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Committee backs change to tax-credit measurement to prevent end-of-year "gaming"
Summary
HB 2156 would change the community investment tax credit from a calendar-year end measurement to a month-end average (12 times per year) and allow life-insurance companies to qualify. Sponsor said the change reduces incentives to inflate year-end unpaid principal balances to maximize credit.
Chairman Baum told the committee HB 2156 would measure the unpaid principal balance for community investment tax credits on a month-end average 12 times per year rather than once at year-end. "If we measure the outstanding amount on a 12 times per year, then it develops a more consistent measurement of the amount of the loan that's actually being made," he said, framing the measure as a guard against end-of-year manipulation.
The bill's second change would allow life-insurance companies that make qualifying loans through community development financial institutions to receive the tax credit. Representative Clemons asked whether the Department of Revenue can handle monthly calculations and whether the change helps recipients; the sponsor said the fiscal note indicates the department can perform the accounting with existing resources and that the credit is awarded to the entity making the loan (offsetting part of their E & F taxes) to encourage lending in low-income census tracts.
Committee members discussed implications for lenders and borrowers; the committee approved the bill and referred it to finance, ways and means (vote reported 13 ayes, 1 nay).
