Minnesota Legislature
HF 2931
as introduced - 89th Legislature (2015 - 2016) Posted on 03/10/2016 03:34pm
Current Version - as introduced
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A bill for an act
relating to taxation; individual income; modifying the small business investment
credit; repealing the sunset; amending Minnesota Statutes 2014, section
116J.8737, subdivisions 1, 5; repealing Minnesota Statutes 2014, section
116J.8737, subdivision 12.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2014, section 116J.8737, subdivision 1, is amended to
read:
Subdivision 1.
Definitions.
(a) For the purposes of this section, the following terms
have the meanings given.
(b) "Qualified small business" means a business that has been certified by the
commissioner under subdivision 2.
(c) "Qualified investor" means an investor who has been certified by the
commissioner under subdivision 3.
(d) "Qualified fund" means a pooled angel investment network fund that has been
certified by the commissioner under subdivision 4.
(e) "Qualified investment" means a cash investment in a qualified small business
of a minimum of:
(1) $10,000 in a calendar year by a qualified investor; or
(2) $30,000 in a calendar year by a qualified fund.
A qualified investment must be made in exchange for common stock, a partnership
or membership interest, preferred stock, debt with mandatory conversion to equity, or an
equivalent ownership interest as determined by the commissioner.
(f) "Family" means a family member within the meaning of the Internal Revenue
Code, section 267(c)(4).
(g) "Pass-through entity" means a corporation that for the applicable taxable year is
treated as an S corporation or a general partnership, limited partnership, limited liability
partnership, trust, or limited liability company and which for the applicable taxable year is
not taxed as a corporation under chapter 290.
(h) "Intern" means a student of an accredited institution of higher education, or a
former student who has graduated in the past six months from an accredited institution
of higher education, who is employed by a qualified small business in a nonpermanent
position for a duration of nine months or less that provides training and experience in the
primary business activity of the business.
(i) "Liquidation event" means a conversion of qualified investment for cash, cash
and other consideration, or any other form of equity or debt interest.
(j) "Qualified greater Minnesota business" means a qualified small business that
is also certified by the commissioner as a qualified greater Minnesota business under
subdivision 2, paragraph (h).
(k) "Minority group member" means a United States citizen who is Asian, Pacific
Islander, Black, Hispanic, or Native American.
(l) "Minority-owned business" means a business for which one or more minority
group members:
(1) own at least 50 percent of the business, or, in the case of a publicly owned
business, own at least 51 percent of the stock; and
(2) manage the business and control the daily business operations.
(m) "Women" means persons of the female gender.
(n) "Women-owned business" means a business for which one or more women:
(1) own at least 50 percent of the business, or, in the case of a publicly owned
business, own at least 51 percent of the stock; and
(2) manage the business and control the daily business operations.
(o) "Officer" means a person elected or appointed by the board of directors to
manage the daily operations of the qualified small business;
(p) "Principal" means a person having authority to act on behalf of the qualified
small business.
new text begin
(q) "Pediatric medical device" means a medical device intended for human use, as
defined under section 510 of the federal Food, Drug, and Cosmetic Act, designed to be
used for a pediatric population and requiring approval under section 515A of the federal
Food, Drug, and Cosmetic Act for a pediatric indication.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 2.
Minnesota Statutes 2014, section 116J.8737, subdivision 5, is amended to read:
Subd. 5.
Credit allowed.
(a)(1) A qualified investor or qualified fund is eligible
for a credit equal to deleted text begin 25 percentdeleted text end new text begin a percentagenew text end of the qualified investment in a qualified
small business. new text begin The credit equals 40 percent of the qualified investment in a qualified
small business engaged primarily in the development and production of pediatric medical
devices, and 25 percent of the qualified investment in all other qualified small businesses.
new text end Investments made by a pass-through entity qualify for a credit only if the entity is a
qualified fund. The commissioner must not allocate more than $15,000,000 in credits to
qualified investors or qualified funds for taxable years beginning after December 31, 2013,
and before January 1, deleted text begin 2017deleted text end new text begin 2015, and must not allocate more than $20,000,000 in credits
per year for taxable years beginning after December 31, 2014new text end ; and
(2) for taxable years beginning after December 31, 2014, deleted text begin and before January 1,
2017,deleted text end $7,500,000 must be allocated to credits for qualifying investments in qualified
greater Minnesota businesses and minority- or women-owned qualified small businesses
in Minnesotadeleted text begin .deleted text end new text begin , and $5,000,000 must be allocated to credits for qualifying investments
in qualified small businesses engaged primarily in the development and production of
pediatric medical devices. new text end Any portion of a taxable year's credits that is reserved for
qualifying investments in greater Minnesota businesses deleted text begin anddeleted text end new text begin ,new text end minority- or women-owned
qualified small businesses in Minnesotanew text begin , and qualified small businesses engaged primarily
in the development and production of pediatric medical devicesnew text end that is not allocated by
September 30 of the taxable year is available for allocation to other credit applications
beginning on October 1. Any portion of a taxable year's credits that is not allocated by
the commissioner does not cancel and may be carried forward to subsequent taxable
years until all credits have been allocated.
