AB62 - Revises provisions relating to transferable tax credits for affordable housing. (BDR 32-437)

A.B. 62 - *AB62* ASSEMBLY BILL NO. 62–COMMITTEE ON REVENUE (ON BEHALF OF THE ADVISORY COMMITTEE ON HOUSING) PREFILED NOVEMBER 20, 2024 ____________ Referred to Committee on Revenue SUMMARY—Revises provisions relating to transferable tax credits for affordable housing. (BDR 32-437) FISCAL NOTE: Effect on Local Government: No. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to taxation; revising the procedure for applying for transferable tax credits for affordable housing; revising provisions governing the transfer of transferable tax credits for affordable housing; revising provisions relating to the amount of transferable tax credits for affordable housing that may be approved; revising provisions relating to the expiration of transferable tax credits for affordable housing; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law authorizes the Housing Division of the Department of Business 1 and Industry to issue transferable tax credits, which are authorized to be taken 2 against certain state taxes, to the sponsor of a project for the acquisition, 3 development, construction, improvement, expansion, reconstruction or 4 rehabilitation of low income housing, as defined by existing federal law. (NRS 5 360.860-360.870; 26 U.S.C. § 42) Under existing law, to be issued transferable tax 6 credits, the project sponsor is required to: (1) apply to, and obtain from, the 7 Division a reservation of an amount of transferable tax credits; (2) close the project 8 within a certain period after obtaining a reservation of transferable tax credits by 9 acquiring title to the project site, entering into an agreement with a licensed 10 contractor to construct the project and obtaining certain financing for the project; 11 and (3) submit to the Division a final application for the issuance of transferable tax 12 credits not less than 45 days before the project closes. A project sponsor that is 13 issued transferable tax credits is authorized to transfer those credits to another 14 entity, and that entity is authorized to transfer the credits to one or more of its 15 subsidiaries or affiliates. (NRS 360.867) 16 – 2 – - *AB62* Section 1 of this bill: (1) requires, with certain exceptions, a final application 17 for the issuance of transferable tax credits to be submitted not less than 15 days 18 before the closing of the project rather than not less than 45 days before the closing 19 of the project; (2) authorizes a project sponsor to demonstrate the acquisition of the 20 land to close the project by entering into a long-term ground lease for the project 21 site; and (3) authorizes a project sponsor to transfer transferable tax credits to a 22 member or partner of the project sponsor to any other entity, who may then transfer 23 the transferable tax credits to another entity. 24 Existing law limits to $10,000,000 the amount of transferable tax credits which 25 the Division is authorized to approve in each fiscal year, with certain exceptions. If 26 the Division determines that approval of more than $10,000,000 of transferable tax 27 credits in a fiscal year is necessary to ensure the maximum development of 28 affordable housing through the issuance of transferable tax credits, the Division is 29 authorized to approve not more than $13,000,000 of transferable tax credits in that 30 fiscal year and must reduce the amount of transferable tax credits authorized to be 31 approved in the next fiscal year by the amount of credits that are approved in excess 32 of $10,000,000. (NRS 360.868) Section 2 of this bill provides that any such 33 reduction to the amount of transferable tax credits authorized to be approved in a 34 fiscal year must first reduce the amount of unused transferable tax credits from 35 prior fiscal years that are available for approval before the amount of transferable 36 tax credits available for approval in a fiscal year is reduced below $10,000,000. 37 Additionally, section 2 increases from $40,000,000 to $100,000,000 the total 38 amount of transferable tax credits for affordable housing that the Division is 39 authorized to approve for all fiscal years. Finally, section 2 provides that the 4-year 40 period during which transferable tax credits may be used begins on the date on 41 which the Division notifies the project sponsor that transferable tax credits will be 42 issued rather than on the date on which the Division issues the transferable tax 43 credits. 