Bill Text: MN HF288 | 2011-2012 | 87th Legislature | Engrossed
Bill Title: Tax credit provided for investment in start-up and emerging Minnesota businesses.
Spectrum: Slight Partisan Bill (Republican 6-2)
Status: (Introduced - Dead) 2011-03-09 - Committee report, to pass and re-refer to Taxes [HF288 Detail]
Download: Minnesota-2011-HF288-Engrossed.html
1.2relating to taxation; insurance; providing a credit for investment in start-up and
1.3emerging Minnesota businesses;proposing coding for new law in Minnesota
1.4Statutes, chapters 116J; 297I.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [116J.665] MINNESOTA BUSINESS INVESTMENT COMPANY
1.7CREDIT.
1.8 Subdivision 1. Definitions. (a) For purposes of this section, the following terms
1.9have the meanings given.
1.10(b) "Affiliate" means:
1.11(1) any person who, directly or indirectly, beneficially owns, controls, or holds
1.12power to vote 15 percent or more of the outstanding voting securities or other voting
1.13ownership interest of a Minnesota business investment company or insurance company; or
1.14(2) any person, 15 percent or more of whose outstanding voting securities or other
1.15voting ownership interests are directly or indirectly beneficially owned, controlled, or held
1.16with power to vote by a Minnesota business investment company or insurance company.
1.17Notwithstanding this subdivision, an investment by a participating investor in a
1.18Minnesota business investment company pursuant to an allocation of premium tax credits
1.19under this section does not cause that Minnesota business investment company to become
1.20an affiliate of that participating investor.
1.21(c) "Allocation date" means the date on which credits under section 297I.23 are
1.22allocated to the participating investors of a Minnesota business investment company
1.23under this section.
1.24(d) "Designated capital" means an amount of money that:
2.1(1) is invested by a participating investor in a Minnesota business investment
2.2company; and
2.3(2) fully funds the purchase price of either or both participating investor's equity
2.4interest in a Minnesota business investment company or a qualified debt instrument issued
2.5by a Minnesota business investment company.
2.6(e) "Minnesota business investment company" means a partnership, corporation,
2.7trust, or limited liability company, organized on a for-profit basis, that:
2.8(1) has its principal office located or is headquartered in Minnesota;
2.9(2) has as its primary business activity the investment of cash in qualified businesses;
2.10and
2.11(3) is certified by the Department of Employment and Economic Development as
2.12meeting the criteria in this section.
2.13(f) "Participating investor" means any insurance company as defined in section
2.1460A.02, subdivision 4, excluding health maintenance organizations, that contributes
2.15designated capital pursuant to this section.
2.16(g) "Person" means any natural person or entity, including, but not limited to, a
2.17corporation, general or limited partnership, trust, or limited liability company.
2.18(h)(1) "Qualified business" means a business that is independently owned and
2.19operated and meets all of the following requirements:
2.20(i) it is headquartered in Minnesota, its principal business operations are located in
2.21this state, and at least 80 percent of its employees are located in Minnesota;
2.22(ii) it has no more than 100 employees;
2.23(iii) it is not engaged in:
2.24(A) professional services provided by accountants, doctors, or lawyers;
2.25(B) banking or lending;
2.26(C) real estate development;
2.27(D) insurance;
2.28(E) oil and gas exploration;
2.29(F) direct gambling activities;
2.30(G) retail sales; or
2.31(H) making loans to or investments in a Minnesota business investment company
2.32or an affiliate; and
2.33(iv) it is not a franchise of and has no financial relationship with a Minnesota business
2.34investment company or any affiliate of a Minnesota business investment company prior to
2.35a Minnesota business investment company's first qualified investment in the business;
3.1(2) a business classified as a qualified business at the time of the first qualified
3.2investment in the business remains classified as a qualified business and may receive
3.3continuing qualified investments from any Minnesota business investment company.
3.4Continuing investments constitute qualified investments even though the business may not
3.5meet the definition of a qualified business at the time of the continuing investments.
3.6(i) "Qualified debt instrument" means a debt instrument issued by a Minnesota
3.7business investment company which meets all of the following criteria:
3.8(1) it is issued at par value or a premium; and
3.9(2) it has an original maturity date of at least four years from the date of issuance,
3.10and a repayment schedule which is not faster than a level principal amortization over
3.11four years.
3.12(j) "Qualified distribution" means any distribution or payment made by a Minnesota
3.13business investment company in connection with any of the following:
3.14(1) costs and expenses of forming, syndicating, and organizing the Minnesota
3.15business investment company, including fees paid for professional services, and the costs
3.16of financing and insuring the obligations of a Minnesota business investment company,
3.17provided no payment is made to a participating investor;
3.18(2) an annual management fee not to exceed one percent of designated capital on
3.19an annual basis to offset the costs and expenses of managing and operating a Minnesota
3.20business investment company;
3.21(3) reasonable and necessary fees in accordance with industry custom for ongoing
3.22professional services, including, but not limited to, legal and accounting services related
3.23to the operation of a Minnesota business investment company, not including lobbying or
3.24governmental relations;
3.25(4) any increase or projected increase in federal or state taxes, including penalties
3.26and related interest of the equity owners of a Minnesota business investment company
3.27resulting from the earnings or other tax liability of a Minnesota business investment
3.28company to the extent that the increase is related to the ownership, management, or
3.29operation of a Minnesota business investment company.
3.30(5) Payments of principal and interest to holders of qualified debt instruments issued
3.31by a Minnesota business investment company may be made without restriction whatsoever.
3.32(k) "Qualified investment" means the investment of money by a Minnesota
3.33business investment company in a qualified business for the purchase of any debt,
3.34debt participation, equity, or hybrid security of any nature and description whatsoever,
3.35including a debt instrument or security that has the characteristics of debt but that provides
3.36for conversion into equity or equity participation instruments such as options or warrants.
4.1Any repayment of a qualified investment prior to one year from the date of issuance shall
4.2result in the amount of the qualified investment being reduced by 50 percent for purposes
4.3of the cumulative investment requirement in subdivision 8, paragraph (d).
4.4(l) "State premium tax liability" means any liability incurred by an insurance
4.5company under chapter 297I or in the case of a repeal or a rate reduction by the state of
4.6the liability imposed by chapter 297I, any other tax liability imposed upon an insurance
4.7company by the state, other than the tax imposed on taxpayers under section 290.05.
4.8 Subd. 2. Certification. (a) The department must provide a standardized format for
4.9applying for the business investment credit under section 297I.23, and for certification as a
4.10Minnesota business investment company.
