Bill Text: CA AB185 | 2015-2016 | Regular Session | Amended

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Bill Title: Income taxation: insurance taxation: credits: California

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Failed) 2016-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB185 Detail]

Download: California-2015-AB185-Amended.html

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BILL NUMBER: AB 185	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JANUARY 11, 2016
	AMENDED IN ASSEMBLY  MAY 20, 2015

INTRODUCED BY   Assembly Members Eduardo Garcia and Medina

                        JANUARY 26, 2015

   An act to add Section 26011.9 to the Public Resources Code, and to
add Section 18410.3 to, and to add and repeal Sections 12283,
17053.9, and 23622.9 of, the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 185, as amended, Eduardo Garcia. Income taxation: insurance
taxation: credits: California New Markets Tax Credit.
   The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws. Existing law
creates the California Competes Tax Credit Committee, which has
specified duties in regard to tax credits for economic development.
Existing law establishes the Governor's Office of Business and
Economic Development, also known as "GO-Biz," to, among other duties,
serve the Governor as the lead entity for economic strategy and the
marketing of California on issues relating to business development,
private sector investment, and economic growth.
   Existing law imposes an annual tax on the gross premiums of an
insurer, as defined, doing business in this state at specified rates.

   This bill would allow a credit under the Personal Income Tax Law
and the Corporation Tax Law, and a credit against the tax imposed on
an insurer, in modified conformity with a federal New Markets Tax
Credit, for taxable years beginning on or after January 1, 
2016,   2017,  and before January 1,  2028,
  2029,  in a specified amount for investments in
low-income communities. The bill would limit the total annual amount
of credit allowed pursuant to these provisions to an amount equal to
any portion not granted under a specified sales and use tax
exclusion, not to exceed $40,000,000 per calendar year, and would
limit the allocation of the credit to a cumulative total of no more
than $200,000,000, as provided. The bill would impose specified
duties on the California Competes Tax Credit Committee and GO-Biz
with regard to the application for, and allocation of, the credit.
The bill would require GO-Biz to establish and impose reasonable fees
upon entities that apply for the allocation of the credit, to be
deposited in the California New Markets Tax Credit Fund established
by the bill, and use the revenue, upon appropriation by the
Legislature, to defray the cost of applying to, and administering the
program, as specified. The bill would specify that the credit would
not be allowed unless the Legislature makes an appropriation from the
fund.
   The bill would provide that its provisions are severable.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares the following:
   (a) While many areas of California have recovered from the
economic and community development impacts of the 2006 Financial
Crisis and the 2010 global recession, Californians in a number of
communities and neighborhoods are still experiencing their lingering
effects. In some cases this has resulted in small and medium
businesses in low-income areas lacking sufficient access to capital
and technical assistance. Given that the state has many needs and
limited resources, moneys from the private sector are necessary to
fill this capital and investment gap.
   (b) Initially enacted in 2000, the federal government established
the New Markets Tax Credit (NMTC) Program, which uses a market-based
approach for expanding capital and technical assistance to businesses
in lower income communities. The federal program is jointly
administered by the Community Development Financial Institutions Fund
(CDFI Fund) and the Internal Revenue Service. The NMTC Program
allocates federal tax incentives to community development entities
(CDE), which they then use to attract private investors who
contribute funds that can be used to finance and invest in businesses
and develop real estate in low-income communities. Through the
2013-14 funding round, the CDFI Fund had awarded approximately
$40,000,000,000 in NMTC in 836 awards including $3,000,000,000 in
American Recovery and Investment Act of 2009 awards and
$1,000,000,000 of special allocation authority to be used for the
recovery and redevelopment of the Gulf Opportunity Zone.
   (c) The federal NMTC totals 39 percent of the original investment
amount in the CDE and is claimed over a period of seven years (5
percent for each of the first three years, and 6 percent for each of
the remaining four years). Any investment by any taxpayer in the CDE
redeemed before the end of the seven-year period will be recaptured.
   (d) Fourteen states in the United States have adopted state
programs using the NMTC model including Alabama, Florida, Illinois,
Nevada, and Oregon. While some of the programs substantially mirror
the federal program, others vary in both the percentage of the credit
and some of the policies that form the foundation of the credit. One
of the reasons cited for establishing state-level programs is to
make a state more attractive to CDEs, which results in increasing the
amount of federal NMTCs being utilized in a state. Further, several
studies, including a January 1, 2011, case study by Pacific Community
Ventures, showed that for every dollar of forgone tax revenue, the
federal NMTC leverages $12 to $14 of private investment.
  SEC. 2.  Section 26011.9 is added to the Public Resources Code, to
read:
   26011.9.  The authority shall make a determination of the amount
of the one hundred million dollars ($100,000,000) in exclusions not
granted in the assigned calendar year pursuant to Section 26011.8. An
amount equal to that amount shall be granted in the subsequent
calendar year through the California New Markets Tax Credit Program
pursuant to Sections 12283, 17053.9, and 23622.9 of the Revenue and
Taxation Code. This section shall not prevent a taxpayer granted an
exclusion pursuant to Section 6010.8 of the Revenue and Taxation Code
from applying for, and receiving a refund for, taxes paid under Part
1 (commencing with Section 6001) of Division 2 of the Revenue and
Taxation Code.
  SEC. 3.  Section 12283 is added to the Revenue and Taxation Code,
to read:
   12283.  (a) There is hereby created the California New Markets Tax
Credit Program as provided in this section, Section 17053.9, and
Section 23622.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to community and economic development entities that can be
leveraged by the entity to attract private sector investment that in
turn will be deployed by providing financing and technical assistance
to small- and medium-size businesses and the development of
commercial, industrial, and community development projects,
including, but not limited to, facilities for nonprofit service
organizations, light manufacturing, and mixed-use and
transit-oriented development. The committee and GO-Biz shall
administer this program as provided in this section, Section 17053.9,
and Section 23622.9. The Director of GO-Biz may delegate the
administration of all or portions of the program within GO-Biz.
   (b) (1) For taxable years beginning on or after January 1,
 2016,   2017,  and before January 1,
 2028,   2029,  and subject to subdivision
(h), there shall be allowed as a credit against the tax described in
Sections 12201, 12204, 12206, and 12209, an amount determined in
accordance with Section 45D of the Internal Revenue Code, as modified
as set forth in this section.
   (2) (A) For purposes of this section, "committee" means the
California Competes Tax Credit Committee established under Section
18410.2.
   (B) For purposes of this section, "GO-Biz" means the Governor's
Office of Business and Economic Development.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (2) (A) Section 45D(c)(1) of the Internal Revenue Code is modified
to only include a qualified community development entity, that is
certified by the Secretary of the Treasury, and its subsidiary
qualified community development entities that have entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012.
   (B)  Section 45D(c)(2) of the Internal Revenue Code is modified to
only include a specialized small business investment company or
community development financial institution that entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012.
   (3) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:
   (A) By substituting "any low-income community in California" for
"any low-income community" every place it appears in Section 45D of
the Internal Revenue Code.
   (B) A qualified active low-income community business shall not
include any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (C) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in one or more California
low-income communities. The operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by this paragraph.  This requirement does not
apply to a business that is controlled by, or under common control
with, a federally recognized tribe. 
   (D) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average.
   (E) A qualified active low-income community business shall not
include any business that operates or derives revenues from the
operation of a country club, gaming establishment, massage parlor,
liquor store, or golf course.
   (F) A qualified active low-income community business shall not
include a sexually oriented business. A "sexually oriented business"
means a nightclub, bar, restaurant, or similar commercial enterprise
that provides for an audience of two or more individuals live nude
entertainment or live nude performances where the nudity is a
function of everyday business operations and where nudity is a
planned and intentional part of the entertainment or performance.
"Nude" means clothed in a manner that leaves uncovered or visible,
through less than fully opaque clothing, any portion of the genitals
or, in the case of a female, any portion of the breasts below the top
of the areola of the breasts.
   (G) A qualified active low-income community business shall not
include a charter school.
   (4) Section 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments designated, is modified
as follows:
   (A)  The following shall apply in lieu of the provisions of
Section 45D(f)(1) of the Internal Revenue Code: "The aggregate amount
of qualified equity investments that may be allocated in any
calendar year for purposes of this section, Section 17053.9, and
Section 23622.9 shall be an amount as determined by GO-Biz in
consultation with the Department of Finance based upon any unused
portion of the one hundred million dollars ($100,000,000) in
exclusions, authorized pursuant to Section 6010.8, as determined by
the California Alternative Energy and Advanced Transportation
Financing Authority and reported to the committee, not to exceed an
amount based upon a credit of forty million dollars ($40,000,000).
The committee shall limit the allocation of investments that may be
designated under this section, Section 17053.9, and Section 23622.9
to a cumulative total amount based on credits of no more than two
hundred million dollars ($200,000,000). The allocation of any
undesignated qualified equity investments shall be returned to the
committee by March 1 of the year following allocation and the value
of the undesignated qualified equity investment shall be available
for allocation in the following calendar years in accordance with the
application process. Any qualified equity investment attributable to
recaptured credits shall be available to the committee on March 1 of
the year following recapture and shall be available for allocation
in the following calendar years in accordance with subparagraph (B)
of paragraph (5). Reallocated qualified equity investments
attributable to recapture credits shall not count against the annual
or the cumulative limit."
   (B) The references to "the Secretary" in Section 45D(f)(2) of the
Internal Revenue Code, relating to allocation of limitation, is
modified to read "GO-Biz."
   (C) The last sentence of Section 45D(f)(3) of the Internal Revenue
Code, relating to carryover of unused limitation, shall not apply.
   (5) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, is modified to add the following:
   (A) (i) The qualified community development entity fails to comply
with subparagraph (D) of paragraph (5) of subdivision (d). In this
case, recapture shall be 100 percent of the credit. The qualified
community development entity shall send notice to GO-Biz within 30
calendar days of the close of any calendar year in which the
qualified community development entity has failed to invest at least
15 percent of the purchase price of the qualified equity investment
in satisfaction of the requirements of subparagraph (D) of paragraph
(5) of subdivision (d).
   (ii) The qualified community development entity made an investment
without performing a revenue impact assessment that satisfies
subparagraph (J) of paragraph (5) of subdivision (d). In this case,
recapture shall be 100 percent of the credit, unless GO-Biz has
approved a waiver pursuant to clause (ii) of subparagraph (J) of
paragraph (5) of subdivision (d). The qualified community development
entity shall send notice to GO-Biz within 30 calendar days of the
close of any calendar year in which the qualified community
development entity has made an investment that fails to meet the
requirements set forth in subparagraph (J) of paragraph (5) of
subdivision (d).
   (B) GO-Biz shall establish a process, in consultation with the
Department of Insurance, for the recapture of credits allowed under
this section from the entity that claimed the credit on a return.
   (C) Recaptured qualified equity investments revert back to GO-Biz
and shall be reissued. The reissue shall not count toward the annual
or cumulative allocation limitation. The reissue shall be done in the
following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (F) of
paragraph (5) of subdivision (d) by the annual allocation limitation.

