SB2814 - Relating to a franchise or insurance premium tax credit for certain housing developments.

      By: Alvarado S.B. No. 2814               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,   specifying the total amount of the credits awarded in connection   with the qualified development for the credit period, and   specifying the annual amount of credit that may be claimed each year   during the credit period for each building that is part of the   qualified development.                (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:                      (A)  for which the department awards or allocates   a federal tax credit through the issuance of a carryover allocation   agreement or determination notice;                      (B)  that has not had an allocation of federal tax   credits terminated by or at the direction of the department;                      (C)  that is the subject of a recorded restrictive   covenant requiring the development to be maintained and operated as   a qualified development that has not been terminated and is not   subject to termination through any process other than the natural   expiration of the covenant's extended use period;                      (D)  that meets all applicable requirements of the   qualified allocation plan, as defined by Section 2306.6702,   Government Code; and                      (E)  for the duration of the extended use period   established in the land use restriction agreement, as defined by   Section 2306.6702(a)(9), Government Code, 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   of annual credits each award year.          Sec. 171.552.  ENTITLEMENT TO CREDIT. A taxable entity is   entitled to a n annual 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.  APPLICATION FOR AND ISSUANCE OF ALLOCATION   CERTIFICATE. (a) A taxable entity or an entity subject to state   premium tax liability as defined by Section 233.0001, Insurance   Code, must apply to the department for an allocation certificate in   connection with a development in which the taxable entity or other   entity owns an interest. The application must be submitted to the   department along with the application for an allocation of federal   tax credits in a manner prescribed by the department.          (b)  The department shall issue an allocation certificate   if:                (1)  the department approves the application submitted   under Subsection (a);                (2)  the development meets the requirements to be a   qualified development; and                (3)  the department awards an amount of credit to the   development under Section 171.554.          Sec. 171.554.  AMOUNT OF CREDITS; METHOD OF AWARD. (a) The   department shall in the manner provided by this section determine   the total amount of annual credits under this subchapter and   Chapter 233, Insurance Code, awarded for each year of the credit   period in connection with a qualified development and indicate the   amount of the annual credit s awarded on the allocation certificate.          (b)  The amount of annual credit awarded in connection with a   qualified development over allowed each year of the credit period   must be the minimum amount necessary for the financial feasibility   of the qualified development, subject to the limitations of this   section.          (c)  The amount of annual credits awarded in connection with   a qualified development allowed each year of over the credit period   may not exceed the total amount of the annual federal tax credit   awarded to the owner or owners of the qualified development allowed   each year of 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 annual credits awarded for a each   award 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 portion of the state housing credit ceiling   for the preceding year that could have been awarded for qualified   developments financed through tax exempt bonds but was not awarded;   and                (3)  any credits recaptured or otherwise returned to   the department in the year that were originally awarded in   connection with a qualified development financed through tax exempt   bonds.          (f)  The total amount of annual credits awarded for a each   award 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 portion of the state housing credit ceiling   for the preceding year that could have been awarded for qualified   developments not financed through tax exempt bonds but was not   awarded; and                (3)  any credits recaptured or otherwise returned to   the department in the year that were originally awarded in   connection with a qualified development not financed through tax   exempt bonds.          (g)  The department shall, in the qualified allocation plan,   determine the priorities and criteria for awarding annual credits   during award years in which the amount of credits applied for   exceeds the maximum amount that may be awarded under this section.          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 annual credit that each owner is   entitled to claim for any year during the credit period . 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 ny   taxable entity entitled to a credit under this subchapter shall   claim its portion of the annual credit in equal installments for   each year 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 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 certificate was issued. A credit carryforward from a   previous report is considered to be used before the current year   installment. A credit carried back to a previous report is   considered to be used after any other franchise tax credit is   applied to that report.          (b)  A credit that is not used may not be refunded.          (c)  The allocation of a credit in accordance with Section   171.559 does not extend the period for which a credit may be carried   forward and does not increase the total amount of the credit that   may be claimed.          (d)  An entity may not carry back a credit under this   subchapter to a tax year for which the report was originally due   before January 1, 2026.          Sec. 171.558.  RECAPTURE. (a) If a qualified development is   subject to the recapture of a portion of the federal tax credit   awarded or allocated to the development, then each taxable entity   or entity subject to state premium tax liability as defined by   Section 233.0001, Insurance Code, that has claimed or is entitled   to claim a portion of the credit under this subchapter is also   subject to the recapture of a portion of the credit under this   subchapter.          (b)  The amount of credit under this subchapter that is   subject to recapture under this section is the same percentage of   the amount originally awarded or allocated as the percentage of the   amount of the federal tax credit originally awarded or allocated   that is subject to recapture under federal law. The recapture of a   credit under this section is not subject to a statute of limitations   provided by Chapter 111.          (c)  The owners of a qualified development that is awarded or   allocated a credit under this subchapter or a representative of   those owners shall identify each taxable entity and each entity   subject to state premium tax liability as defined by Section   233.0001, Insurance Code, that is subject to recapture of the   credit under this section.          (d)  Not later than the 30th day after the date any owner of a   qualified development receives notice that a federal tax credit   awarded or allocated to the development [Text truncated for display. Full text available on LegiScan.]