85R27979 ADM-D
By: Anderson of Dallas H.B. No. 3843
Substitute the following for H.B. No. 3843:
By: Shine C.S.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 basis" means the qualified basis of a
qualified development, as determined under Section 42, Internal
Revenue Code.
(9) "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 3601 et seq.).
(10) "Qualified taxpayer" means a person who owns an
interest in a qualified development.
Sec. 171.9242. ENTITLEMENT TO CREDIT. A development 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 department classifies the development as a qualified
development.
Sec. 171.9243. ALLOCATION CERTIFICATE; CREDIT. (a) In a
year during a credit period, a qualified taxpayer or other person
may apply to the department for an allocation certificate.
(b) The department shall issue an allocation certificate if
the development qualifies for a credit.
(c) The department may determine the amount of a credit
awarded to a qualified development, subject to the following:
(1) the credit must be the minimum amount necessary
for the financial feasibility of the qualified development after
considering any federal tax credit;
(2) the amount of the credit during the credit period
may not exceed the total federal tax credit awarded to the qualified
development over the 10-year federal tax credit period;
(3) the manner in which the department awards the
credit must be consistent with criteria established by the
department; and
(4) in a year, the total amount awarded may not exceed
the sum of:
(A) $0;
(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
qualified taxpayer is eligible for a credit that exceeds the
limitations under Section 171.9244, the qualified taxpayer 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
qualified taxpayer.
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 qualified taxpayer if, on the last
day of a taxable 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 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 qualified
taxpayer subject to the recapture, and the amount of credit
previously allocated to the qualified taxpayer.
Sec. 171.9247. ALLOCATION OF CREDIT. (a) If a qualified
taxpayer receiving a credit under this subchapter is a partnership,
limited liability company, S corporation, or similar pass-through
entity, the qualified taxpayer may allocate credit among its
partners, shareholders, members, or other constituent taxable
entities in any manner agreed by those entities.
(b) A qualified taxpayer 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
qualified taxpayer 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 qualified taxpayer's or taxable
entity's report a copy of the allocation certificate received 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 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. 171.9251. 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," "qualified
development," and "qualified taxpayer" have the meanings assigned
by Section 171.9241, Tax Code.
(2) "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 the qualified
development in which the entity owns an interest 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 qualified
development 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. APPLICABLE PROVISIONS. 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. (a) The Texas Department of Housing and
Community Affairs may begin issuing allocation certificates under
Section 171.9243, Tax Code, as added by this Act, in an open cycle
beginning on January 1, 2018.
(b) A taxable entity may not claim a tax credit under
Subchapter V, Chapter 171, Tax Code, as added by this Act, in
connection with a privilege period that begins before January 1,
2019, or on a report filed before January 1, 2020.
SECTION 4. This Act takes effect January 1, 2018.