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H.B. 309

             1     

INDIVIDUAL AND CORPORATE INCOME TAX

             2     
CREDITS FOR LOW-INCOME HOUSING

             3     
1999 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: David M. Jones

             6      AN ACT RELATING TO REVENUE AND TAXATION; MODIFYING THE CORPORATE
             7      AND INDIVIDUAL LOW-INCOME HOUSING TAX CREDITS; MAKING TECHNICAL
             8      CHANGES; AND PROVIDING AN EFFECTIVE DATE.
             9      This act affects sections of Utah Code Annotated 1953 as follows:
             10      AMENDS:
             11          59-7-607, as last amended by Chapter 134, Laws of Utah 1997
             12          59-10-129, as last amended by Chapter 134, Laws of Utah 1997
             13      Be it enacted by the Legislature of the state of Utah:
             14          Section 1. Section 59-7-607 is amended to read:
             15           59-7-607. Utah low-income housing tax credit.
             16          (1) As used in this section:
             17          (a) "Agency" means the Utah Housing Finance Agency.
             18          (b) "Allocation certificate" means:
             19          (i) the certificate prescribed by the tax commission and issued by the agency to [the] each
             20      taxpayer that specifies the percentage of the annual federal low-income housing tax credit that
             21      [the] each taxpayer may take as an annual credit against state income tax; or
             22          (ii) a copy of the allocation certificate that the housing sponsor provides to the taxpayer.
             23          (c) "Building" means a qualified low-income building as defined in Section 42(c), Internal
             24      Revenue Code.
             25          [(c)] (d) "Federal low-income housing tax credit" means the credit under Section 42,
             26      Internal Revenue Code.
             27          [(d)] (e) "Housing sponsor" means a corporation in the case of a C corporation, a


             28      partnership in the case of a partnership, a corporation in the case of an S corporation, or a limited
             29      liability company in the case of a limited liability company.
             30          [(e)] (f) "Qualified allocation plan" means the qualified allocation plan adopted by the
             31      agency pursuant to Section 42(m), Internal Revenue Code.
             32          (g) "Special low-income housing tax credit certificate" means a certificate:
             33          (i) prescribed by the tax commission;
             34          (ii) that a housing sponsor issues to a taxpayer h FOR A TAXABLE YEAR h ; and
             35          (iii) that specifies the amount of credit a taxpayer may claim under this section if the
             36      taxpayer meets the requirements of this section.
             37          [(f)] (h) "Taxpayer" means the person entitled to the tax credit provided under this section
             38      which is the corporation in the case of a C corporation, the partners in the case of a partnership,
             39      the shareholders in the case of an S corporation, and the members in the case of a limited liability
             40      company.
             41          (2) (a) For tax years beginning on or after January 1, 1995, there is allowed, a
             42      nonrefundable tax credit against taxes otherwise due under this chapter or Chapter 8, for taxpayers
             43      issued an allocation certificate.
             44          (b) The credit shall be in an amount equal to the greater of the amount of:
             45          (i) federal low-income housing tax credit to which the taxpayer is entitled during that year
             46      multiplied by the percentage specified in an allocation certificate issued by the agency; or
             47          (ii) credit specified in the special low-income housing tax credit certificate that the housing
             48      sponsor issues to the taxpayer as provided in Subsection (2)(c).
             49          (c) For purposes of Subsection (2)(b)(ii), the credit is equal to the product of:
             50          (i) the total amount of low-income housing tax credit under this section that:
             51          (A) a housing sponsor h [ issues ] IS ALLOWED h for a building; and
             52          (B) all of the taxpayers may claim with respect to the building if the taxpayers meet the
             53      requirements of this section; and
             54          (ii) the percentage of credit a taxpayer may claim:
             55          (A) under this section if the taxpayer meets the requirements of this section; and
             56          (B) as provided in the agreement between the taxpayer and the housing sponsor.
             57          [(c)] (d) (i) The aggregate annual tax credit which the agency may allocate in each of
             58      calendar years 1995 through 2000 pursuant to this section and Section 59-10-129 shall be an
                            


