Cal. Code Regs. Tit. 4, § 10326 - Application Selection Criteria - Tax-Exempt Bond Applications
(a) General. All applications requesting
Federal Tax Credits under the requirements of IRC Section
42(h)(4) for
buildings and land, the aggregate basis (including land) of which is financed
at least fifty percent (50%) by tax-exempt bonds, shall be eligible to apply
under this Section for a reservation and allocation of Federal Tax Credits.
Those projects requesting State Tax Credits pursuant to subsection (g)(1)(A) of
Sections
12206,
17058,
and
23610.5
of the Revenue and Taxation Code will also be subject to the applicable
requirements of Section
10317. All applicants requesting
Tax Credits for projects financed with tax-exempt bonds shall apply
simultaneously to the CDLAC and CTCAC and shall use the CDLAC-CTCAC Joint
Application. Applications will be eligible for a reservation of tax credits
only if receiving a bond allocation pursuant to a joint application.
(b) Applicable criteria. Selection criteria
for applications reviewed under this Section shall include those required by
IRC Section
42(m), this
Section 10326, and Sections
10300,
10302,
10305,
10320,
10322,
10327,
10328(e),
10330,
10335, and
10337 of these regulations. Other
sections of these regulations shall not apply. The first funding round shall be
the first application review period of a calendar year for tax-exempt bond
financed projects.
(1) Subject to conditions
described in these Regulations, reservations of Federal and State Tax Credits
shall be made for those applications that receive a bond allocation from CDLAC
until the established State Tax Credit allocation amount is exhausted. If the
last application requires more State Tax Credits than remain for the calendar
year, that application will not be funded, and the remaining credits will be
either funded through the Waiting List or carried forward into the next
calendar year. If there is not sufficient State Tax Credits to allocate to
applications recommended for tax-exempt bonds by CDLAC, the State Tax Credits
will be allocated based on ranking within the CDLAC pools and set asides in the
following order:
(A) Black, Indigenous, or
Other People of Color (BIPOC) Project Pool;
(B) Rural Project Pool;
(C) New Construction Pool, Homeless Project
Set Aside;
(D) New Construction
Pool, ELI/VLI Project Set Aside;
(E) New Construction Pool, Mixed-Income
Project Set Aside;
(F) All
remaining New Construction Pool Projects
(2) For State Tax Credits pursuant to Section
10317(j) of these
Regulations, an amount up to $200,000,000 in a calendar year may be allocated
for housing financed by CalHFA's Mixed-Income Program (MIP) that also receives
a bond allocation from CDLAC. Applications with financing by CalHFA (MIP) will
be accepted in any funding round. The amount allocated for CalHFA MIP may be
reduced upon agreement of the Executive Directors of CalHFA and CTCAC.
At the conclusion of the final funding round of a calendar year, the Committee may establish a Waiting List of pending applications in anticipation of utilizing any State Tax Credits that may be returned to the Committee, and/or that have not been allocated to projects for which they were intended. The Waiting List shall expire on December 31 of the year the list is established.
(c)
Application review period. The Committee may require up to sixty (60) days to
review an application, and an additional thirty (30) days to consider the
application for a reservation of Tax Credits. Applicants must deliver
applications no less than ninety (90) days prior to the CTCAC Committee meeting
in which they wish to obtain a decision. Applications not expected to receive a
bond allocation from CDLAC due to relatively low CDLAC scores may or may not be
fully evaluated by the CTCAC.
Applications requesting State Tax Credits allocated pursuant to subsections (g)(1)(A) and (B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code and not in compliance with the application completeness requirements of Sections 10322(d) and (e) of these Regulations shall be considered incomplete, and shall be disqualified from receiving a reservation of Tax Credits during the cycle in which the application was determined incomplete.
(d) Issuer determination of Credit. The
issuer of the bonds may determine the Federal Tax Credit amount, with said
determination verified by the Committee and submitted with the application. The
issuer may request the Committee determine the Credit amount by including such
request in the application.
(e)
Additional application requirements. Applications submitted pursuant to this
Section shall provide the following additional information:
(1) the name, phone number and contact person
of the bond issuer; and,
(2)
verification provided by the bond issuer of the availability of the bond
financing, the actual or estimated bond issuance date, and the actual or
estimated percentage of aggregate basis (including land) financed or to be
financed by the bonds, and a certification provided by a third-party tax
professional as to the expected or actual aggregate basis (including land)
financed by the proceeds of tax exempt bonds;
(3) the name, phone number and contact person
of any entity providing credit enhancement and the type of enhancement
provided.
