H.B. No. 1058

	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 amount of credit that may be claimed each year 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 credits each award year.
	Sec. 171.552.  ENTITLEMENT TO CREDIT. A taxable entity 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 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 credits under this subchapter and Chapter 233,
	Insurance Code, awarded for the credit period in connection with a
	qualified development and indicate the amount of credits awarded on
	the allocation certificate.
	(b)  The amount of credits awarded in connection with a
	qualified development over 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 credits awarded in connection with a
	qualified development over the credit period may not exceed the
	total federal tax credit awarded to the owner or owners of the
	qualified development 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 credits awarded for a 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 credits awarded for a 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 credits during
	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 that each owner is entitled to claim.
	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 taxable
	entity entitled to a credit under this subchapter shall claim the
	credit in equal installments 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 is subject to recapture,
	the owners of the development or a representative of those owners
	shall report to the comptroller:
	(1)  the amount of federal tax credit originally
	awarded or allocated to the development;
	(2)  the amount of federal tax credit that is subject to
	recapture and the percentage of the amount originally awarded or
	allocated which that amount represents; and
	(3)  each entity identified under Subsection (c).
	Sec. 171.559.  ALLOCATION OF CREDIT. (a)  If a taxable
	entity receiving a credit under this subchapter is a partnership,
	limited liability company, S corporation, or similar pass-through
	entity, the taxable entity may allocate the credit to its partners,
	shareholders, members, or other constituent taxable entities in any
	manner agreed to by those entities, regardless of the size of the
	person's ownership interest.  This section does not prohibit a
	partner, member, or shareholder from holding an investment
	consisting only of a credit awarded under this subchapter or a
	federal tax credit.
	(b)  A taxable entity 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 delegated 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 allocation under this section is not a transfer for
	purposes of state law.
	Sec. 171.560.  FILING REQUIREMENTS AFTER ALLOCATION. A
	taxable entity that allocates a portion of the credit under Section
	171.559, and each taxable entity to which a portion was allocated,
	shall file with the taxable entity's report a copy of the
	certification or notice required by Section 171.559(b).
	Sec. 171.561.  APPLICATION FOR CREDIT. (a) A taxable entity
	must apply for a credit under this subchapter on or with the tax
	report for which the credit is claimed and submit with the
	application a copy of the allocation certificate issued in
	connection with the qualified development and any other information
	required by the comptroller.
	(b)  The comptroller shall adopt a form for the application
	for the credit. A taxable entity must use the form to apply for the
	credit.
	Sec. 171.562.  RULES; PROCEDURES. The department and
	comptroller, in consultation with each other, shall adopt rules and
	procedures to implement, administer, and enforce this subchapter.
	Sec. 171.563.  COMPLIANCE MONITORING. (a)  The department
	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. 171.564.  INCLUSION OF INFORMATION IN LOW INCOME
	HOUSING PLAN. The department shall include in the low income
	housing plan under Section 2306.0721, Government Code, information
	relating to the performance of the credit during the previous
	calendar year. The information must:
	(1)  specify the number of qualified developments for
	which allocation certificates were issued during the year and the
	total number of units supported by the developments;
	(2)  describe each qualified development for which an
	allocation certificate was issued during the year, including:
	(A)  location;
	(B)  household type;
	(C)  available demographic information for 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 credits under this subchapter and Chapter 233,
	Insurance Code, are addressing the need for affordable housing in
	their communities; and
	(4)  analyze any remaining disparities in the
	affordability of housing within those communities.
	Sec. 171.565.  EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS.
	(a) After December 31, 2029, the department may not:
	(1)  reserve an amount of credit under this subchapter
	for a qualified development for the purpose of issuing an
	allocation certificate for the development at a later date; or
	(2)  issue an allocation certificate for a qualified
	development unless, on or before December 31, 2029, the department
	reserved an amount of credit under this subchapter for the
	development for the purpose of issuing an allocation certificate at
	a later date if the requirements for issuance of the certificate are
	met.
	(b)  On or after January 1, 2030:
	(1)  the department may issue an allocation certificate
	for which an amount of credit was reserved under Subsection (a)(2);
	and
	(2)  an entity may claim a credit on a tax report as
	provided by this subchapter or Chapter 233, Insurance Code, in
	connection with a qualified development for which the department
	issued an allocation certificate or reserved an amount of credit
	before January 1, 2030.
	Sec. 171.566.  PRIORITY ALLOCATION FOR CERTAIN QUALIFIED
	DEVELOPMENTS. (a) This section applies only to a qualified
	development:
	(1)  that received an allocation of federal tax credits
	under the qualified allocation plan issued by the department for
	2021 or 2022;
	(2)  the owners or developers of which have owned the
	land necessary for the development since at least December 31,
	2022;
	(3)  that is not financed through tax exempt bonds; and
	(4)  that the department determines requires an
	allocation of credit under this subchapter to secure the financial
	feasibility of the qualified development after considering any
	federal tax credit.
	(b)  Notwithstanding Sections 171.554(e) and (f) and subject
	to Subsection (e) of this section, for the first year the department
	issues allocation certificates or reserves credit amounts for the
	purpose of issuing allocation certificates, the department shall
	use $5 million of the state housing credit ceiling to award credits
	to qualified developments to which this section applies.
	(c)  The owners of a qualified development to which this
	section applies who intend to apply for an allocation of credit
	under this section, or a representative of those owners, must
	notify the department of that intent before the deadline for the
	qualified development to be placed in service. If the owners or
	their representative provide the notice required by this
	subsection, the deadline for the qualified development to be placed
	in service is extended until:
	(1)  the deadline set by the department for submitting
	an application for an allocation under this section; or
	(2)  if an application for an allocation under this
	section is submitted before the deadline set by the department, the
	date the department issues a decision on the application.