             59      amount equal to 12.5 cents multiplied by the population of Utah for which taxpayers may take each
             60      year during the ten-year credit period under Section 42, Internal Revenue Code.
             61          (ii) For purposes of this section, the population of Utah shall be determined in accordance
             62      with Section 146(j), Internal Revenue Code.
             63          (3) (a) By October 1, 1994, the agency shall determine criteria and procedures for
             64      allocating the credit under this section and Section 59-10-129 and incorporate the criteria and
             65      procedures into the agency's qualified allocation plan.
             66          (b) The agency shall create the criteria under Subsection (3)(a) based on:
             67          [(a)] (i) the number of affordable housing units to be created in Utah for low and moderate
             68      income persons in the residential housing development of which the building is a part;
             69          [(b)] (ii) the level of area median income being served by the development;
             70          [(c)] (iii) the need for the credit for the economic feasibility of the development; and
             71          [(d)] (iv) the extended period for which the development commits to remain as affordable
             72      housing.
             73          (4) (a) Any housing sponsor that has received an allocation of the federal low-income
             74      housing tax credit and any applicant for an allocation of the federal low-income housing credit may
             75      apply to the agency for a credit under this section.
             76          (b) The agency may not require fees for applications of the credit under this section in
             77      addition to those fees required for applications for the federal low-income housing credit.
             78          (5) (a) The agency shall determine the amount of the credit to allocate to a qualifying
             79      housing sponsor in accordance with the qualified allocation plan of the agency.
             80          (b) (i) The agency shall allocate the credit to housing sponsors by issuing an allocation
             81      certificate to qualifying housing sponsors.
             82          (ii) The allocation certificate under Subsection (5)(b)(i) shall specify the allowed
             83      percentage of the federal low-income credit as determined by the agency.
             84          (c) The percentage specified in an allocation certificate may not exceed 100% of the
             85      federal low-income housing tax credit.
             86          (6) If a partnership, an S corporation, or a limited liability company qualifies for the credit
             87      provided in this section as a housing sponsor, it shall provide a copy of the allocation certificate
             88      to the taxpayers of the entity.
             89          (7) A taxpayer shall attach a copy of the allocation certificate to any return upon which a


             90      credit is claimed under this section.
             91          (8) (a) All elections made by the taxpayer pursuant to Section 42, Internal Revenue Code,
             92      shall apply to this section.
             93          (b) (i) If a taxpayer is required to recapture a portion of any federal low-income housing
             94      tax credit, the taxpayer shall also be required to recapture a portion of any state credits authorized
             95      by this section.
             96          (ii) The state recapture amount shall be equal to the percentage of the state credit that
             97      equals the proportion the federal recapture amount bears to the original federal low-income
             98      housing tax credit amount subject to recapture.
             99          (9) (a) Any credits returned to the agency in any year may be reallocated within the same
             100      time period as provided in Section 42, Internal Revenue Code.
             101          (b) Credits that are unallocated by the agency in any year may be carried over for allocation
             102      in the subsequent year.
             103          (10) (a) Amounts otherwise qualifying for the credit, but not allowable because the credit
             104      exceeds the tax, may be carried back three years or may be carried forward five years as a credit
             105      against the tax.
             106          (b) Carryover credits under Subsection (10)(a) shall be applied against the tax before the
             107      application of the credits earned in the current year and on a first-earned first-used basis.
             108          (11) Any credit taken in this section may be subject to an annual audit by the commission.
             109          (12) The agency shall provide an annual report to the Revenue and Taxation Interim
             110      Committee which shall include at least:
             111          (a) the purpose and effectiveness of the exemption; and
             112          (b) the benefits of the exemption to the state.
             113          (13) The tax commission may, in consultation with the agency, promulgate rules to
             114      implement this section and Section 59-10-129 .
             115          Section 2. Section 59-10-129 is amended to read:
             116           59-10-129. Utah low-income housing tax credit.
             117          (1) As used in this section:
             118          (a) "Agency" means the Utah Housing Finance Agency.
             119          (b) "Allocation certificate" means:
             120          (i) the certificate prescribed by the tax commission and issued by the agency to [the] each


             121      taxpayer that specifies the percentage of the annual federal low-income housing tax credit that
             122      [the] each taxpayer may take as an annual credit against state income tax; or
             123          (ii) a copy of the allocation certificate that the housing sponsor provides to the taxpayer.
             124          (c) "Building" means a qualified low-income building as defined in Section 42(c), Internal
             125      Revenue Code.
             126          [(c)] (d) "Federal low-income housing tax credit" means the credit under Section 42,
             127      Internal Revenue Code.
             128          [(d)] (e) "Housing sponsor" means a corporation in the case of a C corporation, a
             129      partnership in the case of a partnership, a corporation in the case of an S corporation, or a limited
             130      liability company in the case of a limited liability company.
             131          [(e)] (f) "Qualified allocation plan" means the qualified allocation plan adopted by the
             132      agency pursuant to Section 42(m), Internal Revenue Code.
             133          (g) "Special low-income housing tax credit certificate" means a certificate:
             134          (i) prescribed by the tax commission;
             135          (ii) that a housing sponsor issues to a taxpayer h FOR A TAXABLE YEAR h ; and
             136          (iii) that specifies the amount of a credit a taxpayer may claim under this section if the
             137      taxpayer meets the requirements of this section.
             138          [(f)] (h) "Taxpayer" means the person entitled to the tax credit provided under this section
             139      which is the corporation in the case of a C corporation, the partners in the case of a partnership,
             140      the shareholders in the case of an S corporation, and the members in the case of a limited liability
             141      company.
             142          (2) (a) For tax years beginning on or after January 1, 1995, there is allowed, a
             143      nonrefundable tax credit against taxes otherwise due under this chapter for taxpayers issued an
             144      allocation certificate.
             145          (b) The credit shall be in an amount equal to the greater of the amount of:
             146          (i) federal low-income housing tax credit to which the taxpayer is entitled during that year
             147      multiplied by the percentage specified in an allocation certificate issued by the agency; or
             148          (ii) credit specified in the special low-income housing tax credit certificate that the housing
             149      sponsor issues to the taxpayer as provided in Subsection (2)(c).
             150          (c) For purposes of Subsection (2)(b)(ii), the credit is equal to the product of:
             151          (i) the total amount of low-income housing tax credit under this section that:


