Bill Text: MN SF2232 | 2013-2014 | 88th Legislature | Introduced
Bill Title: New markets income tax credit program establishment
Sponsorship: Partisan Bill (Democrat 3)
Status: (Introduced - Dead) 2014-03-03 - Referred to Taxes [SF2232 Detail]
Download: Minnesota-2013-SF2232-Introduced.html
1.2relating to taxation; establishing a new markets tax credit program; authorizing
1.3rulemaking; requiring a report;proposing coding for new law in Minnesota
1.4Statutes, chapter 290.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [290.0693] NEW MARKETS TAX CREDIT.
1.7 Subdivision 1. Definitions. (a) For purposes of this section, the following terms
1.8have the meanings given.
1.9(b) "Adjusted purchase price" means the product of:
1.10(1) the amount paid to the issuer of a qualified equity investment for the qualified
1.11equity investment; and
1.12(2) the following fraction: (i) the total dollar amount of qualified low-income
1.13community investments held by the issuer within the state of Minnesota as of the credit
1.14allowance date during the applicable tax year divided by (ii) the total dollar amount of
1.15qualified low-income community investments held by the issuer in all states as of the
1.16credit allowance date during the applicable tax year.
1.17(c) "Annual allocation authority" means the amount of state new markets tax credit
1.18authority the commissioner may distribute on an annual basis to qualified community
1.19development entities for projects within the state of Minnesota.
1.20(d) "Applicable percentage" means zero percent for each of the first two credit
1.21allowance dates, seven percent for the third credit allowance date, and eight percent for
1.22each of the final four credit allowance dates.
1.23(e) "Commissioner" means the commissioner of revenue.
1.24(f) "Credit allowance date" means:
2.1(1) the date on which a qualified equity investment is initially made; and
2.2(2) each of the six anniversary dates thereafter.
2.3(g) "Greater Minnesota" means the area of the state that excludes the metropolitan
2.4area, as defined in section 473.121, subdivision 2.
2.5(h) "Investments held by an issuer" means, for purposes of calculating the adjusted
2.6purchase price, any capital or equity investment held by an issuer even if the investment
2.7has been sold or repaid; provided that the issuer reinvests an amount equal to the capital
2.8returned to or recovered by the issuer from the original investment, exclusive of any
2.9profits realized, in another qualified low-income community investment within 12 months
2.10of the return or recovery of the capital investment. For the purposes of this requirement,
2.11an issuer is not required to reinvest capital returned from qualified low-income community
2.12investments after the sixth anniversary of the issuance of the qualified equity investment.
2.13The qualified low-income community investment is considered to be held by the issuer
2.14through the seventh anniversary of the qualified equity investment's issuance. Periodic
2.15amounts received by the issuer during a calendar year as repayment of principal on a loan
2.16that is a qualified low-income community investment must be treated as continuously
2.17invested in a qualified low-income community investment if the amounts received are
2.18reinvested in another qualified low-income community investment by the end of the
2.19following calendar year.
2.20(i) "Qualified active low-income community business" has the meaning given in
2.21section 45D of the Internal Revenue Code of 1986, as amended.
2.22(j) "Qualified community development entity" has the meaning given in section 45D
2.23of the Internal Revenue Code of 1986, as amended; provided that the entity has entered
2.24into an allocation agreement with the Community Development Financial Institutions
2.25Fund of the United States Treasury Department with respect to credits authorized by
2.26section 45D of the Internal Revenue Code of 1986, as amended, and includes the state of
2.27Minnesota within the service area set forth in the allocation agreement.
2.28(k) "Qualified equity investment" means any equity investment in a qualified
2.29community development entity that:
2.30(1) is acquired after January 1, 2013, at its original issuance solely in exchange
2.31for cash;
2.32(2) has at least 85 percent of its cash purchase price used by the issuer to make
2.33qualified low-income community investments; and
2.34(3) is designated by the issuer as a qualified equity investment under this subdivision
2.35and is certified by the commissioner as not exceeding the limitation contained in
2.36subdivision 2. The term includes any qualified equity investment that does not meet the
3.1provisions of this paragraph if the investment met the definition of a qualified equity
3.2investment while under possession of a prior holder.
