“Low Income Threshold” means the greatest of the following:
(1) 80% of the MOHCD Area Median Income;
(2) 80% of the area median income for the County of San Francisco, adjusted for household size, as published by the California Tax Credit Allocation Committee or its successor entity;
(3) “Lower Income” for the County of San Francisco, adjusted for household size, as published by the California Department of Housing and Community Development, or its successor agency, under the California Code of Regulations and pursuant to California Health and Safety Code Section 50079.5, as amended from time to time;
(4) “Low Income” for the County of San Francisco within the “San Francisco, CA HUD Metro FMR Area,” adjusted for household size, as published by the United States Department of Housing and Urban Development, or its successor agency; or
(5) The maximum household income for a unit to receive the welfare exemption under California Revenue and Taxation Code Section 214(g), as amended from time to time.
“MOHCD” means the Mayor’s Office of Housing and Community Development, or its successor agency, department, or office.
“MOHCD Area Median Income” means the median income as published annually by MOHCD for the City and County of San Francisco, derived in part from the income limits and area median income determined by the United States Department of Housing and Urban Development, or its successor agency, for the San Francisco County metro fair market rent area, adjusted solely for household size, but not for high housing cost area.
“Recorded Restriction” means a document, agreement, or instrument, recorded with the County Recorder, that restricts the use of the property against which the document, agreement, or instrument is recorded.
“Rent-Restricted Affordable Housing” means a property described under either of the following subsections (1) or (2):
(2) A Residential Rental Property that satisfies both of the following subsections (2)(A) and (2)(B):
(A) Meets the requirements of one or more of the following subsections (2)(A)(i), (2)(A)(ii), or (2)(A)(iii):
(i) Prior to and up to the time of the transfer for which an exemption is claimed under this Section 1108.6, was granted a welfare exemption by the County Assessor under California Revenue and Taxation Code Section 214 for at least 90% of all residential units in the property;
(ii) Prior to and up to the time of the transfer for which an exemption is claimed under this Section 1108.6, was unoccupied, uninhabited, or unused for residential or commercial purposes and contained no structures for which such uses were legally permissible; or
(iii) Meets the requirements of the following subsection (2)(A)(iii)a. and is the subject of the certification in the following subsection 2(A)(iii)b.
a. Prior to and up to the time of the transfer for which an exemption is claimed under this Section 1108.6, was wholly-owned, directly or indirectly, by one or more organizations that are exempt from income taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, which organization(s) transfer a portion of their ownership interest(s) solely to one or more persons or legal entities who intend to hold the ownership interests in compliance with the welfare exemption under California Revenue and Taxation Code Section 214(g) for at least 90% of all residential units in the property.
b. The transferor(s) of the ownership interest(s) must certify to MOHCD that an application for the welfare exemption under California Revenue and Taxation Code Section 214(g) for at least 90% of all residential units in the property will be submitted to the County Assessor within the time limits specified in California Revenue and Taxation Code Section 271(a), and that such application will be substantially complete and valid within nine months of the date of the transfer.
(B) At the time of the transfer for which an exemption is claimed under this Section 1108.6 is, or concurrently with such transfer becomes, subject to a Recorded Restriction with an original term of at least 55 years from the date the property becomes available for residential rental use under such Recorded Restriction, and a remaining term of at least 35 years from the date of the transfer, provided that such Recorded Restriction, at a minimum:
(i) limits the maximum household income for each residential rental unit at initial occupancy to no more than 120% of MOHCD Area Median Income; and
(ii) sets a maximum household income limit applicable at initial occupancy for each residential rental unit (“Unit Maximum Income”) such that the average of all Unit Maximum Incomes in the property does not exceed the Low Income Threshold; and
(iii) limits the maximum monthly rent for each residential rental unit to no more than either:
a. the tenant-paid portion of the contract rent as determined by the San Francisco Housing Authority for residential ten- ants holding Section 8 vouchers or certificates; or
b. one-twelfth of 30% of the Unit Maximum Income; or
c. if the household income of the residential tenants in a residential rental unit exceeds the Unit Maximum Income after initial occupancy, one-twelfth of 30% of the household income of the residential tenants; and
(iv) provides for the regulation, monitoring, and enforcement of the restrictions in this subsection (2)(B) by a governmental agency.
For purposes of this subsection (2)(B) only, a “residential rental unit” does not include a unit for an onsite property manager.
“Residential Rental Property” means a property that may only be used to rent to residential tenants, including an onsite property manager, and excluding travelers, vacationers, or other similarly transient individuals, except that it may include: (1) up to 30% of the square footage of all floors other than the ground floor for non-profit space serving residents and/or the community, such as childcare centers, health clinics, or job training centers; and (2) any amount of square footage of the ground floor for non-residential space.
(b) Exemption from Increased Tax Rate. As authorized by the last sentence of Section 1102 of this Article 12-C, the increased tax rates imposed by subsections (d), (e), and (f) of Section 1102 shall not apply with respect to any deed, instrument, or writing that effects a transfer of Rent-Restricted Affordable Housing. The lower tax rate imposed by subsection (c) of Section 1102 shall apply to the entire consideration or value of the interest or property conveyed by a deed, instrument, or writing that is subject to the exemption in this subsection (b).
(c) Requirements for Exemption.
(1) Except as provided in subsection (c)(2), every person claiming the exemption under subsection (b) must:
(A) Obtain from MOHCD a certificate confirming that the deed, instrument, or writing effects a transfer of Rent-Restricted Affordable Housing.
