Cal. Code Regs. tit. 4 § 10328

Current through Register 2024 Notice Reg. No. 45, November 8, 2024

Section 10328 - Conditions on Credit Reservations

(a) General. All reservations of Tax Credits shall be conditioned upon:

(1) timely project completion;

(2) receipt of amounts of Tax Credits no greater than necessary for financial feasibility and viability as a qualified low-income housing project throughout the extended use period;

(3) income targets as proposed in the application; and,

(4) rents for a low-income household shall not increase in any 12-month period more than the lesser of five percent plus the percentage increase in the cost of living as defined in paragraph (3) of subdivision (g) of Section 1947.12 of the Civil Code or ten percent of the lowest rental rate charged for that household at any time during the 12 months prior to the effective date of the increase, except as follows:

(A) The Executive Director may grant a waiver to exceed this limit provided that the owner shows that the proposed rent increase is necessary to ensure financial stability or fiscal integrity of the property.

(B) An owner may exceed this limit without a waiver in the following circumstances:

(i) to increase the rent up to 30 percent of the monthly income of the household occupying the unit.

(ii) for projects with terminated project-based rental assistance or operating subsidy as described in Section 10337(a)(3)(B); or

(iii) a transfer of a household to another unit in the same property that has a different bedroom count or transfer to a higher AMI designation, as required by a public regulatory agreement or deed restriction, due to a change in the household's income or occupancy from initial qualification.

(b) Preliminary reservations. Preliminary reservations of Tax Credits shall be subject to conditions as described in this subsection and applicable statutes. Reservations of Tax Credits shall be conditioned upon the Committee's receipt of the performance deposit described in Section 10335 and an executed reservation letter bearing the applicant's signature accepting the reservation within twenty (20) calendar days of the Committee's notice to the applicant of the preliminary reservation, except that Hybrid projects and simultaneous phased projects as defined in Section 10327(c)(2)(C) shall submit the acceptance of the reservation for the first application within five (5) business days of the Committee's notice to the applicant of the reservation for the corresponding second application. However, should the 20-day period for returning the executed reservation letter continue past December 15 of any year, an applicant may be required to execute and return the reservation letter in less than twenty (20) days in order that the reservation be effective. Failure to comply with any shortened period would invalidate the reservation offer and permit the Committee to offer a reservation to the next eligible project.

(c) Except for those applying under section 10326 of these regulations, applicants receiving a Credit reservation but who did not receive maximum points in the Readiness to Proceed point category shall provide the Committee with a completed updated application form no later than 180 days or 194 days, as applicable, following Credit reservation and start construction no later than 12 months following Credit reservation. Failure to start construction within 12 months following Credit reservation may result in rescission of Credit reservation.

Upon receipt of the updated application form, the Committee shall conduct a financial feasibility and cost reasonableness analysis for the proposed project, and determine if all conditions of the preliminary reservation have been satisfied. Substantive changes to the approved application, in particular, changes to the financing plan or costs, need to be explained by the applicant in detail, and may cause the project to be reconsidered by the Committee.

(d) Carryover Allocations. Except for those applying under section 10326 of these regulations, applicants receiving a Credit reservation shall satisfy either the Placed-in-service requirements pursuant to subsection 10322(i) or carryover allocation requirements in the year the reservation is made, pursuant to IRC Section 42(h)(1)(E) and these regulations, as detailed below. An application for a carryover allocation must be submitted no later than 20 days following the Credit reservation date, together with the applicable allocation fee, and all required documentation, except that the time for meeting the "10% test" and submitting related documentation, and owning the land, will be no later than twelve (12) months after the date of the carryover allocation. An application for a carryover allocation and allocation fee for the first application of a Hybrid project or a simultaneous phased project as defined in Section 10327(c)(2)(C) shall be submitted within five (5) business days of the Committee's notice to the applicant of the reservation for the corresponding second application.

(1) Additional documentation and analysis. The Executive Director may request, and the holder of a Credit reservation shall provide, additional documentation required for processing a carryover allocation.

(2) In addition to the requirements of the Internal Revenue Code, to receive a carryover allocation an applicant shall provide evidence that applicant has maintained site control from the time of the initial application and, if the land is not already owned, will continue to maintain site control until the time for submitting evidence of the land's purchase.

(3) Certification. The Committee shall require a certification from an applicant that has received a reservation, that the facts in the application continue to be true before a carryover allocation is made.

(e) Placed-in-service. The applicant shall submit documentation required by Section 10322(i).

(f) Additional Conditions to Reservations and Allocations of Tax Credits. Additional conditions, including cancellation, disqualification and other sanctions may be imposed by the Committee in furtherance of the purposes of the Tax Credits programs.

(g) Reservation Exchange. A project with a reservation of Federal Credit pursuant to Section 10325 and a carryover allocation pursuant to Section 10328(d) and IRC Code §42(h)(1)(E) that meets any of the following criteria may elect to return all of the Federal Credit in exchange for a new reservation and allocation of Federal Credits. The reservation and carryover allocation of the Federal Credits returned pursuant to this subdivision shall be deemed cancelled by mutual consent pursuant to a written agreement executed by the Committee and the applicant specifying the returned credit amount and the effective date on which the credits are deemed returned. The Committee shall concurrently issue a new reservation of Federal Credits to the project in the amount of the Federal Credits returned by the project to the Committee.

(1) A High-Rise Project that returns all of the Federal Credit only during January of the calendar year immediately following the calendar year in which the initial reservation and carryover allocation were made.

