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Business Taxes Law Guide—Revision 2024
Tax on Insurers Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 7. Insurance Taxation
Chapter 3. All Insurance Other Than Ocean Marine
Article 1. General
Section 12209
Text of Section Operative Through November 30, 2017
12209. Community development financial institution tax credit. (a) For each year beginning on or after January 1, 1999, and before January 1, 2017, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.
(b) For purposes of determining any tax that may be imposed under Section 685 of the Insurance Code on a taxpayer not organized under the laws of this state, the amount of the credit allowed by subdivision (a) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.
(c) (1) Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.
(2) A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment as defined in paragraph (1) of subdivision (h).
(3) (A) The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.57, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.
(B) The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.
(C) Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.
(4) Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.
(d) The community development financial institution shall do all of the following:
(1) Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.
(2) (A) Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.
(B) Provide in the application a detailed description of the intended use of the investment funds including, but not limited to, the following:
(i) All of the programs, projects, and services that would be funded.
(ii) The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(iii) The percentage of the intended use of the investment funds that would directly benefit rural areas.
(iv) The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.
(3) (A) Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:
(i) Name of the taxpayer.
(ii) Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.
(iii) Phone number of the taxpayer.
(iv) Email address of the taxpayer.
(v) The taxpayer's California company identification number for tax administration purposes.
(B) The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.
(4) Provide an annual listing to the State Board of Equalization, in the form and manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer's California company identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.
(5) Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.
(e) The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, but not after that date.
(f) (1) The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.
(2) The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.
(3) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.
(g) The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:
(1) Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (h). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.
(2) Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (c), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.
(3) Provide an annual listing to the State Board of Equalization, in the form or manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective National Association of Insurance Commissioners company number and employer's tax identification number, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.
(4) Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.
(h) For purposes of this section:
(1) "Qualified investment" means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.
(2) "Community development financial institution" means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.
(i) (1) If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the "tax," as defined in Section 28 of Article XIII of the California Constitution, for the year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.
(2) If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the "tax," as defined in Section 28 of Article XIII of the California Constitution, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the year.
(j) In the case where the credit allowed by this section exceeds the "tax," the excess may be carried over to reduce the "tax" for the next four years, or until the credit has been exhausted, whichever occurs first.
(k) The State Board of Equalization shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.
(l) On or before June 30, 2016, the Legislative Analyst's Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 17053.57, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.
(m) This section shall remain in effect only until December 1, 2017, and as of that date is repealed.
History—Added by Stats. 1999, Ch. 821 (AB 145), in effect January 1, 2000. Stats. 2001, Ch. 535 (SB 409), in effect October 5, 2001, substituted "2007" for "2002" in subdivision (a), substituted "investment" for "deposit" in subdivision (a), added ", or its successor within" after "Organized Investment Network" in subdivision (c), substituted "investment" for deposit in subdivision (c), substituted "investments" for "deposits" in subdivision (c), added "However, if the aggregate … " after "each calendar year." in subdivision (c), added "Department of Insurance," after "Apply to the" in subparagraph (d)(1) and (d)(2), added "amount of the investment and the" after "certification of the" to subparagraph (d)(2), substituted "taxpayer, obtain the … of the certification." for "taxpayer prior to … from the taxpayer." in subparagraph (d)(2), renumbered subparagraph (d)(4) as subparagraph (d)(3) and subparagraph (d)(5) as subparagraph (d)(4), added "Department of Insurance," after "information to the" of subparagraph (d)(3), substituted "application" for "transmittal" in subparagraph (d)(3), substituted "(2)" for "(3)" in subparagraph (d)(3), substituted "Board of Equalization" for "board" in subparagraph (d)(4), added "Department of Insurance," after "Equalization and the" in subparagraph (d)(4), substituted "investment" for "deposit" in subparagraph (d)(4), added "Department of Insurance," prior to "California Organized Investment" in subdivision (e), substituted "investments" for "deposits" in subparagraph (e)(1), substituted "an" for "a deposit or equity" in subparagraph (e)(2), substituted "Board of Equalization" for "board" in subparagraph (e)(3), added "Department of Insurance," prior to "California Organized Investment" in subparagraph (e)(3), substituted "investment" for "deposit" in subparagraph (e)(3), substituted "investments" for "deposits" in subparagraph (e)(3), substituted "investment" for "deposit" in subparagraph (f)(1), added "or loan" after "means a deposit" in subparagraph (f)(1), deleted "that is" after "an equity investment," in subparagraph (f)(1), added "or an equity … investments must be" after "an equity investment," in subparagraph (f)(1), added "Department of Insurance" after "certified by the" in subparagraph (f)(2), substituted "investment" for "deposit" in subparagraph (g)(1), deleted "redeposited or" after "month and not" in subparagraph (g)(1), substituted "investment" for "deposit" in subparagraph (g)(2), substituted "taxable" for "income" in subparagraph (g)(2), relettered subdivision (i) as subdivision (j), added new subdivision (i), substituted "2007" for "2002" in subdivision (j) and deleted "However, any unused … credit is exhausted." in subdivision (j). Stats. 