1st Engrossment - 91st Legislature (2019 - 2020) Posted on 02/25/2019 03:30pm
A bill for an act
relating to taxation; income; making the small business investment credit
permanent; making technical and conforming changes; amending Minnesota
Statutes 2018, section 116J.8737, subdivision 5; repealing Minnesota Statutes
2018, sections 116J.8737, subdivision 12; 290.0692, subdivision 6.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Minnesota Statutes 2018, section 116J.8737, subdivision 5, is amended to read:
(a)deleted text begin(1)deleted text end 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$15,000,000deleted text end new text beginnew text endin credits to qualified investors or qualified funds deleted text beginfor taxable years beginning after
December 31, 2013, and before January 1, 2017, and must not allocate more than $10,000,000
in credits to qualified investors or qualified funds for taxable years beginning after December
31, 2016, and before January 1, 2018; and (2) for taxable years beginning after December
31, 2014, and before January 1, 2018,deleted text endnew text beginnew text end50 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
(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
website 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
(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.
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Repealed Minnesota Statutes: S0788-1
This section expires for taxable years beginning after December 31, 2017, except that reporting requirements under subdivision 6 and revocation of credits under subdivision 7 remain in effect through 2019 for qualified investors and qualified funds, and through 2021 for qualified small businesses, reporting requirements under subdivision 9 remain in effect through 2022, and the appropriation in subdivision 11 remains in effect through 2021.
This section expires at the same time and on the same terms as section 116J.8737, except that the expiration of this section does not affect the commissioner of revenue's authority to audit or power of examination and assessment for credits claimed under this section.