AB 2728: Insurance: community development investments.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2016-08-31
(1)Existing law requires each admitted insurer with annual premiums written in California equal to or less than $100,000,000 to provide information to the Insurance Commissioner by July 1, 2016, on all of its community development investments, community development infrastructure investments, and green investments, as defined, in California. Existing law defines a community development investment as certain projects, developments, or activities that, among other things, benefit low- or moderate-income individuals or families. Existing law defines community development infrastructure as California public debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- or moderate-income communities consistent with the types of projects, developments, or activities specified as community development investments. Existing law defines a green investment, among other things, as specified projects offering energy efficiency improvements and renewable energy generation. Existing law requires the insurer to list investments that are high impact which is an investment that is innovative, responsive to community needs, not routinely provided by an insurer, or has a high degree of positive impact on the economic welfare of low- or moderate-income individuals, families, or communities in urban or rural areas of California.
This bill would instead define a community development investment as certain projects, developments, or activities that, among other things, benefit low-to-moderate income individuals or families. The bill would include investments in reservation-based communities and investments in rural areas, as defined, in community development investments. The bill would instead define community development infrastructure as all California debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low-to-moderate income communities. This bill would include water and waste management and sustainable agriculture projects in the definition of a green investment. The bill would instead define a high-impact investment as an investment that is innovative, responsive to community needs, not routinely provided by an insurer, and provides at least 50% social or environmental benefit to low-to-moderate income individuals, families, or communities in the state. The bill would also define diverse investment managers as investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51% women, veterans, or minorities, or a combination of persons in those groups.
(2)Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made in a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer. Existing law also provides that if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, the entire amount of any credit previously allowed for that taxable year is required to be added to the tax imposed on the taxpayer.
This bill would extend the provisions relating to the authorization of the credit and certification by the California Organized Investment Network until January 1, 2018. The bill would require priority for the tax credit to be given to insurance company investors. The bill would delete the provision described above relating to a reduction of a qualified investment and would instead require that the provision regarding withdrawal, without reinvestment, of a qualified investment also apply when a qualified investment is reduced.
(1)Existing law requires each admitted insurer with annual premiums written in California equal to or less than $100,000,000 to provide information to the Insurance Commissioner by July 1, 2016, on all of its community development investments, community development infrastructure investments, and green investments, as defined, in California. Existing law defines a community development investment as certain projects, developments, or activities that, among other things, benefit low- or moderate-income individuals or families. Existing law defines community development infrastructure as California public debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- or moderate-income communities consistent with the types of projects, developments, or activities specified as community development investments. Existing law defines a green investment, among other things, as specified projects offering energy efficiency improvements and renewable energy generation. Existing law requires the insurer to list investments that are high impact which is an investment that is innovative, responsive to community needs, not routinely provided by an insurer, or has a high degree of positive impact on the economic welfare of low- or moderate-income individuals, families, or communities in urban or rural areas of California.
This bill would instead define a community development investment as certain projects, developments, or activities that, among other things, benefit low- to moderate-income low-to-moderate income individuals or families. The bill would include investments in reservation-based communities and investments in rural areas, as defined, in community development investments. The bill would instead define community development infrastructure as all California debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income low-to-moderate income communities. This bill would include water and waste management and sustainable agriculture projects in the definition of a green investment. The bill would instead define a high-impact investment as an investment that is innovative, responsive to community needs, not routinely provided by an insurer, and provides at least 50% social or environmental benefit to low- to moderate-income low-to-moderate income individuals, families, or communities in the state. The bill would also define diverse investment managers as investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51% women, veterans, or minorities, or a combination of persons in those groups.
(2)Existing law authorizes the commissioner, until January 1, 2020, to establish and appoint a California Organized Investment Network (COIN) Advisory Board, as specified.
This bill would extend the commissioners authorization to establish and appoint the advisory board until January 1, 2022.
(3)
(2)Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made in a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer. Existing law also provides that if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, the entire amount of any credit previously allowed for that taxable year is required to be added to the tax imposed on the taxpayer.
This bill would extend the provisions relating to the authorization of the credit and certification by the California Organized Investment Network until January 1, 2022. 2018. The bill would require priority for the tax credit to be given to insurance company investors. The bill would delete the provision described above relating to a reduction of a qualified investment and would instead require that the provision regarding withdrawal, without reinvestment, of a qualified investment also apply when a qualified investment is reduced.
(1)Existing law requires each admitted insurer with annual premiums written in California equal to or less than $100,000,000 to provide information to the Insurance Commissioner by July 1, 2016, on all of its community development investments, community development infrastructure investments, and green investments, as defined, in California. Existing law defines a community development investment as certain projects, developments, or activities that, among other things, benefit low- or moderate-income individuals or families. Existing law defines community development infrastructure as California public debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- or moderate-income communities consistent with the types of projects, developments, or activities specified as community development investments. Existing law defines a green investment, among other things, as specified projects offering energy efficiency improvements and renewable energy generation. Existing law requires the insurer to list investments that are high-impact, high impact which is an investment that is innovative, responsive to community needs, not routinely provided by an insurer, or has a high degree of positive impact on the economic welfare of low- or moderate-income individuals, families, or communities in urban or rural areas of California.
This bill would instead define a community development investment as certain projects, developments, or activities that, among other things, benefit low- to moderate-income individuals or families. The bill would include investments into in reservation-based communities and investments into in rural areas, as defined, in community development investments. The bill would instead define community development infrastructure as all California debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income communities. This bill would include water and waste management and sustainable agriculture projects in the definition of a green investment. The bill would instead define a high-impact investment as an investment that is innovative, responsive to community needs, not routinely provided by an insurer, and provides at least 50% social or environmental benefit to low- to moderate-income individuals, families families, or communities in the state. The bill would also define diverse fund managers as investment management companies that are at least 51% owned by women, veterans, or minorities, or a combination of persons in those groups. investment managers as investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51% women, veterans, or minorities, or a combination of persons in those groups.
(2)Existing law authorizes the commissioner, until January 1, 2020, to establish and appoint a California Organized Investment Network (COIN) Advisory Board, as specified.
This bill would extend the commissioners authorization to establish and appoint the advisory board until January 1, 2027. 2022.
(3)Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made into in a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer. Existing law also provides that if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, the entire amount of any credit previously allowed for that taxable year is required to be added to the tax imposed on the taxpayer.
This bill would extend the provisions relating to the authorization of the credit and certification by the California Organized Investment Network until January 1, 2027. 2022. The bill would require priority for the tax credit to be given to insurance company investors. The bill would delete the provision described above relating to a reduction of a qualified investment before the end of the 60th month. and would instead require that the provision regarding withdrawal, without reinvestment, of a qualified investment also apply when a qualified investment is reduced.
(1)Existing law requires each admitted insurer with annual premiums written in California equal to or less than $100,000,000 to provide information to the Insurance Commissioner by July 1, 2016, on all of its community development investments, community development infrastructure investments, and green investments, as defined, in California. Existing law defines a community development investment as certain projects, developments, or activities that, among other things, benefit low- or moderate-income individuals or families. Existing law defines community development infrastructure as California public debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- or moderate-income communities consistent with the types of projects, developments, or activities specified as community development investments. Existing law defines a green investment, among other things, as specified projects offering energy efficiency improvements and renewable energy generation. Existing law requires the insurer to list investments that are high-impact, which is an investment that is innovative, responsive to community needs, not routinely provided by an insurer, or has a high degree of positive impact on the economic welfare of low- or moderate-income individuals, families, or communities in urban or rural areas of California.
This bill would instead define a community development investment as certain projects, developments, or activities that, among other things, benefit low- to moderate-income individuals or families. The bill would include investments into reservation-based communities and investments into rural areas, as defined, in community development investments. The bill would instead define community development infrastructure as all California debt where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income communities. This bill would include water and waste management and sustainable agriculture projects in the definition of a green investment. The bill would instead define a high-impact investment as an investment that provides at least 50% social or environmental benefit to low- to moderate-income individuals, families or communities in the state. The bill would also define diverse fund managers as investment management companies that are at least 51% owned by women, veterans, or minorities, or a combination of persons in those groups.
(2)Existing law authorizes the commissioner, until January 1, 2020, to establish and appoint a California Organized Investment Network (COIN) Advisory Board, as specified.
This bill would extend the commissioners authorization to establish and appoint the advisory board until January 1, 2027.
(3)Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made into a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer.
This bill would extend the provisions relating to the authorization of the credit and certification by the California Organized Investment Network until January 1, 2027. The bill would require priority for the tax credit to be given to insurance company investors. The bill would delete the provision described above relating to a reduction of a qualified investment before the end of the 60th month.
It is the intent of the Legislature that, upon fulfillment of the requirements of Section 926.2 of the Insurance Code by the Department of Insurance related to the California Organized Investment Network program, there shall be future reporting requirements for insurers doing business in California to report to the department through the Community Investment Survey Data Call on community development investments, community development infrastructure investments, green investments, and investments with diverse investment managers.
SEC. 2.Section 926.1 of the Insurance Code is amended to read:926.1.As used in this article, the following terms shall have the following meanings:
(a)Area median income (AMI) means either of the following:
(1)The median family income for the Metropolitan Statistical Area (MSA), if a person or geography is located in an MSA, or for the metropolitan division, if a person or geography is located in an MSA that has been subdivided into metropolitan divisions.
(2)The statewide nonmetropolitan median family income, if a person or geography is located outside an MSA.
(b)Community development investment means an investment where all or a portion of the investment has as its primary purpose community development for, or that directly benefits, California low- to moderate-income individuals, families, or communities. Community development investment includes, but is not limited to, investments in California in the following:
(1)Affordable housing, including multifamily rental and ownership housing, for low- to moderate-income individuals or families.
(2)Community facilities or community services providers (including providers of education, health, or social services) directly benefiting low- to moderate-income individuals, families, or communities.
(3)Economic development that demonstrates benefits, including, but not limited to, job creation, retention, or improvement, or provision of needed capital, to low- to moderate-income individuals, families, or communities, including urban or rural communities, or businesses or nonprofit community service organizations that serve these communities.
(4)Activities that revitalize or stabilize low- to moderate-income communities.
(5)Investments in or through California Organized Investment Network (COIN)-certified community development financial institutions (CDFIs) and investments made pursuant to the requirements of federal, state, or local community development investment programs or community development investment tax incentive programs, if these investments directly benefit low- to moderate-income individuals, families, and communities and are consistent with this article.
(6)Community development infrastructure investments.
(7)Investments in a commercial property or properties located in low- to moderate-income geographical areas that are consistent with this article.
(8)Investments in reservation-based communities. Reservation-based means an area of land managed by a Native American tribe under the jurisdiction of the federal Bureau of Indian Affairs, provided that the tribe is named on the most current list of Indian Entities Recognized and Eligible to Receive Services from the Bureau of Indian Affairs, or successor document, as published in the Federal Register by the Bureau of Indian Affairs.
(9)Investments in rural areas. Rural area means any open country or any place, town, village, or city which by itself and taken together with any other places, towns, villages, or cities that it is part of, or associated with, has either a population not exceeding 10,000 persons or has a population not exceeding 20,000 persons and is contained within a nonmetropolitan area. Rural area also means any open country, place, town, village, or city located within a Standard Metropolitan Statistical Area if the population of that area does not exceed 20,000 persons and that area is not part of, or associated with, an urban area and is rural in character.
(c)Community development infrastructure means California public debt (including all debt issued by the State of California or a California state or local government agency) where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income communities and is consistent with subdivision (b).
(d)Diverse investment managers means investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or a combination of persons in those groups.
(e)Geography means a census tract delineated by the United States Bureau of the Census in the most recent decennial census.
(f)Green investments means investments that emphasize renewable energy projects, economic development, and affordable housing focused on infill sites so as to reduce the degree of automobile dependency and promote the use and reuse of existing urbanized lands supplied with infrastructure for the purpose of accommodating new growth and jobs. Green investments also means investments that can help communities grow through new capital investment in the maintenance and rehabilitation of existing infrastructure so that the reuse and reinvention of city centers and existing transportation corridors and community space, including projects offering energy efficiency improvements and renewable energy generation, including, but not limited to, solar and wind power, water and waste management, sustainable agriculture, mixed-use development, affordable housing opportunities, multimodal transportation systems, and transit-oriented development, can advance economic development, jobs, and housing.
(g)High-impact investments means investments that are innovative, responsive to community needs, not routinely provided by insurers, and provide at least 50 percent social or environmental benefit to low- to moderate-income individuals, families, or communities in California.
(h)Insurer means an admitted insurer as defined in Section 24, including the State Compensation Insurance Fund, or a domestic fraternal benefit society as defined in Section 10990.
(i)Investment means a lawful equity or debt investment, or loan, or deposit obligation, or other investment or investment transaction allowed by the Insurance Code.
(j)Low-income means an individual income that is less than 50 percent of the AMI, or a median family income that is less than 50 percent of the AMI in the case of a geographical area.
(k)MSA means a metropolitan statistical area as defined by the Director of the Office of Management and Budget.
(l)Moderate-income means an individual income that is at least 50 percent but less than 80 percent of the AMI, or a median family income that is at least 50 percent but less than 80 percent of the AMI in the case of a geographical area.
(m)Nonmetropolitan area means any area that is not located in an MSA.
SEC. 3.Section 12209 of the Revenue and Taxation Code is amended to read:12209.(a)For each year beginning on or after January 1, 1999, and before January 1, 2018, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)For purposes of determining any tax that may be imposed under Section 685 of the Insurance Code on a taxpayer not organized under the laws of this state, the amount of the credit allowed by subdivision (a) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.
(c)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment as defined in paragraph (1) of subdivision (h).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.57, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(d)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the State Board of Equalization, in the form and manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayers California company identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2018, but not after that date.
(f)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(g)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (h). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (c), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the State Board of Equalization, in the form or manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective National Association of Insurance Commissioners company number and employers tax identification number, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(h)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(i)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 28 of Article XIII of the California Constitution, for the year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(j)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four years, or until the credit has been exhausted, whichever occurs first.
(k)The State Board of Equalization shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(l)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 17053.57, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(m)This section shall remain in effect only until December 1, 2018, and as of that date is repealed.
SEC. 4.Section 17053.57 of the Revenue and Taxation Code is amended to read:17053.57.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2018, there shall be allowed as a credit against the amount of net tax, as defined in Section 17039, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers identification number, or in the case of a partnership, the taxpayer identification numbers of all the partners for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any network or its successor shall limit all public disclosure of that information to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the Department of Insurance, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2018, but not after that date.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from a community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the net tax, as defined in Section 17039, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(i)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 for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2018, and as of that date is repealed.
SEC. 5.Section 23657 of the Revenue and Taxation Code is amended to read:23657.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2018, there shall be allowed as a credit against the amount of tax, as defined in Section 23036, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 17053.57 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes, or in the case of an S corporation, the taxpayer identification numbers of all the shareholders for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2018, but not after that date.
(e)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 23036, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(i)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 17053.57, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2018, and as of that date is repealed.
It is the intent of the Legislature that, upon fulfillment of the requirements of Section 926.2 of the Insurance Code by the Department of Insurance related to the California Organized Investment Network program, there shall be future reporting requirements for insurers doing business in California to report to the department through the Community Investment Survey Data Call on community development investments, community development infrastructure investments, green investments, and investments with diverse investment managers.
SEC. 2.Section 926.1 of the Insurance Code is amended to read:926.1.As used in this article, the following terms shall have the following meanings:
(a)Area median income (AMI) means either of the following:
(1)The median family income for the Metropolitan Statistical Area (MSA), if a person or geography is located in an MSA, or for the metropolitan division, if a person or geography is located in an MSA that has been subdivided into metropolitan divisions.
(2)The statewide nonmetropolitan median family income, if a person or geography is located outside an MSA.
