Cal. Code Regs. tit. 4 § 10320

Current through Register 2024 Notice Reg. No. 43, October 25, 2024

Section 10320 - Actions by the Committee

(a) Meetings. Except for reservations made pursuant to Section 10325(h) of these Regulations, Reservations of Tax Credits shall occur only at scheduled meetings of the Committee, which shall announce application-filing deadlines and the approximate dates of reservation meetings as early in the year as possible.

(b) Approvals required by this Section 10320(b) shall not be unreasonably withheld if all of the following requirements, as applicable, are satisfied:

(1) No allocation of the Federal or State Credits, or ownership of a Tax Credit project, may be transferred without prior written approval of the Executive Director. In the event that prior written approval is not obtained, the Executive Director may assess negative points pursuant to section 10325(c)(2)(M), in addition to other remedies. Subparagraphs (A) through (C) apply to all ownership or Tax Credit transfers requested after January 31, 2014. Subparagraphs (A) through (E) apply to all ownership or Tax Credit transfers requested after April 3, 2024:

(A) Any transfer of project ownership (including changes to any general partner, member, or equivalent responsible party), or allocation of Tax Credits shall be evidenced by a written agreement between the parties to the transfer, including agreements entered into by the transferee and the Committee.

(B) The entity replacing a party or acquiring ownership or Tax Credits shall be subject to a "qualifications review" by the Committee to determine if sufficient project development and management experience is present for owning and operating a Tax Credit project. Information regarding the names of the purchaser(s) or transferee(s), and detailed information describing the experience and financial capacity of said persons, shall be provided to the Committee. Any general partner change during the 15-year federal compliance and extended use period must be to a party earning equal capacity points pursuant to Section 10325(c)(1)(A) as the exiting general partner. At a minimum this must be three (3) projects in service more than three years, or the demonstrated training required under Section 10326(g)(5). Two of the three projects must be Low Income Housing Tax Credit projects in California. If the new general partner does not meet these experience requirements, then substitution of general partner shall not be permitted. The requirements of this paragraph apply to a change to any general partner, member, or equivalent responsible party where an exiting party meets the experience capacity and the remaining party does not have experience equal to the minimum stated above.

(C) The transferor shall deliver all tenant files, inspection records, financial statements, and reserve balances to the transferee prior to or concurrent with the transfer. Failure to deliver such records may subject the transferor to negative points or a fine.

(D) The Executive Director shall not approve a transfer if, in any of the five calendar years prior to the transfer date or in the year to date of the transfer but not earlier than April 3, 2024, the owner has increased the rent for any low-income household in excess of the amounts described in Section 10328(a)(4).

(E) The transferee shall annually certify that they have not increased the rent for any low-income household in excess of the amounts described in Section 10328(a)(4).

(2) In addition to any applicable requirements set forth in Section 10320(b)(1), all Transfer Events shall be subject to the prior written approval of the Executive Director. In the event that prior written approval is not obtained, the Executive Director may assess negative points pursuant to section 10325(c)(2)(M), in addition to other remedies. The following requirements apply to all Transfer Events for which approval is requested on or after October 21, 2015:

(A) Prior to a Transfer Event, the owner of the project shall submit to the Executive Director a Qualified Capital Needs Assessment. In the case of a Transfer Event in which a third-party lender is providing financing, the Qualified Capital Needs Assessment shall be commissioned by said third-party lender.

(B) The entity which shall own the project subsequent to the Transfer Event (the "Post Transfer Owner") shall covenant to the Committee (the "Capital Needs Covenant") that the Post Transfer Owner (and any assignee thereof) shall:

(i) set aside at the closing of the Transfer Event adequate funds to perform the Short Term Work (the "Short Term Work Reserve Amount");

(ii) perform the Short Term Work within three (3) years from the date of the Transfer Event;

(iii) make deposits to reserves as are necessary to fund the Long Term Work, taking into account any balance in replacement reserve accounts upon the conclusion of the Transfer Event beyond those required by clause (i). Notwithstanding the foregoing, the Post Transfer Owner shall have no obligation to fund any reserve amount from annual operations to the extent that the funding of the reserve causes the project to have a debt service coverage ratio of less than 1.00 to 1.00. In calculating the debt service coverage ratio for the purposes herein, the property management fee shall not exceed the greater of (a) 7% the project's effective gross income, or (b) such amount approved by HUD or USDA, as applicable. Any property management fee in excess of these limitations shall be subordinate to the funding of the required reserves and shall not be considered when calculating the debt service coverage ratio; and

(iv) complete the Long Term Work when required, or prior thereto, pursuant to the Qualified Capital Needs Assessment.

