Bill Text: MI SB0541 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Income tax; other; new markets small business incentive credits; create. Amends 1967 PA 281 (MCL 206.1 - 206.532) by adding sec. 279.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2009-05-07 - Referred To Committee On Finance [SB0541 Detail]
Download: Michigan-2009-SB0541-Introduced.html
SENATE BILL No. 541
May 7, 2009, Introduced by Senators RICHARDVILLE and SANBORN and referred to the Committee on Finance.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
(MCL 206.1 to 206.532) by adding section 279.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 279. (1) Subject to the limitations provided under
subsection (10), for tax years that begin after December 31, 2008,
a taxpayer that purchases a qualified equity investment earns a
vested right to a tax credit under this section. The holder of that
qualified equity investment may claim a credit against the tax
imposed by this act, the Michigan business tax act, 2007 PA 36, MCL
208.1101 to 208.1601, or section 476a of the insurance code of
1956, 1956 PA 218, MCL 500.476a, equal to the applicable percentage
of the purchase price paid to the qualified community development
entity for the qualified equity investment. The amount of the
credit allowed to be claimed under this section shall not exceed
the tax liability of the taxpayer for the tax year. If the amount
of the credit allowed under this section and any unused
carryforward of the credit allowed by this section exceed the tax
liability of the taxpayer for the tax year, that portion that
exceeds the tax liability shall not be refunded or transferred,
except as provided in subsection (7), but may be carried forward to
offset tax liability in subsequent tax years.
(2) A qualified community development entity that seeks to
have an equity investment or long-term debt security designated as
a qualified equity investment and eligible for tax credits shall
apply to the department for certification. A taxpayer shall not
claim a credit under this section unless the qualified community
development entity that issued the qualified equity investment has
submitted an application for certification, along with the
application fee, and the department has issued a certificate to the
qualified community development entity for that qualified equity
investment. The taxpayer shall attach the certificate to the annual
return filed under this act, the Michigan business tax act, 2007 PA
36, MCL 208.1101 to 208.1601, or section 476a of the insurance code
of 1956, 1956 PA 218, MCL 500.476a, on which a credit under this
section is claimed.
(3) The application required under this section shall be
accompanied by a $5,000.00 application fee and shall state all of
the following:
(a) The applicant is a qualified community development entity.
(b) The equity investment or long-term debt security is a
qualified equity investment.
(c) The proposed dollar amount of the qualified equity
investment.
(4) The department shall certify qualified equity investments
in the order applications are received by the department.
Applications received on the same day shall be deemed to have been
received simultaneously. For applications received on the same day
and deemed complete, the department shall certify qualified equity
investments and, in the event there is insufficient remaining tax
credit capacity, reduce the amount of certified qualified equity
investment in proportionate percentages based upon the ratio of the
amount of qualified equity investments requested in an application
to the total amount of qualified equity investments requested in
all applications received on the same day.
(5) Within 30 days after 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 shall
provide the department with a written notice in a form or manner as
provided by the department and evidence of receipt of the cash
investment within 10 business days after receipt. Within 30 days
after making qualified low-income community investments in
qualified active low-income community businesses located in this
state, the qualified community development entity shall provide the
department with a written notice, in a form or manner as provided
by the department, of those investments including the name and
address of each qualified active low-income community business that
received all or a portion of those investments. If the qualified
community development entity fails to provide the department with
the written notices and evidence as required under this subsection,
the certification shall lapse and the entity may not issue the
qualified equity investment without reapplying to the department
for certification. If the qualified community development entity
does not receive the cash investment and issue the qualified equity
investment within 30 days following receipt of the certification
notice, the certification shall lapse and the entity may not issue
the qualified equity investment without reapplying to the
department for certification. A certification that lapses reverts
back to the department and may be reissued in accordance with the
application process outlined in this section.
(6) The qualified community development entity shall not use
any of the cash proceeds from the issuance of the qualified equity
investment to invest in qualified low-income community investments
in qualified active low-income community businesses outside this
state.
(7) If a taxpayer is a partnership, limited liability company,
or subchapter S corporation, the taxpayer may allocate all or any
portion of a credit earned under this section to its partners,
members, or shareholders for their direct use in accordance with
the provisions of any agreement among the partners, members, or
shareholders or based on the partner's, member's, or shareholder's
proportionate share of ownership or on an alternative method
approved by the department. A taxpayer may claim a portion of a
credit and allocate the remaining credit amount. A credit amount
allocated under this subsection may be claimed against the
partner's, member's, or shareholder's tax liability under this act,
the Michigan business tax act, 2007 PA 36, MCL 208.1101 to
208.1601, or section 476a of the insurance code of 1956, 1956 PA
218, MCL 500.476a. A credit allocation under this subsection shall
be made on a form prescribed by the department. The allocator and
allocatees shall send a copy of the completed allocation form to
the department in the tax year in which the allocation is made and
attach a copy of the completed allocation form to the annual return
required to be filed under this act for that tax year.
(8) The department shall recapture in a manner as provided
under 1941 PA 122, MCL 205.1 to 205.31, from the taxpayer that
claimed the credit on a return the tax credit allowed under this
section under any of the following circumstances:
(a) If any federal tax credit that may be 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. In that case, the department's recapture
shall be proportionate to the federal recapture with respect to
that qualified equity investment.