   (ii) Thereafter, in accordance with the application process.
   (D) (i) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period.
   (ii) Not more than 45 calendar days following the close of the
cure period, GO-Biz shall make a final determination as to whether
the noncompliance has been cured. This determination shall be based
on information submitted by the qualified community development
entity, and any other information GO-Biz deems relevant to this
determination. Within 30 calendar days of making the final
determination, GO-Biz shall notify the Department of Insurance and
the Franchise Tax Board of the determination and other related
information including, but not limited to, the tax identification
number of the qualified community development entity.
   (iii) GO-Biz shall post, and update monthly, a tally of
undesignated qualified equity investments, pursuant to paragraph (4),
and recaptured credits pursuant to this paragraph.
   (6) If a qualified community development entity makes a capital or
equity investment or a loan with respect to a qualified low-income
building under the state Low-Income Housing Tax Credit Program, the
investment or loan is not a qualified low-income community investment
under this section.
   (d) (1) GO-Biz shall adopt guidelines necessary or appropriate to
carry out its responsibilities with respect to the allocation of the
qualified equity investments and recapture of credit allowed by this
section. The adoption of the guidelines shall not be subject to the
rulemaking provisions of the Administrative Procedure Act of Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
   (2) (A) GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of reviewing applications for
the program. GO-Biz may impose other reasonable fees upon entities
that receive the allocation pursuant to this subdivision that in the
aggregate defray the cost of administering the program.
   (B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
   (3) In developing guidelines GO-Biz shall adopt an allocation
process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income community populations across the state are engaged and
have an opportunity to benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of authority to
designate qualified equity investments including, but not limited to,
its business strategy, targeted community outcomes, capitalization
strategy, and management capacity.
   (C) Considers the qualified community development entity's prior
qualified low-income community investments under Section 45D of the
Internal Revenue Code.
   (D) Considers the qualified community development entity's prior
qualified low-income community investments under this section,
including subparagraph (D) of paragraph (5).
   (4) GO-Biz shall begin accepting applications on or before May 15,
 2016,   2017,  and shall award authority
to designate qualified equity investments annually through 
2020,   2021,  to the extent that allocations are
available pursuant to Section 26011.9 of the Public Resources Code.
To the extent reasonable and consistent in carrying out the purposes
of this section, GO-Biz shall consider how the timing of the state
allocation rounds correspond with the allocation schedule of the
federal New Markets Tax Credit Program. In the instance where GO-Biz
determines that an application is incomplete, the qualified community
development entity shall be given five business days to provide the
omitted information.
   (5) (A) In the  2016   2017  awards
cycle, the committee shall award authority to designate qualified
equity investments to qualified community development entities
described in paragraph (2) of subdivision (c) in the order
applications are received by the committee. Applications received on
the same day shall be deemed to have been received simultaneously.
   (B) In the  2017 to 2020   2018 to 2021 
award cycles, inclusive, at least 60 percent of the authority to
designate qualified equity investments shall be awarded pursuant to
subparagraph (A). At the committee's discretion, a higher percentage
of authority to designate qualified equity investments may be awarded
pursuant to subparagraph (A).
   (C) The committee shall award up to 40 percent of the authority to
designate qualified equity investments in the  2017 to 2020,
  2018 to 2021,  inclusive, award cycles, to
qualified community development entities on a competitive basis using
blind scoring and a review committee that is comprised of community
development finance practitioners and members having demonstrated
experience in assessing organizational business strategy, community
outcomes, capitalization strategy, and management capacity. A member
of the review committee shall not have a financial interest, which
includes, but is not limited to, asking, consenting, or agreeing to
receive any commission, emolument, gratuity, money, property, or
thing of value for his or her own use, benefit, or personal advantage
for procuring or endeavoring to procure for any person, partnership,
joint venture, association, or corporation any qualified equity
investment or other assistance from any applicant.
   (D) (i) For qualified equity investments derived from the 
2016 to 2020,   2017 to 2021,  inclusive, awards
cycles, pursuant to subparagraphs (A), (B), and (C), a qualified
community development entity shall invest at least 15 percent of the
qualified equity investment in a qualified low-income community
business in consultation or in partnership with either of the
following:
   (I) A qualified community development entity certified under
Section 45D of the Internal Revenue Code that has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area, but
excluding qualified community development entities with a national
service area.
   (II) A nonprofit organization  certified by GO-Biz,
pursuant to clause (iii).   that does the following:
 
