refinancing of
property or structures thereon.
(3) "Farmworker Housing Assistance Program" means Chapter 3.7
(commencing with Section 50199.50) of Part 1 of Division 31 of the
Health and Safety Code.
(4) "Qualified farmworker housing" means housing located within
this state which satisfies the requirements of the Farmworker Housing
Assistance Program. The housing may be vacant or occupied.
(5) "Committee" means the California Tax Credit Allocation
Committee as defined in Section 50199.7 of the Health and Safety
Code.
(6) "Qualified accountant" means an accountant licensed or
certified in this state who is neither an employee of the taxpayer
nor related to the taxpayer, within the meaning of Section 267 of the
Internal Revenue Code.
(g) No deduction or other credit shall be allowed under this part
or Part 11 (commencing with Section 23001) to the extent of any
eligible costs, as defined in subdivision (b), that are taken into
account in computing the credit allowed under this section.
(h) The farmworker housing tax credit shall not be allowed unless
the taxpayer:
(1) Constructs or rehabilitates the property subject to the
covenants, conditions, and restrictions imposed by this section and
pursuant to the Farmworker Housing Assistance Program, which shall
include, but not necessarily be limited to, a requirement that the
taxpayer obtain, for approval by the committee, a construction cost
audit and certification of eligible costs from a qualified
accountant.
(2) Subsequent to construction or rehabilitation of the farmworker
housing, owns or operates the farmworker housing pursuant to the
requirements of this section, or ensures the ownership and operation
of the farmworker housing pursuant to the requirements of this
section.
(i) The requirements of this section shall be set forth in a
written agreement between the committee and the taxpayer. The
agreement shall include, but not necessarily be limited to, the
requirements set forth in the Farmworker Housing Assistance Program.
(j) 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 succeeding years if necessary, until the
credit has been exhausted.
(k) (1) In the case of any disqualifying event, as defined in
paragraph (2), there shall be added to the "net tax," as defined in
Section 17039, for the taxable year in which the disqualifying event
occurs, the recapture amount computed under paragraph (3) and the
interest amount computed under paragraph (4).
(2) For purposes of this subdivision, "disqualifying event" shall
mean:
(A) The committee determines that the certification provided under
subdivision (e) was obtained by fraud or misrepresentation.
(B) The taxpayer fails to comply with the requirements of the
Farmworker Housing Assistance Program, or any other requirement
imposed under this section.
(3) For purposes of this subdivision, "recapture amount" means:
(A) In the case of any disqualifying event described in
subparagraph (A) of paragraph (2), the entire amount of any credit
previously allowed under this section.
(B) In the case of any disqualifying event described in
subparagraph (B) of paragraph (2), an amount determined by
multiplying the entire amount of the credit previously allowed under
this section by a fraction, the numerator of which is the number of
years remaining in the compliance period and the denominator of which
is 30.
(4) For purposes of this subdivision, "interest amount" means:
(A) In the case of any disqualifying event described in
subparagraph (A) of paragraph (2), the amount of interest computed
using the adjusted annual rate established in Section 19521 from the
due date of the return for each taxable year in which the credit was
claimed to the date of the payment of the additional tax resulting
from the application of this subdivision.
(B) In the case of any disqualifying event described in
subparagraph (B) of paragraph (2), zero.
(l) The annual amount of credit granted pursuant to this section
and Sections 23608.2 and 23608.3 shall not exceed five hundred
thousand dollars ($500,000), provided that the aggregate amount of
the credit granted pursuant to this section and Sections 23608.2 and
23608.3 for the 1998 calendar year and thereafter may exceed five
hundred thousand dollars ($500,000) per calendar year by an amount
equal to any unallocated credits under this section and Sections
23608.2 and 23608.3 for the preceding calendar year or years.
SEC. 6. Section 17058 of the Revenue and Taxation Code is amended
to read:
17058. (a) (1) There shall be allowed as a credit against the
amount of net tax (as defined in Section 17039) a state low-income
housing credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with the provisions of
Section 42 of the Internal Revenue Code, except as otherwise provided
in this section.