3.3(l) "Qualified low-income community investment" means any capital or equity
3.4investment in, or loan to, any qualified active low-income community business. With
3.5respect to any one qualified active low-income community business, the maximum
3.6amount of qualified low-income community investments made in the business, on
3.7a collective basis with all of its affiliates, that may be used for the calculation of the
3.8numerator described in paragraph (b), clause (2), item (i), is $10,000,000, whether issued
3.9to one or several qualified community development entities.
3.10(m) "Tax credit" means a credit against the tax otherwise due under this chapter or
3.11any gross premiums tax under chapter 297I.
3.12(n) "Taxpayer" means any individual or entity subject to the tax imposed under
3.13this chapter or under chapter 297I.
3.14 Subd. 2. Credit allowed; qualification; limitation. (a) A taxpayer that makes
3.15a qualified equity investment is entitled to a tax credit subject to the conditions and
3.16limitations provided in this section.
3.17(b) The tax credit amount equals the applicable percentage times the adjusted
3.18purchase price paid to the issuer of a qualified equity investment. The amount of the tax
3.19credit claimed must not exceed the amount of the taxpayer's state tax liability under this
3.20chapter or chapter 297I for the tax year for which the tax credit is claimed. On each credit
3.21allowance date of the qualified equity investment the taxpayer, or subsequent holder of the
3.22qualified equity investment, is entitled to a tax credit during the taxable year including the
3.23credit allowance date. The tax credit is not transferable.
3.24(c) Tax credits earned by a partnership, a limited liability company, an S-corporation,
3.25or other pass-through entity may be allocated to the partners, members, or shareholders of
3.26the entity for their direct use in accordance with the provisions of any agreement among
3.27the partners, members, or shareholders.
3.28(d) Any amount of tax credit that the taxpayer is prohibited by this section from
3.29claiming in a taxable year may be carried forward to any of the taxpayer's five subsequent
3.30taxable years.
3.31(e) The amount of annual allocation authority permitted under subdivision 5 cannot
3.32exceed $25,000,000 per taxable year.
3.33 Subd. 3. Certification. The issuer of the qualified equity investment must certify
3.34to the commissioner the anticipated dollar amount of the investment to be made within
3.35the state of Minnesota during the first 12-month period following the initial credit
3.36allowance date. If on the subsequent credit allowance dates, the actual dollar amount of
4.1the investment is different than the amount certified, the commissioner may adjust the
4.2allocation for subsequent taxable years to account for the difference.
4.3 Subd. 4. Credit recapture. (a) The commissioner shall recapture the tax credit
4.4allowed under this section if:
4.5(1) any amount of the federal tax credit available with respect to a qualified equity
4.6investment that is eligible for a tax credit under this section is recaptured under section
4.745D of the Internal Revenue Code of 1986, as amended; or
4.8(2) the issuer of a qualified equity investment redeems or makes principal repayment
4.9prior to the seventh anniversary of the issuance of the qualified equity investment.
4.10(b) Any tax credit that is subject to recapture must be recaptured from the taxpayer
4.11that claimed the tax credit on a return.
4.12 Subd. 5. Allocation of credit. The commissioner shall adopt recapture provisions on
4.13a scaled proportional basis to administer the annual allocation authority issued for qualified
4.14equity investments. The commissioner shall allocate the credits on a first-come, first-served
4.15basis, provided that prior to August 1 of any year, not more than 60 percent of the available
4.16annual allocation authority is allocated to qualified equity investments located in either
4.17the metropolitan area as defined in section 473.121, subdivision 2, or greater Minnesota.
4.18After August 1 of any year, the allocation limitation by geographic area does not apply.
4.19 Subd. 6. Rulemaking. The commissioner may adopt rules to implement this
4.20section. Rules adopted must be, to the greatest extent possible, compatible to applicable
4.21credits under section 45D of the Internal Revenue Code of 1986, as amended.
4.22 Subd. 7. Program report. The commissioner of revenue shall report to the
4.23legislature no later than December 31, 2021, regarding the implementation of this tax
4.24credit, including an evaluation of the success of the tax credit in the state.
4.25 Subd. 8. Expiration. This section expires seven taxable years following final
4.26enactment, except that the commissioner's authority to allow the credit under subdivision
4.272 based on certificates that were issued under subdivision 3 before expiration remains
4.28in effect through the year following the year in which all certificates have either been
4.29canceled or resulted in issuance of credit certificates, or 2028, whichever is earlier. The
4.30commissioner shall issue the rules for the implementation of this section so as to allow the
4.31commencement of qualified low-income community investments with tax year 2015.
