Section 10317. State Tax Credit Eligibility Requirements.

• (a) General. In accordance with the R & T Code Sections 12205, 12206, 17057.5, 17058, 23610.4 and 23610.5, there shall be allowed as a Credit against the “tax” (as defined by R & T Code Section 12201) a State Tax Credit for Federal Credit Ceiling projects pursuant to subsection (g)(1)(A) of

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Regulations Section 10317

Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code and Tax Exempt Bond Projects pursuant to subsection (g)(1)(B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code in an amount equal to no more than 30 percent (30%) of the project’s requested construction-related eligible basis. Except for State Farmworker Credits and projects meeting subparagraphs (A) through (D) in subsection (c)(4) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code, the maximum State Tax Credit award amount for a Tax Exempt Bond Project pursuant to subsection (g)(1)(A) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code, or basis described in paragraph (f) below, is 13 percent (13%) of that project’s requested eligible basis. The maximum State Farmworker Credit award amount for a Tax-Exempt Bond Project, or basis described in paragraph (f) below, is 75 percent (75%) of that project’s requested eligible basis. The maximum State Credit award for a project meeting subparagraphs (A) through (D) in subsection (c)(4) of 12206 of the Revenue and Taxation Code, or basis described in paragraph (f) below, is 95 percent (95%) of that project’s requested eligible basis. Insufficient credits due to a low appraised value as described in Subparagraph (C) shall be evidenced as defined in Section 10322(h)(9)(A) of these Regulations: the sum of third-party debt encumbering the seller’s property exceeds the appraised value. Substantial rehabilitation as described in Subparagraph (D) shall be evidenced by Section 10326(g)(7) of these Regulations. Award amounts shall be computed in accordance with IRC Section 42, except as otherwise provided in applicable sections of the R & T Code. For purposes of calculating the final State Tax Credit amount on the Form(s) 3521A, the project’s actual eligible basis may be used.

• (b) Allocation of Federal Tax Credits required. State Tax Credit recipients shall have first been awarded Federal Tax Credits, or shall qualify for Tax Credits under Section 42(h)(4)(B) of the IRC, as required under H & S Code Section 50199.14(e) and the R & T Code Section 12206(b)(1)(A). State Farmworker Credits are exempt from this requirement.

• (c) Limit on Credit amount.

• (1) Except for applications described in paragraph (d) below, all credit ceiling applications may request State credits provided the project application is not requesting the federal 130% basis adjustment for purposes of calculating the federal credit award amount. Projects are eligible for State credits regardless of their location within a federal Qualified Census Tract (QCT) or a Difficult Development Area (DDA). Notwithstanding paragraph (d) below, applications for the Federal Credit established by the Further Consolidated Appropriations Act, 2020 or the Consolidated Appropriations Act, 2021 are not eligible for State Tax Credits.

  • (2) An applicant requesting state credits shall not reduce basis related to federal tax credits except to reduce requested basis to the project’s threshold basis limit or the credit request to the limits described in Section 10325(f)(9)(C). CTCAC shall revise the basis and credit request if the applicant fails to meet this requirement.

  • (3) In the event that reservations of state credits to credit ceiling applications exceed the amount of state credits available, CTCAC post-reservation shall designate applications for which there are insufficient state credits as difficult development area (DDA) projects pursuant to Section 10327(d)(3) and exchange state credits for federal credits in an amount that will yield equal equity based solely on the tax credit factors stated in the application and may exceed the maximum annual Federal Tax Credits in Section 10325(f)(9)(C).

  • (4) For projects applying for State Tax Credits in paragraph (j), the maximum request for any one project in any funding round shall not exceed Two Hundred Thousand ($200,000) dollars per Tax Credit Unit. Farmworker Housing projects are exempt from this requirement.

• (d) (1) Applications for projects located within a QCT or DDA and with at least 50% of the LowIncome Units designated as Special Needs units may request both the federal 130% basis boost and State credits.

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Regulations Section 10317

• (2) Applications for projects requesting 4% federal tax credits plus State Farmworker Credits within a QCT or DDA may request both the federal 130% basis boost and State credits.

• (3) New construction applications for projects requesting 4% federal tax credits plus State Credits pursuant to subsection (g)(1)(B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code within a QCT or DDA may request both the federal 130% basis boost and State credits.

• (4) Applications for the Federal Credit established by the Further Consolidated Appropriations Act, 2020 or the Consolidated Appropriations Act, 2021, including Special Needs projects described in this section (d), are not eligible for State Tax Credits.

• (e) State Tax Credit exchange. Applications for projects not possessing one of the allocation priorities described in subsection (d) may also include a request for State Tax Credits. During any reservation cycle and/or following any reservation or allocation of State Tax Credits to all applications meeting the above allocation priorities, remaining balances of State Tax Credits maybe awarded to applicants having received a reservation of Federal Tax Credits during the same year, in exchange for the “equivalent” amount of Federal Tax Credits. Said exchanges shall be offered at the discretion of the Executive Director, who may consider and account for any fiscal or administrative impacts on the project or applicant pool when deciding to whom he/she will offer State Tax Credits.

• (f) Acquisition Tax Credits. State Tax Credits for acquisition basis are allowed only for projects meeting the definition of a project “at risk of conversion,” pursuant to Section 42 and R & T Code Section 17058(c)(6).

