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  H.B. No. 1058
 
 
 
 
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,
  specifying the total amount of the credits awarded in connection
  with the qualified development for the credit period, and
  specifying the amount of credit that may be claimed each year for
  each building that is part of the qualified development.
               (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:
                     (A)  for which the department awards or allocates
  a federal tax credit through the issuance of a carryover allocation
  agreement or determination notice;
                     (B)  that has not had an allocation of federal tax
  credits terminated by or at the direction of the department;
                     (C)  that is the subject of a recorded restrictive
  covenant requiring the development to be maintained and operated as
  a qualified development that has not been terminated and is not
  subject to termination through any process other than the natural
  expiration of the covenant's extended use period;
                     (D)  that meets all applicable requirements of the
  qualified allocation plan, as defined by Section 2306.6702,
  Government Code; and
                     (E)  for the duration of the extended use period
  established in the land use restriction agreement, as defined by
  Section 2306.6702(a)(9), Government Code, 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
  of credits each award 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.  APPLICATION FOR AND ISSUANCE OF ALLOCATION
  CERTIFICATE. (a) A taxable entity or an entity subject to state
  premium tax liability as defined by Section 233.0001, Insurance
  Code, must apply to the department for an allocation certificate in
  connection with a development in which the taxable entity or other
  entity owns an interest.  The application must be submitted to the
  department along with the application for an allocation of federal
  tax credits in a manner prescribed by the department.
         (b)  The department shall issue an allocation certificate
  if:
               (1)  the department approves the application submitted
  under Subsection (a);
               (2)  the development meets the requirements to be a
  qualified development; and
               (3)  the department awards an amount of credit to the
  development under Section 171.554.
         Sec. 171.554.  AMOUNT OF CREDITS; METHOD OF AWARD. (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, 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 portion of the state housing credit ceiling
  for the preceding year that could have been awarded for qualified
  developments financed through tax exempt bonds but was not awarded;
  and
               (3)  any credits recaptured or otherwise returned to
  the department in the year that were originally awarded in
  connection with a qualified development financed through tax exempt
  bonds.
         (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 portion of the state housing credit ceiling
  for the preceding year that could have been awarded for qualified
  developments not financed through tax exempt bonds but was not
  awarded; and
               (3)  any credits recaptured or otherwise returned to
  the department in the year that were originally awarded in
  connection with a qualified development not financed through tax
  exempt bonds.
         (g)  The department shall, in the qualified allocation plan,
  determine the priorities and criteria for awarding credits during
  years in which the amount of credits applied for exceeds the maximum
  amount that may be awarded under this section.
         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 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 certificate was issued.  A credit carryforward from a
  previous report is considered to be used before the current year
  installment.  A credit carried back to a previous report is
  considered to be used after any other franchise tax credit is
  applied to that report.
         (b)  A credit that is not used may not be refunded.
         (c)  The allocation of a credit in accordance with Section
  171.559 does not extend the period for which a credit may be carried
  forward and does not increase the total amount of the credit that
  may be claimed. 
         (d)  An entity may not carry back a credit under this
  subchapter to a tax year for which the report was originally due
  before January 1, 2026.
         Sec. 171.558.  RECAPTURE. (a) If a qualified development is
  subject to the recapture of a portion of the federal tax credit
  awarded or allocated to the development, then each taxable entity
  or entity subject to state premium tax liability as defined by
  Section 233.0001, Insurance Code, that has claimed or is entitled
  to claim a portion of the credit under this subchapter is also
  subject to the recapture of a portion of the credit under this
  subchapter.
         (b)  The amount of credit under this subchapter that is
  subject to recapture under this section is the same percentage of
  the amount originally awarded or allocated as the percentage of the
  amount of the federal tax credit originally awarded or allocated
  that is subject to recapture under federal law. The recapture of a
  credit under this section is not subject to a statute of limitations
  provided by Chapter 111. 
         (c)  The owners of a qualified development that is awarded or
  allocated a credit under this subchapter or a representative of
  those owners shall identify each taxable entity and each entity
  subject to state premium tax liability as defined by Section
  233.0001, Insurance Code, that is subject to recapture of the
  credit under this section. 
         (d)  Not later than the 30th day after the date any owner of a
  qualified development receives notice that a federal tax credit
  awarded or allocated to the development is subject to recapture,
  the owners of the development or a representative of those owners
  shall report to the comptroller:
               (1)  the amount of federal tax credit originally
  awarded or allocated to the development;
               (2)  the amount of federal tax credit that is subject to
  recapture and the percentage of the amount originally awarded or
  allocated which that amount represents; and
               (3)  each entity identified under Subsection (c).
         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, regardless of the size of the
  person's ownership interest.  This section does not prohibit a
  partner, member, or shareholder from holding an investment
  consisting only of a credit awarded under this subchapter or a
  federal tax credit.
         (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
  certification or notice required by Section 171.559(b).
         Sec. 171.561.  APPLICATION FOR CREDIT. (a) A taxable entity
  must apply for a credit under this subchapter on or with the tax
  report 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 the comptroller.
         (b)  The comptroller shall adopt a form for the application
  for the credit. A taxable entity must use the form to apply for the
  credit.
         Sec. 171.562.  RULES; PROCEDURES. The department and
  comptroller, in consultation with each other, shall adopt rules and
  procedures to implement, administer, and enforce this subchapter.
         Sec. 171.563.  COMPLIANCE MONITORING. (a)  The department
  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. 171.564.  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. 171.565.  EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS.