4.32EFFECTIVE DATE.This section is effective for taxable years beginning after
4.33December 31, 2014.
1.3rulemaking; requiring a report;proposing coding for new law in Minnesota
1.4Statutes, chapter 290.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. [290.0693] NEW MARKETS TAX CREDIT.
1.7 Subdivision 1. Definitions. (a) For purposes of this section, the following terms
1.8have the meanings given.
1.9(b) "Adjusted purchase price" means the product of:
1.10(1) the amount paid to the issuer of a qualified equity investment for the qualified
1.11equity investment; and
1.12(2) the following fraction: (i) the total dollar amount of qualified low-income
1.13community investments held by the issuer within the state of Minnesota as of the credit
1.14allowance date during the applicable tax year divided by (ii) the total dollar amount of
1.15qualified low-income community investments held by the issuer in all states as of the
1.16credit allowance date during the applicable tax year.
1.17(c) "Annual allocation authority" means the amount of state new markets tax credit
1.18authority the commissioner may distribute on an annual basis to qualified community
1.19development entities for projects within the state of Minnesota.
1.20(d) "Applicable percentage" means zero percent for each of the first two credit
1.21allowance dates, seven percent for the third credit allowance date, and eight percent for
1.22each of the final four credit allowance dates.
1.23(e) "Commissioner" means the commissioner of revenue.
1.24(f) "Credit allowance date" means:
2.1(1) the date on which a qualified equity investment is initially made; and
2.2(2) each of the six anniversary dates thereafter.
2.3(g) "Greater Minnesota" means the area of the state that excludes the metropolitan
2.4area, as defined in section 473.121, subdivision 2.
2.5(h) "Investments held by an issuer" means, for purposes of calculating the adjusted
2.6purchase price, any capital or equity investment held by an issuer even if the investment
2.7has been sold or repaid; provided that the issuer reinvests an amount equal to the capital
2.8returned to or recovered by the issuer from the original investment, exclusive of any
2.9profits realized, in another qualified low-income community investment within 12 months
2.10of the return or recovery of the capital investment. For the purposes of this requirement,
2.11an issuer is not required to reinvest capital returned from qualified low-income community
2.12investments after the sixth anniversary of the issuance of the qualified equity investment.
2.13The qualified low-income community investment is considered to be held by the issuer
2.14through the seventh anniversary of the qualified equity investment's issuance. Periodic
2.15amounts received by the issuer during a calendar year as repayment of principal on a loan
2.16that is a qualified low-income community investment must be treated as continuously
2.17invested in a qualified low-income community investment if the amounts received are
2.18reinvested in another qualified low-income community investment by the end of the
2.19following calendar year.
2.20(i) "Qualified active low-income community business" has the meaning given in
2.21section 45D of the Internal Revenue Code of 1986, as amended.
2.22(j) "Qualified community development entity" has the meaning given in section 45D
2.23of the Internal Revenue Code of 1986, as amended; provided that the entity has entered
2.24into an allocation agreement with the Community Development Financial Institutions
2.25Fund of the United States Treasury Department with respect to credits authorized by
2.26section 45D of the Internal Revenue Code of 1986, as amended, and includes the state of
2.27Minnesota within the service area set forth in the allocation agreement.
2.28(k) "Qualified equity investment" means any equity investment in a qualified
2.29community development entity that:
2.30(1) is acquired after January 1, 2013, at its original issuance solely in exchange
2.31for cash;
2.32(2) has at least 85 percent of its cash purchase price used by the issuer to make
2.33qualified low-income community investments; and
2.34(3) is designated by the issuer as a qualified equity investment under this subdivision
2.35and is certified by the commissioner as not exceeding the limitation contained in
2.36subdivision 2. The term includes any qualified equity investment that does not meet the
3.1provisions of this paragraph if the investment met the definition of a qualified equity
3.2investment while under possession of a prior holder.
3.3(l) "Qualified low-income community investment" means any capital or equity
3.4investment in, or loan to, any qualified active low-income community business. With
3.5respect to any one qualified active low-income community business, the maximum
3.6amount of qualified low-income community investments made in the business, on
3.7a collective basis with all of its affiliates, that may be used for the calculation of the
3.8numerator described in paragraph (b), clause (2), item (i), is $10,000,000, whether issued
3.9to one or several qualified community development entities.