(2) "Taxpayer" for purposes of this section means the sole owner
in the case of an individual, the partners in the case of a
partnership, and the shareholders in the case of an S corporation.
(3) "Housing sponsor" for purposes of this section means the sole
owner in the case of an individual, the partnership in the case of a
partnership, and the S corporation in the case of an S corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) The project's housing sponsor shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
(ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code. The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an S corporation, the housing
sponsor shall provide a copy of the California Tax Credit Allocation
Committee certification to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
(E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, credits may be allocated under this
section in the amounts prescribed in subdivision (c), provided that
the amount of credit allocated under Section 42 of the Internal
Revenue Code is computed on 100 percent of the qualified basis of the
building.
(c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A) of
the Internal Revenue Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing building means a building that satisfies
all of the following criteria:
(A) The building is presently owned by a housing sponsor other
than a qualified nonprofit organization.
(B) The building is a federally assisted building for which the
low-income use restrictions will terminate or the building is
eligible for incentives under Subtitle 13 of the Emergency Low Income
Housing Preservation Act of 1987 or under Section 502(c) of the
Housing Act of 1949, anytime in the two calendar years after the year
of application to the California Tax Credit Allocation Committee,
and the purchaser has received preliminary approval from the
applicable federal agency for a maximum level of incentives through a
plan of action.
(C) The person acquiring the building enters into a regulatory
agreement that requires the building to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the building.
(D) The building satisfies the requirements of Section 42(e) of
the Internal Revenue Code regarding rehabilitation expenditures,
except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity that shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note; or
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period; or
(B) The amount of the cash-flow from those units in the building
that are not low-income units. For purposes of computing cash-flow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may be accumulated and distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an S corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
(e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four taxable
years" for "10 taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the taxable year in which the increase in qualified
basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
The total amount for the four-year period of the housing credit
dollars allocated in a calendar year to any building shall reduce the
aggregate housing credit dollar amount of the California Tax Credit
Allocation Committee for the calendar year in which the allocation is
made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable to this section.
(g) The aggregate housing credit dollar amount which may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 23610.5 shall be
an amount equal to the sum of the following:
(1) (A) Except as provided in subparagraph (B),
thirty-five To be allocated for qualified low-income
housing projects, including farmworker housing:
(A) Thirty-five million dollars ($35,000,000) for
the 1997 calendar year, and each calendar year thereafter .
(B) Fifty million dollars ($50,000,000) for each of the
calendar years 1998 and 1999.
(2) The unused housing credit ceiling, if any, for the
preceding calendar years.
(3)
(C) The amount of housing credit ceiling returned in the
calendar year. For purposes of this paragraph
subparagraph , the amount of housing credit dollar amount
returned in the calendar year equals the housing credit dollar amount
previously allocated to any project that does not become a qualified
low-income housing project within the period required by this
section or to any project with respect to which an allocation is
canceled by mutual consent of the California Tax Credit Allocation
Committee and the allocation recipient.
(2) To be specifically designated for the construction or
rehabilitation of qualified farmworker housing, all of the following:
(A) Five hundred thousand dollars ($500,000).
(B) The unused qualified farmworker housing credits, if any, for
the preceding calendar year or years.
(C) The amount of qualified farmworker housing credit ceiling
returned in the calendar year. For purposes of this subparagraph,
the amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income farmworker housing project within the
period required by this section or to any project with respect to
which an allocation is canceled by mutual consent of the California
Tax Credit Allocation Committee and the allocation recipient.
"Qualified farmworker housing" means housing located within this
state which satisfies the requirements of the Farmworker Housing
Assistance Program. The housing may be vacant or occupied, and it
need not be licensed pursuant to the Employee Housing Act at the time
of the initiation of construction or rehabilitation.