(b)Community development investment means an investment where all or a portion of the investment has as its primary purpose community development for, or that directly benefits, California low- to moderate-income individuals, families, or communities. Community development investment includes, but is not limited to, investments in California in the following:
(1)Affordable housing, including multifamily rental and ownership housing, for low- to moderate-income individuals or families.
(2)Community facilities or community services providers (including providers of education, health, or social services) directly benefiting low- to moderate-income individuals, families, or communities.
(3)Economic development that demonstrates benefits, including, but not limited to, job creation, retention, or improvement, or provision of needed capital, to low- to moderate-income individuals, families, or communities, including urban or rural communities, or businesses or nonprofit community service organizations that serve these communities.
(4)Activities that revitalize or stabilize low- to moderate-income communities.
(5)Investments in or through California Organized Investment Network (COIN)-certified community development financial institutions (CDFIs) and investments made pursuant to the requirements of federal, state, or local community development investment programs or community development investment tax incentive programs, if these investments directly benefit low- to moderate-income individuals, families, and communities and are consistent with this article.
(6)Community development infrastructure investments.
(7)Investments in a commercial property or properties located in low- to moderate-income geographical areas that are consistent with this article.
(8)Investments in reservation-based communities. Reservation-based means an area of land managed by a Native American tribe under the jurisdiction of the federal Bureau of Indian Affairs, provided that the tribe is named on the most current list of Indian Entities Recognized and Eligible to Receive Services from the Bureau of Indian Affairs, or successor document, as published in the Federal Register by the Bureau of Indian Affairs.
(9)Investments in rural areas. Rural area means any open country or any place, town, village, or city which by itself and taken together with any other places, towns, villages, or cities that it is part of, or associated with, has either a population not exceeding 10,000 persons or has a population not exceeding 20,000 persons and is contained within a nonmetropolitan area. Rural area also means any open country, place, town, village, or city located within a Standard Metropolitan Statistical Area if the population of that area does not exceed 20,000 persons and that area is not part of, or associated with, an urban area and is rural in character.
(c)Community development infrastructure means California public debt (including all debt issued by the State of California or a California state or local government agency) where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income communities and is consistent with subdivision (b).
(d)Diverse investment managers means investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or a combination of persons in those groups.
(e)Geography means a census tract delineated by the United States Bureau of the Census in the most recent decennial census.
(f)Green investments means investments that emphasize renewable energy projects, economic development, and affordable housing focused on infill sites so as to reduce the degree of automobile dependency and promote the use and reuse of existing urbanized lands supplied with infrastructure for the purpose of accommodating new growth and jobs. Green investments also means investments that can help communities grow through new capital investment in the maintenance and rehabilitation of existing infrastructure so that the reuse and reinvention of city centers and existing transportation corridors and community space, including projects offering energy efficiency improvements and renewable energy generation, including, but not limited to, solar and wind power, water and waste management, sustainable agriculture, mixed-use development, affordable housing opportunities, multimodal transportation systems, and transit-oriented development, can advance economic development, jobs, and housing.
(g)High-impact investments means investments that are innovative, responsive to community needs, not routinely provided by insurers, and provide at least 50 percent social or environmental benefit to low- to moderate-income individuals, families, or communities in California.
(h)Insurer means an admitted insurer as defined in Section 24, including the State Compensation Insurance Fund, or a domestic fraternal benefit society as defined in Section 10990.
(i)Investment means a lawful equity or debt investment, or loan, or deposit obligation, or other investment or investment transaction allowed by the Insurance Code.
(j)Low-income means an individual income that is less than 50 percent of the AMI, or a median family income that is less than 50 percent of the AMI in the case of a geographical area.
(k)MSA means a metropolitan statistical area as defined by the Director of the Office of Management and Budget.
(l)Moderate-income means an individual income that is at least 50 percent but less than 80 percent of the AMI, or a median family income that is at least 50 percent but less than 80 percent of the AMI in the case of a geographical area.
(m)Nonmetropolitan area means any area that is not located in an MSA.
SEC. 3.Section 12939.2 of the Insurance Code is amended to read:12939.2.(a)The commissioner may establish and appoint a California Organized Investment Network Advisory Board.
(b)For purposes of this section, all of the following shall apply:
(1)Commissioner means the Insurance Commissioner of this state.
(2)Board means the California Organized Investment Network Advisory Board.
(3)Licensed attorney means an attorney who resides in this state who has successfully passed the California bar examination and has been admitted to practice in this state or has otherwise been licensed to practice law in this state by the State Bar of California.
(c)The board shall include the commissioner, or his or her designee, three executives in the insurance investment industry, and one volunteer from each of the following categories:
(1)A licensed attorney practicing insurance law.
(2)A member of the public, appointed by the Speaker of the Assembly.
(3)A member of the public, appointed by the Senate Committee on Rules.
(4)A member of a consumer advocacy group.
(5)An affordable housing practitioner.
(6)A local economic development practitioner.
(7)A member of a financial institution or a community development financial institution.
(8)A representative with experience seeking investments for low- to moderate-income or rural communities.
(d)The board shall elect, from among its members, a chair.
(e)The term of each member shall be for two years.
(f)The board shall have all of the following powers and duties:
(1)To advise the California Organized Investment Network, or any successor thereof, on the best methods to increase the level of insurance industry capital in safe and sound investments while providing fair returns to investors and social benefits to underserved communities.
(2)To meet a minimum of three or more times per year, or as deemed necessary by the commissioner.
(3)To facilitate contacts among executives at insurance companies, community-based organizations, and community development financial institutions.
(4)To recommend programmatic guidelines, but not specific allocations of the tax credit amount, to the California Organized Investment Network program.
(g)The members of the board shall not receive compensation from the state for their services under this section but, when called to attend a meeting of the board, may be reimbursed for their actual and necessary expenses incurred in connection with the meeting.
(h)This section shall remain in effect only until January 1, 2022, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2022, deletes or extends that date.
SEC. 4.SEC. 3.Section 12209 of the Revenue and Taxation Code is amended to read:12209.(a)For each year beginning on or after January 1, 1999, and before January 1, 2022, 2018, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)For purposes of determining any tax that may be imposed under Section 685 of the Insurance Code on a taxpayer not organized under the laws of this state, the amount of the credit allowed by subdivision (a) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.
(c)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment as defined in paragraph (1) of subdivision (h).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.57, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(d)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the State Board of Equalization, in the form and manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayers California company identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2022, 2018, but not after that date.
(f)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(g)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (h). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (c), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the State Board of Equalization, in the form or manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective National Association of Insurance Commissioners company number and employers tax identification number, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(h)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(i)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 28 of Article XIII of the California Constitution, for the year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(j)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four years, or until the credit has been exhausted, whichever occurs first.
(k)The State Board of Equalization shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(l)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 17053.57, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(m)This section shall remain in effect only until December 1, 2022, 2018, and as of that date is repealed.
SEC. 5.SEC. 4.Section 17053.57 of the Revenue and Taxation Code is amended to read:17053.57.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2022, 2018, there shall be allowed as a credit against the amount of net tax, as defined in Section 17039, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers identification number, or in the case of a partnership, the taxpayer identification numbers of all the partners for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any network or its successor shall limit all public disclosure of that information to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the Department of Insurance, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2022, 2018, but not after that date.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from a community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the net tax, as defined in Section 17039, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(i)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 for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2022, 2018, and as of that date is repealed.
SEC. 6.SEC. 5.Section 23657 of the Revenue and Taxation Code is amended to read:23657.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2022, 2018, there shall be allowed as a credit against the amount of tax, as defined in Section 23036, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 17053.57 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes, or in the case of an S corporation, the taxpayer identification numbers of all the shareholders for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2022, 2018, but not after that date.
(e)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 23036, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(i)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 17053.57, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1 2022, 1, 2018, and as of that date is repealed.
It is the intent of the Legislature that, upon fulfillment of the requirements of Section 926.2 of the Insurance Code by the Department of Insurance related to the California Organized Investment Network program, there shall be future reporting requirements for insurers doing business in California to report to the department through the Community Investment Survey Data Call on community development investments, community development infrastructure investments, green investments, and investments with diverse investment managers.
SECTION 1.SEC. 2.Section 926.1 of the Insurance Code is amended to read:926.1.As used in this article, the following terms shall have the following meanings:
(a)Area median income (AMI) means either of the following:
(1)The median family income for the Metropolitan Statistical Area (MSA), if a person or geography is located in an MSA, or for the metropolitan division, if a person or geography is located in an MSA that has been subdivided into metropolitan divisions.
(2)The statewide nonmetropolitan median family income, if a person or geography is located outside an MSA.
(b)Community development investment means an investment where all or a portion of the investment has as its primary purpose community development for, or that directly benefits, California low- to moderate-income individuals, families, or communities. Community development investment includes, but is not limited to, investments in California in the following:
(1)Affordable housing, including multifamily rental and ownership housing, for low- to moderate-income individuals or families.
(2)Community facilities or community services providers (including providers of education, health, or social services) directly benefiting low- to moderate-income individuals, families, or communities.
(3)Economic development that demonstrates benefits, including, but not limited to, job creation, retention, or improvement, or provision of needed capital, to low- to moderate-income individuals, families, or communities, including urban or rural communities, or businesses or nonprofit community service organizations that serve these communities.
(4)Activities that revitalize or stabilize low- to moderate-income communities.
(5)Investments in or through California Organized Investment Network (COIN)-certified community development financial institutions (CDFIs) and investments made pursuant to the requirements of federal, state, or local community development investment programs or community development investment tax incentive programs, if these investments directly benefit low- to moderate-income individuals, families, and communities and are consistent with this article.
(6)Community development infrastructure investments.
(7)Investments in a commercial property or properties located in low- to moderate-income geographical areas that are consistent with this article.
(8)Investments into in reservation-based communities. Reservation-based means an area of land managed by a Native American tribe under the jurisdiction of the federal Bureau of Indian Affairs, provided that the tribe is named on the most current list of Indian Entities Recognized and Eligible to Receive Services from the Bureau of Indian Affairs, or successor document, as published in the Federal Register by the Bureau of Indian Affairs.
(9)Investments into in rural areas. Rural area means any open country or any place, town, village, or city which by itself and taken together with any other places, towns, villages, or cities that it is part of, or associated with, has either a population not exceeding 10,000 persons or has a population not exceeding 20,000 persons and is contained within a nonmetropolitan area. Rural area also means any open country, place, town, village, or city located within a Standard Metropolitan Statistical Area if the population of that area does not exceed 20,000 persons and that area is not part of, or associated with, an urban area and is rural in character.
(c)Community development infrastructure means California public debt (including all debt issued by the State of California or a California state or local government agency) where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- to moderate-income communities and is consistent with subdivision (b).
(d)Diverse fund managers means investment management companies (including corporations, partnerships, LLCs, trust, and other special purpose vehicles) that are at least 51 percent owned by women, veterans, minorities, or a combination of persons in those groups.
(d)Diverse investment managers means investment management organizations, including, but not limited to, corporations, groups and persons within corporations, partnerships, LLCs, and other special purpose vehicles that are either located in, or actively make and hold investments in, California and whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or a combination of persons in those groups.
(e)Geography means a census tract delineated by the United States Bureau of the Census in the most recent decennial census.
(f)Green investments means investments that emphasize renewable energy projects, economic development, and affordable housing focused on infill sites so as to reduce the degree of automobile dependency and promote the use and reuse of existing urbanized lands supplied with infrastructure for the purpose of accommodating new growth and jobs. Green investments also means investments that can help communities grow through new capital investment in the maintenance and rehabilitation of existing infrastructure so that the reuse and reinvention of city centers and existing transportation corridors and community space, including projects offering energy efficiency improvements and renewable energy generation, including, but not limited to, solar and wind power, water and waste management, sustainable agriculture, mixed-use development, affordable housing opportunities, multimodal transportation systems, and transit-oriented development, can advance economic development, jobs, and housing.
(g)High-impact investments means investments that are innovative, responsive to community needs, not routinely provided by insurers, and provide at least 50 percent social or environmental benefit to low- to moderate-income individuals, families, or communities in California.
(h)Insurer means an admitted insurer as defined in Section 24, including the State Compensation Insurance Fund, or a domestic fraternal benefit society as defined in Section 10990.
(i)Investment means a lawful equity or debt investment, or loan, or deposit obligation, or other investment or investment transaction allowed by the Insurance Code.
(j)Low-income means an individual income that is less than 50 percent of the AMI, or a median family income that is less than 50 percent of the AMI in the case of a geographical area.
(k)MSA means a metropolitan statistical area as defined by the Director of the Office of Management and Budget.
(l)Moderate-income means an individual income that is at least 50 percent but less than 80 percent of the AMI, or a median family income that is at least 50 percent but less than 80 percent of the AMI in the case of a geographical area.
(m)Nonmetropolitan area means any area that is not located in an MSA.
SEC. 2.SEC. 3.Section 12939.2 of the Insurance Code is amended to read:12939.2.(a)The commissioner may establish and appoint a California Organized Investment Network Advisory Board.
(b)For purposes of this section, all of the following shall apply:
(1)Commissioner means the Insurance Commissioner of this state.
(2)Board means the California Organized Investment Network Advisory Board.
(3)Licensed attorney means an attorney who resides in this state who has successfully passed the California bar examination and has been admitted to practice in this state or has otherwise been licensed to practice law in this state by the State Bar of California.
(c)The board shall include the commissioner, or his or her designee, three executives in the insurance investment industry, and one volunteer from each of the following categories:
(1)A licensed attorney practicing insurance law.
(2)A member of the public, appointed by the Speaker of the Assembly.
(3)A member of the public, appointed by the Senate Committee on Rules.
(4)A member of a consumer advocacy group.
(5)An affordable housing practitioner.
(6)A local economic development practitioner.
(7)A member of a financial institution or a community development financial institution.
(8)A representative with experience seeking investments for low- to moderate-income or rural communities.
(d)The board shall elect, from among its members, a chair.
(e)The term of each member shall be for two years.
(f)The board shall have all of the following powers and duties:
(1)To advise the California Organized Investment Network, or any successor thereof, on the best methods to increase the level of insurance industry capital in safe and sound investments while providing fair returns to investors and social benefits to underserved communities.
(2)To meet a minimum of three or more times per year, or as deemed necessary by the commissioner.
(3)To facilitate contacts among executives at insurance companies, community-based organizations, and community development financial institutions.
(4)To recommend programmatic guidelines, but not specific allocations of the tax credit amount, to the California Organized Investment Network program.
(g)The members of the board shall not receive compensation from the state for their services under this section but, when called to attend a meeting of the board, may be reimbursed for their actual and necessary expenses incurred in connection with the meeting.
(h)This section shall remain in effect only until January 1, 2027, 2022, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2027, 2022, deletes or extends that date.
SEC. 3.SEC. 4.Section 12209 of the Revenue and Taxation Code is amended to read:12209.(a)For each year beginning on or after January 1, 1999, and before January 1, 2027, 2022, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)For purposes of determining any tax that may be imposed under Section 685 of the Insurance Code on a taxpayer not organized under the laws of this state, the amount of the credit allowed by subdivision (a) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.
(c)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment as defined in paragraph (1) of subdivision (h).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.57, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(d)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the State Board of Equalization, in the form and manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayers California company identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2027, 2022, but not after that date.
(f)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(g)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (h). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (c), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the State Board of Equalization, in the form or manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective National Association of Insurance Commissioners company number and employers tax identification number, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(h)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(i)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 28 of Article XIII of the California Constitution, for the year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(j)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four years, or until the credit has been exhausted, whichever occurs first.
(k)The State Board of Equalization shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(l)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 17053.57, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(m)This section shall remain in effect only until December 1, 2027, 2022, and as of that date is repealed.
