Bill Text: TX HB2238 | 2017-2018 | 85th Legislature | Introduced
Bill Title: Relating to franchise tax and insurance premium tax credits for investment in certain communities; imposing a monetary penalty; authorizing fees.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2017-03-20 - Referred to Ways & Means [HB2238 Detail]
Download: Texas-2017-HB2238-Introduced.html
85R5018 BEF-F | ||
By: Lucio III | H.B. No. 2238 |
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relating to franchise tax and insurance premium tax credits for | ||
investment in certain communities; imposing a monetary penalty; | ||
authorizing fees. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Title 2, Tax Code, is amended by adding Subtitle | ||
K to read as follows: | ||
SUBTITLE K. CREDITS APPLICABLE TO MULTIPLE TAXES | ||
CHAPTER 221. FRANCHISE TAX AND INSURANCE PREMIUM TAX CREDITS FOR | ||
INVESTMENT IN CERTAIN COMMUNITIES | ||
SUBCHAPTER A. GENERAL PROVISIONS | ||
Sec. 221.001. GENERAL DEFINITIONS. In this chapter: | ||
(1) "Applicable percentage" means zero percent for the | ||
first two credit allowance dates, seven percent for the third | ||
credit allowance date, and eight percent for the next four credit | ||
allowance dates. | ||
(2) "Credit allowance date" means, with respect to any | ||
qualified equity investment: | ||
(A) the date on which the qualified equity | ||
investment is initially made; and | ||
(B) the anniversary of that date in each of the | ||
six years immediately following that date. | ||
(3) "Federal tax regulations" means regulations | ||
adopted under the Internal Revenue Code of 1986 that are applicable | ||
to the tax year to which the provisions of the code in effect on | ||
September 1, 2017, applied. | ||
(4) "Franchise tax" means the tax imposed under | ||
Chapter 171. | ||
(5) "Internal Revenue Code" means the Internal Revenue | ||
Code of 1986 in effect on September 1, 2017, excluding any changes | ||
made by federal law after that date, but including any regulations | ||
adopted under that code that are applicable to the tax year to which | ||
the provisions of the code in effect on that date applied. | ||
(6) "Investing entity" means an entity, including a | ||
taxable entity as defined by Section 171.0002 and an entity that | ||
incurs state premium tax liability, that makes or holds a qualified | ||
equity investment. | ||
(7) "Issuer" means a qualified community development | ||
entity, or a subsidiary or affiliate of a qualified community | ||
development entity, that issues a qualified equity investment. | ||
(8) "Low-income community" has the meaning assigned by | ||
Section 45D, Internal Revenue Code. | ||
(9) "Metropolitan statistical area" means a core base | ||
statistical area associated with at least one urbanized area that | ||
has a population of at least 90,000. A metropolitan statistical | ||
area comprises the central county or counties containing the core, | ||
plus adjacent outlying counties having a high degree of social and | ||
economic integration with the central county or counties as | ||
measured through commuting. | ||
(10) "Purchase price" means the amount paid to the | ||
issuer for a qualified equity investment. | ||
(11) "Report" means a franchise tax report, an | ||
insurance premium tax report, or a report under Subchapter H, as | ||
applicable. | ||
(12) "Rural allocation" means the allocation | ||
described by Section 221.154(c)(1). | ||
(13) "Rural area" means a county in this state with a | ||
population less than 90,000. | ||
(14) "State premium tax liability" means any premium | ||
tax liability incurred under Chapter 221, 222, 223, 223A, or 224, | ||
Insurance Code. | ||
(15) "Statewide low-income community allocation" | ||
means the allocation described by Section 221.154(c)(4). | ||
(16) "Texas education allocation" means the | ||
allocation described by Section 221.154(c)(2). | ||
(17) "Texas seaport allocation" means the allocation | ||
described by Section 221.154(c)(3). | ||
Sec. 221.002. DEFINITION: LONG-TERM DEBT SECURITY. (a) In | ||
this chapter, "long-term debt security" means a debt instrument | ||
issued by a qualified community development entity, at par value or | ||
a premium, with an original maturity date not earlier than the | ||
seventh year after the date on which the debt instrument is issued, | ||
with no acceleration of repayment, amortization, or prepayment | ||
features before its original maturity date. | ||
(b) The qualified community development entity that issues | ||
a long-term debt security may not make cash interest payments on the | ||
security during the period beginning on the date on which the | ||
security is issued and ending on the final credit allowance date in | ||
an amount that exceeds the cumulative operating income, as defined | ||
by federal tax regulations adopted under Section 45D, Internal | ||
Revenue Code, of the qualified community development entity for | ||
that period before giving effect to the interest expense of the | ||
long-term debt security. | ||
(c) This section does not limit the holder's ability to | ||
accelerate payments on a long-term debt security in situations in | ||
which the issuer has defaulted on covenants designed to ensure | ||
compliance with this chapter or Section 45D, Internal Revenue Code. | ||
