85R4875 ADM-D     By: Anderson of Dallas H.B. No. 3843       A BILL TO BE ENTITLED   AN ACT   relating to a franchise or insurance premium tax credit for   low-income housing developments.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Chapter 171, Tax Code, is amended by adding   Subchapter V to read as follows:   SUBCHAPTER V. TAX CREDIT FOR LOW-INCOME HOUSING DEVELOPMENTS          Sec. 171.9241.  DEFINITIONS. In this subchapter:                (1)  "Allocation certificate" means a statement issued   by the department certifying that a given development qualifies for   a credit under this subchapter and specifying the amount of the   credit.                (2)  "Compliance period" means the period of 15 years   beginning with the first taxable year of the credit period.                (3)  "Credit" means the low-income housing tax credit   authorized by this subchapter.                (4)  "Credit period" means the period of six taxable   years beginning with the taxable year in which a qualified   development is placed in service. A qualified development   consisting of more than one building is not considered to be in   service until all buildings in the qualified development are placed   in service.                (5)  "Department" means the Texas Department of Housing   and Community Affairs.                (6)  "Development" has the meaning assigned by Section   2306.6702, Government Code.                (7)  "Federal tax credit" means the federal low-income   housing credit created by 26 U.S.C. Section 42.                (8)  "Qualified allocation plan" has the meaning   assigned by Section 2306.6702, Government Code.                (9)  "Qualified basis" means the qualified basis of a   qualified development, as determined under Section 42, Internal   Revenue Code.                (10)  "Qualified development" means a development in   this state that the department determines is eligible for a federal   tax credit and that:                      (A)  is financed with tax-exempt bonds;                      (B)  is the subject of a recorded restrictive   covenant requiring the development to be maintained and operated as   a qualified development; and                      (C)  for the lesser of 15 years after the   beginning of the credit period or the period required by the   department 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 1983).          Sec. 171.9242.  ENTITLEMENT TO CREDIT.  A taxable entity is   entitled to a credit against the taxes imposed under this chapter in   the amount and under the conditions and limitations provided by   this subchapter if the taxable entity is a qualified taxpayer and   receives an allocation certificate under Section 171.9243.          Sec. 171.9243.  ALLOCATION CERTIFICATE; CREDIT. (a)  In a   year during a credit period, a taxable entity may apply to the   department for an allocation certificate for a franchise tax credit   under this subchapter.          (b)  The department shall issue an allocation certificate to   a taxable entity that applies under this section and meets the   requirements to receive an allocation certificate.          (c)  The department may determine the amount of a credit   allowed to taxable entities, subject to the following:                (1)  a credit must be the minimum amount necessary to   the financial feasibility of the qualified development after   considering any federal credit;                (2)  the amount of the credit given to a taxable entity   during the credit period may not exceed the total federal tax credit   awarded to the qualified development over the 10-year federal   credit period;                (3)  the credit must be consistent with the qualified   allocation plan for the qualified development; and                (4)  in a year, the total amount awarded may not exceed   the sum of:                      (A)  $20 million;                      (B)  any unallocated credits for the preceding   year; and                      (C)  any credit recaptured or otherwise returned   to the department in the year.          Sec. 171.9244.  LENGTH OF CREDIT; LIMITATION.  (a)  The   credit established shall be claimed in equal installments during   each year of the credit period.          (b)  The total credit claimed under this subchapter for a   report, including any carryforward under Section 171.9245, may not   exceed the amount of franchise tax due for the report after any   other applicable credit.          Sec. 171.9245.  CARRY FORWARD OR BACKWARD. (a)  If a taxable   entity is eligible for a credit that exceeds the limitations under   Section 171.9244, the taxable entity may carry the unused credit   back for not more than three taxable years or forward for not more   than 10 consecutive reports following the taxable year in which the   allocation was made.  A credit carryforward from a previous report   is considered to be used before the current year installment.          (b)  A credit that is not used may not be refunded to the   taxable entity.          Sec. 171.9246.  