• (g) Tax-Exempt Bond Financing.

  • (1) Projects financed under the tax-exempt bond financing provisions of Section 42(h)(4)(B) of the IRC, subsection (g)(1)(A) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code and Section 10326 of these regulations may apply for State Tax Credits if the following conditions are met:

    • (A) the project is comprised of 100% Tax Credit Units. Excepted from this rule are projects proposed for acquisition and rehabilitation that were developed under the HUD Section 236 or 202 programs, and are subject to those programs’ use restrictions. Projects under those circumstances may propose a lesser percentage of Tax Credit Units to accommodate existing over-income residents who originally qualified under Section 236 or 202 income eligibility;

    • (B) one or more buildings is not eligible for the 130% basis adjustment, in which case the State Tax Credits shall be available only for the buildings not eligible for the 130% basis adjustment. This paragraph shall not apply to projects referenced in Section 10317(d);

    • (C) State Tax Credits will not be available to projects that have already received a reservation of 4% credit in the previous year; and

  • (2) For projects financed under the tax-exempt bond financing provisions of Section 42(h)(4)(B) of the IRC, subsection (g)(1)(B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code and Section 10326 of these regulations applying for State Tax Credits. State Tax Credits will not be available to projects that have already received a reservation of 4% credit in a previous year.

• (h) State Farmworker Credit.

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Regulations Section 10317

• (1) Applicants may request State Farmworker Credits for eligible Farmworker Housing in combination with federal credits, or they may request State Farmworker Credits only. If seeking a federal Credit Ceiling reservation, applicants may apply only during competitive rounds as announced by CTCAC and shall compete under the provisions of Section 10325(c) et. seq. If requesting federal credits for use with tax exempt bond financing, or State Farmworker Credits only, applicants may apply over the counter and shall meet the threshold requirements for projects requesting 4% federal credits.

  • (2) If more than one applicant is requesting nine percent (9%) federal credits in combination with State Farmworker Credits during a competitive round, CTCAC shall award available State Farmworker Credits to the highest scoring Farmworker Housing application that will receive a reservation of federal credits.

  • (3) If available State Farmworker Credits are inadequate to fully fund a pending request for eligible Farmworker Housing, CTCAC may reserve a forward commitment of subsequent year’s State Farmworker Credits for that project alone.

• (i) State Tax Credit Allocations pursuant to subsection (g)(1)(A) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code to bond financed projects. The following parameters apply:

  • (1) In calendar years where there are additional state tax credits available to bond financed projects, an amount equal to fifteen percent (15%) of the annual State Tax Credit authority will be available for acquisition and/or rehabilitation bond financed projects, with a ranking priority for projects meeting subparagraphs (A) through (D) in subsection (c)(4) of 12206 of the Revenue and Tax Code. In all other years, an amount equal to fifteen percent (15%) of the annual State Tax Credit authority will be available for bond financed projects of any construction type. CTCAC shall make reservations up to the 15% limit beginning with the first application review period of a calendar year for tax-exempt bond financed projects;

  • (2) The project will be competitively scored by CDLAC according to the CDLAC scoring and ranking system delineated in Section 5106 of the CDLAC Regulations. Notwithstanding the foregoing, existing tax credit projects must comply with the requirements of Section 10326(g)(8)(A);

  • (3) If the 15% set-aside has not been reserved prior to year end it may be used in a State Tax Credit exchange for projects that have received 9% Tax Credit reservations;

  • (4) The Committee may reserve an amount in excess of the 15% set-aside of State Tax Credits for the last funded tax-exempt bond financed project if that project requires more than the State Tax Credits remaining in this set aside if (1) fewer than half of the State Tax Credits annually available for the credit ceiling competition are reserved in the first competitive credit round, or (2) if State Credits remain available after funding of competitive projects in the second CTCAC funding round.

e last funded tax-exempt bond financed project if that project requires more than the State Tax Credits remaining in this set aside if (1) fewer than half of the State Tax Credits annually available for the credit ceiling competition are reserved in the first competitive credit round, or (2) if State Credits remain available after funding of competitive projects in the second CTCAC funding round.

• (5) Staff shall identify high-cost projects by comparing each scored project’s total eligible basis against its total adjusted threshold basis limits, excluding any increase for deeper targeting pursuant to Section 10327(c)(5)(C). CTCAC shall calculate total eligible basis consistent with the method described in Section 10325(d), except that the amount of developer fee in basis that exceeds the project’s deferral/contribution threshold described in Section 10327(c)(2)(B) shall be excluded. A project will be designated “high cost” if a project’s total eligible basis exceeds its total adjusted threshold basis limit by 30%. Staff shall not recommend such project for credits. Any project may be subject to negative points if the project’s total eligible basis at placed in service exceeds the revised total adjusted threshold basis limits for the year the project is placed in service (or the original total eligible threshold basis limit if higher) by 40%.

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Regulations Section 10317 - 10322

• (j) State Tax Credit Allocations pursuant to subsection (g)(1)(B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code.

