86R6131 SMT-D
By: Whitmire S.B. No. 1590
A BILL TO BE ENTITLED
AN ACT
relating to a franchise or insurance 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 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.
(2) "Credit" means the low-income housing development
tax credit authorized by this subchapter.
(3) "Credit period" means the period of 10 tax years
beginning with the tax 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.
(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 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.).
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 limitations provided by this subchapter if
the taxable entity owns an interest in a qualified development.
Sec. 171.9243. ALLOCATION CERTIFICATE; CREDIT. (a) In a
year during a credit period, a taxable entity or an entity subject
to state insurance 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.
(c) The department may determine the total amount of credits
under this subchapter and Chapter 233, Insurance Code, awarded in
connection with a qualified development, subject to the following:
(1) the amount of credits awarded in connection with a
qualified development must be the minimum amount necessary for the
financial feasibility of the qualified development after
considering any federal tax credit;
(2) 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;
(3) the manner in which the department awards the
amount of credits must be consistent with criteria established by
the department; and
(4) in a year, the total amount of credits awarded in
connection with all qualified developments may not exceed the sum
of:
(A) $35 million;
(B) any unallocated credits for the preceding
year; and
(C) any credit recaptured or otherwise returned
to the department in the year.
(d) The 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 Subsection (c) 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. 171.9244. 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
171.9245, 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 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. 171.9246. 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 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, 2019.
(b) A franchise tax 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. 171.9247. ASSIGNMENT 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 assign the credit to its partners,
shareholders, members, or other constituent taxable entities in any
manner agreed by those entities.
(b) A taxable entity that makes an assignment under this
section shall certify to the comptroller the amount of credit
assigned 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 assigned amount subject to any restrictions prescribed by
this subchapter.
(c) An assignment under this section is not a transfer for
purposes of state law.
Sec. 171.9248. FILING REQUIREMENTS AFTER ASSIGNMENT. A
taxable entity that assigns a portion of the credit under Section
171.9247, and each taxable entity to which a portion was assigned,
shall file with the 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. 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 LOW-INCOME 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 171.9241, Tax
Code.
(2) "State insurance tax liability" means any tax
liability incurred by an entity under Chapters 221 through 226 or
Chapter 281.
SUBCHAPTER B. CREDIT
Sec. 233.0051. CREDIT. An entity is eligible for a credit
against the entity's state insurance tax liability in the amount
and under the conditions and limitations provided by this chapter
if the entity owns an interest in a qualified development.
Sec. 233.0052. 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. 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 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. 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 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, 2020.
(b) Subchapter V, 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, 2021.
SECTION 4. This Act takes effect January 1, 2020.