4.11(b) An applicant for certification as a Minnesota business investment company
4.12is required to:
4.13(1) file an application with the department that includes, without limitation, a
4.14statement that the applicant has read and understands the requirements of this chapter;
4.15(2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
4.16(3) submit as part of its application an audited balance sheet that contains an
4.17unqualified opinion of an independent certified public accountant issued not more than 35
4.18days before the application date that states that the applicant has an equity capitalization
4.19of $500,000 or more in the form of unencumbered cash, marketable securities, or other
4.20liquid assets; and
4.21(4) have at least two principals or persons, at least one of which is primarily located
4.22in Minnesota, employed or engaged to manage the funds who each have a minimum of
4.23five years of money management experience in the venture capital or business industry.
4.24(c) The department may certify partnerships, corporations, trusts, or limited liability
4.25companies, organized on a for-profit basis, which submit an application to be designated as
4.26a Minnesota business investment company if the applicant is located, headquartered, and
4.27licensed or registered to conduct business in Minnesota, has as its primary business activity
4.28the investment of cash in qualified businesses, and meets the other criteria in this section.
4.29(d) The department must review the organizational documents of each applicant
4.30for certification and the business history of each applicant and determine whether the
4.31applicant has satisfied the requirements of this section.
4.32(e) Within 45 days after the receipt of an application, the department must issue the
4.33certification or refuse the certification and communicate in detail to the applicant the
4.34grounds for refusal, including suggestions for the removal of such grounds.
4.35(f) The department must begin accepting applications to become a Minnesota
4.36business investment company as defined under section 297I.23 by August 1, 2011.
5.1(g) Application fees collected by the commissioner under this subdivision must be
5.2deposited in the state treasury and appropriated to the commissioner of employment and
5.3economic development for the purposes of this act.
5.4 Subd. 3. Requirements. (a) A participating investor or affiliate of a participating
5.5investor must not, directly or indirectly:
5.6(1) beneficially own, whether through rights, options, convertible interest, or
5.7otherwise, 15 percent or more of the voting securities or other voting ownership interest of
5.8a Minnesota business investment company;
5.9(2) manage a Minnesota business investment company; or
5.10(3) control the direction of investments for a Minnesota business investment
5.11company.
5.12(b) A Minnesota business investment company may obtain one or more guaranties,
5.13indemnities, bonds, insurance policies, or other payment undertakings for the benefit
5.14of its participating investors from any entity, except that in no case can more than one
5.15participating investor of a Minnesota business investment company on an aggregate
5.16basis with all affiliates of the participating investor be entitled to provide the guaranties,
5.17indemnities, bonds, insurance policies, or other payment undertakings in favor of the
5.18participating investors of a Minnesota business investment company and its affiliates in
5.19this state.
5.20(c) This subdivision does not preclude a participating investor, insurance company,
5.21or other party from exercising its legal rights and remedies, including, without limitation,
5.22interim management of a Minnesota business investment company, in the event that a
5.23Minnesota business investment company is in default of its statutory obligations or its
5.24contractual obligations to the participating investor, insurance company, or other party, or
5.25from monitoring a Minnesota business investment company to ensure its compliance with
5.26this section or disallowing any investments that have not been approved by the department.
5.27(d) The department may contract with an independent third party to review,
5.28investigate, and certify that the applications comply with this section.
5.29 Subd. 4. Aggregate limitations on investment tax credits; allocation. (a)
5.30The aggregate amount of investment tax credits to be allocated to all participating
5.31investors of Minnesota business investment companies under this section shall not exceed
5.32$160,000,000. No Minnesota business investment company, on an aggregate basis with its
5.33affiliates, may file credit allocation claims that exceed $160,000,000.
5.34(b) Credits must be allocated to participating investors in the order that the credit
5.35allocation claims are filed with the department, provided that all credit allocation
5.36claims filed with the department on the same day must be treated as having been filed
6.1contemporaneously. Any credit allocation claims filed with the department prior to the
6.2initial credit allocation claim filing date are deemed to have been filed on the initial credit
6.3allocation claim filing date. The department must set the initial credit allocation claim
6.4filing date not less than 120 days and not greater than 150 days after the department
6.5begins accepting applications for certification.
6.6(c) In the event that two or more Minnesota business investment companies file
6.7credit allocation claims with the department on behalf of their respective participating
6.8investors on the same day, and the aggregate amount of credit allocation claims exceeds
6.9the aggregate limit of investment tax credits under this section or the lesser amount of
6.10credits that remain unallocated on that day, then the department must allocate the credits
6.11among the participating investors who filed on that day on a pro rata basis with respect
6.12to the amounts claimed. The pro rata allocation for any one participating investor is the
6.13product obtained by multiplying a fraction, the numerator of which is the amount of the
6.14credit allocation claim filed on behalf of a participating investor and the denominator of
6.15which is the total of all credit allocation claims filed on behalf of all participating investors
6.16on that day, by the aggregate limit of credits under this section or the lesser amount of
6.17credits that remain unallocated on that day.
6.18(d) Within ten business days after the department receives a credit allocation claim
6.19filed by a Minnesota business investment company on behalf of one or more of its
6.20participating investors, the department must notify the Minnesota business investment
6.21company of the amount of credits allocated to each of the participating investors of that
6.22Minnesota business investment company. In the event a Minnesota business investment
6.23company does not receive an investment of designated capital from each participating
6.24investor required to earn the amount of credits allocated to the participating investor
6.25within ten business days of the Minnesota business investment company's receipt of notice
6.26of allocation, then it shall notify the department on or before the next business day, and
6.27the credits allocated to the participating investor of the Minnesota business investment
6.28company are forfeited. The department must then reallocate those forfeited credits among
6.29the participating investors of the other Minnesota business investment companies on a pro
6.30rata basis with respect to the credit allocation claims filed on behalf of the participating
6.31investors. The commissioner is authorized, but not required, to levy a fine of not more than
6.32$50,000 on any participating investor that does not invest the full amount of designated
6.33capital required to fund the credits allocated to it by the department in accordance with
6.34the credit allocation claim filed on its behalf. Fine receipts must be deposited in the state
6.35treasury and credited to the general fund.
7.1(e) No participating investor, on an aggregate basis with its affiliates, may file an
7.2allocation claim for more than 25 percent of the maximum amount of investment tax
7.3credits authorized under this subdivision, regardless of whether the claim is made in
7.4connection with one or more Minnesota business investment companies.
7.5 Subd. 5. Requirements for continuance of certification. (a) To maintain its
7.6certification, a Minnesota business investment company must make qualified investments
7.7as follows:
7.8(1) within two years after the allocation date, a Minnesota business investment
7.9company must invest an amount equal to at least 35 percent of its designated capital in
7.10qualified investments; and
7.11(2) within three years after the allocation date, a Minnesota business investment
7.12company must invest an amount equal to at least 50 percent of its designated capital
7.13in qualified investments.
