Cal. Code Regs. Tit. 4, § 10317 - State Tax Credit Eligibility Requirements
(a) General. In accordance with the R & T
Code Sections
12205,
12206, 17057.5,
17058, 23610.4 and 23610.5, there
shall be allowed as a Credit against the "tax" (as defined by R & T Code
Section 12201) a State Tax Credit for
Federal Credit Ceiling projects pursuant to subsection (g)(1)(A) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code and Tax Exempt Bond Projects pursuant to
subsection (g)(1)(B) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code in an amount equal to no more than 30 percent
(30%) of the project's requested construction-related eligible basis. Except
for State Farmworker Credits and projects meeting subparagraphs (A) through (D)
in subsection (c)(4) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code, the maximum State Tax Credit award amount for
a Tax Exempt Bond Project pursuant to subsection (g)(1)(A) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code, or basis described in paragraph (f) below, is
13 percent (13%) of that project's requested eligible basis. The maximum State
Farmworker Credit award amount for a Tax-Exempt Bond Project, or basis
described in paragraph (f) below, is 75 percent (75%) of that project's
requested eligible basis. The maximum State Credit award for a project meeting
subparagraphs (A) through (D) in subsection (c)(4) of 12206 of the Revenue and
Taxation Code, or basis described in paragraph (f) below, is 95 percent (95%)
of that project's requested eligible basis. Insufficient credits due to a low
appraised value as described in Subparagraph (C) shall be evidenced as defined
in Section 10322(h)(9)(A) of
these Regulations: the sum of third-party debt encumbering the seller's
property exceeds the appraised value. Substantial rehabilitation as described
in Subparagraph (D) shall be evidenced by Section
10326(g)(7) of
these Regulations. Award amounts shall be computed in accordance with IRC
Section 42, except as otherwise provided in
applicable sections of the R & T Code. For purposes of calculating the
final State Tax Credit amount on the Form(s) 3521A, the project's actual
eligible basis may be used.
(b)
Allocation of Federal Tax Credits required. State Tax Credit recipients shall
have first been awarded Federal Tax Credits, or shall qualify for Tax Credits
under Section
42(h)(4)(b), as
required under H & S Code Section 50199.14(e) and the R & T Code
Section 12206(b)(1)(A).
State Farmworker Credits are exempt from this requirement.
(c) Limit on Credit amount.
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(1) Except for applications described in
paragraph (d) below, all credit ceiling applications may request State credits
provided the project application is not requesting the federal 130% basis
adjustment for purposes of calculating the federal credit award amount.
Projects are eligible for State credits regardless of their location within a
federal Qualified Census Tract (QCT) or a Difficult Development Area (DDA).
Notwithstanding paragraph (d) below, applications for the Federal Credit
established by the Further Consolidated Appropriations Act, 2020 or the
Consolidated Appropriations Act, 2021 are not eligible for State Tax
Credits.
(2) An applicant
requesting state credits shall not reduce basis related to federal tax credits
except to reduce requested basis to the project's threshold basis limit or the
credit request to the amount available in the project's geographic region or
the limits described in Section
10325(f)(9)(C).
CTCAC shall revise the basis and credit request if the applicant fails to meet
this requirement.
(3) In the event
that reservations of state credits to credit ceiling applications exceed the
amount of state credits available, CTCAC post-reservation shall designate
applications for which there are insufficient state credits as difficult
development area (DDA) projects pursuant to Section
10327(d)(3) and
exchange state credits for federal credits in an amount that will yield equal
equity based solely on the tax credit factors stated in the application and may
exceed the maximum annual Federal Tax Credits in Section
10325(f)(9)(C).
(4) For projects applying for State Tax
Credits in paragraph (j), the maximum request for any one project in any
funding round shall not exceed Two Hundred Thousand ($200,000) dollars per Tax
Credit Unit. Farmworker Housing projects are exempt from this
requirement.
(d)
(1) Under authority granted by Revenue and
Taxation Code Sections
12206(b)(2)(E)(ii),
17058(b)(2)(E)(ii),
and
23610.5(b)(2)(E)(ii),
applications for Special Needs projects with at least 50% of the Low-Income
Units designated as special needs units and within a QCT or DDA may request the
federal 130% basis boost and may also request State credits, provided that the
applicant does not reduce basis related to federal tax credits except to reduce
requested basis to the project's threshold basis limit or the credit request to
the amount available in the project's geographic region or the limits described
in Section 10325(f)(9)(C).