(f) Application
evaluation. To receive a reservation of Tax Credits, applications submitted
under this Section shall be evaluated, pursuant to IRC Section
42, H & S Code Sections 50199.4
through 50199.22, R & T Code Sections
12206,
17058, and 23610.5, and these
regulations to determine if: eligible, by meeting all program eligibility
requirements; complete, which includes meeting all basic threshold
requirements; and financially feasible.
(g) Basic thresholds. An application shall be
determined to be complete by demonstration of meeting the following basic
threshold requirements. All basic thresholds shall be met at the time the
application is filed through a presentation of conclusive, documented evidence
to the Executive Director's satisfaction. Further, in order to be eligible to
be considered for Tax Credits under these regulations, the general partner(s)
and management companies must not have any significant outstanding
noncompliance matters relating to the tenant files or physical conditions at
any Tax Credit properties in California, and any application submitted by an
applicant with significant outstanding compliance matters will not be
considered until the Committee has received evidence satisfactory to it that
those matters have been resolved.
(1) Housing
need and demand. Applicants shall provide evidence that the type of housing
proposed, including proposed rent levels, is needed and affordable to the
targeted population within the community in which it is located as set forth in
Section 10325(f)(1).
(2) Demonstrated site control. Applicants
shall provide evidence that the subject property is, and will remain within the
control of the applicant from the time of application submission as set forth
in Section 10325(f)(2).
(3) Local approvals and Zoning. Applicants
shall adhere to the local approvals and zoning requirements set forth in
Section 10325(f)(4).
(4) Financial feasibility. Applicants shall
provide the financing plan for the proposed project consistent with Section
10325(f)(5).
(5) Sponsor characteristics. Applicants shall
provide evidence that as a Development Team, proposed project participants
possess the knowledge, skills, experience and financial capacity to
successfully develop, own and operate the proposed project. The Committee
shall, in its sole discretion, determine if any of the evidence provided shall
disqualify the applicant from participating in the Tax Credit Programs, or if
additional Development Team members need be added to appropriately perform all
program requirements. General partners and management companies lacking
documented experience with Section
42 requirements using the minimum
scoring standards at Section
10325(c)(1)(A) and
(B) shall be required to complete training as
prescribed by CTCAC per Section
10325(c)(1) prior
to a project's placing in service. The minimum scoring standards referenced
herein shall not be obtained through the two (2) point category of "a housing
tax credit certification examination of a nationally recognized housing tax
credit compliance entity on a list maintained by the Committee to satisfy
minimum management company experience requirements for an incoming management
agent" established at Section
10325(c)(1).
Applicants need not submit the third-party public accountant certification that
the projects have maintained a positive operating cash flow.
The State Tax Credit allocation pursuant to subsection (g)(1)(B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code received by individuals, entities, affiliates, and related entities is limited to no more than thirty-three percent (33%) of any amount established per application review period as described in Section 10326(c) of these Regulations. This limitation is applicable to a project applicant, developer, sponsor, owner, general partner, and to parent companies, principals of entities, and family members. For the purposes of this section, related or non-arm's length relationships are further defined as those having control or joint control over an entity, having significant influence over an entity, or participating as key management of an entity. Related entity disclosure is required at the time of application. This 33% limit is not applicable for reservations of State Tax Credits made after the month of May in each calendar year.
(6) Minimum
construction standards. Applicants shall adhere to minimum construction
standards as set forth in Section
10325(f)(7).
(7) Minimum Rehabilitation Project Costs.
Projects involving rehabilitation of existing buildings shall be required to
complete, at a minimum, the higher of:
(A)
$15,000 in hard construction costs per unit; or
(B) 20% of the adjusted basis of the building
pursuant to IRC Section
42(e)(3)(A)(ii)
(l).
