SB 325: Pilot Program for Increased Access to Responsible Small Dollar Loans.
- Session Year: 2017-2018
- House: Senate
- Latest Version Date: 2017-06-15
(1)Existing law, the California Finance Lenders Law, generally provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight and makes a willful violation of its provisions a crime. That law, until January 1, 2023, establishes the Pilot Program for Increased Access to Responsible Small Dollar Loans, which requires licensees and other entities that wish to participate in the program to file an application and pay a specified fee to the commissioner to participate in the program. The program authorizes a licensee approved by the commissioner to participate in the program to impose specified alternative interest rates and charges, including an administrative fee and delinquency fees, on unsecured loans of at least $300 and less than $2,500, subject to certain requirements. The program permits a licensee to use a finder, which is defined as an entity that, at its physical location for business, brings together a borrower and a licensee to negotiate a loan under the program. The program requires the commissioner, annually until July 1, 2021, as specified, to post a report on his or her Internet Web site summarizing utilization of the program. Existing law requires licensed finance lenders to perform specified actions when a loan is repaid, including providing a borrower with certain documents marked paid or an optical reproduction of them.
This bill would permit a licensee that consummates electronically an unsecured loan under the Pilot Program for Increased Access to Responsible Small Dollar Loans to satisfy the requirements to provide a borrower with documents marked paid by providing the borrower or person making final payment with a receipt, as specified. The bill would eliminate the upper limit on the amount of a permissible loan under the pilot program and make corresponding changes. The bill would revise the statement of legislative findings for the program and specify the applicability of certain pilot program requirements on licensees and specified associates, when making loans above $2,500. The bill would revise the term finder to instead be referral partner and would make various conforming changes in this regard. The bill would revise the conditions under which a licensee may refinance a loan under the pilot program to apply to borrowers who have been current on their loans for a minimum of 8 consecutive months. The bill would permit a referral agents activities to be done through other means and not necessarily at his or her physical business location. The bill would delete other provisions connected to an entity who uses an electronic access point, as specified, or personally contacts a borrower at a physical business location, among other things. The bill would prohibit a referral partner from performing unsolicited door-to-door or telephonic solicitation. The bill would require licensees who that use referral agents to provide them training, as specified, and to implement procedures to ensure that referral partners act in compliance with the law. The bill would also eliminate the requirement that a licensee provide a borrower of a consummated loan a written copy of a specified disclosure notice within 2 weeks of consummation. The bill would revise requirements on compensating finders by eliminating a limit on total compensation paid over the life of a loan and would prescribe limits on compensation with reference to the contractual lengths of loans. The bill would revise the content of the report that the Commissioner of Business Oversight is required to provide to include certain information on loan applicants who were denied loans and for borrowers who did and did not have credit scores when they obtained loans, among other things. By expanding the definition of a crime, this bill would impose a state-mandated local program.
(2)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
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 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. Existing law also 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. These provisions are repealed as of December 1, 2017.This bill would extend the repeal date of these provisions from December 1, 2017, to January 1, 2022.The bill would also make conforming changes and delete obsolete provisions.This bill would declare that it is to take effect immediately as an urgency statute.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 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. Existing law also 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. These provisions are repealed as of December 1, 2017.
This bill would extend the repeal date of these provisions from December 1, 2017, to January 1, 2021. 2022.
The bill would also make conforming changes and delete obsolete provisions.
This bill would declare that it is to take effect immediately as an urgency statute.
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 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. Existing law also 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. These provisions are repealed as of December 1, 2017.
This bill would extend the repeal date of these provisions from December 1, 2017, to January 1, 2021.
The bill would also make conforming changes and delete obsolete provisions.
Any section that refers to this section does not apply to any loan of the bona fide principal amount specified in the regulatory ceiling provision of that section or more if that provision is not used for the purpose of evading this division. In determining under Section 22250, 22303, or 22304 or any section that refers to this section whether a loan is a loan of a bona fide principal amount of the amount specified in that section or more and whether the regulatory ceiling provision of that section is used for the purpose of evading this division, the following principles apply:
(a)If a borrower applies for a loan in a bona fide principal amount of less than the specified amount and a loan to that borrower of a bona fide principal amount of the specified amount or more if made by a licensed finance lender, no adequate economic reason for the increase in the size of the loan exists, and by prearrangement or understanding between the borrower and the licensee a substantial payment is to be made upon the loan with the effect of reducing the bona fide principal amount of the loan to less than the specified amount within a short time after the making of the loan other than by reason of a requirement that the loan be paid in substantially equal periodical installments, then the loan shall not be deemed to be a loan of the bona fide principal amount of the specified amount or more and the regulatory ceiling provisions shall be deemed to be used for the purpose of evading this division unless the loan complies with the other provisions of the section that includes the regulatory ceiling provisions.
(b)If a loan made by a licensed finance lender is in a bona fide principal amount of the specified amount or more, the fact that the transaction is in the form of a sale of accounts, chattel paper, goods, or instruments or a lease of goods, or in the form of an advance on the purchase price of any of the foregoing, shall not be deemed to affect the loan or the bona fides of the amount thereof or to indicate that the regulatory ceiling provisions are used for the purpose of evading this division.
(c)For the purposes of determining whether the loan amount exceeds a regulatory ceiling, the bona fide principal amount shall not be comprised of any charges or any other fees or recompense specified in Sections 22200, 22201 (including, but not limited to, amounts paid for insurance of the types specified in Sections 22313 and 22314), 22202, 22305, 22316, 22317, 22318, 22319, 22320, 22320.5, and 22336. 22336, and 22370. Nothing in this subdivision shall be construed to prevent those specified charges, fees, and recompense that have been earned and remain unpaid in an existing loan from being considered as part of the bona fide principal amount of a new loan to refinance that existing loan, provided the new loan is not made for the purpose of circumventing a regulatory ceiling provision. This subdivision is intended to define the meaning of bona fide principal amount as used in this division solely for the purposes of determining whether the loan amount exceeds a regulatory ceiling, and is not intended to affect the meaning of principal for any other purpose.
SEC. 2.Section 22337 of the Financial Code is amended to read:22337.Each licensed finance lender shall:
(a)Deliver or cause to be delivered to the borrower, or any one thereof, at the time the loan is made, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any. The statement shall show the date, amount, and maturity of the loan contract, how and when repayable, the nature of the security for the loan, if any, and the agreed rate of charge or the annual percentage rate pursuant to Regulation Z promulgated by the Consumer Financial Protection Bureau (12 C.F.R. 1026).
(b)Obtain from the borrower a signed statement as to whether any person has performed any act as a broker in connection with the making of the loan. If the statement discloses that a broker or other person has participated, then the finance lender shall obtain a full statement of all sums paid or payable to the broker or other person. The finance lender shall keep these statements for a period of three years from and after the date the loan has been paid in full, or has matured according to its terms, or has been charged off.
(c)Permit payment to be made in advance in any amount on any contract of loan at any time. The licensee may apply the payment first to any agreed prepayment penalty, then to all charges due, including charges at the agreed rate or rates up to the date of payment, not to exceed the applicable maximum rate permitted by this article.
(d)Deliver or cause to be delivered to the person making any cash payment, or to the person who requests a receipt at the time of making any payment, at the time payment is made on account of any loan, a plain and complete receipt showing the total amount received and identifying the loan contract upon which the payment is applied.
(e)(1)Upon repayment of any loan in full, release all security for the loan, endorse and return any certificate of ownership, and cancel or plainly mark paid and return to the borrower or person making final payment, any note, mortgage, security agreement, trust deed, assignment, or order signed by the borrower, or an optical image reproduction thereof, except those documents that are a part of the court record in any action, or that have been delivered to a third person for the purpose of carrying out their terms, or a security agreement that secures any other indebtedness of a borrower to the licensee, or original documents otherwise required by law. When a trust deed on real property has been taken as security for a loan that has been subsequently paid in full, a duly executed request for reconveyance shall be delivered to the trustor or trustee for the purpose of recording a reconveyance. A termination statement, furnished to the borrower as provided for in Sections 9512 and 9513 of the Commercial Code, shall be deemed a release of the security when a financing statement has been filed pursuant to Section 9501 of the Commercial Code.
For purposes of this subdivision, an optical image reproduction shall meet all of the following requirements:
(1)(A)The optical image storage media used to store the document shall be nonerasable write once, read many (WORM) optical image media that does not allow changes to the stored document.
(2)(B)The optical image reproduction shall be made consistent with the minimum standards of quality approved by either the National Institute of Standards and Technology or the Association for Information and Image Management.
(3)(C)Written authentication identifying the optical image reproduction as an exact unaltered copy of the note, trust deed, mortgage, security agreement, assignment or order shall be stamped or printed on the optical image reproduction.
(2)Notwithstanding paragraph (1), if an unsecured loan subject to Article 3.6 (commencing with Section 22365) is consummated electronically, a licensee may comply with the requirement to plainly mark paid and return to the borrower or person making final payment the note or an optical image reproduction thereof, by providing the borrower or person making final payment with a receipt that contains the words paid in full and that show a balance due of zero dollars and zero cents ($0.00).
(f)Deliver or cause to be delivered to the potential borrower, or any one thereof, at the time the licensee first requires or accepts any signed instrument or the payment of any fee, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any.
SEC. 3.Section 22365 of the Financial Code is amended to read:22365.(a)The Pilot Program for Increased Access to Responsible Small Dollar Loans is hereby established.
(b)The Legislature finds and declares that consumer demand for responsible installment loans in principal amounts of at least three hundred dollars ($300) but less than two thousand five hundred dollars ($2,500) exceeds the supply of these loans. In 2010, the Legislature enacted the Pilot Program for Affordable Credit-Building Opportunities, as a first step toward addressing this gap. Californias experience to date with that pilot program has identified several improvements that could be made, which would allow more Californians to access responsible installment loans of at least three hundred dollars ($300) but less than two thousand five hundred dollars ($2,500). This new Pilot Program for Increased Access to Responsible Small Dollar Loans is intended to implement those improvements.
(c)For purposes of this article:
(1)Commissioner means the Commissioner of Business Oversight.
(2)Program means the Pilot Program for Increased Access to Responsible Small Dollar Loans.
(3)Pursuant to Section 22380.5, licensee also includes a licensee approved to participate in the former Pilot Program for Affordable Credit-Building Opportunities as described in Article 3.5 (commencing with Section 22348).
(4)A licensee that makes loans in amounts below two thousand five hundred dollars ($2,500) in accordance with the provisions of this article may opt to use the flexibility provided under this article on loans with higher principal amounts, if that licensee and, if applicable, its referral partners, comply with all of the provisions of this article that impose requirements and limitations on the actions of that licensee and its referral partners.
SEC. 4.Section 22370 of the Financial Code is amended to read:22370.(a)Any loan made pursuant to this section shall comply with the following requirements:
(1)The loan shall be unsecured.
(2)Interest on the loan shall accrue on a simple-interest basis, through the application of a daily periodic rate to the actual unpaid principal balance each day.
(3)The licensee shall disclose the following to the consumer in writing, in a typeface no smaller than 12-point type, at the time of application:
(A)The amount borrowed; the total dollar cost of the loan to the consumer if the loan is paid back on time, including the sum of the administrative fee, principal amount borrowed, and interest payments; the corresponding annual percentage rate, calculated in accordance with Federal Reserve Board Regulation Z (12 C.F.R. 226); the periodic payment amount; the delinquency fee schedule; and the following statement: Repaying your loan early will lower your borrowing costs by reducing the amount of interest you will pay. This loan has no prepayment penalty.
