Bill Text: MN SF2492 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Minnesota New Markets Jobs Act
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2014-03-10 - Referred to Jobs, Agriculture and Rural Development [SF2492 Detail]
Download: Minnesota-2013-SF2492-Introduced.html
1.2relating to economic development; adopting the Minnesota New Markets
1.3Jobs Act; providing capital for business growth in economically distressed
1.4communities; imposing penalties;proposing coding for new law as Minnesota
1.5Statutes, chapter 116X.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. [116X.01] TITLE.
1.8This chapter shall be known as and may be cited as the "Minnesota New Markets
1.9Jobs Act."
1.10 Sec. 2. [116X.02] DEFINITIONS.
1.11 Subdivision 1. Scope. For the purposes of this chapter, the following terms defined
1.12in this section have the meanings given.
1.13 Subd. 2. Applicable percentage. "Applicable percentage" means zero percent
1.14for the first two credit allowance dates, eight percent for the third through sixth credit
1.15allowance dates, and seven percent for the seventh credit allowance date.
1.16 Subd. 3. Department. "Department" means the Department of Employment and
1.17Economic Development.
1.18 Subd. 4. Code. "Code" or "the Code" means the Internal Revenue Code of 1986 as
1.19amended through the date in section 290.01, subdivision 19.
1.20 Subd. 5. Credit allowance date. "Credit allowance date" means with respect to
1.21any qualified equity investment:
1.22(1) the date on which the investment is initially made; and
1.23(2) each of the six anniversary dates of that date thereafter.
2.1 Subd. 6. Long-term debt security. "Long-term debt security" means any debt
2.2instrument issued by a qualified community development entity at par value with an
2.3original maturity date of at least seven years from the date of its issuance, with no
2.4acceleration of repayment, amortization, or prepayment features prior to its original
2.5maturity date. The qualified community development entity that issues the debt instrument
2.6must not make cash interest payments on the debt instrument during the period beginning
2.7on the date of issuance and ending on the final credit allowance date in an amount that
2.8exceeds the cumulative operating income, as defined by regulations adopted under section
2.945D of the Code of the qualified community development entity for that period prior to
2.10giving effect to the expense of the cash interest payments. This subdivision shall not limit
2.11the holder's ability to accelerate payments on the debt instrument in situations where the
2.12issuer has defaulted on covenants designed to ensure compliance with this section or
2.13section 45D of the Code.
2.14 Subd. 7. Purchase price. "Purchase price" means the amount paid to the issuer of a
2.15qualified equity investment for such qualified equity investment.
2.16 Subd. 8. Qualified active low-income community business. "Qualified active
2.17low-income community business" has the meaning given in section 45D of the Code
2.18and Code of Federal Regulations, title 26, section 1.45D-1. A business is considered
2.19a qualified active low-income community business for the duration of the qualified
2.20community development entity's investment in, or loan to, the business if the entity
2.21reasonably expects, at the time it makes the investment or loan, that the business will
2.22continue to satisfy the requirements for being a qualified active low-income community
2.23business, throughout the entire period of the investment or loan. The term qualified active
2.24low-income community business excludes any business that derives or projects to derive
2.2515 percent or more of its annual revenue from the rental or sale of real estate. This
2.26exclusion does not apply to a business that is controlled by, or under common control with,
2.27another business if the second business:
2.28(1) does not derive or project to derive 15 percent or more of its annual revenue
2.29from the rental or sale of real estate; and
2.30(2) is the primary tenant of the real estate leased from the first business.
2.31 Subd. 9. Qualified community development entity. (a)(1) "Qualified community
2.32development entity" has the meaning given in section 45D of the Code; provided that the
2.33entity has entered into, for the current year or any prior year, an allocation agreement with
2.34the Community Development Financial Institutions Fund of the United States Department
2.35of the Treasury with respect to credits authorized by section 45D of the Code, which
2.36includes Minnesota within the service area set forth in the allocation agreement. The
3.1term includes subsidiary community development entities or affiliates of any qualified
3.2community development entity, all of which shall be treated as a single applicant for
3.3purposes of section 116X.05.