Sec. 221.003. DEFINITION: QUALIFIED ACTIVE LOW-INCOME | ||
COMMUNITY BUSINESS. (a) In this chapter, "qualified active | ||
low-income community business" has the meaning assigned by Section | ||
45D, Internal Revenue Code, and Section 1.45D-1 of the federal tax | ||
regulations. | ||
(b) A business is considered a qualified active low-income | ||
community business for the duration of the qualified community | ||
development entity's investment in, or loan to, the business if the | ||
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. | ||
Sec. 221.004. DEFINITION: QUALIFIED COMMUNITY DEVELOPMENT | ||
ENTITY. In this chapter, "qualified community development entity" | ||
has the meaning assigned by Section 45D, Internal Revenue Code, | ||
provided that the entity has entered into, for the current year or a | ||
prior year with an allocation effective date on or after July 1, | ||
2016, an allocation agreement with the Community Development | ||
Financial Institutions Fund of the United States Department of the | ||
Treasury with respect to credits authorized by Section 45D, | ||
Internal Revenue Code, that includes this state in the service area | ||
specified in the allocation agreement. The term includes a | ||
subsidiary or affiliate of a qualified community development entity | ||
and any other qualified community development entity that is | ||
controlled by or under common control with a qualified community | ||
development entity. | ||
Sec. 221.005. DEFINITION: QUALIFIED EQUITY INVESTMENT. (a) | ||
An investment is a "qualified equity investment" for purposes of | ||
this chapter if: | ||
(1) the investment is an equity investment in, or | ||
long-term debt security issued by, a qualified community | ||
development entity; | ||
(2) the investment is acquired on or after October 1, | ||
2017, at its original issuance solely in exchange for cash, except | ||
as provided by Subsection (b); | ||
(3) not later than the 20th month after the date of | ||
issuance at least 85 percent of the investment's purchase price is | ||
used by the issuer to make qualified low-income community | ||
investments in this state; and | ||
(4) the investment is designated by the issuer as a | ||
qualified equity investment under this section and is certified by | ||
the comptroller as not exceeding the limitations provided by | ||
Section 221.154. | ||
(b) A qualified equity investment includes an investment | ||
that does not satisfy the requirements of Subsection (a)(2) if the | ||
investment was a qualified equity investment in the hands of a prior | ||
holder. | ||
Sec. 221.006. DEFINITION: QUALIFIED LOW-INCOME COMMUNITY | ||
INVESTMENT. In this chapter, "qualified low-income community | ||
investment" means an equity investment in, or loan to, a qualified | ||
active low-income community business made by a qualified community | ||
development entity. | ||
Sec. 221.007. DEFINITION: RURAL COMMUNITY DEVELOPMENT | ||
ENTITY. In this chapter, "rural community development entity" means | ||
a qualified community development entity: | ||
(1) whose allocation agreement with the Community | ||
Development Financial Institutions Fund of the United States | ||
Department of the Treasury requires the entity to invest at least 25 | ||
percent of that allocation in rural areas; or | ||
(2) that demonstrates to the comptroller in writing | ||
that the entity or its affiliates invested at least 25 percent of | ||
the entity's most recent federal allocation outside the boundaries | ||
of a metropolitan statistical area. | ||
Sec. 221.008. RULES. The comptroller shall adopt rules | ||
necessary to implement this chapter. | ||
Sec. 221.009. REVIEW BY COMPTROLLER. The comptroller shall | ||
review the qualified low-income community investments of a | ||
qualified community development entity not later than the sixth | ||
month after each anniversary of the investment. In conducting the | ||
review, the comptroller shall ensure that the qualified community | ||
development entity has made and maintained the qualified low-income | ||
community investments required under Sections 221.201(a)(3) and | ||
(4) to avoid recapture of a credit claimed in connection with a | ||
qualified equity investment. | ||
SUBCHAPTER B. FRANCHISE TAX CREDIT | ||
Sec. 221.051. ELIGIBILITY FOR CREDIT. An investing entity | ||
is eligible for a credit against the tax imposed under Chapter 171 | ||
in the amount provided by this subchapter and under the conditions | ||
and limitations provided by this chapter. | ||
Sec. 221.052. QUALIFICATION. An investing entity is | ||
eligible for a credit if the investing entity holds a qualified | ||
equity investment on a credit allowance date. | ||
Sec. 221.053. AMOUNT OF CREDIT; LIMITATION. (a) The amount | ||
of credit for a report is equal to the credit accrued, as determined | ||
under Subsection (b), on each credit allowance date: | ||
(1) that occurs during the period on which the report | ||
is based; and | ||
(2) on which the investing entity holds the qualified | ||
equity investment. | ||
(b) The amount of credit accrued on a credit allowance date | ||
equals the applicable percentage for the credit allowance date | ||
multiplied by the purchase price paid to the issuer of the qualified | ||
equity investment. | ||
(c) The total credit claimed for a report, including the | ||
