SF 2232

as introduced - 88th Legislature (2013 - 2014) Posted on 03/04/2014 09:30am

A bill for an act
relating to taxation; establishing a new markets tax credit program; authorizing
rulemaking; requiring a report; proposing coding for new law in Minnesota
Statutes, chapter 290.

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

Section 1.

new text begin [290.0693] NEW MARKETS TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given.
new text end

new text begin (b) "Adjusted purchase price" means the product of:
new text end

new text begin (1) the amount paid to the issuer of a qualified equity investment for the qualified
equity investment; and
new text end

new text begin (2) the following fraction: (i) the total dollar amount of qualified low-income
community investments held by the issuer within the state of Minnesota as of the credit
allowance date during the applicable tax year divided by (ii) the total dollar amount of
qualified low-income community investments held by the issuer in all states as of the
credit allowance date during the applicable tax year.
new text end

new text begin (c) "Annual allocation authority" means the amount of state new markets tax credit
authority the commissioner may distribute on an annual basis to qualified community
development entities for projects within the state of Minnesota.
new text end

new text begin (d) "Applicable percentage" means zero percent for each of the first two credit
allowance dates, seven percent for the third credit allowance date, and eight percent for
each of the final four credit allowance dates.
new text end

new text begin (e) "Commissioner" means the commissioner of revenue.
new text end

new text begin (f) "Credit allowance date" means:
new text end

new text begin (1) the date on which a qualified equity investment is initially made; and
new text end

new text begin (2) each of the six anniversary dates thereafter.
new text end

new text begin (g) "Greater Minnesota" means the area of the state that excludes the metropolitan
area, as defined in section 473.121, subdivision 2.
new text end

new text begin (h) "Investments held by an issuer" means, for purposes of calculating the adjusted
purchase price, any capital or equity investment held by an issuer even if the investment
has been sold or repaid; provided that the issuer reinvests an amount equal to the capital
returned to or recovered by the issuer from the original investment, exclusive of any
profits realized, in another qualified low-income community investment within 12 months
of the return or recovery of the capital investment. For the purposes of this requirement,
an issuer is not required to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the qualified equity investment.
The qualified low-income community investment is considered to be held by the issuer
through the seventh anniversary of the qualified equity investment's issuance. Periodic
amounts received by the issuer during a calendar year as repayment of principal on a loan
that is a qualified low-income community investment must be treated as continuously
invested in a qualified low-income community investment if the amounts received are
reinvested in another qualified low-income community investment by the end of the
following calendar year.
new text end

new text begin (i) "Qualified active low-income community business" has the meaning given in
section 45D of the Internal Revenue Code of 1986, as amended.
new text end

new text begin (j) "Qualified community development entity" has the meaning given in section 45D
of the Internal Revenue Code of 1986, as amended; provided that the entity has entered
into an allocation agreement with the Community Development Financial Institutions
Fund of the United States Treasury Department with respect to credits authorized by
section 45D of the Internal Revenue Code of 1986, as amended, and includes the state of
Minnesota within the service area set forth in the allocation agreement.
new text end

new text begin (k) "Qualified equity investment" means any equity investment in a qualified
community development entity that:
new text end

new text begin (1) is acquired after January 1, 2013, at its original issuance solely in exchange
for cash;
new text end

new text begin (2) has at least 85 percent of its cash purchase price used by the issuer to make
qualified low-income community investments; and
new text end

new text begin (3) is designated by the issuer as a qualified equity investment under this subdivision
and is certified by the commissioner as not exceeding the limitation contained in
subdivision 2. The term includes any qualified equity investment that does not meet the
provisions of this paragraph if the investment met the definition of a qualified equity
investment while under possession of a prior holder.
new text end

new text begin (l) "Qualified low-income community investment" means any capital or equity
investment in, or loan to, any qualified active low-income community business. With
respect to any one qualified active low-income community business, the maximum
amount of qualified low-income community investments made in the business, on
a collective basis with all of its affiliates, that may be used for the calculation of the
numerator described in paragraph (b), clause (2), item (i), is $10,000,000, whether issued
to one or several qualified community development entities.
new text end