3.4(2) The term qualified community development entity shall not include any regulated
3.5financial institution that is subject to the provisions of the Community Reinvestment Act
3.6of 1977, United States Code, title 12, chapter 30, or any subsidiary or affiliate thereof.
3.7(3) Clause (2) shall not apply to a regulated financial institution, or subsidiary or
3.8affiliate thereof, if the regulated financial institution is chartered by, or headquartered
3.9in, the state of Minnesota and the regulated financial institution otherwise meets the
3.10requirements of clause (1).
3.11 Subd. 10. Qualified equity investment. (a) "Qualified equity investment" means
3.12any equity investment in, or long-term debt security issued by, a qualified community
3.13development entity that:
3.14(1) is acquired after January 1, 2014, at its original issuance solely in exchange
3.15for cash;
3.16(2) has at least 100 percent of its cash purchase price used by the issuer to make
3.17qualified low-income community investments in qualified active low-income community
3.18businesses located in this state by the first anniversary of the initial credit allowance
3.19date; and
3.20(3) is designated by the issuer as a qualified equity investment under this subdivision
3.21and is certified by the department as not exceeding the limitation contained in section
3.22116X.05, subdivision 4.
3.23 (b) Notwithstanding the restrictions on transferability contained in section 116X.04,
3.24this term shall include any qualified equity investment that does not meet the provisions of
3.25paragraph (a) if the investment:
3.26 (1) is transferred to a subsequent holder; and
3.27 (2) was a qualified equity investment in the hands of any prior holder.
3.28 (c) This term shall not include either (1) any qualified equity investment that entitles
3.29the holder to claim tax credits under section 45D of the Code, or (2) any qualified equity
3.30investment, the proceeds of which are used to make debt or equity investments in, directly
3.31or indirectly, any other qualified community development entity.
3.32 Subd. 11. Qualified low-income community investment. "Qualified low-income
3.33community investment" means any capital or equity investment in, or loan to, any
3.34qualified active low-income community business. With respect to any one qualified
3.35active low-income community business, the maximum amount of qualified low-income
3.36community investments that may be made in the business, on a collective basis with all of
4.1its affiliates, with the proceeds of qualified equity investments that have been certified
4.2under section 116X.05 shall be $10,000,000 whether made by one or several qualified
4.3community development entities.
4.4 Subd. 12. State premium tax liability. "State premium tax liability" means any
4.5liability incurred by any entity under Chapter 297I.
4.6 Subd. 13. Refundable performance fee. "Refundable performance fee" means a
4.7fee that a qualified community development entity seeking to have an equity investment or
4.8long-term debt security designated as a qualified equity investment and eligible for tax
4.9credits under section 116X.05 shall pay to the department as assurance of compliance with
4.10certain requirements of this chapter. The amount of the fee shall be equal to one-half of one
4.11percent of the amount of the equity investment or long-term debt security requested to be
4.12designated as a qualified equity investment, up to a maximum performance fee of $500,000.
4.13 Subd. 14. Affiliate. For the purposes of subdivision 9, the term "affiliate" shall
4.14include any entity, without regard to whether such entity otherwise constitutes a qualified
4.15community development entity under subdivision 9, paragraph (a), that is the initial
4.16holder, either directly or through one or more special purpose entities, of a qualified
4.17equity investment in the qualified community development entity and any entity, without
4.18regard to whether such entity otherwise constitutes a qualified community development
4.19entity under subdivision 9, paragraph (a), that provides insurance or any other form of
4.20guaranty to the ultimate recipient of tax credits under section 116X.03 with respect to
4.21a recapture or forfeiture of such tax credits under section 116X.06, either directly or
4.22through the guaranty of any other economic benefit that is paid in lieu of the tax credits
4.23allowable under section 116X.03. The determination of whether an entity is an affiliate
4.24shall be made by taking into account all relevant facts and circumstances, including the
4.25description of the proposed amount, structure, and initial purchaser of the qualified equity
4.26investment required by section 116X.05, subdivision 1, paragraph (a), clause (4), and the
4.27determination shall assume that the information provided pursuant to section 116X.05,
4.28subdivision 1, paragraph (a), clause (4), is true and complete as of the date an application
4.29is submitted pursuant to section 116X.05.