7.14(b) Prior to making a proposed qualified investment in a specific business, a
7.15Minnesota business investment company must request from the department a written
7.16determination that the proposed investment qualifies as a qualified investment in a qualified
7.17business. The department must notify a Minnesota business investment company within
7.18ten business days from the receipt of a request of its determination and an explanation
7.19of its determination. If the department fails to notify the Minnesota business investment
7.20company of its determination within the ten-business-day period, the proposed investment
7.21is deemed a qualified investment in a qualified business. If the department determines that
7.22the proposed investment does not meet the definition of a qualified investment or qualified
7.23business, or both, the department may nevertheless consider the proposed investment a
7.24qualified investment and, if necessary, the business a qualified business, if the department
7.25determines that the proposed investment furthers state economic development.
7.26(c) All designated capital not invested in qualified investments by a Minnesota
7.27business investment company shall be held or invested in such manner as the Minnesota
7.28business investment company, in its discretion, deems appropriate. Designated capital
7.29and proceeds of designated capital returned to a Minnesota business investment company
7.30after being originally invested in qualified investments may be invested again in qualified
7.31investments and the investment shall count toward the requirements of paragraph (a) with
7.32respect to making investments of designated capital in qualified investments.
7.33(d) If, within four years after its allocation date, a Minnesota business investment
7.34company has not invested at least 60 percent of its designated capital in qualified
7.35investments, the Minnesota business investment company must not be permitted to pay
7.36management fees.
8.1(e) If, within six years after its allocation date, a Minnesota business investment
8.2company has not invested at least 100 percent of its designated capital in qualified
8.3investments, the Minnesota business investment company must not be permitted to pay
8.4management fees.
8.5(f) A Minnesota business investment company may not invest more than 15 percent
8.6of its designated capital in any one qualified business without the specific approval
8.7of the department.
8.8(g) For purposes of calculating the investment percentage thresholds of paragraph
8.9(a), the cumulative amount of all qualified investments made by a Minnesota business
8.10investment company from the allocation date must be considered.
8.11 Subd. 6. Minnesota business investment company reporting requirements. (a)
8.12Each Minnesota business investment company must report the following to the department
8.13in the form designated by the commissioner:
8.14(1) as soon as practicable after the receipt of designated capital:
8.15(i) the name of each participating investor from which the designated capital was
8.16received, including such participating investor's insurance tax identification number;
8.17(ii) the amount of each participating investor's investment of designated capital; and
8.18(iii) the date on which the designated capital was received;
8.19(2) on an annual basis, on or before January 31 of each year:
8.20(i) the amount of the Minnesota business investment company's designated capital
8.21that remains to be invested in qualified investments at the end of the immediately
8.22preceding taxable year;
8.23(ii) whether or not the Minnesota business investment company has invested more
8.24than 15 percent of its total designated capital in any one business;
8.25(iii) all qualified investments that the Minnesota business investment company has
8.26made in the previous taxable year, including the number of employees of each qualified
8.27business in which it has made investments at the time of such investment, and as of
8.28December 1 of the preceding taxable year; and
8.29(iv) for any qualified business where the Minnesota business investment company
8.30no longer has an investment, the Minnesota business investment company must provide
8.31employment figures for that company as of the last day before the investment was
8.32terminated;
8.33(3) other information that the department may reasonably request that helps the
8.34department ascertain the impact of the Minnesota business investment company program
8.35both directly and indirectly on the economy of the state including, but not limited to, the
8.36number of jobs created by qualified businesses that have received qualified investments;
9.1(4) within 90 days of the close of its fiscal year, annual audited financial statements
9.2of the Minnesota business investment company, which must include the opinion of an
9.3independent certified public accountant; and
9.4(5) an agreed upon procedures report or equivalent regarding the operations of the
9.5Minnesota business investment company.
9.6(b) A Minnesota business investment company must pay to the department an
9.7annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
9.8The certification fee must be deposited in the state treasury and appropriated to the
9.9commissioner of employment and economic development for the purposes of this act. No
9.10annual certification fee is required if the payment date for the fee is within six months of
9.11the date a Minnesota business investment company is first certified by the department.
9.12(c) Upon satisfying the requirements of subdivision 5, paragraph (a), clause (2),
9.13a Minnesota business investment company must provide the notice to the department
9.14and the department shall, within 60 days of receipt of the notice, either confirm that the
9.15Minnesota business investment company has satisfied the requirements of subdivision
9.165, paragraph (a), clause (2), as of such date or provide notice of noncompliance and an
9.17explanation of any existing deficiencies. If the department does not provide notification
9.18within 60 days, the Minnesota business investment company is deemed to have met the
9.19requirements of subdivision 5, paragraph (a), clause (2).
9.20 Subd. 7. Distributions. (a) A Minnesota business investment company may
9.21make qualified distributions at any time. In order for a Minnesota business investment
9.22company to make a distribution other than a qualified distribution to its equity holders,
9.23the cumulative amount of all qualified investments of the Minnesota business investment
9.24company must equal or exceed 100 percent of its designated capital.
9.25(b) The state shall receive ten percent of the net profits on qualified investments.
9.26For purposes of this paragraph, "net profits on qualified investments" means the amount
9.27of money returned to the Minnesota business investment company in exchange for or
9.28repayment of its qualified investments in qualified businesses in excess of the amount
9.29invested by the Minnesota business investment company in qualified investments. The
9.30net profits on qualified investments are the aggregate of all of the Minnesota business
9.31investment company's qualified investments where gains on qualified investments are
9.32netted against losses on qualified investments.
9.33 Subd. 8. Decertification. (a) The department shall conduct an annual review of
9.34each Minnesota business investment company to determine if a Minnesota business
9.35investment company is abiding by the requirements of certification and to ensure that no
9.36investment has been made in violation of this section. The cost of the annual review must
10.1be paid by each Minnesota business investment company according to a reasonable fee
10.2schedule adopted by the department. Fee receipts must be deposited in the state treasury
10.3and credited to the general fund.
10.4(b) Any material violation of this section, including any material misrepresentation
10.5made to the department in connection with the application process, is grounds for
10.6decertification of a Minnesota business investment company and the disallowance of
10.7credits under section 297I.23, provided that in all instances the department shall provide
10.8notice to the Minnesota business investment company of the grounds of the proposed
10.9decertification and the opportunity to cure the violation before any decertification becomes
10.10effective.
10.11(c) The department shall send written notice of decertification to the commissioner
10.12of revenue and to the address of each participating investor whose tax credit may be
10.13subject to recapture or forfeiture, using the address shown on the last filing submitted
10.14to the department.