(B)A statement that the consumer has the right to rescind the loan by notifying the licensee of the consumers intent to rescind the loan and returning the principal advanced by the end of the business day following the date the loan is consummated.
(4)A licensee may provide the borrower with the disclosures required by paragraph (3) in a mobile or other electronic application, on which the size of the typeface of the disclosure can be manually modified by a prospective borrower, if the prospective borrower is given the option to print the disclosure in a typeface of at least 12-point size or is provided by the licensee with a hardcopy of the disclosure in a typeface of at least 12-point size before the loan is consummated.
(5)The loan shall have a minimum principal amount upon origination of three hundred dollars ($300) and a term of not less than the following:
(A)Ninety days for loans whose principal balance upon origination is less than five hundred dollars ($500).
(B)One hundred twenty days for loans whose principal balance upon origination is at least five hundred dollars ($500), but is less than one thousand five hundred dollars ($1,500).
(C)One hundred eighty days for loans whose principal balance upon origination is at least one thousand five hundred dollars ($1,500).
(b)As an alternative to the charges authorized by Section 22303 or 22304, a licensee approved by the commissioner to participate in the program may contract for and receive charges for a loan made pursuant to this section at an annual simple interest rate not to exceed the following:
(1)The lesser of 36 percent or the sum of 32.75 percent plus the United States prime lending rate, as of the date of loan origination, on that portion of the unpaid principal balance of the loan up to and including, but not in excess of, one thousand dollars ($1,000). The interest rate calculated as of the date of loan origination shall be fixed for the life of the loan.
(2)The lesser of 35 percent or the sum of 28.75 percent plus the United States prime lending rate, as of the date of loan origination, on that portion of the unpaid principal balance of the loan in excess of one thousand dollars ($1,000), but less than two thousand five hundred dollars ($2,500). ($1,000). The interest rate calculated as of the date of loan origination shall be fixed for the life of the loan.
(c)(1)As to any loan made under this section, a licensee approved by the commissioner to participate in the program may contract for and receive an administrative fee, which shall be fully earned immediately upon making the loan, in an amount not to exceed the applicable of the following:
(A)Seven percent of the principal amount, exclusive of the administrative fee, or ninety dollars ($90), whichever is less, on the first loan made to a borrower.
(B)Six percent of the principal amount, exclusive of the administrative fee, or seventy-five dollars ($75), whichever is less, on the second and subsequent loans made to that borrower.
(2)A licensee shall not charge the same borrower an administrative fee more than once in any four-month period.
(3)For purposes of this section, refinance means the replacement or revision of an existing loan contract with a borrower that results in an extension of additional principal to that borrower. A licensee shall not refinance a loan made under this section, unless all of the following conditions are met at the time the borrower submits an application to refinance:
(A)The borrower has repaid at least 60 percent of the outstanding principal remaining on his or her loan. loan or has been current on his or her loan for a minimum of eight consecutive months.
(B)The borrower is current on his or her outstanding loan.
(C)The licensee underwrites the new loan in accordance with paragraph (4) of subdivision (g).
(D)If the loan proceeds of both the original loan and the refinance loan are to be used for personal, family, or household purposes, the borrower has not previously refinanced the outstanding loan more than once.
(4)Notwithstanding paragraph (3), an administrative fee shall not be contracted for or received in connection with the refinancing of a loan unless at least eight months have elapsed since the receipt of a previous administrative fee paid by the borrower. With the exception of a loan that is refinanced, only one administrative fee may be contracted for or received until the loan has been repaid in full. Section 22305 shall not apply to any loan made under this section.
(d)Notwithstanding subdivision (a) of Section 22320.5, a licensee approved by the commissioner to participate in the program may require reimbursement from a borrower for the actual insufficient funds fees incurred by that licensee due to actions of the borrower, and may contract for and receive a delinquency fee that is one of the following amounts:
(1)For a period of delinquency of not less than seven days, an amount not in excess of fourteen dollars ($14).
(2)For a period of delinquency of not less than 14 days, an amount not in excess of twenty dollars ($20).
(e)If a licensee opts to impose a delinquency fee, it shall use the delinquency fee schedule described in subdivision (d), subject to all of the following:
(1)No more than one delinquency fee may be imposed per delinquent payment.
(2)No more than two delinquency fees may be imposed during any period of 30 consecutive days.
(3)No delinquency fee may be imposed on a borrower who is 180 days or more past due if that fee would result in the sum of the borrowers remaining unpaid principal balance, accrued interest, and delinquency fees exceeding 180 percent of the original principal amount of the borrowers loan.
(4)The licensee or any of its wholly owned subsidiaries shall attempt to collect a delinquent payment for a period of at least 30 days following the start of the delinquency before selling or assigning that unpaid debt to an independent party for collection.
(f)The licensee shall develop and implement policies and procedures designed to respond to questions raised by applicants and borrowers regarding their loans, including those involving finders, referral partners, and to address customer complaints as soon as reasonably practicable.
(g)The following shall apply to a loan made by a licensee pursuant to this section:
(1)Prior to disbursement of loan proceeds, the licensee shall either (A) offer a credit education program or seminar to the borrower that has been previously reviewed and approved by the commissioner for use in complying with this section; or (B) invite the borrower to a credit education program or seminar offered by an independent third party that has been previously reviewed and approved by the commissioner for use in complying with this section. The borrower shall not be required to participate in either of these education programs or seminars. A credit education program or seminar offered pursuant to this paragraph shall be provided at no cost to the borrower.
(2)The licensee shall report each borrowers payment performance to at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, upon acceptance as a data furnisher by that consumer reporting agency. For purposes of this section, a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis is one that meets the definition in Section 603(p) of the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). Any licensee that is accepted as a data furnisher after admittance into the program must report all borrower payment performance since its inception of lending under the program, as soon as practicable after its acceptance into the program, but in no event more than six months after its acceptance into the program.
(A)The commissioner may approve a licensee for the program, before that licensee has been accepted as a data furnisher by a consumer reporting agency, if the commissioner has a reasonable expectation, based on information supplied by the licensee, of both of the following:
(i)The licensee will be accepted as a data furnisher, once it achieves a lending volume required of data furnishers of its type by a consumer reporting agency.
(ii)That lending volume will be achieved within the first six months of the licensee commencing lending.
(B)Notwithstanding subparagraph (A), the commissioner shall withdraw approval for pilot program participation from any licensee that fails to become accepted as a data furnisher by a consumer reporting agency within six months of commencing lending under the pilot program.
(3)The licensee shall provide each borrower with the name of the consumer reporting agency or agencies to which it will report the borrowers payment history. A licensee that is accepted as a data furnisher after admittance into the program shall notify its borrowers, as soon as practicable following acceptance as a data furnisher, regarding the name of the consumer reporting agency or agencies to which it will report that borrowers payment history.
(4)(A)The licensee shall underwrite each loan to determine a borrowers ability and willingness to repay the loan pursuant to the loan terms, and shall not make a loan if it determines, through its underwriting, that the borrowers total monthly debt service payments, at the time of origination, including the loan for which the borrower is being considered, and across all outstanding forms of credit that can be independently verified by the licensee, exceed 50 percent of the borrowers gross monthly income.
(B)(i)The licensee shall seek information and documentation pertaining to all of a borrowers outstanding debt obligations during the loan application and underwriting process, including loans that are self-reported by the borrower but not available through independent verification. The licensee shall verify that information using a credit report from at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis or through other available electronic debt verification services that provide reliable evidence of a borrowers outstanding debt obligations.
(ii)Notwithstanding the verification requirement in subparagraph (A), the licensee shall request from the borrower and include all information obtained from the borrower regarding outstanding deferred deposit transactions in the calculation of the borrowers outstanding debt obligations.
(iii)The licensee shall not be required to consider, for purposes of debt-to-income ratio evaluation, loans from friends or family.
(C)The licensee shall also verify the borrowers income that the licensee relies on to determine the borrowers debt-to-income ratio using information from either of the following:
(i)Electronic means or services that provide reliable evidence of the borrowers actual income.
(ii)Internal Revenue Service Form W-2, tax returns, payroll receipts, bank statements, or other third-party documents that provide reasonably reliable evidence of the borrowers actual income.
(5)The licensee shall notify each borrower, at least two days prior to each payment due date, informing the borrower of the amount due, and the payment due date. Notification may be provided by any means mutually acceptable to the borrower and the licensee. A borrower shall have the right to opt out of this notification at any time, upon electronic or written request to the licensee. The licensee shall notify each borrower of this right prior to disbursing loan proceeds.
(h)(1)Notwithstanding Sections 22311 to 22315, inclusive, no person, in connection with, or incidental to, the making of any loan made pursuant to this article, may offer, sell, or require the borrower to contract for credit insurance as defined in paragraph (1) of subdivision (a) of Section 22314 or insurance on tangible personal or real property of the type specified in Section 22313.
(2)Notwithstanding Sections 22311 to 22315, inclusive, no licensee, finder, referral partner, or any other person that participates in the origination of a loan under this article shall refer a borrower to any other person for the purchase of credit insurance as defined in paragraph (1) of subdivision (a) of Section 22314 or insurance on tangible personal or real property of the type specified in Section 22313.
(i)(1)No licensee shall require, as a condition of providing the loan, that the borrower waive any right, penalty, remedy, forum, or procedure provided for in any law applicable to the loan, including the right to file and pursue a civil action or file a complaint with or otherwise communicate with the commissioner or any court or other public entity, or that the borrower agree to resolve disputes in a jurisdiction outside of California or to the application of laws other than those of California, as provided by law. Any waiver by a borrower must be knowing, voluntary, and in writing, and expressly not made a condition of doing business with the licensee. Any waiver that is required as a condition of doing business with the licensee shall be presumed involuntary, unconscionable, against public policy, and unenforceable. The licensee has the burden of proving that a waiver of any rights, penalties, forums, or procedures was knowing, voluntary, and not made a condition of the contract with the borrower.
(2)No licensee shall refuse to do business with or discriminate against a borrower or applicant on the basis that the borrower or applicant refuses to waive any right, penalty, remedy, forum, or procedure, including the right to file and pursue a civil action or complaint with, or otherwise notify, the commissioner or any court or other public entity. The exercise of a persons right to refuse to waive any right, penalty, remedy, forum, or procedure, including a rejection of a contract requiring a waiver, shall not affect any otherwise legal terms of a contract or an agreement.
(3)This subdivision shall not apply to any agreement to waive any right, penalty, remedy, forum, or procedure, including any agreement to arbitrate a claim or dispute, after a claim or dispute has arisen. Nothing in this subdivision shall affect the enforceability or validity of any other provision of the contract.
(j)This section shall not apply to any loan of a bona fide principal amount of two thousand five hundred dollars ($2,500) or more as determined in accordance with Section 22251. For purposes of this subdivision, bona fide principal amount shall be determined in accordance with Section 22251.SEC. 5.Section 22371 of the Financial Code is amended to read:22371.(a)A licensee who is approved by the commissioner to participate in the program may use the services of one or more finders referral partners as provided in this article.
(b)For purposes of this article, a finder referral partner means an entity that, at the finders referral partners physical location for business, business or through online, mobile telephone direct mail, or in-person marketing channels, brings a licensee and a prospective borrower together for the purpose of negotiating a loan contract.