   (ia) Meets the requirements of Section 23701 of the Revenue and
Taxation Code.  
   (ib) Is registered with the Attorney General.  
   (ic) Has articles of incorporation that state the primary mission
of the organization is focused on improving the economic well-being
of low-income communities or individuals.  
   (id) Has bylaws that provide that the organization maintains
accountability to residents of low-income communities through their
representation on any governing board or on an advisory board of the
nonprofit organization. 
   (ii) The 15-percent investment shall be calculated by multiplying
the total purchase price of the qualified equity investments issued
by the qualified community development entity by 15 percent. Each
community development entity application shall indicate how the
qualified community development entity will meet this requirement.

   (iii) GO-Biz shall establish guidelines for certifying a nonprofit
organization pursuant to this subparagraph. A nonprofit organization
shall meet the requirements of Section 23701 and be certified by
GO-Biz as having a primary mission of serving or providing investment
capital in low-income communities in California. The nonprofit
organization shall maintain accountability to residents of low-income
communities through their representation on any governing board or
on an advisory board of the nonprofit organization. GO-Biz may
include reasonable conditions on the certification to effectuate the
intent of this section and may suspend or revoke a certification,
after affording the nonprofit organization notice and the opportunity
to appeal and be heard by the committee, if GO-Biz finds that the
nonprofit organization no longer meets the requirements for
certification. 
   (E)  In making competitive awards of authority to designate
qualified equity investments, priority shall be given to applications
that can demonstrate that the qualified equity investment authority
will allow the qualified community development entity to undertake
qualified low-income community investments in rural, suburban, or
urban areas that have been historically underserved and result in the
greatest benefit to the hardest to serve and undercapitalized lower
income populations, or in newly established businesses, or in
activities that support neighborhood revitalization strategies driven
by local grassroots stakeholders in multiple low-income communities
across one or more regions or the state for the purpose of scaling
economic development activities that compliment regional industry
clusters that result in the greatest benefit to the largest number of
lower income individuals.
   (F) (i)  For applications described in subparagraph (A), in the
event requests for authority to designate qualified equity
investments exceed the applicable annual allocation limitation,
GO-Biz shall certify, consistent with remaining qualified equity
investment capacity, qualified equity investments of applicants in
proportionate percentages based upon the ratio of the amount of
qualified equity investments requested in such applications to the
total amount of qualified equity investments requested in all such
applications received on the same day.
   (ii) If a pending request cannot be fully certified due to this
limit, GO-Biz shall certify the portion that may be certified unless
the qualified community development entity elects to withdraw its
request rather than receive partial certification.
   (G) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee within 30 calendar days of such
transfer and include the information required in the application with
respect to such transferee with such notice. The transferee shall be
subject to the same rules, requirements, and limitations applicable
to the transferor.
   (H) Within  60   200  calendar days of
GO-Biz sending notice of certification, the qualified community
development entity or any transferee, under subparagraph (G), shall
issue the qualified equity investment and receive cash in the amount
of the certified amount. The qualified community development entity
or transferee, under subparagraph (G),  must  
shall  provide GO-Biz with evidence of the receipt of the cash
investment within  65   205  calendar days
of the applicant receiving notice of certification. If the qualified
community development entity or any transferee, under subparagraph
(G), does not receive the cash investment and issue the qualified
equity investment within  60   200 
calendar days of GO-Biz sending the certification notice, the
certification shall lapse and the entity may not issue the qualified
equity investment without reapplying to GO-Biz for certification.
Lapsed certifications revert back to GO-Biz and shall be reissued in
the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (F)
under the annual allocation limitation of forty million dollars
($40,000,000) in paragraph (4) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (I) A qualified community development entity that issues qualified
equity investments  must   shall  notify
GO-Biz of the names of taxpayers that are eligible to utilize tax
credits pursuant to this section and any transfer of a qualified
equity investment.
   (J) (i) A qualified community development entity shall only make a
qualified low-income community investment that demonstrates a
positive revenue impact on the state over a 10-year period against
the aggregate tax credit utilization over the same 10-year period.
GO-Biz shall approve one or more nationally recognized revenue impact
assessment models that shall be used by the qualified community
development entity to demonstrate positive revenue impact. If it is
demonstrated that the qualified low-income community investment has a
positive revenue impact on the state at the time the investment is
made, it shall be treated as if the investment continues to meet the
requirement of this subparagraph for the duration of the seven-year
program                                                period.
   (ii) Upon application and approval by GO-Biz, the requirement of
this subparagraph may be waived.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to GO-Biz within
the first five business days after the first anniversary of the
initial credit allowance date that provides documentation as to the
investment of at least 85 percent of the purchase price in qualified
low-income community investments in qualified active low-income
community businesses located in California. Such report shall include
all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Evidence that the community development entity complied with
subparagraph (D) of paragraph (5).
   (iv) Evidence that each qualified low-income community investment
was determined to have a positive revenue impact on the state. This
requirement does not apply for any qualified low-income community
investment for which GO-Biz approved a waiver, pursuant to clause
(ii) of subparagraph (J) of paragraph (5) or to reinvestments of
redeemed qualified low-income investments.
   (v) Any other information required by GO-Biz as being necessary to
meet the requirements of this section.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to GO-Biz within 60 calendar days of the
beginning of the calendar year during the seven years following
submittal of the report, pursuant to subparagraph (A). No annual
report shall be due prior to the first anniversary of the initial
credit allowance date. The report shall include, but is not limited
to, the following:
   (i) The social, environmental, and economic impact the credit had
on the low-income community during the report period and
cumulatively.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of owner-occupied real estate projects.
   (vi) Location of each qualified low-income community business
assisted by a qualified low-income community investment.
   (vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development entity
during the year.
   (viii) Any other information requested by GO-Biz.
   (e) (1) In the case where the credit allowed by this section
exceeds the tax described in Sections 12201, 12204, 12206, and 12209,
the excess may be carried over to reduce that tax in the following
year, and the six succeeding years if necessary, until the credit is
exhausted.
   (2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment. 
   (3) The credit allowed under this section may be in addition to
any credit allowed under Section 45D of the Internal Revenue Code.