10.15(d) Once a Minnesota business investment company has invested an amount
10.16cumulatively equal to 100 percent of its designated capital in qualified investments,
10.17provided that the Minnesota business investment company has met all other requirements
10.18under this section as of such date, the Minnesota business investment company is no
10.19longer subject to regulation by the department or the reporting requirements under
10.20subdivision 6. Upon receiving certification by a Minnesota business investment company
10.21that it has invested an amount equal to 100 percent of its designated capital, the department
10.22shall notify a Minnesota business investment company within 60 days that it has or has not
10.23met the requirements, with a reason for the determination if it has not. If the department
10.24does not provide notification of deregulation within 60 days, the Minnesota business
10.25investment company is deemed to have met the requirements and is deemed to no longer
10.26be subject to regulation by the department.
10.27 Subd. 9. Registration requirements. All investments by participating investors
10.28for which tax credits are awarded under this section must be registered or specifically
10.29exempt from registration.
10.30 Subd. 10. Rulemaking. The commissioner's actions in establishing procedures and
10.31requirements and in making determinations and certifications to administer this section are
10.32not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act
10.33contained in chapter 14, and are not subject to section 14.386.
10.34 Subd. 11. Reports to governor and legislature. The department shall make an
10.35annual report by March 15 of each year to the governor and the chairs and ranking
11.1minority members of the legislative committees and divisions having jurisdiction over
11.2taxes and economic development. The report must include:
11.3(1) the number of Minnesota business investment companies holding designated
11.4capital;
11.5(2) the amount of designated capital invested in each Minnesota business investment
11.6company;
11.7(3) the cumulative amount that each Minnesota business investment company has
11.8invested as of January 1, 2012, and the cumulative total each year thereafter;
11.9(4) the cumulative amount of follow-on capital that the investments of each
11.10Minnesota business investment company have created in terms of capital invested in
11.11qualified businesses at the same time or subsequent to investments made by a Minnesota
11.12business investment company in such businesses by sources other than Minnesota
11.13business investment companies;
11.14(5) the total amount of investment tax credits applied under this section for each year;
11.15(6) the performance of each Minnesota business investment company with regard to
11.16the requirements for continued certification;
11.17(7) the classification of the companies in which each Minnesota business investment
11.18company has invested according to industrial sector and size of company;
11.19(8) the gross number of jobs created by investments made by each Minnesota
11.20business investment company and the number of jobs retained;
11.21(9) the location of the companies in which each Minnesota business investment
11.22company has invested;
11.23(10) those Minnesota business investment companies that have been decertified,
11.24including the reasons for decertification; and
11.25(11) other related information as necessary to evaluate the effect of this section on
11.26economic development.
11.27EFFECTIVE DATE.This section is effective the day following final enactment.
11.28 Sec. 2. [297I.23] MINNESOTA BUSINESS INVESTMENT COMPANY CREDIT.
11.29 Subdivision 1. Credit allowed. (a) A participating investor as defined under section
11.30116J.665, subdivision 1, is allowed a credit against the tax imposed in this chapter equal to
11.3180 percent of the participating investor's investment of designated capital in a Minnesota
11.32business investment company. Beginning January 1, 2015, in tax years 2015 to 2018,
11.33a participating investor may claim an amount equal to 20 percent of the participating
11.34investor's investment of designated capital.
12.1(b) The credit for any taxable year must not exceed the liability for tax. If the
12.2amount of the credit determined under this section for any taxable year exceeds the
12.3liability for tax, the excess is an investment tax credit carryover to each of the succeeding
12.4taxable years and must be carried forward to each succeeding taxable year until the entire
12.5carryforward has been credited against the participating investor's liability for tax under
12.6this chapter. Credits may be used in connection with both estimated and return payments
12.7of a participating investor's state premium tax liability.
12.8(c) A participating investor claiming a credit under this section is not required to pay
12.9any additional retaliatory tax levied by Minnesota as a result of claiming the credit.
12.10(d) A participating investor is not required to reduce the amount of tax pursuant to
12.11the state premium tax liability included by the participating investor in connection with
12.12ratemaking for any insurance contract written in this state because of a reduction in the
12.13participating investor's tax liability based on the tax credit allowed under this section.
12.14(e) Decertification of a Minnesota business investment company under section
12.15116J.665 may result in the disallowance and the recapture of the credit allowed under this
12.16section. The amount disallowed and recaptured must be assessed as follows:
12.17(1) decertification of a Minnesota business investment company within two years
12.18of the allocation date of tax credits and prior to meeting the requirements of section
12.19116J.665, subdivision 5, paragraph (a), clause (1), shall result in the disallowance of all
12.20of the credits allowed under this section;
12.21(2) decertification of a Minnesota business investment company after two years
12.22of the allocation date of tax credits, but prior to meeting the requirements of section
12.23116J.665, subdivision 5, paragraph (a), clause (1), results in the disallowance of one-half
12.24of all the credits allowed under this section; and
12.25(3) decertification of Minnesota business investment company that has already met
12.26the requirements of section 116J.665, subdivision 5, paragraph (a), clause (1), does not
12.27cause the disallowance of any credits allowed under this section nor the recapture of any
12.28portion of the credits that was previously taken.
12.29 Subd. 2. Transfers. A participating investor must not transfer, agree to transfer,
12.30sell, or agree to sell the credit under this section until 180 days from the date on which
12.31the participating investor invested designated capital. After 180 days from the date of
12.32investment, a participating investor, or subsequent transferee, may transfer credits to
12.33another person who is subject to tax and must notify the department in the form prescribed
12.34by the commissioner within 30 days of the transfer. A person must not transfer a credit
12.35more than once in a 12-month period. No person is entitled to a refund for the interest
12.36created under this subdivision. A credit acquired by transfer is subject to the limitations
13.1prescribed in this section. Any transfer or sale of the credits does not affect the time
13.2schedule for claiming the credit. Any tax credits recaptured under this section remain the
13.3liability of the participating investor that actually applied the credit towards its tax liability.
13.4 Subd. 3. Repayment of tax benefits received. (a) Decertification of a Minnesota
13.5business investment company or revocation of credits under section 116J.665, results in
13.6the disallowance to certified investors of any credits for that tax year or future tax years
13.7and the participating investor is required to repay any credits claimed for the previous
13.8year. Repayment must be made within 60 days of the decertification or the revocation
13.9of the certification.
13.10(b) The provisions of chapters 270C and 297I relating to audit, assessment, refund,
13.11collection, and appeals are applicable to the credits claimed and repayment required under
13.12this section. The commissioner may impose civil penalties as provided in section 297I.85,
13.13and additional tax and penalties are subject to interest at the rate provided in section
13.14270C.40, from the date payment was due.
