California Tax Credit Allocation Committee

Introduction to Commercial Revitalization Deduction Program

SB 2010, signed into law in late September, 2002, designated the California Tax Credit Allocation Committee as California's Commercial Revitalization Agency for the purpose of developing and implementing a Qualified Allocation Plan for the allocation of federally authorized Commercial Revitalization Deductions to qualified businesses located in California's federally designated Renewal Communities, pursuant to Title 26, Subtitle A, Chapter 1, Subchapter X, Part II, Section 1400I of the United States Code.

Five Renewal Communities have been designated in California, including the entire cities of Orange Cove and Parlier, and certain census tracts in the cities of San Diego, San Francisco, and Los Angeles.

For more information about each Renewal Community, please follow the links below:

The Commercial Revitalization Deduction ("CRD") is available to businesses located in Renewal Communities that purchase, build, or renovate property for commercial use. The deduction must be allocated to qualifying businesses by the state's Commercial Revitalization Agency (TCAC) pursuant to an adopted Qualified Allocation Plan. The deduction can be claimed, at the taxpayer's election, either in the amount of 50% of the qualified costs of construction or rehabilitation in the first year after the building is "placed in service", or at the rate of 10% per year for 10 years beginning in the year the building is placed in service.

A total of $12 million in deductions is available to each Renewal Community for each year commencing in 2002 and ending in 2009, provided that a Qualified Allocation Plan has been adopted prior to the allocation of the deduction. This amounts to a total of $60 million annually for California's Renewal Communities. There is no "carryforward" of unused deduction cap so that if the deductions are not allocated in a calendar year, they are lost. There is a cap of $10 million per project for each year from 2002 through 2009.