amount of any carryforward under Section 221.054, may not exceed | ||
the amount of franchise tax due for the report after applying all | ||
other applicable tax credits. | ||
(d) Credits may be applied to the investing entity's | ||
estimated or final tax payments for the applicable period. | ||
Sec. 221.054. CARRYFORWARD. If an investing entity is | ||
eligible for a credit that exceeds the limitation under Section | ||
221.053(c), the investing entity may carry the unused credit | ||
forward for not more than 20 consecutive reports. Credits, | ||
including credit carryforwards, are considered to be used in the | ||
following order: | ||
(1) a credit carryforward under this subchapter; and | ||
(2) a current year credit. | ||
Sec. 221.055. ASSIGNMENT PROHIBITED. (a) Except as | ||
provided by Subsection (b), an investing entity may not convey, | ||
assign, or transfer the credit allowed under this subchapter to | ||
another entity. | ||
(b) A partnership, limited liability company, S | ||
corporation, or other pass-through entity for federal income tax | ||
purposes may allocate the credit to the entity's partners, members, | ||
or shareholders for their direct use in accordance with an | ||
agreement between the partners, members, or shareholders. | ||
SUBCHAPTER C. INSURANCE PREMIUM TAX CREDIT | ||
Sec. 221.101. ELIGIBILITY FOR CREDIT. An investing entity | ||
is eligible for a credit against the entity's state premium tax | ||
liability in the amount provided by this subchapter and under the | ||
conditions and limitations provided by this chapter. | ||
Sec. 221.102. QUALIFICATION. An investing entity is | ||
eligible for a credit if the investing entity holds a qualified | ||
equity investment on a credit allowance date. | ||
Sec. 221.103. AMOUNT OF CREDIT; LIMITATION. (a) The amount | ||
of credit for a tax year is equal to the credit accrued, as | ||
determined under Subsection (b), on each credit allowance date: | ||
(1) that occurs during the tax year; and | ||
(2) on which the investing entity holds the qualified | ||
equity investment. | ||
(b) The amount of credit accrued on a credit allowance date | ||
equals the applicable percentage for the credit allowance date | ||
multiplied by the purchase price paid to the issuer of the qualified | ||
equity investment. | ||
(c) The total credit claimed for a tax year, including the | ||
amount of any carryforward under Section 221.104, may not exceed | ||
the amount of state premium tax liability due for the tax year after | ||
applying all other applicable tax credits. | ||
(d) Credits may be applied to the investing entity's | ||
estimated or final tax payments for the tax year. | ||
Sec. 221.104. CARRYFORWARD. If an investing entity is | ||
eligible for a credit that exceeds the limitation under Section | ||
221.103(c), the investing entity may carry the unused credit | ||
forward for not more than 20 consecutive tax reports. Credits, | ||
including credit carryforwards, are considered to be used in the | ||
following order: | ||
(1) a credit carryforward under this subchapter; and | ||
(2) a current year credit. | ||
Sec. 221.105. ASSIGNMENT PROHIBITED. (a) Except as | ||
provided by Subsection (b), an investing entity may not convey, | ||
assign, or transfer the credit allowed under this subchapter to | ||
another entity. | ||
(b) A partnership, limited liability company, S | ||
corporation, or other pass-through entity for federal income tax | ||
purposes may allocate the credit to the entity's partners, members, | ||
or shareholders for their direct use in accordance with an | ||
agreement between the partners, members, or shareholders. | ||
Sec. 221.106. RETALIATORY TAX. (a) An entity claiming a | ||
credit under this subchapter is not required to pay any additional | ||
retaliatory tax levied under Chapter 281, Insurance Code, as a | ||
result of claiming that credit. | ||
(b) In addition to the exclusion provided by Subsection (a), | ||
an entity claiming a credit under this subchapter is not required to | ||
pay any additional tax that may arise as a result of claiming that | ||
credit. | ||
SUBCHAPTER D. CERTIFICATION AS QUALIFIED EQUITY INVESTMENT | ||
Sec. 221.151. APPLICATION FOR CERTIFICATION AS QUALIFIED | ||
EQUITY INVESTMENT. (a) A qualified community development entity | ||
that seeks to have an equity investment or long-term debt security | ||
certified as a qualified equity investment eligible for credits | ||
under this chapter must apply to the comptroller as provided by this | ||
section. | ||
(b) The comptroller shall provide an application date each | ||
year for applications under Subsection (a). The date may not be | ||
later than October 2. The comptroller shall consider all | ||
applications received on or before the application date to be | ||
received simultaneously on the application date. | ||
(c) An application under this section must include the | ||
following: | ||
(1) evidence of the applicant's certification as a | ||
qualified community development entity, including evidence of the | ||
service area of the entity that includes this state; | ||
(2) a copy of an allocation agreement executed by the | ||
applicant, or its controlling entity, and the Community Development | ||
Financial Institutions Fund of the United States Department of the | ||