13.15EFFECTIVE DATE.This section is effective for taxable years beginning after
13.16December 31, 2011.
1.3emerging Minnesota businesses;proposing coding for new law in Minnesota
1.4Statutes, chapters 116J; 297I.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [116J.665] MINNESOTA BUSINESS INVESTMENT COMPANY
1.7CREDIT.
1.8 Subdivision 1. Definitions. (a) For purposes of this section, the following terms
1.9have the meanings given.
1.10(b) "Affiliate" means:
1.11(1) any person who, directly or indirectly, beneficially owns, controls, or holds
1.12power to vote 15 percent or more of the outstanding voting securities or other voting
1.13ownership interest of a Minnesota business investment company or insurance company; or
1.14(2) any person, 15 percent or more of whose outstanding voting securities or other
1.15voting ownership interests are directly or indirectly beneficially owned, controlled, or held
1.16with power to vote by a Minnesota business investment company or insurance company.
1.17Notwithstanding this subdivision, an investment by a participating investor in a
1.18Minnesota business investment company pursuant to an allocation of premium tax credits
1.19under this section does not cause that Minnesota business investment company to become
1.20an affiliate of that participating investor.
1.21(c) "Allocation date" means the date on which credits under section 297I.23 are
1.22allocated to the participating investors of a Minnesota business investment company
1.23under this section.
1.24(d) "Designated capital" means an amount of money that:
2.1(1) is invested by a participating investor in a Minnesota business investment
2.2company; and
2.3(2) fully funds the purchase price of either or both participating investor's equity
2.4interest in a Minnesota business investment company or a qualified debt instrument issued
2.5by a Minnesota business investment company.
2.6(e) "Minnesota business investment company" means a partnership, corporation,
2.7trust, or limited liability company, organized on a for-profit basis, that:
2.8(1) has its principal office located or is headquartered in Minnesota;
2.9(2) has as its primary business activity the investment of cash in qualified businesses;
2.10and
2.11(3) is certified by the Department of Employment and Economic Development as
2.12meeting the criteria in this section.
2.13(f) "Participating investor" means any insurance company as defined in section
2.1460A.02, subdivision 4, excluding health maintenance organizations, that contributes
2.15designated capital pursuant to this section.
2.16(g) "Person" means any natural person or entity, including, but not limited to, a
2.17corporation, general or limited partnership, trust, or limited liability company.
2.18(h)(1) "Qualified business" means a business that is independently owned and
2.19operated and meets all of the following requirements:
2.20(i) it is headquartered in Minnesota, its principal business operations are located in
2.21this state, and at least 80 percent of its employees are located in Minnesota;
2.22(ii) it has no more than 100 employees;
2.23(iii) it is not engaged in:
2.24(A) professional services provided by accountants, doctors, or lawyers;
2.25(B) banking or lending;
2.26(C) real estate development;
2.27(D) insurance;
2.28(E) oil and gas exploration;
2.29(F) direct gambling activities;
2.30(G) retail sales; or
2.31(H) making loans to or investments in a Minnesota business investment company
2.32or an affiliate; and
2.33(iv) it is not a franchise of and has no financial relationship with a Minnesota business
2.34investment company or any affiliate of a Minnesota business investment company prior to
2.35a Minnesota business investment company's first qualified investment in the business;
3.1(2) a business classified as a qualified business at the time of the first qualified
3.2investment in the business remains classified as a qualified business and may receive
3.3continuing qualified investments from any Minnesota business investment company.
3.4Continuing investments constitute qualified investments even though the business may not
3.5meet the definition of a qualified business at the time of the continuing investments.
3.6(i) "Qualified debt instrument" means a debt instrument issued by a Minnesota
3.7business investment company which meets all of the following criteria:
3.8(1) it is issued at par value or a premium; and
3.9(2) it has an original maturity date of at least four years from the date of issuance,
3.10and a repayment schedule which is not faster than a level principal amortization over
3.11four years.
3.12(j) "Qualified distribution" means any distribution or payment made by a Minnesota
3.13business investment company in connection with any of the following:
3.14(1) costs and expenses of forming, syndicating, and organizing the Minnesota
3.15business investment company, including fees paid for professional services, and the costs
3.16of financing and insuring the obligations of a Minnesota business investment company,
3.17provided no payment is made to a participating investor;
3.18(2) an annual management fee not to exceed one percent of designated capital on
3.19an annual basis to offset the costs and expenses of managing and operating a Minnesota
3.20business investment company;
3.21(3) reasonable and necessary fees in accordance with industry custom for ongoing
3.22professional services, including, but not limited to, legal and accounting services related
3.23to the operation of a Minnesota business investment company, not including lobbying or
3.24governmental relations;
3.25(4) any increase or projected increase in federal or state taxes, including penalties
3.26and related interest of the equity owners of a Minnesota business investment company
3.27resulting from the earnings or other tax liability of a Minnesota business investment
3.28company to the extent that the increase is related to the ownership, management, or
3.29operation of a Minnesota business investment company.
3.30(5) Payments of principal and interest to holders of qualified debt instruments issued
3.31by a Minnesota business investment company may be made without restriction whatsoever.
3.32(k) "Qualified investment" means the investment of money by a Minnesota
3.33business investment company in a qualified business for the purchase of any debt,
3.34debt participation, equity, or hybrid security of any nature and description whatsoever,
3.35including a debt instrument or security that has the characteristics of debt but that provides
3.36for conversion into equity or equity participation instruments such as options or warrants.
4.1Any repayment of a qualified investment prior to one year from the date of issuance shall
4.2result in the amount of the qualified investment being reduced by 50 percent for purposes
4.3of the cumulative investment requirement in subdivision 8, paragraph (d).
4.4(l) "State premium tax liability" means any liability incurred by an insurance
4.5company under chapter 297I or in the case of a repeal or a rate reduction by the state of
4.6the liability imposed by chapter 297I, any other tax liability imposed upon an insurance
4.7company by the state, other than the tax imposed on taxpayers under section 290.05.
4.8 Subd. 2. Certification. (a) The department must provide a standardized format for
4.9applying for the business investment credit under section 297I.23, and for certification as a
4.10Minnesota business investment company.