   (f) GO-Biz shall annually report on its Internet Web site the
information provided by low-income community development entities and
on the geographic distribution of the qualified active low-income
community businesses assisted.
   (g) (1) The Insurance Commissioner and the Franchise Tax Board may
prescribe any rules or regulations that may be necessary or
appropriate to implement this section. The Insurance Commissioner and
the Franchise Tax Board shall have access to any documentation held
by the committee relative to the application and reporting of a
qualified community development entity.
   (2) A qualifying community development entity shall provide GO-Biz
with the name, address, and tax identification number of each
investor and entity for which a qualified equity investment was
designated by the qualifying community development entity, pursuant
to this section. GO-Biz shall provide this information to the
Insurance Commissioner and the Franchise Tax Board in a manner
determined by the Insurance Commissioner and the Franchise Tax Board.

   (h) GO-Biz and the committee shall only make awards pursuant to
paragraph (4) of subdivision (d) in a calendar year in which the
Legislature appropriates funds in the California New Markets Tax
Credit Fund pursuant to subdivision (b) of Section 18410.3.
   (i) This section shall remain in effect only until December 1,
 2028,   2029,  and as of that date is
repealed.
  SEC. 4.  Section 17053.9 is added to the Revenue and Taxation Code,
to read:
   17053.9.  (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 12283, and
Section 23622.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to community and economic development entities that can be
leveraged by the entity to attract private sector investment that in
turn will be deployed by providing financing and technical assistance
to small- and medium-size businesses and the development of
commercial, industrial, and community development projects,
including, but not limited to, facilities for nonprofit service
organizations, light manufacturing, and mixed-use and
transit-oriented development. The committee and GO-Biz shall
administer this program as provided in this section, Section 12283,
and Section 23622.9. The Director of GO-Biz may delegate the
administration of all or portions of the program within GO-Biz.
   (b) (1) For taxable years beginning on or after January 1,
 2016,   2017,  and before January 1,
 2028,   2029,  and subject to subdivision
(h), there shall be allowed as a credit against the "net tax," as
defined in Section 17039, an amount determined in accordance with
Section 45D of the Internal Revenue Code, as modified as set forth in
this section.
   (2) (A) For purposes of this section, "committee" means the
California Competes Tax Credit Committee established under Section
18410.2.
   (B) For purposes of this section, "GO-Biz" means the Governor's
Office of Business and Economic Development.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (2) (A) Section 45D(c)(1) of the Internal Revenue Code is modified
to only include a qualified community development entity, that is
certified by the Secretary of the Treasury, and its subsidiary
qualified community development entities that have entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012.
   (B) Section 45D(c)(2) of the Internal Revenue Code is modified to
only include a specialized small business investment company or
community development financial institution that entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012.
   (3) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:
   (A) By substituting "any low-income community in California" for
"any low-income community" every place it appears in Section 45D of
the Internal Revenue Code.
   (B) A qualified active low-income community business shall not
include any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (C) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in one or more California
low-income communities. The operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by this paragraph.  This requirement does not
apply to a business that is controlled by, or under common control
with, a federally   recognized tribe. 
   (D) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average.
   (E) A qualified active low-income community business shall not
include any business that operates or derives revenues from the
operation of a country club, gaming establishment, massage parlor,
liquor store, or golf course.
   (F) A qualified active low-income community business shall not
include a sexually oriented business. A "sexually oriented business"
means a nightclub, bar, restaurant, or similar commercial enterprise
that provides for an audience of two or more individuals live nude
entertainment or live nude performances where the nudity is a
function of everyday business operations and where nudity is a
planned and intentional part of the entertainment or performance.
"Nude" means clothed in a manner that leaves uncovered or visible,
through less than fully opaque clothing, any portion of the genitals
or, in the case of a female, any portion of the breasts below the top
of the areola of the breasts.
   (G) A qualified active low-income community business shall not
include a charter school.
   (4) Section 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments designated, is modified
as follows:
   (A) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: "The aggregate amount of
qualified equity investments that may be allocated in any calendar
year for purposes of this section, Section 12283, and Section 23622.9
shall be an amount as determined by GO-Biz in consultation with the
Department of Finance based upon any unused portion of the one
hundred million dollars ($100,000,000) in exclusions, authorized
pursuant to Section 6010.8, as determined by the California
Alternative Energy and Advanced Transportation Financing Authority
and reported to the committee, not to exceed an amount based upon a
credit of forty million dollars ($40,000,000). The committee shall
limit the allocation of investments that may be designated under this
section, Section 12283, and Section 23622.9 to a cumulative total
amount based on credits of no more than two hundred million dollars
($200,000,000). The allocation of any undesignated qualified equity
investments shall be returned to the committee by March 1 of the year
following allocation and the value of the undesignated qualified
equity investment shall be available for allocation in the following
calendar years in accordance with the application process. Any
qualified equity investment attributable to recaptured credits shall
be available to the committee on March 1 of the year following
recapture and shall be available for allocation in the following
calendar years in accordance with clause (ii) of subparagraph (B) of
paragraph (5). Reallocated qualified equity investments attributable
to recapture credits shall not count against the annual or the
cumulative limit."
   (B) The references to "the Secretary" in Section 45D(f)(2) of the
Internal Revenue Code, relating to allocation of limitation, is
modified to read "GO-Biz."
   (C) The last sentence of Section 45D(f)(3) of the Internal Revenue
Code, relating to carryover of unused limitation, shall not apply.
   (5) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
"Section 19101 of this code" for "section 6621".
   (B) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, is modified to add the following:
   (i) (I) The qualified community development entity fails to comply
with subparagraph (D) of paragraph (5) of subdivision (d). In this
case, recapture shall be 100 percent of the credit. The qualified
community development entity shall send notice to GO-Biz within 30
calendar days of the close of any calendar year in which the
qualified community development entity has failed to invest at least
15 percent of the purchase price of the qualified equity investment
in satisfaction of the requirements of subparagraph (D) of paragraph
(5) of subdivision (d).
   (II) The qualified community development entity made an investment
without performing a revenue impact assessment that satisfies
subparagraph (J) of paragraph (5) of subdivision (d). In this case,
recapture shall be 100 percent of the credit, unless GO-Biz has
approved a waiver pursuant to clause (ii) of subparagraph (J) of
paragraph (5) of subdivision (d). The qualified community development
entity shall send notice to GO-Biz within 30 calendar days of the
close of any calendar year in which the qualified community
development entity has made an investment that fails to meet the
requirements set forth in subparagraph (J) of paragraph (5) of
subdivision (d).
   (ii) GO-Biz shall establish a process, in consultation with the
Franchise Tax Board, for the recapture of credits allowed under this
section from the entity that claimed the credit on a return.
   (iii)  Recaptured qualified equity investments revert back to
GO-Biz and shall be reissued. The reissue shall not count toward the
annual or cumulative allocation limitation. The reissue shall be done
in the following order:
   (I)  First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (F) of
paragraph (5) of subdivision (d) by the annual allocation limitation.