(2) Notwithstanding the requirements in subsection (c)(1), every person claiming the exemption under subsection (b) for a deed, instrument, or writing that effects a transfer of Rent-Restricted Affordable Housing, when that deed, instrument, or writing is delivered on or after January 1, 2017, but prior to July 1, 2024, may do the following in lieu of the procedures described in subsection (c)(1):
(A) Obtain from MOHCD a certificate confirming that the deed, instrument, or writing effected a transfer of Rent-Restricted Affordable Housing.
(B) By December 31, 2024, submit the certificate described in subsection (c)(2)(A) of this Section 1108.6 to the County Recorder, along with a request for a refund of the tax paid on, or the cancellation or reduction of any deficiency assessed with respect to, the transfer subject to the certificate that exceeds the rates described in Section 1102(c). The County Recorder may authorize the Controller to refund these amounts, without interest, without the need for a refund claim.
(3) Failure to timely satisfy the requirements in this subsection (c) renders the transfer ineligible for the exemption.
(d) Revocation of Exemption.
(1) If a transfer of Rent-Restricted Affordable Housing was granted an exemption under Section 1108.6(b) on the basis that the property satisfied subsection (iii) of the definition of Rent-Restricted Affordable Housing in Section 1108.6(a)(2)(A) and the property did not satisfy subsection (i) or (ii) of that definition, the person claiming such exemption must, within the later of 25 months of the transfer and the date such person submits any request for refund, cancellation, or reduction under Section 1108.6(c)(2)(B), submit proof to the County Recorder that the property was granted a welfare exemption by the County Assessor under California Revenue and Taxation Code Section 214(g) for at least 90% of all residential units in the property within two years from the date of the transfer. The County Recorder may grant a one-year extension to the 25-month and two-year periods in this subsection (d)(1) if the welfare exemption application submitted to the County Assessor was substantially complete within nine months of the date of the transfer and the person claiming the exemption was diligently pursuing the required welfare exemption but was unable to obtain such welfare exemption within the two-year period.
(2) If the County Recorder determines that a transfer of Rent-Restricted Affordable Housing was granted an exemption under Section 1108.6(b) on the basis that that property satisfied subsection (iii) of the definition of Rent-Restricted Affordable Housing in Section 1108.6(a)(2)(A) and the property did not satisfy subsection (i) or (ii) of that definition, and that the property was not granted a welfare exemption by the County Assessor under California Revenue and Taxation Code Section 214(g) for at least 90% of all residential units in the property within two years from the date of the transfer (or the extended date under Section 1108.6(d)(1)), the County Recorder may revoke the exemption and issue a deficiency determination for the amount of tax exempted upon the basis of any information within the County Recorder’s possession or that may come into the County Recorder’s possession. Such deficiency determination shall bear interest at the rate of 1% per month, or fraction thereof, on the amount of tax exempted, from the date the tax would have become delinquent had the exemption in Section 1108.6 not applied, and shall be subject to a penalty of 35% of the amount of tax exempted. Such deficiency determinations and the amounts paid pursuant to such deficiency determinations shall be subject to the procedures otherwise applicable in Article 12-C of the Business and Tax Regulations Code, except for the provisions in Section 1115.2, and except that, if the County Recorder grants the one-year extension under Section 1108.6(d)(1), the time period in Section 1115(b) of the Business and Tax Regulations Code for the County Recorder to serve notice of the deficiency determination under this Section 1108.6(d)(2) shall also be extended by one year.
(e) Operative Dates.
(1) This Section 1108.66 shall apply to all deeds, instruments, or writings that effect a transfer of Rent-Restricted Affordable Housing other than deeds, instruments, or writings that effect a transfer under Section 41B.6 of the Administrative Code, as that Section 41B.6 existed as of June 3, 2019, that are or have been delivered on or after January 1, 2017, but on or before the sunset date in subsection (f).
(2) This Section 1108.6 shall apply to all deeds, instruments, or writings that effect a transfer under Section 41B.6 of the Administrative Code, as that Section 41B.6 existed as of June 3, 2019, that are or have been delivered on or after June 3, 2019, but on or before the sunset date in subsection (f).
(f) Sunset Date. This Section 1108.6
shall expire by operation of law on December 31, 2030, and shall not apply to any deeds, instruments, or writings that are delivered on or after January 1, 2031.
(g) Penalty Waiver. The County Recorder shall waive all penalties and interest imposed on transfers qualifying for the exemption in Section 1108.6
(b) for deeds, instruments, or writings that effected a transfer of Rent-Restricted Affordable Housing under subsection (2) of the definition of Rent-Restricted Affordable Housing in Section 1108.6
(a), when the deed, instrument, or writing was delivered on or after January 1, 2017, but prior to the effective date of the ordinance, in Board File No. 231007, adding this subsection (g). The waiver in this subsection (g) shall include penalties and interest on the portion of the transfer tax not subject to the exemption in Section 1108.6
(b). The County Recorder may authorize the Controller to refund any penalties or interest qualifying for waiver under this subsection (g), without interest, to the person that paid such penalties or interest if such person files a request for refund with the County Recorder on or before December 31, 2024.
(h) Severability. If any section, subsection, sentence, clause, phrase, or word of this Section 1108.6
, or any application thereof to any person or circumstance, is held to be invalid or unconstitutional by a decision of a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions or applications of this Section 1108.6
. The Board of Supervisors hereby declares that it would have enacted this Section 1108.6
and each and every subsection, sentence, clause, phrase, and word not declared invalid or unconstitutional without regard to whether any other portion of this Section 1108.6
or application thereof would be subsequently declared invalid or unconstitutional.
(i) Undertaking for the General Welfare. In enacting and implementing this Section 1108.6
, the City is assuming an undertaking only to promote the general welfare. It is not assuming, nor is it imposing on its officers and employees, an obligation for breach of which it is liable in money damages to any person who claims that such breach proximately caused injury.