The Executive Director may waive or modify the requirements of this Section 10320(b)(2)(A) and (B) if the owner can demonstrate that the Transfer Event will not produce, prior to any distributions of Net Project Equity to parties related to the sponsor, developer, limited partner(s) or general partner(s), sufficient Net Project Equity to fund all or any portion of the work contemplated by the Qualified Capital Needs Assessment. There shall be a presumption that a Transfer Event has insufficient Net Project Equity (and the requirements of this Section 10320(b)(2)(A) and (B) shall be waived) if no Net Project Equity from the Transfer Event is distributed to parties related to the sponsor, developer, general partner(s) or limited partner(s) of the owner other than a distribution or a payment to the limited partner(s) of the selling entity in the amount equal to, or less than, all federal, state, and local taxes incurred by the limited partner(s) as a result of the Transfer Event.

(3) The Capital Needs Covenant shall at all times be subordinate to any deed of trust given to any third party lender to a project. The owner of a project subject to a Capital Needs Covenant shall certify compliance with the terms of said Capital Needs Covenant to CTCAC annually for the term of the Capital Needs Covenant on a form to be developed by the Executive Director. Failure to comply with the terms of the Capital Needs Covenant may subject the owner to negative points and/or a ban on buying or receiving future properties.

(4) If a projects seeks to receive a new reservation of 9% or 4% tax credits concurrently with a Transfer Event or during the time that the project is subject to a Capital Needs Covenant, the following provisions shall apply in lieu of paragraph (2):

(A) The applicant shall submit a Qualified Capital Needs Assessment. In cases in which a third-party lender is providing financing, the Qualified Capital Needs Assessment shall be commissioned by said third-party lender.

(B) The rehabilitation scope of work shall include all of the Short Term Work. The applicant may receive eligible basis for the costs of the Short Term Work only if the applicant can demonstrate that the Short Term Work was funded by one of the following:

(i) a credit from the seller of the project equal to the costs of Short Term Work.

(ii) a reduction in the purchase price of the project as compared to the purchase price of the project had the project not been subject to the Transfer Event requirement, as shown by an appraisal that calculates the impact of the Short Term Work requirement on value.

(iii) general partner equity.

(iv) developer fee contributed to the project (a deferred developer fee does not qualify).

(C) After the Transfer Event giving rise to the covenant required pursuant to Section 10320(b)(2)(B) (the "Initial Transfer"), if the project will be subsequently transferred in connection with the closing of the new reservation of 9% or 4% credits (a "Subsequent Transfer"), any increase in acquisition price (if the Initial Transfer was a sale) or the project valuation (if the Initial Transfer was a refinancing) between the Initial Transfer and the Subsequent Transfer which is attributable to a reduction in the amount of annual deposits into the replacement reserve account from those required pursuant to Section 10320(b)(2)(B)(iii) because all or a portion of the Long Term Work will be performed in connection with the new reservation of 9% or 4% credits, must be evidenced in the form of (i) a seller carryback note or (ii) a general partner equity contribution.

(D) Upon the closing of the syndication of the new 9% or 4% credits reserved for the project, any Capital Needs Covenant shall automatically terminate without any further action of the project owner and/or the Committee.

