Bill Text: IN SB0521 | 2013 | Regular Session | Introduced
Bill Title: Indiana new markets job act.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2013-03-14 - Referred to Committee on Ways and Means pursuant to House Rule 127 [SB0521 Detail]
Download: Indiana-2013-SB0521-Introduced.html
Citations Affected: IC 6-3.1-34.
Synopsis: Indiana new markets job act. Provides for an Indiana new
markets tax credit similar to the federal new markets tax credit.
Requires a qualified community development entity to pay the state a
conditionally refundable fee of $500,000 and a nonrefundable
application fee of $5,000 for each qualified equity investment that the
qualified community development entity seeks to have approved by the
Indiana economic development corporation (IEDC). Provides that the
IEDC may not approve more than $20,000,000 of qualified equity
investments that are eligible for the Indiana new markets tax credit per
state fiscal year. Provides that the department of state revenue is
required to issue letter rulings requested by taxpayers, similar to private
letter rulings issued by the Internal Revenue Service at the federal
level, regarding the Indiana new markets tax credit.
Effective: January 1, 2013 (retroactive).
January 14, 2013, read first time and referred to Committee on Tax and Fiscal Policy.
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Chapter 34. Indiana New Markets Job Act
Sec. 1. This chapter applies only to taxable years beginning after December 31, 2012.
Sec. 2. The following definitions apply throughout this chapter:
(1) "Applicable percentage" means:
(A) zero percent (0%) for the first two (2) credit allowance dates;
(B) seven percent (7%) for the third credit allowance date; and
(C) eight percent (8%) for the next four (4) credit allowance dates.
(2) "Credit allowance date" means, with respect to any qualified equity investment:
(A) the date on which the investment is initially made; and
(B) each of the six (6) anniversary dates immediately following the date specified in clause (A).
(3) "IEDC" refers to the Indiana economic development corporation.
(4) "Long term debt security" means any debt instrument issued by a qualified community development entity, at par value or a premium, with an original maturity date at least seven (7) years after the date the debt instrument is issued, with no acceleration of repayment, amortization, or prepayment features before the original maturity date. The qualified community development entity that issues the debt instrument may not make cash interest payments on the debt instrument during the period beginning on the date of issuance and ending on the final credit allowance date in an amount that exceeds the cumulative operating income, as defined by regulations adopted under Section 45D of the Internal Revenue Code of the qualified community development entity for that period before giving effect to the expense of the cash interest payments. The foregoing does not limit the holder's ability to accelerate payments on the debt instrument if the issuer has defaulted on covenants designed to ensure compliance with this chapter or Section 45D of the Internal Revenue Code.
(5) "Low income community" means:
(A) "low income community" as defined in Section 45D of the Internal Revenue Code; or
(B) any Indiana county where the average annual unemployment rate when an initial qualified low income community investment is made in a qualified low income community business is higher than the Indiana statewide average unemployment rate.
(6) "Purchase price" means the amount paid to an issuer of a qualified equity investment for the qualified equity investment.
(7) "Qualified active low income community business" has the meaning set forth in Section 45D of the Internal Revenue Code, and 26 CFR 1.45D-1. A business is considered a qualified active low income community business for the duration of the qualified community development entity's investment in, or loan to, the business if the qualified community development entity reasonably expects, at the time the qualified community development entity 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. The term excludes any business that
derives or projects to derive fifteen percent (15%) or more of
the business's annual revenue from the rental or sale of real
estate. This exclusion does not apply to a business that is
controlled by, or under common control with, another
business, if the second business:
(A) does not derive, or project to derive, fifteen percent
(15%) or more of its annual revenue from the rental or
sale of real estate and is the primary tenant of the real
estate leased from the first business; or
(B) is primarily engaged in the business of primary,
secondary, or higher education.
(8) "Qualified community development entity" has the
meaning set forth in Section 45D of the Internal Revenue
Code, for any period during which an allocation agreement is
in effect between the entity and the Community Development
Financial Institutions Fund of the U.S. Treasury Department
with respect to credits authorized by Section 45D of the
Internal Revenue Code that includes the state of Indiana
within the service area described in the allocation agreement.
The term includes a subsidiary community development
entity of a qualified community development entity.
(9) "Qualified equity investment" means any equity
investment in, or long term debt security issued by, a qualified
community development entity:
(A) that is made or acquired after December 31, 2012, at
its original issuance solely in exchange for cash;
(B) of which at least eighty-five percent (85%) of the cash
purchase price is used by the issuing qualified community
development entity before the first anniversary of the
initial credit allowance date to make qualified low income
community investments in qualified active low income
community businesses located in Indiana;
(C) that is designated by the issuing qualified community
development entity as a qualified equity investment; and
(D) that is certified by the IEDC under section 7 of this
chapter.
