Texas 2025 - 89th Regular

Texas Senate Bill SB2814 Compare Versions

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1	1	By: Alvarado S.B. No. 2814
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6	6	AN ACT
7	7	relating to a franchise or insurance premium tax credit for certain
8	8	housing developments.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Chapter 171, Tax Code, is amended by adding
11	11	Subchapter K to read as follows:
12	12	SUBCHAPTER K. TAX CREDIT FOR CERTAIN HOUSING DEVELOPMENTS
13	13	Sec. 171.551. DEFINITIONS. In this subchapter:
14	14	(1) "Allocation certificate" means a statement issued
15	15	by the department certifying that a qualified development qualifies
16	16	for credits under this subchapter and Chapter 233, Insurance Code,
17	17	specifying the total amount of the credits awarded in connection
18	18	with the qualified development for the credit period, and
19	19	specifying theannual amount of credit that may be claimed each year
20	20	during the credit period for each building that is part of the
21	21	qualified development.
22	22	(2) "Credit" means the low-income housing development
23	23	tax credit authorized by this subchapter.
24	24	(3) "Credit period" means, with respect to a building
25	25	that is part of a qualified development, the period of 10 tax years
26	26	beginning with the tax year in which the building is placed in
27	27	service.
28	28	(4) "Department" means the Texas Department of Housing
29	29	and Community Affairs.
30	30	(5) "Development" has the meaning assigned by Section
31	31	2306.6702, Government Code.
32	32	(6) "Federal tax credit" means the federal low-income
33	33	housing credit created by Section 42, Internal Revenue Code.
34	34	(7) "Qualified basis" means the qualified basis of a
35	35	qualified development, as determined under Section 42, Internal
36	36	Revenue Code.
37	37	(8) "Qualified development" means a development in
38	38	this state:
39	39	(A) for which the department awards or allocates
40	40	a federal tax credit through the issuance of a carryover allocation
41	41	agreement or determination notice;
42	42	(B) that has not had an allocation of federal tax
43	43	credits terminated by or at the direction of the department;
44	44	(C) that is the subject of a recorded restrictive
45	45	covenant requiring the development to be maintained and operated as
46	46	a qualified development that has not been terminated and is not
47	47	subject to termination through any process other than the natural
48	48	expiration of the covenant's extended use period;
49	49	(D) that meets all applicable requirements of the
50	50	qualified allocation plan, as defined by Section 2306.6702,
51	51	Government Code; and
52	52	(E) for the duration of the extended use period
53	53	established in the land use restriction agreement, as defined by
54	54	Section 2306.6702(a)(9), Government Code, is in compliance with:
55	55	(i) all accessibility and adaptability
56	56	requirements for a federal tax credit; and
57	57	(ii) Title VIII of the Civil Rights Act of
58	58	1968 (42 U.S.C. Section 3601 et seq.).
59	59	(9) "State housing credit ceiling" means $25 million
60	60	of annual credits each award year.
61	61	Sec. 171.552. ENTITLEMENT TO CREDIT. A taxable entity is
62	62	entitled to an annual credit against the taxes imposed under this
63	63	chapter in the amount and under the limitations provided by this
64	64	subchapter if the taxable entity owns a direct or indirect interest
65	65	in a qualified development.
66	66	Sec. 171.553. APPLICATION FOR AND ISSUANCE OF ALLOCATION
67	67	CERTIFICATE. (a) A taxable entity or an entity subject to state
68	68	premium tax liability as defined by Section 233.0001, Insurance
69	69	Code, must apply to the department for an allocation certificate in
70	70	connection with a development in which the taxable entity or other
71	71	entity owns an interest. The application must be submitted to the
72	72	department along with the application for an allocation of federal
73	73	tax credits in a manner prescribed by the department.
74	74	(b) The department shall issue an allocation certificate
75	75	if:
76	76	(1) the department approves the application submitted
77	77	under Subsection (a);
78	78	(2) the development meets the requirements to be a
79	79	qualified development; and
80	80	(3) the department awards an amount of credit to the
81	81	development under Section 171.554.
82	82	Sec. 171.554. AMOUNT OF CREDITS; METHOD OF AWARD. (a) The
83	83	department shall in the manner provided by this section determine
84	84	the total amount of annual credits under this subchapter and
85	85	Chapter 233, Insurance Code, awarded for each year of the credit
86	86	period in connection with a qualified development and indicate the
87	87	amount of the annual credits awarded on the allocation certificate.