  • (1) For calendar years beginning in 2021, an amount up to five hundred million dollars ($500,000,000) in total State Tax Credit authority will be available (if authorized in the California Budget Act or related legislation) for new construction Tax Exempt Bond Projects, including retrofitting or repurposing of existing nonresidential structures that were converted to residential use within the previous five years from the date of application subject to the requirements of the CDLAC regulations and the requirements of Section 10326 of these regulations. For calendar years 2024 to 2034 where any additional credits are available pursuant to subsection (g)(1)(B) of Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code, the lesser of five percent (5%) or $25,000,000 shall be available to Farmworker Housing. Any credits pursuant to this clause that remain unallocated following the conclusion of a funding round shall roll over to the subsequent funding rounds in that calendar year with the exception that any credits that remain unallocated after the final funding round in that calendar year shall be added back to the aggregate amount of credits that may be allocated pursuant to this subparagraph. The approximate amount of State Tax Credits available in each reservation cycle shall be established by the Committee annually at a public meeting.

ng rounds in that calendar year with the exception that any credits that remain unallocated after the final funding round in that calendar year shall be added back to the aggregate amount of credits that may be allocated pursuant to this subparagraph. The approximate amount of State Tax Credits available in each reservation cycle shall be established by the Committee annually at a public meeting.

• (2) No later than the CDLAC bond issuance deadline, the applicant must submit to CTCAC building permits (a grading permit does not suffice to meet this requirement except that in the event that the city or county as a rule does not issue building permits prior to the completion of grading, a grading permit shall suffice; if the project is a design-build project in which the city or county does not issue building permits until designs are fully complete, the city or county shall have approved construction to begin) or the applicable tribal documents, and notice to proceed delivered to the contractor.

• (3) Failure to submit said documents to CTCAC by the CDLAC bond issuance deadline shall result in rescission of the Tax Credit Reservation and may result in assessment of negative points.

• (k) All projects that have received state credits shall comply with the limitations on cash distributions required pursuant to Sections 12206(d), 17058(d), and 23610.5(d) of the Revenue and Taxation Code.

  • (1) Applicants requesting state credits shall make an election to sell (“certificate”) all or any portion of the state credit, as allowed pursuant to Revenue and Taxation Code Sections 12206(o), 17058(q), and 23610.5(r). The applicant for a certificated credit shall be a nonprofit entity and the state credit price shall not be less than eighty (80) cents per dollar of credit. The applicant may make the election to sell at any time before CTCAC issues the Form(s) 3521A for the project, at which the point the election shall become irrevocable.

  • (2) An applicant who elects to sell any portion of the state credit and a buyer who later resells any portion of the credit shall report to CTCAC within 10 days of the sale of the credit, in a form specified by CTCAC, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the party or parties to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received for the sale of the credit. At the request of the owner, CTCAC shall reissue the Form(s) 3521A in the name of the buyer.

Note: Authority cited: Section 50199.17, Health and Safety Code; Sections 12206, 17058 and 23610.5, Revenue and Taxation 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.

Section 10322. Application Requirements.

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Regulations Section 10322

• (a) Separate Application. A separate application is required for each project.

• (b) Application forms. Applications shall be submitted on forms provided by the Committee. Applicants shall submit the most current Committee forms and supplementary materials in a manner, format, and number prescribed by the Committee.

• (c) Late application. Applications received after an application-filing deadline shall not be accepted.

• (d) Incomplete application. Determination of completeness, compliance with all Basic and Additional Thresholds, the scoring of the application, and any application submission requirements pursuant to these regulations and the application form shall be based on the documents contained in the application as of the final filing deadline except as provided in Section 10322(e). Applications not meeting all application information and submission requirements shall be considered incomplete, and shall be disqualified from receiving a reservation of Tax Credits during the cycle in which the application was determined incomplete. Disqualified applicants shall be notified in writing by the Committee of the basis for disqualification and may appeal the disqualification under Section 10330.

• (e) Application Omissions. No additional documents pertaining to: the Basic or Additional Threshold Requirements; scoring categories; and any application submission requirements pursuant to these regulations and the application form shall be accepted after the application-filing deadline unless the Executive Director, at their sole discretion, determines that the deficiency is an application omission of either a document existing as of the application-filing deadline, or a document certifying to a condition existing at the time of the application-filing deadline. Any submission of additional documents, including as part of an appeal for an application disqualified under Section 10322(d), shall include evidence demonstrating either the document existed as of the application-filing deadline, or the document certifies to a condition existing at the time of the application-filing deadline. It is within the Executive Director’s discretion to request any clarifying information or material regarding the additional document(s).

• (f) Application changes. Notwithstanding Section 10322(e), no application changes are permitted except as allowed under Sections 10317(d), 10325(c)(6)(B), and 10327(a). Any changes made pursuant to those sections shall never increase the score or credit amount of the application as submitted, and may reduce the application’s score and/or credit amount.

• (g) Applications not fully evaluated. Incomplete applications or others not expected to receive a reservation of Tax Credits due to relatively low scores, may or may not be fully evaluated by the Committee.

