By: Goldman, Talarico H.B. No. 1058       A BILL TO BE ENTITLED   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,   and specifying the total amount of the credits awarded in   connection with the qualified development for the credit period.                (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 that the department determines is eligible for a federal   tax credit and that:                      (A)  is the subject of a recorded restrictive   covenant requiring the development to be maintained and operated as   a qualified development;                      (B)  meets all applicable requirements of the   qualified allocation plan, as defined by Section 2306.6702,   Government Code; 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 3601 et seq.).                (9)  "State housing credit ceiling" means $25 million   each 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.  ALLOCATION CERTIFICATE. (a) In a year during   a credit period, a taxable entity or an entity subject to state   premium tax liability as defined by Section 233.0001, Insurance   Code, may apply to the department for an allocation certificate in   connection with a development in which the taxable entity or other   entity owns an interest.          (b)  The department shall issue an allocation certificate if   the development is a qualified development.          Sec. 171.554.  AMOUNT OF CREDITS. (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 after considering any federal tax credit, 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 unallocated credits for the preceding year;   and                (3)  any credit recaptured or otherwise returned to the   department in the year.          (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 unallocated credits for the preceding year;   and                (3)  any credit recaptured or otherwise returned to the   department in the year.          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 franchise 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 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.          Sec. 171.558.  RECAPTURE. (a)  The comptroller shall   recapture the amount of a credit claimed on a report filed under   this chapter from a taxable entity if, on the last day of a tax year,   the amount of the qualified basis of the qualified development is   less than the amount of the qualified basis as of the last day of the   prior tax year.  The comptroller shall determine the amount   required to be recaptured using the formula provided by Section   42(j), Internal Revenue Code, as that section existed on January 1,   2023.          (b)  A report must include any portion of credit required to   be recaptured, the identity of any taxable entity subject to the   recapture, and the amount of any credit previously allocated to the   taxable entity.          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.          (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 allocation   certificate on which the credit is based.          Sec. 171.561.  RULES; PROCEDURES. The department and   comptroller, in consultation with each other, shall adopt rules and   procedures to implement, administer, and enforce this subchapter.          Sec. 171.562.  COMPLIANCE MONITORING. (a)  The department,   in consultation with the comptroller, 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. 171.563.  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. 171.564.  EXPIRATION OF SUBCHAPTER. This subchapter   expires December 31, 2035.          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" 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 Chapters 221 through 226.   SUBCHAPTER B. CREDIT          Sec. 233.0051.  CREDIT.  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.          Sec. 233.0052.  LENGTH OF CREDIT; LIMITATIONS.  (a)  The   entity shall claim the credit in the manner provided by Section   171.556(a), 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, filing requirements after allocation, and   compliance monitoring apply to the credit authorized by this   chapter.   SUBCHAPTER C. EXPIRATION OF CHAPTER          Sec. 233.0101.  EXPIRATION OF CHAPTER. This chapter expires   December 31, 2035.          SECTION 3.  (a) The Texas Department of Housing and   Community Affairs may begin issuing allocation certificates under   Section 171.553, Tax Code, as added by this Act, in an open cycle   beginning on January 1, 2024.          (b)  Except as provided by Subsections (d) and (e) 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)  An entity may not carry back a credit under Section   171.557, Tax Code, as added by this Act, to a tax year the report for   which is originally due before January 1, 2026.          (d)  The expiration of Subchapter K, Chapter 171, Tax Code,   as added by this Act, in accordance with Section 171.564, Tax Code,   as added by this Act, does not affect the carryforward of a credit   under Section 171.557, Tax Code, as added by this Act.          (e)  The expiration of Chapter 233, Insurance Code, as added   by this Act, in accordance with Section 233.0101, Insurance Code,   as added by this Act, does not affect the carryforward of a credit   under Section 233.0052(c), Insurance Code, as added by this Act.          SECTION 4.  This Act takes effect January 1, 2024.