HF 2268

1st Engrossment - 88th Legislature (2013 - 2014) Posted on 03/17/2014 03:24pm

A bill for an act
relating to taxation; extending allowance of the small business investment credit;
amending Minnesota Statutes 2012, section 116J.8737, subdivisions 5, 12.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to
read:

Subd. 5.

Credit allowed.

(a) A qualified investor or qualified fund is eligible for
a credit equal to 25 percent of the qualified investment in a qualified small business.
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 deleted text begin $11,000,000 in credits to
qualified investors or qualified funds for taxable years beginning after December 31, 2009,
and before January 1, 2011, and must not allocate more than $12,000,000 deleted text end new text begin $15,000,000
new text end in credits per year for taxable years deleted text begin beginning after December 31, 2010, and deleted text end before
January 1, deleted text begin 2015 deleted text end new text begin 2019 new text end . 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 the investor receives
more than 50 percent of the investor's gross annual income from the qualified small
business in which the qualified investment is proposed. 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 deleted text begin for 2010 deleted text end new text begin for a taxable year new text end must be made available on
the department's Web site by deleted text begin September 1, 2010, and the department must begin accepting
applications by September 1, 2010. Applications for subsequent years must be made
available by deleted text end 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; or

(4) the qualified small business's common stock begins trading on a public exchange
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 for taxable years beginning after
December 31, 2014.
new text end

Sec. 2.

Minnesota Statutes 2012, section 116J.8737, subdivision 12, is amended to read:

Subd. 12.

Sunset.

This section expires for taxable years beginning after December
31, deleted text begin 2014 deleted text end new text begin 2018 new text end , except that reporting requirements under subdivision 6 and revocation
of credits under subdivision 7 remain in effect through deleted text begin 2016 deleted text end new text begin 2020 new text end for qualified
investors and qualified funds, and through deleted text begin 2018 deleted text end new text begin 2022 new text end for qualified small businesses,
reporting requirements under subdivision 9 remain in effect through deleted text begin 2019 deleted text end new text begin 2023 new text end , and the
appropriation in subdivision 11 remains in effect through deleted text begin 2018 deleted text end new text begin 2022 new text end .