SEC. 4.SEC. 5.Section 17053.57 of the Revenue and Taxation Code is amended to read:17053.57.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2027, 2022, there shall be allowed as a credit against the amount of net tax, as defined in Section 17039, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers identification number, or in the case of a partnership, the taxpayer identification numbers of all the partners for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any network or its successor shall limit all public disclosure of that information to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the Department of Insurance, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2027, 2022, but not after that date.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from a community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the net tax, as defined in Section 17039, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(i)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 for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2027, 2022, and as of that date is repealed.
SEC. 5.SEC. 6.Section 23657 of the Revenue and Taxation Code is amended to read:23657.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2027, 2022, there shall be allowed as a credit against the amount of tax, as defined in Section 23036, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 17053.57 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes, or in the case of an S corporation, the taxpayer identification numbers of all the shareholders for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2027, 2022, but not after that date.
(e)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)If a qualified investment is reduced or withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 23036, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(i)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 17053.57, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2027, 1 2022, and as of that date is repealed.
As used in this article, the following terms shall have the following meanings:
(a)Area median income (AMI) means either of the following:
(1)The median family income for the Metropolitan Statistical Area (MSA), if a person or geography is located in an MSA, or for the metropolitan division, if a person or geography is located in an MSA that has been subdivided into metropolitan divisions.
(2)The statewide nonmetropolitan median family income, if a person or geography is located outside an MSA.
(b)Community development investment means an investment where all or a portion of the investment has as its primary purpose community development for, or that directly benefits, California low- or to moderate-income individuals, families, or communities. Community development investment includes, but is not limited to, investments in California in the following:
(1)Affordable housing, including multifamily rental and ownership housing, for low- or to moderate-income individuals or families.
(2)Community facilities or community services providers (including providers of education, health, or social services) directly benefiting low- or to moderate-income individuals, families, or communities.
(3)Economic development that demonstrates benefits, including, but not limited to, job creation, retention, or improvement, or provision of needed capital, to low- or to moderate-income individuals, families, or communities, including urban or rural communities, or businesses or nonprofit community service organizations that serve these communities.
(4)Activities that revitalize or stabilize low- or to moderate-income communities.
(5)Investments in or through California Organized Investment Network (COIN)-certified community development financial institutions (CDFIs) and investments made pursuant to the requirements of federal, state, or local community development investment programs or community development investment tax incentive programs, including green investments, if these investments directly benefit low- or to moderate-income individuals, families, and communities and are consistent with this article.
(6)Community development infrastructure investments.
(7)Investments in a commercial property or properties located in low- or to moderate-income geographical areas and that are consistent with this article.
(8)Investments into reservation-based communities. Reservation-based means an area of land managed by a Native American tribe under the jurisdiction of the federal Bureau of Indian Affairs, provided that the tribe is named on the most current list of Indian Entities Recognized and Eligible to Receive Services from the Bureau of Indian Affairs, or successor document, as published in the Federal Register by the Bureau of Indian Affairs.
(9)Investments into rural areas. Rural area means any open country or any place, town, village, or city which by itself and taken together with any other places, towns, villages, or cities that it is part of, or associated with, has either a population not exceeding 10,000 persons or has a population not exceeding 20,000 persons and is contained within a nonmetropolitan area. Rural area also means any open country, place, town, village, or city located within a Standard Metropolitan Statistical Area if the population of that area does not exceed 20,000 persons and that area is not part of, or associated with, urban area and is rural in character.
(c)Community development infrastructure means California public debt (including all debt issued by the State of California or a California state or local government agency) where all or a portion of the debt has as its primary purpose community development for, or that directly benefits, low- or to moderate-income communities and is consistent with subdivision (b).
(d)Diverse fund managers means investment management companies (including corporations, partnerships, LLCs, trust, and other special purpose vehicles) that are at least 51 percent owned by women, veterans, minorities, or a combination of persons in those groups.
(d)
(e)Geography means a census tract delineated by the United States Bureau of the Census in the most recent decennial census.
(e)
(f)Green investments means investments that emphasize renewable energy projects, economic development, and affordable housing focused on infill sites so as to reduce the degree of automobile dependency and promote the use and reuse of existing urbanized lands supplied with infrastructure for the purpose of accommodating new growth and jobs. Green investments also means investments that can help communities grow through new capital investment in the maintenance and rehabilitation of existing infrastructure so that the reuse and reinvention of city centers and existing transportation corridors and community space, including projects offering energy efficiency improvements and renewable energy generation, including, but not limited to, solar and wind power, water and waste management, sustainable agriculture, mixed-use development, affordable housing opportunities, multimodal transportation systems, and transit-oriented development, can advance economic development, jobs, and housing.
(f)
(g)High-impact investments means investments that are innovative, responsive to community needs, not routinely provided by insurers, or have a high degree of positive impact on the economic welfare of low- or provide at least 50 percent social or environmental benefit to low- to moderate-income individuals, families, or communities in urban or rural areas of California.
(g)
(h)Insurer means an admitted insurer as defined in Section 24, including the State Compensation Insurance Fund, or a domestic fraternal benefit society as defined in Section 10990.
(h)
(i)Investment means a lawful equity or debt investment, or loan, or deposit obligation, or other investment or investment transaction allowed by the Insurance Code.
(i)
(j)Low-income means an individual income that is less than 50 percent of the AMI, or a median family income that is less than 50 percent of the AMI in the case of a geographical area.
(j)
(k)MSA means a metropolitan statistical area as defined by the Director of the Office of Management and Budget.
(k)
(l)Moderate-income means an individual income that is at least 50 percent but less than 80 percent of the AMI, or a median family income that is at least 50 percent but less than 80 percent of the AMI in the case of a geographical area.
(l)
(m)Nonmetropolitan area means any area that is not located in an MSA.
SEC. 2.Section 12939.2 of the Insurance Code is amended to read:12939.2.(a)The commissioner may establish and appoint a California Organized Investment Network Advisory Board.
(b)For purposes of this section, all of the following shall apply:
(1)Commissioner means the Insurance Commissioner of this state.
(2)Board means the California Organized Investment Network Advisory Board.
(3)Licensed attorney means an attorney who resides in this state who has successfully passed the California bar examination and has been admitted to practice in this state or has otherwise been licensed to practice law in this state by the State Bar of California.
(c)The board shall include the commissioner, or his or her designee, three executives in the insurance investment industry, and one volunteer from each of the following categories:
(1)A licensed attorney practicing insurance law.
(2)A member of the public, appointed by the Speaker of the Assembly.
(3)A member of the public, appointed by the Senate Committee on Rules.
(4)A member of a consumer advocacy group.
(5)An affordable housing practitioner.
(6)A local economic development practitioner.
(7)A member of a financial institution or a community development financial institution.
(8)A representative with experience seeking investments for low- to moderate-income or rural communities.
(d)The board shall elect, from among its members, a chair.
(e)The term of each member shall be for two years.
(f)The board shall have all of the following powers and duties:
(1)To advise the California Organized Investment Network, or any successor thereof, on the best methods to increase the level of insurance industry capital in safe and sound investments while providing fair returns to investors and social benefits to underserved communities.
(2)To meet a minimum of three or more times per year, or as deemed necessary by the commissioner.
(3)To facilitate contacts among executives at insurance companies, community-based organizations, and community development financial institutions.
(4)To recommend programmatic guidelines, but not specific allocations of the tax credit amount, to the California Organized Investment Network program.
(g)The members of the board shall not receive compensation from the state for their services under this section but, when called to attend a meeting of the board, may be reimbursed for their actual and necessary expenses incurred in connection with the meeting.
(h)This section shall remain in effect only until January 1, 2020, 2027, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2020, 2027, deletes or extends that date.
SEC. 3.Section 12209 of the Revenue and Taxation Code is amended to read:12209.(a)For each year beginning on or after January 1, 1999, and before January 1, 2017, 2027, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)For purposes of determining any tax that may be imposed under Section 685 of the Insurance Code on a taxpayer not organized under the laws of this state, the amount of the credit allowed by subdivision (a) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.
(c)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment as defined in paragraph (1) of subdivision (h).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.57, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(d)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the State Board of Equalization, in the form and manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayers California company identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, 2027, but not after that date.
(f)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(g)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (h). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (c), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the State Board of Equalization, in the form or manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective National Association of Insurance Commissioners company number and employers tax identification number, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(h)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(i)(1)If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 28 of Article XIII of the California Constitution, for the year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(2)If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the tax, as defined in Section 28 of Article XIII of the California Constitution, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the year.
(j)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four years, or until the credit has been exhausted, whichever occurs first.
(k)The State Board of Equalization shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(l)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 17053.57, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(m)This section shall remain in effect only until December 1, 2017, 2027, and as of that date is repealed.
SEC. 4.Section 17053.57 of the Revenue and Taxation Code is amended to read:17053.57.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2017, 2027, there shall be allowed as a credit against the amount of net tax, as defined in Section 17039, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers identification number, or in the case of a partnership, the taxpayer identification numbers of all the partners for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any network or its successor shall limit all public disclosure of that information to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the Department of Insurance, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, 2027, but not after that date.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from a community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)(1)If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the net tax, as defined in Section 17039, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(2)If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the net tax, as defined in Section 17039, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the taxable year.
(i)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 for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2017, 2027, and as of that date is repealed.
SEC. 5.Section 23657 of the Revenue and Taxation Code is amended to read:23657.(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2017, 2027, there shall be allowed as a credit against the amount of tax, as defined in Section 23036, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).
(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 17053.57 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(5)Priority shall be given to insurance company investors over all other tax credit investors.
(c)The community development financial institution shall do all of the following:
(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B)Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i)All of the programs, projects, and services that would be funded.
(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i)Name of the taxpayer.
(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii)Phone number of the taxpayer.
(iv)Email address of the taxpayer.
(v)The taxpayers California company identification number for tax administration purposes, or in the case of an S corporation, the taxpayer identification numbers of all the shareholders for tax administration purposes.
(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(d)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, 2027, but not after that date.
(e)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(g)For purposes of this section:
(1)Qualified investment means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2)Community development financial institution means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(h)(1)If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the tax, as defined in Section 23036, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(2)If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the tax, as defined in Section 23036, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the taxable year.
(i)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax for the next four taxable years, or until the credit has been exhausted, whichever occurs first.
(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(k)On or before June 30, 2016, the Legislative Analysts Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 17053.57, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(l)This section shall remain in effect only until December 1, 2017, 2027, and as of that date is repealed.
|
Date
|
Status
|
|---|---|
| Aug 25, 2016 | Read third time. Passed. Ordered to the Assembly. |
| Jun 9, 2016 | Referred to Coms. on INS. and GOV. & F. |
| Jun 23, 2016 | From committee: Do pass and re-refer to Com. on GOV. & F. with recommendation: To Consent Calendar. (Ayes 8. Noes 0.) (June 22). Re-referred to Com. on GOV. & F. |
| Jun 29, 2016 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (June 29). Re-referred to Com. on APPR. |
| Aug 1, 2016 | In committee: Referred to APPR. suspense file. |
| Aug 11, 2016 | From committee: Do pass. (Ayes 7. Noes 0.) (August 11). |
| Aug 15, 2016 | Read second time. Ordered to third reading. |
| Aug 19, 2016 | Read third time and amended. Ordered to second reading. |
| Aug 22, 2016 | Read second time. Ordered to third reading. |
| Jun 1, 2016 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Aug 25, 2016 | Read third time. Passed. Ordered to the Assembly. (Ayes 39. Noes 0. Page 5416.). |
| Aug 30, 2016 | Assembly Rule 63 suspended. |
| Aug 30, 2016 | Assembly Rule 63 suspended. (Page 6474.) |
| Aug 30, 2016 | In Assembly. Concurrence in Senate amendments pending. |
| Aug 30, 2016 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 30, 2016 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 80. Noes 0. Page 6490.). |
| Sep 9, 2016 | Enrolled and presented to the Governor at 2:30 p.m. |
| Sep 13, 2016 | Vetoed by Governor. |
| Apr 21, 2016 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 13. Noes 0.) (April 20). |
| Feb 21, 2016 | From printer. May be heard in committee March 22. |
| Feb 22, 2016 | Read first time. |
| Mar 10, 2016 | Referred to Coms. on INS. and REV. & TAX. |
| Mar 28, 2016 | (pending re-referral to Com. on INS.) |
| Mar 28, 2016 | Assembly Rule 56 suspended. |
| Mar 28, 2016 | Re-referred to Coms. on REV. & TAX. and INS. pursuant to Assembly Rule 96. |
| Apr 18, 2016 | In committee: Set, first hearing. Referred to REV. & TAX. suspense file. |
| Apr 19, 2016 | From committee: Do pass and re-refer to Com. on INS. (Ayes 9. Noes 0.) (April 18). Re-referred to Com. on INS. |
| Feb 19, 2016 | Introduced. To print. |
| Apr 25, 2016 | Read second time and amended. |
| Apr 26, 2016 | Re-referred to Com. on APPR. |
| May 4, 2016 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| May 27, 2016 | From committee: Do pass. (Ayes 20. Noes 0.) (May 27). |
| May 27, 2016 | Read second time. Ordered to third reading. |
| May 31, 2016 | Read third time. Passed. Ordered to the Senate. |
| May 31, 2016 | Read third time. Passed. Ordered to the Senate. (Ayes 80. Noes 0. Page 5042.) |
| May 31, 2016 | Read third time. Passed. Ordered to the Senate. (Ayes 80. Noes 0.) |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 30, 2016 | AB 2728 ATKINS Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 25, 2016 | Assembly 3rd Reading AB2728 Atkins By Roth | Senate Floor |
Passed |
|
| Aug 11, 2016 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 1, 2016 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 29, 2016 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Governance and Finance |
Passed |
|
| Jun 22, 2016 | Do pass, but first be re-referred to the Committee on [Governance and Finance] with the recommendation: To Consent Calendar | Senate Standing Committee on Insurance |
Passed |
|
| May 31, 2016 | AB 2728 ATKINS Assembly Third Reading | Assembly Floor |
Passed |
|
| May 27, 2016 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 20, 2016 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Insurance |
Passed |
|
| Apr 18, 2016 | Do pass and be re-referred to the Committee on [Insurance] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Bankers Small Business CDC of California | ** Support | Aug 25, 2016 |
| Burbank Housing Development Corporation | ** Support | Aug 25, 2016 |
| California Apartment Association | ** Support | Aug 25, 2016 |
| California Department of Insurance | ** Support | Aug 25, 2016 |
| California LISC | ** Support | Aug 25, 2016 |
| CDC Small Business Finance | ** Support | Aug 25, 2016 |
| Century Housing | ** Support | Aug 25, 2016 |
| Clearinghouse Community Development Financial Institution | ** Support | Jun 29, 2016 |
| CSAA Insurance Group | ** Support | Aug 25, 2016 |
| Denice Wint | ** Support | Aug 25, 2016 |
| Enterprise Community Investments | ** Support | Aug 25, 2016 |
| First General Bank | ** Support | Aug 25, 2016 |
| Genesis LA Economic Growth Corporation | ** Support | Aug 25, 2016 |
| Housing Trust Silicon Valley | ** Support | Aug 25, 2016 |
| Mercy Loan Fund | ** Support | Aug 25, 2016 |
| National Association of Mutual Insurance Companies | ** Support | Aug 25, 2016 |
| Nehemiah Community Reinvestmant Fund | * Support | Jun 29, 2016 |
| Neighborhood Housing Services of the Inland Empire | ** Support | Aug 25, 2016 |
| NeighborWorks HomeOwnership Center Sacramento | ** Support | Aug 25, 2016 |
| Pacific Association Of Domestic Insurance Companies | ** Support | Aug 25, 2016 |
| Personal Insurance Federation Of California | ** Support | Aug 25, 2016 |
| Prudential Financial | ** Support | Aug 25, 2016 |
| Redwood Valley Little River Bank of Pomo Indians | ** Support | Aug 25, 2016 |
| Rural Community Assistance Corporation | ** Support | Aug 25, 2016 |
| Small Business Investor Alliance | ** Support | Aug 25, 2016 |
| United Native Housing Development Corporation | ** Support | Aug 25, 2016 |
| VEDC | ** Support | Jun 29, 2016 |
| WNC & Associates, Inc. | ** Support | Aug 25, 2016 |
GOVERNOR'S VETO
GV Bill Id:AB 2728
Author:(Atkins)
As Enrolled Ver:September 9, 2016
2/3 vote
ASSEMBLY: | 80-0 | (May 31, 2016) | SENATE: | 39-0 | (August 25, 2016) |
ASSEMBLY: | 80-0 | (August 30, 2016) |
|
Original Committee Reference: INS.