The farmworker housing tax credit shall not be allowed unless the
taxpayer constructs or rehabilitates the property subject to the
covenants, conditions, and restrictions imposed by this section and
pursuant to the Farmworker Housing Assistance Program, which shall
include, but not necessarily be limited to, a requirement that the
taxpayer obtain, for approval by the committee, a construction cost
audit and certification of eligible costs from a qualified
accountant; and, subsequent to the construction or rehabilitation of
the farmworker housing, owns or operates the farmworker housing
pursuant to the requirements of this section, or ensures the
ownership and operation of the farmworker housing pursuant to the
requirements of this section.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30 consecutive taxable years beginning with
the first taxable year of the credit period with respect thereto.
(i) Section 42(j) of the Internal Revenue Code shall not be
applicable and the following requirements of this section shall be
set forth in a regulatory agreement between the California Tax Credit
Allocation Committee and the housing sponsor, which agreement shall
be subordinated, when required, to any lien or encumbrance of any
banks or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code shall apply, providing the
agreement includes all of the following provisions:
(1) A term not less than the compliance period.
(2) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
(3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and which allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in
any state court.
(5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code.
(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(8) The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit ceiling
that may be allocated by the committee in that period, and the
approximate date on which allocations shall be made. If the
enactment of federal or state law, the adoption of rules or
regulations or other similar events prevent the use of two allocation
periods, the committee may reduce the number of periods and adjust
the filing deadlines, maximum percentage of credit allocated, and the
allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code. In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate there is a need and
demand for low-income housing in the community or region for which it
is proposed.
(ii) The project's
proposed financing, including tax credit proceeds, shall be
sufficient to complete the project and that the proposed operating
income shall be adequate to operate the project for the extended use
period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if:
(i) The project serves the lowest income tenants at rents
affordable to those tenants; and
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee of all residential units is comprised of
low-income units with three and more bedrooms.
(ii) Projects providing single room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application.
(k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
(l) In the case where the credit allowed under this section
exceeds the net tax, the excess credit may be carried over to reduce
the net tax in the following year, and succeeding taxable years, if
necessary, until the credit has been exhausted.
(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
(1) The project was not placed in service prior to 1990.
(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(q) Any unused credit may continue to be carried forward, as
provided in subdivision (l), until the credit has been exhausted.
This section shall remain in effect on and after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code pertaining to
low-income housing credits remains in effect.
(r) The amendments to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 1994.
SEC. 7. Section 23608.2 of the Revenue and Taxation Code is
repealed.
23608.2. (a) (1) For income years beginning on or after January
1, 1997, there shall be allowed as a credit against the "tax," as
defined by Section 23036, an amount equal to the lesser of 50 percent
of the eligible costs, as determined under subdivision (b), or the
amount allocated under paragraph (2) of subdivision (e).
(2) Notwithstanding paragraph (1), no credit shall be allowed
until the qualified year, as defined in paragraph (3).
(3) For purposes of this section, the "qualified year" is the
first income year during which the construction or rehabilitation of
the qualified farmworker housing is completed and there is occupancy
of the qualified farmworker housing by eligible farmworkers.
(b) (1) For purposes of this section, the "eligible costs" shall
be equal to the total finance costs, construction costs, excavation
costs, installation costs, and permit costs paid or incurred to
construct or rehabilitate farmworker housing. "Eligible costs"
include, but are not limited to, improvements to ensure compliance
with laws governing access for persons with disabilities and costs
related to reducing utility expenses. Noneligible costs include land
and those costs financed by grants and below-market financing.
(2) For purposes of paragraph (1), construction or rehabilitation
of the farmworker housing shall have commenced on or after January 1,
1997.
(3) Notwithstanding any provision of this part, eligible costs
shall not include any costs paid or incurred prior to January 1,
1997.
(c) Notwithstanding any other provision of this part, no credit
shall be allowed under this section unless the taxpayer first obtains
a certification from the committee that the amounts described in
subdivision (b) qualify for the credit under this section and the
total amount of the credit allocated to the taxpayer pursuant to the
Farmworker Housing Assistance Program.
(d) The taxpayer shall do all of the following:
(1) Apply to the committee for credit certification prior to the
payment or incurrence of costs described in paragraph (1) of
subdivision (b).
(2) Retain a copy of the certification.
(3) Make the certification available to the Franchise Tax Board
upon request.