   (II)  Thereafter, in accordance with the application process.
   (iv) (I) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period.
   (II) Not more than 45 calendar days following the close of the
cure period, GO-Biz shall make a final determination as to whether
the noncompliance has been cured. This determination shall be based
on information submitted by the qualified community development
entity, and any other information GO-Biz deems relevant to this
determination. Within 30 calendar days of making the final
determination, GO-Biz shall notify the Franchise Tax Board of the
determination and other related information including, but not
limited to, the tax identification number of the qualified community
development entity.
   (III) GO-Biz shall post, and update monthly, a tally of
undesignated qualified equity investments, pursuant to paragraph (4),
and recaptured credits pursuant to this paragraph.
   (6) If a qualified community development entity makes a capital or
equity investment or a loan with respect to a qualified low-income
building under the state Low-Income Housing Tax Credit Program, the
investment or loan is not a qualified low-income community investment
under this section.
   (d) (1) GO-Biz shall adopt guidelines necessary or appropriate to
carry out its responsibilities with respect to the allocation of the
qualified equity investments and recapture of credit allowed by this
section. The adoption of the guidelines shall not be subject to the
rulemaking provisions of the Administrative Procedure Act of Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
   (2) (A) GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of reviewing applications for
the program. GO-Biz may impose other reasonable fees upon entities
that receive the allocation pursuant to this subdivision that in the
aggregate defray the cost of administering the program.
   (B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
   (3) In developing guidelines GO-Biz shall adopt an allocation
process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income community populations across the state are engaged and
have an opportunity to benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of authority to
designate qualified equity investments including, but not limited to,
its business strategy, targeted community outcomes, capitalization
strategy, and management capacity.
   (C) Considers the qualified community development entity's prior
qualified low-income community investments under Section 45D of the
Internal Revenue Code.
   (D) Considers the qualified community development entity's prior
qualified low-income community investments under this section,
including subparagraph (D) of paragraph (5).
   (4) GO-Biz shall begin accepting applications on or before May 15,
 2016,   2017,  and shall award authority
to designate qualified equity investments annually through 
2020,   2021,  to the extent that allocations are
available pursuant to Section 26011.9 of the Public Resources Code.
To the extent reasonable and consistent in carrying out the purposes
of this section, GO-Biz shall consider how the timing of the state
allocation rounds correspond with the allocation schedule of the
federal New Markets Tax Credit Program. In the instance where GO-Biz
determines that an application is incomplete, the qualified community
development entity shall be given five business days to provide the
omitted information.
   (5) (A) In the  2016   2017  awards
cycle, the committee shall award authority to designate qualified
equity investments to qualified community development entities
described in paragraph (2) of subdivision (c) in the order
applications are received by the committee. Applications received on
the same day shall be deemed to have been received simultaneously.
   (B) In the  2017 to 2020   2018 to 2021 
award cycles, inclusive, at least 60 percent of the authority to
designate qualified equity investments shall be awarded pursuant to
subparagraph (A). At the committee's discretion, a higher percentage
of authority to designate qualified equity investments may be awarded
pursuant to subparagraph (A).
   (C) The committee shall award up to 40 percent of the authority to
designate qualified equity investments in the  2017 to 2020,
  2018 to 2021,  inclusive, award cycles, to
qualified community development entities on a competitive basis using
blind scoring and a review committee that is comprised of community
development finance practitioners and members having demonstrated
experience in assessing organizational business strategy, community
outcomes, capitalization strategy, and management capacity. A member
of the review committee shall not have a financial interest, which
includes, but is not limited to, asking, consenting, or agreeing to
receive any commission, emolument, gratuity, money, property, or
thing of value for his or her own use, benefit, or personal advantage
for procuring or endeavoring to procure for any person, partnership,
joint venture, association, or corporation any qualified equity
investment or other assistance from any applicant.
   (D) (i) For qualified equity investments derived from the 
2016 to 2020,   2017 to 2021,  inclusive, awards
cycles, pursuant to subparagraphs (A), (B), and (C), a qualified
community development entity shall invest at least 15 percent of the
qualified equity investment in a qualified low-income community
business in consultation or in partnership with either of the
following:
   (I) A qualified community development entity certified under
Section 45D of the Internal Revenue Code that has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area, but
excluding qualified community development entities with a national
service area.
   (II) A nonprofit organization  certified by GO-Biz,
pursuant to clause (iii).   that does the following:
 
   (ia) Meets the requirements of Section 23701.  
   (ib) Is registered with the Attorney General.  
   (ic) Has articles of incorporation that state the primary mission
of the organization is focused on improving the economic well-being
of low-income communities or individuals.  
   (id) Has bylaws that provide that the organization maintains
accountability to residents of low-income communities through their
representation on any governing board or on an advisory board of the
nonprofit organization. 
   (ii) The 15-percent investment shall be calculated by multiplying
the total purchase price of the qualified equity investments issued
by the qualified community development entity by 15 percent. Each
community development entity application shall indicate how the
qualified community development entity will meet this requirement.

