85R27979 ADM-D
	By: Anderson of Dallas	H.B. No. 3843
	Substitute the following for H.B. No. 3843:
	By:  Shine	C.S.H.B. No. 3843

	A BILL TO BE ENTITLED
	AN ACT
	relating to a franchise or insurance premium tax credit for
	low-income housing developments.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Chapter 171, Tax Code, is amended by adding
	Subchapter V to read as follows:
	SUBCHAPTER V. TAX CREDIT FOR LOW-INCOME HOUSING DEVELOPMENTS
	Sec. 171.9241.  DEFINITIONS. In this subchapter:
	(1)  "Allocation certificate" means a statement issued
	by the department certifying that a given development qualifies for
	a credit under this subchapter and specifying the amount of the
	credit.
	(2)  "Compliance period" means the period of 15 years
	beginning with the first taxable year of the credit period.
	(3)  "Credit" means the low-income housing tax credit
	authorized by this subchapter.
	(4)  "Credit period" means the period of six taxable
	years beginning with the taxable year in which a qualified
	development is placed in service. A qualified development
	consisting of more than one building is not considered to be in
	service until all buildings in the qualified development are placed
	in service.
	(5)  "Department" means the Texas Department of Housing
	and Community Affairs.
	(6)  "Development" has the meaning assigned by Section
	2306.6702, Government Code.
	(7)  "Federal tax credit" means the federal low-income
	housing credit created by 26 U.S.C. Section 42.
	(8)  "Qualified basis" means the qualified basis of a
	qualified development, as determined under Section 42, Internal
	Revenue Code.
	(9)  "Qualified development" means a development in
	this state that the department determines is eligible for a federal
	tax credit and that:
	(A)  is financed with tax-exempt bonds;
	(B)  is the subject of a recorded restrictive
	covenant requiring the development to be maintained and operated as
	a qualified development; 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.).
	(10)  "Qualified taxpayer" means a person who owns an
	interest in a qualified development.
	Sec. 171.9242.  ENTITLEMENT TO CREDIT. A development 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 department classifies the development as a qualified
	development.
	Sec. 171.9243.  ALLOCATION CERTIFICATE; CREDIT. (a)  In a
	year during a credit period, a qualified taxpayer or other person
	may apply to the department for an allocation certificate.
	(b)  The department shall issue an allocation certificate if
	the development qualifies for a credit.
	(c)  The department may determine the amount of a credit
	awarded to a qualified development, subject to the following:
	(1)  the credit must be the minimum amount necessary
	for the financial feasibility of the qualified development after
	considering any federal tax credit;
	(2)  the amount of the credit during the credit period
	may not exceed the total federal tax credit awarded to the qualified
	development over the 10-year federal tax credit period;
	(3)  the manner in which the department awards the
	credit must be consistent with criteria established by the
	department; and
	(4)  in a year, the total amount awarded may not exceed
	the sum of:
	(A)  $0;
	(B)  any unallocated credits for the preceding
	year; and
	(C)  any credit recaptured or otherwise returned
	to the department in the year.
	Sec. 171.9244.  LENGTH OF CREDIT; LIMITATION.  (a)  The
	credit established shall be claimed in equal installments during
	each year of the credit period.
	(b)  The total credit claimed under this subchapter for a
	report, including any carryforward under Section 171.9245, may not
	exceed the amount of franchise tax due for the report after any
	other applicable credit.
	Sec. 171.9245.  CARRY FORWARD OR BACKWARD. (a)  If a
	qualified taxpayer is eligible for a credit that exceeds the
	limitations under Section 171.9244, the qualified taxpayer may
	carry the unused credit back for not more than three taxable years
	or forward for not more than 10 consecutive reports following the
	taxable 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 to the
	qualified taxpayer.
	Sec. 171.9246.  RECAPTURE. (a)  The comptroller shall
	recapture the amount of a credit claimed on a franchise tax report
	filed under this chapter from a qualified taxpayer if, on the last
	day of a taxable 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 taxable year.  The comptroller
	shall determine the amount required to be recaptured using the
	formula provided by Section 42(j), Internal Revenue Code, as
	effective January 1, 2017.