SUMMARY: Extends the sunset date on the tax credit allowed for defined community development investments until 2018, and declares Legislative intent that the authority of the Department of Insurance (DOI) to issue a data call to insurers will be extended.
The Senate amendments
- Delete a sunset extension provision that would have extended the statutory authorization for the California Organized Investment Network (COIN) Advisory Board from 2017 to 2022.
- Shorten the sunset extension for the tax credit from 2022 to 2018.
EXISTING LAW:
- Establishes a COIN Advisory Board to consult with and advise the DOI with respect to issues associated with the COIN program.
- Sunsets the Advisory Board on January 1, 2020.
- Requires any admitted insurer that writes at least $100 million in California premium to file, by July 1, 2016, data with DOI detailing its investment activity for the past three years with respect to community development investments.
- Requires the DOI, by December 31, 2016, to provide information on its Internet Web site:
- Concerning the community development investments made by insurers, specifically noting information concerning investments that are innovative, responsive to community needs, not routinely made by insurers, and that have a high impact on low and moderate income communities, and
- On the actions taken by the COIN program to analyze insurer data for purposes of identifying potential insurer investment opportunities, and on COIN's outreach and marketing efforts, and
- Identifying the amount of California public debt purchased by insurers, the amount of identified California investments by insurers, and the amount of green investments by insurers.
- Provides that the data call and information posting provisions will sunset on January 1, 2020.
FISCAL EFFECT: Annual ongoing general fund revenue loss in the range of $3.8 million from the extension of the Community Development Financial Institutions (CDFI) tax credit.
COMMENTS: The bill contains intent language that the authority for DOI to continue to conduct data calls relating to community development investments by insurers, which currently sunsets in 2017, should be extended. As noted above, a report relating to the previous data call and efforts by COIN to further the purposes of the program was due December 31, 2016. However, the DOI fast tracked the most recent data call ahead of the Legislatively-established time table, and issued the report last month. Unfortunately, stakeholders were unable to come to agreement on the role of future data calls, and the role of COIN is becoming more proactive in identifying, developing and marketing appropriate community development investments by insurers. As a result, the bill was pared back, and these issues will be before the Legislature next year.
I am returning the following seven bills without my signature:
Assembly Bill 717
Assembly Bill 724
Assembly Bill 1561
Assembly Bill 2127
Assembly Bill 2728
Senate Bill 898
Senate Bill 907
Each of these bills creates a new tax break or expands an existing tax break. In total, these bills would reduce revenues by about $300 million through 2017-18.
As I said last year, tax breaks are the same as new spending -- they both cost the General Fund money. As such, they must be considered during budget deliberations so that all spending proposals are weighed against each other at the same time. This is even more important when the state's budget remains precariously balanced.
Therefore, I cannot sign these measures.
Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086 FN: 0005051
(Without Reference to File)
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2728
Author:(Atkins)
As Amended Ver:August 19, 2016
Majority vote
ASSEMBLY: | 80-0 | (May 31, 2016) | SENATE: | 39-0 | (August 25, 2016) |
Original Committee Reference: INS.
SUMMARY: Extends the sunset date on the tax credit allowed for defined community development investments until 2018, and declares Legislative intent that the authority of the Department of Insurance to issue a data call to insurers will be extended.
The Senate amendments
- Delete a sunset extension provision that would have extended the statutory authorization for the California Organized Investment Network (COIN) Advisory Board from 2017 to 2022.
- Shorten the sunset extension for the tax credit from 2022 to 2018.
EXISTING LAW:
- Establishes a COIN Advisory Board to consult with and advise the Department of Insurance (DOI) with respect to issues associated with the COIN program.
- Sunsets the Advisory Board on January 1, 2020.
- Requires any admitted insurer that writes at least $100 million in California premium to file, by July 1, 2016, data with DOI detailing its investment activity for the past three years with respect to community development investments.
- Requires the DOI, by December 31, 2016, to provide information on its Internet Web site:
- Concerning the community development investments made by insurers, specifically noting information concerning investments that are innovative, responsive to community needs, not routinely made by insurers, and that have a high impact on low and moderate income communities, and
- On the actions taken by the COIN program to analyze insurer data for purposes of identifying potential insurer investment opportunities, and on COIN's outreach and marketing efforts, and
- Identifying the amount of California public debt purchased by insurers, the amount of identified California investments by insurers, and the amount of green investments by insurers.
- Provides that the data call and information posting provisions will sunset on January 1, 2020.
FISCAL EFFECT: Annual ongoing general fund revenue loss in the range of $3.8 million from the extension of the Community Development Financial Institutions (CDFI) tax credit.
COMMENTS: The bill contains intent language that the authority for DOI to continue to conduct data calls relating to community development investments by insurers, which currently sunsets in 2017, should be extended. As noted above, a report relating to the previous data call and efforts by COIN to further the purposes of the program, was due December 31, 2016. However, the DOI fast tracked the most recent data call ahead of the Legislatively-established time table, and issued the report last month. Unfortunately, stakeholders were unable to come to agreement on the role of future data calls, and the role of COIN is becoming more proactive in identifying, developing and marketing appropriate community development investments by insurers. As a result, the bill was pared back, and these issues will be before the Legislature next year.
Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086 FN: 0004953
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
THIRD READING
Bill No: AB 2728
:
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez, Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/29/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 80-0, 5/31/16 - See last page for vote
SOURCE: California Department of Insurance
DIGEST: This bill adds to the categories of investments that qualify under standards established for California Organized Investment Network (COIN) program and extends the sunset date of the Community Development Financial Institution (CDFI) tax credit.
Senate Floor Amendments of 8/19/16 eliminate the extension of the advisory board and move the sunset date for the tax credit to January 1, 2018.
Existing law:
- Establishes COIN within the California Department of Insurance (CDI).
- Defines "community development investments" as investments where all or part of the investment has as its primary purpose community development for, or that directly benefits, low or moderate income (LMI) individuals, families, or communities including investments in affordable housing, community service providers, certain economic developments, and activities that revitalize or stabilize LMI communities.
- Requires any insurer that writes at least $100 million in California premium to report to COIN by July 1, 2016, various categories of investments over the last three years (“data call”), including community development investments and “green investments,” as defined.
- Requires CDI to report on its Web site, by December 31, 2016, aggregate data from the data call, specific insurers that make high-impact investments, and actions taken by COIN to analyze the data in order to create and identify potential investments opportunities.
- Sunsets the data call and reporting provisions on January 1, 2020.
- Allows a tax credit against the gross premiums tax, personal income tax, and corporation tax, ending in the 2017 taxable year, of an amount equal to 20 percent of the amount of each qualified investment into a CDFI up to $50 million per year.
- Provides that COIN must certify investments that qualify for the CDFI credit.
- Requires the Legislative Analyst’s Office to submit a report to the Legislature on the effects of the CDFI tax credit by June 30, 2016.
This bill:
- Adds investments in reservation-based communities and rural area investments to the list of community development investments for purposes potential future data calls.
- Defines, for the purposes of potential future data calls, “diverse investment managers” as investment management organizations whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or combination of person in those groups.
- Revises the definitions of “high-impact” and “green” investments.
- Declares the Legislature's intent to establish future data calls once CDI complies with an existing requirement to publish specified information on its Web site.
- Extends the sunset date on the CDFI tax credit to January 1, 2018.
- Grants priority to insurance companies over all other tax credit investors.
- Provides that investment reductions of less than $50,000 trigger a clawback of the total amount of the credit.
Background
COIN was created in 1996 as a public/private partnership that includes CDI, the insurance industry, state government leaders, and community development organizations. COIN's goal is to help address unmet capital needs that support investments in economic development and affordable housing in low-income urban and rural communities throughout California. The program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. Investments are submitted, scrutinized by COIN, and reported on the CDI website. Insurers may identify investments on their own and submit them for certification or may select investments sourced or structured by COIN.
COIN also administers a “data call” that requires insurers to submit information related to qualified investments. This bill revises the categories of investments that must be disclosed and adds diverse fund managers to the reportable categories. Under existing statute, the last data call was due on July 1, 2016. This bill contains intent language to establish new data calls once the CDI complies with existing reporting requirements. It is anticipated that an additional data call will be considered next year when the Legislature is in a better position to review several reports about the program that were published after the policy committee deadline.
COIN also administers the CDFI tax credit program. Those tax credits are available to any qualified taxpayer, not just insurers. Each year, CDI may certify up to $50 million in investments each year. Investors receive a tax credit worth up to 20% of their investment in one of the CDFIs certified by COIN. Investments must be in the form of non-interest bearing deposits, loans, or equity investments, in an amount of at least $50,000, and held for at least 60 months. Investors can claim a credit against the state personal income tax, corporation tax, or insurance gross premium tax. This bill extends the tax credit to January 1, 2018.
A June report by the Legislative Analyst’s Office (LAO) evaluated the tax credit. LAO notes that, as of 2015, the tax credit has been fully utilized and that small- to medium-sized CDFIs have likely benefited the most. However, few insurance companies participate in the program. In 2015, only three insurance companies participated in the program, investing a total of $22.3 million in CDFIs (less than a third of total qualified investments). Based on information provided by COIN, CDFI investments between 2011 and 2015 could result in 1,400 jobs in low-to-moderate income areas. However, LAO expects that the total statewide net increase in employment may be significantly less, or even negative, due to opportunity costs.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
According the Senate Appropriations Committee, the bill would result in ongoing costs to the Insurance Fund of $630,000 per year starting in fiscal year 2017-18 to retain five limited term positions associated with the tax credit program that will expire on June 30, 2017. The Franchise Tax Board estimates that the tax credit extension will result in an annual revenue loss of $0.6 million in fiscal year 2016-17. Due to recent amendments, estimated costs for fiscal year 2017-18 and beyond are not available at this time. These estimates do not include the revenue impact of tax credits allowed against the insurance gross premiums tax.
California Department of Insurance (source)
3CORE
Association of California Life and Health Insurance Companies
Bankers Small Business CDC of California
Burbank Housing Development Corporation
California Apartment Association
CDC Small Business Finance
California LISC
Century Housing
CSAA Insurance Group
Denice Wint (individual)
Enterprise Community Investments
First General Bank
Genesis LA Economic Growth Corporation
Housing Trust Silicon Valley
Mercy Loan Fund
National Association of Mutual Insurance Companies
Neighborhood Housing Services of the Inland Empire
NeighborWorks HomeOwnership Center Sacramento
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Prudential Financial, Inc.
Redwood Valley Little River Bank of Pomo Indians
Roxborough, Pomerance, Nye & Adreani, LLP
Rural Community Assistance Corporation
Small Business Investor Alliance
United Native Housing Development Corporation
WNC & Associates
OPPOSITION: (Verified 8/22/16)
None received
ARGUMENTS IN SUPPORT: Many of the supporters of this bill explain that since 1997, $57 million in state tax credits have generated more than $285 million in investments and that the economic impact of this program is exponentially greater than the sum of the deposits.
ASSEMBLY FLOOR: 80-0, 5/31/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
8/24/16 11:39:17
**** END ****
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
THIRD READING
Bill No: AB 2728
:
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez, Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/29/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 80-0, 5/31/16 - See last page for vote
SOURCE: California Department of Insurance
DIGEST: This bill adds to the categories of investments that qualify under standards established for California Organized Investment Network (COIN) program and extends the sunset date of the Community Development Financial Institution (CDFI) tax credit.
Senate Floor Amendments of 8/19/16 eliminate the extension of the advisory board and move the sunset date for the tax credit to January 1, 2018.
Existing law:
- Establishes COIN within the California Department of Insurance (CDI).
- Defines "community development investments" as investments where all or part of the investment has as its primary purpose community development for, or that directly benefits, low or moderate income (LMI) individuals, families, or communities including investments in affordable housing, community service providers, certain economic developments, and activities that revitalize or stabilize LMI communities.
- Requires any insurer that writes at least $100 million in California premium to report to COIN by July 1, 2016, various categories of investments over the last three years (“data call”), including community development investments and “green investments,” as defined.
- Requires CDI to report on its Web site, by December 31, 2016, aggregate data from the data call, specific insurers that make high-impact investments, and actions taken by COIN to analyze the data in order to create and identify potential investments opportunities.
- Sunsets the data call and reporting provisions on January 1, 2020.
- Allows a tax credit against the gross premiums tax, personal income tax, and corporation tax, ending in the 2017 taxable year, of an amount equal to 20 percent of the amount of each qualified investment into a CDFI up to $50 million per year.
- Provides that COIN must certify investments that qualify for the CDFI credit.
- Requires the Legislative Analyst’s Office to submit a report to the Legislature on the effects of the CDFI tax credit by June 30, 2016.
This bill:
- Adds investments in reservation-based communities and rural area investments to the list of community development investments for purposes potential future data calls.
- Defines, for the purposes of potential future data calls, “diverse investment managers” as investment management organizations whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or combination of person in those groups.
- Revises the definitions of “high-impact” and “green” investments.
- Declares the Legislature's intent to establish future data calls once CDI complies with an existing requirement to publish specified information on its Web site.
- Extends the sunset date on the CDFI tax credit to January 1, 2018.
- Grants priority to insurance companies over all other tax credit investors.
- Provides that investment reductions of less than $50,000 trigger a clawback of the total amount of the credit.
Background
COIN was created in 1996 as a public/private partnership that includes CDI, the insurance industry, state government leaders, and community development organizations. COIN's goal is to help address unmet capital needs that support investments in economic development and affordable housing in low-income urban and rural communities throughout California. The program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. Investments are submitted, scrutinized by COIN, and reported on the CDI website. Insurers may identify investments on their own and submit them for certification or may select investments sourced or structured by COIN.
COIN also administers a “data call” that requires insurers to submit information related to qualified investments. This bill revises the categories of investments that must be disclosed and adds diverse fund managers to the reportable categories. Under existing statute, the last data call was due on July 1, 2016. This bill contains intent language to establish new data calls once the CDI complies with existing reporting requirements. It is anticipated that an additional data call will be considered next year when the Legislature is in a better position to review several reports about the program that were published after the policy committee deadline.
COIN also administers the CDFI tax credit program. Those tax credits are available to any qualified taxpayer, not just insurers. Each year, CDI may allocate up to $50 million in tax credits each year. Investors receive a tax credit worth up to 20% of their investment in one of the CDFIs certified by COIN. Investments must be in the form of non-interest bearing deposits, loans, or equity investments, in an amount of at least $50,000, and held for at least 60 months. Investors can claim a credit against the state personal income tax, corporation tax, or insurance gross premium tax. This bill extends the tax credit to January 1, 2018.
