The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill would, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, allow a credit of $500 $5,000 against the taxes imposed by those laws to a qualified taxpayer. The bill would define a qualified taxpayer for this purpose to mean a taxpayer that owns and leases qualified rental property, as defined, to a qualified nonprofit, as defined, pursuant to a lease that satisfies specified requirements. qualified lease. The bill would require the qualified taxpayer to obtain certification, under penalty of perjury, from the qualified nonprofit that the qualified rental property will be used to provide housing to survivors of domestic violence, as provided. By expanding the crime of perjury, this bill would establish a state-mandated local program.

Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would include additional information required for any bill authorizing a new tax expenditure.

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.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, allow a credit of $500 against the taxes imposed by those laws in an amount equal to the difference between the fair market rental value and the amount realized in rents and other revenues from leasing qualified rental property, as defined, to qualified nonprofits, as defined, for the purpose of providing housing to survivors of domestic violence below market rates. The bill would state it is the intent of the Legislature to comply with the additional information requirements of a bill authorizing a new tax expenditure. to a qualified taxpayer. The bill would define a qualified taxpayer for this purpose to mean a taxpayer that owns and leases qualified rental property, as defined, to a qualified nonprofit, as defined, pursuant to a lease that satisfies specified requirements. The bill would require the qualified taxpayer to obtain certification, under penalty of perjury, from the qualified nonprofit that the qualified rental property will be used to provide housing to survivors of domestic violence, as provided. By expanding the crime of perjury, this bill would establish a state-mandated local program.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, allow a credit against the taxes imposed by those laws in an amount equal to the difference between the fair market rental value and the amount realized in rents and other revenues from leasing qualified rental property, as defined, to qualified nonprofits, as defined, for the purpose of providing housing to survivors of domestic violence below market rates. The bill would state it is the intent of the Legislature to comply with the additional information requirements of a bill authorizing a new tax expenditure.

This bill would take effect immediately as a tax levy.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 221 (Seyarto) - Personal Income Tax Law: Corporation Tax Law: credits: domestic violence survivor housing

Bill Summary:

SB 221 would enact a tax credit for landlords that provide below market rent to a non-profit providing housing for domestic violence survivors.

Fiscal Impact:

The Franchise Tax Board (FTB) estimates that the bill would result in General Fund revenue losses of $140 million in 2023-24, $120 million in 2024-25, and $120 million in 2025-26. FTB’s costs to implement the bill have yet to be determined.

Background:

Tax expenditure programs (TEPs) are special tax provisions that reduce the amount of revenues the “basic” tax system would otherwise generate in order to provide (1) benefits to certain groups of taxpayers, and/or (2) incentives to encourage certain types of behavior and activities, such as charitable giving. Specifically, current law provides for, among other things, various income and corporation tax credits and deductions, as well as exemptions from the sales and use tax. The Department of Finance is required to publish a list of TEPs (currently totaling several hundred), which currently exceed $87 billion annually.

Proposed Law:

This bill would, for taxable years 2023 through 2027, provide a tax credit to a taxpayer that owns rental property that is leased to a non-profit that is dedicated to assisting survivors of domestic violence. The credit would be $5,000 for each qualified lease (as defined). Beginning in November, 2026, FTB would be required to submit a report to the Legislature detailing the number of taxpayers allowed a credit, and the average dollar value of credits allowed.

Staff Comments:

This bill would assist domestic violence survivors by providing a tax credit to landlords that rent housing below market rates to a non-profit entity that provides housing for victims of domestic abuse.

Any local government costs resulting from the mandate in this measure are not state-reimbursable because the mandate only involves the definition of a crime or the penalty for conviction of a crime.

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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Personal Income Tax Law: Corporation Tax Law: credits: domestic violence survivor housing

Provides a tax credit to landlords that provide below market rent to a non-profit that provides housing for domestic violence survivors.

Background

Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. The Legislature enacts such tax incentives either to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behavior, such as charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something that but for the tax credit, they would otherwise not do. The Department of Finance is required annually to publish a list of tax expenditures, currently totaling around $87 billion per year.

