88R992 BEF-D
	By: Perry	S.B. No. 325

	A BILL TO BE ENTITLED
	AN ACT
	relating to a franchise or insurance premium tax credit for certain
	housing developments.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Chapter 171, Tax Code, is amended by adding
	Subchapter K to read as follows:
	SUBCHAPTER K. TAX CREDIT FOR CERTAIN HOUSING DEVELOPMENTS
	Sec. 171.551.  DEFINITIONS. In this subchapter:
	(1)  "Allocation certificate" means a statement issued
	by the department certifying that a qualified development qualifies
	for credits under this subchapter and Chapter 233, Insurance Code,
	and specifying the total amount of the credits awarded in
	connection with the qualified development for the credit period.
	(2)  "Credit" means the low-income housing development
	tax credit authorized by this subchapter.
	(3)  "Credit period" means, with respect to a building
	that is part of a qualified development, the period of 10 tax years
	beginning with the tax year in which the building is placed in
	service.
	(4)  "Department" means the Texas Department of Housing
	and Community Affairs.
	(5)  "Development" has the meaning assigned by Section
	2306.6702, Government Code.
	(6)  "Federal tax credit" means the federal low-income
	housing credit created by Section 42, Internal Revenue Code.
	(7)  "Qualified basis" means the qualified basis of a
	qualified development, as determined under Section 42, Internal
	Revenue Code.
	(8)  "Qualified development" means a development in
	this state that the department determines is eligible for a federal
	tax credit and that:
	(A)  is the subject of a recorded restrictive
	covenant requiring the development to be maintained and operated as
	a qualified development; and
	(B)  for the lesser of 15 years after the
	beginning of the credit period or the period required by the
	department, is in compliance with:
	(i)  all accessibility and adaptability
	requirements for a federal tax credit; and
	(ii)  Title VIII of the Civil Rights Act of
	1968 (42 U.S.C. Section 3601 et seq.).
	(9)  "State housing credit ceiling" means $25 million
	each year.
	Sec. 171.552.  ENTITLEMENT TO CREDIT. A taxable entity is
	entitled to a credit against the taxes imposed under this chapter in
	the amount and under the limitations provided by this subchapter if
	the taxable entity owns a direct or indirect interest in a qualified
	development.
	Sec. 171.553.  ALLOCATION CERTIFICATE. (a) In a year during
	a credit period, a taxable entity or an entity subject to state
	premium tax liability as defined by Section 233.0001, Insurance
	Code, may apply to the department for an allocation certificate in
	connection with a development in which the taxable entity or other
	entity owns an interest.
	(b)  The department shall issue an allocation certificate if
	the development is a qualified development.
	Sec. 171.554.  AMOUNT OF CREDITS. (a) The department shall
	in the manner provided by this section determine the total amount of
	credits under this subchapter and Chapter 233, Insurance Code,
	awarded for the credit period in connection with a qualified
	development and indicate the amount of credits awarded on the
	allocation certificate.
	(b)  The amount of credits awarded in connection with a
	qualified development over the credit period must be the minimum
	amount necessary for the financial feasibility of the qualified
	development after considering any federal tax credit, subject to
	the limitations of this section.
	(c)  The amount of credits awarded in connection with a
	qualified development over the credit period may not exceed the
	total federal tax credit awarded to the owner or owners of the
	qualified development over the 10-year federal tax credit period.
	(d)  The manner in which the department awards the amount of
	credits must be consistent with criteria established by the
	department.
	(e)  The total amount of credits awarded for a year in
	connection with all qualified developments financed through tax
	exempt bonds may not exceed the sum of:
	(1)  50 percent of the state housing credit ceiling for
	the year;
	(2)  any unallocated credits for the preceding year;
	and
	(3)  any credit recaptured or otherwise returned to the
	department in the year.
	(f)  The total amount of credits awarded for a year in
	connection with all qualified developments not financed through tax
	exempt bonds may not exceed the sum of:
	(1)  50 percent of the state housing credit ceiling for
	the year;
	(2)  any unallocated credits for the preceding year;
	and
	(3)  any credit recaptured or otherwise returned to the
	department in the year.
	Sec. 171.555.  APPORTIONMENT OF CREDIT. The direct or
	indirect owners of a qualified development who intend to claim a
	credit under this subchapter or Chapter 233, Insurance Code, may by
	agreement determine the portion of the total amount of credits
	awarded under Section 171.554 that each owner is entitled to claim.
	If the owners do not agree, the department shall determine the
	portion each owner is entitled to claim based on each owner's
	ownership interest in the qualified development.
	Sec. 171.556.  LENGTH OF CREDIT; LIMITATION. (a) A taxable
	entity entitled to a credit under this subchapter shall claim the
	credit in equal installments during each year of the credit period.
	(b)  The total credit claimed under this subchapter for a
	report, including any carry forward or backward under Section
	171.557, may not exceed the amount of franchise tax due for the
	report after any other applicable credit.
	Sec. 171.557.  CARRY FORWARD OR BACKWARD. (a)  If a taxable
	entity is eligible for a credit that exceeds the limitations under
	Section 171.556, the taxable entity may carry the unused credit
	back for not more than three tax years or forward for not more than
	10 consecutive reports following the tax year in which the
	allocation was made.  A credit carryforward from a previous report
	is considered to be used before the current year installment.
	(b)  A credit that is not used may not be refunded.
	Sec. 171.558.  RECAPTURE. (a)  The comptroller shall
	recapture the amount of a credit claimed on a report filed under
	this chapter from a taxable entity if, on the last day of a tax year,
	the amount of the qualified basis of the qualified development is
	less than the amount of the qualified basis as of the last day of the
	prior tax year.  The comptroller shall determine the amount
	required to be recaptured using the formula provided by Section
	42(j), Internal Revenue Code, as that section existed on January 1,
	2023.