4.11(b) An applicant for certification as a Minnesota business investment company
4.12is required to:
4.13(1) file an application with the department that includes, without limitation, a
4.14statement that the applicant has read and understands the requirements of this chapter;
4.15(2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
4.16(3) submit as part of its application an audited balance sheet that contains an
4.17unqualified opinion of an independent certified public accountant issued not more than 35
4.18days before the application date that states that the applicant has an equity capitalization
4.19of $500,000 or more in the form of unencumbered cash, marketable securities, or other
4.20liquid assets; and
4.21(4) have at least two principals or persons, at least one of which is primarily located
4.22in Minnesota, employed or engaged to manage the funds who each have a minimum of
4.23five years of money management experience in the venture capital or business industry.
4.24(c) The department may certify partnerships, corporations, trusts, or limited liability
4.25companies, organized on a for-profit basis, which submit an application to be designated as
4.26a Minnesota business investment company if the applicant is located, headquartered, and
4.27licensed or registered to conduct business in Minnesota, has as its primary business activity
4.28the investment of cash in qualified businesses, and meets the other criteria in this section.
4.29(d) The department must review the organizational documents of each applicant
4.30for certification and the business history of each applicant and determine whether the
4.31applicant has satisfied the requirements of this section.
4.32(e) Within 45 days after the receipt of an application, the department must issue the
4.33certification or refuse the certification and communicate in detail to the applicant the
4.34grounds for refusal, including suggestions for the removal of such grounds.
4.35(f) The department must begin accepting applications to become a Minnesota
4.36business investment company as defined under section 297I.23 by August 1, 2011.
5.1(g) Application fees collected by the commissioner under this subdivision must be
5.2deposited in the state treasury and appropriated to the commissioner of employment and
5.3economic development for the purposes of this act.
5.4 Subd. 3. Requirements. (a) A participating investor or affiliate of a participating
5.5investor must not, directly or indirectly:
5.6(1) beneficially own, whether through rights, options, convertible interest, or
5.7otherwise, 15 percent or more of the voting securities or other voting ownership interest of
5.8a Minnesota business investment company;
5.9(2) manage a Minnesota business investment company; or
5.10(3) control the direction of investments for a Minnesota business investment
5.11company.
5.12(b) A Minnesota business investment company may obtain one or more guaranties,
5.13indemnities, bonds, insurance policies, or other payment undertakings for the benefit
5.14of its participating investors from any entity, except that in no case can more than one
5.15participating investor of a Minnesota business investment company on an aggregate
5.16basis with all affiliates of the participating investor be entitled to provide the guaranties,
5.17indemnities, bonds, insurance policies, or other payment undertakings in favor of the
5.18participating investors of a Minnesota business investment company and its affiliates in
5.19this state.
5.20(c) This subdivision does not preclude a participating investor, insurance company,
5.21or other party from exercising its legal rights and remedies, including, without limitation,
5.22interim management of a Minnesota business investment company, in the event that a
5.23Minnesota business investment company is in default of its statutory obligations or its
5.24contractual obligations to the participating investor, insurance company, or other party, or
5.25from monitoring a Minnesota business investment company to ensure its compliance with
5.26this section or disallowing any investments that have not been approved by the department.
5.27(d) The department may contract with an independent third party to review,
5.28investigate, and certify that the applications comply with this section.
5.29 Subd. 4. Aggregate limitations on investment tax credits; allocation. (a)
5.30The aggregate amount of investment tax credits to be allocated to all participating
5.31investors of Minnesota business investment companies under this section shall not exceed
5.32$160,000,000. No Minnesota business investment company, on an aggregate basis with its
5.33affiliates, may file credit allocation claims that exceed $160,000,000.
5.34(b) Credits must be allocated to participating investors in the order that the credit
5.35allocation claims are filed with the department, provided that all credit allocation
5.36claims filed with the department on the same day must be treated as having been filed
6.1contemporaneously. Any credit allocation claims filed with the department prior to the
6.2initial credit allocation claim filing date are deemed to have been filed on the initial credit
6.3allocation claim filing date. The department must set the initial credit allocation claim
6.4filing date not less than 120 days and not greater than 150 days after the department
6.5begins accepting applications for certification.
6.6(c) In the event that two or more Minnesota business investment companies file
6.7credit allocation claims with the department on behalf of their respective participating
6.8investors on the same day, and the aggregate amount of credit allocation claims exceeds
6.9the aggregate limit of investment tax credits under this section or the lesser amount of
6.10credits that remain unallocated on that day, then the department must allocate the credits
6.11among the participating investors who filed on that day on a pro rata basis with respect
6.12to the amounts claimed. The pro rata allocation for any one participating investor is the
6.13product obtained by multiplying a fraction, the numerator of which is the amount of the
6.14credit allocation claim filed on behalf of a participating investor and the denominator of
6.15which is the total of all credit allocation claims filed on behalf of all participating investors
6.16on that day, by the aggregate limit of credits under this section or the lesser amount of
6.17credits that remain unallocated on that day.
6.18(d) Within ten business days after the department receives a credit allocation claim
6.19filed by a Minnesota business investment company on behalf of one or more of its
6.20participating investors, the department must notify the Minnesota business investment
6.21company of the amount of credits allocated to each of the participating investors of that
6.22Minnesota business investment company. In the event a Minnesota business investment
6.23company does not receive an investment of designated capital from each participating
6.24investor required to earn the amount of credits allocated to the participating investor
6.25within ten business days of the Minnesota business investment company's receipt of notice
6.26of allocation, then it shall notify the department on or before the next business day, and
6.27the credits allocated to the participating investor of the Minnesota business investment
6.28company are forfeited. The department must then reallocate those forfeited credits among
6.29the participating investors of the other Minnesota business investment companies on a pro
6.30rata basis with respect to the credit allocation claims filed on behalf of the participating
6.31investors. The commissioner is authorized, but not required, to levy a fine of not more than
6.32$50,000 on any participating investor that does not invest the full amount of designated
6.33capital required to fund the credits allocated to it by the department in accordance with
6.34the credit allocation claim filed on its behalf. Fine receipts must be deposited in the state
6.35treasury and credited to the general fund.
7.1(e) No participating investor, on an aggregate basis with its affiliates, may file an
7.2allocation claim for more than 25 percent of the maximum amount of investment tax
7.3credits authorized under this subdivision, regardless of whether the claim is made in
7.4connection with one or more Minnesota business investment companies.
7.5 Subd. 5. Requirements for continuance of certification. (a) To maintain its
7.6certification, a Minnesota business investment company must make qualified investments
7.7as follows:
7.8(1) within two years after the allocation date, a Minnesota business investment
7.9company must invest an amount equal to at least 35 percent of its designated capital in
7.10qualified investments; and
7.11(2) within three years after the allocation date, a Minnesota business investment
7.12company must invest an amount equal to at least 50 percent of its designated capital
7.13in qualified investments.