Treasury; | ||
(3) a certificate executed by an executive officer of | ||
the applicant attesting that the allocation agreement remains in | ||
effect and has not been revoked or canceled by the Community | ||
Development Financial Institutions Fund; | ||
(4) a description of the amount and structure of the | ||
equity investment or long-term debt security proposed to be | ||
certified; | ||
(5) examples of the types of qualified active | ||
low-income community businesses in which the applicant, its | ||
controlling entity, or affiliates of its controlling entity have | ||
invested under the federal New Markets Tax Credit Program or a state | ||
new markets tax credit program, including written proof that the | ||
applicant or an affiliate has made at least one qualified | ||
low-income community investment or a similar loan to a business in a | ||
low-income census tract in this state; | ||
(6) evidence that: | ||
(A) the entity qualifies as a rural community | ||
development entity, if the entity is applying for a rural | ||
allocation; | ||
(B) the entity or the entity's affiliate has | ||
previously made at least one qualified low-income community | ||
investment that would meet the investment requirements for a Texas | ||
education allocation, if the entity is applying for a Texas | ||
education allocation; or | ||
(C) the entity or the entity's affiliate has | ||
previously made at least one qualified low-income community | ||
investment that would meet the investment requirements for a Texas | ||
seaport allocation, if the entity is applying for a Texas seaport | ||
allocation; | ||
(7) a nonrefundable application fee of $5,000 to be | ||
paid to the comptroller; and | ||
(8) the refundable performance deposit required by | ||
Subchapter F. | ||
Sec. 221.152. ACTION ON APPLICATION. (a) Not later than | ||
the 30th day after the date an application under Section 221.151 is | ||
received, the comptroller shall grant or deny the application in | ||
full or part. | ||
(b) If the comptroller denies the application, the | ||
comptroller shall inform the applicant of the denial. | ||
(c) If the comptroller denies an application because the | ||
application is incomplete, the applicant may, not later than the | ||
15th day after the date the applicant receives notice under | ||
Subsection (b), provide additional information required by the | ||
comptroller to complete the application. The comptroller shall | ||
consider an application completed under this subsection to be | ||
completed on the date the application was initially submitted. | ||
(d) If an applicant does not complete an application in the | ||
time required under Subsection (c), the application is finally | ||
denied and the applicant must submit a new application if the | ||
applicant wishes to reapply. The comptroller shall determine the | ||
application date for the new application without regard to the | ||
previously denied application. | ||
Sec. 221.153. CERTIFICATION OF QUALIFIED EQUITY | ||
INVESTMENT. (a) If an application under Section 221.151 is | ||
granted, the comptroller shall certify the proposed equity | ||
investment or long-term debt security as a qualified equity | ||
investment that is eligible for credits under this chapter, subject | ||
to Section 221.154. | ||
(b) The comptroller shall provide written notice of the | ||
certification to the qualified community development entity. | ||
(c) The certification of a qualified equity investment is | ||
effective on the date the comptroller provides notice under | ||
Subsection (b). | ||
Sec. 221.154. LIMIT ON CERTIFIED INVESTMENTS. (a) Subject | ||
to Subsections (b) and (c), the comptroller shall limit the amount | ||
of qualified equity investments that may be certified under Section | ||
221.153 to an amount the comptroller estimates will result in not | ||
more than: | ||
(1) $60 million in credits being claimed under this | ||
chapter in any state fiscal year; and | ||
(2) $300 million in total credits being claimed under | ||
this chapter. | ||
(b) The comptroller shall estimate the amounts under | ||
Subsection (a) without regard to the carryforward provisions under | ||
Sections 221.054 and 221.104. | ||
(c) The comptroller shall allocate 25 percent, or as nearly | ||
as possible to 25 percent, of the amount available under Subsection | ||
(a) for each of the following: | ||
(1) a rural allocation, which may be used only by | ||
rural community development entities to make qualified low-income | ||
community investments in rural areas; | ||
(2) a Texas education allocation, which may be used | ||
only to make qualified low-income community investments in | ||
nonprofit or for-profit entities offering primary, secondary, or | ||
higher education in low-income communities in this state; | ||
(3) a Texas seaport allocation, which may be used only | ||
to make qualified low-income community investments in businesses | ||
operating at a port, harbor, or municipality: | ||
(A) accessible to seagoing ships that are limited | ||
to 35 miles from the coastline; and | ||
(B) located in a low-income community in this | ||
state; and | ||
(4) a statewide low-income community allocation, | ||
which may be used to make qualified low-income community | ||
investments in any low-income community in this state. | ||