   (iii) GO-Biz shall establish guidelines for certifying a nonprofit
organization pursuant to this subparagraph. A nonprofit organization
shall meet the requirements of Section 23701 and be certified by
GO-Biz as having a primary mission of serving or providing investment
capital in low-income communities in California. The nonprofit
organization shall maintain accountability to residents of low-income
communities through their representation on any governing board or
on an advisory board of the nonprofit organization. GO-Biz may
include reasonable conditions on the certification to effectuate the
intent of this section and may suspend or revoke a certification,
after affording the nonprofit organization notice and the opportunity
to appeal and be heard by the committee, if GO-Biz finds that the
nonprofit organization no longer meets the requirements for
certification. 
   (E) In making competitive awards of authority to designate
qualified equity investments, priority shall be given to applications
that can demonstrate that the qualified equity investment authority
will allow the qualified community development entity to undertake
qualified low-income community investments in rural, suburban, or
urban areas that have been historically underserved and result in the
greatest benefit to the hardest to serve and undercapitalized lower
income populations, or in newly established businesses, or in
activities that support neighborhood revitalization strategies driven
by local grassroots stakeholders in multiple low-income communities
across one or more regions or the state for the purpose of scaling
economic development activities that compliment regional industry
clusters that result in the greatest benefit to the largest number of
lower income individuals.
   (F) (i)  For applications described in subparagraph (A), in the
event requests for authority to designate qualified equity
investments exceed the applicable annual allocation limitation,
GO-Biz shall certify, consistent with remaining qualified equity
investment capacity, qualified equity investments of applicants in
proportionate percentages based upon the ratio of the amount of
qualified equity investments requested in such applications to the
total amount of qualified equity investments requested in all such
applications received on the same day.
   (ii) If a pending request cannot be fully certified due to this
limit, GO-Biz shall certify the portion that may be certified unless
the qualified community development entity elects to withdraw its
request rather than receive partial certification.
   (G) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee within 30 calendar days of such
transfer and include the information required in the application with
respect to such transferee with such notice. The transferee shall be
subject to the same rules, requirements, and limitations applicable
to the transferor.
   (H) Within  60   200  calendar days of
GO-Biz sending notice of certification, the qualified community
development entity or any transferee, under subparagraph (G), shall
issue the qualified equity investment and receive cash in the amount
of the certified amount. The qualified community development entity
or transferee, under subparagraph (G),  must  
shall  provide GO-Biz with evidence of the receipt of the cash
investment within  65   205  calendar days
of the applicant receiving notice of certification. If the qualified
community development entity or any transferee, under subparagraph
(G), does not receive the cash investment and issue the qualified
equity investment within  60   200 
calendar days of GO-Biz sending the
             certification notice, the certification shall lapse and
the entity may not issue the qualified equity investment without
reapplying to GO-Biz for certification. Lapsed certifications revert
back to GO-Biz and shall be reissued in the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (F)
under the annual allocation limitation of forty million dollars
($40,000,000) in paragraph (4) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (I) A qualified community development entity that issues qualified
equity investments  must   shall  notify
GO-Biz of the names of taxpayers that are eligible to utilize tax
credits pursuant to this section and any transfer of a qualified
equity investment.
   (J) (i) A qualified community development entity shall only make a
qualified low-income community investment that demonstrates a
positive revenue impact on the state over a 10-year period against
the aggregate tax credit utilization over the same 10-year period.
GO-Biz shall approve one or more nationally recognized revenue impact
assessment models that shall be used by the qualified community
development entity to demonstrate positive revenue impact. If it is
demonstrated that the qualified low-income community investment has a
positive revenue impact on the state at the time the investment is
made, it shall be treated as if the investment continues to meet the
requirement of this subparagraph for the duration of the seven-year
program period.
   (ii) Upon application and approval by GO-Biz, the requirement of
this subparagraph may be waived.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to GO-Biz within
the first five business days after the first anniversary of the
initial credit allowance date that provides documentation as to the
investment of at least 85 percent of the purchase price in qualified
low-income community investments in qualified active low-income
community businesses located in California. Such report shall include
all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Evidence that the community development entity complied with
subparagraph (D) of paragraph (5).
   (iv) Evidence that each qualified low-income community investment
was determined to have a positive revenue impact on the state. This
requirement does not apply for any qualified low-income community
investment for which GO-Biz approved a waiver, pursuant to clause
(ii) of subparagraph (J) of paragraph (5) or to reinvestments of
redeemed qualified low-income investments.
   (v) Any other information required by GO-Biz as being necessary to
meet the requirements of this section.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to GO-Biz within 60 calendar days of the
beginning of the calendar year during the seven years following
submittal of the report, pursuant to subparagraph (A). No annual
report shall be due prior to the first anniversary of the initial
credit allowance date. The report shall include, but is not limited
to, the following:
   (i) The social, environmental, and economic impact the credit had
on the low-income community during the report period and
cumulatively.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of owner-occupied real estate projects.
   (vi) Location of each qualified low-income community business
assisted by a qualified low-income community investment.
   (vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development entity
during the year.
   (viii) Any other information requested by GO-Biz.
   (e) (1) In the case where the credit allowed by this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and the six succeeding years if
necessary, until the credit is exhausted.
   (2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment. 
   (3) The credit allowed under this section may be in addition to
any credit allowed under Section 45D of the Internal Revenue Code.

   (f) GO-Biz shall annually report on its Internet Web site the
information provided by low-income community development entities and
on the geographic distribution of the qualified active low-income
community businesses assisted.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide GO-Biz
with the name, address, and tax identification number of each
investor and entity for which a qualified equity investment was
designated by the qualifying community development entity, pursuant
to this section. GO-Biz shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) GO-Biz and the committee shall only make awards pursuant to
paragraph (4) of subdivision (d) in a calendar year in which the
Legislature appropriates funds in the California New Markets Tax
Credit Fund pursuant to subdivision (b) of Section 18410.3.
   (i) This section shall remain in effect only until December 1,
 2028,   2029,  and as of that date is
repealed.
  SEC. 5.  Section 18410.3 is added to the Revenue and Taxation Code,
to read:
   18410.3.  (a) The California New Markets Tax Credit Fund is hereby
established in the State Treasury.
   (b) Upon appropriation, moneys in the fund shall be used for the
purposes described in subdivision (d) of Section 12283, subdivision
(d) of Section 17053.9, and subdivision (d) of Section 23622.9.
  SEC. 6.  Section 23622.9 is added to the Revenue and Taxation Code,
to read:
   23622.9.  (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 12283, and
Section 17053.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to community and economic development entities that can be
leveraged by the entity to attract private sector investment that in
turn will be deployed by providing financing and technical assistance
to small- and medium-size businesses and the development of
commercial, industrial, and community development projects,
including, but not limited to, facilities for nonprofit service
organizations, light manufacturing, and mixed-use and
transit-oriented development. The committee and GO-Biz shall
administer this program as provided in this section, Section 12283,
and Section 17053.9. The Director of GO-Biz may delegate the
administration of all or portions of the program within GO-Biz.
   (b) (1) For taxable years beginning on or after January 1,
 2016,   2017,  and before January 1,
 2028,   2029,  and subject to subdivision
(h), there shall be allowed as a credit against the "tax," as defined
in Section 23036, an amount determined in accordance with Section
45D of the Internal Revenue Code, as modified as set forth in this
section.
   (2) (A) For purposes of this section, "committee" means the
California Competes Tax Credit Committee established under Section
18410.2.
   (B) For purposes of this section, "GO-Biz" means the Governor's
Office of Business and Economic Development.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (2) (A) Section 45D(c)(1) of the Internal Revenue Code is modified
to only include a qualified community development entity, that is
certified by the Secretary of the Treasury, and its subsidiary
qualified community development entities that have entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012.
   (B) Section 45D(c)(2) of the Internal Revenue Code is modified to
only include a specialized small business investment company or
community development financial institution that entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012.
   (3) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:
   (A) By substituting "any low-income community in California" for
"any low-income community" every place it appears in Section 45D of
the Internal Revenue Code.
   (B) A qualified active low-income community business shall not
include any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (C) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in one or more California
low-income communities. The operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by this paragraph.  This requirement does not
apply to a business that is controlled by, or under common control
with, a federally recognized tribe. 
   (D) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average.
   (E) A qualified active low-income community business shall not
include any business that operates or derives revenues from the
operation of a country club, gaming establishment, massage parlor,
liquor store, or golf course.
   (F) A qualified active low-income community business shall not
include a sexually oriented business. A "sexually oriented business"
means a nightclub, bar, restaurant, or similar commercial enterprise
that provides for an audience of two or more individuals live nude
entertainment or live nude performances where the nudity is a
function of everyday business operations and where nudity is a
planned and intentional part of the entertainment or performance.
"Nude" means clothed in a manner that leaves uncovered or visible,
through less than fully opaque clothing, any portion of the genitals
or, in the case of a female, any portion of the breasts below the top
of the areola of the breasts.
   (G) A qualified active low-income community business shall not
include a charter school.
   (4) Section 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments designated, is modified
as follows:
   (A) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: "The aggregate amount of
qualified equity investments that may be allocated in any calendar
year for purposes of this section, Section 12283, and Section 17053.9
shall be an amount as determined by GO-Biz in consultation with the
Department of Finance based upon any unused portion of the one
hundred million dollars ($100,000,000) in exclusions, authorized
pursuant to Section 6010.8, as determined by the California
Alternative Energy and Advanced Transportation Financing Authority
and reported to the committee, not to exceed an amount based upon a
credit of forty million dollars ($40,000,000). The committee shall
limit the allocation of investments that may be designated under this
section, Section 12283, and Section 17053.9 to a cumulative total
amount based on credits of no more than two hundred million dollars
($200,000,000). The allocation of any undesignated qualified equity
investments shall be returned to the committee by March 1 of the year
following allocation and the value of the undesignated qualified
equity investment shall be available for allocation in the following
calendar years in accordance with the application process. Any
qualified equity investment attributable to recaptured credits shall
be available to the committee on March 1 of the year following
recapture and shall be available for allocation in the following
calendar years in accordance with clause (ii) of subparagraph (B) of
paragraph (5). Reallocated qualified equity investments attributable
to recapture credits shall not count against the annual or the
cumulative limit."
   (B) The references to "the Secretary" in Section 45D(f)(2) of the
Internal Revenue Code, relating to allocation of limitation, is
modified to read "GO-Biz."
   (C) The last sentence of Section 45D(f)(3) of the Internal Revenue
Code, relating to carryover of unused limitation, shall not apply.
   (5) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
"Section 19101 of this code" for "section 6621".
   (B) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, is modified to add the following:
   (i) (I) The qualified community development entity fails to comply
with subparagraph (D) of paragraph (5) of subdivision (d). In this
case, recapture shall be 100 percent of the credit. The qualified
community development entity shall send notice to GO-Biz within 30
calendar days of the close of any calendar year in which the
qualified community development entity has failed to invest at least
15 percent of the purchase price of the qualified equity investment
in satisfaction of the requirements of subparagraph (D) of paragraph
(5) of subdivision (d).
   (II) The qualified community development entity made an investment
without performing a revenue impact assessment that satisfies
subparagraph (J) of paragraph (5) of subdivision (d). In this case,
recapture shall be 100 percent of the credit, unless GO-Biz has
approved a waiver pursuant to clause (ii) of subparagraph (J) of
paragraph (5) of subdivision (d). The qualified community development
entity shall send notice to GO-Biz within 30 calendar days of the
close of any calendar year in which the qualified community
development entity has made an investment that fails to meet the
requirements set forth in subparagraph (J) of paragraph (5) of
subdivision (d).
   (ii) GO-Biz shall establish a process, in consultation with the
Franchise Tax Board, for the recapture of credits allowed under this
section from the entity that claimed the credit on a return.
   (iii) Recaptured qualified equity investments revert back to
GO-Biz and shall be reissued. The reissue shall not count toward the
annual or cumulative allocation limitation. The reissue shall be done
in the following order:
   (I) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (F) of
paragraph (5) of subdivision (d) by the annual allocation limitation.