7.14(b) Prior to making a proposed qualified investment in a specific business, a
7.15Minnesota business investment company must request from the department a written
7.16determination that the proposed investment qualifies as a qualified investment in a qualified
7.17business. The department must notify a Minnesota business investment company within
7.18ten business days from the receipt of a request of its determination and an explanation
7.19of its determination. If the department fails to notify the Minnesota business investment
7.20company of its determination within the ten-business-day period, the proposed investment
7.21is deemed a qualified investment in a qualified business. If the department determines that
7.22the proposed investment does not meet the definition of a qualified investment or qualified
7.23business, or both, the department may nevertheless consider the proposed investment a
7.24qualified investment and, if necessary, the business a qualified business, if the department
7.25determines that the proposed investment furthers state economic development.
7.26(c) All designated capital not invested in qualified investments by a Minnesota
7.27business investment company shall be held or invested in such manner as the Minnesota
7.28business investment company, in its discretion, deems appropriate. Designated capital
7.29and proceeds of designated capital returned to a Minnesota business investment company
7.30after being originally invested in qualified investments may be invested again in qualified
7.31investments and the investment shall count toward the requirements of paragraph (a) with
7.32respect to making investments of designated capital in qualified investments.
7.33(d) If, within four years after its allocation date, a Minnesota business investment
7.34company has not invested at least 60 percent of its designated capital in qualified
7.35investments, the Minnesota business investment company must not be permitted to pay
7.36management fees.
8.1(e) If, within six years after its allocation date, a Minnesota business investment
8.2company has not invested at least 100 percent of its designated capital in qualified
8.3investments, the Minnesota business investment company must not be permitted to pay
8.4management fees.
8.5(f) A Minnesota business investment company may not invest more than 15 percent
8.6of its designated capital in any one qualified business without the specific approval
8.7of the department.
8.8(g) For purposes of calculating the investment percentage thresholds of paragraph
8.9(a), the cumulative amount of all qualified investments made by a Minnesota business
8.10investment company from the allocation date must be considered.
8.11 Subd. 6. Minnesota business investment company reporting requirements. (a)
8.12Each Minnesota business investment company must report the following to the department
8.13in the form designated by the commissioner:
8.14(1) as soon as practicable after the receipt of designated capital:
8.15(i) the name of each participating investor from which the designated capital was
8.16received, including such participating investor's insurance tax identification number;
8.17(ii) the amount of each participating investor's investment of designated capital; and
8.18(iii) the date on which the designated capital was received;
8.19(2) on an annual basis, on or before January 31 of each year:
8.20(i) the amount of the Minnesota business investment company's designated capital
8.21that remains to be invested in qualified investments at the end of the immediately
8.22preceding taxable year;
8.23(ii) whether or not the Minnesota business investment company has invested more
8.24than 15 percent of its total designated capital in any one business;
8.25(iii) all qualified investments that the Minnesota business investment company has
8.26made in the previous taxable year, including the number of employees of each qualified
8.27business in which it has made investments at the time of such investment, and as of
8.28December 1 of the preceding taxable year; and
8.29(iv) for any qualified business where the Minnesota business investment company
8.30no longer has an investment, the Minnesota business investment company must provide
8.31employment figures for that company as of the last day before the investment was
8.32terminated;
8.33(3) other information that the department may reasonably request that helps the
8.34department ascertain the impact of the Minnesota business investment company program
8.35both directly and indirectly on the economy of the state including, but not limited to, the
8.36number of jobs created by qualified businesses that have received qualified investments;
9.1(4) within 90 days of the close of its fiscal year, annual audited financial statements
9.2of the Minnesota business investment company, which must include the opinion of an
9.3independent certified public accountant; and
9.4(5) an agreed upon procedures report or equivalent regarding the operations of the
9.5Minnesota business investment company.
9.6(b) A Minnesota business investment company must pay to the department an
9.7annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
9.8The certification fee must be deposited in the state treasury and appropriated to the
9.9commissioner of employment and economic development for the purposes of this act. No
9.10annual certification fee is required if the payment date for the fee is within six months of
9.11the date a Minnesota business investment company is first certified by the department.
9.12(c) Upon satisfying the requirements of subdivision 5, paragraph (a), clause (2),
9.13a Minnesota business investment company must provide the notice to the department
9.14and the department shall, within 60 days of receipt of the notice, either confirm that the
9.15Minnesota business investment company has satisfied the requirements of subdivision
9.165, paragraph (a), clause (2), as of such date or provide notice of noncompliance and an
9.17explanation of any existing deficiencies. If the department does not provide notification
9.18within 60 days, the Minnesota business investment company is deemed to have met the
9.19requirements of subdivision 5, paragraph (a), clause (2).
9.20 Subd. 7. Distributions. (a) A Minnesota business investment company may
9.21make qualified distributions at any time. In order for a Minnesota business investment
9.22company to make a distribution other than a qualified distribution to its equity holders,
9.23the cumulative amount of all qualified investments of the Minnesota business investment
9.24company must equal or exceed 100 percent of its designated capital.
9.25(b) The state shall receive ten percent of the net profits on qualified investments.
9.26For purposes of this paragraph, "net profits on qualified investments" means the amount
9.27of money returned to the Minnesota business investment company in exchange for or
9.28repayment of its qualified investments in qualified businesses in excess of the amount
9.29invested by the Minnesota business investment company in qualified investments. The
9.30net profits on qualified investments are the aggregate of all of the Minnesota business
9.31investment company's qualified investments where gains on qualified investments are
9.32netted against losses on qualified investments.
9.33 Subd. 8. Decertification. (a) The department shall conduct an annual review of
9.34each Minnesota business investment company to determine if a Minnesota business
9.35investment company is abiding by the requirements of certification and to ensure that no
9.36investment has been made in violation of this section. The cost of the annual review must
10.1be paid by each Minnesota business investment company according to a reasonable fee
10.2schedule adopted by the department. Fee receipts must be deposited in the state treasury
10.3and credited to the general fund.
10.4(b) Any material violation of this section, including any material misrepresentation
10.5made to the department in connection with the application process, is grounds for
10.6decertification of a Minnesota business investment company and the disallowance of
10.7credits under section 297I.23, provided that in all instances the department shall provide
10.8notice to the Minnesota business investment company of the grounds of the proposed
10.9decertification and the opportunity to cure the violation before any decertification becomes
10.10effective.
10.11(c) The department shall send written notice of decertification to the commissioner
10.12of revenue and to the address of each participating investor whose tax credit may be
10.13subject to recapture or forfeiture, using the address shown on the last filing submitted
10.14to the department.