4.30 Sec. 3. [116X.03] CREDIT ESTABLISHED.
4.31(a) Any entity that makes a qualified equity investment earns a vested right to credit
4.32against the entity's state premium tax liability on a premium tax report filed under this
4.33section that may be utilized as described in paragraphs (b) to (e).
5.1(b) On each credit allowance date of the qualified equity investment, the entity, or
5.2subsequent holder of the qualified equity investment, shall be entitled to utilize a portion
5.3of the credit during the taxable year, including the credit allowance date.
5.4(c) The credit amount shall be equal to the applicable percentage for the credit
5.5allowance date multiplied by the purchase price paid to the issuer of the qualified equity
5.6investment.
5.7(d) The amount of the credit claimed by an entity shall not exceed the amount of the
5.8entity's state premium tax liability for the tax year for which the credit is claimed. Any
5.9amount of tax credit that the entity is prohibited from claiming in a taxable year as a result
5.10of this chapter may be carried forward for use in any subsequent taxable year.
5.11(e) An entity claiming a credit under this chapter is not required to pay any additional
5.12retaliatory tax levied under section 297I.05 as a result of claiming that credit. In addition,
5.13it is the intent of this act that an entity claiming a credit under this chapter is not required
5.14to pay any additional tax that may arise as a result of claiming that credit.
5.15 Sec. 4. [116X.04] TRANSFERABILITY.
5.16No tax credit claimed under this chapter shall be refundable or saleable on the open
5.17market. However, a participating investor may transfer credits to an affiliated insurance
5.18company, provided that it gives prior written notice to the department. Tax credits earned
5.19by a partnership, limited liability company, S-corporation, or other "pass-through" entity
5.20may be allocated to the partners, members, or shareholders of the entity for their direct
5.21use in accordance with the provisions of any agreement among those partners, members,
5.22or shareholders. Any allocation of tax credits made to a partner, member, or shareholder
5.23in accordance with this section shall not be considered a sale of such tax credits for
5.24purposes of this chapter.
5.25 Sec. 5. [116X.05] CERTIFICATION OF QUALIFIED EQUITY INVESTMENTS.
5.26 Subdivision 1. Application. (a) A qualified community development entity that
5.27seeks to have an equity investment or long-term debt security designated as a qualified
5.28equity investment and eligible for tax credits under this chapter shall apply to the
5.29department. The department shall begin accepting applications on January 1, 2015. The
5.30qualified community development entity shall include the following in its application:
5.31(1) evidence of the applicant's certification as a qualified community development
5.32entity, including evidence of the service area of the entity that includes Minnesota;
6.1(2) a copy of the allocation agreement executed by the applicant, or its controlling
6.2entity, and the Community Development Financial Institutions Fund under section
6.3116X.02, subdivision 9;
6.4(3) a certificate executed by an executive officer of the applicant attesting that the
6.5allocation agreement remains in effect and has not been revoked or canceled by the
6.6Community Development Financial Institutions Fund;
6.7(4) a description of the proposed amount, structure, and initial purchaser of the
6.8qualified equity investment;
6.9(5) the minimum amount of the qualified equity investment the qualified community
6.10development entity is willing to accept in the event the amount proposed to be certified
6.11under clause (4) is less than the applicant's proposed amount of qualified equity investment;
6.12(6) a plan describing the proposed investment of the proceeds of the qualified equity
6.13investment, including the types of qualified active low-income community businesses in
6.14which the applicant expects to invest. Applicants are not required to identify qualified
6.15active low-income community businesses in which they will invest when submitting
6.16an application;
6.17(7) a nonrefundable application fee of $5,000. This fee shall be paid to the
6.18department and shall be required of each application submitted; and
6.19(8) the refundable performance fee required by section 116X.08.