RECAPTURE. (a)  The comptroller shall   recapture the amount of a credit claimed on a franchise tax report   filed under this chapter from a taxable entity if, on the last day   of a taxable year, the amount of the qualified basis of a qualified   development with respect to a taxable entity is less than the amount   of the qualified basis as of the last day of the prior taxable year.     The comptroller shall determine the amount required to be   recaptured using the formula provided by Section 42(j), Internal   Revenue Code, as effective January 1, 2017.          (b)  A franchise tax return must include any proportion of   credit required to be recaptured, the identity of any taxable   entity subject to the recapture, and the amount of credit   previously allocated to the taxable entity.          Sec. 171.9247.  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 credit among its partners,   shareholders, members, or other constituent taxable entities in any   manner agreed by those entities.          (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 assigned 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 assignment under this section is not a transfer.          Sec. 171.9248.  FILING REQUIREMENTS AFTER ALLOCATION. A   taxable entity that allocates a portion of the credit under Section   171.9247, and each taxable entity to which a portion was allocated,   shall file with the taxable entity's report a copy of the allocation   certificate received by the taxpayer for that year.          Sec. 171.9249.  RULES; PROCEDURES. The department and   comptroller, in consultation with each other, shall adopt rules and   procedures to implement, administer, and enforce this subchapter.          Sec. 171.9250.  COMPLIANCE MONITORING. (a)  The department,   in consultation with the comptroller, shall monitor compliance with   this subchapter.          (b)  The department shall report any instances of   noncompliance with this subchapter to the comptroller.          Sec. 171.9251.  REPORT. (a)  Not later than December 31 of   each year, the department shall deliver a written report to the   legislature. A report delivered in this section must:                (1)  specify the number of qualified developments to   have been allocated a tax credit during the year under this   subchapter or Chapter 230, Insurance Code, and the total number of   units supported by the developments;                (2)  describe each qualified development to receive a   tax credit under this subchapter or Chapter 230, Insurance Code,   including:                      (A)  location;                      (B)  household type;                      (C)  demographic information available on 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 credit, are addressing the need for affordable   housing in their community; and                (4)  analyze any remaining disparities in the   affordability of housing within those communities.          (b)  The department shall make a report delivered under this   section available to the public.          SECTION 2.  Subtitle B, Title 3, Insurance Code, is amended   by adding Chapter 230 to read as follows:   CHAPTER 230.  CREDIT AGAINST PREMIUM TAXES   FOR LOW-INCOME HOUSING DEVELOPMENTS   SUBCHAPTER A.  GENERAL PROVISIONS          Sec. 230.001.  DEFINITIONS.  In this chapter:                (1)  "Allocation certificate" and "credit period" have   the meanings assigned by Section 171.9241, Tax Code.                (2)  "Qualified taxpayer" means a person that owns an   interest in a qualified development, as that term is defined in   Subchapter V, Chapter 171, Tax Code.                (3)  "State premium tax liability" means any liability   incurred by an entity under Chapters 221 through 226.   SUBCHAPTER B.  CREDIT          Sec. 230.051.  CREDIT.  (a)  An entity is eligible for a   credit against the entity's state premium tax liability in the   amount and under the conditions and limitations provided by this   chapter if the entity is a qualified taxpayer and receives an   allocation certificate issued in the manner prescribed by Section   171.9243, Tax Code.          (b)  The amount of the credit is equal to the amount provided   by the allocation certificate.          Sec. 230.052.  LENGTH OF CREDIT; LIMITATION.  The entity   shall claim the credit in the manner provided by Section   171.9244(a), Tax Code, subject to the limitation provided by   Section 171.9244(b), Tax Code.  The entity may carry a surplus   credit forward or backward as provided by Section 171.9245, Tax   Code.          Sec. 230.053.  APPLICATION FOR CREDIT.  (a)  An entity must   apply for a credit under this chapter on or with the tax return for   the taxable year for which the credit is claimed and submit with the   application the allocation certificate issued to the entity and any   other information required by Subchapter V, 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. 230.054.  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. 230.055.  The provisions of Subchapter V, Chapter 171,   Tax Code, relating to recapture, allocation of credit, filing   requirements after allocation, and compliance monitoring apply to   the credit authorized by this chapter.          SECTION 3.  This Act applies only to an original report due   on or after the effective date of this Act.          SECTION 4.  This Act takes effect January 1, 2018.