Texas 2023 - 88th Regular

Texas House Bill HB1058 Compare Versions

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1	1	H.B. No. 1058
2	2
3	3
4	4	AN ACT
5	5	relating to a franchise or insurance premium tax credit for certain
6	6	housing developments.
7	7	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
8	8	SECTION 1. Chapter 171, Tax Code, is amended by adding
9	9	Subchapter K to read as follows:
10	10	SUBCHAPTER K. TAX CREDIT FOR CERTAIN HOUSING DEVELOPMENTS
11	11	Sec. 171.551. DEFINITIONS. In this subchapter:
12	12	(1) "Allocation certificate" means a statement issued
13	13	by the department certifying that a qualified development qualifies
14	14	for credits under this subchapter and Chapter 233, Insurance Code,
15	15	specifying the total amount of the credits awarded in connection
16	16	with the qualified development for the credit period, and
17	17	specifying the amount of credit that may be claimed each year for
18	18	each building that is part of the qualified development.
19	19	(2) "Credit" means the low-income housing development
20	20	tax credit authorized by this subchapter.
21	21	(3) "Credit period" means, with respect to a building
22	22	that is part of a qualified development, the period of 10 tax years
23	23	beginning with the tax year in which the building is placed in
24	24	service.
25	25	(4) "Department" means the Texas Department of Housing
26	26	and Community Affairs.
27	27	(5) "Development" has the meaning assigned by Section
28	28	2306.6702, Government Code.
29	29	(6) "Federal tax credit" means the federal low-income
30	30	housing credit created by Section 42, Internal Revenue Code.
31	31	(7) "Qualified basis" means the qualified basis of a
32	32	qualified development, as determined under Section 42, Internal
33	33	Revenue Code.
34	34	(8) "Qualified development" means a development in
35	35	this state:
36	36	(A) for which the department awards or allocates
37	37	a federal tax credit through the issuance of a carryover allocation
38	38	agreement or determination notice;
39	39	(B) that has not had an allocation of federal tax
40	40	credits terminated by or at the direction of the department;
41	41	(C) that is the subject of a recorded restrictive
42	42	covenant requiring the development to be maintained and operated as
43	43	a qualified development that has not been terminated and is not
44	44	subject to termination through any process other than the natural
45	45	expiration of the covenant's extended use period;
46	46	(D) that meets all applicable requirements of the
47	47	qualified allocation plan, as defined by Section 2306.6702,
48	48	Government Code; and
49	49	(E) for the duration of the extended use period
50	50	established in the land use restriction agreement, as defined by
51	51	Section 2306.6702(a)(9), Government Code, is in compliance with:
52	52	(i) all accessibility and adaptability
53	53	requirements for a federal tax credit; and
54	54	(ii) Title VIII of the Civil Rights Act of
55	55	1968 (42 U.S.C. Section 3601 et seq.).
56	56	(9) "State housing credit ceiling" means $25 million
57	57	of credits each award year.
58	58	Sec. 171.552. ENTITLEMENT TO CREDIT. A taxable entity is
59	59	entitled to a credit against the taxes imposed under this chapter in
60	60	the amount and under the limitations provided by this subchapter if
61	61	the taxable entity owns a direct or indirect interest in a qualified
62	62	development.
63	63	Sec. 171.553. APPLICATION FOR AND ISSUANCE OF ALLOCATION
64	64	CERTIFICATE. (a) A taxable entity or an entity subject to state
65	65	premium tax liability as defined by Section 233.0001, Insurance
66	66	Code, must apply to the department for an allocation certificate in
67	67	connection with a development in which the taxable entity or other
68	68	entity owns an interest. The application must be submitted to the
69	69	department along with the application for an allocation of federal
70	70	tax credits in a manner prescribed by the department.
71	71	(b) The department shall issue an allocation certificate
72	72	if:
73	73	(1) the department approves the application submitted
74	74	under Subsection (a);
75	75	(2) the development meets the requirements to be a
76	76	qualified development; and
77	77	(3) the department awards an amount of credit to the
78	78	development under Section 171.554.
79	79	Sec. 171.554. AMOUNT OF CREDITS; METHOD OF AWARD. (a) The
80	80	department shall in the manner provided by this section determine
81	81	the total amount of credits under this subchapter and Chapter 233,
82	82	Insurance Code, awarded for the credit period in connection with a
83	83	qualified development and indicate the amount of credits awarded on
84	84	the allocation certificate.
85	85	(b) The amount of credits awarded in connection with a
86	86	qualified development over the credit period must be the minimum
87	87	amount necessary for the financial feasibility of the qualified
88	88	development, subject to the limitations of this section.
