Minnesota Legislature
SF 3304
as introduced - 90th Legislature (2017 - 2018) Posted on 03/15/2018 12:47pm
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A bill for an act
relating to taxation; income; extending the small business investment credit;
amending Minnesota Statutes 2016, section 116J.8737, subdivisions 5, 12; Laws
2010, chapter 216, section 12, as amended.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2016, 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 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 new text begin (i) new text end $15,000,000 in credits to qualified
investors or qualified funds for taxable years beginning after December 31, 2013, and before
January 1, 2017, deleted text begin and must not allocate more thandeleted text end new text begin (ii)new text end $10,000,000 in credits to qualified
investors or qualified funds for taxable years beginning after December 31, 2016, and before
January 1, 2018deleted text begin ;deleted text end new text begin ,new text end new text begin and (iii) $20,000,000 in credits to qualified investors or qualified funds
for taxable years beginning after December 31, 2017, and before January 1, 2020; new text end and
(2) for taxable years beginning after December 31, 2014, and before January 1, 2018,
50 percent must be allocated to credits for qualifying investments in qualified greater
Minnesota businesses and minority- or women-owned qualified small businesses in
Minnesota. Any portion of a taxable year's credits that is reserved for qualifying investments
in greater Minnesota businesses and minority- or women-owned qualified small businesses
in Minnesota 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 for taxable years beginning after December
31, 2017.
new text end
Sec. 2.
Minnesota Statutes 2016, 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 2017deleted text end new text begin 2019new text end , except that reporting requirements under subdivision 6 and revocation of credits
under subdivision 7 remain in effect through deleted text begin 2019deleted text end new text begin 2021new text end for qualified investors and qualified
funds, and through deleted text begin 2021deleted text end new text begin 2023new text end for qualified small businesses, reporting requirements under
subdivision 9 remain in effect through deleted text begin 2022deleted text end new text begin 2024new text end , and the appropriation in subdivision 11
remains in effect through deleted text begin 2021deleted text end new text begin 2023new 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. 3.
Laws 2010, chapter 216, section 12, the effective date, as amended by Laws 2016,
chapter 158, article 1, section 212, is amended to read:
EFFECTIVE DATE.
This section is effective for investments made after July 1, 2010,
for taxable years beginning after December 31, 2009, and before January 1, deleted text begin 2017deleted text end new text begin 2020new text end , and
only applies to investments made after the qualified small business receiving the investment
has been certified by the commissioner of employment and economic development.
new text begin EFFECTIVE DATE; REVIVAL AND REENACTMENT. new text end
new text begin
This section is effective
retroactively from January 1, 2015, and Laws 2010, chapter 216, section 12, as amended
by Laws 2016, chapter 158, article 1, section 212, is revived and reenacted as of that date.
new text end