44 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. NRS 360.867 is hereby amended to read as follows: 1 360.867 1. On behalf of a project, the project sponsor may 2 apply to the Division for a certificate of eligibility for transferable 3 tax credits which may be applied to: 4 (a) Any tax imposed by chapter 363A or 363B of NRS; 5 (b) The gaming license fees imposed by the provisions of 6 NRS 463.370; 7 (c) Any tax imposed by chapter 680B of NRS; or 8 (d) Any combination of the fees and taxes described in 9 paragraphs (a), (b) and (c). 10 2. To apply for a certificate of eligibility for transferable tax 11 credits, the project sponsor must: 12 (a) Submit an application on a form prescribed by the Division; 13 and 14 (b) Comply with the requirements to obtain an allocation of 15 federal low-income housing tax credits which are set forth in the 16 qualified allocation plan. 17 – 3 – - *AB62* 3. The Division shall: 1 (a) Review each application for a certificate of eligibility for 2 transferable tax credits submitted pursuant to subsection 2 and any 3 supporting documents to determine whether the requirements for 4 eligibility for a reservation of transferable tax credits are met and the 5 amount of transferable tax credit threshold points awarded to the 6 project; 7 (b) Determine the amount of transferable tax credits for which 8 the project may be eligible, which amount must equal the amount 9 determined by the Division to be necessary to make the project 10 financially feasible after considering all other sources of financing 11 for the project; and 12 (c) Reserve the amount of transferable tax credits for which each 13 project is determined to be eligible pursuant to paragraph (b) in the 14 order of the amount of transferable tax credit threshold points 15 awarded to each such project pursuant to paragraph (a) until a 16 reservation is made for each project or the amount of transferable 17 credits reserved for the fiscal year is equal to the amount of 18 transferable tax credits which the Division is authorized to approve 19 for the fiscal year pursuant to NRS 360.868, whichever occurs first. 20 If the amount of transferable tax credits reserved for the fiscal year 21 reaches the amount of transferable tax credits which the Division is 22 authorized to approve for the fiscal year pursuant to NRS 360.868 23 before each eligible project is reserved the full amount of 24 transferable tax credits for which it is determined to be eligible 25 pursuant to paragraph (b), the Division may take any action that the 26 Division determines will ensure the maximum development of 27 affordable housing in this State, including, without limitation, 28 proportionally reducing the reservation of each project for which 29 transferable tax credits are reserved or reserving for the last project 30 to receive a reservation of transferable tax credits an amount of 31 transferable tax credits that is less than the full amount of 32 transferable tax credits for which the project was determined to be 33 eligible pursuant to paragraph (b). 34 4. If the Division reserves transferable tax credits for a project 35 pursuant to subsection 3, the Division shall provide written notice of 36 the reservation which identifies the amount of the tax credits 37 reserved for the project to: 38 (a) The project sponsor; 39 (b) The Department; 40 (c) The Nevada Gaming Control Board; 41 (d) The Office of Finance; and 42 (e) The Fiscal Analysis Division of the Legislative Counsel 43 Bureau. 44 5. The Division: 45 – 4 – - *AB62* (a) Shall terminate a reservation of transferable tax credits if the 1 project for which the reservation is awarded is not closed within 2 the period specified in paragraph (a) of subsection 6 unless, before 3 the expiration of that period, the Division receives from the project 4 sponsor a written request for an extension of not more than 45 days. 5 The Division may grant only one extension pursuant to this 6 paragraph and, if the project is not closed before the expiration of 7 the extension period, the Division must terminate the reservation of 8 transferable tax credits. A request for an extension submitted 9 pursuant to this paragraph must be accompanied by proof 10 satisfactory to the Division that: 11 (1) The requirements for financing the project have been 12 substantially completed; 13 (2) The delay in closing was the result of circumstances that 14 could not have been anticipated by and were outside the control of 15 the project sponsor at the time the application was submitted by the 16 project sponsor; and 17 (3) The project will be closed not later than 45 days after the 18 Division receives the request. 19 (b) May terminate a reservation of transferable tax credits if the 20 Division determines that any event, circumstance or condition 21 occurs for which a reservation of federal low-income housing tax 22 credits may be terminated. If transferable tax credits are terminated 23 pursuant to this paragraph, the Division may issue a reservation for 24 the amount of transferable tax credits terminated to other projects 25 eligible for transferable tax credits in the order of the amount of 26 transferable tax credit threshold points awarded to each such project 27 pursuant to paragraph (a) of subsection 3. 