• (h) Standard application documents. The following documentation relevant to the proposed project is required to be submitted with all applications:

  • (1) Applicant’s Statement. A completed and signed version of the CTCAC Applicant Statement signifying the responsibility of the applicant to:

    • (A) provide application related documentation to the Committee upon request;

• (B) be familiar with and comply with Credit program statutes and regulations;

  - (C) hold the Committee and its employees harmless from program-related matters; 
  
  - (D) acknowledge the potential for program modifications resulting from statutory or regulatory actions; 
  
  - (E) acknowledge that Credit amounts reserved or allocated may be reduced in some cases when the terms and amounts of project sources and uses of funds are modified
  

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Regulations Section 10322

• (F) agree to comply with local, state, and federal laws, constitutions, codes, standards, rules, guidelines, and regulations, including, without limitation, those that pertain to accessibility, construction, health and safety, labor, fair housing, fair employment practices, affirmatively furthering fair housing, nondiscrimination, and equal opportunity, including the Fair Housing and Non-Discrimination Laws and Housing and Accessibility Requirements;

• (G) disclose any regulatory or investigative proceeding by a local, state, or federal agency relating to an alleged, pending, ongoing, or closed violation of fair housing or anti-discrimination laws and the status of the proceeding, as applicable;

• (H) acknowledge that the Committee has recommended the applicant seek tax advice;

• (I) acknowledge that the application will be evaluated according to Committee regulations, and that Credit is not an entitlement;

• (J) acknowledge that continued compliance with program requirements is the responsibility of the applicant;

• (K) acknowledge that information submitted to the Committee is subject to the Public Records Act;

• (L) agree to enter with the Committee into a regulatory contract if Credit is allocated; and,

• (M) acknowledge, under penalty of perjury, that all information provided to the Committee is true and correct, and that applicant has an affirmative duty to notify the Committee of changes causing information in the application or other submittals to become false.

• (2) The Application form. Completion of all applicable parts of Committee-provided application forms which shall include, but not be limited to:

  • (A) General Application Information

    • (i) Credit amounts requested

    • (ii) minimum set-aside election

    • (iii) application stage selection

    • (iv) set-aside selection

    • (v) housing type

  • (B) Applicant Information

    • (i) applicant role in ownership

    • (ii) applicant legal status

    • (iii) developer type

    • (iv) contact person

  • (C) Development Team Information

  • (D) Subject Property Information

  • (E) Proposed Project Information

    • (i) project type

    • (ii) Credit type

    • (iii) building and unit types

  • (F) Land Use Approvals

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Regulations Section 10322

• (G) Development Timetable

• (H) Identification and Commitment Status of Fund Sources

• (I) Identification of Fund Uses

• (J) Calculation of Eligible, Qualified and Requested Basis

• (K) Syndication Cost Description

• (L) Determination of Credit Need and Maximum Credit Allowable

• (M) Project Income Determination

  • (N) Restricted Residential Rent and Income Proposal

  • (O) Subsidy Information

  • (P) Operating Expense Information

  • (Q) Projected Cash Flow Calculation

  • (R) Basic Threshold Compliance Summary

  • (S) Additional Threshold Selection

  • (T) Tax-exempt Financing Information

  • (U) Market Study

  • (V) Current title report or preliminary title report

    • (i) within 90 days of application, except as provided in Section 10322(h)(35), showing the titleholder holds fee title

    • (ii) for tribal trust land, a title status report or an attorney’s opinion regarding chain of title and current title status

• (3) Organizational documents. An organizational chart and a detailed plan describing the ownership role of the applicant throughout the low-income use period of the proposed project, and the California Secretary of State certificate for the project owner (if available). An executed limited partnership agreement may be submitted as documentation that the project ownership entity is formed. If the project owner is not yet formed, provide the certificate for the managing general partner or the parent company of the proposed project owner. A reservation of credit cannot be made to a to-be-formed entity.

• (4) Designated contact person. A contract between the applicant and the designated contact person for the applicant signifying the contact person’s authority to represent and act on behalf of the applicant with respect to the Application. The Committee reserves its right to contact the applicant directly.

• (5) Identification of project participants. For purposes of this Section all of the following project participants, if applicable will be considered to be members of the Development Team. The application must contain the company name and contact person, address, telephone number, and fax number of each:

  • (A) developer;

  • (B) general contractor;

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Regulations Section 10322

• (C) architect;

• (D) attorney

• (E) tax professional;

• (F) Supportive Services coordinator, if applicable;

• (G) property management company;

• (H) consultant;

• (I) market analyst and/or appraiser; and

• (J) CNA consultant.

If any members of the Development Team have not yet been selected at the application filing deadline, each must be named and materials required above must be submitted at the 180 or 194 day deadline described in Section 10325(c)(7).

• (6) Identities of interest. Identification of any persons or entities (including affiliated entities) that plan to provide development or operational services to the proposed project in more than one capacity, and full disclosure of Related Parties, as defined.

• (7) Legal description. A legal description of the subject property.

• (8) Site Layout, Location, Unique Features and Surrounding Areas.

  • (A) A narrative description of the current use of the subject property;

  • (B) A narrative description of all adjacent property land uses, the surrounding neighborhood, and identification and proximity of services, including transportation

• (C) Labeled photographs, or color copies of photographs of the subject property and all adjacent properties;

  • (D) A layout of the subject property, including the location and dimensions of existing buildings, utilities, and other pertinent features.

  • (E) A site or parcel map indicating the location of the subject property and showing exactly where the buildings comprising the Tax Credit Project will be situated. (If a subdivision is anticipated, the boundaries of the parcel for the proposed project must be clearly marked; and

  • (F) A description of any unique features of the site, noting those that may increase project costs or require environmental mitigation.