(e) The committee shall do all of the following:
(1) Provide forms and instructions for applications for credit
certification, as specified pursuant to the Farmworker Housing
Assistance Program.
(2) Accept applications and issue a certificate to the taxpayer
that includes a certification as to the eligible costs described in
subdivision (b) that qualify for the credit and the total amount of
the credit to which the taxpayer is entitled for the income year.
Credit in excess of the amount necessary to make the project feasible
shall not be allocated. Credits shall be allocated through a
minimum of one competitive funding round per year.
(3) Obtain the taxpayer's taxpayer identification number, or each
shareholder's taxpayer identification number in the case of an S
corporation, for tax administration purposes.
(4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
committee, containing the names, taxpayer identification numbers
pursuant to paragraph (3), eligible costs, and total amount of credit
certified to each taxpayer.
(f) For purposes of this section:
(1) "Compliance period" means, with respect to any farmworker
housing, the period of 30 consecutive income years, beginning with
the income year in which the credit is allowable.
(2) "Construct or rehabilitate" includes reconstruction, but does
not include any costs related to acquisition or refinancing of
property or structures thereon.
(3) "Farmworker Housing Assistance Program" means Chapter 3.7
(commencing with Section 50199.50) of Part 1 of Division 31 of the
Health and Safety Code.
(4) "Qualified farmworker housing" means housing located within
this state which satisfies the requirements of the Farmworker Housing
Assistance Program. The housing may be vacant or occupied, and it
need not be licensed pursuant to the Employee Housing Act at the time
of the initiation of construction or rehabilitation.
(5) "Committee" means the California Tax Credit Allocation
Committee as defined in Section 50199.7 of the Health and Safety
Code.
(6) "Qualified accountant" means an accountant licensed or
certified in this state who is neither an employee of the taxpayer,
nor related to the taxpayer within the meaning of Section 267 of the
Internal Revenue Code.
(g) No deduction or other credit shall be allowed under this part
or Part 10 (commencing with Section 17001) to the extent of any
eligible costs, as defined in subdivision (b), that are taken into
account in computing the credit allowed under this section.
(h) The farmworker housing tax credit shall not be allowed unless
the taxpayer:
(1) Constructs or rehabilitates the property subject to the
covenants, conditions, and restrictions imposed by this section and
pursuant to the Farmworker Housing Assistance Program, which shall
include, but not necessarily be limited to, a requirement that the
taxpayer obtain, for approval by the committee, a construction cost
audit and certification of eligible costs from a qualified
accountant.
(2) Subsequent to construction or rehabilitation of the farmworker
housing, owns or operates the farmworker housing pursuant to the
requirements of this section, or ensures the ownership and operation
of the farmworker housing pursuant to the requirements of this
section.
(i) The requirements of this section shall be set forth in a
written agreement between the committee and the taxpayer. The
agreement shall include, but not necessarily be limited to, the
requirements set forth in the Farmworker Housing Assistance Program.
(j) 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 succeeding years if necessary, until the credit
has been exhausted.
(k) (1) In the case of any disqualifying event, as defined in
paragraph (2), there shall be added to the "tax," as defined in
Section 23036, for the income year in which the disqualifying event
occurs, the recapture amount computed under paragraph (3) and the
interest amount computed under paragraph (4).
(2) For purposes of this subdivision, "disqualifying event" shall
mean:
(A) The committee determines that the certification provided under
subdivision (e) was obtained by fraud or misrepresentation.
(B) The taxpayer fails to comply with the requirements of the
Farmworker Housing Assistance Program, or any other requirement
imposed under this section.
(3) For purposes of this subdivision, "recapture amount" means:
(A) In the case of any disqualifying event described in
subparagraph (A) of paragraph (2), the entire amount of any credit
previously allowed under this section.
(B) In the case of any disqualifying event described in
subparagraph (B) of paragraph (2), an amount determined by
multiplying the entire amount of the credit previously allowed under
this section by a fraction, the numerator of which is the number of
years remaining in the compliance period and the denominator of which
is 30.