A June report by the Legislative Analyst’s Office (LAO) evaluated the tax credit. LAO notes that, as of 2015, the tax credit has been fully utilized and that small- to medium-sized CDFIs have likely benefited the most. However, few insurance companies participate in the program. In 2015, only three insurance companies participated in the program, investing a total of $22.3 million in CDFIs (less than a third of total qualified investments). Based on information provided by COIN, CDFI investments between 2011 and 2015 could result in 1,400 jobs in low-to-moderate income areas. However, LAO expects that the total statewide net increase in employment may be significantly less, or even negative, due to opportunity costs.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
According the Senate Appropriations Committee, the bill would result in ongoing costs to the Insurance Fund of $630,000 per year starting in fiscal year 2017-18 to retain five limited term positions associated with the tax credit program that will expire on June 30, 2017. The Franchise Tax Board estimates that the tax credit extension will result in an annual revenue loss of $0.6 million in fiscal year 2016-17. Due to recent amendments, estimated costs for fiscal year 2017-18 and beyond are not available at this time. These estimates do not include the revenue impact of tax credits allowed against the insurance gross premiums tax.
California Department of Insurance (source)
3CORE
Association of California Life and Health Insurance Companies
Bankers Small Business CDC of California
Burbank Housing Development Corporation
California Apartment Association
CDC Small Business Finance
California LISC
Century Housing
CSAA Insurance Group
Denice Wint (individual)
Enterprise Community Investments
First General Bank
Genesis LA Economic Growth Corporation
Housing Trust Silicon Valley
Mercy Loan Fund
National Association of Mutual Insurance Companies
Neighborhood Housing Services of the Inland Empire
NeighborWorks HomeOwnership Center Sacramento
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Prudential Financial, Inc.
Redwood Valley Little River Bank of Pomo Indians
Roxborough, Pomerance, Nye & Adreani, LLP
Rural Community Assistance Corporation
Small Business Investor Alliance
United Native Housing Development Corporation
WNC & Associates
OPPOSITION: (Verified 8/22/16)
None received
ARGUMENTS IN SUPPORT: Many of the supporters of this bill explain that since 1997, $57 million in state tax credits have generated more than $285 million in investments and that the economic impact of this program is exponentially greater than the sum of the deposits.
ASSEMBLY FLOOR: 80-0, 5/31/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
8/22/16 20:37:58
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Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
THIRD READING
Bill No: AB 2728
:
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez, Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/29/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 80-0, 5/31/16 - See last page for vote
SOURCE: California Department of Insurance
DIGEST: This bill extends the sunset date on the advisory board to the California Organized Investment Network (COIN) program within the California Department of Insurance (CDI) and the Community Development Financial Institution (CDFI) tax credit, adds categories of COIN qualified investments, and declares that that Legislature intends that future data calls will be established once the current reporting requirement has been fulfilled.
Existing law:
- Establishes COIN within CDI, with the purpose of encouraging insurers to invest in community development investments and facilitating those investments.
- Defines "community development investments" as investments where all or part of the investment has as its primary purpose community development for, or that directly benefits, low or moderate income (LMI) individuals, families, or communities including investments in affordable housing, community service providers, certain economic developments, and activities that revitalize or stabilize LMI communities.
- Establishes an advisory board, until January 1, 2020, to facilitate contacts among insurance company executives, community-based organizations, and community development financial institutions, and to make recommendations about the program.
- Requires any insurer that writes at least $100 million in California premium to report to COIN program by July 1, 2016, various categories of investments over the last three years (“data call”), including community development investments and “green investments,” as defined.
- Requires CDI to report on its Web site, by December 31, 2016, aggregate data from the data call, specific insurers that make high-impact investments, and actions taken by COIN to analyze the data in order to create and identify potential investments opportunities.
- Sunsets the data call and reporting provisions on January 1, 2020.
- Provides for a tax credit, until December 1, 2017, of an amount equal to 20 percent of the amount of each qualified investment into a CDFI certified by CDI up to $50 million total.
- Provides that COIN allocates the CDFI credits.
- Requires the Legislative Analyst’s Office to submit a report to the Legislature on the effects of the CDFI tax credit by June 30, 2016.
This bill:
- Adds investments in reservation-based communities and rural area investments onto the list of community development investments for purposes potential future data calls.
- Defines, for the purposes of potential future data calls, “diverse investment managers” as investment management organizations whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or combination of person in those groups.
- Revises the definitions of “high-impact” and “green” investments.
- Extends the sunset date on the advisory board to January 1, 2022.
- Declares the Legislature's intent to establish future data calls once CDI complies with an existing requirement to publish COIN-related information on its Web site.
- Extends the sunset date on the CDFI tax credit to January 1, 2022.
- Grants priority to insurance companies over all other tax credit investors.
- Provides that investment reductions of less than $50,000 trigger a clawback of the total amount of the credit.
Background
COIN was created in 1996 as a public/private partnership among CDI, the insurance industry, state government leaders, and community development organizations. COIN's goal is to help address unmet capital needs that support investments in economic development and affordable housing in low-income urban and rural communities throughout California. The program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. Investments are submitted, scrutinized by COIN, and reported on the CDI Web site. Insurers may identify worthy investments on their own and submit them for certification or may select investments sourced or structured by COIN.
CDI sponsored this bill intending to renew the data call requirement. The bill declares that it is the intention of the Legislature to add a data call once CDI fulfills its requirement to report aggregate data and other information based on the data submitted this year. Although the statute required insurers to submit the data by July 1, CDI administratively moved that deadline to March and published its report in July. The committees have not reviewed CDI’s report against reporting requirements or whether the results justify additional data calls. At this time, the bill only contains intent language and does not establish any new data calls.
COIN also administers the CDFI tax credit program. Those tax credits are available to any qualified taxpayer, not just insurers. Each year, CDI may allocate up to $10 million in credits annually to leverage up to $50 million total in community development investments. Under the tax credit program, investors receive a tax credit worth up to 20 percent of their investment in one of the COIN certified CDFIs in the form of non-interest bearing deposits, loans, or equity investments of at least $50,000 held for at least 60 months. Investors can claim a credit against the state personal income tax, corporation tax, or insurance gross premium tax. This bill extends the tax credit to January 1, 2022.
A recently released report by the Legislative Analyst’s Office (LAO) evaluated the tax credit. The LAO notes that, as of 2015, the tax credit has been fully utilized and that small- to medium-sized CDFIs have likely benefited the most. However, few insurance companies participate in the program. In 2015, only three insurance companies participated in the program, investing a total of $22.3 million in CDFIs (less than a third of total qualified investments). Based on information provided by COIN, CDFI investments between 2011 and 2015 could result in 1,400 jobs in low-to-moderate income areas. However, the LAO expects that the total statewide net increase in employment may be significantly less, or even negative, due to opportunity costs.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
According the Senate Appropriations Committee analysis this bill would result in ongoing costs to the Insurance Fund of $630,000 per year starting in fiscal year 2017-18 to retain five limited term positions associated with the tax credit program that will expire on June 30, 2017. The Franchise Tax Board estimates that the tax credit extension will result in an annual revenue loss of $0.6 million in fiscal year 2016-17, $1.9 million in fiscal year 2017-18, and $3.2 million in fiscal year 2018-19. These estimates do not include the revenue impact of tax credits allowed against the insurance gross premiums tax.
California Department of Insurance (source)
3CORE
Association of California Life and Health Insurance Companies
Bankers Small Business CDC of California
Burbank Housing Development Corporation
California Apartment Association
CDC Small Business Finance
California LISC
Century Housing
CSAA Insurance Group
Enterprise Community Investments
First General Bank
Genesis LA Economic Growth Corporation
Housing Trust Silicon Valley
Mercy Loan Fund
National Association of Mutual Insurance Companies
Neighborhood Housing Services of the Inland Empire
NeighborWorks HomeOwnership Center Sacramento
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Prudential Financial, Inc.
Redwood Valley Little River Bank of Pomo Indians
Roxborough, Pomerance, Nye & Adreani, LLP
Rural Community Assistance Corporation
Small Business Investor Alliance
United Native Housing Development Corporation
WNC & Associates
OPPOSITION: (Verified 8/12/16)
None received
ARGUMENTS IN SUPPORT: United Native Housing Development Corporation notes that legislation like AB 2728 will eliminate regulatory barriers which will allow direly needed affordable housing services be extended to disadvantaged communities that have historically been underserved. Many of the supporters of this bill explain that since 1997, $57 million in state tax credits have generated more than $285 million in investments and that the economic impact of this program is exponentially greater than the sum of the deposits.
ASSEMBLY FLOOR: 80-0, 5/31/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
8/15/16 19:39:56
**** END ****
SENATE COMMITTEE ON
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2728 (Atkins) - Insurance: community development investments
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
This bill meets the criteria for referral to the Suspense File.
Bill Summary:
AB 2728 would extend the sunset date for the California Organized Investment Network (COIN) program and the California Developmental Financial Institution (CDFI) tax credit.
Fiscal Impact:
- Ongoing costs to the Department of Insurance (CDI) of $630,000 per year starting in fiscal year 2017-18 to retain five limited term positions associated with the tax credit program that will expire on June 30, 2017. (Insurance Fund)
- The Franchise Tax Board estimates that the tax credit extension will result in an annual revenue loss of $0.6 million in fiscal year 2016-17, $1.9 million in fiscal year 2017-18, and $3.2 million in fiscal year 2018-19. These estimates do not include the revenue impact of tax credits allowed against the insurance gross premiums tax.
Background:
COIN, within CDI, is a “collaborative effort between the California Department of Insurance, the insurance industry, community affordable housing and economic development organizations, and community advocates. COIN was established in 1996 at the request of the insurance industry as an alternative to state legislation that would have required insurance companies to invest in underserved communities.” This program serves as a liaison between insurers that are seeking investment opportunities and community organizations that are seeking investment capital for projects.
CDFIs are “mission-driven community organizations, separate from government control, dedicated to providing financial products and services to low-income communities underserved by traditional financial markets.”
Each year, CDI may allocate up to $10 million in tax credits annually to leverage up to $50 million in community development investments. Under the CDFI tax credit program, investors receive a tax credit worth up to 20% of their investment in one of the COIN certified CDFIs in the form of non-interest bearing deposits, loans, or equity investments of at least $50,000 held for at least 60 months. Investors can claim a credit against the state personal income tax, corporation tax, or insurance gross premium tax. Existing law sunsets the tax credit on December 1, 2017 and sunsets the program on January 1, 2020.
Existing law requires insurers to report data on the investments in order to track insurer COIN investments. In 2015, CDI and the COIN advisory board moved the data call deadline to March 2016. Those data have been submitted and CDI is currently working to publish the results.
Proposed Law:
This bill would:
- Add definitions for qualified COIN investments in Native American and rural communities, investments made by diverse investment managers, and make technical and clarifying changes to definitions of other COIN-qualified investments.
- Extend the sunset date on the COIN Advisory Board and the CDFI tax credit program until January 1, 2022.
- Prioritize insurance company investors in the allocation of the tax credit.
- State the Legislature’s intent to extend the sunset date on the Community Investment Survey Data Call upon CDI complying with an existing requirement to provide COIN-related information on its Internet Web site.
Related Legislation:
AB 2647 (E. Garcia, 2016) would have expanded the COIN tax credit from $50 million to $120 million and extended the sunset date to January 1, 2027. This bill was held in the Assembly Committee on Appropriations.
AB 32 (Perez, Chapter 608, Statutes of 2013) increased the COIN tax credit from $10 million to $50 million.
AB 624 (Perez, Chapter 436, Statutes of 2011) authorized the establishment of the COIN Advisory Board.
-- END --
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No: | AB 2728 | Hearing Date: | 6/29/16 |
Author: | Atkins | Tax Levy: | No |
Version: | 4/25/16 | Fiscal: | Yes |
Consultant: | Grinnell | ||
Insurance: community development investments
Extends the Community Development Financial Institution Credit until the 2021 taxable year; makes other changes to the credit and other programs relating to insurance company investment.
Background
Tax Credit. Federal law allows a new markets tax credit for taxpayers’ qualified equity investments in community development entities, the primary mission of which must be serving or providing investment capital for low-income communities or low-income persons, as certified by the Secretary of the Treasury. The federal credit is equal to 39% of the qualified equity investment and is spread over seven years. State law does not conform to the federal new markets credit, but instead allows the Community Development Financial Institution credit (CDFI), administered by the Department of Insurance (CDI) (AB 1520, Vincent, 1997).
Taxpayers may claim a credit against the Gross Premiums Tax, Personal Income Tax, or Corporation Tax equal to 20% of qualified investments in the form of non-interest bearing deposits, loans, or equity investments of at least $50,000 held for at least 60 months. Taxpayers can carry over the credit for four years. The credit was initially used only to reduce Personal Income Tax, or Corporation Tax liabilities, but the Legislature added a credit against the Gross Premiums Tax in 1999, also administered by CDI (AB 157, Vincent). In 2002, the Legislature extended the credit until 2007 (SB 409, Vincent), again until 2012 (AB 2831, Ridley-Thomas, 2006), and finally until 2017, but only allowed CDI to certify new deposits for credits until January 1, 2015 (AB 624, J. Pérez, 2011). The Legislature then allowed CDI to certify new deposits until January 1, 2017, while increasing from $10 million to $50 million each year the amount of investments that generate CDFI credits (AB 32, J. Pérez, 2013).
For deposits to generate credits, the CDFI must be certified by the California Organized Investment Network (COIN), an office in CDI, by demonstrating that it is a private financial institution located in California, its primary mission is community development, and that it lends in urban, rural or reservation-based communities in California. CDFIs may be banks, credit unions, or non-regulated non-profit institutions organized to provide private capital for community development or investing. There are currently 48 CDFIs in California. CDFIs must use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
CDFIs must apply to COIN on behalf of the taxpayer. If the investment is approved, COIN certifies the amount of the investment and the credit, which is capped at a total of $50 million each year, plus any unused amount from past years. COIN generally allocates the credits on a first-come, first-served basis; however, if COIN determines that the total amount of investment will exceed the cap, it can prioritize applications with investments that directly benefit low-income persons, or prioritize rental housing, mortgages for community-based residential housing, and self-help housing ahead of single-family housing. CDI or the Franchise Tax Board (FTB) may recapture the credit within the 60 month period if the taxpayer withdraws or reduces the amount of the investment below $50,000.
COIN generally allocates credits twice per year. In recent years, requests for credits exceeded the amount they are authorized to allocate. In December, 2015, COIN certified CDFI credits for:
- CSAA Insurance Group for its $353,235 investment into Enterprise Community Investment for the California Hotel project in Oakland that provides for the rehabilitation of 137 units of affordable rental housing, including 119 efficiencies, 34 units for special needs households, and 15 units for homeless persons with mental illness.
- MetLife Insurance Company for its $3 million investment into Genesis LA Economic Growth Corp that will promote safe and healthy communities in underserved areas of Los Angeles County through a learning center that provides summer camps and school enrichment programs, workforce development programs, and funding for a homeless servicing agency.
- United HealthCare for its $3 million investment into Enterprise Community Loan Fund to support and leverage financing for the development and preservation of affordable housing and Federally Qualified Health Centers for low-income families across the State.
- MetLife Insurance Company for its $687,162 investment into Enterprise Community Investment that will leverage additional capital to rehabilitate Gabilan Plaza apartments, an affordable housing project for low to moderate-income families in Salinas. The rehabilitation will include adding photovoltaic panels and converting ten units for handicap accessibility
Data call. Insurers that write more than $100 million in California premium must report to COIN by July 1, 2016 of various categories of investments over the last three years, including community development and green investments, referred to as a “data call.” CDI must report aggregate data relating to specific insurer investments, high-impact investments, and COIN actions to analyze data by December 31, 2016. These requirements expire on January 1, 2020.
AB 624 also created the COIN Advisory Board to advise COIN or its successor on the best methods of increasing the level of insurance industry capital in safe and sound investments while providing fair returns to investors and social benefits to underserved communities. The advisory board is composed of the Insurance Commissioner or his or her designee, and at least one voluntary member from:
- An insurance company executive
- A licensed attorney practicing law
- A member of the public appointed by the Speaker of the Assembly
- A member of the public appointed by the Senate Committee on Rules
- A consumer advocacy group
- A local economic development practitioner
- A financial institution or community development financial institution
Members serve two year terms, staggered by drawing lots at the board’s first meeting so that a simple majority serves two-year terms, with the remaining members serving one year terms. The board is required to meet quarterly, or as directed by the Commissioner, and can be reimbursed for actual expenses. Similar to the tax credits, state law authorizing the board is due to expire on January 1, 2017.