• (9) Appraisals. Appraisals are required for:1) all rehabilitation applications except as noted in subsection (A), below, 2) all adaptive reuse applications, 3) all competitive applications, except for new construction projects that are on tribal trust land or that have submitted a third party purchase contract with, or evidence of a purchase from, an unrelated third party, 4) all applications seeking tiebreaker credit for donated or leased land, or land with a soft loan and 5) all new construction applications involving a land sale from a related party. For purposes of this paragraph only, a purchase contract or sale with a related party shall be deemed to be a purchase contract or sale with an unrelated party if the applicant demonstrates that the related party is acting solely as a pass-through entity and the tax

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Regulations Section 10322

credit partnership is only paying the acquisition price from the last arms-length transaction, plus any applicable and reasonable carrying costs. Appraisals shall not include the value of favorable financing.

Appraisals must be prepared by a California certified general appraiser having no identity of interest with the development’s partner(s) or intended partner or general contractor, acceptable to the Committee, and include, at a minimum, the following:

• (i) the highest and best use of the proposed project as residential rental property, considering any on-going recorded rent restrictions;

• (ii) for rehabilitation applications, the Sales Comparison Approach and Income Approach valuation methodologies shall be used; for new construction applications, the Sales Comparison Approach shall be used; for adaptive reuse applications, the Cost Approach valuation methodology shall be used for adaptive reuse of office buildings, retail buildings, and similar, and the Sales Comparison and Income Approaches may be used for hotels, motels, and similar;

• (iii) the appraiser’s reconciled value, in cases that require multiple methodologies;

• (iv) a value for the land of the subject property (“as if vacant”) for all rehabilitation or adaptive reuse projects requesting acquisition basis and new construction projects with existing improvements that may or may not be demolished;

• (v) an on-site inspection; and

• (vi) a purchase contract verifying the sales price of the subject property.

• (A) Rehabilitation applications. An “as-is” appraisal is required with a date of value that is within 120 days before or after the execution of: a purchase contract; for leased land, an executed development agreement negotiated between the landowner and the applicant or developer; an option agreement; any other site control document pursuant to Section 10325(f)(2); or the transfer of ownership by all the parties

For tax-exempt bond-funded properties receiving credits under Section 10326 only or in combination with State Tax Credits, the applicant may elect to forego the appraisal required pursuant to this section and use an acquisition value equal to the sum of the third-party debt encumbering the seller’s property, which may increase during subsequent reviews to reflect the actual amount.

• (B) New construction applications. Projects for which an appraisal is required above shall provide an “as-is” appraisal with a date of value that is within either:

  • (i) 120 days before or after the execution of a purchase contract; for leased land, an executed development agreement negotiated between the landowner and the applicant or developer; an option agreement; any other site control document pursuant to Section 10325(f)(2); the transfer of ownership by all the parties, or

  • (ii) one year of the application date if the latest purchase contract, development agreement, option agreement, or any other site control document pursuant to Section 10325(f)(2) was executed within that year.

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Regulations Section 10322

An amendment to an agreement does not constitute any of the agreements listed in (i) or (ii) above.

• (C) Adaptive reuse applications. All adaptive reuse applications must submit an appraisal using an “as-is” appraisal date of value as stated in (B) above. For applications required to use the Cost Approach, the appraisal must consider the age, condition, and depreciated value of the existing building(s) when utilizing newly constructed “shell” sales comparisons and must include these calculations in the report.

For applications with existing project-based rental subsidy, the Income Approach shall not include post-rehabilitation contract rent(s). Rent(s) used in the Income Approach, if not the existing approved contract rent, must be supported by a rent comparable study or similar. For applications with existing affordability restrictions, the Income Approach must be based on the affordability restrictions and restricted rents encumbering the property (a “restricted value”) unless all affordability restrictions will expire within five years.

CTCAC may contract with an appraisal reviewer who may review submitted appraisals. If it does so, CTCAC shall commission an appraisal review. If the appraisal review finds the submitted appraisal to be inappropriate, misleading, or inconsistent with the data reported and with other generally known information, then the reviewer shall develop their own opinion of value and CTCAC shall use the opinion of value established by the appraisal reviewer.

review submitted appraisals. If it does so, CTCAC shall commission an appraisal review. If the appraisal review finds the submitted appraisal to be inappropriate, misleading, or inconsistent with the data reported and with other generally known information, then the reviewer shall develop their own opinion of value and CTCAC shall use the opinion of value established by the appraisal reviewer.

• (10) Market Studies. A full market study prepared or updated within 180 days of the filing deadline by an independent third-party having no identity of interest with the development’s partners, intended partners, or any other member of the Development Team described in Subsection (5) above. The study must meet the current market study guidelines distributed by the Committee, and establish both need and demand for the proposed project. CTCAC shall publicly notice any changes to its market study guidelines and shall take public comment consistent with the comment period and hearing provisions of Health and Safety Code Section 50199.17. For scattered site projects, a market study may combine information for all sites into one report, provided that the market study has separate rent comparability matrices for each site. A new construction hybrid 9% and 4% tax credit development may combine information for both component projects into one report and, if not, shall reflect the other component project as a development in the planning or construction stages.