CTCAC shall revise the basis and credit request if the application fails to
meet this requirement. Under authority granted by Internal Revenue Code Section
42(d)(5)(B)(v),
CTCAC designates Special Needs housing type applicants for credit ceiling
credits as Difficult Development Area projects, regardless of their location
within a federally designated QCT or DDA.
(2) Under authority granted by Revenue and
Taxation Code Sections
12206(b)(2)(E)(iii),
17058(b)(2)(E)(iii), and 23610.5(b)(2)(E)(iii), applications for 4% federal tax
credits plus State Farmworker Credits within a QCT or DDA may request the
federal 130% basis boost and may also request State credits.
(3) Under authority granted by Revenue and
Taxation Code Sections
12206(b)(2)(E)(iii),
17058(b)(2)(E)(iii), and 23610.5(b)(2)(E)(iii), new construction applications
for 4% federal tax credits plus State Credits pursuant to subsection (g)(1)(B)
of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code within a QCT or DDA may request the federal
130% basis boost and may also request State credits.
(4) Applications for the Federal Credit
established by the Further Consolidated Appropriations Act, 2020 or the
Consolidated Appropriations Act, 2021, including Special Needs projects
described in this section (d), are not eligible for State Tax Credits.
Applications for the Federal Credit established by the Further Consolidated Appropriations Act, 2020 or the Consolidated Appropriations Act, 2021, including Special Needs projects described in this section (d), are not eligible for State Tax Credits.
(e) State Tax Credit exchange.
Applications for projects not possessing one of the allocation priorities
described in subsection (d) may also include a request for State Tax Credits.
During any reservation cycle and/or following any reservation or allocation of
State Tax Credits to all applications meeting the above allocation priorities,
remaining balances of State Tax Credits may be awarded to applicants having
received a reservation of Federal Tax Credits during the same year, in exchange
for the "equivalent" amount of Federal Tax Credits. Said exchanges shall be
offered at the discretion of the Executive Director, who may consider and
account for any fiscal or administrative impacts on the project or applicant
pool when deciding to whom he/she will offer State Tax Credits.
(f) Acquisition Tax Credits. State Tax
Credits for acquisition basis are allowed only for projects meeting the
definition of a project "at risk of conversion," pursuant to Section
42 and R & T Code Section
17058(c)(4).
(g) Tax-Exempt Bond Financing.
(1) Projects financed under the tax-exempt
bond financing provisions of Section
42(h)(4)(b) of the
IRC, subsection (g)(1)(A) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code and Section
10326 of these regulations may
apply for State Tax Credits if the following conditions are met:
(A) the project is comprised of 100% Tax
Credit Units. Excepted from this rule are projects proposed for acquisition and
rehabilitation that were developed under the HUD Section
236 or
202 programs, and are subject to
those programs' use restrictions. Projects under those circumstances may
propose a lesser percentage of Tax Credit Units to accommodate existing
over-income residents who originally qualified under Section
236 or
202 income eligibility;
(B) one or more buildings is not eligible for
the 130% basis adjustment, in which case the State Tax Credits shall be
available only for the buildings not eligible for the 130% basis adjustment.
This paragraph shall not apply to projects referenced in Section
10317(d);
(C) State Tax Credits will not be available
to projects that have already received a reservation of 4% credit in the
previous year; and
(2)
For projects financed under the tax-exempt bond financing provisions of Section
42(h)(4)(b) of the
IRC, subsection (g)(1)(B) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code and Section
10326 of these regulations applying
for State Tax Credits. State Tax Credits will not be available to projects that
have already received a reservation of 4% credit in a previous
year.
(h) State
Farmworker Credit.
(1) Applicants may request
State Farmworker Credits for eligible Farmworker Housing in combination with
federal credits, or they may request State Farmworker Credits only. If seeking
a federal Credit Ceiling reservation, applicants may apply only during
competitive rounds as announced by CTCAC and shall compete under the provisions
of Section 10325(c) et. seq.
If requesting federal credits for use with tax exempt bond financing, or State
Farmworker Credits only, applicants may apply over the counter and shall meet
the threshold requirements for projects requesting 4% federal
credits.
(2) If more than one
applicant is requesting nine percent (9%) federal credits in combination with
State Farmworker Credits during a competitive round, CTCAC shall award
available State Farmworker Credits to the highest scoring Farmworker Housing
application that will receive a reservation of federal credits.