The term includes any qualified equity investment that does
not meet the condition specified in clause (A) if the investment
was a qualified equity investment in the hands of a previous
holder.
(10) "Qualified low income community investment" means
any capital or equity investment in, or loan to, any qualified
active low income community business.
(11) "State tax liability" means a person's total tax liability
that is incurred under:
(A) IC 6-3-1 through IC 6-3-7 (the adjusted gross income
tax);
(B) IC 6-5.5 (the financial institutions tax); and
(C) IC 27-1-18-2 (the insurance premiums tax);
as computed after the application of the credits that under
IC 6-3.1-1-2 are to be applied before the credit provided by
this chapter.
(12) "Taxpayer" means an individual, a corporation, a
partnership, or another person or entity that has state tax
liability.
Sec. 3. Any entity that makes a qualified equity investment earns
a vested right to a credit against the entity's state tax liability that
may be utilized as follows:
(1) For each taxable year that includes a credit allowance date
of the qualified equity investment, the entity, or subsequent
holder of the qualified equity investment, is entitled to claim
part of the credit against the entity's or the subsequent
holder's state tax liability for the taxable year.
(2) Each taxable year, subject to subdivision (3), the credit
amount equals:
(A) the applicable percentage associated with the credit
allowance date that occurs during the taxable year;
multiplied by
(B) the purchase price paid to the issuer of the qualified
equity investment.
(3) The amount of the tax credit claimed may not exceed the
amount of the taxpayer's state tax liability for the taxable
year for which the tax credit is claimed.
Sec. 4. (a) If:
(1) a pass through entity does not have state tax liability
against which the tax credit provided by this chapter may be
applied; and
(2) the pass through entity would be eligible for the tax credit
if the pass through entity were a taxpayer;
a shareholder, partner, or member of the pass through entity is
entitled to a tax credit under this chapter.
(b) Tax credits earned by a pass through entity may be allocated
to the partners, members, or shareholders of the pass through
entity for their direct use in accordance with the provisions of any
agreement among the partners, members, or shareholders.
Sec. 5. (a) If the amount of a tax credit for a taxpayer in a
taxable year exceeds the taxpayer's state tax liability for that
taxable year, the taxpayer may carry the excess over to a
subsequent taxable year. The amount of the tax credit carryover
from a taxable year is reduced each taxable year thereafter to the
extent that the carryover is used by the taxpayer to obtain a tax
credit under this chapter for any subsequent taxable year.
(b) A taxpayer is not entitled to a carryback or refund of an
unused tax credit.
Sec. 6. The tax credit provided by this chapter is not saleable on
the open market.
Sec. 7. (a) After July 31, 2013, a qualified community
development entity may apply to have an equity investment or a
long term debt security designated as a qualified equity investment
that meets the requirements for the tax credit provided by this
chapter. An application submitted under this subsection must
include the following:
(1) Evidence of the applicant's certification as a qualified
community development entity, including evidence that the
applicant's service area includes the state of Indiana.
(2) A copy of an allocation agreement executed by the
applicant, or its controlling entity, and the Community
Development Financial Institutions Fund.
(3) A certificate executed by an executive officer of the
applicant attesting that the allocation agreement remains in
effect and has not been revoked or canceled by the
Community Development Financial Institutions Fund.
(4) A description of the proposed amount, structure, and
purchaser of the qualified equity investment.
(5) Identifying information for any entity that will earn tax
credits as a result of the issuance of the qualified equity
investment.
(6) Examples of the types of qualified active low income
businesses in which the applicant, its controlling entity, or
affiliates of its controlling entity have invested under the
federal new markets tax credit program. An applicant is not
required when submitting an application to identify a
qualified active low income community business in which the
applicant will invest.
(7) A nonrefundable application fee of five thousand dollars
($5,000). This fee shall be paid to the IEDC and shall be
required of each application submitted.
(8) The refundable performance fee of five hundred thousand
dollars ($500,000) required by section 11(a) of this chapter.
(b) After July 31, 2013, the IEDC shall begin accepting
applications submitted to the IEDC under subsection (a). Within
thirty (30) days after receipt of an application submitted under
subsection (a), including the payment of the application fee and the
refundable performance fee, the IEDC shall grant or deny the
application in full or in part. If the IEDC denies any part of the
application, the IEDC shall inform the qualified community
development entity of the grounds for the denial. If the qualified
community development entity provides any additional
information required by the IEDC or otherwise completes the
application within fifteen (15) days of the notice of denial, the
application is considered completed as of the original date of
submission. If the qualified community development entity fails to
provide the information or complete the application within the
fifteen (15) day period, the application remains denied and must be
resubmitted in full with a new submission date.