(4) For purposes of this subdivision, "interest amount" means:
(A) In the case of any disqualifying event described in
subparagraph (A) of paragraph (2), the amount of interest computed
using the adjusted annual rate established in Section 19521 from the
due date of the return for each income year in which the credit was
claimed to the date of payment of the additional tax resulting from
the application of this subdivision.
(B) In the case of any disqualifying event described in
subparagraph (B) of paragraph (2), zero.
(l) The annual amount of credit granted pursuant to this section
and Sections 17053.14 and 23608.3 shall not exceed five hundred
thousand dollars ($500,000), provided that the aggregate amount of
the credit granted pursuant to this section and Sections 17053.14 and
23608.3 for the calendar year 1998 and thereafter may exceed five
hundred thousand dollars ($500,000) per calendar year by an amount
equal to any unallocated credits under this section and Sections
17053.14 and 23608.3 for the preceding calendar year or years.
SEC. 8. Section 23608.3 of the Revenue and Taxation Code is
repealed.
23608.3. (a) For income years beginning on or after January 1,
1997, there shall be allowed as a credit against the "tax," as
defined in Section 23036, for a bank or financial corporation as
determined in subdivision (b).
(b) (1) For purposes of this section, the credit shall be equal to
50 percent of the difference between the amount of interest income
which could have been collected by the bank or financial corporation
had the loan rate been one point above prime, or any other index used
by the lender, and the lesser amount of interest income actually due
for the term of the loan by the bank or financial corporation on
those portions of loans used to finance only eligible costs actually
paid or incurred to rehabilitate or construct qualified farmworker
housing.
(2) The credit allowed under this section shall be taken in equal
installments over a period equal to the lesser of 10 years or the
term of the loan beginning in the taxpayer's income year during which
the qualified farmworker housing is completed and there is initial
occupancy by eligible farmworkers. In the case where the credit
allowed by this section exceeds the "tax" for any income year, the
excess may not be carried over to reduce the "tax" in any succeeding
year.
(3) The credit shall not apply to loans with a term of less than
three years or to loans funded prior to January 1, 1997. The credit
shall apply only to interest income from the loan and shall not apply
to any other loan fees or other charges collected by the bank or
financial corporation with respect to the loan.
(c) The taxpayer shall qualify for the credit by application to
and certification by the committee that the expenses qualify for the
credit under this section.
(d) The taxpayer shall do all of the following:
(1) Apply to the committee for credit certification prior to the
funding of the loan.
(2) Retain a copy of the certification.
(3) Make the certification available to the Franchise Tax Board
upon request.
(e) The committee shall do all of the following:
(1) Provide forms and instructions for applications for credit
certification, as specified pursuant to the Farmworker Housing
Assistance Program.
(2) Accept applications and issue a certificate to the taxpayer
that includes the credit amount to which the taxpayer is entitled for
the income year.
(3) Obtain the taxpayer's taxpayer identification number, and each
shareholder's taxpayer identification number in the case of an S
corporation, for tax administration purposes.
(4) Provide an annual listing to the Franchise Tax Board, and in a
form and manner agreed upon by the Franchise Tax Board and the
committee, containing the names, taxpayer identification numbers
pursuant to paragraph (3), qualified amounts, and total amount of
credit certified to each taxpayer.
(f) For the purposes of this section:
(1) "Construct or rehabilitate" includes reconstruction, but does
not include any costs related to acquisition or refinancing of
property or structures thereon.
(2) "Farmworker Housing Assistance Program" means Chapter 3.7
(commencing with Section 50199.50) of Part 1 of Division 31 of the
Health and Safety Code.
(3) "Eligible costs" means those expenditures certified by the
committee to meet the requirements of Sections 17053.14 and 23608.2.
(4) "Qualified farmworker housing" means housing within the state
that meets the requirements of the Farmworker Housing Assistance
Program.
(g) (1) In the event that the committee determines that the
certification provided under subdivision (e) was obtained by fraud or
misrepresentation of the taxpayer, there shall be added to the "tax,"
as defined in Section 23036 for the income year in which the
disqualifying event occurs, the recapture amount computed under
paragraph (2) and the interest amount computed under paragraph (3).
