BILL ANALYSIS
AB 1811
Page 1
ASSEMBLY THIRD READING
AB 1811 (Reyes)
As Amended May 30, 2000
Majority vote. Tax levy
REVENUE AND TAXATION 8-0APPROPRIATIONS 21-0
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|Ayes:|Knox, Kaloogian, Alquist, |Ayes:|Migden, Campbell, |
| |Aroner, Ducheny, Honda, | |Ackerman, Alquist, |
| |Olberg, Romero | |Aroner, Ashburn, Brewer, |
| | | |Cedillo, Corbett, Davis, |
| | | |Kuehl, Maldonado, Papan, |
| | | |Romero, Runner, Shelley, |
| | | |Thomson, Wesson, Wiggins, |
| | | |Wright, Zettel |
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SUMMARY : Modifies the rules used to allocate farmworker housing
tax credits by allocating them in much the same way as
low-income housing tax credits are allocated. Specifically,
this bill:
1)Revises the eligibility rules for the Farmworker Housing
Credit Program by allowing farmworker-housing tax credits to
be issued before construction of farmworker housing is
completed and occupied.
2)Removes the requirement that applicants for farmworker housing
tax credits obtain credit certification from the Tax Credit
Allocation Committee (TCAC) before paying or incurring costs
to construct or rehabilitate farmworker housing.
EXISTING LAW :
1)Offers personal income and bank and corporation tax credits
equal to 50% of eligible costs to construct or rehabilitate
qualified farmworker housing. Qualified farmworker housing is
housing located in California that satisfies the requirements
of the Farmworker Housing Assistance Program. Eligible costs
include those expended to finance, construct, excavate,
install, and/or obtain permits to construct or rehabilitate
qualified farmworker housing, including improvements to ensure
compliance with laws governing access for persons with
disabilities and costs related to reducing utility expenses.
AB 1811
Page 2
Eligible costs do not include land or costs financed by grants
and below-market financing. The housing must be made
available to farmworkers for at least 30 years.
2)Provides that taxpayers are required to obtain credit
certification from TCAC before paying or incurring costs in
order to be eligible to claim farmworker-housing tax credits.
3)Provides that commercial lenders are also eligible for a
credit equal to 50% of the interest income foregone on loans
used to finance expenditures for qualified farmworker housing.
These credits must be taken in equal installment amounts over
a 10-year period or for the term of the loan, whichever is
shorter. Loans must be pre-certified by TCAC and must be for
terms of at least three years.
4)Provides that the aggregate amount of farmworker housing
credits allocated annually equals $500,000 per year.
Unallocated credits may be carried forward into the future.
Credits may not be claimed until the first taxable or income
year in which construction or rehabilitation is completed and
the constructed or rehabilitated farmworker housing is
occupied by eligible farmworkers.
FISCAL EFFECT : This bill is likely to result in farmworker
housing tax credits being awarded sooner than they would be
under current law. However, this bill is not expected to result
in an overall revenue loss, because the annual $500,000 cap on
authorized farmworker housing credit allocations remains
unchanged under this bill.
COMMENTS : This bill is co-sponsored by the State Treasurer and
the Lieutenant Governor and is intended to increase utilization
of farmworker housing tax credits. By patterning the farmworker
housing tax credit program on the highly successful and overly
subscribed low-income housing tax credit program, the sponsors
hope to make farmworker housing tax credits more attractive to
investors.
Sponsors note that the current farmworker housing tax credit
program does not provide up-front cash to be used for project
development, because the project owner is unable to incur any
project costs until they have been certified by TCAC.
Additionally, the owner is unable to obtain credits until the
project is complete and the units are occupied. These time
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constraints mean that the tax credits cannot be used in
conjunction with other state programs that provide incentives to
create and rehabilitate farmworker housing.
To date no farmworker housing tax credits have been claimed,
most likely because the credits cannot be claimed until a
project is completed and occupied. This bill will allow the
owner of qualified farmworker housing to obtain tax credits up
front (before the project is completed and occupied), thereby
increasing the owner's ability to obtain up-front capital for
the project.
The primary reason for the popularity of low-income housing tax
credits is their transferability. Commonly, developers who
receive tax credit allocations sell their ownership interest in
the property to investors (typically at about $0.70 on the
dollar) in order to generate the capital necessary to build
low-income units. Because low-income housing tax credits are
transferable, investors who purchase the ownership interest in
low-income housing developments obtain the credits associated
with the property and can then use the credits to offset their
tax liabilities. The Treasurer's Office intends that farmworker
housing tax credits be transferable in a similar manner as
low-income housing tax credits; however, this bill is silent on
this issue.
Analysis Prepared by : Eileen A. Roush / REV. & TAX. / (916)
319-2098
FN: 0005591