(d) A qualified community development entity may apply in a | ||
single application for and receive certification of qualified | ||
equity investments in more than one allocation category under | ||
Subsection (c). | ||
(e) Subject to Subsection (f), if a pending application | ||
cannot be fully certified due to the limit specified by Subsection | ||
(a) or (c), the comptroller shall certify the portion that can be | ||
certified. | ||
(f) The comptroller shall certify qualified equity | ||
investments in the order in which applications are received by the | ||
comptroller. Applications received on or before the application | ||
date provided under Section 221.151(b) are considered to have been | ||
received simultaneously on the application date. For applications | ||
that are complete and received on or before the application date | ||
provided under Section 221.151(b) and for which the total amounts | ||
requested cannot be certified because of the limit specified by | ||
Subsection (a) or (c), the comptroller shall certify qualified | ||
equity investments in each allocation category under Subsection (c) | ||
on a pro rata basis based on the ratio of the amount of qualified | ||
equity investments available in an allocation category to the total | ||
amount of qualified equity investments requested in that allocation | ||
category. | ||
Sec. 221.155. TRANSFER OF INVESTMENT AUTHORITY. A | ||
qualified community development entity whose application for | ||
certification of a qualified equity investment is approved under | ||
this subchapter may transfer all or a portion of its certified | ||
qualified equity investment authority to its controlling entity or | ||
to a qualified community development entity controlled by or under | ||
common control with the transferring entity, if the transferring | ||
entity: | ||
(1) provides the information required in the | ||
application under Section 221.151(c) with respect to the recipient | ||
of the transfer; and | ||
(2) notifies the comptroller of the transfer not later | ||
than the 30th day after the date of the transfer. | ||
Sec. 221.156. ISSUANCE OF QUALIFIED EQUITY INVESTMENT; FEE. | ||
(a) Not later than the 20th month after the date the qualified | ||
community development entity receives notice of certification, the | ||
entity or a recipient of a transfer under Section 221.155 shall | ||
issue the qualified equity investment and receive cash in the | ||
amount certified. | ||
(b) The qualified community development entity or a | ||
recipient of a transfer under Section 221.155 must provide the | ||
comptroller with evidence of the receipt of the cash investment not | ||
later than the 10th business day after the date the cash investment | ||
is received. | ||
(c) At the time the qualified community development entity | ||
or a recipient of a transfer under Section 221.155 issues the | ||
qualified equity investment, the qualified community development | ||
entity or transfer recipient shall pay to the comptroller a fee | ||
equal to 20 basis points, or 0.2 percent, of the amount issued. | ||
Fees collected under this subsection may be appropriated only to | ||
pay the cost of preparing a report under Section 221.352. | ||
Sec. 221.157. LAPSE OF CERTIFICATION. (a) If the qualified | ||
community development entity or a recipient of a transfer under | ||
Section 221.155 does not issue the qualified equity investment and | ||
receive the cash investment before the 20th month after the date the | ||
certification notice is received as required by Section 221.156, | ||
the certification lapses and the qualified community development | ||
entity or recipient of the transfer may not accept an equity | ||
investment or issue a long-term debt security as a qualified equity | ||
investment without reapplying to the comptroller for | ||
certification. | ||
(b) If a certification lapses under this section, the | ||
comptroller shall reissue the previously certified amount, giving | ||
preference to an applicant for reissuance of certification whose | ||
proposed amount for certification was previously certified in a | ||
reduced amount under Section 221.154. If more than one applicant | ||
for reissuance of certification had its proposed amount reduced, | ||
the comptroller shall reissue the certified amount to those | ||
applicants on a pro rata basis, subject to the limits specified by | ||
Section 221.154. | ||
(c) After reissuing certifications under Subsection (b), | ||
the comptroller shall reissue any certified amounts remaining to | ||
applicants in amounts determined by the comptroller, subject to the | ||
limits specified by Section 221.154. | ||
SUBCHAPTER E. RECAPTURE OF CREDIT | ||
Sec. 221.201. RECAPTURE. (a) Subject to Section 221.202, | ||
the comptroller shall recapture the amount of a credit claimed on a | ||
franchise tax report filed under Chapter 171 or a premium tax report | ||
filed under Chapter 221, 222, 223, 223A, or 224, Insurance Code, | ||
from the investing entity if: | ||
(1) any amount of a federal tax credit available with | ||
respect to a qualified equity investment that is eligible for a | ||
credit under this chapter is recaptured under Section 45D, Internal | ||
Revenue Code, in which case the comptroller's recapture must be | ||
proportionate to the federal recapture with respect to the | ||