	(d)  An applicant for an allocation of credit under this
	section must submit to the department:
	(1)  documents proving that the owners or developers of
	the qualified development meet the land ownership requirement under
	Subsection (a)(2);
	(2)  a financial analysis demonstrating that the
	allocation is necessary to secure the financial feasibility of the
	development as required by Subsection (a)(4); and
	(3)  any other documentation required by the department
	to demonstrate that the qualified development meets the
	requirements provided by Subsection (a).
	(e)  If the amount of state credits reserved under this
	section is not fully allocated to qualified developments to which
	this section applies, the department shall allocate the remaining
	portion to qualified developments to which this section does not
	apply.
	(f)  The department shall, in the qualified allocation plan,
	determine the priorities and criteria for awarding credits under
	this section if the amount of credits applied for exceeds the
	maximum amount that may be awarded under this section.
	SECTION 2.  Subtitle B, Title 3, Insurance Code, is amended
	by adding Chapter 233 to read as follows:
	CHAPTER 233. CREDIT AGAINST CERTAIN TAXES FOR CERTAIN HOUSING
	DEVELOPMENTS
	SUBCHAPTER A. GENERAL PROVISIONS
	Sec. 233.0001.  DEFINITIONS. In this chapter:
	(1)  "Allocation certificate," "credit," and
	"qualified development" have the meanings assigned by Section
	171.551, Tax Code.
	(2)  "State premium tax liability" means any tax
	liability incurred by an entity under Chapter 221, 222, 223, or 224.
	SUBCHAPTER B. CREDIT
	Sec. 233.0051.  CREDIT.  (a)  An entity is eligible for a
	credit against the entity's state premium tax liability in the
	amount and under the limitations provided by this chapter if the
	entity owns a direct or indirect interest in a qualified
	development.
	(b)  An entity that claims a credit under this chapter is not
	required to pay any additional retaliatory tax under Chapter 281 as
	a result of claiming the credit.
	Sec. 233.0052.  LENGTH OF CREDIT; LIMITATIONS.  (a)  The
	entity shall claim the credit in the manner provided by Section
	171.556, Tax Code.
	(b)  The total credit claimed under this chapter for a
	report, including any carry forward or backward described by
	Subsection (c), may not exceed the amount of the entity's state
	premium tax liability due for the report after any other applicable
	credit.
	(c)  The entity may carry a surplus credit forward or
	backward as provided by Section 171.557, Tax Code.
	Sec. 233.0053.  APPLICATION FOR CREDIT.  (a)  An entity must
	apply for a credit under this chapter on or with the tax report for
	the tax year for which the credit is claimed and submit with the
	application a copy of the allocation certificate issued in
	connection with the qualified development and any other information
	required by Subchapter K, 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. 233.0054.  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. 233.0055.  APPLICABLE PROVISIONS.  The provisions of
	Subchapter K, Chapter 171, Tax Code, relating to recapture,
	allocation of credit, apportionment of credit, length of credit,
	filing requirements after allocation, and compliance monitoring
	apply to the credit authorized by this chapter.
	SUBCHAPTER C. EXPIRATION OF AUTHORITY TO ALLOCATE CREDITS
	Sec. 233.0101.  EXPIRATION OF ALLOCATION AUTHORITY; USE OF
	ALLOCATED CREDITS. (a) The authority of the Texas Department of
	Housing and Community Affairs to reserve credit amounts and issue
	allocation certificates for purposes of Subchapter K, Chapter 171,
	Tax Code, and this chapter expires as provided by Section
	171.565(a), Tax Code.
	(b)  An entity may claim a credit under this chapter on a tax
	report as provided by Section 171.565(b), Tax Code.
	SECTION 3.  (a) The Texas Department of Housing and
	Community Affairs may begin reserving credit amounts for the
	purpose of issuing allocation certificates under Subchapter K,
	Chapter 171, Tax Code, as added by this Act, in an open cycle
	beginning on January 1, 2024.
	(b)  Except as provided by Subsection (c) of this section,
	Subchapter K, Chapter 171, Tax Code, as added by this Act, and
	Chapter 233, Insurance Code, as added by this Act, apply only to a
	tax report originally due on or after January 1, 2026, and before
	January 1, 2036.
	(c)  The expiration of the authority to allocate credits
	under Subchapter K, Chapter 171, Tax Code, as added by this Act, in
	accordance with Section 171.565, Tax Code, as added by this Act,
	does not affect the carryforward of a credit under:
	(1)  Section 171.557, Tax Code, as added by this Act; or
	(2)  Section 233.0052(c), Insurance Code, as added by
	this Act.
	SECTION 4.  This Act takes effect January 1, 2024.
	______________________________	______________________________
	President of the Senate	Speaker of the House
	I certify that H.B. No. 1058 was passed by the House on April
	4, 2023, by the following vote:  Yeas 121, Nays 25, 1 present, not
	voting; that the House concurred in Senate amendments to H.B. No.
	1058 on May 25, 2023, by the following vote:  Yeas 122, Nays 15, 3
	present, not voting; and that the House adopted H.C.R. No. 123
	authorizing certain corrections in H.B. No. 1058 on May 25, 2023, by
	the following vote: Yeas 133, Nays 7, 1 present, not voting.
	______________________________
	Chief Clerk of the House
	I certify that H.B. No. 1058 was passed by the Senate, with
	amendments, on May 22, 2023, by the following vote:  Yeas 25, Nays
	6; and that the Senate adopted H.C.R. No. 123 authorizing certain
	corrections in H.B. No. 1058 on May 27, 2023, by the following vote:
	Yeas 31, Nays 0.
	______________________________
	Secretary of the Senate
	APPROVED: __________________
	Date
	__________________
	Governor