6.20 Subd. 2. Consideration of application. Within 30 days after receipt of a completed
6.21application containing the information in subdivision 1, including the payment of the
6.22application fee and the refundable performance fee, the department shall grant or deny the
6.23application in full or in part. If the department denies any part of the application, it shall
6.24inform the qualified community development entity of the grounds for the denial. If the
6.25qualified community development entity provides any additional information required
6.26by the department or otherwise completes its application within 15 days of the notice of
6.27denial, the application shall be considered completed as of the original date of submission.
6.28If the qualified community development entity fails to provide the information or complete
6.29its application within the 15-day period, the application remains denied and must be
6.30resubmitted in full with a new submission date.
6.31 Subd. 3. Certification. If the application required under this section is complete, the
6.32department shall certify the proposed equity investment or long-term debt security as a
6.33qualified equity investment that is eligible for tax credits under this chapter, subject to the
6.34limitations contained in subdivision 5. The department shall provide written notice of the
6.35certification to the qualified community development entity. The notice shall include the
6.36name of the initial purchaser of the qualified equity investment and the credit amount.
7.1Before any tax credits are claimed under this chapter, the qualified community development
7.2entity shall provide written notice to the department of the names of the entities eligible to
7.3claim such credits as a result of holding a qualified equity investment. If the names of the
7.4entities that are eligible to utilize the credits change due to a transfer of a qualified equity
7.5investment or an allocation or affiliate transfer pursuant to section 116X.04, the qualified
7.6community development entity shall notify the department of the change.
7.7 Subd. 4. Amount certified. The department shall certify $250,000,000 in qualified
7.8equity investments. The department shall certify qualified equity investments in the order
7.9applications are received by the department. Applications received on the same day shall
7.10be deemed to have been received simultaneously. For applications that are complete and
7.11received on the same day, the department shall certify, consistent with remaining qualified
7.12equity investment capacity, the qualified equity investments in proportionate percentages
7.13based upon the ratio of the amount of qualified equity investment requested in an
7.14application to the total amount of qualified equity investments requested in all applications
7.15received on the same day. If any amount of qualified equity investment that would be
7.16certified under this section is less than the acceptable minimum amount specified in the
7.17application as required by subdivision 1, clause (5), the application is deemed withdrawn
7.18and the amount of qualified equity investment shall be proportionately allocated among
7.19the other applicants pursuant to this subdivision.
7.20 Subd. 5. Transfer of authority. An approved applicant may transfer all or a
7.21portion of its certified qualified equity investment authority to its controlling entity or any
7.22subsidiary qualified community development entity of the controlling entity, provided
7.23that the applicant provides the information required in the application with respect to
7.24such transferee and the applicant notifies the department of the transfer within 30 days
7.25of the transfer.
7.26 Subd. 6. Cash investment. Within 60 days of the applicant receiving notice
7.27of certification, the qualified community development entity or any transferee under
7.28subdivision 5 shall issue the qualified equity investment and receive cash in the amount of
7.29the certified amount. The qualified community development entity or transferee under
7.30subdivision 5 must provide the department with evidence of the receipt of the cash
7.31investment within ten business days after receipt. If the qualified community development
7.32entity or any transferee under subdivision 5 does not receive the cash investment and issue
7.33the qualified equity investment within 60 days following receipt of the certification notice,
7.34the certification shall lapse and the entity may not issue the qualified equity investment
7.35without reapplying to the department for certification. Lapsed certifications revert back to
7.36the department and shall be reissued, first, pro rata to other applicants whose qualified
8.1equity investment allocations were reduced under subdivision 4 and, thereafter, in
8.2accordance with the application process.