             152          (A) a housing sponsor h [ issues ] IS ALLOWED h for a building; and
             153          (B) all of the taxpayers may claim with respect to the building if the taxpayers meet the
             154      requirements of this section; and
             155          (ii) the percentage of credit a taxpayer may claim:
             156          (A) under this section if the taxpayer meets the requirements of this section; and
             157          (B) as provided in the agreement between the taxpayer and the housing sponsor.
             158          [(c)] (d) (i) The aggregate annual tax credit which the agency may allocate in each of
             159      calendar years 1995 through 2000 pursuant to this section and Section 59-7-607 shall be an amount
             160      equal to 12.5 cents multiplied by the population of Utah for which taxpayers may take each year
             161      during the ten-year credit period under Section 42, Internal Revenue Code.
             162          (ii) For purposes of this section, the population of Utah shall be determined in accordance
             163      with Section 146(j), Internal Revenue Code.
             164          (3) (a) By October 1, 1994, the agency shall determine criteria and procedures for
             165      allocating the credit under this section and Section 59-7-607 and incorporate the criteria and
             166      procedures into the agency's qualified allocation plan.
             167          (b) The agency shall create the criteria under Subsection (3)(a) based on:
             168          [(a)] (i) the number of affordable housing units to be created in Utah for low and moderate
             169      income persons in the residential housing development of which the building is a part;
             170          [(b)] (ii) the level of area median income being served by the development;
             171          [(c)] (iii) the need for the credit for the economic feasibility of the development; and
             172          [(d)] (iv) the extended period for which the development commits to remain as affordable
             173      housing.
             174          (4) (a) Any housing sponsor that has received an allocation of the federal low-income
             175      housing tax credit and any applicant for an allocation of the federal low-income housing credit may
             176      apply to the agency for a credit under this section.
             177          (b) The agency may not require fees for applications of the credit under this section in
             178      addition to those fees required for applications for the federal low-income housing credit.
             179          (5) (a) The agency shall determine the amount of the credit to allocate to a qualifying
             180      housing sponsor in accordance with the qualified allocation plan of the agency.
             181          (b) (i) The agency shall allocate the credit to housing sponsors by issuing an allocation
             182      certificate to qualifying housing sponsors.


             183          (ii) The allocation certificate under Subsection (5)(b)(i) shall specify the allowed
             184      percentage of the federal low-income credit as determined by the agency.
             185          (c) The percentage specified in an allocation certificate may not exceed 100% of the
             186      federal low-income housing tax credit.
             187          (6) If a partnership, an S corporation, or a limited liability company qualifies for the credit
             188      provided in this section as a housing sponsor, it shall provide a copy of the allocation certificate
             189      to the taxpayers of the entity.
             190          (7) A taxpayer shall attach a copy of the allocation certificate to any return upon which a
             191      credit is claimed under this section.
             192          (8) (a) All elections made by the taxpayer pursuant to Section 42, Internal Revenue Code,
             193      shall apply to this section.
             194          (b) (i) If a taxpayer is required to recapture a portion of any federal low-income housing
             195      tax credit, the taxpayer shall also be required to recapture a portion of any state credits authorized
             196      by this section.
             197          (ii) The state recapture amount shall be equal to the percentage of the state credit that
             198      equals the proportion the federal recapture amount bears to the original federal low-income
             199      housing tax credit amount subject to recapture.
             200          (9) (a) Any credits returned to the agency in any year may be reallocated within the same
             201      time period as provided in Section 42, Internal Revenue Code.
             202          (b) Credits that are unallocated by the agency in any year may be carried over for allocation
             203      in the subsequent year.
             204          (10) (a) Amounts otherwise qualifying for the credit, but not allowable because the credit
             205      exceeds the tax, may be carried back three years or may be carried forward five years as a credit
             206      against the tax.
             207          (b) Carryover credits under Subsection (10)(a) shall be applied against the tax before the
             208      application of the credits earned in the current year and on a first-earned first-used basis.
             209          (11) Any credit taken in this section may be subject to an annual audit by the commission.
             210          (12) The agency shall provide an annual report to the Revenue and Taxation Interim
             211      Committee which shall include at least:
             212          (a) the purpose and effectiveness of the exemption; and
             213          (b) the benefits of the exemption to the state.


             214          Section 3. Effective date.
             215          This act takes effect for taxable years beginning on or after January 1, 2000.




Legislative Review Note
    as of 2-15-99 4:23 PM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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