3.10(m) "Tax credit" means a credit against the tax otherwise due under this chapter or
3.11any gross premiums tax under chapter 297I.
3.12(n) "Taxpayer" means any individual or entity subject to the tax imposed under
3.13this chapter or under chapter 297I.
3.14 Subd. 2. Credit allowed; qualification; limitation. (a) A taxpayer that makes
3.15a qualified equity investment is entitled to a tax credit subject to the conditions and
3.16limitations provided in this section.
3.17(b) The tax credit amount equals the applicable percentage times the adjusted
3.18purchase price paid to the issuer of a qualified equity investment. The amount of the tax
3.19credit claimed must not exceed the amount of the taxpayer's state tax liability under this
3.20chapter or chapter 297I for the tax year for which the tax credit is claimed. On each credit
3.21allowance date of the qualified equity investment the taxpayer, or subsequent holder of the
3.22qualified equity investment, is entitled to a tax credit during the taxable year including the
3.23credit allowance date. The tax credit is not transferable.
3.24(c) Tax credits earned by a partnership, a limited liability company, an S-corporation,
3.25or other pass-through entity may be allocated to the partners, members, or shareholders of
3.26the entity for their direct use in accordance with the provisions of any agreement among
3.27the partners, members, or shareholders.
3.28(d) Any amount of tax credit that the taxpayer is prohibited by this section from
3.29claiming in a taxable year may be carried forward to any of the taxpayer's five subsequent
3.30taxable years.
3.31(e) The amount of annual allocation authority permitted under subdivision 5 cannot
3.32exceed $25,000,000 per taxable year.
3.33 Subd. 3. Certification. The issuer of the qualified equity investment must certify
3.34to the commissioner the anticipated dollar amount of the investment to be made within
3.35the state of Minnesota during the first 12-month period following the initial credit
3.36allowance date. If on the subsequent credit allowance dates, the actual dollar amount of
4.1the investment is different than the amount certified, the commissioner may adjust the
4.2allocation for subsequent taxable years to account for the difference.
4.3 Subd. 4. Credit recapture. (a) The commissioner shall recapture the tax credit
4.4allowed under this section if:
4.5(1) any amount of the federal tax credit available with respect to a qualified equity
4.6investment that is eligible for a tax credit under this section is recaptured under section
4.745D of the Internal Revenue Code of 1986, as amended; or
4.8(2) the issuer of a qualified equity investment redeems or makes principal repayment
4.9prior to the seventh anniversary of the issuance of the qualified equity investment.
4.10(b) Any tax credit that is subject to recapture must be recaptured from the taxpayer
4.11that claimed the tax credit on a return.
4.12 Subd. 5. Allocation of credit. The commissioner shall adopt recapture provisions on
4.13a scaled proportional basis to administer the annual allocation authority issued for qualified
4.14equity investments. The commissioner shall allocate the credits on a first-come, first-served
4.15basis, provided that prior to August 1 of any year, not more than 60 percent of the available
4.16annual allocation authority is allocated to qualified equity investments located in either
4.17the metropolitan area as defined in section 473.121, subdivision 2, or greater Minnesota.
4.18After August 1 of any year, the allocation limitation by geographic area does not apply.
4.19 Subd. 6. Rulemaking. The commissioner may adopt rules to implement this
4.20section. Rules adopted must be, to the greatest extent possible, compatible to applicable
4.21credits under section 45D of the Internal Revenue Code of 1986, as amended.
4.22 Subd. 7. Program report. The commissioner of revenue shall report to the
4.23legislature no later than December 31, 2021, regarding the implementation of this tax
4.24credit, including an evaluation of the success of the tax credit in the state.
4.25 Subd. 8. Expiration. This section expires seven taxable years following final
4.26enactment, except that the commissioner's authority to allow the credit under subdivision
4.272 based on certificates that were issued under subdivision 3 before expiration remains
4.28in effect through the year following the year in which all certificates have either been
4.29canceled or resulted in issuance of credit certificates, or 2028, whichever is earlier. The
4.30commissioner shall issue the rules for the implementation of this section so as to allow the
4.31commencement of qualified low-income community investments with tax year 2015.
4.32EFFECTIVE DATE.This section is effective for taxable years beginning after
4.33December 31, 2014.