(c)An entity, whose sole means of bringing a licensee and a prospective borrower together at that entitys physical location for business is via an electronic access point through which a prospective borrower may directly access the Internet Web site of a licensee is not a finder for purposes of this article.SEC. 6.Section 22372 of the Financial Code is amended to read:22372.(a)A finder referral partner may perform one or more of the following services for a licensee at the finders physical location for business: licensee:
(1)Distributing, circulating, using, or publishing preprinted brochures, flyers, factsheets, or other written materials relating to loans that the licensee may make or negotiate and that have been reviewed and approved in writing by the licensee prior to their being distributed, circulated, or published.
(2)Providing written factual information about loan terms, conditions, or qualification requirements to a prospective borrower that has been either prepared by the licensee or reviewed and approved in writing by the licensee. A finder referral partner may discuss that information with a prospective borrower in general terms, but may not provide counseling or advice to a prospective borrower.
(3)Notifying a prospective borrower of the information needed in order to complete a loan application without providing counseling or advice to a prospective borrower.
(4)Entering information provided by the prospective borrower on a preprinted or electronic application form or onto a preformatted computer database without providing counseling or advice to a prospective borrower.
(5)Assembling credit applications and other materials obtained in the course of a credit application transaction for submission to the licensee.
(6)Contacting the licensee to determine the status of a loan application.
(7)Communicating a response that is returned by the licensees automated underwriting system to a borrower or a prospective borrower.
(8)Obtaining a borrowers signature on documents prepared by the licensee and delivering final copies of the documents to the borrower.
(b)A finder referral partner that is licensed or regulated pursuant to this division, Division 1.1 (commencing with Section 1000), Division 1.2 (commencing with Section 2000), Division 3 (commencing with Section 12000), Division 5 (commencing with Section 14000), Division 6 (commencing with Section 17000), Division 7 (commencing with Section 18000), Division 8 (commencing with Section 21000), Division 10 (commencing with Section 23000), or Division 20 (commencing with Section 50000) of this code; Chapter 5 (commencing with Section 1621) of Part 2 of Division 1 of the Insurance Code; Chapter 1 (commencing with Section 5000) of Division 3 of the Business and Professions Code; is an approved agent of a person licensed pursuant to Division 1.2 (commencing with Section 2000) of this code; or is a federally regulated bank, thrift, or credit union, may additionally provide any of the following services on behalf of the licensee for any loan for which the finder referral partner performed finding activities:
(1)Disbursing loan proceeds to a borrower, if this method of disbursement is acceptable to the borrower.
(A)Any loan disbursement made by a finder referral partner under this subdivision shall be deemed made by the licensee on the date the funds are disbursed or otherwise made available by the finder referral partner to the borrower.
(B)A finder referral partner that disburses loan proceeds to a borrower shall deliver or cause to be delivered to the borrower at the time loan proceeds are disbursed a plain and complete receipt showing all of the following:
(i)The date of disbursement.
(ii)The total amount disbursed.
(iii)The corresponding loan account identification.
(iv)The following statement, prominently displayed in a type size equal to or greater than the type size used to display the other items on the receipt: If you have any questions about your loan, now or in the future, you should direct those questions to [name of licensee] by [insert at least two different ways in which a borrower may contact the licensee].
(2)Receiving loan payment or payments from the borrower, if this method of payment is acceptable to the borrower.
(A)Any loan payment made by a borrower to a finder referral partner under this subdivision shall be applied to the borrowers loan and deemed received by the licensee as of the date the payment is received by the finder. referral partner.
(B)A finder referral partner that receives loan payments under this subdivision shall deliver or cause to be delivered to the borrower at the time that the payment is made by the borrower, a plain and complete receipt showing all of the following:
(i)The name of the finder. referral partner.
(ii)The total payment amount received.
(iii)The date of payment.
(iv)The corresponding loan account identification upon which the payment is being applied.
(v)The loan balance prior to and following application of the payment.
(vi)The amount of the payment that was applied to principal, interest, and fees.
(vii)The type of payment, such as cash, automated clearing house (ACH) transfer, check, money order, or debit card.
(viii)The following statement, prominently displayed in a type size equal to or greater than the type size used to display the other items on the receipt: If you have any questions about your loan, now or in the future, you should direct those questions to [name of licensee] by [insert at least two different ways in which a borrower may contact the licensee].
(C)A borrower who submits a loan payment to a finder referral partner under this subdivision shall not be liable for any failure or delay by the finder referral partner in transmitting the payment to the licensee.
(D)A finder referral partner that disburses or receives loan payments pursuant to this subdivision shall maintain records of all disbursements made and loan payments received for a period of at least two years or until one month following the completion of an examination of the licensee by the commissioner, whichever is later. The commissioner shall determine when an examination is complete.
(3)Providing any notice or disclosure required to be provided to the borrower by the licensee, other than the notice required to be provided by the licensee to the borrower pursuant to subdivision (d) of Section 22373. A licensee that uses a finder referral partner to provide notices or disclosures to borrowers shall maintain a record of which notices and disclosures each finder referral partner provides to borrowers on its behalf, for the purpose of facilitating the commissioners examination of the licensee.
(c)A finder referral partner shall not engage in either any of the following activities:
(1)Providing counseling or advice to a borrower or prospective borrower.
(2)Providing loan-related marketing material that has not previously been approved by the licensee to a borrower or a prospective borrower.
(3)Performing unsolicited door-to-door or telephonic solicitation of borrowers or prospective borrowers.
(d)Any person who performs one or more of the following activities is a broker within the meaning of Section 22004 rather than a finder referral partner within the meaning of this section:
(1)Negotiating the price, length, or any other loan term between a licensee and a prospective borrower.
(2)Advising either a prospective borrower or a licensee as to any loan term.
(3)Offering information pertaining to a single prospective borrower to more than one licensee, except that, if a licensee has declined to offer a loan to a prospective borrower and has so notified that prospective borrower in writing, the person may then offer information pertaining to a single prospective borrower to another licensee with which it has a finders referral partners agreement.
(4)Personally contacting or providing services to a borrower or prospective borrower at any place other than the finders physical location for business.(e)A finder referral partner shall comply with all laws applicable to the licensee that impose requirements upon the licensee for safeguards for information security.
(f)A licensee that uses the services of one or more referral partners shall train each referral partner to ensure that the partner understands the applicable requirements of this article, the permitted and prohibited acts of this article, and other relevant state and federal laws.
(g)A licensee that uses the services of one or more referral partners shall develop and implement policies and procedures reasonably intended to ensure each referral partners compliance with the provisions of this article and other relevant state and federal laws.
SEC. 7.Section 22373 of the Financial Code is amended to read:22373.(a)At the time the finder referral partner receives or processes an application for a program loan, the finder referral partner shall provide the following statement to the applicant, on behalf of the licensee, in no smaller than 10-point type, and shall ask the applicant to acknowledge receipt of the statement in writing:
Your loan application has been referred to us by [Name of Finder]. Referral Partner]. We may pay a fee to [Name of Finder] Referral Partner] for the successful referral of your loan application. IF YOU ARE APPROVED FOR THE LOAN, [NAME OF LICENSEE] WILL BECOME YOUR LENDER, AND YOU WILL BE BUILDING A RELATIONSHIP WITH [NAME OF LICENSEE]. If you have any questions about your loan, now or in the future, you should direct those questions to [name of licensee] by [insert at least two different ways in which a borrower may contact the licensee]. If you wish to report a complaint about [Name of Finder] Referral Partner] or [Name of Licensee] regarding this loan transaction, you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(b)If the loan applicant has questions about the loan that the finder referral partner is not permitted to answer, the finder referral partner shall make a good faith effort to assist the applicant in making direct contact with the lender before the loan is consummated. This good faith effort shall, at a minimum, consist of assisting the applicant in communicating with the licensee as soon as reasonably practicable, which shall at a minimum include a two-way communication. For purposes of this section, two-way communication includes telephone, electronic mail, or another form of communication that allows the applicant to communicate with the licensee.
(c)Using the policies developed pursuant to subdivision (f) of Section 22370, the licensee shall ensure that a loan is not consummated until the licensee has completed a two-way communication with the applicant. Sending a voicemail or electronic message to the applicant, without a prior or subsequent response from the applicant, shall not constitute a two-way communication.
(d)If the loan is consummated, the licensee shall provide the borrower a written copy of the disclosure notice within two weeks following the date of the loan consummation. A licensee may include the disclosure within its loan contract, or may provide it as a separate document to the borrower, via any means acceptable to the borrower.SEC. 8.Section 22374 of the Financial Code is amended to read:22374.(a)A finder referral partner may be compensated by the licensee pursuant to the written agreement between the licensee and the finder, referral partner, as described in Section 22376. Compensation may be paid in accordance with a compensation schedule that is mutually agreed to by the licensee and the finder. referral partner.
(b)Notwithstanding subdivision (a), the compensation of a finder referral partner by a licensee shall be subject to all of the following requirements:
(1)No compensation shall be paid to a finder referral partner in connection with a loan application unless that loan is consummated.
(2)No compensation shall be paid to a finder referral partner based upon the principal amount of the loan.
(3)The total compensation paid by a licensee to a finder over the life of a loan shall not exceed the sum of the origination fee and interest charges paid by the borrower in connection with that loan.(4)(3)Subject to the limitations set forth in paragraphs (1) to (3), inclusive, and (2), and exclusive of servicing fees, the total compensation paid by a licensee to a finder for the services set forth in subdivision (a) of Section 22372 referral partner shall not exceed sixty-five dollars ($65) per loan, the following, whether paid at the time of consummation, over installments, or in a manner otherwise agreed upon by the licensee and the finder, plus referral partner:
(A)Sixty-five dollars ($65) on each loan with a contractual loan length of 18 months or less, the amount to be calculated as an average across all loans with contractual lengths of 18 months or less.
(B)One hundred dollars ($100) on each loan with a contractual loan length of more than 18 months, the amount to be calculated as an average across all loans with contractual lengths of more than 18 months.
(4)A licensee may also pay a referral partner up to two dollars ($2) per payment received by the finder referral partner on behalf of the licensee for the duration of the loan, when the finder referral partner receives borrower loan payments on the licensees behalf in accordance with subdivision (b) of Section 22372.
(5)The finders referral partners location for services under this article and other information required by Section 22375 has been reported to the commissioner and the finder referral partner has not been barred from providing services at that location by the commissioner.
(c)No licensee shall, directly or indirectly, pass on to a borrower any fee or other compensation, or any portion of any fee or other compensation, that the licensee pays to a finder referral partner in connection with that borrowers loan.
SEC. 9.Section 22375 of the Financial Code is amended to read:22375.A licensee that utilizes the service of a finder referral partner shall do all of the following:
(a)Notify the commissioner within 15 days of entering into a contract with a finder, referral partner, on a form acceptable to the commissioner, regarding all of the following:
(1)The name, business address, and licensing details of the finder referral partner and all locations at which the finder referral partner will perform services under this article.
(2)The name and contact information for an employee of the finder referral partner who is knowledgeable about, and has the authority to execute, the contract governing the business relationship between the finder referral partner and the licensee.
(3)The name and contact information for one or more employees of the finder referral partner who are responsible for that finders referral partners finding activities on behalf of the licensee.
(4)A list of the activities the finder referral partner shall perform on behalf of the licensee.
(5)Any other information requested by the commissioner.
(b)Pay an annual finder referral partner registration fee to the commissioner in an amount to be established by the commissioner by regulation for each finder referral partner utilized by the licensee.
(c)Submit an annual report to the commissioner including, for each finder, referral partner, the information listed in paragraph (12) (13) and subparagraph (A) of paragraph (13) (14) of subdivision (d) of Section 22380, and any other information pertaining to each finder referral partner and the licensees relationship and business arrangements with each finder referral partner as the commissioner may by regulation require. The information disclosed to the commissioner for the report described in this subdivision is exempted from any requirement of public disclosure by paragraph (2) of subdivision (d) of Section 6254 of the Government Code.