89	89	(c) The amount of credits awarded in connection with a
90	90	qualified development over the credit period may not exceed the
91	91	total federal tax credit awarded to the owner or owners of the
92	92	qualified development over the 10-year federal tax credit period.
93	93	(d) The manner in which the department awards the amount of
94	94	credits must be consistent with criteria established by the
95	95	department.
96	96	(e) The total amount of credits awarded for a year in
97	97	connection with all qualified developments financed through tax
98	98	exempt bonds may not exceed the sum of:
99	99	(1) 50 percent of the state housing credit ceiling for
100	100	the year;
101	101	(2) any portion of the state housing credit ceiling
102	102	for the preceding year that could have been awarded for qualified
103	103	developments financed through tax exempt bonds but was not awarded;
104	104	and
105	105	(3) any credits recaptured or otherwise returned to
106	106	the department in the year that were originally awarded in
107	107	connection with a qualified development financed through tax exempt
108	108	bonds.
109	109	(f) The total amount of credits awarded for a year in
110	110	connection with all qualified developments not financed through tax
111	111	exempt bonds may not exceed the sum of:
112	112	(1) 50 percent of the state housing credit ceiling for
113	113	the year;
114	114	(2) any portion of the state housing credit ceiling
115	115	for the preceding year that could have been awarded for qualified
116	116	developments not financed through tax exempt bonds but was not
117	117	awarded; and
118	118	(3) any credits recaptured or otherwise returned to
119	119	the department in the year that were originally awarded in
120	120	connection with a qualified development not financed through tax
121	121	exempt bonds.
122	122	(g) The department shall, in the qualified allocation plan,
123	123	determine the priorities and criteria for awarding credits during
124	124	years in which the amount of credits applied for exceeds the maximum
125	125	amount that may be awarded under this section.
126	126	Sec. 171.555. APPORTIONMENT OF CREDIT. The direct or
127	127	indirect owners of a qualified development who intend to claim a
128	128	credit under this subchapter or Chapter 233, Insurance Code, may by
129	129	agreement determine the portion of the total amount of credits
130	130	awarded under Section 171.554 that each owner is entitled to claim.
131	131	If the owners do not agree, the department shall determine the
132	132	portion each owner is entitled to claim based on each owner's
133	133	ownership interest in the qualified development.
134	134	Sec. 171.556. LENGTH OF CREDIT; LIMITATION. (a) A taxable
135	135	entity entitled to a credit under this subchapter shall claim the
136	136	credit in equal installments during each year of the credit period.
137	137	(b) The total credit claimed under this subchapter for a
138	138	report, including any carry forward or backward under Section
139	139	171.557, may not exceed the amount of tax due for the report after
140	140	any other applicable credit.
141	141	Sec. 171.557. CARRY FORWARD OR BACKWARD. (a) If a taxable
142	142	entity is eligible for a credit that exceeds the limitations under
143	143	Section 171.556, the taxable entity may carry the unused credit
144	144	back for not more than three tax years or forward for not more than
145	145	10 consecutive reports following the tax year in which the
146	146	allocation certificate was issued. A credit carryforward from a
147	147	previous report is considered to be used before the current year
148	148	installment. A credit carried back to a previous report is
149	149	considered to be used after any other franchise tax credit is
150	150	applied to that report.
151	151	(b) A credit that is not used may not be refunded.
152	152	(c) The allocation of a credit in accordance with Section
153	153	171.559 does not extend the period for which a credit may be carried
154	154	forward and does not increase the total amount of the credit that
155	155	may be claimed.
156	156	(d) An entity may not carry back a credit under this
157	157	subchapter to a tax year for which the report was originally due
158	158	before January 1, 2026.
159	159	Sec. 171.558. RECAPTURE. (a) If a qualified development is
160	160	subject to the recapture of a portion of the federal tax credit
161	161	awarded or allocated to the development, then each taxable entity
162	162	or entity subject to state premium tax liability as defined by
163	163	Section 233.0001, Insurance Code, that has claimed or is entitled
164	164	to claim a portion of the credit under this subchapter is also
165	165	subject to the recapture of a portion of the credit under this
166	166	subchapter.
167	167	(b) The amount of credit under this subchapter that is
168	168	subject to recapture under this section is the same percentage of
169	169	the amount originally awarded or allocated as the percentage of the
170	170	amount of the federal tax credit originally awarded or allocated
171	171	that is subject to recapture under federal law. The recapture of a
172	172	credit under this section is not subject to a statute of limitations
173	173	provided by Chapter 111.