The Executive Director shall waive or modify the requirements of this Section 10320(b)(4) if the owner can demonstrate that the Transfer Event will not produce, prior to any distributions of Net Project Equity to parties related to the sponsor, developer, limited partner(s) or general partner(s), sufficient Net Project Equity to fund all or any portion of the work contemplated by the Qualified Capital Needs Assessment. There shall be a presumption that a Transfer Event has insufficient Net Project Equity if no Net Project Equity from the Transfer Event is distributed to parties related to the sponsor, developer, general partner(s) or limited partner(s) of the owner other than a distribution or a payment to the limited partner(s) of the selling entity in the amount equal to, or less than, all federal, state, and local taxes incurred by the limited partner(s) as a result of the Transfer Event.

Sections 10320(b)(4)(B) and 10320(b)(4)(C) shall not be applicable to any project with an existing tax credit regulatory agreement with a remaining term of five (5) or less years.

(5) No management company of an existing or new tax credit project shall be replaced without prior written approval of the Executive Director. In the event that prior written approval is not obtained, the Executive Director may assess negative points or a fine. With respect to 4% tax credit projects, management companies ineligible for at least two management company experience points pursuant to Section 10325(c)(1)(B) shall obtain training in project operations, on-site certification, fair housing law, and manager certification in IRS Section 42 program requirements from CTCAC or a CTCAC-approved, nationally recognized entity. The out-going management company shall deliver all tenant files, inspection records, financial statements, and reserve balances to the in-coming management company prior to or concurrent with the transfer. Failure to deliver such records may subject the out-going management company to negative points or a fine.

(6) Except for resyndication applications without a distribution of Net Project Equity, if a project seeks to receive a new reservation of 9% or 4% tax credits, any uncorrected Form(s) 8823 for life and safety violations (life-threatening and non-life threatening) and for Uniform Physical Condition Standards violations that are in existence at the time of the CTCAC application must be corrected by the project owner that received the Form(s) 8823. The resyndication application shall not include any costs to correct these Form(s) 8823.

(7) An applicant seeking to (1) demolish or similarly alter any of the existing structures currently subject to CTCAC regulatory restrictions when seeking a new reservation of 9% and/or 4% tax credits; and/or (2) separate an existing project currently subject to CTCAC regulatory restrictions into multiple projects must request and receive prior written approval of the Executive Director. Projects that involve the demolition of existing residential units or separating an existing project must increase the unit count by (i) 25 or (ii) 50% of the existing demolished units, whichever is greater, unless, for existing SRO projects, waived by the Executive Director provided that the applicant demonstrates that full compliance would be impractical.

(8) A project owner seeking to sell a portion of vacant or unused land must request and receive prior written approval of the Executive Director. The sales proceeds must either:

1) be contributed (not loaned) to a new multifamily affordable housing restricted project; or

2) reduce rents at the existing property by the aggregate amount of the proceeds. The project owner must request and receive prior written approval of the Executive Director.

(c) CTCAC shall initially subordinate its regulatory contract to a permanent lender but thereafter shall not subordinate existing regulatory contracts to acquisition or refinancing debt, except in relation to new Deeds of Trust for rehabilitation loans, FHA-insured loans, restructured public loans, or as otherwise permitted by the Executive Director. At the request of the owner, CTCAC shall enter into a stand-still agreement permitting the acquisition or refinance lender 60 days to work with the owner to remedy a breach of the regulatory contract prior to CTCAC implementing any of the remedies in the regulatory contract, except that CTCAC shall not enter into a stand-still agreement related to a Transfer Event requested on or after October 21, 2015 unless the conditions of Section 10320(b)(2) have been satisfied. If CTCAC enters into a stand-still agreement related to a Transfer Event, Sections 10320(b)(2), (b)(3) and (b)(4) shall apply to the project.

(d) False information. Upon being informed, or finding, that information supplied by an applicant, any person acting on behalf of an applicant, or any team member identified in the application, pursuant to these regulations, is false or no longer true, and the applicant has not notified CTCAC in writing, the Committee may take appropriate action as described in H & S Code Section 50199.22(b) and in section 10325(c)(2) of these regulations. Additionally the Executive Director may assess negative points to any or all members of the development team as described in Section 10322(h)(5).