Proposed Law
Assembly Bill 2728 extends the CDFI credit in the Personal Income Tax, Corporation Tax, and Gross Premiums Tax until the 2021 taxable year. The bill also makes the following changes:
- Adds investments in reservation-based communities and rural area investments onto the list of community development investments for purposes of meeting “data call” reporting requirements,
- Extends the COIN board’s authorization until January 1, 2022,
- Requires priority be given to insurance company investors over all others for purposes of allocating the CDFI credit, and
- Provides that investment reductions of less than $50,000 trigger a clawback of the total amount of the credit.
State Revenue Impact
According to Franchise Tax Board, AB 2728 results in revenue losses of $600,000 in 2016-17, $1.9 million in 2017-18, and $3.2 million in 2019-20. However, this estimate does not consider the measure’s impact on Gross Premiums taxpayers which are approximately 53% of the credit generated.
Comments
1. Purpose of the bill. According to the author, “According to the author, COIN is a collaborative effort between CDI, the insurance industry, community affordable housing and economic development organizations, and community advocates. COIN was established in 1996 at the request of the insurance industry as an alternative to state legislation that would have required insurance companies to invest in underserved communities, similar to the federal Community Reinvestment Act that applies to the banking industry. This voluntary program facilitates insurance industry investments that benefit California's environment and its LMI and rural communities. The program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. Each year, CDI may award up to $10 million in tax credits annually to leverage up to $50 million in community development investments. Under the program, investors receive a tax credit worth up to 20% of their investment in one of the COIN Certified CDFIs and can apply the credit to the state personal income tax, corporation tax or insurer premium tax. CDFIs are mission-driven community organizations, separate from government control, dedicated to providing financial products and services to low-income communities underserved by traditional financial markets. All CDFIs that are eligible to participate in the COIN CDFI Tax Credit Program must be certified by COIN. The COIN tax credit currently sunsets on January 1, 2017. If the COIN tax credit is not extended, low and moderate income communities in California will lose the support of an effective program that incentivizes critical investments in their communities.”
2. Policy Questions. Taxpayers claiming the CDFI include some of the world’s largest financial institutions and insurance companies, including Charles Schwab, JP Morgan Chase, and MetLife. These firms are highly sophisticated investors, allocating billions of dollars to various asset classes. The credit AB 2728 extends serves to subsidize these firms’ investment in CDFIs with the intent that capital will flow to productive uses in low-income communities in California, with the credit percentage intended to compensate them for the additional risk of depositing funds in a CDFI instead of safer investments with lower returns. As such, this credit poses significant policy question, such as whether it is appropriate for state government to use tax credits to subsidize private investment, and if so, are CDFIs the right thing to subsidize? Additionally, because tax credits are funded by forgoing revenue that could be used for other government services, is extending the CDFI credit worth its cost?
3. Performance? The Legislature first enacted the CDFI credit in 1999, extended it three times, and increased the investment amounts that generate credits fivefold in 2013, for a total of $10 million in credits annually. However, it’s unclear whether the revenue foregone by allowing tax credits for firms to hold deposits in CDFIs performs better than direct public investments in low-income communities, such as affordable housing, transportation, and other public works. The CDFI credit may also overlap with other programs subject to significantly more oversight, such as the Low-Income Housing Tax Credit. However, COIN argues that the credit allows COIN certified CDFIs to access otherwise inaccessible capital and fund investments that the CDFIs would not have been able to fund had they received a traditional loan. COIN adds that the COIN CDFI Tax Credit is unique because, unlike traditional CDFI loans, it gives COIN certified CDFIs access to insurer capital, access to zero interest capital, and full use and control of the investment with the condition that loans be made in accordance with the CDFI’s mission. COIN adds that
- Insurers do not typically invest in CDFIs; however, through the COIN CDFI Tax Credit Program insurers, like MetLife, have made more than $10 million in qualified investments annually into COIN certified CDFIs. In 2015, COIN awarded MetLife Insurance Company $600,000 in tax credits for their $3 million investment to Genesis LA, a COIN certified CDFI. Genesis LA used this investment to make a $1.35 million loan to MERCI, a nonprofit organization that provides direct services to adults with severe developmental disabilities living in East Los Angeles and the San Gabriel Valley. Genesis LA’s loan helped MERCI finance an expansion that will allow them to serve 120 new clients and create approximately 29 new jobs. The loan from Genesis LA leveraged another $4.8 million to finance the project. Genesis LA and MetLife were introduced through the COIN Program, and MERCI is an example of an investment that would not have been possible without the investment terms required by the COIN Program
- Many investments funded by COIN certified CDFIs, especially those in rural areas, would not be possible but for the requirement that investments qualified through the COIN CDFI Tax Credit program be either zero interest loans/deposits, equity investment or equity-like debt instruments that allow the CDFI full use and control of the investment for the 60 month term. One example of such an investment is the Local Initiatives Support Corporation’s (LISC) investment into Self-Help Enterprises (SHE) to finance well replacement costs for rural residents of the Central Valley. Well replacement costs range from $20,000 to $35,000 depending on location, soil conditions and availability of drillers. Conventional lending agencies cannot provide home equity lines of credit to homeowners while personal loan limits do not provide enough funding to cover the total cost and have interest rates and terms that are unfavorable to those already struggling to make ends meet. Traditional interest bearing CDFI loans would have prevented LISC and SHE from conducting this necessary program; however the COIN qualified zero interest loan removed these financing barriers.
The Committee may wish to consider the return on the state’s current level of investment in the CDFI program, and whether superior alternatives exist to support investment in California communities with high levels of unemployment and poverty.
4. Alternatives. The CDFI credit serves as a carrot, not a stick, by subsidizing investments made by banks and insurance companies. Instead, the Legislature could instead enact requirements similar to federal law’s Community Reinvestment Act (CRA), which provides considerable regulatory encouragement for federally-regulated banks to invest in low-income areas. California could adopt its own CRA to require banks and insurance companies to invest in specified areas as a condition of doing business in the state
5. LAO’s take. AB 2831 (Ridley-Thomas) required the LAO to prepare an analysis of the CDFI credit. LAO’s April 14, 2011 letter to the Chair of the relevant committees in the Assembly and Senate included four conclusions, among them:
- Economic Impact. It is very difficult to estimate the impact of the tax credits, although we suspect that in many cases investments in the CDFIs would not have been made in the credit’s absence. It is true that some of the credits have benefited larger CDFIs that are capable of raising funds in other ways and for which the credit-funded investments represent a smaller portion of their total assets. Even in these cases it seems likely that the tax credits helped generate investment activity that otherwise might not have been funded.
- Credit Percentage Seems Reasonable. This credit is set up like most investment credits in that it refunds a percentage of the invested amount, and 20 percent is the equivalent of about 2.5 to 3 percentage points on a ten-year loan at prevailing interest rates. This is about one-half of the interest rate spread between a fairly safe investment and a very risky one. For example, recently, the difference between the rates on a BBB (low investment-grade) bond and a CCC (“junk”) bond was about 6 percent. While we have no reason to believe that a 20 percent subsidy is too high or too low, it is possible that changing conditions in financial markets in the future could warrant a different subsidy percentage for this credit.
- Owned Versus Rental Housing. The CDFIs have supported both rental and owner-occupied housing, including both construction and mortgage loans. Credit standards for home purchase loans have increased markedly since the collapse of the housing market. In order to benefit lower-income individuals, it may make sense for housing development efforts to focus more on rental housing at least in the near future. Accordingly, the Legislature may wish to consider focusing the tax credit more on CDFI investments in rental housing opportunities to benefit low-income populations. (In response to this point, AB 624 allowed CDI to prioritize rental housing and other use over single-family homes if total investments exceed the legal cap.)
- First-Come, First-Served Tax Credits Can Be Problematic. In some prior years, the program has hit its annual cap. If the credit is retained in its current form, it may be advisable to authorize COIN or some other entity to award the credits competitively instead of on a first-come, first-served basis. This might allow the state to prioritize CDFI investments that best fit desired policy objectives—for example, by directly benefiting lower-income people instead of benefiting projects that merely are located in lower-income areas
5. MCO. Recently, when enacting the new Managed Care Organization (MCO) Provider Tax, the Legislature reduced the gross premiums tax rate from 2.35% to 0% for specified premiums received on or after July 1, 2016, and on or before June 30, 2019 (SBx2 2, Hernández, 2016). The application of this temporary 0% rate is limited to premiums received by an insurer that provides health insurance and has a corporate affiliate, which is either a "health care service plan" or "health plan," contracted with the State Department of Health Care Services to provide Medi-Cal services. As such, health insurers may not have much demand for the CDFI tax credit in the next three years, as it cannot be applied to reduce its MCO tax obligation.
6. What about us? The Small Business Investors Alliance requested amendments to AB 2728 to allow equity investments in “Small Business Investment Companies,” to qualify investors for CDFI credits. The Alliance argues that its ownership model, which relies on a combination of private investment and proceeds of bonds issued by the United States Small Business Association, and investment expertise can provide superior returns to the current CDFI credit.
7. Bored of boards. AB 2728 extends the statutory authorization of the COIN Advisory Board until January 1, 2022. However, the Insurance Commissioner can create and convene any advisory board that he sees fit without explicit direction from state law, and nothing in its current law grants it any formal regulatory powers. The Committee may wish to consider whether extending the COIN Advisory Board’s existence in statute is necessary.
8. Incoming! The Senate Committee on Insurance approved AB 2728 on an 8 to 0 vote on June 22nd. The Committee on Governance and Finance is hearing the bill as the committee of second reference.
Assembly Actions
Assembly Revenue and Taxation 9-0
Assembly Insurance 13-0
Assembly Appropriations 20-0
Assembly Floor 80-0
Support and Opposition
(6/23/16)
Support: Insurance Commissioner Dave Jones; 3 Core; Advocation, Inc.; Burbank Housing Development Corporation; Cal Coastal: A Small Business Leader; California Apartment Association; California Department of Insurance; Century Housing; Clearing House Community Development Financial Institution; DCA Capitol Partners; Enterprise Community Investment; First General Bank; Fresno Community Development Financial Institution; Fresno Economic Opportunities Commissio;; Genesis LA Economic Growth Corporation; Housing Trust Silicon Valley; LISC; Mercy Housing; Neighbor Works Home Ownership Center; Neighbor Works Home Ownership Center Sacramento Region; Neighbor Works Orange County; Neighborhood Housing Services of the Inland Empire; Pacific Community Ventures; Personal Insurance Federation of California; Redwood Valley Little River Band of Promo Indians; Roxborugh Pomerance Nye and Adreani; Rural Community Assistance Corporation; San Luis Obispo County Housing Trust Fund; Small Business Finance-CDC; Star Mountain Capita, LLC; Tri Counties Bank; United Native Housing Development Corporation; VEDC; Ventura County Community Development Coroperation; WNC and Associates.
Opposition: Unknown.
-- END --
SENATE COMMITTEE ON
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: Hearing Date: June 22, 2016
Author: | |||
Version: | Amended | ||
Urgency: | Fiscal: | ||
Consultant: | |||
Subject:
SUMMARY
Extends the sunset date on the California Organized Investment Network (COIN) program within the California Department of Insurance (CDI) and the CDFI tax credit, adds categories of COIN qualified investments, and declares that that Legislature intends that future data calls will be established once the current reporting requirement has been fulfilled.
DIGEST
Existing law
- Establishes COIN within CDI, with the purpose of encouraging insurers to invest in community development investments and facilitating those investments.
- Defines "community development investments" as investments where all or part of the investment has as its primary purpose community development for, or that directly benefits, California low or moderate income (LMI) individuals, families, or communities including investments in affordable housing, community service providers, certain economic developments, and activities that revitalize or stabilize LMI communities.
- Defines various subcategories of community development investments that include investments made in affordable housing, activities that revitalize or stabilize LMI communities, and investments in a community development financial institution (CDFI).
- Establishes an Advisory Board, until January 1, 2020, to make recommendations on how the program should operate; facilitate contacts among insurance company executives, community-based organizations, and community development financial institutions; and make recommendations about the program.
- Requires any insurer that writes at least $100 million in California premium to report to COIN program by July 1, 2016, various categories of investments over the last three years (“data call”), including community development investments and “green investments,” as defined.
- Requires CDI to report on its website, by December 31, 2016, aggregate data relating to specific insurer investments; insurers that make high-impact investments; and actions taken by COIN to analyze the data in order to create and identify potential investments opportunities.
- Sunsets the data call and reporting provisions on January 1, 2020.
- Provides for a tax credit, until December 1, 2017, of an amount equal to 20 percent of the amount of each qualified investment into a CDFI certified by CDI up to $50 million.
- Provides that COIN allocates the CDFI credits.
- Requires the Legislative Analyst’s Office to submit a report to the Legislature on the effects of the CDFI tax credit by June 30, 2016.
This bill
- Adds to the list of defined community development investments in certain qualified investments in rural areas, as defined, and reservation-based communities, that is areas managed by a Native American tribe where the tribe is eligible to receive services from the Bureau of Indian Affairs.
- Defines “diverse investment managers” as investment management organizations whose investment managers are comprised of at least 51 percent women, veterans, or minorities, or combination of person in those groups (does not include any reference to the impact those investments may have on LMI communities).
- Revises the definitions of “high-impact” and “green” investments.
- Extends the sunset date on the advisory board to January 1, 2022.
- Declares the Legislature's intent to extend the data call once CDI complies with an existing requirement to provide COIN-related information on its Web site.
- Extends the sunset date on the community development financial institution (CDFI) tax credit to January 1, 2022.
- Grants priority to insurance company investors over all other tax credit investors.
COMMENTS
- Purpose of the bill According to the author, COIN is a collaborative effort between CDI, the insurance industry, community affordable housing and economic development organizations, and community advocates. COIN was established in 1996 at the request of the insurance industry as an alternative to state legislation that would have required insurance companies to invest in underserved communities, similar to the federal Community Reinvestment Act that applies to the banking industry. This voluntary program facilitates insurance industry investments that benefit California's environment and its LMI and rural communities. The program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects.
Each year, CDI may award up to $10 million in tax credits annually to leverage up to $50 million in community development investments. Under the program, investors receive a tax credit worth up to 20% of their investment in one of the COIN Certified CDFIs and can apply the credit to the state personal income tax, corporation tax or insurer premium tax.
CDFIs are mission-driven community organizations, separate from government control, dedicated to providing financial products and services to low-income communities underserved by traditional financial markets. All CDFIs that are eligible to participate in the COIN CDFI Tax Credit Program must be certified by COIN.
The COIN tax credit currently sunsets on January 1, 2017. If the COIN tax credit is not extended, low and moderate income communities in California will lose the support of an effective program that incentivizes critical investments in their communities.
- Background The COIN Program was created in 1996 as a public/private partnership between CDI, the insurance industry, state government leaders, and community development organizations. COIN's goal is to help address unmet capital needs that support investments in economic development and affordable housing in low-income urban and rural communities throughout California. The program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. Investments are submitted, scrutinized by COIN, and reported on the CDI website. Insurers may identify worthy investments on their own and submit them for certification or may select investments sourced or structured by COIN.
Tax Credit. Existing law sunsets the tax credit on December 1, 2017, and sunsets the program on January 1, 2020. This bill would sunset both the tax credit and the program elements in the same calendar year; the program would sunset on January 1, 2022, and the tax credit on December 1, 2022. This bill is double-referred to the Committee on Governance and Finance that will consider the extension of the tax credit.