All market studies shall meet all of the requirements listed in the CTCAC Market Study Guidelines as listed on the CTCAC website. If the market study does not meet the guidelines, and support sufficient need and demand for the project, the application may be considered ineligible to receive Tax Credits and may be disqualified.

For acquisition/rehabilitation projects meeting all of the following criteria, a comprehensive market study as outlined in IRS Section 42(m)(1)(A)(iii) shall mean a written statement by a third-party market analyst certifying that the project meets these criteria:

• All of the buildings in the project are subject to existing federal or state rental assistance or operating subsidies, an existing CTCAC Regulatory Agreement, or an existing regulatory agreement with a federal, state, or local public entity.

• The proposed tenant-paid rents and income targeting levels shall not increase by more than five percent (5%) (except that proposed rents and income targeting levels for units subject to a continuing state or federal project-based rental assistance contract may increase more and proposed rents and income targeting levels for resyndication projects shall be consistent with Section 10325(f)(11) or Section 10326(g)(8)).

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Regulations Section 10322

• The project shall have a vacancy rate of no more than ten percent (10%) for special needs units and non-special needs SRO units without a significant project-based public rental subsidy and five percent (5%) for all other units at the time of the tax credit application.

• (11) Construction and design description. A detailed narrative description of the proposed project construction and design, including how the design will serve the targeted population.

• (12) Architectural drawings. Preliminary drawings of the proposed project, including a site plan, building elevations, and unit floor plans (including square footage of each unit). The project architect shall certify that the design of the development will comply with building codes and the physical building requirements of all applicable Housing and Accessibility Requirements. In the case of rehabilitation projects proceeding without an architect, the entity performing the CNA shall note necessary fair housing improvements, and the applicant shall budget for and implement the related construction work. The site plan shall identify all areas or features proposed as project amenities, laundry facilities, recreation facilities and community space. Drawings shall be to a scale that clearly shows all requested information. Blueprints need not be submitted. A project applying as a HighRise Project must include the project architect certification in accordance with the High-Rise Project definition in Section 10302.

• (13) Placed-in-service schedule. A schedule of the projected placed-in-service date for each building.

• (14) Identification of local jurisdiction. The following information related to the local jurisdiction within which the proposed project is located:

  • (A) jurisdiction or tribe (e.g., City of Sacramento)

  • (B) chief executive officer or tribal chairperson and title (e.g., Susan Smith, City Manager)

  • (C) mailing address

  • (D) telephone number

  • (E) fax number

• (15) Sources and uses of funds. The sources and uses of funds description shall separately detail apportioned amounts for residential space and commercial space.

• (16) Financing plan. A detailed description of the financing plan, and proposed sources and uses of funds, to include construction, permanent, and bridge loan sources, and other fund sources, including rent or operating subsidies and reserves. The commitment status of all fund sources shall be described, and non-traditional financing arrangements shall be explained.

• (17) Eligible basis certification. A certification from a third party certified public accountant or tax attorney that project costs included in applicant’s calculation of eligible basis are allowed by IRC Section 42, as amended, and are presented in accordance with standard accounting procedures. This must be delivered on the tax professional’s corporate letterhead, in the prescribed CTCAC format and must include a statement that the Sources and Uses Budget was reviewed and that the accountant or attorney discussed the budget with the applicant as needed.

• (18) Use of tax benefits description. If the Tax Credits are not to be offered to investors, a detailed explanation of how the tax benefits will be used by the applicant.

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• (19) Terms of syndication agreement. Written estimate(s) from syndicator(s) or financial consultants on their corporate letterhead and in the prescribed CTCAC format, of equity dollars expected to be raised for the proposed project, based on the amount of Tax Credits requested, including gross and net proceeds, pay-in schedules, syndication costs (including syndicator consulting fees), and an estimated net tax Credit factor, for both Federal and State Tax Credits if both are to be used or if State Tax Credits exchange points are requested. The syndicator shall not pay any fees or provide any other financial or other substantive benefit to a partnership developer unless all such fees or benefits are fully and completely disclosed to CTCAC in the Executed Letter of Intent.

• (20) Tax Credit certification. If the Tax Credits are not to be syndicated, a letter from a third party certified public accountant establishing the Tax Credit factor.

• (21) Utility allowance estimates. Current utility allowance estimates consistent with 26 CFR Section 1.42-10. The applicant must indicate which components of the utility allowance schedule apply to the project. For buildings that are using an energy consumption model utility allowance estimate, the estimate shall be calculated using the most recent version of the California Utility Allowance Calculator (CUAC) developed by the California Energy Commission (CEC), and incorporated in the CEC’s compliance program (CBECC). The CUAC estimate shall be signed by a California Association of Building Energy Consultants (CABEC) Certified Energy Analyst (CEA). Measures that are used in the CUAC that require field verification shall be verified by a certified HERS Rater, in accordance with current HERS regulations. Use of CUAC is limited to (i) new construction projects, (ii) rehabilitation projects applying for tax credits consistent with the requirements of Section 10325(f)(7)(A), and (iii) existing tax credit projects with new photovoltaics installed, which offsets tenants’ electrical load, and which includes site installation verification by a qualified HERS Rater. Projects utilizing the CUAC are approved for use upon the field verifications being completed. For projects using the CUAC where the field verification has not been completed prior to occupancy, the project must use an approved utility allowance source per 26 CFR Section 1.42-10 until the field verification is completed. Owners shall provide the tenants with a 90 day notification prior to the effective date with an informative summary about the current utility allowance and the proposed CUAC allowances before the utility allowances can be used in determining the gross rent of rent-restricted units. For projects applying for tax credits, the CUAC with supporting documentation shall be submitted in the Placed-inservice application required in Section 10322(i). For existing tax credit projects not applying for tax credits, the CUAC with supporting documentation shall be submitted to CTCAC upon field verification completion for CTCAC approval.

