Bill Text: IN HB1414 | 2013 | Regular Session | Amended
Bill Title: Indiana new markets jobs act.
Spectrum: Moderate Partisan Bill (Republican 7-1)
Status: (Introduced - Dead) 2013-02-04 - Representatives Cherry, Davis, Truitt and Shackleford added as coauthors [HB1414 Detail]
Download: Indiana-2013-HB1414-Amended.html
Citations Affected: IC 6-3.1.
Synopsis: Indiana new markets jobs act. 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
active 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. Requires a qualified
community development entity to pay a nonrefundable application fee
of $5,000 for each qualified equity investment that the qualified
community development entity seeks to have approved by the Indiana
economic development corporation (IEDC). Requires the IEDC 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). Provides that the IEDC is required to
issue letter rulings requested by taxpayers, similar to private letter
rulings issued by the Internal Revenue Service at the federal level,
regarding the Indiana new markets tax credit. Makes an appropriation.
Effective: January 1, 2013 (retroactive).
January 22, 2013, read first time and referred to Committee on Commerce, Small Business
and Economic Development.
January 31, 2013, amended, reported _ Do Pass. Referred to Committee on Ways and
Means pursuant to Rule 127.
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 and to make an appropriation.
Chapter 34. New Markets Job Growth Credit
Sec. 1. This chapter applies only to taxable years beginning after December 31, 2012.
Sec. 2. 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. 3. 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. 4. As used in this chapter, "IEDC" refers to the Indiana economic development corporation.
Sec. 5. 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. 6. 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. 7. (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.
Sec. 8. (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. 9. (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, 2012, at its original
issuance solely in exchange for cash;
(2) has one hundred percent (100%) 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 18 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. 10. 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. 11. 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. 12. As used in this chapter, "tax credit" refers to a credit
granted under this chapter against state tax liability.
Sec. 13. As used in this chapter, "taxpayer" means an
individual, a corporation, a partnership, or another person or
entity that has state tax liability.
Sec. 14. 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. 15. A tax credit claimed under this chapter is not
refundable or saleable on the open market.
Sec. 16. (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. 17. (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. 18. (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. 19. (a) After July 31, 2013, a qualified community
development entity may apply to the IEDC to have an equity
investment or a long term debt security designated as a qualified
equity investment that meets the requirements for the tax credit
provided by this chapter. An application submitted under this
subsection must include the following:
(1) Evidence of the applicant's certification as a qualified
community development entity, including evidence that the
applicant's service area includes Indiana.
(2) A copy of an allocation agreement executed by the
applicant, or its controlling entity, and the Community
Development Financial Institutions Fund.
(3) A certificate executed by an executive officer of the
applicant attesting that the allocation agreement remains in
effect and has not been revoked or canceled by the
Community Development Financial Institutions Fund.
(4) A description of the proposed amount, structure, and
purchaser of the equity investment or long term debt security.
(5) Identifying information for any taxpayer eligible to utilize
a tax credit earned as a result of the issuance of the equity
investment or long term debt security.
(6) Information regarding the proposed use of proceeds from
the issuance of the qualified equity investment.
(7) A nonrefundable application fee of five thousand dollars
($5,000). This fee shall be paid to the IEDC and is required for
each application submitted.
(b) Within thirty (30) days after receipt of an application
submitted under subsection (a), including the payment of the
application fee, the IEDC shall grant or deny the application in full
or in part. If the IEDC denies any part of the application, the IEDC
shall inform the qualified community development entity of the
grounds for the denial. If the qualified community development
entity provides any additional information required by the IEDC
or otherwise completes the application within fifteen (15) days of
the notice of denial, the application is considered completed as of
the original date of submission. If the qualified community
development entity fails to provide the information or complete the
application within the fifteen (15) day period, the application
remains denied and must be resubmitted in full with a new
submission date.
(c) Subject to subsection (d) and section 18 of this chapter, if the
application is complete, the IEDC shall certify the proposed equity
investment or long term debt security as a qualified equity
investment that is eligible for tax credits under this chapter. The
IEDC shall provide written notice of the certification to the
qualified community development entity and to the department.
The notice must include the names of those entities eligible to
utilize the credits and their respective credit amounts. If the names
of the entities that are eligible to utilize the credits change due to
a transfer of a qualified equity investment or a change in allocation
under section 16(b) of this chapter, the qualified community
development entity shall notify the IEDC of the change.
(d) The IEDC shall certify proposed qualified equity
investments in the order applications are received by the IEDC.