2002, Ch. 664 (AB 3034), in effect January 1, 2003, deleted "is" after "fifty thousand dollars ($50,000) and" in the second sentence of subparagraph (f)(1), and added a comma after "Investment Network" in subdivision (i). Stats. 2006, Ch. 580 (AB 2831), in effect September 28, 2006, substituted "2012" for "2007" after "January 1, 1999, and before January 1," in, added "taxable" after "by a taxpayer during the" in, added "that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof" in subdivision (a); redesignated former subdivision (c) as (c)(1), added paragraph (2) and subparagraphs (A), (B), and (C) to subdivision (c), redesignated second sentence in former subdivision (c) as paragraph (3) in subdivision (c); added paragraph (5) to subdivision (d); added "The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, issue regulations to implement the provisions of this section." to subdivision (e); relettered former subdivisions "(e)", "(f)", "(g) (1)", "(h)", "(i)", and "(j)" as "(f)", "(g)", "(h) (1)", "(i)", "(j)", and "(k)"; added "and evaluate" after "Accept" to, added "To receive a certificate, an applicant shall satisfy the … no longer meets the requirement for certification." to subdivision (f)(1); added "and evaluate" after "Accept" to, added "Applications for tax credits shall be accepted and evaluated throughout the year." to, added "If the aggregate amount of tax credit applications … approved for qualifying investments received on that day on a pro rata basis." to subdivision (f)(2); added paragraph (4) to subdivision (f); added "an investment that is" after "Qualified investment" means", added ", or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment", deleted "All qualified investments" after ", Community Development Financial Institutions Fund, or its successor" , added "During that 60-month period, the community development financial institution … economically disadvantaged communities and low-income people in California." to subdivision (g)(1); added ", consistent with the findings, declarations, and intent set forth in Section 12939 of the Insurance Code" to subdivision (g)(2); and substituted "2012" for "2007" after "until December 31," in subdivision (k). Stats. 2011, Ch. 436 (AB 624), in effect January 1, 2012, substituted "January 1, 2017" for "January 1, 2012" in subdivision (a); substituted "a" for "no" after "of this part," and added "not" after "credit shall" in paragraph (1) of subdivision (c); substituted "A" for "No" before "credit shall", added "not" after "credit shall", substituted "(h)" for "(g)" after "(1) of subdivision", and deleted last sentence in paragraph (2) of subdivision (c); deleted subparagraphs (A), (B), and (C) of paragraph (2) in subdivision (c); added paragraph (4), and added subparagraphs (A), (B), (C) to paragraph (4), in subdivision (c); substituted "California Organized Investment Network" for "COIN" in paragraph (5) of subdivision (d); added new subdivision (e); relettered former "(e)", "(f)", "(g)", "(h)", "(i)", "(j)", and "(k)"as "( f)", "(g)", "(h)", "(i)", "(j)", "(k)", and "(l)"; substituted "(h)" for "(g)" after "paragraph (2) of subdivision" in paragraph (1) of subdivision (g); deleted last four sentences in paragraph (2) of subdivision (g); substituted "(h)" for "(g)" in paragraph (4) of subdivision (g); added "legislative" after "consistent with the" in paragraph (2) of subdivision (h); and substituted "December 1, 2017" for "December 31, 2012" in subdivision (l). Stats. 2013, Ch. 608 (AB 32), in effect October 7, 2013, redesignated former paragraph (c)(3) as (c)(3)(A), added subparagraphs (c)(3)(B) and (c)(3)(C), substituted "fifty" for "twenty" and "($50,000,000)" for "($20,000,000)" throughout the new subparagraph (c)(3)(A), substituted wording of paragraph (c)(4) for previous wording of subparagraphs (c)(4)(A) and (B), and deleted former subparagraph (c)(4)(C) which read: "Represent investments from insurance companies subject to tax under Section 12201 of this code or under Section 28 of Article XIII of the California Constitution."; redesignated former paragraph (d)(2) as (d)(2)(A), added subparagraph (d)(2)(B); deleted paragraph (d)(3) and included similar wording in new subparagraph (d)(3)(A), and added subparagraph (d)(3)(B); substituted "2017" for "2015" in subdivision (e); redesignated former subdivision (f) as (f)(1), replaced "issue" with "adopt, amend, or repeal" after "from time to time," in paragraph (1) of subdivision (f), and added paragraphs (2) and (3) to subdivision (f); added ", with highest priority granted to those applications … households or rural areas or housholds" after "limit specified in subdivision (c)" in first sentence of paragraph (2) of subdivision (g), and added the fourth sentence to paragraph (2) of subdivision (g); added new subdivision (l); and relettered former subdivision (l) as subdivision (m).
Text of Section Operative Through June 29, 2020
12209. Community development financial institution tax credit. (a) Notwithstanding Sections 12207 and 12208 to the contrary, for the years 2020 and 2021, the total amount of all credits otherwise allowable under Sections 12207 and 12208, including any credit amount allowed to be carried over pursuant to those sections or subdivision (c), shall not reduce the "tax," as described by Section 12201, by more than five million dollars ($5,000,000) for a given year.
(b) (1) The amount of any credit otherwise allowable for a year under Section 12207 that is not allowed due to the application of this section shall remain a credit carryover amount under Section 12207.
(2) The carryover period for any credit allowable under Section 12207 that is not allowed due to the application of this section shall be increased by the number of years the credit or any portion thereof was not allowed.
(c) The amount of any credit otherwise allowable for a year under Section 12208 that was not allowed due to the application of this section may be carried over to reduce the "tax," as described by Section 12201, for the following year, and succeeding years if necessary, until the credit amount or any portion thereof that was not allowed due to the application of this section is exhausted. However, any credit amount under Section 12208 that is allowed to be carried over pursuant to this subdivision is also subject to the limitation in subdivision (a).
(d) The limitation under subdivision (a) shall not apply to the credit allowed by Section 12206 (relating to credit for low-income housing).
History—Added by Stats. 2020, Ch. 8 (AB 85), in effect June 29, 2020. Stats. 2022, Ch. 3 (SB 113), in effect February 9, 2022, deleted ", 2021," after "2020" and substituted "2021" for "2022" before ", the total" in subdivision (a).