174	174	(c) The owners of a qualified development that is awarded or
175	175	allocated a credit under this subchapter or a representative of
176	176	those owners shall identify each taxable entity and each entity
177	177	subject to state premium tax liability as defined by Section
178	178	233.0001, Insurance Code, that is subject to recapture of the
179	179	credit under this section.
180	180	(d) Not later than the 30th day after the date any owner of a
181	181	qualified development receives notice that a federal tax credit
182	182	awarded or allocated to the development is subject to recapture,
183	183	the owners of the development or a representative of those owners
184	184	shall report to the comptroller:
185	185	(1) the amount of federal tax credit originally
186	186	awarded or allocated to the development;
187	187	(2) the amount of federal tax credit that is subject to
188	188	recapture and the percentage of the amount originally awarded or
189	189	allocated which that amount represents; and
190	190	(3) each entity identified under Subsection (c).
191	191	Sec. 171.559. ALLOCATION OF CREDIT. (a) If a taxable
192	192	entity receiving a credit under this subchapter is a partnership,
193	193	limited liability company, S corporation, or similar pass-through
194	194	entity, the taxable entity may allocate the credit to its partners,
195	195	shareholders, members, or other constituent taxable entities in any
196	196	manner agreed to by those entities, regardless of the size of the
197	197	person's ownership interest. This section does not prohibit a
198	198	partner, member, or shareholder from holding an investment
199	199	consisting only of a credit awarded under this subchapter or a
200	200	federal tax credit.
201	201	(b) A taxable entity that makes an allocation under this
202	202	section shall certify to the comptroller the amount of credit
203	203	allocated to each constituent taxable entity or shall notify the
204	204	comptroller that it has delegated the duty of certification to one
205	205	constituent taxable entity that shall provide the notification to
206	206	the comptroller. Each constituent taxable entity is entitled to
207	207	claim the allocated amount subject to any restrictions prescribed
208	208	by this subchapter.
209	209	(c) An allocation under this section is not a transfer for
210	210	purposes of state law.
211	211	Sec. 171.560. FILING REQUIREMENTS AFTER ALLOCATION. A
212	212	taxable entity that allocates a portion of the credit under Section
213	213	171.559, and each taxable entity to which a portion was allocated,
214	214	shall file with the taxable entity's report a copy of the
215	215	certification or notice required by Section 171.559(b).
216	216	Sec. 171.561. APPLICATION FOR CREDIT. (a) A taxable entity
217	217	must apply for a credit under this subchapter on or with the tax
218	218	report for which the credit is claimed and submit with the
219	219	application a copy of the allocation certificate issued in
220	220	connection with the qualified development and any other information
221	221	required by the comptroller.
222	222	(b) The comptroller shall adopt a form for the application
223	223	for the credit. A taxable entity must use the form to apply for the
224	224	credit.
225	225	Sec. 171.562. RULES; PROCEDURES. The department and
226	226	comptroller, in consultation with each other, shall adopt rules and
227	227	procedures to implement, administer, and enforce this subchapter.
228	228	Sec. 171.563. COMPLIANCE MONITORING. (a) The department
229	229	shall monitor compliance with this subchapter in the same manner as
230	230	the department monitors compliance with the federal tax credit
231	231	program.
232	232	(b) The department shall report any instances of
233	233	noncompliance with this subchapter to the comptroller.
234	234	Sec. 171.564. INCLUSION OF INFORMATION IN LOW INCOME
235	235	HOUSING PLAN. The department shall include in the low income
236	236	housing plan under Section 2306.0721, Government Code, information
237	237	relating to the performance of the credit during the previous
238	238	calendar year. The information must:
239	239	(1) specify the number of qualified developments for
240	240	which allocation certificates were issued during the year and the
241	241	total number of units supported by the developments;
242	242	(2) describe each qualified development for which an
243	243	allocation certificate was issued during the year, including:
244	244	(A) location;
245	245	(B) household type;
246	246	(C) available demographic information for the
247	247	residents intended to be served by the development;
248	248	(D) the income levels intended to be served by
249	249	the development; and
250	250	(E) the rents or set-asides authorized for the
251	251	development;
252	252	(3) include housing market and demographic
253	253	information to demonstrate how the qualified developments,
254	254	supported by the tax credits under this subchapter and Chapter 233,
255	255	Insurance Code, are addressing the need for affordable housing in
256	256	their communities; and
257	257	(4) analyze any remaining disparities in the
258	258	affordability of housing within those communities.
259	259	Sec. 171.565. EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS.