8.3 Sec. 6. [116X.06] DISALLOWANCE OF TAX CREDITS AND PENALTIES.
8.4(a) The department shall disallow the utilization of any tax credits earned as a result
8.5of holding a qualified equity investment, but not yet claimed, if:
8.6(1) the issuer redeems or makes principal repayment with respect to a qualified
8.7equity investment prior to the seventh anniversary of the issuance of the qualified equity
8.8investment. In this case, the department's disallowance of unclaimed tax credits shall be
8.9proportionate to the amount of the redemption or repayment with respect to such qualified
8.10equity investment;
8.11(2) the issuer fails to invest an amount equal to 100 percent of the purchase price
8.12of the qualified equity investment in qualified low-income community investments in
8.13Minnesota within 12 months of the issuance of the qualified equity investment and
8.14maintain at least 100 percent of such level of investment in qualified low-income
8.15community investments in Minnesota until the last credit allowance date for the qualified
8.16equity investment. For purposes of this section, an investment shall be considered held
8.17by an issuer even if the investment has been sold or repaid if the issuer reinvests an
8.18amount equal to the capital returned to or recovered by the issuer from the original
8.19investment, exclusive of any profits realized, in another qualified low-income community
8.20investment within 12 months of the receipt of such capital. An issuer shall not be required
8.21to reinvest capital returned from qualified low-income community investments after the
8.22sixth anniversary of the issuance of the qualified equity investment, the proceeds of which
8.23were used to make the qualified low-income community investment, and the qualified
8.24low-income community investment shall be considered held by the issuer through the
8.25seventh anniversary of the qualified equity investment's issuance; or
8.26(3) there is any violation of section 116X.10.
8.27(b) Notwithstanding any contrary provision, any tax credits already claimed under
8.28this chapter shall not be subject to recapture upon the occurrence of an event set forth in
8.29paragraph (a), clause (1) or (2).
8.30(c) If the department disallows the utilization of tax credits under this section, it may
8.31also, at its discretion, impose penalties on the qualified community development entity
8.32that issued the qualified equity investment for which tax credits are disallowed, not to
8.33exceed the amount of the refundable performance fee required under section 116X.08
8.34and without regard to whether such fee has been refunded to the qualified community
8.35development entity.
9.1 Sec. 7. [116X.07] NOTICE OF NONCOMPLIANCE.
9.2Enforcement of each of the disallowance and penalty provisions shall be subject
9.3to a six-month cure period. No disallowance or penalty shall occur until the qualified
9.4community development entity shall have been given notice of noncompliance and
9.5afforded six months from the date of the notice to cure the noncompliance.
9.6 Sec. 8. [116X.08] REFUNDABLE PERFORMANCE FEE.
9.7 Subdivision 1. Performance guarantee amount. A qualified community
9.8development entity that seeks to have an equity investment or long-term debt security
9.9designated as a qualified equity investment and eligible for tax credits under this section
9.10shall pay a refundable performance fee to the department for deposit in the new markets
9.11performance guarantee account, which is hereby established. The entity shall forfeit:
9.12(1) the performance fee in its entirety if the qualified community development entity
9.13and its subsidiary qualified community development entities fail to issue the total amount
9.14of qualified equity investments certified by the department and receive cash in the total
9.15amount certified under section 116X.05, subdivision 3; or
9.16(2) the amount of the performance fee equal to the product of the original amount of
9.17the refundable performance fee multiplied by the percentage of the remaining amount of
9.18the proceeds of the qualified equity investment not used to make qualified low-income
9.19equity investments if the qualified community development entity or any subsidiary
9.20qualified community development entity that issues a qualified equity investment certified
9.21under this section fails to meet the investment requirement under section 116X.06 by the
9.22second credit allowance date of such qualified equity investment. Forfeiture of the fee
9.23or any portion thereof under this paragraph shall be subject to the six-month cure period
9.24established under section 116X.07.
9.25 Subd. 2. Request for refund. The fee required under subdivision 1 shall be paid
9.26to the department and held in the new markets performance guarantee account until
9.27compliance with subdivision 1 shall have been established. The qualified community
9.28development entity may request a refund of the fee from the department no sooner than 30
9.29days after having met all the requirements of subdivision 1. The department shall have 30
9.30days to comply with the request or give notice of noncompliance.