(e) CTCAC shall not enter into a qualified contract, as defined in IRC Section 42(h)(6)(F).

Cal. Code Regs. Tit. 4, § 10320

Note: Authority cited: Section 50199.17, Health and Safety Code. Reference: Sections 12206, 17058 and 23610.5, Revenue and Taxation Code; and Sections 50199.4, 50199.5, 50199.6, 50199.7, 50199.8, 50199.9, 50199.10, 50199.11, 50199.12, 50199.13, 50199.14, 50199.15, 50199.16, 50199.17, 50199.18, 50199.20, 50199.21 and 50199.22, Health and Safety Code.

Note: Authority cited: Section 50199.17, Health and Safety Code. Reference: Sections 12206, 17058 and 23610.5, Revenue and Taxation Code; and Sections 50199.4, 50199.5, 50199.6, 50199.7, 50199.8, 50199.9, 50199.10, 50199.11, 50199.12, 50199.13, 50199.14, 50199.15, 50199.16, 50199.17, 50199.18, 50199.20, 50199.21 and 50199.22, Health and Safety Code.

1. Repealer and new section filed 7-30-90 as an emergency; operative 7-17-90 (Register 90, No. 41). A Certificate of Compliance must be transmitted to OAL by 11-14-90 or emergency language will be repealed by operation of law on the following day. This action is not subject to review by OAL (Health and Safety Code section 50199.17). For prior history, see Register 89, No. 2.
2. Readoption as an emergency of action originally filed as emergency on 7-30-90 filed 11-26-90; operative 11-13-90 (Register 91, No. 4). A Certificate of Compliance must be transmitted to OAL by 3-26-91 or emergency language will be repealed by operation of law on the following day.
3. Readoption of emergency action filed 11-26-90, filed 1-4-91 as an emergency; operative 12-18-90 pursuant to Health and Safety Code section 50199.17 (Register 91, No. 8). The regulation will be repealed by operation of law on 4-17-91 unless, before that date the committee has completed the adoption process pursuant to Health and Safety Code section 50199.17(b).
4. Readoption of emergency actions filed 11-26-90 and 1-4-91 as an emergency filed 4-19-91 as an emergency; operative 3-28-91 pursuant to Health and Safety Code section 50199.17 (Register 91, No. 21). A Certificate of Compliance must be transmitted to OAL on 7-26-91 or emergency language will be repealed by operation of law on the following day.
5. Certificate of Compliance as to 3-28-91 order transmitted to OAL 7-16-91 and filed 8-15-91 pursuant to Health and Safety Code section 50199.17(b) (Register 91, No. 48).
6. Amendment of subsections (a), (d) and (e) filed 3-16-92 as an emergency; operative 1-16-92 (Register 92, No. 25). A Certificate of Compliance must be transmitted to OAL 7-14-92 or emergency language will be repealed by operation of law on the following day.
7. Repealer and new section filed 7-1-92 as an emergency; operative 5-15-92 (Register 92, No. 28). A Certificate of Compliance must be transmitted to OAL by 11-2-92 or emergency language will be repealed by operation of law on the following day.
8. Repealer and new section refiled, with amendment of subsection (b), 11-9-92 as an emergency; operative 8-31-92 (Register 92, No. 46). A Certificate of Compliance must be transmitted to OAL 3-9-93 or emergency language will be repealed by operation of law on the following day.
9. Repealer and new section refiled 1-28-93 as an emergency; operative 12-29-92 (Register 93, No. 5). A Certificate of Compliance must be transmitted to OAL 5-28-93 or emergency language will be repealed by operation of law on the following day.
10. Repealer and new section refiled 6-15-93 as an emergency; operative 4-2-93 pursuant to Health and Safety Code 50199.17 (Register 93, No. 25). A Certificate of Compliance must be transmitted to OAL by 7-31-93 or emergency language will be repealed by operation of law on the following day.
11. Repealer and new section refiled 10-6-93 as an emergency; operative 7-21-93 pursuant to Health and Safety Code section 50199.17 (Register 93, No. 41). A Certificate of Compliance must be transmitted to OAL by 11-18-93 or emergency language will be repealed by operation of law on the following day.
12. Editorial correction of History 10 (Register 93, No. 41).