(8)
(A)
Existing tax credit projects applying for additional tax credits for
acquisition and/or rehabilitation (i.e., resyndication) shall maintain the
rents and income targeting levels in the existing regulatory contract for the
duration of the new regulatory contract. If the project has exhibited negative
cash flow for at least each of the last three years or within the next five
years will lose a rental or operating subsidy that was factored into the
project's initial feasibility, the Executive Director may alter this
requirement, provided that the new rents and income targeting levels shall be
as low as possible to maintain project feasibility. In addition, the Executive
Director may approve a reduction in the number of units for purposes of
unrestricting a manager's unit, adding or increasing service or community
space, or for adding bathrooms and kitchens to SRO units, provided that the
existing rent and income targeting remain proportional.
(B) If the regulatory agreement for an
existing tax credit project applying for a new reservation of tax credits for
acquisition and/or rehabilitation (i.e., resyndication) contains a requirement
to provide service amenities, even if that requirement has expired, the project
shall provide a similar or greater level of services for a period of at least
15 years under the new regulatory agreement. A project obtaining maximum CDLAC
points for services shall be deemed to have met this requirement. If the
project has exhibited cash flow of less than $20,000 for at least each of the
last three years, has no hard debt and fails to break even in year 15 with
services, or within the next five years will lose a rental or operating subsidy
that was factored into the project's initial feasibility, the Executive
Director may alter this requirement, provided that the service expenditures
shall be the maximum that project feasibility allows.
(C) For existing tax credit projects applying
for a new reservation of tax credits for acquisition and/or rehabilitation
(i.e., resyndication), the pre-rehabilitation reserve study in the CNA shall
demonstrate a rehabilitation need of at least $5,000 per unit over the first
three years. Projects for which the Executive Director has waived the
requirements of Section
10320(b)(4) and
projects with ten years or less remaining on the CTCAC regulatory agreement are
exempt from this requirement.
(9) A non-competitive project that includes
Low-Income Units targeted at greater than 60% AMI shall have average targeting
that does not exceed 60% AMI. A competitive project that includes Low-Income
Units targeted at greater than 60% AMI shall have average targeting that does
not exceed 50% AMI. Projects electing the average income federal set-aside must
choose targeting in 10% increments of AMI (i.e. 20% AMI, 30% AMI, 40% AMI,
etc.).
A project with a tax credit reservation dated prior to, or a submitted application pending as of, March 26, 2018 may, with the discretionary approval of the Executive Director, revise its targeting prior to the recordation of the regulatory agreement to include Low-Income Units targeted at greater than 60% AMI only to increase the number of Low-Income Units or to accommodate existing over-income tenants, provided that the average targeting does not exceed 60% AMI for non-competitive projects or 50% AMI for competitive projects.
A project including Low-Income Units targeted at greater than 60% AMI shall make the "Yes" election on line 8b of the IRS Form 8609.
(h) Reserved.
(i) Tax-exempt bond reservations.
Reservations of Tax Credits shall be subject to conditions as described in this
Section and applicable statutes. Reservations of Tax Credits shall be
conditioned upon the Committee's receipt of the reservation fee described in
Section 10335 and an executed reservation
letter bearing the applicant's signature accepting the reservation within
twenty (20) calendar days of the Committee's notice to the applicant of the
reservation, except that Hybrid projects and simultaneous phased projects as
defined in Section
10327(c)(2)(C)
shall submit the acceptance of the reservation for the first application within
five (5) business days of the Committee's notice to the applicant of the
reservation for the corresponding second application.
(j) Additional conditions on reservations.
The following additional conditions shall apply to reservations of Tax Credits
pursuant to this Section:
(1) Bonds issued.
Bonds shall be issued within the time limit specified by CDLAC, if applicable;
and,
(2) Projects shall maintain at
least 10% of the total Low-Income Units at rents affordable to tenants earning
50% or less of the AMI and shall maintain a minimum 30 year affordability
period.
(3) Projects proposing the
rehabilitation of existing structures shall provide CTCAC with an updated
development timetable by December 31 of the year following the year the project
received its reservation of Tax Credits.
(i)
The report shall include the actual placed-in-service date or the anticipated
placed-in-service date for the last building in the project and the date the
project achieved full occupancy. The report shall detail the causes for any
change from the original date.
(ii)
Projects proposing new construction shall provide CTCAC with an updated
development timetable by December 31 of the second year following the year the
project received its reservation of Tax Credits. The update shall include the
actual placed-in-service date for the last building in the project and the date
that the project achieved full occupancy; or the date the project is
anticipated to achieve full occupancy.