(2) For purposes of this subdivision, "recapture amount" means the
entire amount of any credit previously allowed under this section.
(3) For purposes of this subdivision, "interest amount" means the
amount of interest computed using the adjusted annual rate
established in Section 19521 from the due date of the return for the
taxable year in which the credit was claimed to the date of payment
of the additional tax resulting from the application of this
subdivision.
(h) (1) Except as provided in paragraph (2), if the bank or
financial corporation sells the loan to another bank or financial
corporation, the balance of the credit, if any, shall be transferred
to the assignee or transferee of the loan, subject to the same
conditions and limitations as set forth in this section.
(2) A bank or financial corporation may assign, sell, or otherwise
transfer the loan to another person or entity and retain the right
to claim the credit granted under this section if the bank or
financial corporation also retains responsibility for servicing the
loan.
(i) The annual amount of credit granted pursuant to this section
and Sections 17053.14 and 23608.2 shall not exceed five hundred
thousand dollars ($500,000), provided that the aggregate amount of
the credit granted pursuant to this section and Sections 17053.14 and
23608.2 for the 1998 calendar year and thereafter may exceed five
hundred thousand dollars ($500,000) per calendar year by an amount
equal to any unallocated credits under this section and Sections
17053.14 and 23608.2 for the preceding calendar year or years.
SEC. 9. Section 23610.5 of the Revenue and Taxation Code is
amended to read:
23610.5. (a) (1) There shall be allowed as a credit against the
"tax" (as defined by Section 23036) a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code of 1986, except as otherwise provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a C corporation, the partners in the case of a
partnership, and the shareholders in the case of an S corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a C corporation, the partnership in the
case of a partnership, and the S corporation in the case of an S
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) The project's housing sponsor shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
(ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code. The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an S corporation, the housing
sponsor shall provide a copy of the California Tax Credit Allocation
Committee certification to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
(E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, credits may be allocated under this
section in the amounts prescribed in subdivision (c), provided that
the amount of credit allocated under Section 42 of the Internal
Revenue Code is computed on 100 percent of the qualified basis of the
building.
(c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A).
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing building means a building that satisfies
all of the following criteria:
(A) The building is presently owned by a housing sponsor other
than a qualified nonprofit organization.
(B) The building is a federally assisted building for which the
low-income use restrictions will terminate or the building is
eligible for prepayment under Subtitle 13 of the Emergency Low Income
Housing Assistance Act of 1987 or under Section 502(c) of the
Housing Act of 1949, anytime in the two calendar years after the year
of application to the California Tax Credit Allocation Committee,
and the purchaser has received preliminary approval from the
applicable federal agency for a maximum level of incentives through a
plan of action.
(C) The person acquiring the building enters into a regulatory
agreement that requires the building to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the building.
(D) The
building satisfies the requirements of Section 42(e) of the Internal
Revenue Code regarding rehabilitation expenditures, except that the
provisions of Section 42(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
which, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity that shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note; or
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first income year of the credit period; or
(B) The amount of the cash-flow from those units in the building
that are not low-income units. For purposes of computing cash-flow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may accumulate and be distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an S corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
(e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four income years"
for "10 taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
If, as of the close of any income year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the income years in which the increase in
qualified basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable.
(g) The aggregate housing credit dollar amount which may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 17058 shall be
an amount equal to the sum of the following:
(1) (A) Except as provided in subparagraph (B),
thirty-five To be allocated for qualified low-income
housing projects, including farmworker housing:
(A) Thirty-five million dollars ($35,000,000) for
the 1997 calendar year, and each calendar year thereafter .
(B) Fifty million dollars ($50,000,000) for each of the
calendar years 1998 and 1999.
(2) The unused housing credit ceiling, if any, for the
preceding calendar years; and
(3)
(C) The amount of housing credit ceiling returned in the
calendar year. For purposes of this paragraph
subparagraph , the amount of housing credit dollar amount
returned in the calendar year equals the housing credit dollar amount
previously allocated to any project that does not become a qualified
low-income housing project within the period required by this
section or to any project with respect to which an allocation is
canceled by mutual consent of the California Tax Credit Allocation
Committee and the allocation recipient.