(3) If available State Farmworker Credits are
inadequate to fully fund a pending request for eligible Farmworker Housing,
CTCAC may reserve a forward commitment of subsequent year's State Farmworker
Credits for that project alone.
(i) State Tax Credit Allocations pursuant to
subsection (g)(1)(A) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code to bond financed projects. The following
parameters apply:
(1) In calendar years where
there are additional state tax credits available to bond financed projects, an
amount equal to fifteen percent (15%) of the annual State Tax Credit authority
will be available for acquisition and/or rehabilitation bond financed projects,
with a ranking priority for projects meeting subparagraphs (A) through (D) in
subsection (c)(4) of 12206 of the Revenue and Tax Code. In all other years, an
amount equal to fifteen percent (15%) of the annual State Tax Credit authority
will be available for bond financed projects of any construction type. CTCAC
shall make reservations up to the 15% limit beginning with the first
application review period of a calendar year for tax-exempt bond financed
projects;
(2) The project will be
competitively scored by CDLAC according to the CDLAC scoring and ranking system
delineated in Section
5230 of the CDLAC Regulations.
Notwithstanding the foregoing, existing tax credit projects must comply with
the requirements of Section
10326(g)(8)(A);
(3) If the 15% set-aside has not been
reserved prior to year end it may be used in a State Tax Credit exchange for
projects that have received 9% Tax Credit reservations;
(4) The Committee may reserve an amount in
excess of the 15% set-aside of State Tax Credits for the last funded tax-exempt
bond financed project if that project requires more than the State Tax Credits
remaining in this set aside if (1) fewer than half of the State Tax Credits
annually available for the credit ceiling competition are reserved in the first
competitive credit round, or (2) if State Credits remain available after
funding of competitive projects in the second CTCAC funding round.
(5) Staff shall identify high-cost projects
by comparing each scored project's total eligible basis against its total
adjusted threshold basis limits, excluding any increase for deeper targeting
pursuant to Section
10327(c)(5)(C).
CTCAC shall calculate total eligible basis consistent with the method described
in Section 10325(d), except
that the amount of developer fee in basis that exceeds the project's
deferral/contribution threshold described in Section
10327(c)(2)(B)
shall be excluded. A project will be designated "high cost" if a project's
total eligible basis exceeds its total adjusted threshold basis limit by 30%.
Staff shall not recommend such project for credits. Any project may be subject
to negative points if the project's total eligible basis at placed in service
exceeds the revised total adjusted threshold basis limits for the year the
project is placed in service (or the original total eligible threshold basis
limit if higher) by 40%.
(j) State Tax Credit Allocations pursuant to
subsection (g)(1)(B) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code.
(1) For
calendar years beginning in 2021, an amount up to five hundred million dollars
($500,000,000) in total State Tax Credit authority will be available (if
authorized in the California Budget Act or related legislation) for new
construction Tax Exempt Bond Projects, including retrofitting or repurposing of
existing nonresidential structures that were converted to residential use
within the previous five years from the date of application subject to the
requirements of the CDLAC regulations and the requirements of Section
10326 of these regulations. For
calendar years 2024 to 2034 where any additional credits are available pursuant
to subsection (g)(1)(B) of Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code, the lesser of five percent (5%) or
$25,000,000 shall be available to Farmworker Housing. Any credits pursuant to
this clause that remain unallocated following the conclusion of a funding round
shall roll over to the subsequent funding rounds in that calendar year with the
exception that any credits that remain unallocated after the final funding
round in that calendar year shall be added back to the aggregate amount of
credits that may be allocated pursuant to this subparagraph. The approximate
amount of State Tax Credits available in each reservation cycle shall be
established by the Committee annually at a public meeting.
(2) No later than the CDLAC bond issuance
deadline, the applicant must submit to CTCAC building permits (a grading permit
does not suffice to meet this requirement except that in the event that the
city or county as a rule does not issue building permits prior to the
completion of grading, a grading permit shall suffice; if the project is a
design-build project in which the city or county does not issue building
permits until designs are fully complete, the city or county shall have
approved construction to begin) or the applicable tribal documents, and notice
to proceed delivered to the contractor.
(3) Failure to submit said documents to CTCAC
by the CDLAC bond issuance deadline shall result in rescission of the Tax
Credit Reservation and may result in assessment of negative points.
(k) All projects that have
received state credits shall comply with the limitations on cash distributions
required pursuant to Sections
12206(d),
17058(d),
and
23610.5(d)
of the Revenue and Taxation Code.