SEC. 10.Section 22376 of the Financial Code is amended to read:22376.All arrangements between a licensee and a finder referral partner shall be set forth in a written agreement between the parties. The agreement shall contain a provision establishing that the finder referral partner agrees to comply with all regulations that are established by the commissioner pursuant to this article regarding the activities of finders referral partners and that the commissioner shall have access to all of the finders referral partners books and records that pertain to the finders referral partners operations under the agreement with the licensee.
SEC. 11.Section 22377 of the Financial Code is amended to read:22377.(a)The commissioner may examine the operations of each licensee and each finder referral partner to ensure that the activities of the licensee and the finder referral partner are in compliance with this article. The costs of the commissioners examination of each finder referral partner shall be attributed to the commissioners examination of the licensee. Any violation of this article by a finder referral partner or a finders referral partners employee shall be attributed to the finance lender with whom it the referral partner has entered into an agreement for purposes of determining the licensees compliance with this division.
(b)Upon a determination that a finder referral partner has acted in violation of this article, or any implementing regulation, or upon a determination that it would be warranted by the data reported to the commissioner pursuant to subdivision (c) of Section 22375 for any finder, referral partner, the commissioner may disqualify a finder referral partner from performing services under this article, bar a finder referral partner from performing services at one or more specific locations of that finder, referral partner, terminate a written agreement between a finder referral partner and a licensee, and, if the commissioner deems that action in the public interest, prohibit the use of that finder referral partner by all licensees accepted to participate in the pilot program.
(c)In addition to any other penalty allowed by law, the commissioner may impose an administrative penalty up to two thousand five hundred dollars ($2,500) for violations of this article committed by a finder. referral partner.
SEC. 12.Section 22380 of the Financial Code is amended to read:22380.(a)On or before July 1, 2015, and annually on or before July 1, 2017, to July 1, 2021, inclusive, the commissioner shall post a report on his or her Internet Web site summarizing utilization of the Pilot Program for Increased Access to Responsible Small Dollar Loans. The report required to be submitted on or before July 1, 2015, shall additionally include the information required by former Section 22361, summarizing utilization of the Pilot Program for Affordable Credit-Building Opportunities, which was created by Chapter 640 of the Statutes of 2010.
(b)The information disclosed to the commissioner for the commissioners use in preparing the reports described in this section is exempted from any requirement of public disclosure by paragraph (2) of subdivision (d) of Section 6254 of the Government Code.
(c)If there is more than one licensee approved to participate in the program under this article, the reports required pursuant to subdivision (a) shall state information in aggregate so as not to identify data by specific licensee.
(d)Each report required pursuant to this section shall specify the time period to which the report corresponds, and shall include, but not be limited to, the following for that time period:
(1)The number of entities that applied to participate in the program.
(2)The number of entities accepted to participate in the program.
(3)The reason or reasons for rejecting applications for participation, if applicable. This information shall be provided in a manner that does not identify the entity or entities rejected.
(4)The number of program loan applications received by lenders participating in the program, the number of loans made pursuant to the program, the total amount loaned, the distribution of loan lengths upon origination, and the distribution of interest rates and principal amounts upon origination among those loans.
(5)The number of borrowers who obtained more than one program loan and the distribution of the number of loans per borrower.
(6)Of the number of borrowers who obtained more than one program loan, the percentage of those borrowers whose credit scores increased between successive loans, based on information from at least one major credit bureau, and the average size of the increase.(6)(A)The number and percentage of loan applicants who are denied for loans with bona fide principal amounts under one thousand dollars ($1,000) and the reasons for denial, including, for example, insufficient income, insufficient creditworthiness, both insufficient income and insufficient creditworthiness, and any other reasons, including, but not limited to, suspected fraud.
(B)The number and percentage of loan applicants who are denied for loans with bona fide principal amounts of one thousand dollars ($1,000) or more and the reasons for denial, including, for example, insufficient income, insufficient creditworthiness, both insufficient income and insufficient creditworthiness, and any other reasons, including, but not limited to, suspected fraud.
(7)(A)(i)The number of borrowers who lacked a credit score when they obtained their first program loan.
(ii)Among those borrowers who lacked a credit score when they obtained their first program loan, the percentage of those borrowers who did not have a credit score when they obtained a subsequent program loan.
(iii)Among those borrowers who lacked a credit score when they obtained their first program loan, the percentage of those borrowers who established a credit score on the subsequent loan and the average credit score established by those borrowers between subsequent loans.
(iv)Among those borrowers who did have a credit score when they obtained their first program loan, the percentage of those borrowers who increased their credit score when they obtained a subsequent loan and the average credit score increase of those borrowers between successive loans.
(B)In each applicable instance described in subparagraph (A), the licensee shall identify the name of the credit score used.
(7)(8)The income distribution of borrowers upon loan origination, including the number of borrowers who obtained at least one program loan and who resided in a low-to-moderate-income census tract at the time of their loan application.
(8)(9)The number of borrowers who obtained loans for the following purposes, based on borrower responses at the time of their loan applications indicating the primary purpose for which the loan was obtained:
(A)Medical.
(B)Other emergency.
(C)Vehicle repair.
(D)Vehicle purchase.
(E)To pay bills.
(F)To consolidate debt.
(G)To build or repair credit history.
(H)To finance a purchase of goods or services other than a vehicle.
(I)For other than personal, family, or household purposes.
(J)Other.
(9)(10)The number of borrowers who self-report that they had a bank account at the time of their loan application, the number of borrowers who self-report that they had a bank account and used check-cashing services, and the number of borrowers who self-report that they did not have a bank account at the time of their loan application.
(10)(11)With respect to refinance loans, each report shall specifically include the following information:
(A)The number and percentage of borrowers who applied for a refinance loan.
(B)Of those borrowers who applied for a refinance loan, the number and percentage of borrowers who obtained a refinance loan.
(C)Of those borrowers who obtained a refinance loan:
(i)The percentage of borrowers who refinanced once.
(ii)The percentage of borrowers who refinanced twice.
(iii)The percentage of borrowers who refinanced more than twice.
(D)Of those borrowers who obtained a refinance loan, the average percentage of principal paid down before obtaining a refinance loan.
(E)Of those borrowers who obtained a refinance loan, the average amount of additional principal extended.
(F)Of those borrowers who obtained a refinance loan, the average number of late payments made on the loan that was refinanced.
(11)(12)The number and type of finders referral partners used by licensees and the relative performance of loans consummated by finders referral partners compared to the performance of loans consummated without a finder. referral partner.
(12)(13)The number and percentage of borrowers who obtained one or more program loans on which late fees were assessed, the total amount of late fees assessed, and the average late fee assessed by dollar amount and as a percentage of the principal amount loaned.
(13)(14)(A)The performance of loans under this article, as reflected by all of the following:
(i)The number and percentage of program borrowers who experienced at least one delinquency lasting between 7 seven and 29 days, and the distribution of principal loan amounts corresponding to those delinquencies.
(ii)The number and percentage of program borrowers who experienced at least one delinquency lasting between 30 and 59 days, and the distribution of principal loan amounts corresponding to those delinquencies.
(iii)The number and percentage of program borrowers who experienced at least one delinquency lasting 60 days or more, and the distribution of principal loan amounts corresponding to those delinquencies.
(iv)The number and percentage of program borrowers who experienced at least one delinquency of greater than 7 seven days and who did not subsequently bring their loan current.
(v)Among loans that were ever delinquent for 7 seven days or more, the average number of times borrowers experienced a delinquency of 7 seven days or more.
(vi)The number and percentage of program borrowers who defaulted after having made three payments or fewer.
(B)To the extent data are readily available to the commissioner, the commissioner shall include in each report comparable delinquency data for unsecured loans made by persons licensed under Chapter 2 (commencing with Section 22365) of Division 9 in principal amounts between two thousand five hundred dollars ($2,500) and four thousand nine hundred ninety-nine dollars ($4,999), and in principal amounts between five thousand dollars ($5,000) and nine thousand nine hundred ninety-nine dollars ($9,999), and for unsecured extensions of credit made by state-chartered banks and credit unions under the commissioners jurisdiction, in principal amounts between two thousand five hundred dollars ($2,500) and four thousand nine hundred ninety-nine dollars ($4,999), and in principal amounts between five thousand dollars ($5,000) and nine thousand nine hundred ninety-nine dollars ($9,999).
(14)(15)The number and types of violations of this article by finders, which referral partners that were documented by the commissioner.
(15)(16)The number and types of violations of this article by licensees, which licensees that were documented by the commissioner.
(16)(17)The number of times that the commissioner disqualified a finder referral partner from performing services, barred a finder referral partner from performing services at one or more specific locations of the finder, referral partner, terminated a written agreement between a finder referral partner and a licensee, or imposed an administrative penalty.
(17)(18)The number of complaints received by the commissioner about a licensee or a finder, referral partner, and the nature of those complaints.
(18)(19)Recommendations for improving the program.
(19)(20)Recommendations regarding whether the program should be continued after January 1, 2023.