new text begin (m) "Tax credit" means a credit against the tax otherwise due under this chapter or
any gross premiums tax under chapter 297I.
new text end

new text begin (n) "Taxpayer" means any individual or entity subject to the tax imposed under
this chapter or under chapter 297I.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed; qualification; limitation. new text end

new text begin (a) A taxpayer that makes
a qualified equity investment is entitled to a tax credit subject to the conditions and
limitations provided in this section.
new text end

new text begin (b) The tax credit amount equals the applicable percentage times the adjusted
purchase price paid to the issuer of a qualified equity investment. The amount of the tax
credit claimed must not exceed the amount of the taxpayer's state tax liability under this
chapter or chapter 297I for the tax year for which the tax credit is claimed. On each credit
allowance date of the qualified equity investment the taxpayer, or subsequent holder of the
qualified equity investment, is entitled to a tax credit during the taxable year including the
credit allowance date. The tax credit is not transferable.
new text end

new text begin (c) Tax credits earned by a partnership, a limited liability company, an S-corporation,
or other pass-through entity may be allocated to the partners, members, or shareholders of
the entity for their direct use in accordance with the provisions of any agreement among
the partners, members, or shareholders.
new text end

new text begin (d) Any amount of tax credit that the taxpayer is prohibited by this section from
claiming in a taxable year may be carried forward to any of the taxpayer's five subsequent
taxable years.
new text end

new text begin (e) The amount of annual allocation authority permitted under subdivision 5 cannot
exceed $25,000,000 per taxable year.
new text end

new text begin Subd. 3. new text end

new text begin Certification. new text end

new text begin The issuer of the qualified equity investment must certify
to the commissioner the anticipated dollar amount of the investment to be made within
the state of Minnesota during the first 12-month period following the initial credit
allowance date. If on the subsequent credit allowance dates, the actual dollar amount of
the investment is different than the amount certified, the commissioner may adjust the
allocation for subsequent taxable years to account for the difference.
new text end

new text begin Subd. 4. new text end

new text begin Credit recapture. new text end

new text begin (a) The commissioner shall recapture the tax credit
allowed under this section if:
new text end

new text begin (1) any amount of the federal tax credit available with respect to a qualified equity
investment that is eligible for a tax credit under this section is recaptured under section
45D of the Internal Revenue Code of 1986, as amended; or
new text end

new text begin (2) the issuer of a qualified equity investment redeems or makes principal repayment
prior to the seventh anniversary of the issuance of the qualified equity investment.
new text end

new text begin (b) Any tax credit that is subject to recapture must be recaptured from the taxpayer
that claimed the tax credit on a return.
new text end

new text begin Subd. 5. new text end

new text begin Allocation of credit. new text end

new text begin The commissioner shall adopt recapture provisions on
a scaled proportional basis to administer the annual allocation authority issued for qualified
equity investments. The commissioner shall allocate the credits on a first-come, first-served
basis, provided that prior to August 1 of any year, not more than 60 percent of the available
annual allocation authority is allocated to qualified equity investments located in either
the metropolitan area as defined in section 473.121, subdivision 2, or greater Minnesota.
After August 1 of any year, the allocation limitation by geographic area does not apply.
new text end

new text begin Subd. 6. new text end

new text begin Rulemaking. new text end

new text begin The commissioner may adopt rules to implement this
section. Rules adopted must be, to the greatest extent possible, compatible to applicable
credits under section 45D of the Internal Revenue Code of 1986, as amended.
new text end

new text begin Subd. 7. new text end

new text begin Program report. new text end

new text begin The commissioner of revenue shall report to the
legislature no later than December 31, 2021, regarding the implementation of this tax
credit, including an evaluation of the success of the tax credit in the state.
new text end

new text begin Subd. 8. new text end

new text begin Expiration. new text end

new text begin This section expires seven taxable years following final
enactment, except that the commissioner's authority to allow the credit under subdivision
2 based on certificates that were issued under subdivision 3 before expiration remains
in effect through the year following the year in which all certificates have either been
canceled or resulted in issuance of credit certificates, or 2028, whichever is earlier. The
commissioner shall issue the rules for the implementation of this section so as to allow the
commencement of qualified low-income community investments with tax year 2015.
new text end

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