Domestic Violence. The California Department of Public Health reports^[1] that as many as 1 in 5 women and 1 in 7 men face severe domestic violence from a partner. Further, the estimated domestic violence cost over a female victim's lifetime is $103,767 and $23,414 for a male victim. According to the Department of Justice^[2], there were 164,608 domestic violence calls in 2021 alone. These numbers represent only those that reported the abuse.

Rent Costs. Rents in California continue to rise every year becoming more and more unaffordable to single-income families. According to the Department of Housing and Urban Development (HUD)^[3], the fair market rent in 2023 for a one bedroom in the Sacramento area is $1,400. For someone working full time and making minimum wage, this is 52 percent of their gross income ($1,400/$2,686).

Seeking to help domestic violence survivors find affordable and safe housing, the author wants to provide a tax credit to landlords that rent housing below market rates to a non-profit entity that provides housing for victims of domestic abuse.

Proposed Law

Senate Bill 221, for taxable years 2023 through 2028, provides a tax credit to a taxpayer that owns rental property into this state that they lease to a non-profit that is dedicated to assisting survivors of domestic violence, equal to $5,000 for each qualified lease. A “qualified lease” means a lease of a qualified rental property between a qualified taxpayer and a qualified non-profit where the rental rate is at least 20 percent lower than the fair market rent and the term of the lease is at least 12 months This credit is available to property owners that file under both the Personal Income and Corporation Tax law.

The measure allows the taxpayer to carry over any unused credit for up to five years, or until the credit has been exhausted.

The bill contains provisions to comply with the requirements of Revenue and Taxation Code Section 41.

SB 221 sunsets on December 1, 2028.

State Revenue Impact

Pending.

Comments

1. Purpose of the bill. According to the author, “SB221 grants a tax credit to individuals partnered with non-profit service providers dedicated to assisting with providing Transitional Housing at below market rates to survivors of domestic violence. With women on average waiting more than 10 years to access stable housing – a rate twice that of men, and the Office of Emergency Services Domestic Violence Assistance Program over-subscribed by almost 28,000 requests, California must seek to help and incentivize the increase in housing supply to these survivors.”

2. Revenue loss. Existing tax law provides various credits, deductions, exclusions, and exemptions for taxpayers. Since the Legislature enacts these items to accomplish some governmental purpose, which has a cost — in the form of foregone revenues — state law refers to them as "tax expenditures." This bill would create a new tax expenditure that seeks to encourage the hiring of homeless persons, but that will result in less revenue for the General Fund. Without General Fund moneys, the government has less funding to pay for important public services such as education and public safety. As a result, the state will have to reduce spending or increase taxes to match the foregone revenue. The Committee may wish to consider whether SB 221 is worth the spending cuts and/or tax increases.

3. Windfall. Tax expenditures produce two different outcomes. First, they reward behavior that would have occurred without the tax benefit, referred to as windfall benefit. Second, they generate certain activity that would not have occurred but for the tax benefit. SB 221 provides a tax credit for landlords that provide below market rental leases with qualified nonprofits. Some of these taxpayers would have executed these leases anyway as part of business operations and will receive a windfall benefit. On the other hand, taxpayers may view this tax credit as enough incentive to offer the discounted lease. However, regardless of whether it is a windfall benefit, SB 221 still has a General Fund impact to the state. The Committee may wish to consider whether enacting a tax credit for these types of leases will outweigh the cost to the state.

4. Section 41. Section 41 of the Revenue and Taxation Code requires any bill enacting a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve and detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). To satisfy these requirements SB 221:

• States that its goal, purpose, and objective is to incentivize people and businesses that provide residential rental space to work with nonprofits in assisting survivors of domestic violence.
• To measure its impact, it directs Franchise Tax Board to prepare a report which must be provided no later than November 1, 2026, and annually thereafter, to the Legislature that compiles the number of taxpayers claiming the credit and the average dollar value of the credit allowed.

Support and Opposition

(4/28/23)

Support: California Apartment Association

Opposition: None submitted.

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1. Domestic Violence/Intimate Partner Violence (ca.gov) ↑

2. State of California Department of Justice - OpenJustice ↑

3. FY2023_FMR_Schedule.pdf (huduser.gov) ↑