	(b)  A report must include any portion of credit required to
	be recaptured, the identity of any taxable entity subject to the
	recapture, and the amount of any credit previously allocated to the
	taxable entity.
	Sec. 171.559.  ALLOCATION OF CREDIT. (a)  If a taxable
	entity receiving a credit under this subchapter is a partnership,
	limited liability company, S corporation, or similar pass-through
	entity, the taxable entity may allocate the credit to its partners,
	shareholders, members, or other constituent taxable entities in any
	manner agreed to by those entities.
	(b)  A taxable entity that makes an allocation under this
	section shall certify to the comptroller the amount of credit
	allocated to each constituent taxable entity or shall notify the
	comptroller that it has delegated the duty of certification to one
	constituent taxable entity that shall provide the notification to
	the comptroller. Each constituent taxable entity is entitled to
	claim the allocated amount subject to any restrictions prescribed
	by this subchapter.
	(c)  An allocation under this section is not a transfer for
	purposes of state law.
	Sec. 171.560.  FILING REQUIREMENTS AFTER ALLOCATION. A
	taxable entity that allocates a portion of the credit under Section
	171.559, and each taxable entity to which a portion was allocated,
	shall file with the taxable entity's report a copy of the allocation
	certificate on which the credit is based.
	Sec. 171.561.  RULES; PROCEDURES. The department and
	comptroller, in consultation with each other, shall adopt rules and
	procedures to implement, administer, and enforce this subchapter.
	Sec. 171.562.  COMPLIANCE MONITORING. (a)  The department,
	in consultation with the comptroller, shall monitor compliance with
	this subchapter in the same manner as the department monitors
	compliance with the federal tax credit program.
	(b)  The department shall report any instances of
	noncompliance with this subchapter to the comptroller.
	Sec. 171.563.  REPORT TO LEGISLATURE. (a)  Not later than
	December 31 of each year, the department shall deliver a written
	report to the legislature. The report must:
	(1)  specify the number of qualified developments for
	which allocation certificates were issued during the year and the
	total number of units supported by the developments;
	(2)  describe each qualified development for which an
	allocation certificate was issued during the year, including:
	(A)  location;
	(B)  household type;
	(C)  available demographic information for the
	residents intended to be served by the development;
	(D)  the income levels intended to be served by
	the development; and
	(E)  the rents or set-asides authorized for the
	development;
	(3)  include housing market and demographic
	information to demonstrate how the qualified developments,
	supported by the tax credits under this subchapter and Chapter 233,
	Insurance Code, are addressing the need for affordable housing in
	their communities; and
	(4)  analyze any remaining disparities in the
	affordability of housing within those communities.
	(b)  The department shall make a report delivered under this
	section available to the public.
	SECTION 2.  Subtitle B, Title 3, Insurance Code, is amended
	by adding Chapter 233 to read as follows:
	CHAPTER 233. CREDIT AGAINST CERTAIN TAXES FOR CERTAIN HOUSING
	DEVELOPMENTS
	SUBCHAPTER A. GENERAL PROVISIONS
	Sec. 233.0001.  DEFINITIONS. In this chapter:
	(1)  "Allocation certificate" and "qualified
	development" have the meanings assigned by Section 171.551, Tax
	Code.
	(2)  "State premium tax liability" means any tax
	liability incurred by an entity under Chapters 221 through 226.
	SUBCHAPTER B. CREDIT
	Sec. 233.0051.  CREDIT.  An entity is eligible for a credit
	against the entity's state premium tax liability in the amount and
	under the limitations provided by this chapter if the entity owns a
	direct or indirect interest in a qualified development.
	Sec. 233.0052.  LENGTH OF CREDIT; LIMITATIONS.  (a)  The
	entity shall claim the credit in the manner provided by Section
	171.556(a), Tax Code.
	(b)  The total credit claimed under this chapter for a
	report, including any carry forward or backward described by
	Subsection (c), may not exceed the amount of the entity's state
	premium tax liability due for the report after any other applicable
	credit.
	(c)  The entity may carry a surplus credit forward or
	backward as provided by Section 171.557, Tax Code.
	Sec. 233.0053.  APPLICATION FOR CREDIT.  (a)  An entity must
	apply for a credit under this chapter on or with the tax report for
	the tax year for which the credit is claimed and submit with the
	application a copy of the allocation certificate issued in
	connection with the qualified development and any other information
	required by Subchapter K, Chapter 171, Tax Code.
	(b)  The comptroller shall adopt a form for the application
	for the credit. An entity must use this form in applying for the
	credit.
	Sec. 233.0054.  RULES; PROCEDURES. The comptroller and the
	Texas Department of Housing and Community Affairs, in consultation
	with each other, shall adopt rules and procedures to implement,
	administer, and enforce this chapter.
	Sec. 233.0055.  APPLICABLE PROVISIONS.  The provisions of
	Subchapter K, Chapter 171, Tax Code, relating to recapture,
	allocation of credit, filing requirements after allocation, and
	compliance monitoring apply to the credit authorized by this
	chapter.
	SECTION 3.  (a) The Texas Department of Housing and
	Community Affairs may begin issuing allocation certificates under
	Section 171.553, Tax Code, as added by this Act, in an open cycle
	beginning on January 1, 2024.
	(b)  Subchapter K, Chapter 171, Tax Code, as added by this
	Act, and Chapter 233, Insurance Code, as added by this Act, apply
	only to a tax report originally due on or after January 1, 2026.
	(c)  An entity may not carry back a credit under Section
	171.557, Tax Code, as added by this Act, to a tax year the report for
	which is originally due before January 1, 2026.
	SECTION 4.  This Act takes effect January 1, 2024.