88	88	(b) The amount of annual credit awarded in connection with a
89	89	qualified development overallowed each year of the credit period
90	90	must be the minimum amount necessary for the financial feasibility
91	91	of the qualified development, subject to the limitations of this
92	92	section.
93	93	(c) The amount of annual credits awarded in connection with
94	94	a qualified development allowed each year ofover the credit period
95	95	may not exceed the total amount of the annual federal tax credit
96	96	awarded to the owner or owners of the qualified development allowed
97	97	each year ofover the 10-year federal tax credit period.
98	98	(d) The manner in which the department awards the amount of
99	99	credits must be consistent with criteria established by the
100	100	department.
101	101	(e) The total amount of annual credits awarded for aeach
102	102	award year in connection with all qualified developments financed
103	103	through tax exempt bonds may not exceed the sum of:
104	104	(1) 50 percent of the state housing credit ceiling for
105	105	the year;
106	106	(2) any portion of the state housing credit ceiling
107	107	for the preceding year that could have been awarded for qualified
108	108	developments financed through tax exempt bonds but was not awarded;
109	109	and
110	110	(3) any credits recaptured or otherwise returned to
111	111	the department in the year that were originally awarded in
112	112	connection with a qualified development financed through tax exempt
113	113	bonds.
114	114	(f) The total amount of annual credits awarded for aeach
115	115	award year in connection with all qualified developments not
116	116	financed through tax exempt bonds may not exceed the sum of:
117	117	(1) 50 percent of the state housing credit ceiling for
118	118	the year;
119	119	(2) any portion of the state housing credit ceiling
120	120	for the preceding year that could have been awarded for qualified
121	121	developments not financed through tax exempt bonds but was not
122	122	awarded; and
123	123	(3) any credits recaptured or otherwise returned to
124	124	the department in the year that were originally awarded in
125	125	connection with a qualified development not financed through tax
126	126	exempt bonds.
127	127	(g) The department shall, in the qualified allocation plan,
128	128	determine the priorities and criteria for awarding annual credits
129	129	during award years in which the amount of credits applied for
130	130	exceeds the maximum amount that may be awarded under this section.
131	131	Sec. 171.555. APPORTIONMENT OF CREDIT. The direct or
132	132	indirect owners of a qualified development who intend to claim a
133	133	credit under this subchapter or Chapter 233, Insurance Code, may by
134	134	agreement determine the portion of the total amount of credits
135	135	awarded under Section 171.554 annual credit that each owner is
136	136	entitled to claim for any year during the credit period. If the
137	137	owners do not agree, the department shall determine the portion
138	138	each owner is entitled to claim based on each owner's ownership
139	139	interest in the qualified development.
140	140	Sec. 171.556. LENGTH OF CREDIT; LIMITATION. (a) Any
141	141	taxable entity entitled to a credit under this subchapter shall
142	142	claim its portion of the annual credit in equal installmentsfor
143	143	each yearduring each year of the credit period.
144	144	(b) The total credit claimed under this subchapter for a
145	145	report, including any carry forward or backward under Section
146	146	171.557, may not exceed the amount of tax due for the report after
147	147	any other applicable credit.
148	148	Sec. 171.557. CARRY FORWARD OR BACKWARD. (a) If a taxable
149	149	entity is eligible for a credit that exceeds the limitations under
150	150	Section 171.556, the taxable entity may carry the unused credit
151	151	back for not more than three tax years or forward for not more than
152	152	10 consecutive reports following the tax year in which the
153	153	allocation certificate was issued. A credit carryforward from a
154	154	previous report is considered to be used before the current year
155	155	installment. A credit carried back to a previous report is
156	156	considered to be used after any other franchise tax credit is
157	157	applied to that report.
158	158	(b) A credit that is not used may not be refunded.
159	159	(c) The allocation of a credit in accordance with Section
160	160	171.559 does not extend the period for which a credit may be carried
161	161	forward and does not increase the total amount of the credit that
162	162	may be claimed.
163	163	(d) An entity may not carry back a credit under this
164	164	subchapter to a tax year for which the report was originally due
165	165	before January 1, 2026.
166	166	Sec. 171.558. RECAPTURE. (a) If a qualified development is
167	167	subject to the recapture of a portion of the federal tax credit
168	168	awarded or allocated to the development, then each taxable entity
169	169	or entity subject to state premium tax liability as defined by
170	170	Section 233.0001, Insurance Code, that has claimed or is entitled
171	171	to claim a portion of the credit under this subchapter is also
172	172	subject to the recapture of a portion of the credit under this
173	173	subchapter.
