85R4875 ADM-D
By: Anderson of Dallas H.B. No. 3843
A BILL TO BE ENTITLED
AN ACT
relating to a franchise or insurance premium tax credit for
low-income housing developments.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter V to read as follows:
SUBCHAPTER V. TAX CREDIT FOR LOW-INCOME HOUSING DEVELOPMENTS
Sec. 171.9241. DEFINITIONS. In this subchapter:
(1) "Allocation certificate" means a statement issued
by the department certifying that a given development qualifies for
a credit under this subchapter and specifying the amount of the
credit.
(2) "Compliance period" means the period of 15 years
beginning with the first taxable year of the credit period.
(3) "Credit" means the low-income housing tax credit
authorized by this subchapter.
(4) "Credit period" means the period of six taxable
years beginning with the taxable year in which a qualified
development is placed in service. A qualified development
consisting of more than one building is not considered to be in
service until all buildings in the qualified development are placed
in service.
(5) "Department" means the Texas Department of Housing
and Community Affairs.
(6) "Development" has the meaning assigned by Section
2306.6702, Government Code.
(7) "Federal tax credit" means the federal low-income
housing credit created by 26 U.S.C. Section 42.
(8) "Qualified allocation plan" has the meaning
assigned by Section 2306.6702, Government Code.
(9) "Qualified basis" means the qualified basis of a
qualified development, as determined under Section 42, Internal
Revenue Code.
(10) "Qualified development" means a development in
this state that the department determines is eligible for a federal
tax credit and that:
(A) is financed with tax-exempt bonds;
(B) is the subject of a recorded restrictive
covenant requiring the development to be maintained and operated as
a qualified development; and
(C) 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 1983).
Sec. 171.9242. ENTITLEMENT TO CREDIT. A taxable entity is
entitled to a credit against the taxes imposed under this chapter in
the amount and under the conditions and limitations provided by
this subchapter if the taxable entity is a qualified taxpayer and
receives an allocation certificate under Section 171.9243.
Sec. 171.9243. ALLOCATION CERTIFICATE; CREDIT. (a) In a
year during a credit period, a taxable entity may apply to the
department for an allocation certificate for a franchise tax credit
under this subchapter.
(b) The department shall issue an allocation certificate to
a taxable entity that applies under this section and meets the
requirements to receive an allocation certificate.
(c) The department may determine the amount of a credit
allowed to taxable entities, subject to the following:
(1) a credit must be the minimum amount necessary to
the financial feasibility of the qualified development after
considering any federal credit;
(2) the amount of the credit given to a taxable entity
during the credit period may not exceed the total federal tax credit
awarded to the qualified development over the 10-year federal
credit period;
(3) the credit must be consistent with the qualified
allocation plan for the qualified development; and
(4) in a year, the total amount awarded may not exceed
the sum of:
(A) $20 million;
(B) any unallocated credits for the preceding
year; and
(C) any credit recaptured or otherwise returned
to the department in the year.
Sec. 171.9244. LENGTH OF CREDIT; LIMITATION. (a) The
credit established shall be claimed in equal installments during
each year of the credit period.
(b) The total credit claimed under this subchapter for a
report, including any carryforward under Section 171.9245, may not
exceed the amount of franchise tax due for the report after any
other applicable credit.
Sec. 171.9245. CARRY FORWARD OR BACKWARD. (a) If a taxable
entity is eligible for a credit that exceeds the limitations under
Section 171.9244, the taxable entity may carry the unused credit
back for not more than three taxable years or forward for not more
than 10 consecutive reports following the taxable 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 to the
taxable entity.
Sec. 171.9246. RECAPTURE. (a) The comptroller shall
recapture the amount of a credit claimed on a franchise tax report
filed under this chapter from a taxable entity if, on the last day
of a taxable year, the amount of the qualified basis of a qualified
development with respect to a taxable entity is less than the amount
of the qualified basis as of the last day of the prior taxable year.
The comptroller shall determine the amount required to be
recaptured using the formula provided by Section 42(j), Internal
Revenue Code, as effective January 1, 2017.
(b) A franchise tax return must include any proportion of
credit required to be recaptured, the identity of any taxable
entity subject to the recapture, and the amount of credit
previously allocated to the taxable entity.
Sec. 171.9247. 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 credit among its partners,
shareholders, members, or other constituent taxable entities in any
manner agreed 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 assigned 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 assignment under this section is not a transfer.
Sec. 171.9248. FILING REQUIREMENTS AFTER ALLOCATION. A
taxable entity that allocates a portion of the credit under Section
171.9247, and each taxable entity to which a portion was allocated,
shall file with the taxable entity's report a copy of the allocation
certificate received by the taxpayer for that year.
Sec. 171.9249. RULES; PROCEDURES. The department and
comptroller, in consultation with each other, shall adopt rules and
procedures to implement, administer, and enforce this subchapter.
Sec. 171.9250. COMPLIANCE MONITORING. (a) The department,
in consultation with the comptroller, shall monitor compliance with
this subchapter.
(b) The department shall report any instances of
noncompliance with this subchapter to the comptroller.
Sec. 171.9251. REPORT. (a) Not later than December 31 of
each year, the department shall deliver a written report to the
legislature. A report delivered in this section must:
(1) specify the number of qualified developments to
have been allocated a tax credit during the year under this
subchapter or Chapter 230, Insurance Code, and the total number of
units supported by the developments;
(2) describe each qualified development to receive a
tax credit under this subchapter or Chapter 230, Insurance Code,
including:
(A) location;
(B) household type;
(C) demographic information available on 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 credit, are addressing the need for affordable
housing in their community; 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 230 to read as follows:
CHAPTER 230. CREDIT AGAINST PREMIUM TAXES
FOR LOW-INCOME HOUSING DEVELOPMENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 230.001. DEFINITIONS. In this chapter:
(1) "Allocation certificate" and "credit period" have
the meanings assigned by Section 171.9241, Tax Code.
(2) "Qualified taxpayer" means a person that owns an
interest in a qualified development, as that term is defined in
Subchapter V, Chapter 171, Tax Code.
(3) "State premium tax liability" means any liability
incurred by an entity under Chapters 221 through 226.
SUBCHAPTER B. CREDIT
Sec. 230.051. CREDIT. (a) An entity is eligible for a
credit against the entity's state premium tax liability in the
amount and under the conditions and limitations provided by this
chapter if the entity is a qualified taxpayer and receives an
allocation certificate issued in the manner prescribed by Section
171.9243, Tax Code.
(b) The amount of the credit is equal to the amount provided
by the allocation certificate.
Sec. 230.052. LENGTH OF CREDIT; LIMITATION. The entity
shall claim the credit in the manner provided by Section
171.9244(a), Tax Code, subject to the limitation provided by
Section 171.9244(b), Tax Code. The entity may carry a surplus
credit forward or backward as provided by Section 171.9245, Tax
Code.
Sec. 230.053. APPLICATION FOR CREDIT. (a) An entity must
apply for a credit under this chapter on or with the tax return for
the taxable year for which the credit is claimed and submit with the
application the allocation certificate issued to the entity and any
other information required by Subchapter V, 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. 230.054. 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. 230.055. The provisions of Subchapter V, 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. This Act applies only to an original report due
on or after the effective date of this Act.
SECTION 4. This Act takes effect January 1, 2018.