(c) Subject to subsection (d), if the application is complete, the
IEDC shall certify the proposed equity investment or long term
debt security as a qualified equity investment that is eligible for tax
credits under this chapter. The IEDC shall provide written notice
of the certification to the qualified community development entity
and to the department. The notice must include the names of those
entities who earned the credits and their respective credit amounts.
If the names of the entities that are eligible to utilize the credits
change due to a transfer of a qualified equity investment, the
qualified community development entity shall notify the IEDC of
the change. The IEDC shall then notify the department.
(d) The IEDC shall certify qualified equity investments in the
order applications are received by the IEDC. Applications received
on the same day are considered to have been received
simultaneously. If the sum of the amounts of the proposed qualified
equity investments submitted in applications received on the same
day would cause the limitation specified in subsection (e) to be
exceeded, the IEDC shall ask each applicant that submitted an
application that day whether the applicant is willing to accept a
partial certification of the applicant's proposed qualified equity
investment or would instead prefer to withdraw its application. If
the sum of the proposed qualified equity investments of the
applicants that have not withdrawn their applications would not
cause the limit specified in subsection (e) to be exceeded, the IEDC
shall certify each proposed qualified equity investment of the
applicants that have not withdrawn their applications in full. If the
sum of the proposed qualified equity investments of the applicants
that have not withdrawn their applications would cause the limit
specified in subsection (e) to be exceeded, the IEDC shall certify a
fractional amount of each proposed qualified equity investment
described in applications that were received that day and not
withdrawn equal to:
(1) the remaining amount of the limitation specified in
subsection (e) at the conclusion of the previous day; multiplied
by
(2) the ratio of the amount of the proposed qualified equity
investment requested in an application to the total amount of
proposed qualified equity investments requested in all
applications received that day.
(e) The IEDC may not certify more than twenty million dollars
($20,000,000) of qualified equity investments under this chapter
during any state fiscal year.
(f) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity
of the controlling entity, provided that the applicant provides the
information required in the application with respect to the
transferee and the applicant notifies the IEDC of the transfer
within thirty (30) days of the transfer.
(g) Within thirty (30) days of the applicant receiving notice of
certification, the qualified community development entity or any
transferee under subsection (f) shall issue the qualified equity
investment and receive cash in the amount of the certified amount.
The qualified community development entity or transferee under
subsection (f) must provide the IEDC with evidence of the receipt
of the cash investment within ten (10) business days after receipt.
If the qualified community development entity or any transferee
under subsection (f) does not receive the cash investment and issue
the qualified equity investment within thirty (30) days following
receipt of the certification notice, the certification lapses and the
entity may not issue the qualified equity investment without
reapplying to the IEDC for certification. A lapsed certification
reverts back to the IEDC and may be reissued, first, if applicable,
to applicants that received a reduced certification of a qualified
equity investment under subsection (d), and, thereafter, if any part
of the lapsed certification remains, to applicants in accordance
with subsection (c).
(h) The IEDC shall transfer the nonrefundable application fees
collected by the IEDC under subsection (a)(7) to the treasurer of
state. The treasurer of state shall deposit the nonrefundable
application fees received from the IEDC under this section in the
state general fund.
Sec. 8. The department shall recapture part of the credit
provided by this chapter from an entity that claims the credit on a
return, to the extent any of the following apply:
(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 of the
Internal Revenue Code. If this subdivision applies, the
recapture amount is proportionate to the federal recapture
amount with respect to the qualified equity investment.
(2) The issuer redeems or makes principal repayment with
respect to a qualified equity investment prior to the seventh
anniversary on which the qualified equity investment is made.
If this subdivision applies, the recapture amount is
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 eighty-five
percent (85%) of the purchase price of the qualified equity
investment in qualified low income community investments in
Indiana within twelve (12) months of the issuance of the
qualified equity investment and maintain at least eighty-five
percent (85%) of the level of investment in qualified low
income community investments in Indiana until the last credit
allowance date for the qualified equity investment. For
purposes of this subdivision, an 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 within twelve (12) months of
the receipt of the capital. An issuer is not required to reinvest
capital returned from qualified low income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, the proceeds of which were used
to make the qualified low income community investment, and
the qualified low income community investment is considered
held by the issuer through the seventh anniversary of the
qualified equity investment's issuance.
(4) At any time before the final credit allowance date of a
qualified equity investment, the issuer uses the cash proceeds
of the qualified equity investment to make qualified low
income community investments in any one (1) qualified active
low income community business, including affiliated qualified
active low income community businesses, in excess of ten
million dollars ($10,000,000) of cash proceeds of the qualified
equity investment, exclusive of reinvestments of capital
returned or repaid with respect to earlier investments in the
qualified active low income community business and its
affiliates.
Sec. 9. A recapture provision described in section 8 of this
chapter is subject to a six (6) month cure period. The department
may not take action to recapture part of the credit provided by this
chapter in a circumstance described in section 8 of this chapter
until the qualified community development entity is given notice of
noncompliance and afforded six (6) months from the date of the
notice to cure the noncompliance.