174	174	(b) The amount of credit under this subchapter that is
175	175	subject to recapture under this section is the same percentage of
176	176	the amount originally awarded or allocated as the percentage of the
177	177	amount of the federal tax credit originally awarded or allocated
178	178	that is subject to recapture under federal law. The recapture of a
179	179	credit under this section is not subject to a statute of limitations
180	180	provided by Chapter 111.
181	181	(c) The owners of a qualified development that is awarded or
182	182	allocated a credit under this subchapter or a representative of
183	183	those owners shall identify each taxable entity and each entity
184	184	subject to state premium tax liability as defined by Section
185	185	233.0001, Insurance Code, that is subject to recapture of the
186	186	credit under this section.
187	187	(d) Not later than the 30th day after the date any owner of a
188	188	qualified development receives notice that a federal tax credit
189	189	awarded or allocated to the development is subject to recapture,
190	190	the owners of the development or a representative of those owners
191	191	shall report to the comptroller:
192	192	(1) the amount of federal tax credit originally
193	193	awarded or allocated to the development;
194	194	(2) the amount of federal tax credit that is subject to
195	195	recapture and the percentage of the amount originally awarded or
196	196	allocated which that amount represents; and
197	197	(3) each entity identified under Subsection (c).
198	198	Sec. 171.559. ALLOCATION OF CREDIT. (a) If a taxable
199	199	entity receiving a credit under this subchapter is a partnership,
200	200	limited liability company, S corporation, or similar pass-through
201	201	entity, the taxable entity may allocate the credit to its partners,
202	202	shareholders, members, or other constituent taxable entities in any
203	203	manner agreed to by those entities, regardless of the size of the
204	204	person's ownership interest. This section does not prohibit a
205	205	partner, member, or shareholder from holding an investment
206	206	consisting only of a credit awarded under this subchapter or a
207	207	federal tax credit.
208	208	(b) A taxable entity that makes an allocation under this
209	209	section shall certify to the comptroller the amount of credit
210	210	allocated to each constituent taxable entity or shall notify the
211	211	comptroller that it has delegated the duty of certification to one
212	212	constituent taxable entity that shall provide the notification to
213	213	the comptroller. Each constituent taxable entity is entitled to
214	214	claim the allocated amount subject to any restrictions prescribed
215	215	by this subchapter.
216	216	(c) An allocation under this section is not a transfer for
217	217	purposes of state law.
218	218	Sec. 171.560. FILING REQUIREMENTS AFTER ALLOCATION. A
219	219	taxable entity that allocates a portion of the credit under Section
220	220	171.559, and each taxable entity to which a portion was allocated,
221	221	shall file with the taxable entity's report a copy of the
222	222	certification or notice required by Section 171.559(b).
223	223	Sec. 171.561. APPLICATION FOR CREDIT. (a) A taxable entity
224	224	must apply for a credit under this subchapter on or with the tax
225	225	report for which the credit is claimed and submit with the
226	226	application a copy of the allocation certificate issued in
227	227	connection with the qualified development and any other information
228	228	required by the comptroller.
229	229	(b) The comptroller shall adopt a form for the application
230	230	for the credit. A taxable entity must use the form to apply for the
231	231	credit.
232	232	Sec. 171.562. RULES; PROCEDURES. The department and
233	233	comptroller, in consultation with each other, shall adopt rules and
234	234	procedures to implement, administer, and enforce this subchapter.
235	235	Sec. 171.563. COMPLIANCE MONITORING. (a) The department
236	236	shall monitor compliance with this subchapter in the same manner as
237	237	the department monitors compliance with the federal tax credit
238	238	program.
239	239	(b) The department shall report any instances of
240	240	noncompliance with this subchapter to the comptroller.
