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Letters Needed for League-Supported AB 2037

Bill Would Create New Local Economic Development Option

August 14, 2012

Given the state’s budget problems it may be difficult to envision how a state tax credit bill might be enacted this year. Yet, AB 2037 has secured bi-partisan support and seems to still have a chance of moving this year because it proposes to reallocate some unused tax credits for another purpose.

 

Modeled after the federal New Markets Tax Program, AB 2037 (Davis) would create a California New Markets Tax Credit program designed to help incentivize community revitalization projects in low-income communities. The program would provide another option for attracting private capital and federal tax credits to spur investment and create jobs.

The bill would be funded by appropriating $300 million of unused tax credits originally allocated to the existing California State Hiring Tax Credit (CSHTC) program, which was created in 2009 as part of a budget agreement but has been significantly underused.  

Specifically the program would:

  • Allow for a specified credit to taxpayers holding a “qualified equity investment” on a “credit allowance date” of the investment that occurs during the taxable years starting on or after Jan. 1, 2013 until Jan. 1, 2020. The program provisions sunset on Dec. 1, 2020.
  • Requires the California Tax Credit Allocation Committee (Committee) to administer and adopt guidelines to carry out the program’s purpose and establish and impose reasonable fees upon entities that apply for a credit allocation.
  • Requires the Committee to allocate credits and give priority to applications submitted by an entity that has a record of successfully providing capital or technical assistance to disadvantaged businesses or communities or intend to make qualified low-income community investments.
  • Requires the Committee to annual reserve at least:
    • 15 percent of the tax credits for community development entities that target businesses located in low-income communities facing disproportionate environmental pollution;
    • 15 percent of the tax credits for community development entities that target rural areas, including businesses providing equipment or supplies to agricultural producers, packers, handlers, and processors; and
    • 20 percent of the tax credits for community development entities that target businesses in inner-city areas.

Because such a program could provide additional resources for community revitalization efforts, city officials are encouraged to send support letters for AB 2037. The League’s position letter and a sample support letter are available on the League’s website.



 
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