qualified equity investment; | ||
(2) the issuer redeems or makes principal repayment | ||
with respect to a qualified equity investment before the seventh | ||
anniversary of the date the qualified equity investment is issued, | ||
in which case the comptroller's recapture must be proportionate to | ||
the amount of the redemption or repayment with respect to the | ||
qualified equity investment; | ||
(3) the issuer fails to invest an amount equal to 85 | ||
percent of the purchase price of the qualified equity investment in | ||
qualified low-income community investments in this state not later | ||
than the 20th month after the date the qualified equity investment | ||
is issued, in which case the comptroller's recapture may not exceed | ||
the amount of tax credits associated with the portion of the | ||
purchase price received but not invested on the date of the | ||
recapture; or | ||
(4) the issuer fails to maintain an amount of | ||
investment equal to 85 percent of the purchase price of the | ||
qualified equity investment in qualified low-income community | ||
investments in this state until the last credit allowance date for | ||
the qualified equity investment, in which case the comptroller's | ||
recapture may not exceed the amount of tax credits associated with | ||
the portion of the purchase price received but not maintained in | ||
qualified low-income community investments on the date of | ||
recapture. | ||
(b) For purposes of this chapter, a qualified low-income | ||
community investment is considered held by an issuer even if the | ||
investment has been sold or repaid if the issuer reinvests an amount | ||
equal to the capital returned to or recovered by the issuer from the | ||
original investment, exclusive of any profits realized, in another | ||
qualified low-income community investment not later than the 12th | ||
month after the date the issuer receives the capital. | ||
(c) An issuer is not required to reinvest capital returned | ||
from a qualified low-income community investment after the sixth | ||
anniversary of the date the qualified equity investment whose | ||
proceeds were used to make the qualified low-income community | ||
investment was issued. The qualified low-income community | ||
investment is considered held by the issuer through the seventh | ||
anniversary of the date the qualified equity investment was issued. | ||
(d) Periodic amounts received during a calendar year as | ||
repayment of principal on a loan that is a qualified low-income | ||
community investment shall be treated as continuously invested in a | ||
qualified low-income community investment if the amounts are | ||
reinvested in one or more qualified low-income community | ||
investments not later than the last day of the following calendar | ||
year. | ||
(e) After the seventh anniversary of the date a qualified | ||
equity investment is issued, the qualified community development | ||
entity may request that the comptroller certify that tax credits | ||
associated with the qualified equity investment are not subject to | ||
recapture under this section. | ||
(f) Not later than the 60th day after the date the | ||
comptroller receives a request under Subsection (e), the | ||
comptroller shall: | ||
(1) certify in writing to the qualified community | ||
development entity that tax credits associated with the qualified | ||
equity investment are not subject to recapture and that the | ||
qualified community development entity has satisfied all the | ||
requirements of this chapter; or | ||
(2) notify the qualified community development entity | ||
that tax credits associated with the qualified equity investment | ||
are subject to recapture and that the qualified community | ||
development entity has not satisfied the requirements of this | ||
chapter and shall provide a written explanation of the reason for | ||
that determination. | ||
(g) After the comptroller certifies under Subsection (f)(1) | ||
that tax credits associated with a qualified equity investment are | ||
not subject to recapture: | ||
(1) the comptroller may not recapture any tax credits | ||
associated with that qualified equity investment; and | ||
(2) the qualified community development entity is not | ||
subject to regulation by the comptroller or to the reporting | ||
requirements under Section 221.351 in connection with that | ||
qualified equity investment. | ||
Sec. 221.202. NOTICE OF NONCOMPLIANCE. (a) The | ||
comptroller shall notify a qualified community development entity | ||
and an investing entity that has claimed a credit on a report if the | ||
credit is subject to recapture under Section 221.201. | ||
(b) The comptroller may not recapture a credit under this | ||
subchapter if the qualified community development entity cures the | ||
noncompliance described by Section 221.201 before the 90th day | ||
after the date the qualified community development entity receives | ||
notice under Subsection (a). | ||
SUBCHAPTER F. SECURITY FOR PERFORMANCE | ||
Sec. 221.251. SECURITY REQUIRED. (a) Not later than the | ||
14th day after the date a qualified equity investment is certified | ||
under Subchapter D, the qualified community development entity that | ||
received investment authority for the qualified equity investment | ||