241	241	Sec. 171.564. INCLUSION OF INFORMATION IN LOW INCOME
242	242	HOUSING PLAN. The department shall include in the low income
243	243	housing plan under Section 2306.0721, Government Code, information
244	244	relating to the performance of the credit during the previous
245	245	calendar year. The information must:
246	246	(1) specify the number of qualified developments for
247	247	which allocation certificates were issued during the year and the
248	248	total number of units supported by the developments;
249	249	(2) describe each qualified development for which an
250	250	allocation certificate was issued during the year, including:
251	251	(A) location;
252	252	(B) household type;
253	253	(C) available demographic information for the
254	254	residents intended to be served by the development;
255	255	(D) the income levels intended to be served by
256	256	the development; and
257	257	(E) the rents or set-asides authorized for the
258	258	development;
259	259	(3) include housing market and demographic
260	260	information to demonstrate how the qualified developments,
261	261	supported by the tax credits under this subchapter and Chapter 233,
262	262	Insurance Code, are addressing the need for affordable housing in
263	263	their communities; and
264	264	(4) analyze any remaining disparities in the
265	265	affordability of housing within those communities.
266	266	Sec. 171.565. EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS.
267	267	(a) After December 31, 2029, the department may not:
268	268	(1) reserve an amount of credit under this subchapter
269	269	for a qualified development for the purpose of issuing an
270	270	allocation certificate for the development at a later date; or
271	271	(2) issue an allocation certificate for a qualified
272	272	development unless, on or before December 31, 2029, the department
273	273	reserved an amount of credit under this subchapter for the
274	274	development for the purpose of issuing an allocation certificate at
275	275	a later date if the requirements for issuance of the certificate are
276	276	met.
277	277	(b) On or after January 1, 2030:
278	278	(1) the department may issue an allocation certificate
279	279	for which an amount of credit was reserved under Subsection (a)(2);
280	280	and
281	281	(2) an entity may claim a credit on a tax report as
282	282	provided by this subchapter or Chapter 233, Insurance Code, in
283	283	connection with a qualified development for which the department
284	284	issued an allocation certificate or reserved an amount of credit
285	285	before January 1, 2030.
286	286	Sec. 171.566. PRIORITY ALLOCATION FOR CERTAIN QUALIFIED
287	287	DEVELOPMENTS. (a) This section applies only to a qualified
288	288	development:
289	289	(1) that received an allocation of federal tax credits
290	290	under the qualified allocation plan issued by the department for
291	291	2021 or 2022;
292	292	(2) the owners or developers of which have owned the
293	293	land necessary for the development since at least December 31,
294	294	2022;
295	295	(3) that is not financed through tax exempt bonds; and
296	296	(4) that the department determines requires an
297	297	allocation of credit under this subchapter to secure the financial
298	298	feasibility of the qualified development after considering any
299	299	federal tax credit.
300	300	(b) Notwithstanding Sections 171.554(e) and (f) and subject
301	301	to Subsection (e) of this section, for the first year the department
302	302	issues allocation certificates or reserves credit amounts for the
303	303	purpose of issuing allocation certificates, the department shall
304	304	use $5 million of the state housing credit ceiling to award credits
305	305	to qualified developments to which this section applies.
306	306	(c) The owners of a qualified development to which this
307	307	section applies who intend to apply for an allocation of credit
308	308	under this section, or a representative of those owners, must
309	309	notify the department of that intent before the deadline for the
310	310	qualified development to be placed in service. If the owners or
311	311	their representative provide the notice required by this
312	312	subsection, the deadline for the qualified development to be placed
313	313	in service is extended until:
314	314	(1) the deadline set by the department for submitting
315	315	an application for an allocation under this section; or
316	316	(2) if an application for an allocation under this
317	317	section is submitted before the deadline set by the department, the
318	318	date the department issues a decision on the application.
319	319	(d) An applicant for an allocation of credit under this
320	320	section must submit to the department:
321	321	(1) documents proving that the owners or developers of
322	322	the qualified development meet the land ownership requirement under
323	323	Subsection (a)(2);
324	324	(2) a financial analysis demonstrating that the
325	325	allocation is necessary to secure the financial feasibility of the
326	326	development as required by Subsection (a)(4); and
327	327	(3) any other documentation required by the department
328	328	to demonstrate that the qualified development meets the
329	329	requirements provided by Subsection (a).
330	330	(e) If the amount of state credits reserved under this
331	331	section is not fully allocated to qualified developments to which
332	332	this section applies, the department shall allocate the remaining
333	333	portion to qualified developments to which this section does not
334	334	apply.
335	335	(f) The department shall, in the qualified allocation plan,
336	336	determine the priorities and criteria for awarding credits under
337	337	this section if the amount of credits applied for exceeds the
338	338	maximum amount that may be awarded under this section.
