By: Goldman, Talarico H.B. No. 1058
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;
(B) meets all applicable requirements of the
qualified allocation plan, as defined by Section 2306.6702,
Government Code; 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.).
(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. INCLUSION OF INFORMATION IN LOW INCOME
HOUSING PLAN. The department shall include in the low income
housing plan under Section 2306.0721, Government Code, information
relating to the performance of the credit during the previous
calendar year. The information 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.
Sec. 171.564. EXPIRATION OF SUBCHAPTER. This subchapter
expires December 31, 2035.
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.
SUBCHAPTER C. EXPIRATION OF CHAPTER
Sec. 233.0101. EXPIRATION OF CHAPTER. This chapter expires
December 31, 2035.
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) Except as provided by Subsections (d) and (e) of this
section, 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, and before
January 1, 2036.
(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.
(d) The expiration of Subchapter K, Chapter 171, Tax Code,
as added by this Act, in accordance with Section 171.564, Tax Code,
as added by this Act, does not affect the carryforward of a credit
under Section 171.557, Tax Code, as added by this Act.
(e) The expiration of Chapter 233, Insurance Code, as added
by this Act, in accordance with Section 233.0101, Insurance Code,
as added by this Act, does not affect the carryforward of a credit
under Section 233.0052(c), Insurance Code, as added by this Act.
SECTION 4. This Act takes effect January 1, 2024.