9.31 Sec. 9. [116X.09] PREAPPROVAL OF INVESTMENTS.
9.32Before making a proposed qualified low-income community investment, a qualified
9.33community development entity may request from the department a written determination
9.34that the proposed investment will qualify as a qualified low-income community investment
10.1and will satisfy all applicable provisions of this chapter. The department must notify a
10.2qualified community development entity within ten business days from the receipt of a
10.3request of its determination and an explanation thereof. Any determination made by the
10.4department pursuant to this section shall be binding on the department.
10.5 Sec. 10. [116X.10] USE OF PROCEEDS PROHIBITED.
10.6A qualified active low-income community business that receives a qualified
10.7low-income community investment under this chapter, or any affiliates of a qualified
10.8active low-income community business, may not directly or indirectly use the proceeds
10.9of such qualified active low-income community investment to lend to or invest in a
10.10qualified community development entity or member or affiliate of a qualified community
10.11development entity where the proceeds of the loan or investment are directly or indirectly
10.12used to fund or refinance the purchase of a qualified equity investment hereunder.
10.13 Sec. 11. EFFECTIVE DATE.
10.14Sections 1 to 10 are effective the day following final enactment, and apply to
10.15premium tax returns originally due on or after that date.
1.3Jobs Act; providing capital for business growth in economically distressed
1.4communities; imposing penalties;proposing coding for new law as Minnesota
1.5Statutes, chapter 116X.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. [116X.01] TITLE.
1.8This chapter shall be known as and may be cited as the "Minnesota New Markets
1.9Jobs Act."
1.10 Sec. 2. [116X.02] DEFINITIONS.
1.11 Subdivision 1. Scope. For the purposes of this chapter, the following terms defined
1.12in this section have the meanings given.
1.13 Subd. 2. Applicable percentage. "Applicable percentage" means zero percent
1.14for the first two credit allowance dates, eight percent for the third through sixth credit
1.15allowance dates, and seven percent for the seventh credit allowance date.
1.16 Subd. 3. Department. "Department" means the Department of Employment and
1.17Economic Development.
1.18 Subd. 4. Code. "Code" or "the Code" means the Internal Revenue Code of 1986 as
1.19amended through the date in section 290.01, subdivision 19.
1.20 Subd. 5. Credit allowance date. "Credit allowance date" means with respect to
1.21any qualified equity investment:
1.22(1) the date on which the investment is initially made; and
1.23(2) each of the six anniversary dates of that date thereafter.
2.1 Subd. 6. Long-term debt security. "Long-term debt security" means any debt
2.2instrument issued by a qualified community development entity at par value with an
2.3original maturity date of at least seven years from the date of its issuance, with no
2.4acceleration of repayment, amortization, or prepayment features prior to its original
2.5maturity date. The qualified community development entity that issues the debt instrument
2.6must not make cash interest payments on the debt instrument during the period beginning
2.7on the date of issuance and ending on the final credit allowance date in an amount that
2.8exceeds the cumulative operating income, as defined by regulations adopted under section
2.945D of the Code of the qualified community development entity for that period prior to
2.10giving effect to the expense of the cash interest payments. This subdivision shall not limit
2.11the holder's ability to accelerate payments on the debt instrument in situations where the
2.12issuer has defaulted on covenants designed to ensure compliance with this section or
2.13section 45D of the Code.
2.14 Subd. 7. Purchase price. "Purchase price" means the amount paid to the issuer of a
2.15qualified equity investment for such qualified equity investment.
2.16 Subd. 8. Qualified active low-income community business. "Qualified active
2.17low-income community business" has the meaning given in section 45D of the Code
2.18and Code of Federal Regulations, title 26, section 1.45D-1. A business is considered
2.19a qualified active low-income community business for the duration of the qualified
2.20community development entity's investment in, or loan to, the business if the entity
2.21reasonably expects, at the time it makes the investment or loan, that the business will
2.22continue to satisfy the requirements for being a qualified active low-income community
2.23business, throughout the entire period of the investment or loan. The term qualified active
2.24low-income community business excludes any business that derives or projects to derive
2.2515 percent or more of its annual revenue from the rental or sale of real estate. This
2.26exclusion does not apply to a business that is controlled by, or under common control with,
2.27another business if the second business:
2.28(1) does not derive or project to derive 15 percent or more of its annual revenue
2.29from the rental or sale of real estate; and
2.30(2) is the primary tenant of the real estate leased from the first business.