Sec. 10. (a) As used in this section, "fund" refers to the new
markets performance guarantee fund established in subsection (b).
(b) The new markets performance guarantee fund is established
within the state treasury.
(c) The fund consists of fees paid under this chapter by qualified
community development entities to the state under section 11 of
this chapter.
(d) The treasurer of state shall administer the fund.
(e) Money in the fund at the end of a state fiscal year does not
revert to the state general fund.
(f) The treasurer of state shall hold a fee deposited in the fund
until a determination is made whether a qualified community
development entity that paid the fee has complied with the
requirements of section 11(b) of this chapter. If the treasurer of
state receives notice from the department under section 11(d) of
this chapter that a qualified community development entity is no
longer eligible for a refund of the fee, the treasurer of state shall
transfer the qualified community development entity's fee from the
fund to the state general fund.
Sec. 11. (a) A qualified community development entity seeking
to have an equity investment or long term debt security designated
as a qualified equity investment that is eligible for tax credits under
this chapter must pay a fee in the amount of five hundred thousand
dollars ($500,000) to the IEDC. The IEDC shall transfer a fee
payable under this subsection to the treasurer of state for deposit
in the new markets performance guarantee fund.
(b) A qualified community development entity that has had an
equity investment or long term debt security designated as a
qualified equity investment eligible for tax credits under this
chapter must meet the following requirements:
(1) The qualified community development entity and its
subsidiary qualified community development entities must:
(A) issue the total amount of qualified equity investments
certified by the IEDC under this chapter; and
(B) receive cash in the total amount certified under section
7(c) of this chapter.
(2) The qualified community development entity or any
subsidiary qualified community development entity that issues
a qualified equity investment certified under this chapter
must meet the investment requirement under section 8(3) of
this chapter before the second credit allowance date of the
qualified equity investment.
(c) If the department determines that a qualified community
development entity has met the conditions specified in subsection
(b), the department shall notify the qualified community
development entity and the auditor of state that the qualified
community development entity is entitled to a refund of the fee
paid under subsection (a). The auditor of state shall then issue a
warrant to the qualified community development entity for the
amount of the fee paid by the qualified community development
entity under subsection (a).
(d) If the department determines that a qualified community
development entity has failed to meet the conditions specified in
subsection (b), the department shall notify the qualified community
development entity. The qualified community development entity
then has six (6) months from the date the notice is issued to cure
the qualified community development entity's noncompliance with
the conditions specified in subsection (b). If at the end of the six (6)
month cure period, the department determines that the qualified
community development entity has met the conditions specified in
subsection (b), the department shall proceed as directed in
subsection (c). If at the end of the six (6) month cure period, the
department determines that the qualified community development
entity has failed to meet the conditions specified in subsection (b),
the department shall notify the qualified community development
entity, the treasurer of state, and the auditor of state that the
qualified community development entity is no longer eligible for a
refund of the fee.
Sec. 12. (a) As used in this section, "letter ruling" means a
written interpretation of law as applied to a specific set of facts
submitted by an entity requesting the interpretation.
(b) The IEDC shall issue letter rulings regarding the credit
provided by this chapter, subject to the terms and conditions set
forth in this section.
(c) The IEDC shall respond to a request for a letter ruling
within sixty (60) days after receiving the request. The applicant
may provide a draft letter ruling for the IEDC's consideration. The
applicant may withdraw the request for a letter ruling, in writing,
prior to the issuance of the letter ruling. The IEDC may refuse to
issue a letter ruling for good cause, but must state the specific
reasons for refusing to issue the letter ruling. Good cause includes
the following:
(1) The applicant is requesting that the IEDC determine
whether a statute is constitutional or a regulation is lawful.
(2) The request involves a hypothetical situation or alternative
plans.
(3) The facts or issues presented in the request are unclear,
overbroad, insufficient, or otherwise inappropriate as a basis
upon which to issue a letter ruling.
(4) The issue is currently being considered in a rulemaking
procedure, contested case, or other agency or judicial
proceeding that may definitely resolve the issue.
(d) Letter rulings bind the IEDC, its agents and their successors,
and the department until after the entity or its shareholders,
members, or partners, as applicable, claim all of the credits on an
Indiana tax return, subject to the terms and conditions set forth in
properly published regulations. A letter ruling applies only to the
applicant for the letter ruling.
(e) In rendering letter rulings and making other determinations
under this chapter, to the extent applicable, the IEDC shall look for
guidance to Section 45D of the Internal Revenue Code and the
regulations issued under Section 45D of the Internal Revenue
Code.
Sec. 13. An entity claiming a credit under this chapter is not
required to pay any additional tax as a result of claiming the credit,
including the tax levied under IC 27-1-20-12.