260	260	(a) After December 31, 2029, the department may not:
261	261	(1) reserve an amount of credit under this subchapter
262	262	for a qualified development for the purpose of issuing an
263	263	allocation certificate for the development at a later date; or
264	264	(2) issue an allocation certificate for a qualified
265	265	development unless, on or before December 31, 2029, the department
266	266	reserved an amount of credit under this subchapter for the
267	267	development for the purpose of issuing an allocation certificate at
268	268	a later date if the requirements for issuance of the certificate are
269	269	met.
270	270	(b) On or after January 1, 2030:
271	271	(1) the department may issue an allocation certificate
272	272	for which an amount of credit was reserved under Subsection (a)(2);
273	273	and
274	274	(2) an entity may claim a credit on a tax report as
275	275	provided by this subchapter or Chapter 233, Insurance Code, in
276	276	connection with a qualified development for which the department
277	277	issued an allocation certificate or reserved an amount of credit
278	278	before January 1, 2030.
279	279	Sec. 171.566. PRIORITY ALLOCATION FOR CERTAIN QUALIFIED
280	280	DEVELOPMENTS. (a) This section applies only to a qualified
281	281	development:
282	282	(1) that received an allocation of federal tax credits
283	283	under the qualified allocation plan issued by the department for
284	284	2021 or 2022;
285	285	(2) the owners or developers of which have owned the
286	286	land necessary for the development since at least December 31,
287	287	2022;
288	288	(3) that is not financed through tax exempt bonds; and
289	289	(4) that the department determines requires an
290	290	allocation of credit under this subchapter to secure the financial
291	291	feasibility of the qualified development after considering any
292	292	federal tax credit.
293	293	(b) Notwithstanding Sections 171.554(e) and (f) and subject
294	294	to Subsection (e) of this section, for the first year the department
295	295	issues allocation certificates or reserves credit amounts for the
296	296	purpose of issuing allocation certificates, the department shall
297	297	use $5 million of the state housing credit ceiling to award credits
298	298	to qualified developments to which this section applies.
299	299	(c) The owners of a qualified development to which this
300	300	section applies who intend to apply for an allocation of credit
301	301	under this section, or a representative of those owners, must
302	302	notify the department of that intent before the deadline for the
303	303	qualified development to be placed in service. If the owners or
304	304	their representative provide the notice required by this
305	305	subsection, the deadline for the qualified development to be placed
306	306	in service is extended until:
307	307	(1) the deadline set by the department for submitting
308	308	an application for an allocation under this section; or
309	309	(2) if an application for an allocation under this
310	310	section is submitted before the deadline set by the department, the
311	311	date the department issues a decision on the application.
312	312	(d) An applicant for an allocation of credit under this
313	313	section must submit to the department:
314	314	(1) documents proving that the owners or developers of
315	315	the qualified development meet the land ownership requirement under
316	316	Subsection (a)(2);
317	317	(2) a financial analysis demonstrating that the
318	318	allocation is necessary to secure the financial feasibility of the
319	319	development as required by Subsection (a)(4); and
320	320	(3) any other documentation required by the department
321	321	to demonstrate that the qualified development meets the
322	322	requirements provided by Subsection (a).
323	323	(e) If the amount of state credits reserved under this
324	324	section is not fully allocated to qualified developments to which
325	325	this section applies, the department shall allocate the remaining
326	326	portion to qualified developments to which this section does not
327	327	apply.
328	328	(f) The department shall, in the qualified allocation plan,
329	329	determine the priorities and criteria for awarding credits under
330	330	this section if the amount of credits applied for exceeds the
331	331	maximum amount that may be awarded under this section.
332	332	SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
333	333	by adding Chapter 233 to read as follows:
334	334	CHAPTER 233. CREDIT AGAINST CERTAIN TAXES FOR CERTAIN HOUSING
335	335	DEVELOPMENTS
336	336	SUBCHAPTER A. GENERAL PROVISIONS
337	337	Sec. 233.0001. DEFINITIONS. In this chapter:
338	338	(1) "Allocation certificate," "credit," and
339	339	"qualified development" have the meanings assigned by Section
340	340	171.551, Tax Code.
341	341	(2) "State premium tax liability" means any tax
342	342	liability incurred by an entity under Chapter 221, 222, 223, or 224.
343	343	SUBCHAPTER B. CREDIT
344	344	Sec. 233.0051. CREDIT. (a) An entity is eligible for a
345	345	credit against the entity's state premium tax liability in the
346	346	amount and under the limitations provided by this chapter if the
347	347	entity owns a direct or indirect interest in a qualified
348	348	development.
349	349	(b) An entity that claims a credit under this chapter is not
350	350	required to pay any additional retaliatory tax under Chapter 281 as
351	351	a result of claiming the credit.