Applications received on the same day are considered to have been
received simultaneously. If the sum of the amounts of proposed
qualified equity investments submitted in applications received on
the same day would cause the limitation in section 18 of this
chapter to be exceeded for any state fiscal year that would include
a credit allowance date of the proposed qualified equity
investments, the IEDC shall ask each applicant that submitted an
application that day whether the applicant is willing to accept a
partial certification of the applicant's proposed qualified equity
investment or would instead prefer to withdraw its application. If
the sum of the proposed qualified equity investments of the
applicants that have not withdrawn their applications would not
cause the limit specified in section 18 of this chapter to be exceeded
for any succeeding state fiscal year that includes a credit allowance
date of the proposed qualified equity investments, the IEDC shall
certify each proposed qualified equity investment of the applicants
that have not withdrawn their applications in full. If the sum of the
proposed qualified equity investments of the applicants that have
not withdrawn their applications would cause the limit specified in
section 18 of this chapter to be exceeded for any succeeding state
fiscal year that includes a credit allowance date of the proposed
qualified equity investments, the IEDC shall certify a fractional
amount of each proposed qualified equity investment described in
applications that were received that day and not withdrawn equal
to:
(1) the maximum remaining amount of qualified equity
investments that may be approved consistent with the
limitation specified in section 18 of this chapter for all
succeeding state fiscal years that include a credit allowance
date of the proposed qualified equity investments, determined
at the conclusion of the previous day; multiplied by
(2) the ratio of the amount of the proposed qualified equity
investment requested in the application to the total amount of
proposed qualified equity investments requested in all
applications received that day and not withdrawn.
(e) Within thirty (30) days of the applicant receiving notice of
certification, the qualified community development entity shall
issue the qualified equity investment and receive cash in the
amount of the certified amount. The qualified community
development entity must provide the IEDC with evidence of the
receipt of the cash investment within ten (10) business days after
receipt. If the qualified community development entity does not
receive the cash investment and issue the qualified equity
investment within thirty (30) days following receipt of the
certification notice, the certification lapses and the entity may not
issue the qualified equity investment without reapplying to the
IEDC for certification. Lapsed certifications revert back to the
IEDC and may be reissued only in accordance with the application
process described in this section.
(f) The IEDC shall retain the nonrefundable application fees collected by the IEDC under subsection (a)(7). The nonrefundable application fees collected by the IEDC under subsection (a)(7) are annually appropriated to the IEDC for the IEDC's use in carrying out any of its duties under IC 5-28.
Sec. 20. 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 24 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. 21. (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. 22. Subject to section 24 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 23 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. 23. For purposes of section 22(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. 24. The IEDC may not make an adjustment in a tax credit
under section 20 of this chapter or recapture a tax credit under
section 22 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. 25. (a) As used in this section, "letter ruling" means a
written interpretation of law as applied to a specific set of facts
submitted by an entity requesting the interpretation.
(b) The IEDC shall issue letter rulings regarding the credit
provided by this chapter, subject to the terms and conditions set
forth in this section.
(c) The IEDC shall respond to a request for a letter ruling
within sixty (60) days after receiving the request. An applicant may
provide a draft letter ruling for the IEDC's consideration. The
applicant may withdraw the request for a letter ruling, in writing,
before the letter ruling is issued. The IEDC may refuse to issue a
letter ruling for good cause, but must state the specific reasons for
refusing to issue the letter ruling. Good cause includes the
following:
(1) The applicant is requesting that the IEDC determine
whether a statute is constitutional or a regulation is lawful.
(2) The request involves a hypothetical situation or alternative
plans.
(3) The facts or issues presented in the request are unclear,
overbroad, insufficient, or otherwise inappropriate as a basis
upon which to issue a letter ruling.
(4) The issue is currently being considered in a rulemaking
procedure, contested case, or other agency or judicial
proceeding that may definitely resolve the issue.
(d) Letter rulings bind the IEDC and its agents and their
successors and the department until after the entity or its
shareholders, members, or partners, as applicable, claim all of the
credits on an Indiana tax return, subject to the terms and
conditions set forth in properly published regulations. A letter
ruling applies only to the applicant for the letter ruling.
(e) In rendering letter rulings and making other determinations
under this chapter, to the extent applicable, the IEDC shall look for
guidance to Section 45D of the Internal Revenue Code and the
regulations issued under Section 45D of the Internal Revenue
Code.
Sec. 26. An entity claiming a credit under this chapter is not
required to pay any additional tax as a result of claiming the credit,
including the tax levied under IC 27-1-20-12.
Sec. 27. Before August 1, 2013, the IEDC shall adopt emergency
rules in the manner provided under IC 4-22-2-37.1 to implement
this chapter and to administer the certification of qualified equity
investments and the allocation of tax credits under this chapter.
Notwithstanding any provision of IC 4-22-2-37.1 to the contrary,
emergency rules adopted under this section expire on the
expiration date stated in the emergency rules.
Sec. 28. 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.