10.15(d) Once a Minnesota business investment company has invested an amount
10.16cumulatively equal to 100 percent of its designated capital in qualified investments,
10.17provided that the Minnesota business investment company has met all other requirements
10.18under this section as of such date, the Minnesota business investment company is no
10.19longer subject to regulation by the department or the reporting requirements under
10.20subdivision 6. Upon receiving certification by a Minnesota business investment company
10.21that it has invested an amount equal to 100 percent of its designated capital, the department
10.22shall notify a Minnesota business investment company within 60 days that it has or has not
10.23met the requirements, with a reason for the determination if it has not. If the department
10.24does not provide notification of deregulation within 60 days, the Minnesota business
10.25investment company is deemed to have met the requirements and is deemed to no longer
10.26be subject to regulation by the department.
10.27 Subd. 9. Registration requirements. All investments by participating investors
10.28for which tax credits are awarded under this section must be registered or specifically
10.29exempt from registration.
10.30 Subd. 10. Rulemaking. The commissioner's actions in establishing procedures and
10.31requirements and in making determinations and certifications to administer this section are
10.32not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act
10.33contained in chapter 14, and are not subject to section 14.386.
10.34 Subd. 11. Reports to governor and legislature. The department shall make an
10.35annual report by March 15 of each year to the governor and the chairs and ranking
11.1minority members of the legislative committees and divisions having jurisdiction over
11.2taxes and economic development. The report must include:
11.3(1) the number of Minnesota business investment companies holding designated
11.4capital;
11.5(2) the amount of designated capital invested in each Minnesota business investment
11.6company;
11.7(3) the cumulative amount that each Minnesota business investment company has
11.8invested as of January 1, 2012, and the cumulative total each year thereafter;
11.9(4) the cumulative amount of follow-on capital that the investments of each
11.10Minnesota business investment company have created in terms of capital invested in
11.11qualified businesses at the same time or subsequent to investments made by a Minnesota
11.12business investment company in such businesses by sources other than Minnesota
11.13business investment companies;
11.14(5) the total amount of investment tax credits applied under this section for each year;
11.15(6) the performance of each Minnesota business investment company with regard to
11.16the requirements for continued certification;
11.17(7) the classification of the companies in which each Minnesota business investment
11.18company has invested according to industrial sector and size of company;
11.19(8) the gross number of jobs created by investments made by each Minnesota
11.20business investment company and the number of jobs retained;
11.21(9) the location of the companies in which each Minnesota business investment
11.22company has invested;
11.23(10) those Minnesota business investment companies that have been decertified,
11.24including the reasons for decertification; and
11.25(11) other related information as necessary to evaluate the effect of this section on
11.26economic development.
11.27EFFECTIVE DATE.This section is effective the day following final enactment.
11.28 Sec. 2. [297I.23] MINNESOTA BUSINESS INVESTMENT COMPANY CREDIT.
11.29 Subdivision 1. Credit allowed. (a) A participating investor as defined under section
11.30116J.665, subdivision 1, is allowed a credit against the tax imposed in this chapter equal to
11.3180 percent of the participating investor's investment of designated capital in a Minnesota
11.32business investment company. Beginning January 1, 2015, in tax years 2015 to 2018,
11.33a participating investor may claim an amount equal to 20 percent of the participating
11.34investor's investment of designated capital.
12.1(b) The credit for any taxable year must not exceed the liability for tax. If the
12.2amount of the credit determined under this section for any taxable year exceeds the
12.3liability for tax, the excess is an investment tax credit carryover to each of the succeeding
12.4taxable years and must be carried forward to each succeeding taxable year until the entire
12.5carryforward has been credited against the participating investor's liability for tax under
12.6this chapter. Credits may be used in connection with both estimated and return payments
12.7of a participating investor's state premium tax liability.
12.8(c) A participating investor claiming a credit under this section is not required to pay
12.9any additional retaliatory tax levied by Minnesota as a result of claiming the credit.
12.10(d) A participating investor is not required to reduce the amount of tax pursuant to
12.11the state premium tax liability included by the participating investor in connection with
12.12ratemaking for any insurance contract written in this state because of a reduction in the
12.13participating investor's tax liability based on the tax credit allowed under this section.
12.14(e) Decertification of a Minnesota business investment company under section
12.15116J.665 may result in the disallowance and the recapture of the credit allowed under this
12.16section. The amount disallowed and recaptured must be assessed as follows:
12.17(1) decertification of a Minnesota business investment company within two years
12.18of the allocation date of tax credits and prior to meeting the requirements of section
12.19116J.665, subdivision 5, paragraph (a), clause (1), shall result in the disallowance of all
12.20of the credits allowed under this section;
12.21(2) decertification of a Minnesota business investment company after two years
12.22of the allocation date of tax credits, but prior to meeting the requirements of section
12.23116J.665, subdivision 5, paragraph (a), clause (1), results in the disallowance of one-half
12.24of all the credits allowed under this section; and
12.25(3) decertification of Minnesota business investment company that has already met
12.26the requirements of section 116J.665, subdivision 5, paragraph (a), clause (1), does not
12.27cause the disallowance of any credits allowed under this section nor the recapture of any
12.28portion of the credits that was previously taken.
12.29 Subd. 2. Transfers. A participating investor must not transfer, agree to transfer,
12.30sell, or agree to sell the credit under this section until 180 days from the date on which
12.31the participating investor invested designated capital. After 180 days from the date of
12.32investment, a participating investor, or subsequent transferee, may transfer credits to
12.33another person who is subject to tax and must notify the department in the form prescribed
12.34by the commissioner within 30 days of the transfer. A person must not transfer a credit
12.35more than once in a 12-month period. No person is entitled to a refund for the interest
12.36created under this subdivision. A credit acquired by transfer is subject to the limitations
13.1prescribed in this section. Any transfer or sale of the credits does not affect the time
13.2schedule for claiming the credit. Any tax credits recaptured under this section remain the
13.3liability of the participating investor that actually applied the credit towards its tax liability.
13.4 Subd. 3. Repayment of tax benefits received. (a) Decertification of a Minnesota
13.5business investment company or revocation of credits under section 116J.665, results in
13.6the disallowance to certified investors of any credits for that tax year or future tax years
13.7and the participating investor is required to repay any credits claimed for the previous
13.8year. Repayment must be made within 60 days of the decertification or the revocation
13.9of the certification.
13.10(b) The provisions of chapters 270C and 297I relating to audit, assessment, refund,
13.11collection, and appeals are applicable to the credits claimed and repayment required under
13.12this section. The commissioner may impose civil penalties as provided in section 297I.85,
13.13and additional tax and penalties are subject to interest at the rate provided in section
13.14270C.40, from the date payment was due.
13.15EFFECTIVE DATE.This section is effective for taxable years beginning after
13.16December 31, 2011.