etermining the gross rent of rent-restricted units. For projects applying for tax credits, the CUAC with supporting documentation shall be submitted in the Placed-inservice application required in Section 10322(i). For existing tax credit projects not applying for tax credits, the CUAC with supporting documentation shall be submitted to CTCAC upon field verification completion for CTCAC approval.

• (22) Certification of subsidies. The applicant must certify as to the full extent of all Federal, State, and local subsidies which apply (or for which the taxpayer expects to apply) with respect to the proposed project. (IRC Section 42(m)(2)(C)(ii)) If rental assistance, operating subsidies or annuities are proposed, all related commitments that secure such funds must be provided. Tax-Exempt Bond Projects may receive a reservation of tax credits with the condition to provide the applicable subsidy commitment no later than the CDLAC bond issuance deadline. The source, monthly contract rent, annual amount (if applicable), term, number of units receiving assistance, and expiration date of each subsidy must be included.

• (23) Cash flow projection. A 15-year projection of residential project cash flow. If a capitalized operating reserve is proposed to meet the underwriting requirements of Section 10327, it must be included in the cash flow projections. Use of a capitalized operating reserve is limited to Special Needs projects, projects applying under the Non-profit Homeless Assistance set-aside, HOPE VI projects, and Section 8 project based projects.

• (24) Self-scoring sheet as provided in the application.

• (25) Acquisition Tax Credits application. Applicants requesting acquisition Tax Credits shall provide:

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Regulations Section 10322

• (A) a chain of title report or, for tribal trust land, an attorney’s opinion regarding chain of title; and

• (B) if applicable, an applicant statement that the acquisition is exempt from, or a thirdparty tax attorney’s opinion stating that the acquisition meets the requirements of IRC Section 42(d)(2)(B)(ii) as to the 10-year placed-in-service rule; or,

• (C) if a waiver of the 10-year ownership rule is necessary, a letter from the appropriate Federal official that states that the proposed project qualifies for a waiver under IRC Section 42(d)(6).

• (26) Rehabilitation application. Applicants proposing rehabilitation of an existing structure shall provide:

  • (A) An independent, third-party appraisal prepared and submitted with the preliminary reservation application consistent with the guidelines in Section 10322(h)(9).

• (B) A CNA performed within 180 days prior to the application deadline (except as provided in Section 10322(h)(35)) that details the condition and remaining useful life of the building’s major structural components, all necessary work to be undertaken and its associated costs, as well as the nature of the work, distinguishing between immediate and long-term repairs. The CNA shall also include a pre-rehabilitation 15-year reserve study, indicating anticipated dates and costs of future replacements of all current major building components. The CNA must be prepared by the project architect, as long as the project architect has no identity of interest with the developer, or by a qualified independent 3rd party who has no identity of interest with any of the members of the Development Team. An adaptive reuse application is not required to submit a CNA.

• (27) Acquisition of Occupied Housing application. Applicants proposing acquisition of occupied rental residential housing shall provide all existing income, rent and family size information for the current tenant population.

• (28) Tenant relocation plan. In addition to any other applicable relocation requirements, applicants proposing rehabilitation or demolition of occupied housing shall comply with the requirements of the California Relocation Assistance Law, California Government Code Section 7260 et seq, or, if the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 already applies to the project, pursuant to this federal law. Applicants shall provide an explanation of the relocation requirements that they are complying with, and a detailed relocation plan consistent with one of the above-listed relocation standards including an itemized relocation cost estimate that calculates the tenant relocation expenses required pursuant to the applicable California or federal relocation law. The relocation plan must also address the potential displacement of current tenants who do not meet the CTCAC income eligibility requirements or who will receive a rent increase exceeding five percent (5%). The relocation plan must include: a detailed description of proposed temporary onsite or offsite relocation and any corresponding relocation payments for tenants who meet CTCAC income eligibility requirements; an estimate of the number of current tenants who do not meet CTCAC income eligibility requirements or will receive a rent increase exceeding five percent (5%), how this estimate was determined, and the estimated relocation cost; and a detailed description of how the current tenants will be provided notice and information about the required relocation assistance, including copies of such noticing document(s).

• (29) Owner-occupied Housing application. Applicants proposing owner-occupied housing projects of four units or less, involving acquisition or rehabilitation, shall provide evidence from an appropriate official substantiating that the building is part of a development plan of action sponsored by a State or local government or a qualified nonprofit organization (IRC Section 42(i)(3)(E)).