13. Repealer and new section refiled 12-20-93 as an emergency; operative 11-18-93 pursuant to Health and Safety Code section 50199.17 (Register 93, No. 52). A Certificate of Compliance must be transmitted to OAL by 3-18-94 or emergency language will be repealed by operation of law on the following day.
14. Repealer and new section refiled with amendments 5-3-94 as an emergency; operative 1-25-94 pursuant to Health and Safety Code section 50199.17 (Register 94, No. 18). A Certificate of Compliance must be transmitted to OAL by 5-25-94 or emergency language will be repealed by operation of law on the following day.
15. Repealer and new section refiled 6-29-94 as an emergency; operative 5-28-94 pursuant to Health and Safety Code section 50199.17 (Register 94, No. 26).
16. Repealer and new section refiled 10-24-94 as an emergency; operative 9-22-94 pursuant to Health and Safety Code section 50199.17 (Register 94, No. 43). A Certificate of Compliance must be transmitted to OAL by 1-20-95 or emergency language will be repealed by operation of law on the following day.
17. Repealer and new section refiled 1-17-95 as an emergency, including amendment of subsection (e) and N ote ; operative 1-20-95 pursuant to Health and Safety Code section 50199.17 (Register 95, No. 3). A Certificate of Compliance must be transmitted to OAL by 5-22-95 or emergency language will be repealed by operation of law on the following day.
18. Repealer and new section refiled 7-7-95 as an emergency; operative 5-20-95 pursuant to Health and Safety Code section 50199.17 (Register 95, No. 27). A Certificate of Compliance must be transmitted to OAL by 9-17-95 or emergency language will be repealed by operation of law on the following day.
19. New section refiled 7-17-95 as an emergency; operative 5-25-95 pursuant to Health and Safety Code section 50199.17 (Register 95, No. 29). A Certificate of Compliance must be transmitted to OAL by 9-22-95 or emergency language will be repealed by operation of law on the following day.
20. New section, including amendment of section and N ote, refiled 3-18-96 as an emergency; operative 9-22-95 pursuant to Health and Safety Code section 50199.17 (Register 96, No. 12). A Certificate of Compliance must be transmitted to OAL by 1-20-96 or emergency language will be repealed by operation of law on the following day.
21. Editorial correction inserting inadvertently omitted last sentence of subsection (b) (Register 96, No. 13).
22. New section refiled 3-18-96 as an emergency; operative 9-26-95 pursuant to Health and Safety Code section 50199.17 (Register 96, No. 13). A Certificate of Compliance must be transmitted to OAL by 1-24-96 or emergency language will be repealed by operation of law on the following day.
23. New section refiled 3-18-96 as an emergency; operative 10-30-95 pursuant to Health and Safety Code section 50199.17 (Register 96, No. 14). A Certificate of Compliance must be transmitted to OAL by 2-27-96 or emergency language will be repealed by operation of law on the following day.
24. Repealer and new section filed 8-19-97; operative 2-18-97 pursuant to Health and Safety Code section 50199.17 (Register 97, No. 34).
25. Emergency amendment effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on February 16, 2001, filed with the Secretary of State on March 5, 2001 (Register 2001, No. 10). Editor's Note: On December 20, 2000, the Committee adopted and made effective an emergency amendment to an earlier version of this regulation; this amendment was superseded by the February 16, 2001 amendment. The December 20, 2000 amendment was filed with the Secretary of State on March 5, 2001; it was not printed in the California Code of Regulations.
26. Emergency readoption without change filed 11-19-2001 of an action most recently filed 3-5-2001; operative 9-17-2001 pursuant to Health and Safety Code section 50199.17 (Register 2001, No. 47).
27. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on March 19, 2003, filed with the Secretary of State on 5-8-2003 (Register 2003, No. 19). Editor's Note: These March 19, 2003 emergency regulations supersede prior emergency regulations adopted and made effective by the Committee on January 29, 2003. The January 29 emergency regulations were filed with the Secretary of State on May 8, 2003, but were never printed in the California Code of Regulations.
28. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on February 18, 2004, filed with the Secretary of State on 4-26-2004. These February 18, 2004 emergency regulations supersede prior emergency regulations (Register 2004, No. 18).
29. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on June 16, 2004, filed with the Secretary of State on 7-19-2004. These June 16, 2004 emergency regulations supersede prior emergency regulations (Register 2004, No. 30).
30. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on October 5, 2004, filed with the Secretary of State on 12-16-2004. These October 5, 2004 emergency regulations supersede prior emergency regulations (Register 2004, No. 51).
31. Emergency adoption effective pursuant to Health and Safety Code section 50199.17 upon adoption by the Committee on February 16, 2005, filed with the Secretary of State on 4-4-2005. These February 16, 2005 emergency regulations supersede prior emergency regulations (Register 2005, No. 14).
32. Emergency readoption of action adopted by the Committee 2-16-2005 and filed with the Secretary of State 4-4-2005; refiled 11-1-2005; readopted by the Committee and effective 9-28-2005 pursuant to Health and Safety Code section 50199.17 (Register 2005, No. 44).
33. Emergency adoption filed 3-23-2006; conclusively presumed to be an emergency and effective upon adoption by the Committee on 1-18-2006 pursuant to Health and Safety Code section 50199.17(c) and (d). This filing supercedes prior emergency regulations and is exempt from the Administrative Procedure Act except as provided in Health and Safety Code section 50199.17(a) and (b) (Register 2006, No. 12).
34. New section replacing prior emergency adoption filed 7-22-2010; operative 2-17-2010. Submitted to OAL for printing only pursuant to Health and Safety Code section 50199.17 (Register 2010, No. 30).
35. Amendment of subsections (b) and (b)(2) filed 4-18-2011; operative date of the amendments is immediately upon adoption by the committee pursuant to Health and Safety Code section 50199.17(c) (Register 2011, No. 16).
36. Amendment of subsections (b)-(b)(2) filed 3-28-2014; operative upon adoption by the California Tax Credit Allocation Committee on 1-29-2014 pursuant to Health and Safety Code section 50199.77(c). Submitted to OAL for printing only (Register 2014, No. 13).
37. Amendment of subsection (b), new subsection (b)(1), redesignation of former subsections (b)(1)-(2) as subsections (b)(1)(A)-(B), new subsections (b)(2)-(c) and subsection relettering filed 12-28-2015; operative upon adoption by the Tax Credit Allocation Committee on 10/21/2015 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2016, No. 1).
38. Amendment of subsection (b)(2)(B)(ii) and (b)(2)(B)(iv), repealer of subsection (b)(2)(C), amendment of subsection (b)(4), new subsection (b)(4)(A), subsection relettering, new subsections (b)(4)(B)(i)-(iv) and amendment of newly designated subsection (b)(4)(D) filed 2-9-2017; operative upon adoption by the Tax Credit Allocation Committee on 12/14/2016 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17(c) (Register 2017, No. 6).
39. Amendment of subsection (b)(1), new subsection (b)(1)(C), amendment of subsection (b)(2), new subsection (b)(5), amendment of subsection (d) and new subsection (e) filed 2/22/2018; operative upon adoption by the Tax Credit Allocation Committee on 12-13-2017 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2018, No. 8).
40. Amendment of subsection (b)(1)(B), new subsections (b)(2)(6)-(8) and amendment of Note filed 2-26-2021; operative upon adoption by the California Tax Credit Allocation Committee on 12-20-2020 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2021, No. 9).
41. Editorial correction establishing correct subsection hierarchy and correcting HISTORY 40 (Register 2022, No. 18).
42. Amendment of subsection (b)(1), new subsections (b)(1)(D)-(E) and amendment of subsection (b)(7) filed 5-20-2024; operative upon adoption by the California Tax Credit Allocation Committee on 4/3/2024 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to Government Code section 11343.8 (Register 2024, No. 21).