California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 7.6.1 - California Organized Investment Network
Article 4 - Tax Credit Application Evaluation
Section 2696.32 - Evaluation Criteria and Factors

Universal Citation: 10 CA Code of Regs 2696.32

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) Evaluation criteria

(1) COIN will evaluate applications and the qualified investment information they contain to determine which taxpayers will receive tax credit certificates. In making these evaluations, COIN will apply the following criteria:
(A) COIN will determine the aggregate benefit of the investment to LMI areas and households. The greater the aggregate benefit, the higher the priority COIN will give to the application. This criterion will receive more weight than all other criteria combined;

(B) COIN will determine whether the investment benefits rural areas and households. The more the investment benefits rural areas and households, the higher the priority COIN will give to the application. This criterion will receive the second most weight of all the criteria;

(C) COIN will determine the benefit of the investment on job creation, retention, and training. The greater the benefit, the higher the priority COIN will give to the application. This criterion will receive the third most weight of all the criteria;

(D) COIN will determine whether the investment is a green investment. The more the investment creates a benefit as a green investment, the higher the priority COIN will give to the application. This criterion will receive the fourth most weight of all the criteria;

(E) COIN will determine whether the investor is an insurer. If the investor is an insurer, COIN will increase the priority;

(F) COIN will determine whether an investment would likely cause, directly or indirectly, an adverse impact on LMI households or areas, or an adverse impact on the COIN program. If it would, COIN will lower the priority given to the application according to the amount of the adverse impact; and

(G) In evaluating applications that fund housing, COIN will give higher priority to an application if it supports affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing, instead of single-family owned housing.

(2) In evaluating an application and the qualified investment information it contains, COIN will:
(A) Determine the weight to give each factor in subdivision (b)(2) of this section;

(B) Determine the credibility and reliability of all information provided in an application, including but not limited to the qualifications, bias, truthfulness, assumptions, analysis, and other considerations with respect to experts, expert testimony, and studies and reports supporting an application; and

(C) Determine whether the applicant and the taxpayer have provided satisfactory substantiation that the investment justifies an award of a tax credit based on the totality of evidence and explanations submitted.

(b) Evaluation factors

(1) In evaluating each application and the qualified investment information it contains according to the criteria specified in subdivisions (a)(1)(A) - (C) of this section, COIN will consider each factor in subdivision (b)(2) of this section.

(2) Factors:
(A) The characteristics of the organizations that will provide benefits. Priority will be given to an application based on:
1. The organization's proven history of delivering the same or similar benefits;

2. The extent of the education and experience the organization's managers and directors possess that is relevant to delivering the benefits; and

3. Any other relevant considerations with respect to the characteristics of the organization.

(B) The value of benefits delivered relative to the cost of delivering those benefits. Priority will be given to an application according to the degree to which the organization's administrative expense ratio is lower than the industry norm for that ratio for an organization delivering the same type of benefits.

(C) The characteristics of the households and areas that will receive benefits under the investment. Priority will be given to an application based on:
1. The median income of the households or areas served; the lower the median income, the higher the priority COIN will assign;

2. The unemployment rates of the areas served; the higher the unemployment rate, the higher the priority COIN will assign;

3. Any other relevant considerations with respect to the households and areas that will receive benefits.

(D) The number of households and areas that will receive benefits. Priority will be given to an application in proportion to the number of households and/or areas that will receive benefits under the investment.

(E) When benefits will begin and end. Priority will be given to an application:
1. In proportion to the duration of the benefits to be delivered; and

2. In inverse proportion to the lead time that will ensue before benefits will begin to be delivered.

(F) The type and quality of benefits. Priority will be given to an application to the degree to which the organization providing the benefits delivers demonstrably better benefits than other organizations delivering comparable benefits.

(G) How many households need the benefits in the area served by the investment. Priority will be given to an application in proportion to the number of households in need of the benefits, in the area or areas served.

(H) How acutely and urgently the households need the benefits in the area served by the investment. Priority will be given to an application in proportion to the acuteness or urgency of the households' need for those benefits.

(I) The quantity of benefits delivered to each beneficiary; the greater the quantity, the higher the priority COIN will assign.

(J) The possible financial or other impediments to delivery of the benefits. Priority will be given to an application in inverse proportion to:
1. The degree to which the delivery of benefits is contingent on obtaining additional funds from another source; and

2. The degree to which delivery of benefits is contingent on obtaining contracts with or permission from other parties or government entities.

(K) The extent to which any business financed by the investment would be owned or staffed by members of the community being served by the investment. Priority will be given to an application that involves financing a business:
1. Whose owner lives in the community served by the business; and

2. In proportion to the number of the business's employees who live in the area where the business will operate.

(L) The extent to which those receiving benefits from the investment are the intended beneficiaries of the investment, as opposed to ancillary, unintended beneficiaries.

(M) Whether the investment in the CDFI would have been less likely to occur if the tax credit were not available as an incentive. Priority will be given to an application to the degree to which it is unlikely that the investment would be made without the tax credit.

(N) The availability of matching funds that will enable the CDFI to increase the overall benefit to LMI households and areas through leveraging; the higher the ratio of matching funds to funds to be provided by the investment, the higher the priority COIN will assign.

(O) The credibility of the metrics and calculations provided by the applicant pursuant to Subdivisions (b)(3)(C)4. and (b)(3)(C)5. of Section 2696.30. Priority will be given to an application commensurate with:
1. The reasonableness of the metrics;

2. The validity of the calculations; and

3. The reliability of the underlying data.

(P) The extent to which the investment will enhance the general welfare of low-to-moderate income areas or households, or rural areas or households.

1. New article 4 (section 2696.32) and section filed 6-26-2014; operative 6-26-2014 (Register 2014, No. 26). Pursuant to Revenue and Taxation Code section 12209(f)(2) this is a deemed emergency, and pursuant to Revenue and Taxation Code section 12209(f)(3) this emergency regulation "shall remain in effect until amended or repealed by the department."

Note: Authority cited: Sections 12209(f), 17053.57(d) and 23657(e), Revenue and Taxation Code. Reference: Sections 12209, 17053.57 and 23657, Revenue and Taxation Code; and Sections 926.1 and 12939, 12939.1 and 12939.2, Insurance Code.

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