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Regulations Section 10322

• (30) Nonprofit Set-Aside application. Applicants requesting Tax Credits from the Nonprofit setaside, as defined by IRC Section 42(h)(5), shall provide the following documentation with respect to each developer and general partner of the proposed owner:

  - (A) IRS documentation of designation as a 501(c)(3) or 501(c)(4) corporation; 
  
  - (B) proof that one of the exempt purposes of the corporation is to provide low-income housing; 
  
  - (C) a detailed description of the nonprofit participation in the development and ongoing operations of the proposed project, as well as an agreement to provide CTCAC with annual certifications verifying continued involvement; 
  
  - (D) a third-party legal opinion verifying that the nonprofit organization is not affiliated with, controlled by, or party to interlocking directorates with any Related Party of a for-profit organization, and the basis for said determination; and, 
  
  - (E) a third-party legal opinion certifying that the applicant is eligible for the Nonprofit SetAside pursuant to IRC Section 42(h)(5). 
  

  • (31) Rural Set-Aside application. Applicants requesting Tax Credits from the Rural set-aside, as defined by H & S Code Section 50199.21 and Section 10315(c) of these regulations, shall provide verification that the proposed project is located in an eligible rural area. Evidence that project is located in an area eligible for Section 515 financing from RHS may be in the form of a letter from RHS’s national process branch.

  • (32) RHS Section 514, 515, HOME or CDBG-DR program applications. Rural housing applicants requesting Tax Credits for projects financed by the RHS Section 514 or 515 program or from a HOME or CDBG-DR Participating Jurisdiction shall submit evidence from RHS, or the HOME or CDBG-DR Participating Jurisdiction that such funding has been committed, and such evidence shall meet the requirements of Section 10325(f)(8).

  • (33) Community service facility. An applicant requesting basis for a community service facility shall submit a third-party tax attorney’s opinion stating that the community service facility meets the requirements of IRC Section 42(d)(4)(C). CTCAC may use its discretion in determining whether the community service facility meets the qualifications.

  • (34) Mixed housing types. An applicant proposing a project to include senior housing in combination with non-senior housing shall provide a third-party legal opinion stating that the project complies with Fair Housing Laws.

  • (35) Reapplication documents. Notwithstanding the time sensitive document requirements, the Committee may permit the site control title report and the CNA of an unsuccessful application to be submitted, only once, in the reapplication cycle immediately following the unsuccessful application.

• (i) Placed-in-service Applications and issuance of Tax Forms. Prior to CTCAC issuing IRS Form 8609 and/or FTB form 3521A, the project owner shall:

• (1) Submit a complete placed-in-service application containing all information and documents required by the Executive Director and published on the CTCAC website. The application shall explain any changes in information or documentation between the initial application and placed-in-service application.

  - (A) Complete placed-in-service applications for new construction projects shall be submitted within one year of the final certificate of occupancy date. In projects with
  

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multiple buildings, the placed-in-service date shall be the latest final certificate of occupancy date of any building.

  - (B) Complete placed-in-service applications for rehabilitation projects shall be submitted within one year of the rehabilitation completion date. 

  - (C) For projects where conversion to permanent financing has not taken place, documents related to permanent financing conversion, as identified on the CTCAC website, shall be submitted within 60 days of the permanent financing conversion date. 

• (2) Execute the CTCAC regulatory agreement and record the agreement in the official records of the county where the project is located.

• (3) If applicable, execute a lease rider agreement and record the agreement in the official records of the county where the project is located.

• (j) Revisions to 4% Reservations at Placed in Service. Proposals submitted under Section 10326 of these regulations do not require new applications for changes in costs or Tax Credits alone. Committee staff will adjust the Credit amount when the placed-in-service package is received and reviewed. Approval of the Executive Director is required for any change in unit mix or income targeting after reservation except for changes that result in deeper income targeting. It is the applicant’s responsibility to notify CTCAC of any unit mix or income targeting change. Projects at placed-in-service that are requesting additional Tax Credits will be required to submit a fee equal to one percent (1%) of the increase from reservation in the annual federal tax credits allocated. This section shall apply to all projects for which CTCAC issues tax forms after December 31, 2017.

• (k) Unless the proposed project is a Special Needs development, or within ten (10) years of an expiring tax credit regulatory agreement, applicants for nine percent (9%) Low Income Housing Tax Credits to acquire and/or rehabilitate existing tax credit properties still regulated by an extended use agreement shall:

  • (1) certify that the property sales price is no more than the current debt balance secured by the property, and

  • (2) be prohibited from receiving any tax credits derived from acquisition basis.

All applicants for Low-Income Housing Tax Credits to acquire and/or rehabilitate existing tax credit properties still regulated by an extended use agreement shall use all funds in the applicant project’s replacement reserve accounts for rehabilitating the property to the benefit of its residents, except that an applicant may use existing reserves to reasonably meet CTCAC’s or another funder’s minimum reserve account requirement.

sing Tax Credits to acquire and/or rehabilitate existing tax credit properties still regulated by an extended use agreement shall use all funds in the applicant project’s replacement reserve accounts for rehabilitating the property to the benefit of its residents, except that an applicant may use existing reserves to reasonably meet CTCAC’s or another funder’s minimum reserve account requirement.

Note: Authority cited: Section 50199.17, Health and Safety Code; Sections 12206, 17058 and 23610.5, Revenue and Taxation 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.