(l)
(1) In
the initial application, applicants requesting state credits shall make an
election to sell ("certificate") or not sell all or any portion of the state
credit, as allowed pursuant to Revenue and Taxation Code Sections
12206(o),
17058(q),
and
23610.5(r).
The applicant for a certificated credit shall be a non-profit entity and the
state credit price shall not be less than eighty (80) cents per dollar of
credit. The applicant may, only once, revoke an election to sell at any time
before CTCAC issues the Form(s) 3521A for the project, at which the point the
election shall become irrevocable.
(2) An applicant who elects to sell any
portion of the state credit and a buyer who later resells any portion of the
credit shall report to CTCAC within 10 days of the sale of the credit, in a
form specified by CTCAC, all required information regarding the purchase and
sale of the credit, including the social security or other taxpayer
identification number of the party or parties to whom the credit has been sold,
the face amount of the credit sold, and the amount of consideration received
for the sale of the credit. At the request of the owner, CTCAC shall reissue
the Form(s) 3521A in the name of the buyer.
Notes
Note: Authority cited: Section 50199.17, Health and Safety Code. Reference: Sections 12206, 17058 and 23610.5, Revenue and Taxation Code; and Sections 50199.4, 50199.5, 50199.6, 50199.7, 50199.8, 50199.9, 50199.10, 50199.11, 50199.12, 50199.13, 50199.14, 50199.15, 50199.16, 50199.17, 50199.18, 50199.20, 50199.21 and 50199.22, Health and Safety Code.
Note: Authority cited: Section 50199.17, Health and Safety Code. Reference: Sections 12206, 17058 and 23610.5, Revenue and Taxation Code; and Sections 50199.4, 50199.5, 50199.6, 50199.7, 50199.8, 50199.9, 50199.10, 50199.11, 50199.12, 50199.13, 50199.14, 50199.15, 50199.16, 50199.17, 50199.18, 50199.20, 50199.21 and 50199.22, Health and Safety Code.
2. Amendment of subsections (a)-(c), (d)(1) and (f) filed 7-21-98; operative 11-20-97 and 12-11-97 pursuant to Health and Safety Code section 50199.17 (Register 98, No. 30).
3. New subsection (g) filed 4-3-2000 as an emergency; operative 2-9-2000 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 14).
4. Emergency readoption without change filed 9-22-2000 of an action originally filed 4-3-2000; operative 6-9-2000 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 38).
5. Emergency readoption without change filed 10-23-2000 of an action originally filed 4-3-2000; operative 9-27-2000 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 43).
6. Emergency amendment effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on February 16, 2001, filed with the Secretary of State on March 5, 2001 (Register 2001, No. 10).
EDITOR'S NOTE: On December 20, 2000, the Committee adopted and made effective an emergency amendment to an earlier version of this regulation; this amendment was superseded by the February 16, 2001 amendment. The December 20, 2000 amendment was filed with the Secretary of State on March 5, 2001; it was not printed in the California Code of Regulations.
7. Emergency readoption with amendment of subsection (c) filed 11-19-2001 of an action most recently filed 3-5-2001; operative 9-17-2001 pursuant to Health and Safety Code section 50199.17 (Register 2001, No. 47).
8. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on March 19, 2003, filed with the Secretary of State on 5-8-2003 (Register 2003, No. 19).
EDITOR'S NOTE: These March 19, 2003 emergency regulations supersede prior emergency regulations adopted and made effective by the Committee on January 29, 2003. The January 29 emergency regulations were filed with the Secretary of State on May 8, 2003, but were never printed in the California Code of Regulations.
9. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on February 18, 2004, filed with the Secretary of State on 4-26-2004. These February 18, 2004 emergency regulations supersede prior emergency regulations (Register 2004, No. 18).
10. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on June 16, 2004, filed with the Secretary of State on 7-19-2004. These June 16, 2004 emergency regulations supersede prior emergency regulations (Register 2004, No. 30).
11. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on October 5, 2004, filed with the Secretary of State on 12-16-2004. These October 5, 2004 emergency regulations supersede prior emergency regulations (Register 2004, No. 51).
12. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on February 16, 2005, filed with the Secretary of State on 4-4-2005. These February 16, 2005 emergency regulations supersede prior emergency regulations (Register 2005, No. 14).