   (II) Thereafter, in accordance with the application process.
   (iv) (I) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period.
   (II) Not more than 45 calendar days following the close of the
cure period, GO-Biz shall make a final determination as to whether
the noncompliance has been cured. This determination shall be based
on information submitted by the qualified community development
entity, and any other information GO-Biz deems relevant to this
determination. Within 30 calendar days of making the final
determination, GO-Biz shall notify the Franchise Tax Board of the
determination and other related information including, but not
limited to, the tax identification number of the qualified community
development entity.
   (III) GO-Biz shall post, and update monthly, a tally of
undesignated qualified equity investments, pursuant to paragraph (4),
and recaptured credits pursuant to this paragraph.
   (6) If a qualified community development entity makes a capital or
equity investment or a loan with respect to a qualified low-income
building under the state Low-Income Housing Tax Credit Program, the
investment or loan is not a qualified low-income community investment
under this section.
   (d) (1)  GO-Biz shall adopt guidelines necessary or appropriate to
carry out its responsibilities with respect to the allocation of the
qualified equity investments and recapture of credit allowed by this
section. The adoption of the guidelines shall not be subject to the
rulemaking provisions of the Administrative Procedure Act of Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
   (2) (A) GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of reviewing applications for
the program. GO-Biz may impose other reasonable fees upon entities
that receive the allocation pursuant to this subdivision that in the
aggregate defray the cost of administering the program.
   (B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
   (3) In developing guidelines GO-Biz shall adopt an allocation
process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income community populations across the state are engaged and
have an opportunity to benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of authority to
designate qualified equity investments including, but not limited to,
its business strategy, targeted community outcomes, capitalization
strategy, and management capacity.
   (C) Considers the qualified community development entity's prior
qualified low-income community investments under Section 45D of the
Internal Revenue Code.
   (D) Considers the qualified community development entity's prior
qualified low-income community investments under this section,
including subparagraph (D) of paragraph (5).
   (4) GO-Biz shall begin accepting applications on or before May 15,
 2016,   2017,  and shall award authority
to designate qualified equity investments annually through 
2020,   2021,  to the extent that allocations are
available pursuant to Section 26011.9 of the Public Resources Code.
To the extent reasonable and consistent in carrying out the purposes
of this section, GO-Biz shall consider how the timing of the state
allocation rounds correspond with the allocation schedule of the
federal New Markets Tax Credit Program. In the instance where GO-Biz
determines that an application is incomplete, the qualified community
development entity shall be given five business days to provide the
omitted information.
   (5) (A) In the  2016   2017  awards
cycle, the committee shall award authority to designate qualified
equity investments to qualified community development entities
described in paragraph (2) of subdivision (c) in the order
applications are received by the committee. Applications received on
the same day shall be deemed to have been received simultaneously.
   (B) In the  2017 to 2020   2018 to 2021 
award cycles, inclusive, at least 60 percent of the authority to
designate qualified equity investments shall be awarded pursuant to
subparagraph (A). At the committee's discretion, a higher percentage
of authority to designate qualified equity investments may be awarded
pursuant to subparagraph (A).
   (C) The committee shall award up to 40 percent of the authority to
designate qualified equity investments in the  2017 to 2020,
  2018 to 2021,  inclusive, award cycles, to
qualified community development entities on a competitive basis using
blind scoring and a review committee that is comprised of community
development finance practitioners and members having demonstrated
experience in assessing organizational business strategy, community
outcomes, capitalization strategy, and management capacity. A member
of the review committee shall not have a financial interest, which
includes, but is not limited to, asking, consenting, or agreeing to
receive any commission, emolument, gratuity, money, property, or
thing of value for his or her own use, benefit, or personal advantage
for procuring or endeavoring to procure for any person, partnership,
joint venture, association, or corporation any qualified equity
investment or other assistance from any applicant.
   (D) (i) For qualified equity investments derived from the 
2016 to 2020,   2017 to 2021,  inclusive, awards
cycles, pursuant to subparagraphs (A), (B), and (C), a qualified
community development entity shall invest at least 15 percent of the
qualified equity investment in a qualified low-income community
business in consultation or in partnership with either of the
following:
   (I) A qualified community development entity certified under
Section 45D of the Internal Revenue Code that has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area, but
excluding qualified community development entities with a national
service area.
   (II) A nonprofit organization  certified by GO-Biz,
pursuant to clause (iii).   that does the following:
 