must deposit $500,000 with the comptroller as a refundable | ||
performance deposit to be deposited as required by Section 221.254. | ||
(b) This section applies regardless of whether the | ||
investment authority is for a rural allocation, a Texas education | ||
allocation, a Texas seaport allocation, or a statewide low-income | ||
community allocation. | ||
Sec. 221.252. FAILURE TO PROVIDE SECURITY: LOSS OF | ||
CERTIFICATION. The comptroller shall revoke the certification of | ||
the qualified equity investment of a qualified community | ||
development entity that fails to make a deposit under Section | ||
221.251. | ||
Sec. 221.253. FORFEITURE OF SECURITY. (a) A qualified | ||
community development entity that makes a performance deposit under | ||
Section 221.251 forfeits the deposit in its entirety if: | ||
(1) the qualified community development entity or any | ||
qualified community development entity to which a transfer is made | ||
under Section 221.155 fails to issue the total amount of qualified | ||
equity investments certified by the comptroller and receive cash in | ||
the amount certified under Section 221.153 not later than the date | ||
specified by Section 221.156; or | ||
(2) subject to Subsection (b), the qualified community | ||
development entity or a qualified community development entity to | ||
which a transfer is made under Section 221.155 that issues a | ||
qualified equity investment certified under Section 221.153 fails | ||
to make or maintain the investment required under Sections | ||
221.201(a)(3) and (4) to avoid recapture of a tax credit claimed in | ||
connection with the qualified equity investment. | ||
(b) A deposit is not subject to forfeiture under Subsection | ||
(a)(2) if the qualified community development entity cures the | ||
noncompliance before the 90th day after the date the qualified | ||
community development entity receives notice under Subsection (c). | ||
(c) The comptroller shall notify a qualified community | ||
development entity that made a deposit under Section 221.251 in | ||
writing if the deposit is subject to forfeiture under this section. | ||
Sec. 221.254. NEW MARKETS PERFORMANCE GUARANTEE FUND. (a) | ||
The new markets performance guarantee fund is an interest-bearing | ||
fund outside the state treasury with the comptroller. The fund | ||
consists of money the comptroller deposits under Subsection (b). | ||
The comptroller shall administer the fund. | ||
(b) The comptroller shall deposit a performance deposit | ||
made under Section 221.251 to the credit of the new markets | ||
performance guarantee fund. The deposit must remain on deposit with | ||
the fund until the comptroller determines that: | ||
(1) the qualified community development entity has | ||
complied with the provisions of this chapter; or | ||
(2) the deposit has been forfeited and will be | ||
deposited in accordance with Section 221.256. | ||
Sec. 221.255. RELEASE OF SECURITY. (a) Not earlier than | ||
the 30th day after the date the requirements that must be satisfied | ||
to avoid forfeiture of a deposit as described by Section 221.253 are | ||
satisfied, a qualified community development entity that made the | ||
deposit may request a refund of the deposit from the comptroller. | ||
(b) The comptroller shall refund the deposit or, if | ||
applicable, give notice of noncompliance as described by Section | ||
221.253 not later than the 30th day after the date of receiving a | ||
request under Subsection (a). | ||
Sec. 221.256. DEPOSIT OF FORFEITED SECURITY. The | ||
comptroller shall deposit in the general revenue fund a deposit | ||
forfeited under Section 221.253. | ||
SUBCHAPTER G. EVALUATION OF BUSINESS BY COMPTROLLER | ||
Sec. 221.301. EVALUATION REQUIRED. (a) Except as provided | ||
by Subsection (c), a qualified community development entity or a | ||
recipient of a transfer under Section 221.155 must, before making | ||
an investment in a business, request a written opinion from the | ||
comptroller as to whether: | ||
(1) the business in which the qualified community | ||
development entity proposes to invest would qualify as a qualified | ||
active low-income community business under Section 221.003; and | ||
(2) the location where the qualified community | ||
development entity proposes to invest would meet the location | ||
requirements for a rural allocation, a Texas education allocation, | ||
or a Texas seaport allocation, as applicable. | ||
(b) Not later than the 10th business day after the date of | ||
the receipt of a request under Subsection (a), the comptroller | ||
shall make the requested determinations and issue the written | ||
opinion, including explanations for the determinations. | ||
(c) A qualified community development entity or a recipient | ||
of a transfer under Section 221.155 may, but is not required to, | ||
request a written opinion under Subsection (a) before making an | ||
investment in a business if the qualified community development | ||
entity or transfer recipient concurrently makes a federal qualified | ||
low-income community investment in the business. | ||
Sec. 221.302. CONSIDERATION OF FEDERAL TAX LAWS. In | ||
issuing a written opinion and making other determinations under | ||
this chapter, the comptroller shall consider Section 45D, Internal | ||
Revenue Code, and the federal tax regulations issued under that | ||