  (a) After December 31, 2029, the department may not:
               (1)  reserve an amount of credit under this subchapter
  for a qualified development for the purpose of issuing an
  allocation certificate for the development at a later date; or
               (2)  issue an allocation certificate for a qualified
  development unless, on or before December 31, 2029, the department
  reserved an amount of credit under this subchapter for the
  development for the purpose of issuing an allocation certificate at
  a later date if the requirements for issuance of the certificate are
  met. 
         (b)  On or after January 1, 2030:
               (1)  the department may issue an allocation certificate
  for which an amount of credit was reserved under Subsection (a)(2);
  and
               (2)  an entity may claim a credit on a tax report as
  provided by this subchapter or Chapter 233, Insurance Code, in
  connection with a qualified development for which the department
  issued an allocation certificate or reserved an amount of credit
  before January 1, 2030.
         Sec. 171.566.  PRIORITY ALLOCATION FOR CERTAIN QUALIFIED
  DEVELOPMENTS. (a) This section applies only to a qualified
  development:
               (1)  that received an allocation of federal tax credits
  under the qualified allocation plan issued by the department for
  2021 or 2022;
               (2)  the owners or developers of which have owned the
  land necessary for the development since at least December 31,
  2022;
               (3)  that is not financed through tax exempt bonds; and
               (4)  that the department determines requires an
  allocation of credit under this subchapter to secure the financial
  feasibility of the qualified development after considering any
  federal tax credit.
         (b)  Notwithstanding Sections 171.554(e) and (f) and subject
  to Subsection (e) of this section, for the first year the department
  issues allocation certificates or reserves credit amounts for the
  purpose of issuing allocation certificates, the department shall
  use $5 million of the state housing credit ceiling to award credits
  to qualified developments to which this section applies.
         (c)  The owners of a qualified development to which this
  section applies who intend to apply for an allocation of credit
  under this section, or a representative of those owners, must
  notify the department of that intent before the deadline for the
  qualified development to be placed in service. If the owners or
  their representative provide the notice required by this
  subsection, the deadline for the qualified development to be placed
  in service is extended until:
               (1)  the deadline set by the department for submitting
  an application for an allocation under this section; or
               (2)  if an application for an allocation under this
  section is submitted before the deadline set by the department, the
  date the department issues a decision on the application.
         (d)  An applicant for an allocation of credit under this
  section must submit to the department:
               (1)  documents proving that the owners or developers of
  the qualified development meet the land ownership requirement under
  Subsection (a)(2);
               (2)  a financial analysis demonstrating that the
  allocation is necessary to secure the financial feasibility of the
  development as required by Subsection (a)(4); and
               (3)  any other documentation required by the department
  to demonstrate that the qualified development meets the
  requirements provided by Subsection (a).
         (e)  If the amount of state credits reserved under this
  section is not fully allocated to qualified developments to which
  this section applies, the department shall allocate the remaining
  portion to qualified developments to which this section does not
  apply.
         (f)  The department shall, in the qualified allocation plan,
  determine the priorities and criteria for awarding credits under
  this section if the amount of credits applied for exceeds the
  maximum amount that may be awarded under this section.
         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," "credit," 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 Chapter 221, 222, 223, or 224.
  SUBCHAPTER B. CREDIT
         Sec. 233.0051.  CREDIT.  (a)  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.
         (b)  An entity that claims a credit under this chapter is not
  required to pay any additional retaliatory tax under Chapter 281 as
  a result of claiming the credit.
         Sec. 233.0052.  LENGTH OF CREDIT; LIMITATIONS.  (a)  The
  entity shall claim the credit in the manner provided by Section
  171.556, 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, apportionment of credit, length of credit,
  filing requirements after allocation, and compliance monitoring
  apply to the credit authorized by this chapter.
  SUBCHAPTER C. EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS
         Sec. 233.0101.  EXPIRATION OF ALLOCATION AUTHORITY; USE OF
  ALLOCATED CREDITS. (a) The authority of the Texas Department of
  Housing and Community Affairs to reserve credit amounts and issue
  allocation certificates for purposes of Subchapter K, Chapter 171,
  Tax Code, and this chapter expires as provided by Section
  171.565(a), Tax Code.
         (b)  An entity may claim a credit under this chapter on a tax
  report as provided by Section 171.565(b), Tax Code.
         SECTION 3.  (a) The Texas Department of Housing and
  Community Affairs may begin reserving credit amounts for the
  purpose of issuing allocation certificates under Subchapter K,
  Chapter 171, Tax Code, as added by this Act, in an open cycle
  beginning on January 1, 2024.
         (b)  Except as provided by Subsection (c) 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)  The expiration of the authority to allocate credits
  under Subchapter K, Chapter 171, Tax Code, as added by this Act, in
  accordance with Section 171.565, Tax Code, as added by this Act,
  does not affect the carryforward of a credit under:
               (1)  Section 171.557, Tax Code, as added by this Act; or
               (2)  Section 233.0052(c), Insurance Code, as added by
  this Act.
         SECTION 4.  This Act takes effect January 1, 2024.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 1058 was passed by the House on April
  4, 2023, by the following vote:  Yeas 121, Nays 25, 1 present, not
  voting; that the House concurred in Senate amendments to H.B. No.
  1058 on May 25, 2023, by the following vote:  Yeas 122, Nays 15, 3
  present, not voting; and that the House adopted H.C.R. No. 123
  authorizing certain corrections in H.B. No. 1058 on May 25, 2023, by
  the following vote: Yeas 133, Nays 7, 1 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 1058 was passed by the Senate, with
  amendments, on May 22, 2023, by the following vote:  Yeas 25, Nays
  6; and that the Senate adopted H.C.R. No. 123 authorizing certain
  corrections in H.B. No. 1058 on May 27, 2023, by the following vote:
  Yeas 31, Nays 0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor