Bill Text: IN HB1020 | 2013 | Regular Session | Introduced
Bill Title: New markets job growth income tax credit.
Sponsorship: Bipartisan Bill
Status: (Introduced - Dead) 2013-01-14 - Representative Riecken added as coauthor [HB1020 Detail]
Download: Indiana-2013-HB1020-Introduced.html
Citations Affected: IC 6-3.1-34.
Synopsis: New markets job growth income tax credit. Establishes a
new markets job growth credit against state tax liability for investments
made by a taxpayer in a qualified community development entity that
then uses the proceeds of the investment to make investments in certain
qualified low income community businesses located in Indiana.
Specifies that the tax credit is equal to an applicable percentage
multiplied by the purchase price of the qualified investment. Provides
that the applicable percentage is 0% for the first and second credit
allowance dates, 7% for the third credit allowance date, and 8% for the
fourth, fifth, sixth, and seventh credit allowance dates. Provides that a
taxpayer is not entitled to a carryback or refund of an unused tax credit,
but the taxpayer may carry over excess credit amounts for not more
than five subsequent taxable years. Requires the Indiana economic
development corporation to limit the monetary amount of qualified
equity investments to an amount necessary to limit the claiming of the
tax credit to not more than $20,000,000 in any state fiscal year (based
on the anticipated use of the tax credits without regard to the potential
for taxpayers to carry forward tax credits to later tax years). (The
introduced version of this bill was prepared by the interim study
committee on economic development.)
Effective: January 1, 2014.
January 7, 2013, read first time and referred to Committee on Commerce, Small Business
and Economic Development.
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Chapter 34. New Markets Job Growth Credit
Sec. 1. As used in this chapter, "applicable percentage" means the following:
(1) Zero percent (0%) for the first and second credit allowance dates.
(2) Seven percent (7%) for the third credit allowance date.
(3) Eight percent (8%) for the fourth, fifth, sixth, and seventh credit allowance dates.
Sec. 2. As used in this chapter, "credit allowance date", with respect to any qualified equity investment, means:
(1) the date on which the qualified equity investment is initially made; and
(2) each of the following six (6) anniversary dates of the date described in subdivision (1).
Sec. 3. As used in this chapter, "IEDC" refers to the Indiana economic development corporation.
Sec. 4. As used in this chapter, "long term debt security" means any debt instrument that satisfies the following conditions:
(1) The debt instrument is issued by a qualified community development entity, at par value or a premium, with an original maturity date of at least seven (7) years after the date of its issuance, with no acceleration of repayment, amortization, or prepayment features before its original maturity date.
(2) The qualified community development entity that issues the debt instrument may not make cash interest payments on the debt instrument during the period beginning on the date of issuance and ending on the final credit allowance date in an amount that exceeds the cumulative operating income (as defined by federal regulations adopted under Section 45D of the Internal Revenue Code) of the qualified community development entity for that period, before giving effect to the expense of the cash interest payments.
However, the conditions of this section do not limit in any way the ability of the holder of the debt instrument to accelerate payments on the debt instrument in situations where the issuer has defaulted on covenants designed to ensure compliance with this chapter or Section 45D of the Internal Revenue Code.
Sec. 5. As used in this chapter, "purchase price" means the amount paid to the issuer of a qualified equity investment for the qualified equity investment.
Sec. 6. (a) As used in this chapter, "qualified active low income community business" has the meaning set forth in Section 45D of the Internal Revenue Code and 26 CFR 1.45D-1.
(b) A business is considered a qualified active low income community business for the duration of the qualified community development entity's investment in, or loan to, the business if the qualified community development entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low income community business throughout the entire period of the investment or loan.
(c) The term does not include a business that derives or projects that it will derive at least fifteen percent (15%) of its annual revenue from the rental or sale of real estate. However, this exclusion does not apply to a business that is controlled by, or
under common control with, a second business if the second
business:
(1) does not derive or project that it will derive at least fifteen
percent (15%) of its annual revenue from the rental or sale of
real estate; and
(2) is the primary tenant of the real estate leased from the first
business.
(d) The term does not include a charter school.
Sec. 7. (a) As used in this chapter, "qualified community
development entity" means an entity that:
(1) is a qualified community development entity for purposes
of Section 45D of the Internal Revenue Code; and
(2) 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 that
includes Indiana within the service area set forth in the
allocation agreement.
(b) The term includes affiliated entities and subordinate
community development entities of any entity described in
subsection (a).
Sec. 8. (a) As used in this chapter, "qualified equity investment"
means any equity investment in, or long term debt security issued
by, a qualified community development entity that:
(1) is acquired after December 31, 2013, at its original
issuance solely in exchange for cash;
(2) has at least eighty-five percent (85%) of its cash purchase
price used by the issuer to make qualified low income
community investments in qualified active low income
community businesses located in Indiana by the first
anniversary of the initial credit allowance date; and
(3) is designated by the issuer as a qualified equity investment
under this chapter and is certified by the IEDC as not
exceeding the limitation under section 17 of this chapter.
(b) The term includes an otherwise qualified equity investment
that does not meet the requirements of subsection (a)(2) if the
investment was a qualified equity investment in the hands of a
prior holder.
Sec. 9. As used in this chapter, "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 (1) 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 its
affiliates, is ten million dollars ($10,000,000), whether issued to one
(1) or several qualified community development entities.
Sec. 10. As used in this chapter, "state tax liability" means a
person's total tax liability that is incurred under:
(1) IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);
(2) IC 6-5.5 (the financial institutions tax); and
(3) IC 27-1-18-2 (the insurance premiums tax);
as computed after the application of the credits that under
IC 6-3.1-1-2 are to be applied before the credit provided by this
chapter.
Sec. 11. As used in this chapter, "tax credit" refers to a credit
granted under this chapter against state tax liability.
Sec. 12. As used in this chapter, "taxpayer" means an
individual, a corporation, a partnership, or another person or
entity that has state tax liability.
Sec. 13. A taxpayer that makes a qualified equity investment
earns a vested right to tax credits as follows:
(1) On each credit allowance date of the qualified equity
investment, the taxpayer, or the subsequent holder of the
qualified equity investment, is entitled to a tax credit for the
taxable year that includes the credit allowance date.
(2) Subject to subdivision (3), the tax credit amount is equal
to:
(A) the applicable percentage; multiplied by
(B) the purchase price paid to the issuer of the qualified
equity investment.
(3) The amount of the tax credit claimed may not exceed the
amount of the taxpayer's state tax liability for the taxable
year for which the tax credit is claimed.
Sec. 14. A tax credit claimed under this chapter is not
refundable or saleable on the open market.
Sec. 15. (a) If:
(1) a pass through entity does not have state tax liability
against which a tax credit may be applied; and
(2) the pass through entity would be eligible for a tax credit if
the pass through entity were a taxpayer;
a shareholder, partner, or member of the pass through entity is
entitled to a tax credit under this chapter.
(b) Tax credits earned by a pass through entity may be allocated
to the partners, members, or shareholders of the pass through
entity for their direct use in accordance with the provisions of any
agreement among the partners, members, or shareholders.
Sec. 16. (a) If the amount of a tax credit for a taxpayer in a
taxable year exceeds the taxpayer's state tax liability for that
taxable year, the taxpayer may carry the excess over to not more
than five (5) subsequent taxable years. The amount of the tax credit
carryover from a taxable year shall be reduced to the extent that
the carryover is used by the taxpayer to obtain a tax credit under
this chapter for any subsequent taxable year.
(b) A taxpayer is not entitled to a carryback or refund of an
unused tax credit.
Sec. 17. (a) The IEDC shall limit the monetary amount of
qualified equity investments permitted under this chapter to an
amount necessary to limit the claiming of the tax credit to not more
than twenty million dollars ($20,000,000) in any state fiscal year.
This limitation on qualified equity investments must be based on
the anticipated use of credits without regard to the potential for
taxpayers to carry forward tax credits to later tax years.
(b) When the total tax credits approved under this chapter equal
the maximum amount allowable in any state fiscal year, no
application filed thereafter for that same state fiscal year may be
approved.
Sec. 18. The issuer of a qualified equity investment shall certify
to the IEDC the anticipated dollar amount of the investments to be
made in Indiana during the first twelve (12) month period
following the initial credit allowance date. Subject to section 22 of
this chapter, if on the second credit allowance date the actual
dollar amount of the investments is different than the amount
certified, the IEDC shall adjust the credits arising on the second
allowance date to account for the difference.
Sec. 19. (a) If the proceeds of a qualified equity investment are
invested completely in qualified low income community
investments in Indiana, the purchase price, for the purpose of
calculating the tax credit under this chapter, equals one hundred
percent (100%) of the qualified equity investment, regardless of the
location of investments made with the proceeds of other qualified
equity investments issued by the same qualified community
development entity.
(b) To the extent a part of a qualified equity investment is not
invested in Indiana, the purchase price, for the purpose of
calculating the tax credit under this chapter, must be reduced by
the same ratio that the part of the qualified equity investment that
is not invested in Indiana bears to the total amount of the qualified
equity investment, independently of the location of investments
made with proceeds of other qualified equity investments issued by
the same qualified community development entity. In this case, the
burden is on the qualified community development entity to
establish the extent to which the qualified equity investments are
fully invested in Indiana, either by:
(1) establishing that the qualified community development
entity itself invests exclusively in Indiana; or
(2) otherwise establishing, through direct tracing, the part of
a qualified equity investment invested solely in Indiana.
Sec. 20. Subject to section 22 of this chapter, the IEDC shall
recapture the tax credit allowed under this chapter from a
taxpayer that claimed the credit on a tax return, if:
(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; or
(2) subject to section 21 of this chapter, the issuer redeems or
makes a principal repayment with respect to a qualified
equity investment before the seventh anniversary of the
issuance of the qualified equity investment.
If subdivision (1) applies, the IEDC's recapture is proportionate to
the federal recapture with respect to the qualified equity
investment. If subdivision (2) applies, the IEDC's recapture is
proportionate to the amount of the redemption or repayment with
respect to the qualified equity investment.
Sec. 21. For purposes of section 20(2) of this chapter, an
investment shall be considered held by an issuer even if the
investment has been sold or repaid if 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 twelve
(12) months after receipt of the capital. An issuer may not be
required to reinvest capital returned from qualified low income
community investments after the sixth anniversary of the issuance
of the qualified equity investment, the proceeds of which were used
to make the qualified low income community investment. The
qualified low income community investment shall be considered
held by the issuer through the seventh anniversary of the qualified
equity investment's issuance.
Sec. 22. The IEDC may not make an adjustment in a tax credit
under section 18 of this chapter or recapture a tax credit under
section 20 of this chapter unless:
(1) the IEDC has given the qualified community development
entity notice of the proposed adjustment or recapture; and
(2) the IEDC allowed the qualified community development
entity six (6) months after the date of the notice to cure the
cause of the proposed adjustment or recapture.
Sec. 23. The IEDC shall adopt rules to implement this chapter
and to administer the certification of qualified equity investments
and the allocation of tax credits under this chapter.
Sec. 24. To apply a tax credit under this chapter against the
taxpayer's state tax liability, a taxpayer must claim the tax credit
on the taxpayer's annual state tax return or returns in the manner
prescribed by the department. In addition, the taxpayer must
submit to the department any additional information that the
department determines is necessary for the department to
determine whether the taxpayer is eligible for the tax credit.