code, to the extent that those provisions are applicable. | ||
SUBCHAPTER H. REPORTING | ||
Sec. 221.351. REPORT TO COMPTROLLER. (a) Except as | ||
provided by this subsection, a qualified community development | ||
entity that issues a qualified equity investment under Section | ||
221.156 shall submit an annual report to the comptroller not later | ||
than the fifth business day after the anniversary of a credit | ||
allowance date applicable to the investment. The qualified | ||
community development entity is not required to submit any report | ||
under this subsection after the annual report following the final | ||
credit allowance date. | ||
(b) The report must: | ||
(1) provide evidence that the qualified community | ||
development entity has made and maintained the investment required | ||
under Sections 221.201(a)(3) and (4) to avoid recapture of a credit | ||
claimed in connection with the qualified equity investment; | ||
(2) include one or more bank statements for the | ||
qualified community development entity that reflect each qualified | ||
low-income community investment made by the qualified community | ||
development entity in connection with the qualified equity | ||
investment; | ||
(3) state the name, location, and industry code of | ||
each qualified active low-income community business receiving a | ||
qualified low-income community investment in connection with the | ||
qualified equity investment; | ||
(4) state the number of employment positions created | ||
and retained as a result of each qualified low-income community | ||
investment made in connection with the qualified equity investment; | ||
(5) state whether the qualified community development | ||
entity has been subject to a recapture of any amount of a federal | ||
tax credit available under Section 45D, Internal Revenue Code, with | ||
respect to the qualified equity investment; and | ||
(6) include a copy of the most recent annual report | ||
submitted by the qualified community development entity to the | ||
United States Department of the Treasury regarding Section 45D, | ||
Internal Revenue Code. | ||
(c) A qualified community development entity that fails to | ||
submit a report to the comptroller within the time prescribed by | ||
Subsection (a) shall pay to the comptroller a penalty equal to the | ||
sum of: | ||
(1) $25,000; and | ||
(2) $5,000 for each day the report is not submitted | ||
after the date the report is due under Subsection (a). | ||
Sec. 221.352. COMPTROLLER'S REPORT TO LEGISLATURE. (a) | ||
The comptroller shall contract with an independent researcher at a | ||
center for research established under Section 1.005, Education | ||
Code, to prepare a biennial report with respect to the | ||
implementation of this chapter. | ||
(b) The report must include: | ||
(1) the number of qualified community development | ||
entities holding certified qualified equity investments; | ||
(2) the amount of qualified equity investments of each | ||
qualified community development entity; | ||
(3) the investments each qualified community | ||
development entity has made in qualified active low-income | ||
community businesses as of the most recent annual report submitted | ||
to the comptroller by the qualified community development entity; | ||
(4) the total amount of credits earned under this | ||
chapter; | ||
(5) the performance of each qualified community | ||
development entity with respect to reporting requirements imposed | ||
by this chapter; | ||
(6) with respect to each qualified active low-income | ||
community business in which a qualified community development | ||
entity has invested: | ||
(A) the classification of the qualified active | ||
low-income community business according to the industrial sector | ||
and the size of the business; | ||
(B) the total number of jobs created by the | ||
qualified low-income community investment and the average wages | ||
paid for the jobs; and | ||
(C) the total number of jobs retained as a result | ||
of the qualified low-income community investment and the average | ||
wages paid for the jobs; and | ||
(7) an analysis of the effect implementation of this | ||
chapter has had during the period covered by the report on: | ||
(A) economic activity in this state; and | ||
(B) state tax revenue. | ||
(c) The comptroller shall file the report with the governor, | ||
the lieutenant governor, and the speaker of the house of | ||
representatives not later than December 15 of each even-numbered | ||
year. | ||
SECTION 2. (a) As soon as practicable after the effective | ||
date of this Act, the comptroller of public accounts shall adopt | ||
rules necessary to implement the provisions of Chapter 221, Tax | ||
Code, as added by this Act. | ||
(b) The comptroller of public accounts shall provide an | ||
initial application date under Section 221.151(b), Tax Code, as | ||
added by this Act, of October 2, 2017. | ||
SECTION 3. Subchapter B, Chapter 221, Tax Code, as added by | ||
this Act, applies only to a report under Chapter 171, Tax Code, | ||
originally due on or after January 1, 2018. | ||
SECTION 4. Subchapter C, Chapter 221, Tax Code, as added by | ||
this Act, applies only to a tax report originally due on or after | ||
January 1, 2018. | ||
SECTION 5. This Act takes effect September 1, 2017. |