   (ia) Meets the requirements of Section 23701.  
   (ib) Is registered with the Attorney General.  
   (ic) Has articles of incorporation that state the primary mission
of the organization is focused on improving the economic well-being
of low-income communities or individuals. 
   (id) Has bylaws that provide that the organization maintains
accountability to residents of low-income communities through their
representation on any governing board or on an advisory board of the
nonprofit organization. 
   (ii) The 15-percent investment shall be calculated by multiplying
the total purchase price of the qualified equity investments issued
by the qualified community development entity by 15 percent. Each
community development entity application shall indicate how the
qualified community development entity will meet this requirement.

   (iii) GO-Biz shall establish guidelines for certifying a nonprofit
organization pursuant to this subparagraph. A nonprofit organization
shall meet the requirements of Section 23701 and be certified by
GO-Biz as having a primary mission of serving or providing investment
capital in low-income communities in California. The nonprofit
organization shall maintain accountability to residents of low-income
communities through their representation on any governing board or
on an advisory board of the nonprofit organization. GO-Biz may
include reasonable conditions on the certification to effectuate the
intent of this section and may suspend or revoke a certification,
after affording the nonprofit organization notice and the opportunity
to appeal and be heard by the committee, if GO-Biz finds that the
nonprofit organization no longer meets the requirements for
certification. 
   (E) In making competitive awards of authority to designate
qualified equity investments, priority shall be given to applications
that can demonstrate that the qualified equity investment authority
will allow the qualified community development entity to undertake
qualified low-income community investments in rural, suburban, or
urban areas that have been historically underserved and result in the
greatest benefit to the hardest to serve and undercapitalized lower
income populations, or in newly established businesses, or in
activities that support neighborhood revitalization strategies driven
by local grassroots stakeholders in multiple low-income communities
across one or more regions or the state for the purpose of scaling
economic development activities that compliment regional industry
clusters that result in the greatest benefit to the largest number of
lower income individuals.
   (F) (i) For applications described in subparagraph (A), in the
event requests for authority to designate qualified equity
investments exceed the applicable annual allocation limitation,
GO-Biz shall certify, consistent with remaining qualified equity
investment capacity, qualified equity investments of applicants in
                                                 proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (ii) If a pending request cannot be fully certified due to this
limit, GO-Biz shall certify the portion that may be certified unless
the qualified community development entity elects to withdraw its
request rather than receive partial certification.
   (G) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee within 30 calendar days of such
transfer and include the information required in the application with
respect to such transferee with such notice. The transferee shall be
subject to the same rules, requirements, and limitations applicable
to the transferor.
   (H) Within  60   200  calendar days of
GO-Biz sending notice of certification, the qualified community
development entity or any transferee, under subparagraph (G), shall
issue the qualified equity investment and receive cash in the amount
of the certified amount. The qualified community development entity
or transferee, under subparagraph (G),  must  
shall  provide GO-Biz with evidence of the receipt of the cash
investment within  65   205  calendar days
of the applicant receiving notice of certification. If the qualified
community development entity or any transferee, under subparagraph
(G), does not receive the cash investment and issue the qualified
equity investment within  60   200 
calendar days of GO-Biz sending the certification notice, the
certification shall lapse and the entity may not issue the qualified
equity investment without reapplying to GO-Biz for certification.
Lapsed certifications revert back to GO-Biz and shall be reissued in
the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (F)
under the annual allocation limitation of forty million dollars
($40,000,000) in paragraph (4) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (I) A qualified community development entity that issues qualified
equity investments  must   shall  notify
GO-Biz of the names of taxpayers that are eligible to utilize tax
credits pursuant to this section and any transfer of a qualified
equity investment.
   (J) (i) A qualified community development entity shall only make a
qualified low-income community investment that demonstrates a
positive revenue impact on the state over a 10-year period against
the aggregate tax credit utilization over the same 10-year period.
GO-Biz shall approve one or more nationally recognized revenue impact
assessment models that shall be used by the qualified community
development entity to demonstrate positive revenue impact. If it is
demonstrated that the qualified low-income community investment has a
positive revenue impact on the state at the time the investment is
made, it shall be treated as if the investment continues to meet the
requirement of this subparagraph for the duration of the seven-year
program period.
   (ii) Upon application and approval by GO-Biz, the requirement of
this subparagraph may be waived.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to GO-Biz within
the first five business days after the first anniversary of the
initial credit allowance date that provides documentation as to the
investment of at least 85 percent of the purchase price in qualified
low-income community investments in qualified active low-income
community businesses located in California. Such report shall include
all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Evidence that the community development entity complied with
subparagraph (D) of paragraph (5).
   (iv) Evidence that each qualified low-income community investment
was determined to have a positive revenue impact on the state. This
requirement does not apply for any qualified low-income community
investment for which GO-Biz approved a waiver, pursuant to clause
(ii) of subparagraph (J) of paragraph (5) or to reinvestments of
redeemed qualified low-income investments.
   (v) Any other information required by GO-Biz as being necessary to
meet the requirements of this section.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to GO-Biz within 60 calendar days of the
beginning of the calendar year during the seven years following
submittal of the report, pursuant to subparagraph (A). No annual
report shall be due prior to the first anniversary of the initial
credit allowance date. The report shall include, but is not limited
to, the following:
   (i) The social, environmental, and economic impact the credit had
on the low-income community during the report period and
cumulatively.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of owner-occupied real estate projects.
   (vi) Location of each qualified low-income community business
assisted by a qualified low-income community investment.
   (vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development entity
during the year.
   (viii) Any other information requested by GO-Biz.
   (e) (1) In the case where the credit allowed by this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and the six succeeding years if necessary,
until the credit is exhausted.
   (2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment. 
   (3) The credit allowed under this section may be in addition to
any credit allowed under Section 45D of the Internal Revenue Code.

   (f) GO-Biz shall annually report on its Internet Web site the
information provided by low-income community development entities and
on the geographic distribution of the qualified active low-income
community businesses assisted.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide GO-Biz
with the name, address, and tax identification number of each
investor and entity for which a qualified equity investment was
designated by the qualifying community development entity, pursuant
to this section. GO-Biz shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) GO-Biz and the committee shall only make awards pursuant to
paragraph (4) of subdivision (d) in a calendar year in which the
Legislature appropriates funds in the California New Markets Tax
Credit Fund pursuant to subdivision (b) of Section 18410.3.
   (i) This section shall remain in effect only until December 1,
 2028,   2029,  and as of that date is
repealed.
  SEC. 7.  The provisions of this act are severable. If any provision
of this act or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.
  SEC. 8.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.