(b) The commissioner may not allocate more than a total maximum amount in credits
for a taxable year to a qualified investor for the investor's cumulative qualified investments
as an individual qualified investor and as an investor in a qualified fund; for married
couples filing joint returns the maximum is $250,000, and for all other filers the maximum
is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
over all taxable years for qualified investments in any one qualified small business.
(c) The commissioner may not allocate a credit to a qualified investor either as
an individual qualified investor or as an investor in a qualified fund if, at the time the
investment is proposed:
(1) the investor is an officer or principal of the qualified small business; or
(2) the investor, either individually or in combination with one or more members of
the investor's family, owns, controls, or holds the power to vote 20 percent or more of
the outstanding securities of the qualified small business.
A member of the family of an individual disqualified by this paragraph is not eligible for a
credit under this section. For a married couple filing a joint return, the limitations in this
paragraph apply collectively to the investor and spouse. For purposes of determining the
ownership interest of an investor under this paragraph, the rules under section 267(c) and
267(e) of the Internal Revenue Code apply.
(d) Applications for tax credits for 2010 must be made available on the department's
Web site by September 1, 2010, and the department must begin accepting applications
by September 1, 2010. Applications for subsequent years must be made available by
November 1 of the preceding year.
(e) Qualified investors and qualified funds must apply to the commissioner for tax
credits. Tax credits must be allocated to qualified investors or qualified funds in the order
that the tax credit request applications are filed with the department. The commissioner
must approve or reject tax credit request applications within 15 days of receiving the
application. The investment specified in the application must be made within 60 days of
the allocation of the credits. If the investment is not made within 60 days, the credit
allocation is canceled and available for reallocation. A qualified investor or qualified fund
that fails to invest as specified in the application, within 60 days of allocation of the
credits, must notify the commissioner of the failure to invest within five business days of
the expiration of the 60-day investment period.
(f) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. If two or more qualified investors or
qualified funds file tax credit request applications on the same day, and the aggregate
amount of credit allocation claims exceeds the aggregate limit of credits under this section
or the lesser amount of credits that remain unallocated on that day, then the credits must
be allocated among the qualified investors or qualified funds who filed on that day on a
pro rata basis with respect to the amounts claimed. The pro rata allocation for any one
qualified investor or qualified fund is the product obtained by multiplying a fraction,
the numerator of which is the amount of the credit allocation claim filed on behalf of
a qualified investor and the denominator of which is the total of all credit allocation
claims filed on behalf of all applicants on that day, by the amount of credits that remain
unallocated on that day for the taxable year.
(g) A qualified investor or qualified fund, or a qualified small business acting on their
behalf, must notify the commissioner when an investment for which credits were allocated
has been made, and the taxable year in which the investment was made. A qualified fund
must also provide the commissioner with a statement indicating the amount invested by
each investor in the qualified fund based on each investor's share of the assets of the
qualified fund at the time of the qualified investment. After receiving notification that the
investment was made, the commissioner must issue credit certificates for the taxable year
in which the investment was made to the qualified investor or, for an investment made by
a qualified fund, to each qualified investor who is an investor in the fund. The certificate
must state that the credit is subject to revocation if the qualified investor or qualified
fund does not hold the investment in the qualified small business for at least three years,
consisting of the calendar year in which the investment was made and the two following
years. The three-year holding period does not apply if:
(1) the investment by the qualified investor or qualified fund becomes worthless
before the end of the three-year period;
(2) 80 percent or more of the assets of the qualified small business is sold before
the end of the three-year period;
(3) the qualified small business is sold before the end of the three-year period;
(4) the qualified small business's common stock begins trading on a public exchange
before the end of the three-year period; or
(5) the qualified investor dies before the end of the three-year period.
(h) The commissioner must notify the commissioner of revenue of credit certificates
issued under this section.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 3. new text begin REPEALER.
new text end
new text begin
Minnesota Statutes 2014, section 116J.8737, subdivision 12,
new text end
new text begin
is repealed.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end