COIN Program. The bill extends the sunset date on the COIN’s advisory board. The board is one way of matching the industry to the community building a network among insurance company executives, community-based organizations, and community development financial institutions in order to facilitate interest in COIN targeted investments.
This bill adds specific definitions intended to benefit Native American and rural communities to categories of community development investment designed to benefit LMI communities. This bill also adds investments made with diverse investment fund managers as another category of COIN-qualified investments (although they are not necessarily qualified for the tax credit); similar to green investments, this category of investment is not targeted at LMIs.
Data Calls. In order to track insurer COIN investments, insurers have been required to report data on their investments. CDI posts processes the data and posts the results on its website. However, the usefulness of data for the purpose of improving the program is still in question.
AB 2128 (Gordon, 2014) extended the sunset date for the COIN program from January 1, 2015, to January 1, 2020. However, CDI’s June 2014 report did little to justify further data calls. The data was reported without much analysis and was not helpful in determining how the data was used to improve the program. CDI withdrew the first version of that report and posted a revised report in September. An agreement was reached and AB 2128 was amended to limit the data call to only larger insurers and specifically required COIN to report on ways it used the data to improve the program. Under AB 2128, insurers must submit the data by July 1, 2016, and CDI must post the information by December 31, 2016. This timeline gave the committees in both houses plenty of opportunity to examine the data and other information and consider a proposal to extend the data calls during the normal hearing process.
In 2015, CDI and the advisory board moved the data call deadline to March 2016. That data has been submitted and CDI is working to publish the results in July. At that time, the author intends to review the reported information and possibly amend the bill to include one or more data calls as provided in the intent language of the bill. Several insurance industry stakeholders have expressed support for the bill in its current form, but have not taken a position on the bill if the author adds one or more data calls.
- Support CDI supports extending the sunset date on the COIN advisory board because the board provides focus and guidance to COIN, ensuring that its policies and procedures are keeping with its mission statement.
The Pacific Association of Domestic Insurance Companies and the National Association of Mutual Insurance Companies supports the bill because it is consistent with the laudable public policy objective of promoting insurers to deposit funds into CDFIs and would ensure that insurance company investors receive priority for the allocation of the CDFI tax credit.
United Native Housing Development Corporation notes that legislation like AB 2728 will eliminate regulatory barriers which will allow direly needed affordable housing services be extended to disadvantaged communities that have historically been underserved.
Many of the supporters of this bill, explain that since 1997, $57 million in state tax credits have generated more than $285 million in investments and that the economic impact of this program is exponentially greater than the sum of the deposits.
- Prior and Related Legislation
AB 2647 (E. Garcia, 2016) would have expanded COIN tax credits from $50 million to $120 million and extended the sunset date to January 1, 2027. Held by the Assembly Committee on Appropriations.
Chapter 384, Statutes of 2014 (AB 2128, Gordon) reauthorized and revised provisions requiring insurers to submit information to COIN regarding their community investment activity.
Chapter 608, Statutes 2013 (AB 32, J. Perez), increased the COIN tax credit from $10 million to $50 million.
Chapter 436, Statutes 2011 (AB 624, J. Perez) authorized the establishment of the COIN Advisory Board.
Chapter 418, Statutes 2010 (AB 1011, Jones) expanded definitions to include green investments and added the green investment posting requirement.
Chapter 340, Statutes 2010 (AB 41, Solorio) established the requirement on insurers to submit a policy statement on community development investments. Also, extended the sunset date on the requirement that insurers submit information to the CDI regarding their community investment activities.
AB 1910 (Coto, 2008) would have established the requirement on insurers to submit a policy statement on community development investments. Vetoed.
Chapter 456, Statutes 2006 (AB 925, Ridley-Thomas) required insurers to submit information to CDI regarding their community investment activities.
POSITIONS
Support
California Department of Insurance (sponsor)
3CORE
Association of California Life and Health Insurance Companies
Bankers Small Business CDC of California
Burbank Housing Development Corporation
California Apartment Association
CDC Small Business Finance
California LISC
Century Housing
Clearinghouse Community Development Financial Institution
CSAA Insurance Group
Enterprise Community Investments
First General Bank
Genesis LA Economic Growth Corporation
Housing Trust Silicon Valley
Mercy Loan Fund
National Association of Mutual Insurance Companies
Neighborhood Housing Services of the Inland Empire
NeighborWorks HomeOwnership Center Sacramento
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Prudential Financial, Inc.
Redwood Valley Little River Bank of Pomo Indians
Roxborough, Pomerance, Nye & Adreani, LLP
Rural Community Assistance Corporation
Small Business Investor Alliance
United Native Housing Development Corporation
VEDC
WNC & Associates
Oppose
None received
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 2728
Author:(Atkins)
As Amended Ver:April 25, 2016
Majority vote
Committee | Votes | Ayes | Noes |
Revenue & Taxation | 9-0 | Ridley-Thomas, Brough, Dababneh, Gipson, Mullin, O'Donnell, Patterson, Quirk, Wagner | |
Insurance | 13-0 | Daly, Melendez, Travis Allen, Bigelow, Calderon, Chu, Cooley, Cooper, Dababneh, Dahle, Frazier, Gatto, Rodriguez | |
Appropriations | 20-0 | Gonzalez, Bigelow, Bloom, Bonilla, Bonta, Calderon, Chang, Daly, Eggman, Gallagher, Eduardo Garcia, Roger Hernández, Holden, Jones, Obernolte, Quirk, Santiago, Wagner, Weber, Wood |
|
SUMMARY: Extends the sunset dates for the California Organized Investment Network (COIN) Advisory Board and COIN-certified tax credits. Specifically, this bill:
- Extends the sunset date on the COIN Advisory Board to January 1, 2022.
- Adds definitions for qualified COIN investments in Native American and rural communities.
- Makes technical and clarifying changes to definitions of COIN-qualified investments.
- States the Legislature's intent that the sunset date of January 1, 2020 on a mandate that insurers submit community development investment data to the Department of Insurance (DOI) will be extended upon the DOI complying with an existing requirement to provide COIN-related information on its Internet Web site.
- Extends the sunset date on the Community Development Financial Institution (CDFI) tax credit program until January 1, 2022.
EXISTING LAW:
- Establishes a COIN Advisory Board to consult with and advise the DOI with respect to issues associated with the COIN program.
- Sunsets the Advisory Board on January 1, 2020.
- Requires any admitted insurer that writes at least $100 million in California premium to file, by July 1, 2016, data with DOI detailing its investment activity for the past 3 years with respect to community development investments.
- Requires the DOI, by December 31, 2016, to provide information on its Internet Web site:
- Concerning the community development investments made by insurers, specifically noting information concerning investments that are innovative, responsive to community needs, not routinely made by insurers, and that have a high impact on low and moderate income communities, and
- On the actions taken by the COIN program to analyze insurer data for purposes of identifying potential insurer investment opportunities, and on COIN's outreach and marketing efforts, and
- Identifying the amount of California public debt purchased by insurers, the amount of identified California investments by insurers, and the amount of green investments by insurers.
- Provides that the data call and information posting provisions will sunset on January 1, 2020.
FISCAL EFFECT: Annual ongoing general fund revenue loss in the range of $3.8 million from the extension of the Community Development Financial Institutions (CDFI) tax credit.
COMMENTS:
- Purpose. The author argues that the CDFI tax credit program administered by the DOI's COIN program provides a valuable economic incentive for insurers to invest in California low and moderate income communities. COIN directly administers the tax credit program, and is tasked with encouraging insurers to make other qualified investments in California's low and moderate income communities. The bill extends the sunset date on the tax credit component of the COIN program, and it is the author's intent to, upon reviewing the information provided by the DOI after July 1, 2016, to extend the sunset on the remainder of the COIN program's activities as well as the insurer data call provisions.
- Background. The COIN program has existed within the DOI for 20 years, in one form or another. Originally created administratively, the purposes of COIN have been clarified, and its operations formalized, in statute. Encouraging community development investments was the primary goal of the program. However, over time its role expanded to administering the tax credit program, and managing the data insurers have been required to file concerning their efforts at making socially desirable community development investments with some portion of the premium dollars collected from California policyholders.
- Recent legislation. The current sunset dates for the COIN program were established by AB 624 (Pérez), Chapter 436, Statutes 2011, (tax credit), and AB 2128 (Gordon), Chapter 384, Statutes 2014, (data call). Stakeholders engaged in substantial discussions prior to enactment of AB 2128, and many stakeholders maintain that extending the sunset date on future data call mandates ought to wait until after the DOI completes its analysis and information posting responsibilities, currently required to be completed by December 31 of this year. For this reason, the author opted to refrain from including sunset extensions on that portion of the COIN program, instead adding language declaring the Legislature's intent to extend that sunset date upon the DOI fulfilling its responsibilities.
Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086 FN: 0003212
Date of Hearing: May 4, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
ABPCA Bill Id:AB 2728
Author:(Atkins) – As Amended Ver:April 25, 2016
Policy Committee: | Revenue and Taxation | Vote: | 9 - 0 |
Insurance | 13 - 0 |
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill extends the sunset dates for the California Organized Investment Network (COIN) Advisory Board and COIN-certified tax credits. In summary, this bill:
- Extends the sunset date on the COIN Advisory Board to January 1, 2022.
- Extends the sunset date on the Community Development Financial Institution (CDFI) tax credit program until January 1, 2022.
- Adds definitions for qualified COIN investments in Native American and rural communities and investments made by diverse investment managers.
- Makes technical and clarifying changes to definitions of COIN-qualified investments.
- Prioritizes insurance company investors in the allocation of the tax credit.
- States the Legislature's intent that the sunset date of January 1, 2020, on a mandate that insurers submit community development investment data, including data on investments with diverse investment managers, to the Department of Insurance (DOI) will be extended upon the DOI complying with an existing requirement to provide COIN-related information on its Internet Web site.
FISCAL EFFECT:
- Annual ongoing GF revenue loss in the range of $3.8 million from the extension of the CDFI tax credit. This estimate reflects the average credit cost across a five-year period from FY 2013-14 to FY 2017-18, as projected, and includes reduced Personal Income Tax (PIT), Corporation Tax (CT), and insurer premium tax revenues.
- Minor and absorbable administrative costs to DOI.
COMMENTS:
- Purpose. The author argues that the CDFI tax credit program administered by the DOI's COIN program provides a valuable economic incentive for insurers to invest in California low and moderate income communities. COIN directly administers the tax credit program, and is tasked with encouraging insurers to make other qualified investments in California's low- and moderate-income communities. The bill extends the sunset date on the tax credit component of the COIN program, and it is the author's intent to, upon reviewing the information provided by the DOI after July 1, 2016, to extend the sunset on the remainder of the COIN program's activities as well as the insurer data call provisions.
- Background. The COIN program was created in 1996 as a public-private partnership by DOI, the insurance industry, state government leaders, and community development organizations with the goal of helping to address the unmet capital needs for economic development and affordable housing in low-income urban and rural communities throughout California. This voluntary program was established at the request of the insurance industry as a potential alternative to state legislation that would create a system similar to the federal Community Reinvestment Act.
The COIN program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. CDFIs work with COIN - an office within the California Department of Insurance - as financial intermediaries providing access to credit, loans, and investments to small businesses and non-profits that serve economically disadvantaged communities. CDFIs also offer administrative and technical assistance in these low-income communities. Generally, CDFIs lend to borrowers that do not satisfy the criteria for conventional lenders and focus on a particular community or certain groups of people
- CDFI tax credit: Under this program, investors receive a tax credit worth 20 percent of their investment in one of the community development financial institutions certified by the California Organized Investment Network. The credit can be applied against the corporation tax, personal income tax, or insurer premium tax.
Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081
Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
ABPCA Bill Id:AB 2728 (
Author:Atkins) – As Introduced Ver:February 19, 2016
AND AS PROPOSED TO BE AMENDED
SUBJECT: Insurance: community development investments
SUMMARY: Extends the sunset dates for the California Organized Investment Network (COIN) Advisory Board and COIN-certified tax credits. Specifically, this bill:
- Extends the sunset date on the COIN Advisory Board to January 1, 2027.
- Adds definitions for qualified COIN investments in Native American and rural communities.
- Makes technical and clarifying changes to definitions of COIN-qualified investments.
- States the Legislature's intent that the sunset date of January 1, 2020 on a mandate that insurers submit community development investment data to the Department of Insurance (DOI) will be extended upon the DOI complying with an existing requirement to provide COIN-related information on its Internet Web site.
- Extends the sunset date on the Community Development Financial Institution (CDFI) tax credit program until January 1, 2027.
EXISTING LAW:
- Establishes a COIN Advisory Board to consult with and advise the DOI with respect to issues associated with the COIN program.
- Sunsets the Advisory Board on January 1, 2020.
- Requires any admitted insurer that writes at least $100,000,000 in California premium to file, by July 1, 2016, data with DOI detailing its investment activity for the past 3 years with respect to community development investments.
- Requires the DOI, by December 31, 2016, to provide information on its Internet Web site:
- Concerning the community development investments made by insurers, specifically noting information concerning investments that are innovative, responsive to community needs, not routinely made by insurers, and that have a high impact on low and moderate income communities, and
- On the actions taken by the COIN program to analyze insurer data for purposes of identifying potential insurer investment opportunities, and on COIN's outreach and marketing efforts, and
- Identifying the amount of California public debt purchased by insurers, the amount of identified California investments by insurers, and the amount of green investments by insurers.
- Provides that the data call and information posting provisions will sunset on January 1, 2020.
FISCAL EFFECT: According to the Revenue and Tax Committee analysis of this bill, the Franchise Tax Board staff estimates that the bill will result in an annual General Fund loss of $600,000 in FY 2016-17, $1.9 million in FY 2017-18, and $3.2 million in FY 2018-19.
COMMENTS:
- Purpose. The author argues that the CDFI tax credit program administered by the DOI's COIN program provides a valuable economic incentive for insurers to invest in California low and moderate income communities. COIN directly administers the tax credit program, and is tasked with encouraging insurers to make other qualified investments in California's low and moderate income communities. The bill extends the sunset date on the tax credit component of the COIN program, and it is the author's intent to, upon reviewing the information provided by the DOI after July 1, 2016, to extend the sunset on the remainder of the COIN program's activities as well as the insurer data call provisions.
- Background. The COIN program has existed within the DOI for 20 years, in one form or another. Originally created administratively, the purposes of COIN have been clarified, and its operations formalized, in statute. Encouraging community development investments was the primary goal of the program. However, over time its role expanded to administering the tax credit program, and managing the data insurers have been required to file concerning their efforts at making socially desirable community development investments with some portion of the premium dollars collected from California policyholders.
- Tax Credit program. This bill was double-referred to Insurance Committee and Revenue and Taxation Committee. DOI proposed sunset date extensions and some reforms to the tax credit program, and the Revenue and Taxation Committee proposed some modifications to those proposals. The bill will be before the Insurance Committee in the event it passes Revenue and Taxation when it is heard April 18.
- Recent legislation. The current sunset dates for the COIN program were established by AB 624 (Perez), Statutes 2011, Chapter 426 (tax credit), and AB 2128 (Gordon), Statutes 2014, Chapter 384 (data call). Stakeholders engaged in substantial discussions prior to enactment of AB 2128, and many stakeholders maintain that extending the sunset date on future data call mandates ought to wait until after the DOI completes its analysis and information posting responsibilities, currently required to be completed by December 31 of this year. For this reason, the author opted to refrain from including sunset extensions on that portion of the COIN program, instead adding language declaring the Legislature's intent to extend that sunset date upon the DOI fulfilling its responsibilities.
REGISTERED SUPPORT / OPPOSITION:
Support
California Department of Insurance
Burbank Housing Development Corporation
Redwood Valley Little River Bank of Pomo Indians
Opposition
None received
Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086
Date of Hearing: April 18, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
ABPCA Bill Id:AB 2728 (
Author:Atkins) – As Introduced Ver:February 19, 2016
Majority vote. Fiscal committee.