352	352	Sec. 233.0052. LENGTH OF CREDIT; LIMITATIONS. (a) The
353	353	entity shall claim the credit in the manner provided by Section
354	354	171.556, Tax Code.
355	355	(b) The total credit claimed under this chapter for a
356	356	report, including any carry forward or backward described by
357	357	Subsection (c), may not exceed the amount of the entity's state
358	358	premium tax liability due for the report after any other applicable
359	359	credit.
360	360	(c) The entity may carry a surplus credit forward or
361	361	backward as provided by Section 171.557, Tax Code.
362	362	Sec. 233.0053. APPLICATION FOR CREDIT. (a) An entity must
363	363	apply for a credit under this chapter on or with the tax report for
364	364	the tax year for which the credit is claimed and submit with the
365	365	application a copy of the allocation certificate issued in
366	366	connection with the qualified development and any other information
367	367	required by Subchapter K, Chapter 171, Tax Code.
368	368	(b) The comptroller shall adopt a form for the application
369	369	for the credit. An entity must use this form in applying for the
370	370	credit.
371	371	Sec. 233.0054. RULES; PROCEDURES. The comptroller and the
372	372	Texas Department of Housing and Community Affairs, in consultation
373	373	with each other, shall adopt rules and procedures to implement,
374	374	administer, and enforce this chapter.
375	375	Sec. 233.0055. APPLICABLE PROVISIONS. The provisions of
376	376	Subchapter K, Chapter 171, Tax Code, relating to recapture,
377	377	allocation of credit, apportionment of credit, length of credit,
378	378	filing requirements after allocation, and compliance monitoring
379	379	apply to the credit authorized by this chapter.
380	380	SUBCHAPTER C. EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS
381	381	Sec. 233.0101. EXPIRATION OF ALLOCATION AUTHORITY; USE OF
382	382	ALLOCATED CREDITS. (a) The authority of the Texas Department of
383	383	Housing and Community Affairs to reserve credit amounts and issue
384	384	allocation certificates for purposes of Subchapter K, Chapter 171,
385	385	Tax Code, and this chapter expires as provided by Section
386	386	171.565(a), Tax Code.
387	387	(b) An entity may claim a credit under this chapter on a tax
388	388	report as provided by Section 171.565(b), Tax Code.
389	389	SECTION 3. (a) The Texas Department of Housing and
390	390	Community Affairs may begin reserving credit amounts for the
391	391	purpose of issuing allocation certificates under Subchapter K,
392	392	Chapter 171, Tax Code, as added by this Act, in an open cycle
393	393	beginning on January 1, 2024.
394	394	(b) Except as provided by Subsection (c) of this section,
395	395	Subchapter K, Chapter 171, Tax Code, as added by this Act, and
396	396	Chapter 233, Insurance Code, as added by this Act, apply only to a
397	397	tax report originally due on or after January 1, 2026, and before
398	398	January 1, 2036.
399	399	(c) The expiration of the authority to allocate credits
400	400	under Subchapter K, Chapter 171, Tax Code, as added by this Act, in
401	401	accordance with Section 171.565, Tax Code, as added by this Act,
402	402	does not affect the carryforward of a credit under:
403	403	(1) Section 171.557, Tax Code, as added by this Act; or
404	404	(2) Section 233.0052(c), Insurance Code, as added by
405	405	this Act.
406	406	SECTION 4. This Act takes effect January 1, 2024.
407	407	______________________________ ______________________________
408	408	President of the Senate Speaker of the House
409	409	I certify that H.B. No. 1058 was passed by the House on April
410	410	4, 2023, by the following vote: Yeas 121, Nays 25, 1 present, not
411	411	voting; that the House concurred in Senate amendments to H.B. No.
412	412	1058 on May 25, 2023, by the following vote: Yeas 122, Nays 15, 3
413	413	present, not voting; and that the House adopted H.C.R. No. 123
414	414	authorizing certain corrections in H.B. No. 1058 on May 25, 2023, by
415	415	the following vote: Yeas 133, Nays 7, 1 present, not voting.
416	416	______________________________
417	417	Chief Clerk of the House
418	418	I certify that H.B. No. 1058 was passed by the Senate, with
419	419	amendments, on May 22, 2023, by the following vote: Yeas 25, Nays
420	420	6; and that the Senate adopted H.C.R. No. 123 authorizing certain
421	421	corrections in H.B. No. 1058 on May 27, 2023, by the following vote:
422	422	Yeas 31, Nays 0.
423	423	______________________________
424	424	Secretary of the Senate
425	425	APPROVED: __________________
426	426	Date
427	427	__________________
428	428	Governor