SEC. 13.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SECTION 1.Section 926.2 of the Insurance Code is amended to read:926.2.(a)(1)Each admitted insurer with annual premiums written in California equal to or in excess of one hundred million dollars ($100,000,000) for any reporting year shall provide information to the commissioner on all of its community development investments, community development infrastructure investments, and green investments in California. This information shall be reported by July 1, 2016, on investments made or held during the calendar years 2013, 2014, and 2015 and list, if applicable, investments that are high-impact, green, or rural. The information reported by insurers may include investments both held and originated, the percentage of any investment that qualifies, and why an investment qualifies. This information shall be provided as part of the required filing pursuant to Section 900 or 11131, or through a data call, or by other means as determined by the commissioner. The California Organized Investment Network (COIN) shall provide insurers with information on why investments, if any, were found not to be qualified by the commissioner.(2)This subdivision does not preclude an insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraph (1) through a single filing on behalf of the entire group of affiliated companies, provided that the data so filed accurately reflects the investments made by each of the affiliates, and accurately attributes, by National Association of Insurance Commissioners (NAIC) number or other identifier required by the commissioner, which of the investments were made by each affiliated company.(3)This subdivision does not preclude an insurer from satisfying the requirements of paragraph (1) through a filing made by a community development financial institution, provided all of the following conditions are met:(A)The insurer has no less than a 10-percent ownership interest in a COIN-certified community development financial institution.(B)The insurer makes community development investments and community development infrastructure investments in and through the community development financial institution.(C)The community development financial institution accurately files the information required by paragraph (1) with the commissioner on behalf of the insurer and accurately attributes, by NAIC number or other identifier required by the commissioner, which investments, including the dollar amounts of the investments, were made by each insurer on whose behalf the community development financial institution is reporting.(b)The commissioner shall, by December 31, 2016, provide all of the following:(1)Information on the departments Internet Web site on the aggregate insurer community development investments and community development infrastructure investments. Insurers that make high-impact investments that are defined as 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 moderate-income individuals, families, or communities in urban or rural areas of California shall be identified.(2)Information on the departments Internet Web site on the actions taken by COIN to analyze the data by insurers for the purpose of creating and identifying potential investment opportunities, including the development of investment opportunity bulletins. This information shall state the efforts made by COIN to market and expand outreach to communities.(c)The department shall also, by December 31, 2016, provide information on the departments Internet Web site regarding the aggregate amount of California public debt (including all debt issued by the State of California or a California state or local government agency) purchased by insurers as reported to the department in their NAIC annual statement filing pursuant to Section 900 or 11131.(d)The department shall also, by December 31, 2016, provide on its Internet Web site the aggregate amount of identified California investments, as reported to the NAIC in the annual statement filed pursuant to Section 900 or 11131.(e)The department shall also by December 31, 2016, provide information on its Internet Web site regarding the aggregate amount of identified California insurer investments in green investments.(f)This article shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.SEC. 2.Section 12939.1 of the Insurance Code is amended to read:12939.1.(a)The department, California Organized Investment Network (COIN), or any successor thereof, shall require the community development financial institutions (CDFIs) receiving tax credit investments pursuant to Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code to submit reports to the department, COIN, or any successor thereof, on their use of the program and may specify by notice to those CDFIs the form, content, and manner of the reports.(b)Biennially, the department, COIN, or any successor thereof, shall include in the report required by Section 12922, information on the CDFI tax credit program based on the reports submitted by the CDFIs pursuant to subdivision (a).SEC. 3.Section 12209 of the Revenue and Taxation Code is amended to read:12209.(a)For each taxable year beginning on or after January 1, 1999, and before January 1, 2017, 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.(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)Telephone 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, 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 January 1, 2022, 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, 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.(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)Telephone 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, 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 January 1, 2022, 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, 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.(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)Telephone 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, 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 January 1, 2022, and as of that date is repealed.SEC. 6.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:In order to preserve, at the earliest possible time, the enforcement of the tax credit provisions that spur investment in, and positive impact on, economically vulnerable individuals, families, and communities in this state, it is necessary that this act take effect immediately.(a)(1)Each admitted insurer with annual premiums written in California equal to or in excess of one hundred million dollars ($100,000,000) for any reporting year shall provide information to the commissioner on all of its community development investments, community development infrastructure investments, and green investments in California. This information shall be reported by July 1, 2016, on investments made or held during the calendar years 2013, 2014, and 2015 and list, if applicable, investments that are high-impact, green, or rural. The information reported by insurers may include investments both held and originated, the percentage of any investment that qualifies, and why an investment qualifies. This information shall be provided as part of the required filing pursuant to Section 900 or 11131, or through a data call, or by other means as determined by the commissioner. The California Organized Investment Network (COIN) shall provide insurers with information on why investments, if any, were found not to be qualified by the commissioner.
(2)This subdivision does not preclude an insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraph (1) through a single filing on behalf of the entire group of affiliated companies, provided that the data so filed accurately reflects the investments made by each of the affiliates, and accurately attributes, by National Association of Insurance Commissioners (NAIC) number or other identifier required by the commissioner, which of the investments were made by each affiliated company.
(3)This subdivision does not preclude an insurer from satisfying the requirements of paragraph (1) through a filing made by a community development financial institution, provided all of the following conditions are met:
(A)The insurer has no less than a 10 percent 10-percent ownership interest in a COIN-certified community development financial institution.
(B)The insurer makes community development investments and community development infrastructure investments in and through the community development financial institution.
(C)The community development financial institution accurately files the information required by paragraph (1) with the commissioner on behalf of the insurer and accurately attributes, by NAIC number or other identifier required by the commissioner, which investments, including the dollar amounts of the investments, were made by each insurer on whose behalf the community development financial institution is reporting.
(b)The commissioner shall, by December 31, 2016, provide all of the following:
(1)Information on the departments Internet Web site on the aggregate insurer community development investments and community development infrastructure investments. Insurers that make high-impact investments that are defined as 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 moderate-income individuals, families, or communities in urban or rural areas of California shall be identified.
(2)Information on the departments Internet Web site on the actions taken by COIN to analyze the data by insurers for the purpose of creating and identifying potential investment opportunities, including the development of investment opportunity bulletins. This information shall state the efforts made by COIN to market and expand outreach to communities.
(c)The department shall also, by December 31, 2016, provide information on the departments Internet Web site regarding the aggregate amount of California public debt (including all debt issued by the State of California or a California state or local government agency) purchased by insurers as reported to the department in their NAIC annual statement filing pursuant to Section 900 or 11131.
(d)The department shall also, by December 31, 2016, provide on its Internet Web site the aggregate amount of identified California investments, as reported to the NAIC in the annual statement filed pursuant to Section 900 or 11131.
(e)The department shall also by December 31, 2016, provide information on its Internet Web site regarding the aggregate amount of identified California insurer investments in green investments.
(f)This article shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.
SEC. 2.Section 12939.1 of the Insurance Code is amended to read:12939.1.(a)The department, California Organized Investment Network (COIN), or any successor thereof, shall require the CDFIs community development financial institutions (CDFIs) receiving tax credit investments pursuant to Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code to submit reports to the department, COIN, or any successor thereof, on their use of the program and may specify by notice to those CDFIs the form, content, and manner of the reports.
(b)Biennially Biennially, the department, COIN, or any successor thereof, shall include in the report required by Section 12922, information on the CDFI tax credit program based on the reports submitted by the CDFIs pursuant to subdivision (a).
SEC. 3.Section 12209 of the Revenue and Taxation Code is amended to read:12209.(a)For each taxable year beginning on or after January 1, 1999, and before January 1, 2017, 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.
(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 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 Telephone 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, 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 January 1, 2021, 2022, 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, 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.
(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 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 Telephone 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, 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 January 1, 2021, 2022, 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, 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.
(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 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 Telephone 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, 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 January 1, 2021, 2022, and as of that date is repealed.
SEC. 6.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to preserve, at the earliest possible time, the enforcement of the tax credit provisions that spur investment in, and positive impact on, economically vulnerable individuals, families, and communities in this state, it is necessary that this act take effect immediately.
(a)(1)Each admitted insurer with annual premiums written in California equal to or in excess of one hundred million dollars ($100,000,000) for any reporting year shall provide information to the commissioner on all of its community development investments, community development infrastructure investments, and green investments in California. This information shall be reported by July 1, 2016, on investments made or held during the calendar years 2013, 2014, and 2015 and list, if applicable, investments that are high-impact, green, or rural. The information reported by insurers may include investments both held and originated, the percentage of any investment that qualifies, and why an investment qualifies. This information shall be provided as part of the required filing pursuant to Section 900 or 11131, or through a data call, or by other means as determined by the commissioner. The California Organized Investment Network (COIN) shall provide insurers with information on why investments, if any, were found not to be qualified by the commissioner.
(2)This subdivision does not preclude an insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraph (1) through a single filing on behalf of the entire group of affiliated companies, provided that the data so filed accurately reflects the investments made by each of the affiliates, and accurately attributes, by National Association of Insurance Commissioners (NAIC) number or other identifier required by the commissioner, which of the investments were made by each affiliated company.
(3)This subdivision does not preclude an insurer from satisfying the requirements of paragraph (1) through a filing made by a community development financial institution, provided all of the following conditions are met:
(A)The insurer has no less than a 10 percent ownership interest in a COIN-certified community development financial institution.
(B)The insurer makes community development investments and community development infrastructure investments in and through the community development financial institution.
(C)The community development financial institution accurately files the information required by paragraph (1) with the commissioner on behalf of the insurer and accurately attributes, by NAIC number or other identifier required by the commissioner, which investments, including the dollar amounts of the investments, were made by each insurer on whose behalf the community development financial institution is reporting.
(b)The commissioner shall, by December 31, 2016, provide all of the following:
(1)Information on the departments Internet Web site on the aggregate insurer community development investments and community development infrastructure investments. Insurers that make high-impact investments that are defined as 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 moderate-income individuals, families, or communities in urban or rural areas of California shall be identified.
(2)Information on the departments Internet Web site on the actions taken by COIN to analyze the data by insurers for the purpose of creating and identifying potential investment opportunities, including the development of investment opportunity bulletins. This information shall state the efforts made by COIN to market and expand outreach to communities.
(c)The department shall also, by December 31, 2016, provide information on the departments Internet Web site regarding the aggregate amount of California public debt (including all debt issued by the State of California or a California state or local government agency) purchased by insurers as reported to the department in their NAIC annual statement filing pursuant to Section 900 or 11131.
(d)The department shall also, by December 31, 2016, provide on its Internet Web site the aggregate amount of identified California investments, as reported to the NAIC in the annual statement filed pursuant to Section 900 or 11131.
(e)The department shall also by December 31, 2016, provide information on its Internet Web site regarding the aggregate amount of identified California insurer investments in green investments.
(f)This article shall remain in effect only until January 1, 2020, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2020, 2021, deletes or extends that date.
SEC. 2.Section 12939.1 of the Insurance Code is amended to read:12939.1.(a)The department, California Organized Investment Network (COIN), or any successor thereof, shall require the CDFIs receiving tax credit investments pursuant to Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code to submit reports to the department, COIN, or any successor thereof, on their use of the program and may specify by notice to those CDFIs the form, content, and manner of the reports.
(b)Biennially the department, COIN, or any successor thereof, shall include in the report required by Section 12922, information on the CDFI tax credit program based on the reports submitted by the CDFIs pursuant to subdivision (a).
(c)On or before December 31, 2010, the Legislative Analyst shall prepare an analysis, based upon data provided by the Franchise Tax Board, the Department of Insurance, and COIN, to the Legislative Analyst on or before September 30, 2010, of the tax credit investments provided for in Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code, including, but not limited to, the credits fiscal impact, what programs, projects, and other uses were funded or carried out by the CDFIs that were supported in whole or in part by the tax credit investments, and the resulting benefits to economically disadvantaged communities and low income people in California.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, 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.
(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, 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, January 1, 2021, 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, 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.
(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, 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, January 1, 2021, 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, 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.
(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, 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, January 1, 2021, and as of that date is repealed.