SUBJECT: Insurance: community development investments
SUMMARY: Extends the Community Development Financial Institution (CDFI) tax credit program from January 1, 2017 until January 1, 2027, as provided. Specifically, the tax-related provisions of this bill:
- Extend the authorization of the CDFI tax credit in an amount equal to 20% of a qualified investment, as defined, made by a taxpayer into a CDFI for each taxable year before January 1, 2027, instead of January 1, 2017.
- Authorize the COIN to certify investments for the CDFI tax credit on or before January 1, 2027, instead of January 1, 2017.
- Extend the authorization for the Insurance Commissioner to establish and appoint a California Organized Investment Network (COIN) advisory board until January 1, 2027.
- Grant priority for allocations of the CDFI tax credit to insurance company investors over all other tax credit investors.
- Delete the current 20% recapture requirement where a qualified investment amount is reduced prior to the end of the 60th month, as provided.
EXISTING LAW:
- Authorizes a credit under the Insurance Gross Premiums Tax (IT), Personal Income Tax (PIT), and the Corporation Tax (CT) Laws, in an amount equal to 20% of a qualified investment made by a taxpayer into a CDFI.
- Limits the annual certification of total qualified investments made by all taxpayers to all CDFIs to $50 million for each calendar year, but if the qualified investments are less than that amount in one calendar year, the difference may be carried over to future years and added to the aggregate amount authorized for those years.
- Defines "qualified investment" as an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument meeting federal or state agency standards. The duration of the investment must be for 60 months or more and the amount must equal $50,000 or more.
- Defines a "community development financial institution" as a private financial institution located in California that is certified by the COIN Office of the Department of Insurance, that has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. The term "CDFI" includes a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, and a community development venture fund.
- Prohibits the total amount of investments certified by the California Organized Investment Network (COIN) in a calendar year to any one CDFI, together with its affiliates, from exceeding 30% of the annual aggregate amount of qualified investment, except as provided.
- Requires that each year 10% of the annual aggregate amount of qualified investments be reserved for investment amounts of less than or equal to $200,000, except as specified.
- Requires that, in allocating the CDFI tax credit among housing applications, priority be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential program, and self-help housing ahead of single-family owned housing.
- Provides that the credit is subject to recapture if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another CDFI within 60 days. For a qualified investment that is reduced up to $50,000, only an amount equal to 20% of the total investment reduction is subject to recapture.
- Requires COIN to certify investments for the CDFI tax credit and authorizes COIN to do so until January 1, 2017.
- Allows a carryforward of the unused CDFI credit up to four taxable years, or until the credit has been exhausted, whichever occurs first.
- Authorizes COIN to certify investments for the credit on or before January 1, 2017.
- Provides that the CDFI tax credit is effective until December 1, 2017, and as of that date is repealed.
- Requires the Legislative Analyst's Office, to submit a report to the Legislature by June 30, 2016, on the effects of the CDFI tax credits, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
FISCAL EFFECT: The FTB staff estimates that this bill will result in an annual GF revenue loss of $0.6 million in fiscal year (FY) 2016-17, $1.9 million in FY 2017-18, and $3.2 million in FY 2018-19.
COMMENTS:
- Author's Statement. The author has provided the following statement in support of this bill:
"If the COIN tax credit is not extended, low and moderate income communities in California will lose the support of an effective program that incentivizes critical investments in their communities." - Background: The COIN Program. The COIN program was created in 1996 as a public-private partnership by the Department of Insurance, the insurance industry, state government leaders, and community development organizations with the goal of helping to address the unmet capital needs for economic development and affordable housing in low-income urban and rural communities throughout California. This voluntary program was established at the request of the insurance industry, "as an alternative to state legislation that would have required insurance companies to invest in low-income urban and rural communities, similar to the federal Community Reinvestment Act (CRA) that applies to the banking industry." (Insurance Commissioner Urges California Insurers to Invest in Low-Income Communities, Press Release, August 6, 2001.) The COIN program serves as a liaison between insurers that are seeking investment opportunities and the community organizations that are seeking investment capital for projects. CDFIs work with COIN - an office within the California Department of Insurance - as financial intermediaries providing access to credit, loans, and investments to small businesses and non-profits that serve economically disadvantaged communities. CDFIs also offer administrative and technical assistance in these low-income communities. Generally, CDFIs lend to borrowers that do not satisfy the criteria for conventional lenders and focus on a particular community or certain groups of people.
- The CDFI Tax Credit Program. In 1997, the COIN CDFI Tax Credit program was created to attract and leverage private capital to fund investments into CDFIs that yield economic and social benefits for California's underserved markets, as well as investments that yield environmental benefits. The program was set to expire at the end of 2011, but was extended until January 1, 2017. The amount of the credit is equal to 20% of each qualified investment of $50,000 or more made in a specified private financial institution located in California – a CDFI – that has been certified by the COIN as eligible. The COIN must certify each CDFI and each qualified investment.
A CDFI, among other requirements, must apply to COIN for certification of its status and on behalf of a taxpayer for certification of the credit amount allocated to the taxpayer. The COIN office generally approves applications on a first-come, first-serve basis, although it has some discretion in certifying CDFIs. However, the COIN may not allocate in any calendar year to any one CDFI, together with its affiliates, more than 30% of the annual aggregate amount of qualified investments certified by COIN, as specified. Additionally, each year 10% of the total aggregate amount of qualified investments must be reserved for investment amounts of less than or equal to $200,000 unless COIN determines after October 1 that the supply of credits exceed demand. Furthermore, among housing applications, priority must be granted to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
The goal of the CDFI tax credit program is to provide incentives to attract private capital investments that otherwise would not be available to CDFIs. This tax credit may be claimed by taxpayers against the insurance gross premium tax, the state CT, or the state PIT. The statewide amount of the credit for all recipients is capped at $10 million per year for the three taxes combined. Every $1 of the tax credit yields $5 of private investment, with the total tax credit allocation of $10 million generating up to $50 million of private investments in COIN-certified CDFIs. However, if less than $50 million is invested in qualified CDFIs in any calendar year, the remaining amount may be carried over to the next year and any succeeding year during which the credit remains in effect. More than $71 million in qualified investments were approved by the COIN, and more than $14 million of the tax credits were certified for the 2015 calendar year. The investment amounts range from $50,000 to $7.5 million. The majority of the investors are banks and financial institutions, but a few insurance companies, such as United Healthcare, CSAA Insurance Group, and Metropolitan Life Insurance Company, were also among the investors.
Most investments that qualify for the CDFI tax credit may also qualify for the federal New Markets tax credit. Furthermore, those investments may also qualify for the low-income housing tax credit and/or the hiring tax credit in targeted tax areas. The low-income housing tax credit and hiring tax credit programs are state tax programs that are also intended to generate new investment and economic activity in targeted communities.
- Federal "New Markets" Tax Credit Program. Existing federal law provides for a "new markets" tax credit that permits individuals and corporate taxpayers to receive a credit against their federal income taxes for making equity investments in investment vehicles known as Community Development Entities (CDEs). The primary mission of a CDE is to serve, or provide investment capital for, low-income communities or low-income persons, as specified. The federal credit amount is equal to 39% of the value of the qualified equity investment, and is spread over seven years. Thus, in each of the first three years, the federal credit amount is equal to 5% of qualified contributions and in each of the remaining four years the amount of credit is increased to 6% of qualified contributions. The Department of the Treasury administers the program and provides allocations of the federal credits to eligible community development entities through a competitive grant process when Congress makes the credits available. The federal limit of the total qualified investments from all taxpayers for 2015 is $3.5 billion.
- Gross Premiums Tax. Unlike the federal "New Markets" tax credit, the CDFI tax credit is also available to insurers that are subject to the gross premiums tax pursuant to the California Constitution (Section 28, Article. XIII, California Constitution). The gross premiums tax is an excise tax on insurers for the privilege of transacting insurance in California. The rate of gross premiums tax is equal to 2.35% of all premiums written. Section 28(a) of Article XIII of the California Constitution defines an "insurer" to include "insurance companies or associations and reciprocal or inter-insurance exchanges together with their corporate or other attorneys in fact considered as a single unit, and the State Compensation Insurance Fund." For most types of insurers, this tax is in lieu of all other taxes except property taxes and vehicle license fees. Thus, insurers do not pay tax on other forms of income, such as investment income or income earned from other trades or businesses. The statutory provisions relating to the assessment and collection of the tax are contained in Part 7 (commencing with Section 12001) of Division 2 of the Revenue and Taxation Code (R&TC).
The special tax treatment of insurance companies is primarily grounded in the economics of the insurance industry. Most corporate taxpayers calculate their income by subtracting costs incurred in the production of goods or services from the revenues received from their sale. Insurance companies, by contrast, collect their revenues up front, then make payments to policyholders based on contingent events that occur many months or years later. Thus, it can be difficult to "match up" revenues to related expenses. In an income tax framework, insurers ideally would be allowed to deduct the current value of all future obligations (claims) covered by the insurance policies they have written when calculating their taxable income for a given year. Because the actual amount of these obligations is uncertain, as are the amount of investment earnings on accumulated premiums received during the intervening period, an accurate determination of the theoretically appropriate amount of taxable income proves very difficult to achieve in practice. Insurers subject to the gross premiums tax do not pay tax on other forms of income, such as investment income, or income earned from other trades or businesses. - Temporary Exemption. SBx2 2 (Hernández), Chapter 2, Statutes of 2016, reduced the gross premiums tax rate from 2.35% to 0% for specified premiums received on or after July 1, 2016, and on or before June 30, 2019. The application of this temporary 0% rate is limited to premiums received by an insurer that provides health insurance and has a corporate affiliate, which is either a "health care service plan" or "health plan," meeting all the following requirements:
- The plan must be licensed by the Department of Managed Health Care or be a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services;
- The plan must have had at least one enrollee in the health plan in the base year, as specified; and,
- The plan must be subject to the new Managed Care Organization (MCO) Provider Tax enacted by this bill.
- The plan must be licensed by the Department of Managed Health Care or be a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services;
Thus, health insurers currently subject to the gross premiums tax will receive the functional equivalent of a gross premiums tax exemption for FYs 2016-17 through 2018-19, provided the insurer has a corporate affiliate operating as a health care service plan subject to the new MCO Provider tax. As such, it is unclear how much demand health insurers will have for the CDFI tax credit allocations in the next three years.
- Priority for Insurance Company Investors. For purposes of allocating the CDFI credit, this bill proposes to give priority to insurance companies over all other tax credit investors, such as banks, financial institutions, or private individuals. According to the author's office, the intent of this credit program is to incentivize insurance companies to invest in California's most underserved communities and that, after the passage of AB 32 (Perez), Chapter 608, Statutes of 2013, the Department of Insurance issued specific regulations to prioritize insurers' applications over all other applications.
Prior to the enactment of AB 32, the law required that priority be granted to applications that, among other things, represented investments from insurance companies subject to gross premiums tax. However, this preference for insurance companies (repealed by AB 32) was available only when credit demand exceeded supply. In contrast, this bill proposes to prioritize insurers' applications regardless of whether the demand for the CDFI tax credit exceeds supply. - The Recapture Requirement. Private investments have a minimum term of 60 months, and the CDFI tax credit is allocated in year one of the five-year investment period. The credit is subject to a 60-month recapture period if the investment is reduced or withdrawn. The COIN is required to provide the State Board of Equalization or the FTB, whichever is applicable, with an annual list of the names and identification numbers of any taxpayers who make any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
Existing law authorizes a recapture of the entire credit amount if the qualified investment is withdrawn before the end of the 60 months and not reinvested in another CDFI within 60 days. However, if a qualified investment is not withdrawn but reduced (not below $50,000), only an amount equal to 20% of the total reduction amount is subject to recapture. This bill proposes to delete the 20% recapture provision, which may be interpreted as allowing investors to reduce their investments prematurely without the threat of recapture. However, according to the author's office, the intent of this bill is not for the investor to be able to retain the credit while reducing the investment amount. Instead, the intent is to recapture the entire amount of the credit allowed if a reduction in the qualified investment occurs prior to the end of the 60th month period. Committee staff was informed that the author plans to revise the 20% recapture provision to reflect this intent. - The Report by the Legislative Analyst's Office (LAO). As required by existing law, on April 14, 2011, the LAO issued an analysis of the CDFI tax credit, discussing the credit's fiscal impact and the resulting benefits to economically disadvantaged communities and low-income people in California. The LAO report noted all the following:
- Economic Impact. While the LAO was unable to estimate the economic impact of the tax credits, it states that "in many cases investments in the CDFIs would not have been made in the credit's absence." The report admits that "some of the credits have benefited larger CDFIs that are capable of raising funds in other ways and for which the credit-funded investments represent a smaller portion of their total assets." However, the LAO found that, even in those cases, the tax credits "helped generate investment activity that otherwise might not have been funded."
- Credit Percentage Seems Reasonable. The credit refunds a percentage of the invested amount, which translates into approximately "2.5 to 3 percentage points on a ten-year loan at prevailing interest rates," which is "about one-half of the interest spread between a fairly safe investment and a very risky one." While the LAO did not find a 20% subsidy to be too high or too low, it noted that "changing conditions in financial markets in the future could warrant a different subsidy percentage for this credit."
- Owned Versus Rental Housing. In light of the higher credit standards for home purchase loans since the collapse of the housing market, the LAO suggests that in order to benefit low-income individuals, the CDFI tax credit program should focus on investments in rental housing, at least in the near future.
- First–Come, First–Serve Tax Credits Can Be Problematic. The LAO advises to authorize COIN or some other entity to award the credits competitively, instead of a first-come, first-served basis, to allow the state to prioritize CDFI investment if there is more demand for the credit in the future.
- Economic Impact. While the LAO was unable to estimate the economic impact of the tax credits, it states that "in many cases investments in the CDFIs would not have been made in the credit's absence." The report admits that "some of the credits have benefited larger CDFIs that are capable of raising funds in other ways and for which the credit-funded investments represent a smaller portion of their total assets." However, the LAO found that, even in those cases, the tax credits "helped generate investment activity that otherwise might not have been funded."
- New LAO Report. Existing law requires the LAO to submit a new report to the Legislature, on or before June 30, 2016, regarding the effects of the CDFI tax credits on employment in low-to-moderate income and rural areas and the benefits of these tax credits to low-to-moderate income and rural persons. In light of this requirement, the Committee may wish to consider whether it is prudent to review the LAO findings prior to extending the COIN program for another ten years.
- Double-Referral. This bill has been double-referred to the Assembly Committee on Insurance.
- Prior Legislation. AB 32 (Perez), Chapter 608, Statutes of 2013, increased the annual aggregate amount of qualified investments eligible for the CDFI tax credit from $10 million to $50 million.
AB 624 (Pérez), Chapter 436, Statutes of 2011, extended the CDFI tax credit program from January 1, 2012 until January 1, 2017.
AB 2832 (Ridley-Thomas), Chapter 580, Statutes of 2006, extended the operation of the CDFI tax credit program from January 1, 2007 until January 1, 2012.
SB 409 (Vincent), Chapter 535, Statutes of 2001, extended the operation of the CDFI tax credit program from January 1, 2002 until January 1, 2007.
AB 1520 (Vincent), Chapter 947, Statutes of 1997, established the CDFI tax credit program until January 1, 2002.
REGISTERED SUPPORT / OPPOSITION:
Support
California Department of Insurance (Sponsor)
Burbank Housing Development Corporation
Opposition
None on file
Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098
Discussed in Hearing
56SEC
Assembly Floor
2MIN
Senate Floor
1MIN
Senate Standing Committee on Governance and Finance
1MIN
Assembly Floor
Bill Author
Bill Co-Author(s):