13. Emergency readoption of action adopted by the Committee 2-16-2005 and filed with the Secretary of State 4-4-2005; refiled 11-1-2005; readopted by the Committee and effective 9-28-2005 pursuant to Health and Safety Code section 50199.17 (Register 2005, No. 44).
14. Emergency adoption filed 3-23-2006; conclusively presumed to be an emergency and effective upon adoption by the Committee on 1-18-2006 pursuant to Health and Safety Code section 50199.17(c) and (d). This filing supercedes prior emergency regulations and is exempt from the Administrative Procedure Act except as provided in Health and Safety Code section 50199.17(a) and (b) (Register 2006, No. 12).
15. New section replacing prior emergency adoption filed 7-22-2010; operative 2-17-2010. Submitted to OAL for printing only pursuant to Health and Safety Code section 50199.17 (Register 2010, No. 30).
16. Amendment of subsections (d) and (g)(1) filed 4-18-2011; operative date of the amendments is immediately upon adoption by the committee pursuant to Health and Safety Code section 50199.17(c) (Register 2011, No. 16).
17. Amendment of subsection (i)(5) filed 4-11-2012; operative upon adoption by the committee on 2-1-2012 pursuant to Health and Safety Code section 50199.17(c) (Register 2012, No. 15).
18. Amendment of subsection (d) filed 4-12-2012; operative upon adoption by the committee on 2-29-2012 pursuant to Health and Safety Code section 50199.17(c) (Register 2012, No. 15).
19. Amendment of subsections (a), (c), (d) and (g)(1)-(2) filed 3-28-2014; operative upon adoption by the California Tax Credit Allocation Committee on 1-29-2014 pursuant to Health and Safety Code section 50199.77(c). Submitted to OAL for printing only (Register 2014, No. 13).
20. Amendment of subsections (g)(4) and (h), repealer of subsections (h)(1) and (h)(3), subsection renumbering and amendment of newly designated subsection (i)(1) filed 12-28-2015; operative upon adoption by the Tax Credit Allocation Committee on
21. Amendment of subsections (c)-(d) and new subsections (j)-(k)(2) filed 2-9-2017; operative upon adoption by the Tax Credit Allocation Committee on
22. Editorial correction deleting duplicative subsection (d) (Register 2018, No. 8).
23. Amendment of subsections (a) and (c), redesignation and amendment of former subsection (d) as new subsection (d)(1), new subsection (d)(2), amendment of subsections (g)(1) and (i)(2) and new subsection (i)(6) filed
24. Amendment of subsections (c), (g)(2) and (i)(6) filed 2-7-2019; operative upon adoption by the California Tax Credit Allocation Committee on 12-12-2018 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to pursuant to Health and Safety Code section 50199.17 (Register 2019, No. 6).
25. Amendment filed
26. Amendment of subsections (c)-(d)(1), (g) and (g)(3) filed 8-14-2020; operative
27. Amendment of subsections (i)(1)-(2), repealer of subsection (i)(3), subsection renumbering, amendment of newly designated subsection (i)(4) and subsection (j) and amendment of Note filed 2-26-2021; operative upon adoption by the California Tax Credit Allocation Committee on 12-20-2020 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2021, No. 9).
28. Amendment of subsections (c), (d)(3) and (j) filed 7-29-2021; operative upon adoption by the California Tax Credit Allocation Committee on 6-16-2021 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2021, No. 31).
29. Amendment of subsection (j) filed 8-8-2022; operative upon adoption by the California Tax Credit Allocation Committee on 7-20-2022 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2022, No. 32).
30. Amendment of subsections (a), (d)(1) and (i)(5) filed 3-13-2023; operative upon adoption by the California Tax Credit Allocation Committee on 1-18-2023 pursuant to Health and Safety Code section 50199.17. Submitted to OAL for filing and printing only pursuant to Government Code section 11343.8 (Register 2023, No. 11).
31. Amendment of subsection (j) filed
32. Amendment of subsections (a) and (d)(1), repealer of subsection (g)(4) and amendment of subsection (j) filed 3-12-2024; operative
33. Amendment of subsection (c) filed 5-20-2024; operative upon adoption by the California Tax Credit Allocation Committee on
34. Amendment of subsection (c), new designation of subsections (c)(1)-(4), (g)(1)-(2) and (h)(1)-(3) and amendment of newly designated subsections (c)(3) and (j)(1) filed 2-3-2025; operative upon adoption by the California Tax Credit Allocation Committee on
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