Other conditions, including cancellation, disqualification and other sanctions imposed by the Committee in furtherance of the purposes of the Credit programs.
(4) Projects intended for eventual tenant
homeownership must submit, at application, evidence of a financially feasible
program, incorporating, among other items, an exit strategy, home ownership
counseling, funds to be set aside to assist tenants in the purchase of units,
and a plan for conversion of the facility to home ownership at the end of the
initial 15-year compliance period. In such a case, the regulatory agreement
will contain provisions for the enforcement of such covenants.
(k) Placed-in-service. Upon
completion of construction of the proposed project, the applicant shall submit
documentation required by Section
10322(i).
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. Editorial correction of subsection (g)(6)(B) (Register 98, No. 30).
3. Amendment of subsection (f), repealer and new subsection (g)(3), and amendment of subsection (g)(6)(G) 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).
4. New subsections (g)(1)(D)-(E) and (g)(6)(H) filed 7-26-99; operative 6-3-99 pursuant to Health and Safety Code section 50199.17 (Register 99, No. 31).
5. Readoption of emergency action filed 7-26-99, operative 6-3-99; filed 4-3-2000 as an emergency; operative 10-12-99 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 14).
6. Readoption of emergency action filed 4-3-2000, operative 10-12-99; filed 4-3-2000 as an emergency; operative 2-9-2000 pursuant to Health and Safety Code section 50199.17, with amendment of section (Register 2000, No. 14).
7. 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).
8. 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).
9. 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.
10. Emergency readoption without change 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).
11. 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.
12. 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).
13. 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).
14. 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).
15. 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).
16. 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).
17. 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).
18. 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).
19. Amendment of subsection (e)(2) 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).
20. Amendment of subsections (g)(1)(B) and (g)(4)-(5) filed 3-19-2013; operative upon adoption by the California Tax Credit Allocation Committee on 1-23-2013 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for printing only (Register 2013, No. 12).
21. Amendment of subsection (g)(1)(B), including repealer of subsections (g)(1)(B)(i)-(iv) filed 7-22-2013; operative upon adoption by the Tax Credit Allocation Committee on 5-15-2013 pursuant to Health and Safety Code section 50199.17. Submitted to OAL for printing only (Register 2013, No. 30).
22. Amendment of subsections (g)(2)(A)(i), (g)(2)(B), (g)(5), (j)(3) and (k) 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).
23. Amendment of subsection (g)(2), repealer of subsections (g)(2)(A)-(B), amendment of subsections (g)(3) and (g)(7)(A), new subsection (g)(8) and amendment of subsections (h) and (j)(1) filed 12-28-2015; operative upon adoption by the Tax Credit Allocation Committee on
24. Amendment of subsections (g)(5) and (g)(5)(B), repealer of subsections (g)(5)(B)(i)-(v), redesignation of subsection (g)(8) as subsection (g)(8)(A) and new subsections (g)(8)(B) and (j)(5) filed 2-9-2017; operative upon adoption by the Tax Credit Allocation Committee on
25. Amendment of subsections (g)(3) and (g)(5), new subsection (g)(8)(C) and amendment of subsection (j)(3) filed
26. New subsection (g)(9) filed 7-9-2018; operative upon adoption by the Tax Credit Allocation Committee 5-16-2018 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for printing only pursuant to Health and Safety Code section 50199.17 (Register 2018, No. 28).
27. Amendment of subsection (g)(9) 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).
28. Amendment of subsection (a), new subsections (b)(1)-(2), amendment of subsections (c) and (g)(5), repealer of subsections (g)(5)(A)-(B) and amendment of subsection (g)(9) filed
29. Amendment of subsections (a)-(c) and (g)(9), repealer of subsections (h) and (j)(1), subsection renumbering, amendment of newly designated subsections (j)(2)-(3) 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).
30. Amendment of subsection (b)(1) and new subsections (b)(1)(A)-(F) 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).
31. Amendment of subsections (b)(1), (e)(2), (g)(5) and (j)(4) 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).
32. Amendment of subsection (i) filed
33. Amendment of subsections (a) and (g)(1), repealer of subsections (g)(1)(A)-(B) and amendment of subsections (g)(3), (g)(9) and (j)(2) filed 2-3-2025; operative upon adoption by the California Tax Credit Allocation Committee on
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