| |
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A BILL TO BE ENTITLED
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AN ACT
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| |
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relating to a franchise or insurance premium tax credit for certain |
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housing developments. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 171, Tax Code, is amended by adding |
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Subchapter K to read as follows: |
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SUBCHAPTER K. TAX CREDIT FOR CERTAIN HOUSING DEVELOPMENTS |
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Sec. 171.551. DEFINITIONS. In this subchapter: |
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(1) "Allocation certificate" means a statement issued |
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by the department certifying that a qualified development qualifies |
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for credits under this subchapter and Chapter 233, Insurance Code, |
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|
specifying the total amount of the credits awarded in connection |
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with the qualified development for the credit period, and |
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|
specifying the amount of credit that may be claimed each year for |
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each building that is part of the qualified development. |
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(2) "Credit" means the low-income housing development |
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|
tax credit authorized by this subchapter. |
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(3) "Credit period" means, with respect to a building |
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that is part of a qualified development, the period of 10 tax years |
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beginning with the tax year in which the building is placed in |
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service. |
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(4) "Department" means the Texas Department of Housing |
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and Community Affairs. |
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(5) "Development" has the meaning assigned by Section |
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2306.6702, Government Code. |
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(6) "Federal tax credit" means the federal low-income |
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|
housing credit created by Section 42, Internal Revenue Code. |
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(7) "Qualified basis" means the qualified basis of a |
|
|
qualified development, as determined under Section 42, Internal |
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|
Revenue Code. |
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(8) "Qualified development" means a development in |
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this state: |
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(A) for which the department awards or allocates |
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a federal tax credit through the issuance of a carryover allocation |
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|
agreement or determination notice; |
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(B) that has not had an allocation of federal tax |
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credits terminated by or at the direction of the department; |
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(C) that is the subject of a recorded restrictive |
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|
covenant requiring the development to be maintained and operated as |
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a qualified development that has not been terminated and is not |
|
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subject to termination through any process other than the natural |
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|
expiration of the covenant's extended use period; |
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(D) that meets all applicable requirements of the |
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qualified allocation plan, as defined by Section 2306.6702, |
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Government Code; and |
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(E) for the duration of the extended use period |
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established in the land use restriction agreement, as defined by |
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Section 2306.6702(a)(9), Government Code, is in compliance with: |
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(i) all accessibility and adaptability |
|
|
requirements for a federal tax credit; and |
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(ii) Title VIII of the Civil Rights Act of |
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1968 (42 U.S.C. Section 3601 et seq.). |
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(9) "State housing credit ceiling" means $25 million |
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of credits each award year. |
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Sec. 171.552. ENTITLEMENT TO CREDIT. A taxable entity is |
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|
entitled to a credit against the taxes imposed under this chapter in |
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the amount and under the limitations provided by this subchapter if |
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the taxable entity owns a direct or indirect interest in a qualified |
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development. |
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Sec. 171.553. APPLICATION FOR AND ISSUANCE OF ALLOCATION |
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CERTIFICATE. (a) A taxable entity or an entity subject to state |
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premium tax liability as defined by Section 233.0001, Insurance |
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|
Code, must apply to the department for an allocation certificate in |
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|
connection with a development in which the taxable entity or other |
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|
entity owns an interest. The application must be submitted to the |
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|
department along with the application for an allocation of federal |
|
|
tax credits in a manner prescribed by the department. |
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(b) The department shall issue an allocation certificate |
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if: |
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(1) the department approves the application submitted |
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under Subsection (a); |
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(2) the development meets the requirements to be a |
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|
qualified development; and |
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(3) the department awards an amount of credit to the |
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development under Section 171.554. |
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Sec. 171.554. AMOUNT OF CREDITS; METHOD OF AWARD. (a) The |
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department shall in the manner provided by this section determine |
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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 |
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|
the allocation certificate. |
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(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. |
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(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. |
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(d) The manner in which the department awards the amount of |
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|
credits must be consistent with criteria established by the |
|
|
department. |
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(e) The total amount of credits awarded for a year in |
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|
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; |
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(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 |
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(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. |
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(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. |
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(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. |
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Sec. 171.555. APPORTIONMENT OF CREDIT. The direct or |
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|
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. |
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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. |
|
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(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. |
|
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(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. |
|
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Sec. 171.558. RECAPTURE. (a) If a qualified development is |
|
|
subject to the recapture of a portion of the federal 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 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 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 credit originally awarded or |
|
|
allocated to the development; |
|
|
(2) the amount of federal 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). |
|
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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 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, 2025, 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, 2025, 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, 2026: |
|
|
(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, 2026. |
|
|
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. |
|
|
|
|
|
* * * * * |