|
Date
|
Status
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|---|---|
| Jul 10, 2017 | July 10 set for first hearing canceled at the request of author. |
| Jun 26, 2017 | June 26 hearing postponed by committee. |
| Jun 15, 2017 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on B. & F. |
| Jun 15, 2017 | Referred to Com. on B. & F. |
| Jun 1, 2017 | In Assembly. Read first time. Held at Desk. |
| May 31, 2017 | Read third time. Urgency clause adopted. Passed. (Ayes 40. Noes 0. Page 1355.) Ordered to the Assembly. |
| May 26, 2017 | Ordered to special consent calendar. |
| May 26, 2017 | Read second time. Ordered to third reading. |
| May 25, 2017 | From committee: Do pass. (Ayes 7. Noes 0. Page 1182.) (May 25). |
| May 19, 2017 | Set for hearing May 25. |
| May 15, 2017 | May 15 hearing: Placed on APPR. suspense file. |
| May 4, 2017 | Set for hearing May 15. |
| May 3, 2017 | May 8 hearing postponed by committee. |
| May 1, 2017 | Set for hearing May 8. |
| Apr 27, 2017 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 9. Noes 0. Page 1100.) (April 26). Re-referred to Com. on APPR. |
| Apr 6, 2017 | Set for hearing April 26. |
| Apr 5, 2017 | From committee: Do pass and re-refer to Com. on INS. with recommendation: To consent calendar. (Ayes 7. Noes 0. Page 623.) (April 5). Re-referred to Com. on INS. |
| Mar 20, 2017 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on GOV. & F. |
| Mar 8, 2017 | Set for hearing April 5. |
| Mar 6, 2017 | Withdrawn from committee. |
| Mar 3, 2017 | Set for hearing April 26. |
| Feb 23, 2017 | Referred to Coms. on INS. and GOV. & F. |
| Feb 14, 2017 | From printer. May be acted upon on or after March 16. |
| Feb 13, 2017 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| May 31, 2017 | Special Consent Calendar # SB325 Mendoza Urgency Clause | Senate Floor |
Passed |
|
| May 25, 2017 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| May 15, 2017 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Apr 26, 2017 | Do pass, but first be re-referred to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Insurance |
Passed |
|
| Apr 5, 2017 | Do pass, but first be re-referred to the Committee on [Insurance] with the recommendation: To Consent Calendar | Senate Standing Committee on Governance and Finance |
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
|
|---|---|---|
| 319-3081 | ** Against | Jul 7, 2017 |
| A Listo!) | ** Support | Jul 7, 2017 |
| A Prospera) | ** Support | Jul 7, 2017 |
| AARP California | ** Against | Jul 7, 2017 |
| American Insurance Association | ** Support | May 27, 2017 |
| Asian Law Alliance | ** Against | Jul 7, 2017 |
| Association Of California Life And Health Insurance Companies | ** Support | May 27, 2017 |
| Avanza Inc (D | ** Support | Jul 7, 2017 |
| B. & F. | ** Against | Jul 7, 2017 |
| Brightline Defense Project | ** Against | Jul 7, 2017 |
| California Apartment Association | ** Support | May 27, 2017 |
| California Association for Micro Enterprise Opportunity | ** Against | Jul 7, 2017 |
| California Capital Financial Development Corporation | ** Against | Jul 7, 2017 |
| California League of United Latin American Citizens | ** Against | Jul 7, 2017 |
| California Low-Income Consumer Coalition | ** Against | Jul 7, 2017 |
| California Reinvestment Coalition | ** Against | Jul 7, 2017 |
| California Senior Leaders Alliance | ** Against | Jul 7, 2017 |
| California Teamsters Public Affairs Council | ** Against | Jul 7, 2017 |
| Center for Responsible Lending | ** Against | Jul 7, 2017 |
| Clergy and Laity United for Economic Justice | ** Against | Jul 7, 2017 |
| Coalition for Humane Immigrant Rights | ** Against | Jul 7, 2017 |
| Consumer Attorneys Of California | ** Against | Jul 7, 2017 |
| Consumers For Auto Reliability & Safety | ** Against | Jul 7, 2017 |
| Consumers Union | ** Against | Jul 7, 2017 |
| Courage Campaign | ** Against | Jul 7, 2017 |
| Dolex Dollar Express, Inc. | ** Support | Jul 7, 2017 |
| East Bay Community Law Center | ** Against | Jul 7, 2017 |
| East LA Community Corporation | ** Against | Jul 7, 2017 |
| Greenlining Institute | ** Against | Jul 7, 2017 |
| Housing & Economic Right Advocates | ** Against | Jul 7, 2017 |
| Insikt, Inc. | ** Support | Jul 7, 2017 |
| Kern Schools Federal Credit Union | ** Support | Jul 7, 2017 |
| Latin Business Association | ** Against | Jul 7, 2017 |
| National Association of Mutual Insurance Companies | ** Support | May 27, 2017 |
| National Council Of La Raza | ** Against | Jul 7, 2017 |
| New Economics for Women | ** Against | Jul 7, 2017 |
| Northgate Gonzalez | ** Support | Jul 7, 2017 |
| Northgate Gonzalez Financial (D | ** Support | Jul 7, 2017 |
| Nuestra Casa De East Palo Alto | ** Against | Jul 7, 2017 |
| Oportun | ** Against | Jul 7, 2017 |
| Opposition None received | ** Support | Apr 24, 2017 |
| Pacific Association Of Domestic Insurance Companies | ** Support | May 27, 2017 |
| Peace And Freedom Party, California | ** Against | Jul 7, 2017 |
| Personal Insurance Federation Of California | ** Support | May 27, 2017 |
| Philippine National Bank Remittance Centers, Inc. | ** Support | Jul 7, 2017 |
| POSITIONS | ** Support | Apr 24, 2017 |
| Presente.org | ** Against | Jul 7, 2017 |
| Progressive Democrats Of Santa Monica Mountains | ** Against | Jul 7, 2017 |
| Public Counsel | ** Against | Jul 7, 2017 |
| Public Good Law Center | ** Against | Jul 7, 2017 |
| Public Law Center | ** Against | Jul 7, 2017 |
| Riverside Legal Aid | ** Against | Jul 7, 2017 |
| San Fernando Valley Young Democrats | ** Against | Jul 7, 2017 |
| Silicon Valley Community Foundation | ** Against | Jul 7, 2017 |
| The Greater Los Angeles Lulac Council 3267 | ** Against | Jul 7, 2017 |
| western center on law and poverty | ** Against | Jul 7, 2017 |
Date of Hearing: July 10, 2017
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Matthew Dababneh, Chair
SBPCA Bill Id:SB 325
Author:(Mendoza) – As Amended Ver:June 15, 2017
AS PROPOSED TO BE AMENDED
SENATE VOTE: 40-0
SUBJECT: Pilot Program for Increased Access to Responsible Small Dollar Loans
Note: This analysis reflects late requested amendments by the author’s office which the committee Chair has accepted. For clarity, the following summary contains what will be in the bill with the requested amendments followed by list of what is being taken out of the bill.
SUMMARY: Makes changes to the Pilot Program for Increased Access to Responsible Small Dollar Loans (program) contained within the California Finance Lenders Law. Specifically, this bill:
- Clarifies that allowable charges and fees imposed by lenders in connection with pilot program loans are not included in the “bona fide principal amount” calculation.
- Allows a licensed lender to provide a borrower a “paid in full” notice, or optical reproduction thereof, a balance due of zero when a loan is consummated electronically.
- Renames the term “finder” to “referral partner”.
- Requires a licensee to train each referral partner to ensure program compliance, as specified.
- Deletes provisions requiring a second duplicate disclosure notification.
- Contains provisions to recalculate the total compensation paid to referral partners without changing the total amount allowable.
- Revises the content of the report annually submitted by the Commissioner of the Department of Business Oversight (DBO) to include information on borrowers that were denied participation in the program and additional borrower information as specified.
The proposed amendments remove the following provisions from the bill:
- Removal of the program lending cap of $2,500, requiring compliance with pilot program provisions.
- Creation of an additional mechanism for refinancing a loan when a borrower has repaid at least 60% of the loan and has been current for a minimum of eight consecutive months.
- Allowing a referral partner to bring together borrowers and a licensee through online, mobile or in person marketing channels, as specified.
- Prohibiting unsolicited door-to-door or telephonic solicitation of borrowers or prospective borrowers.
- Altering the calculation for total compensation paid by a licensee to a referral partner by prescribing limits on compensation with reference to the length of a contractual loan.
EXISTING LAW: Until January 1, 2023, authorizes the pilot program within the California Finance Lenders Law (CFLL), administered by the DBO (Financial Code Sections 22365 et seq.). Generally speaking, the pilot program authorizes lenders who have been vetted by DBO to charge somewhat higher interest rates and fees on loans of principal amounts up to $2,500 than are allowed under the CFLL. The pilot program also authorizes pilot program lenders to use finders, as specified. Pilot program lenders must perform rigorous underwriting, provide extensive borrower disclosures, offer borrowers credit education prior to the disbursement of loan funds, and report borrower payment history to at least one major credit bureau – requirements that do not apply to CFLL licensees which are not pilot program lenders.
FISCAL EFFECT: Unknown
COMMENTS:
Background: Relatively few installment loans are made in California with principal amounts under $2,500. This represents a challenge to the significant population of people in California who are unable to access affordable credit through banks and credit unions. Californians who lack credit scores, or have very thin credit files or damaged credit, currently have very few affordable options when they need to borrow money. Credit cards are often unavailable to this population, or, if available, bear very high interest rates and fees. When their spending needs outpace their incomes, these Californians commonly turn to payday loans, auto title loans, or high-interest rate, unsecured installment loans. All three of these options come with high costs, and none rewards timely loan repayment with a credit score increase.
In an attempt to increase the availability of affordable, credit-building installment loans made in California in amounts below $2,500, the California Legislature authorized a small-dollar loan pilot program in 2010 (SB 1146 (Florez), Chapter 640, Statutes of 2010). The Legislature modified the pilot program in 2013 and again in 2015, with the aim of attracting more lenders to join the pilot program and increasing the availability of pilot program loans across the state (SB 318 (Hill), Chapter 467, Statutes of 2013; and SB 235 (Block), Chapter 505, Statutes of 2015).
Existing law requires the Commissioner of DBO to issue periodic reports regarding the pilot program, to give the Legislature and interested parties information regarding pilot program usage and informing efforts to improve the pilot program’s effectiveness. The first such report was issued in June 2015, and covered the period of January 1, 2011, through December 31, 2014.
Discussion:
“Bona fide principal amount” calculation: This bill seeks to clarify what is included in the calculation of what makes up a “bona fide principal amount”. The author’s office notes the disparity between loans that are currently made outside of the pilot program that do not contain allowable charges and fees to be included within the calculation of a “bona fide principal amount” and loans within the pilot program that do contain these allowable charges and fees was an unintentional consequence of earlier legislation. This change may result in minor increases in the calculation of a “bona fide loan amount” within the pilot program. Aligning the method of calculating the “bona fide loan amount” inside and outside the pilot program will reduce confusion and eliminate an unnecessary inconsistency in the law.
Alternative notification of “paid in full”: This provision does not remove the requirement for licensed lenders to inform borrowers of their “paid in full” status, but rather, seeks to update the means by which this notification may be made. The author’s office notes:
The alternate method authorized by the bill is intended to ensure that pilot program borrowers are given clear proof that they have fully repaid their loans, without subjecting pilot program lenders to the unnecessarily burdensome and expensive requirement to provide a copy of the borrower’s original contract, marked “paid,” whenever a pilot program loan is fully repaid. The requirement to provide hard copy of the original, signed contract is outdated in connection with loans that are consummated electronically, because contracts consummated online lack an actual borrower signature; typically, a borrower types his or her name on a signature line to verify consent.
Rename “finders” as “referral partners”: The renaming of finders to “referral partners” is based solely on the belief of the author’s office that the new name “better reflects the partnership role that these third parties play in pilot program lending.” This renaming will likely have little or no impact on the effectiveness of the pilot program.
Training for referral partners: There is currently a concern that some referral partners may be operating in a manner that is not consistent with the intent of the consumer protections contained within the pilot program. To date there has not been sufficient data to substantiate these concerns. However, this bill includes increased training for referral partners to ensure that the consumer protections inherent within the pilot program are adhered to by all licensees and referral partners. It is the opinion of the Assembly Banking and Finance Committee staff that more training will lead to better outcomes within the program but that training alone will not prevent possible inappropriate behavior by referral partners.
Delete duplicate copy of disclosure: Disclosures on the details of a loan, the role of the lender, the referral partner and the DBO are essential in ensuring a borrower knows precisely the terms and obligations of a consumer loan. However, the author’s office argues that a second set of disclosures that are sent to the borrower two weeks after the consummation of the loan creates confusion causing borrowers to wonder if there have been changes to the original disclosure document. It should be noted that this provision does not change the original disclosure requirement but simply removes the requirement for the second set of disclosures.
Recalculating total compensation to referral partners: This provision does not change the amount a referral partner may be paid, but rather, changes the means whereby the calculation of those payments is made. The author’s office notes:
Compliance with this provision is enormously burdensome on licensees and does not provide sufficient borrower protection to warrant its retention. Because the total amount of interest that will be paid by a borrower over the course of a loan is not known until that loan is fully repaid, this provision requires lenders to perform settle-ups each time a loan is repaid. As lending volumes increase, these settle-ups require more and more time to perform. Furthermore, because these calculations are performed on a backward-looking basis, after a loan is fully repaid, they do not impact lender or referral partner behavior. Finally, this formula serves to penalize referral partners who help facilitate loans that are repaid early. Because early repayment saves borrowers money, it seems unfair to penalize a referral partner that helped facilitate a loan which cost a borrower less than originally anticipated.
Changes in information reported to DBO: As noted earlier in this analysis, there remain data gaps on the performance of the pilot program. The provisions contained within this section seek to increase the information provided to DBO. This information may be used to guide future changes to the program to increase consumer access and program efficiency. It should be noted, however, that increasing the amount of information reported to DBO may not yield immediate results as it takes a substantial amount of time, possibly years, for trends to emerge.
Prior Legislation:
AB 784 (Dababneh) of 2017: As proposed, increased the lending cap of the pilot program up to $5,000. The bill removed the sunset to the pilot program making the program permanent and raised the amount of an applicable bona fide loan amount from $2,500 to $5,000 in the California Finance Lender’s Law (Financial Code Sections 22303, 22304, and 22305). Status: Held in Assembly Appropriations Committee.
SB 1146 (Florez), Chapter 640, Statutes of 2010: Authorized California’s original small-dollar loan pilot program within the CFLL, named the Pilot Program for Affordable Credit-Building Opportunities. Allowed lenders approved to participate in the pilot program to charge higher interest rates and fees on loans of up to $2,500 than those authorized under CFLL. Required pilot program lenders to rigorously underwrite their loans, offer credit education at no cost to their borrowers, and report borrower payment history to at least one major credit bureau. Required detailed reporting of loan outcomes to DBO. Originally scheduled to sunset on January 1, 2015, but was replaced by the Pilot Program for Increased Access to Responsible Small Dollar Loans, as described immediately below.
SB 318 (Hill), Chapter 467, Statutes of 2013: Replaced the Pilot Program for Affordable, Credit-Building Opportunities with the Pilot Program for Increased Access to Responsible Small Dollar Loans. Retained several aspects of the original pilot, including the underwriting requirements, offers of free credit education, reports to at least one major credit bureau, and detailed reporting of pilot program loan outcomes, but modified other aspects of the original pilot program. These modifications increased the maximum interest rates and fees that pilot lenders could charge, allowed pilot lenders to originate new loans and to refinance loans more frequently than under the original pilot, and eliminated several administrative and licensing rules that were serving as bureaucratic barriers to the success of the original pilot. Scheduled to sunset on January 1, 2018.
SB 235 (Block), Chapter 505, Statutes of 2015: Expanded the activities in which pilot program finders could engage on behalf of pilot program lenders. Authorized finders to disburse loan proceeds to borrowers, receive loan payments from borrowers, and provide notices and disclosures to borrowers, as specified, and provided pilot program lenders with greater flexibility in the ways in which they may compensate their finders.
REGISTERED SUPPORT / OPPOSITION for the June 15, 2017, version of SB 325:
SUPPORT:
Insikt, Inc. (Sponsor)
Avanza Inc (d/b/a Listo!)
Dolex Dollar Express, Inc.
Kern Schools Federal Credit Union
Northgate Gonzalez
Northgate Gonzalez Financial (d/b/a Prospera)
Philippine National Bank Remittance Centers, Inc.
OPPOSE:
AARP California
Asian Law Alliance
Brightline Defense Project
California Association for Micro Enterprise Opportunity
California Capital Financial Development Corporation
California League of United Latin American Citizens
California Low-income Consumer Coalition
California Reinvestment Coalition
California Senior Leaders Alliance
California Teamsters Public Affairs Council
Center for Responsible Lending
Clergy And Laity United For Economic Justice
Coalition for Humane Immigrant Rights
Consumer Attorneys of California
Consumers for Auto Reliability & Safety
Consumers Union
Courage Campaign
East Bay Community Law Center
East LA Community Corporation
Greenlining Institute
Housing & Economic Right Advocates
Latin Business Association
National Council of La Raza
NEW Economics for Women
Nuestra Casa de East Palo Alto
Oportun
Peace and Freedom Party, California
Presente.org
Progressive Democrats of Santa Monica Mountains
Public Counsel
Public Good Law Center
Public Law Center
Riverside Legal Aid
San Fernando Valley Young Democrats
Silicon Valley Community Foundation
The Greater Los Angeles LULAC Council 3267
Western Center on Law and Poverty
Analysis Prepared by: William Herms / B. & F. / (916) 319-3081
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SB |
THIRD READING
Bill No: SB 325
:
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/5/17
AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach
SENATE INSURANCE COMMITTEE: 9-0, 4/26/17
AYES: Mendoza, Gaines, Berryhill, Glazer, Hernandez, Mitchell, Newman, Portantino, Roth
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/25/17
AYES: Lara, Bates, Beall, Bradford, Hill, Nielsen, Wiener
DIGEST:
This bill extends the sunset dates in sections of law authorizing the Community Development Financial Institution tax credit.
Existing law:
- Establishes the California Organized Investment Network (COIN) within the California Department of Insurance (CDI).
- 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 Community Development Financial Institution (CDFI) up to $50 million per year.
- Provides that COIN must certify CDFIs, as well as investments that qualify for the credit. 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.
- Requires CDFIs to use the proceeds of the investment generating the credit 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.
- Requires CDFIs to 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.
- Allows CDI to certify new deposits until January 1, 2017 (AB 32, J. Pérez, 2013).
- Repeals the CDFI credit on December 1, 2017, in the Gross Premiums Tax, Personal Income Tax, and Corporation Tax each have CDFI credit statutes.
This bill:
- Extends the repeal dates, but not the allocation authority, for the CDFI credit in the Gross Premiums Tax, Personal Income Tax, and Corporation Tax from December 1, 2017, to January 1, 2022.
- Makes technical and conforming changes.
- Contains an urgency clause.
Background
Last year, the Governor vetoed AB 2728 (Atkins), which would have extended COIN’s authority to certify CDFI credits, using the same veto message issued for several other bills which either extended or authorized new tax expenditures. However, SB 325’s extension of the sunset dates on the tax credit provisions in current law explicitly ensures that that credits must meet the requirements in current law during the 2021 taxable year.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
According to the Senate Appropriations Committee, CDI indicates that it would incur costs of $632,000 in 2017-18 and 2018-19, and $426,000 in 2021-22, to implement the provisions of this bill (Insurance Fund). The Franchise Tax Board would incur minor costs, and this bill would not impact revenues.
American Insurance Association
Association of California Life and Health Insurance Companies
California Apartment Association
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
OPPOSITION: (Verified 5/25/17)
None received
ARGUMENTS IN SUPPORT: According to the author, “Although current law does not authorize the allocation of new tax credits, those credits that have been allocated involve continuing obligations on the part of participating insurers and CDFIs: taxpayers must leave tax-qualified investments with the CDFI for at least 60 months, CDFIs must continue to meet statutory and regulatory qualifications, and must annually report to the Franchise Tax Board or the Board of Equalization and COIN any taxpayers who withdrew or made a partial withdrawal of a tax-qualified investment prior to the end of the 60-year period. These statutory provisions and others are scheduled to be repealed as of December 1, 2017, even though many of the qualified credits were only recently allocated. This bill continues the authority of the program to revoke the certification of a CDFI that fails to maintain qualification under program standards until January 1, 2021 by permitting taxpayers to carry over excess credits in those years when the credit exceeds the tax obligation until January 1, 2021, preserves the obligation of taxpayers to hold investments for five years, continues the obligations of CDFIs to report taxpayers who made early withdrawals, and aligns the repeal date of COIN-related reporting requirements with tax credit provisions by extending it from January 1, 2020, to January 1, 2021.”
5/27/17 18:03:44
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2017 - 2018 Regular Session
SB 325 (Mendoza) - Insurance: community development investments
Version: March 20, 2017 | Policy Vote: GOV. & F. 7 - 0, INS. 9 - 0 |
Urgency: Yes | Mandate: No |
Hearing Date: May 15, 2017 | Consultant: Robert Ingenito |
This bill meets the criteria for referral to the Suspense File.
Bill Summary:
SB 325 would extend the sunset dates in sections of law authorizing the Community Development Financial Institution tax credit.
Fiscal Impact:
The California Department of Insurance (CDI) indicates that it would incur costs of $632,000 in 2017-18 and 2018-19, and $426,000 in 2021-22, to implement the provisions of the bill (Insurance Fund). The Franchise Tax Board (FTB) would incur minor costs, and the bill would not impact revenues.
Background:
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. The federal credit is (1) equal to 39 percent of the qualified equity investment, and (2) spread over seven years. State law does not conform to the federal new markets credit, but instead allows the Community Development Financial Institution (CDFI) credit, administered by the California Organized Investment Network (COIN), housed in the Department of Insurance (CDI).
Taxpayers may claim a credit against the Gross Premiums Tax, Personal Income Tax, or Corporation Tax equal to 20 percent 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. In 2002, the Legislature extended the credit until 2007, then until 2012, and again until 2017, but only allowed CDI to certify new deposits for credits until January 1, 2015. The Legislature then allowed CDI to certify new deposits until January 1, 2017, while increasing from $10 million to $50 million the amount of investments that COIN could annually certify to generate CDFI credits. Last year, the Governor vetoed a bill that would have extended COIN’s authority to certify credits until January 1, 2018.
For deposits to generate credits, the CDFI must be certified by COIN 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 again 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. COIN or 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 have exceeded the amount they are authorized to allocate.
The Gross Premiums Tax, Personal Income Tax, and Corporation Tax each have CDFI credit statutes; however, all three will be repealed by their own terms on December 1, 2017.
Proposed Law:
This bill would (1) extend the repeal dates for the CDFI credit in the Gross Premiums Tax, Personal Income Tax, and Corporation Tax from December 1, 2017 to January 1, 2022, without renewing the credit.
Related Legislation:
AB 778 (Cabellero) would, among other things, extend the tax credit to 2022, and is currently pending in the Assembly Appropriations Committee. AB 566 (Ridley-Thomas) would, among other things, extend the tax credit to 2019, and is also currently pending the Assembly Appropriations Committee.
Staff Comments:
As noted previously, legislation proposed to renew the tax credit was vetoed last year; consequently, the statutory provisions governing the ongoing duties and obligations attached to previously allocated credits will be repealed on December 1 of this year. This bill would preserve in statute the ongoing obligations attached to existing tax credits and ensure that COIN-qualified investments continue to be used to benefit communities in need.
This bill would cost CDI approximately $632,000 in 2017-18 and 2018-19, and $426,000 in 2021-22. The costs include extending the five limited-term positions which were added by AB 32 (Perez, Chapter 608, Statutes of 2013) to January 1, 2022. The positons are required to administer the tax credit program, which includes certifying nearly 50 CDFIs.
-- END --
SENATE COMMITTEE ON INSURANCE
Senator Tony Mendoza, Chair
2017 - 2018 Regular
Bill No: SB 325 Hearing Date: April 26, 2017
Author: | Mendoza | ||
Version: | March 20, 2017 Amended | ||
Urgency: | Yes | Fiscal: | Yes |
Consultant: | Hugh Slayden | ||
Subject: Insurance: community development investments
SUMMARY
Extends the repeal dates of provisions that govern the publication of insurer investments reported to the Community Organized Investment Network (COIN) and the provisions that govern the Community Development Financial Institution tax credit.
DIGEST
Existing law
- Establishes COIN within the California Department of Insurance (CDI) with the purpose of encouraging and facilitating insurer investments in community development investments intended for community development projects or that directly benefit low- to moderate-income (LMI) communities.
- Requires any insurer that writes at least $100 million in California premium to report to COIN by July 1, 2016, specified categories of investments over the last three years, including community development investments and “green investments” (“data call”).
- 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.
- Repeals the data call and reporting provisions on January 1, 2020.
- Provides for a tax credit to individual, corporate, and insurer taxpayers, until January 1, 2017, of an amount equal to 20 percent of the amount of each qualified investment into a community development financial institution (CDFI) certified by COIN.
- Limits the tax credit to a total of $50 million dollars in qualifying investments (paired with $10 million in tax credits) per year and provides that COIN allocates the tax credits based on specified criteria.
- Requires taxpayers that receive the tax credit to maintain the investment for at least 60-months and adds to the tax owed for the year in which an early withdrawal occurs.
- Authorizes the taxpayer to carry over credits in years when the credit exceeds the tax liability.
- Requires the CDFI to provide to the Board of Equalization and CDI a list of any taxpayer who make a withdrawal or partial withdrawal of any qualified investment prior to the expiration of the 60-month period and to submit specified reports to COIN on its use of the program.
- Authorizes CDI to suspend or revoke the certification of a CDFI if the institution no longer meets the requirement for certification.
- Repeals on December 1 of this year, all provisions governing the tax credit, including those related to the 60-month deposit period and the continuing obligation of a CDFI to remain certified.
This bill
- Extends the repeal date on those provisions that govern the publication of the COIN data call results until January 1, 2021.
- Extends the repeal date on those provisions that govern existing tax credit to January 1, 2022, without renewing the tax credit.
- Strikes obsolete language related to a report required to be submitted by the Legislative Analyst on or before December 31, 2010.
- Declares that it is to take effect immediately as an urgency statute.
COMMENTS
- Purpose of the bill According to the author, COIN administered a tax credit to taxpayers who made a qualified investment in a CDFI that serves LMI communities. Under existing law, the taxpayer must leave the investment with the CDFI for at least five years and the CDFI must comply with applicable rules and standards so long as it holds the investment. Because legislation proposed to renew the tax credit was vetoed last year, the statutory provisions governing the ongoing duties and obligations attached to previously allocated credits will be repealed on December 1 of this year. SB 325 preserves in statute the ongoing obligations attached to existing tax credits and ensures that COIN-qualified investments continue to be used to benefit communities in need.
- Background COIN serves as a liaison between insurers seeking investment opportunities and community organizations seeking investment capital for projects that benefit LMI and rural communities, as well as projects with a positive environmental impact. COIN engages in several activities to encourage investments.
Matchmaking and the Data Call. COIN provides guidance to insurers and works with community organizations to identify and pre-package qualifying investments. In order to track COIN investments, COIN issues a “data call” that requires insurers to report their investments. COIN processes the data and CDI posts the results on its website. The data call has evolved. In 2005, Insurance Commissioner Garamendi issued a voluntary data call. The next year, he sponsored AB 925 (Ridley-Thomas), Chapter 456, Statutes of 2006, that codified a mandatory data call until 2011. AB 1011 (Jones), Chapter 418, Statutes of 2010, expanded the categories to be reported in the data call to include green investments. AB 41 (Solorio) Chapter 340, Statutes of 2010, extended the sunset date until 2015.
Questions were raised when CDI sponsored AB 2128 (Gordon), Chapter 384, Statutes of 2014. COIN issued its report in June after its Assembly policy hearing and shortly before the Senate policy hearing. Insurers expressed concern that COIN was not using the data in a useful way and that the June 2014 report did little to justify further data calls. An agreement was reached and AB 2128 limited the data call to exclude smaller insurers and specifically require COIN to report on ways it used the data to improve the program. AB 2128 required insurers to submit the data by July 1, 2016, and required CDI to post the information by December 31, 2016. This timeline gave the committees in both houses an opportunity to examine the data when considering a proposal to extend the data call in 2017. CDI posted a revised version of its report in September 2014.
In 2016, CDI sponsored AB 2728 (Atkins). When heard by this committee, that bill would have extended the tax credit until 2022 and declared legislative intent to add new data calls once CDI had satisfied the reporting requirement. In order to expedite publication of the report, CDI had already “moved” the deadline for insurers to report their investments to March 2016 so that CDI could publish a report in July. There is some disagreement whether the July report met the statutory criteria. Insurance Code Section 926.2 requires CDI to provide information on the “actions taken by COIN to analyze the data by insurers for the purpose of creating and identifying potential investment opportunities, including the development of investment opportunity bulletins.” While the 2016 COIN report discusses how the 2014 data was used to better target investment opportunities in rural areas, it does not discuss how COIN used the 2016 to improve its “matchmaking” function. Ultimately, stakeholder discussions broke down on the data call and the author did not pursue a new data call in that bill and amended the bill to only extend the tax credit until 2018.
On April 21, 2017, after business hours, CDI submitted supplemental information related to the July 2016 report, but that has not been fully analyzed. SB 325 does not renew the COIN data call, but does preserve the reporting requirements established by AB 2128.
Tax Credit. Until last year, COIN administered a tax credit for qualified investments made in a CDFI. The program provided a 20% credit for investments of $50,000 or more. While the credit was available to almost any taxpayer, not just insurers, total qualifying investments were capped at $50 million annually ($10 million in tax credits). COIN allocated the tax credits and related investments based on the anticipated impact of the proposed projects on LMI communities. These investments provide low- to no-cost mechanisms to fund projects such as affordable housing and community centers.
This bill does not actually renew the tax credit, but preserves statutory language that governs the obligations surrounding previously allocated credits until those obligations expire. The Governance and Finance Committee recently considered the tax credit provisions and reported the bill out with a recommendation that it be placed on the consent calendar.
Other COIN Measures. The Assembly Insurance Committee heard two COIN bills on April 19. AB 778 (Cabellero) would extend the tax credit to 2022 and establish two data calls in 2018 and 2020. AB 566 (Ridley-Thomas) would extend the tax credit to 2019 and also declares legislative intent to add new data calls once CDI satisfies the reporting requirement (similar to AB 2728). The authors have agreed to accept amendments suggested by the Assembly Insurance Committee. The data call will be stripped from AB 778 and AB 566 will be amended to clarify CDI’s authority to issue data calls, to add a single data call, and to require CDI to convene a task force of industry experts to consider and make recommendations on the most effective strategies to increase insurer investment in LMI communities.
- Support Several insurance trade organizations note that the economic impact of the program goes well beyond the sum total of these investments. CDFIs leverage tax credit investments to secure additional sources of matching funds and other capital, sometimes several times over, to finance programs and projects that create jobs in areas of high unemployment; construct affordable housing; create facilities for after-school programs; and extend health clinic services to the uninsured.
- Opposition None received
POSITIONS
Support
American Insurance Association
Association of California Life and Health Insurance Companies
California Apartment Association
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Oppose
None received
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SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Mike McGuire, Chair
2017 - 2018 Regular
Bill No: | SB 325 | Hearing Date: | 4/5/17 |
Author: | Mendoza | Tax Levy: | No |
Version: | 3/20/17 | Fiscal: | Yes |
Consultant: | Grinnell | ||
Insurance: community development investments
Extends the sunset dates in sections of law authorizing the Community Development Financial Institution tax credit.
Background
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 (CDFI) credit, administered by the California Organized Investment Network (COIN), housed in 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 (AB 157, Vincent). In 2002, the Legislature extended the credit until 2007 (SB 409, Vincent), again until 2012 (AB 2831, Ridley-Thomas, 2006), and again 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 the amount of investments that COIN could annually certify to generate CDFI credits (AB 32, J. Pérez, 2013). Last year, the Governor vetoed a bill that would’ve extended COIN’s authority to certify credits until January 1, 2018 (AB 2728, Atkins).
For deposits to generate credits, the CDFI must be certified by COIN 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. COIN 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 have exceeded the amount they are authorized to allocate.
The Gross Premiums Tax, Personal Income Tax, and Corporation Tax each have CDFI credit statutes; however, all three will be repealed by their own terms on December 1, 2017. Each statute requires that the CDFI remain certified, and that the deposit stay with the CDFI for 60 months for taxpayer to claim the credit. These laws also impose other regulatory and reporting requirements. The author wants to extend the statute’s repeal date, but not COIN’s allocation authority, to ensure that credits must meet the requirements in current law during the 2021 taxable year.
Proposed Law
Senate Bill 325 extends the repeal dates for the CDFI credit in the Gross Premiums Tax, Personal Income Tax, and Corporation Tax from December 1, 2017 to January 1, 2022. The measure also makes technical and conforming changes, and contains an urgency clause.
State Revenue Impact
The Franchise Tax Board (FTB) states that SB 325 does not affect state revenues.
Comments
1. Purpose of the bill. According to the author, “Although current law does not authorize the allocation of new tax credits, those credits that have been allocated involve continuing obligations on the part of participating insurers and CDFIs: taxpayers must leave tax-qualified investments with the CDFI for at least 60 months, CDFIs must continue to meet statutory and regulatory qualifications, and must annually report to the Board of Equalization and COIN any taxpayers who withdrew or made a partial withdrawal of a tax-qualified investment prior to the end of the 60-year period. These statutory provisions and others are scheduled to be repealed as of December 1, 2017, even though many of the qualified credits were only recently allocated. This bill continues the authority of the program to revoke the certification of a CDFI that fails to maintain qualification under program standards until January 1, 2021 by permitting taxpayers to carry over excess credits in those years when the credit exceeds the tax obligation until January 1, 2021, preserves the obligation of taxpayers to hold investments for five years, continues the obligations of CDFIs to report taxpayers who made early withdrawals, and aligns the repeal date of COIN-related reporting requirements with tax credit provisions by extending it from January 1, 2020, to January 1, 2021.”
2. LAO’s take. While SB 325 doesn’t substantively change the CDFI program or extend COIN’s authority to allocate CDFI credits, the Legislative Analyst’s Office (LAO) issued its report on the CDFI credit in June of last year. In the report, LAO stated that the credit had increased access to capital for CDFIs, which as a result, may increase employment in low-to-moderate income areas that may not have otherwise received those investments. The report also stated that rural areas are receiving more credits than in previous years. However, the report stated that insurers are participating less, and that COIN’s estimates of the credit’s economic and employment effects may overstate the case.
3. Veto. As mentioned above, Governor Brown vetoed AB 2728 last year, which would’ve extended COIN’s authority to certify CDFI credits, using the same veto message issued for several other bills which either extended or authorized new tax expenditures. The Governor said:
To the Members of the California State Assembly:
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.
Sincerely,
Edmund G. Brown Jr
4. Double-referred. The Senate Rules Committee referred SB 325 to both the Committees on Governance and Finance, which considers bills affecting the Personal Income and Corporation Tax, and Insurance.
5. Urgency. As an urgency statute, SB 325 must be approved by 2/3 vote of each house of the Legislature. Regular legislation takes effect on the January 1 following its passage, but urgency bills take effect as soon as they're passed, signed, and chaptered.
Support and Opposition
(3/30/17)
Support: None received.
Opposition: None received.
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Discussed in Hearing
13MIN
Assembly Standing Committee on Banking and Finance
48MIN
Senate Standing Committee on Appropriations
2MIN
Senate Standing Committee on Appropriations
Bill Author
Bill Co-Author(s):
