The Legislature hereby finds and declares all of the following:

(a)  The federal Tax Reform Act of 1986 (Public Law 99-514) and subsequent amendments to the Internal Revenue Code, including, but not limited to, the federal Revenue Reconciliation Act of 1989, establishes a low-income housing tax credit to stimulate the production and rehabilitation of shelter for lower income individuals and families.

(b)  The federal law allows credit of approximately 9 percent each year over a 10-year or 15-year period for expenses for new construction and rehabilitation of each qualifying low-income unit. A credit of approximately 4 percent each year over a 10-year or 15-year period is provided for the expenses of the acquisition of an existing building generally not placed in service within the last 10 years, and the construction and rehabilitation of each qualifying low-income unit financed with tax-exempt bonds or certain other federal subsidies.

(c)  The federal law limits the low-income housing tax credits that can be annually allocated by each state. This credit authorization is to be allocated by the state housing credit agency. Not less than 10 percent of that amount is required to be set aside for projects involving nonprofit organizations.

(d)  Federal law requires a plan for allocation of credit among projects, including selection criteria to be used to determine housing priorities that are appropriate to local conditions.

(e)  Federal law requires that the credit dollar amount allocated to a project not exceed the amount necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period. This analysis shall include a determination of the reasonableness of developmental and operational costs.

(f)  The credit agency is required to perform certain other functions under federal tax law to ensure the availability of the credits and to ensure compliance with federal tax law.

(g)  It is necessary to designate the state housing credit agency and to establish an allocation system for the low-income housing credit.

(Added by renumbering Section 50199.6 by Stats. 1994, Ch. 1164, Sec. 24. Effective January 1, 1995. Conditionally inoperative as provided in Section 50199.18.)