339	339	SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
340	340	by adding Chapter 233 to read as follows:
341	341	CHAPTER 233. CREDIT AGAINST CERTAIN TAXES FOR CERTAIN HOUSING
342	342	DEVELOPMENTS
343	343	SUBCHAPTER A. GENERAL PROVISIONS
344	344	Sec. 233.0001. DEFINITIONS. In this chapter:
345	345	(1) "Allocation certificate," "credit," and
346	346	"qualified development" have the meanings assigned by Section
347	347	171.551, Tax Code.
348	348	(2) "State premium tax liability" means any tax
349	349	liability incurred by an entity under Chapter 221, 222, 223, or 224.
350	350	SUBCHAPTER B. CREDIT
351	351	Sec. 233.0051. CREDIT. (a) An entity is eligible for a
352	352	credit against the entity's state premium tax liability in the
353	353	amount and under the limitations provided by this chapter if the
354	354	entity owns a direct or indirect interest in a qualified
355	355	development.
356	356	(b) An entity that claims a credit under this chapter is not
357	357	required to pay any additional retaliatory tax under Chapter 281 as
358	358	a result of claiming the credit.
359	359	Sec. 233.0052. LENGTH OF CREDIT; LIMITATIONS. (a) The
360	360	entity shall claim the annual credit in the manner provided by
361	361	Section 171.556, Tax Code.
362	362	(b) The total credit claimed under this chapter for a
363	363	report, including any carry forward or backward described by
364	364	Subsection (c), may not exceed the amount of the entity's state
365	365	premium tax liability due for the report after any other applicable
366	366	credit.
367	367	(c) The entity may carry a surplus credit forward or
368	368	backward as provided by Section 171.557, Tax Code.
369	369	Sec. 233.0053. APPLICATION FOR CREDIT. (a) An entity must
370	370	apply for a credit under this chapter on or with the tax report for
371	371	the tax year for which the credit is claimed and submit with the
372	372	application a copy of the allocation certificate issued in
373	373	connection with the qualified development and any other information
374	374	required by Subchapter K, Chapter 171, Tax Code.
375	375	(b) The comptroller shall adopt a form for the application
376	376	for the credit. An entity must use this form in applying for the
377	377	credit.
378	378	Sec. 233.0054. RULES; PROCEDURES. The comptroller and the
379	379	Texas Department of Housing and Community Affairs, in consultation
380	380	with each other, shall adopt rules and procedures to implement,
381	381	administer, and enforce this chapter.
382	382	Sec. 233.0055. APPLICABLE PROVISIONS. The provisions of
383	383	Subchapter K, Chapter 171, Tax Code, relating to recapture,
384	384	allocation of credit, apportionment of credit, length of credit,
385	385	filing requirements after allocation, and compliance monitoring
386	386	apply to the credit authorized by this chapter.
387	387	SUBCHAPTER C. EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS
388	388	Sec. 233.0101. EXPIRATION OF ALLOCATION AUTHORITY; USE OF
389	389	ALLOCATED CREDITS. (a) The authority of the Texas Department of
390	390	Housing and Community Affairs to reserve credit amounts and issue
391	391	allocation certificates for purposes of Subchapter K, Chapter 171,
392	392	Tax Code, and this chapter expires as provided by Section
393	393	171.565(a), Tax Code.
394	394	(b) An entity may claim a credit under this chapter on a tax
395	395	report as provided by Section 171.565(b), Tax Code.
396	396	SECTION 3. (a) The Texas Department of Housing and
397	397	Community Affairs may begin reserving credit amounts for the
398	398	purpose of issuing allocation certificates under Subchapter K,
399	399	Chapter 171, Tax Code, as added by this Act, in an open cycle
400	400	beginning on January 1, 2024.
401	401	(b) Except as provided by Subsection (c) of this section,
402	402	Subchapter K, Chapter 171, Tax Code, as added by this Act, and
403	403	Chapter 233, Insurance Code, as added by this Act, apply only to a
404	404	tax report originally due on or after January 1, 2026, and before
405	405	January 1, 2036.
406	406	(c) The expiration of the authority to allocate credits
407	407	under Subchapter K, Chapter 171, Tax Code, as added by this Act, in
408	408	accordance with Section 171.565, Tax Code, as added by this Act,
409	409	does not affect the carryforward of a credit under:
410	410	(1) Section 171.557, Tax Code, as added by this Act; or
411	411	(2) Section 233.0052(c), Insurance Code, as added by
412	412	this Act.
413	413	SECTION 4. This Act takes effect January 1, 2026.