	(b)  A franchise tax return must include any proportion of
	credit required to be recaptured, the identity of any qualified
	taxpayer subject to the recapture, and the amount of credit
	previously allocated to the qualified taxpayer.
	Sec. 171.9247.  ALLOCATION OF CREDIT. (a)  If a qualified
	taxpayer receiving a credit under this subchapter is a partnership,
	limited liability company, S corporation, or similar pass-through
	entity, the qualified taxpayer may allocate credit among its
	partners, shareholders, members, or other constituent taxable
	entities in any manner agreed by those entities.
	(b)  A qualified taxpayer 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 assigned 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 assignment under this section is not a transfer.
	Sec. 171.9248.  FILING REQUIREMENTS AFTER ALLOCATION. A
	qualified taxpayer that allocates a portion of the credit under
	Section 171.9247, and each taxable entity to which a portion was
	allocated, shall file with the qualified taxpayer's or taxable
	entity's report a copy of the allocation certificate received for
	that year.
	Sec. 171.9249.  RULES; PROCEDURES. The department and
	comptroller, in consultation with each other, shall adopt rules and
	procedures to implement, administer, and enforce this subchapter.
	Sec. 171.9250.  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. 171.9251.  REPORT. (a)  Not later than December 31 of
	each year, the department shall deliver a written report to the
	legislature. A report delivered in this section must:
	(1)  specify the number of qualified developments to
	have been allocated a tax credit during the year under this
	subchapter or Chapter 230, Insurance Code, and the total number of
	units supported by the developments;
	(2)  describe each qualified development to receive a
	tax credit under this subchapter or Chapter 230, Insurance Code,
	including:
	(A)  location;
	(B)  household type;
	(C)  demographic information available on 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 credit, are addressing the need for affordable
	housing in their community; and
	(4)  analyze any remaining disparities in the
	affordability of housing within those communities.
	(b)  The department shall make a report delivered under this
	section available to the public.
	SECTION 2.  Subtitle B, Title 3, Insurance Code, is amended
	by adding Chapter 230 to read as follows:
	CHAPTER 230.  CREDIT AGAINST PREMIUM TAXES
	FOR LOW-INCOME HOUSING DEVELOPMENTS
	SUBCHAPTER A.  GENERAL PROVISIONS
	Sec. 230.001.  DEFINITIONS.  In this chapter:
	(1)  "Allocation certificate," "qualified
	development," and "qualified taxpayer" have the meanings assigned
	by Section 171.9241, Tax Code.
	(2)  "State premium tax liability" means any liability
	incurred by an entity under Chapters 221 through 226.
	SUBCHAPTER B.  CREDIT
	Sec. 230.051.  CREDIT.  (a)  An entity is eligible for a
	credit against the entity's state premium tax liability in the
	amount and under the conditions and limitations provided by this
	chapter if the entity is a qualified taxpayer and the qualified
	development in which the entity owns an interest receives an
	allocation certificate issued in the manner prescribed by Section
	171.9243, Tax Code.
	(b)  The amount of the credit is equal to the amount provided
	by the allocation certificate.
	Sec. 230.052.  LENGTH OF CREDIT; LIMITATION.  The entity
	shall claim the credit in the manner provided by Section
	171.9244(a), Tax Code, subject to the limitation provided by
	Section 171.9244(b), Tax Code.  The entity may carry a surplus
	credit forward or backward as provided by Section 171.9245, Tax
	Code.
	Sec. 230.053.  APPLICATION FOR CREDIT.  (a)  An entity must
	apply for a credit under this chapter on or with the tax return for
	the taxable year for which the credit is claimed and submit with the
	application the allocation certificate issued to the qualified
	development and any other information required by Subchapter V,
	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. 230.054.  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. 230.055.  APPLICABLE PROVISIONS.  The provisions of
	Subchapter V, 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.
	SECTION 3.  (a) The Texas Department of Housing and
	Community Affairs may begin issuing allocation certificates under
	Section 171.9243, Tax Code, as added by this Act, in an open cycle
	beginning on January 1, 2018.
	(b)  A taxable entity may not claim a tax credit under
	Subchapter V, Chapter 171, Tax Code, as added by this Act, in
	connection with a privilege period that begins before January 1,
	2019, or on a report filed before January 1, 2020.
	SECTION 4.  This Act takes effect January 1, 2018.