(2) A project that prior to the placed-in-service deadline merits additional time to place in service when development was significantly delayed during construction due to physical damage to the development directly caused by a disaster, including but not limited to, fires, floods, or earthquakes. In considering a request the Executive Director may consider at his or her discretion, among other things, the extent of the damage, the length of the delay, the time remaining until the project's placed in service deadline, and the circumstances causing the physical damage.

(3) A project reserved Federal credit established by the Further Consolidated Appropriations Act, 2020 or the Consolidated Appropriations Act, 2021 that returns all of the Federal Credit only during January of the calendar year immediately following the calendar year in which the initial reservation and carryover allocation were made.

(4) A Waiting List project that returns all of the Federal Credit only during the calendar year immediately following the calendar year in which the initial reservation and carryover allocation were made.

(5) Notwithstanding paragraph (4), a Waiting List project that returns all of the Federal Credit prior to December 31, 2023, immediately following when the initial reservation and carryover allocation were made.

(6) A project reserved and allocated Federal Credit that returns all of the Federal Credit due to circumstances beyond the applicant's control and subject to the prior written approval of the Executive Director at his or her sole discretion.

(h) CTCAC may contract with accountants and contractors or construction engineers to review the accuracy and reasonableness of a subset of final cost certifications submitted each year. The owner of a project selected for review and the accountant who prepared the final cost certification for such a project shall provide all requested information and generally facilitate the review.

Cal. Code Regs. Tit. 4, § 10328

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. New section filed 8-19-97; operative 2-18-97 pursuant to Health and Safety Code section 50199.17 (Register 97, No. 34).
2. Amendment of subsection (b)(1)(B), repealer of subsection (b)(1)(C), subsection relettering, and amendment of subsection (d) filed 7-21-98; operative 11-20-97 and 12-11-97 pursuant to Health and Safety Code section 50199.17 (Register 98, No. 30).
3. Amendment of subsection (a)(3) and repealer of subsection (a)(4) filed 7-26-99; operative 6-3-99 pursuant to Health and Safety Code section 50199.17 (Register 99, No. 31).
4. Readoption of emergency action filed 7-26-99, operative 6-3-99; filed 4-3-2000 as an emergency; operative 10-12-99 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 14).
5. Readoption of emergency action filed 4-3-2000, operative 10-12-99; filed 4-3-2000 as an emergency; operative 2-9-2000 pursuant to Health and Safety Code section 50199.17, with amendment of section (Register 2000, No. 14).
6. Emergency readoption without change filed 9-22-2000 of an action originally filed 4-3-2000; operative 6-9-2000 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 38).
7. Emergency readoption without change filed 10-23-2000 of an action originally filed 4-3-2000; operative 9-27-2000 pursuant to Health and Safety Code section 50199.17 (Register 2000, No. 43).
8. 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.
9. 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).
10. 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.
11. 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).
12. 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).
13. 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).
14. 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).
15. 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).
16. 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).
17. 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).
18. Amendment of subsection (d)(1) 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).
19. New subsection (g) filed 4-11-2012; operative upon adoption by the committee on 2-1-2012 pursuant to Health and Safety Code section 50199.17(c) (Register 2012, No. 15).
20. Amendment of subsections (c)-(d)(1), (e) and (g) 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).
21. Amendment of subsection (c) and new subsection (h) 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).
22. Amendment of subsection (g) and new subsections (g)(1)-(2) 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).
23. Amendment of subsection (c) filed 2-7-2019; operative upon adoption by the California Tax Credit Allocation Committee on 12-12-2018 pursuant to Health and Safety Code section 50199.17(c). Submitted to OAL for filing and printing only pursuant to pursuant to Health and Safety Code section 50199.17 (Register 2019, No. 6).
24. New subsection (g)(3) filed 8-14-2020; operative 6/17/2020. Submitted to OAL for filing and printing only pursuant to Health and Safety Code section 50199.17 (Register 2020, No. 33).
25. Amendment of subsections (g) and (g)(3) filed 7-29-2021; operative upon adoption by the California Tax Credit Allocation Committee on 6-16-2021 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. 31).
26. Amendment of subsections (c) and (g)(2) and amendment of Note filed 8-8-2022; operative upon adoption by the California Tax Credit Allocation Committee on 7-20-2022 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 2022, No. 32).
27. Amendment of subsections (g)(1)-(3) and new subsections (g)(4)-(5) filed 2-8-2023 as an emergency; operative 2/8/2023 (Register 2023, No. 6). A Certificate of Compliance must be transmitted to OAL by 8-7-2023 or emergency language will be repealed by operation of law on the following day.
28. Amendment of subsections (d) and (g)(2) filed 3-13-2023; operative upon adoption by the California Tax Credit Allocation Committee on 1-18-2023 pursuant to Health and Safety Code section 50199.17. Submitted to OAL for filing and printing only pursuant to Government Code section 11343.8 (Register 2023, No. 11).
29. Although 2-8-2023 emergency order was scheduled to expire by operation of law on 8-8-2023, amendment replacing 2-8-2023 emergency order filed 6/21/2023; operative upon adoption by the California Tax Credit Allocation Committee on 5-10-2023 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 2023, No. 25).
30. Editorial correction renumbering History 29 (Register 2024, No. 11).
31. Amendment of subsection (e) filed 3-12-2024; operative 1/24/2024 upon adoption by the California Tax Credit Allocation Committee 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. 11).
32. New subsections (a)(4)-(a)(4)(B)(iii) 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).