28 6. Except as otherwise provided in this section, to be issued 29 transferable tax credits: 30 (a) Not later than 270 days after the Division provides written 31 notice of the reservation of transferable tax credits pursuant to 32 subsection 4, the project sponsor must demonstrate to the Division 33 that the project has been closed by providing proof satisfactory to 34 the Division that the project sponsor has: 35 (1) Purchased and holds title in fee simple to , or has entered 36 into a long-term ground lease for, the project site in the name of 37 the project sponsor. 38 (2) Entered into a written agreement with a contractor who is 39 licensed in this State to begin construction. 40 (3) Obtained adequate financing for the construction of the 41 project. The applicant must provide written commitments or 42 contracts from third parties. 43 (4) Executed a written commitment for a loan for permanent 44 financing for the construction of the project in an amount that 45 – 5 – - *AB62* ensures the financial feasibility of the project. The commitment may 1 be subject to the condition that the construction is completed and the 2 project is appraised for an amount sufficient to justify the loan in 3 accordance with the requirements of the lender for credit. If the 4 project is a rural development project that receives loans or grants 5 from the United States Department of Agriculture, the applicant 6 must provide a form approved by the Division that indicates that 7 money has been obligated for the construction of the project before 8 the expiration of the period. An advance of that money is not 9 required before the expiration of the period. 10 (b) Not less than [45] 15 days before the project is closed, the 11 project sponsor must submit to the Division a final application for 12 transferable tax credits on a form provided by the Division and such 13 other information as the Division deems necessary to determine 14 whether the project qualifies for the issuance of transferable tax 15 credits. Upon receipt of a final application pursuant to this 16 paragraph, the Division shall complete a review of the project and 17 the project sponsor. If, after such review, the Division determines 18 that the project complies with the requirements upon which 19 transferable tax credits were reserved pursuant to this section and a 20 declaration of restrictive covenants and conditions will be recorded 21 in the office of the county recorder for the county in which the 22 project is located: 23 (1) The Division shall: 24 (I) Determine the appropriate amount of transferable tax 25 credits for the project, which must be the amount the Division 26 determines is necessary to make the project financially feasible after 27 all other sources of funding are allocated and paid toward the final 28 cost of the project and may not exceed the amount of transferable 29 tax credits reserved for the project pursuant to this section; and 30 (II) Notify the project sponsor that the transferable tax 31 credits will be issued; 32 (2) Within 30 days after the receipt of the notice, the project 33 sponsor shall make an irrevocable declaration of the amount of 34 transferable tax credits that will be applied to each fee or tax set 35 forth in subsection 1, thereby accounting for all of the credits which 36 will be issued; and 37 (3) Upon receipt of the declaration described in subparagraph 38 (2), the Division shall issue transferable tax credits to the project 39 sponsor in the amount approved by the Division. The project 40 sponsor may transfer the transferable tax credits to a member or 41 partner of the project sponsor or to any other entity. The project 42 sponsor shall notify the Division upon transferring any transferable 43 tax credits. An entity to which a project sponsor transfers any 44 transferable tax credits may transfer those transferable tax credits to 45 – 6 – - *AB62* one or more of its subsidiaries or affiliates and shall notify the 1 Division upon making any such transfer. The Division shall notify 2 the Department of Taxation, the Office of Finance, the Fiscal 3 Analysis Division of the Legislative Counsel Bureau and the 4 Nevada Gaming Control Board of all transferable tax credits issued, 5 segregated by each fee or tax set forth in subsection 1, and of all 6 transferable tax credits transferred, segregated by each fee or tax set 7 forth in subsection 1. 8 7 [Text truncated for display. Full text available on LegiScan.]