(b) If the issuer redeems or makes principal repayment with
respect to a qualified equity investment prior to the seventh
anniversary of the issuance of the qualified equity investment. In
that case, the department's recapture shall be proportionate to the
amount of the redemption or repayment with respect to the qualified
equity investment.
(c) If the issuer fails to invest at least 85% of the cash
purchase price of the qualified equity investment in qualified low-
income community investments in this state within 12 months of the
issuance of the qualified equity investment and maintain such level
of investment in qualified low-income community investments in this
state until the last credit allowance date for that qualified
equity investment.
(9) For purposes of this section, a qualified low-income
community investment shall be considered held by a qualified
community development entity even if the investment has been sold
or repaid, provided that the qualified community development entity
reinvests an amount equal to the capital returned to or recovered
by the qualified community development entity from the original
investment, exclusive of any profits realized, in another qualified
low-income community investment in this state within 12 months
after the receipt of that capital. A qualified community
development entity 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
proceeds of which were used to make the qualified low-income
community investment, and the qualified low-income community
investment shall be considered held by the qualified community
development entity through the seventh anniversary of the qualified
equity investment's issuance. In addition to the notification
required under 1941 PA 122, MCL 205.1 to 205.31, the department
shall provide notice to the qualified community development entity
of any proposed recapture of tax credits pursuant to this section
for which the qualified community development entity issued a
qualified equity investment.
(10) The total amount of all qualified equity investments that
may be certified by the department under this section, section 465
of the Michigan business tax act, 2007 PA 36, MCL 208.1465, and
section 476a of the insurance code of 1956, 1956 PA 218, MCL
500.476a, shall not result in more than $20,000,000.00 in tax
credits available in any 1 tax year not including any carried-
forward amounts from credits approved in a previous tax year. A
qualified community development entity shall not issue a qualified
equity investment before July 1, 2009 or after December 31, 2011. A
qualified community development entity that issues a long-term debt
security shall not make cash interest payments on that long-term
debt security during the period commencing with its issuance and
ending on its final credit allowance date that are in excess of the
sum of those cash interest payments and the cumulative operating
income of that qualified community development entity for the same
period. For purposes of this subsection, "cash interest payments"
and "cumulative operating income" shall be determined in accordance
with section 45D of the internal revenue code and any federal
regulations relating to that section.
(11) The department may promulgate rules to implement this
section.
(12) As used in this section:
(a) "Applicable percentage" means 0% for each of the first 2
credit allowance dates, 7% for the third credit allowance date, and
8% for the next 4 credit allowance dates.
(b) "Credit allowance date" means the date on which the
qualified equity investment is initially made and each of the 6
anniversary dates of that date thereafter.
(c) "Long-term debt security" means any debt instrument issued
by a qualified community development entity, at par value or a
premium, with an original maturity date of at least 7 years from
the date of its issuance, with no acceleration of repayment,
amortization, or prepayment features prior to its original maturity
date. This definition in no way limits the holder's ability to
accelerate payments on the debt instrument in situations where the
qualified community development entity has defaulted on covenants
designed to ensure compliance with this act or section 45D of the
internal revenue code.
(d) "Purchase price" means the amount paid to the qualified
community development entity for the qualified equity investment.
(e) "Qualified active low-income community business" has the
meaning given to that term in section 45D of the internal revenue
code, except that any business that derives or projects to derive
15% or more of its annual revenue from the rental or sale of real
estate is not considered to be a qualified active low-income
community business unless the business is controlled by, or under
common control with, another business that does not derive or
project to derive 15% or more of its annual revenue from the rental
or sale of real estate and is the primary tenant of the real estate
leased from the initial business. A business shall be 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 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.
(f) "Qualified community development entity" has the meaning
given to that term in section 45D of the internal revenue code,
provided that such entity has entered into, or is controlled by a
qualified community development entity that 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. The allocation agreement shall include the state of
Michigan within the service area set forth in that allocation
agreement.
(g) "Qualified equity investment" means any equity investment
in, or long-term debt security issued by, a qualified community
development entity that is acquired after July 1, 2009 at its
original issuance solely in exchange for cash, has at least 85% of
its cash purchase price used by the qualified community development
entity to make qualified low-income community investments in
qualified active low-income community businesses located in this
state, and is designated by the qualified community development
entity as a qualified equity investment under this section and is
certified by the department as not exceeding the limitation
contained in subsection (10). Qualified equity investment includes
any qualified equity investment that is not acquired after July 1,
2009 at its original issuance solely in exchange for cash if the
investment was a qualified equity investment in the hands of a
prior holder.
(h) "Qualified low-income community investment" means, subject
to the limitation provided under this subdivision, any capital or
equity investment in, or loan to, any qualified active low-income
community business made after July 1, 2009. With respect to any 1
qualified active low-income community business, the maximum amount
allowed of qualified low-income community investments made in that
business, on a collective basis with all of its affiliates, with
proceeds of qualified equity investments certified as eligible for
tax credits under this section, whether issued to 1 or more
qualified community development entities, is $10,000,000.00.