(2) To be specifically designated for the construction or
rehabilitation of qualified farmworker housing, all of the following:
(A) Five hundred thousand dollars ($500,000).
(B) The unused qualified farmworker housing credits, if any, for
the preceding calendar year or years.
(C) The amount of qualified farmworker housing credit ceiling
returned in the calendar year. For purposes of this subparagraph,
the amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income farmworker housing project within the
period required by this section or to any project with respect to
which an allocation is canceled by mutual consent of the California
Tax Credit Allocation Committee and the allocation recipient.
"Qualified farmworker housing" means housing located within this
state which satisfies the requirements of the Farmworker Housing
Assistance Program. The housing may be vacant or occupied, and it
need not be licensed pursuant to the Employee Housing Act at the time
of the initiation of construction or rehabilitation.
The farmworker housing tax credit shall not be allowed unless the
taxpayer constructs or rehabilitates the property subject to the
covenants, conditions, and restrictions imposed by this section and
pursuant to the Farmworker Housing Assistance Program, which shall
include, but not necessarily be limited to, a requirement that the
taxpayer obtain, for approval by the committee, a construction cost
audit and certification of eligible costs from a qualified
accountant; and, subsequent to the construction or rehabilitation of
the farmworker housing, owns or operates the farmworker housing
pursuant to the requirements of this section, or ensures the
ownership and operation of the farmworker housing pursuant to the
requirements of this section.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30-consecutive income years beginning with
the first income year of the credit period with respect thereto.
(i) Section 42(j) of the Internal Revenue Code shall not be
applicable and the following shall be substituted in its place:
(1) The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code, shall apply, providing the
agreement includes all of the following provisions:
(A) A term not less than the compliance period.
(B) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
(C) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(D) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto,
and which allows individuals, whether prospective, present, or
former occupants of the building, who meet the income limitation
applicable to the building, the right to enforce the regulatory
agreement in any state court.
(E) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
(F) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code.
(G) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(H) The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit ceiling
that may be allocated by the committee in that period, and the
approximate date on which allocations shall be made. If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two
allocation periods, the committee may reduce the number of periods
and adjust the filing deadlines, maximum percentage of credit
allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code. In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate there is a need for
low-income housing in the community or region for which it is
proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and shall be
adequate to operate the project for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if:
(i) The project serves the lowest income tenants at rents
affordable to those tenants; and
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee of all residential units is comprised of
low-income units with three and more bedrooms.
(ii) Projects providing single room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
(5) Not less than 20 percent of the low-income housing tax credits
available annually under this section, Section 12206, and Section
17058 shall be set aside for allocation to rural areas as defined in
Section 50199.21 of the Health and Safety Code. Any amount of credit
set aside for rural areas remaining on or after October 31 of any
calendar year shall be available for allocation to any eligible
project. No amount of credit set aside for rural areas shall be
considered available for any eligible project so long as there are
eligible rural applications pending on October 31.
(k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
(l) In the case where the state credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding years if necessary, until the
credit has been exhausted.
(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
(1) The project was not placed in service prior to 1990.
(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(q) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each income year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as that section
was amended by Chapter 881 of the Statutes of 1993, as of the last
day of the income year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, as that section was amended by Chapter 881 of
the Statutes of 1993, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section, as that section
was amended by Chapter 881 of the Statutes of 1993.
(2) The election provided in paragraph (1):
(A) May be based on any method selected by the corporation that
originally receives the credit.
(B) Shall be irrevocable for the income year the credit is
allowed, once made.
(C) May be changed for any subsequent income year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
(r) Any unused credit may continue to be carried forward, as
provided in subdivision (k), until the credit has been exhausted.
This section shall remain in effect on or after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, pertaining to
low-income housing credits, remains in effect.
(s) The amendments to this section made by the act adding this
subdivision shall apply only to income years beginning on or after
January 1, 1994, except that paragraph (1) of subdivision (q), as
amended, shall apply to income years beginning on or after January 1,
1993.
SEC. 10. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.