2.31 Subd. 9. Qualified community development entity. (a)(1) "Qualified community
2.32development entity" has the meaning given in section 45D of the Code; provided that the
2.33entity has entered into, for the current year or any prior year, an allocation agreement with
2.34the Community Development Financial Institutions Fund of the United States Department
2.35of the Treasury with respect to credits authorized by section 45D of the Code, which
2.36includes Minnesota within the service area set forth in the allocation agreement. The
3.1term includes subsidiary community development entities or affiliates of any qualified
3.2community development entity, all of which shall be treated as a single applicant for
3.3purposes of section 116X.05.
3.4(2) The term qualified community development entity shall not include any regulated
3.5financial institution that is subject to the provisions of the Community Reinvestment Act
3.6of 1977, United States Code, title 12, chapter 30, or any subsidiary or affiliate thereof.
3.7(3) Clause (2) shall not apply to a regulated financial institution, or subsidiary or
3.8affiliate thereof, if the regulated financial institution is chartered by, or headquartered
3.9in, the state of Minnesota and the regulated financial institution otherwise meets the
3.10requirements of clause (1).
3.11 Subd. 10. Qualified equity investment. (a) "Qualified equity investment" means
3.12any equity investment in, or long-term debt security issued by, a qualified community
3.13development entity that:
3.14(1) is acquired after January 1, 2014, at its original issuance solely in exchange
3.15for cash;
3.16(2) has at least 100 percent of its cash purchase price used by the issuer to make
3.17qualified low-income community investments in qualified active low-income community
3.18businesses located in this state by the first anniversary of the initial credit allowance
3.19date; and
3.20(3) is designated by the issuer as a qualified equity investment under this subdivision
3.21and is certified by the department as not exceeding the limitation contained in section
3.22116X.05, subdivision 4.
3.23 (b) Notwithstanding the restrictions on transferability contained in section 116X.04,
3.24this term shall include any qualified equity investment that does not meet the provisions of
3.25paragraph (a) if the investment:
3.26 (1) is transferred to a subsequent holder; and
3.27 (2) was a qualified equity investment in the hands of any prior holder.
3.28 (c) This term shall not include either (1) any qualified equity investment that entitles
3.29the holder to claim tax credits under section 45D of the Code, or (2) any qualified equity
3.30investment, the proceeds of which are used to make debt or equity investments in, directly
3.31or indirectly, any other qualified community development entity.
3.32 Subd. 11. Qualified low-income community investment. "Qualified low-income
3.33community investment" means any capital or equity investment in, or loan to, any
3.34qualified active low-income community business. With respect to any one qualified
3.35active low-income community business, the maximum amount of qualified low-income
3.36community investments that may be made in the business, on a collective basis with all of
4.1its affiliates, with the proceeds of qualified equity investments that have been certified
4.2under section 116X.05 shall be $10,000,000 whether made by one or several qualified
4.3community development entities.
4.4 Subd. 12. State premium tax liability. "State premium tax liability" means any
4.5liability incurred by any entity under Chapter 297I.
4.6 Subd. 13. Refundable performance fee. "Refundable performance fee" means a
4.7fee that a qualified community development entity seeking to have an equity investment or
4.8long-term debt security designated as a qualified equity investment and eligible for tax
4.9credits under section 116X.05 shall pay to the department as assurance of compliance with
4.10certain requirements of this chapter. The amount of the fee shall be equal to one-half of one
4.11percent of the amount of the equity investment or long-term debt security requested to be
4.12designated as a qualified equity investment, up to a maximum performance fee of $500,000.
4.13 Subd. 14. Affiliate. For the purposes of subdivision 9, the term "affiliate" shall
4.14include any entity, without regard to whether such entity otherwise constitutes a qualified
4.15community development entity under subdivision 9, paragraph (a), that is the initial
4.16holder, either directly or through one or more special purpose entities, of a qualified
4.17equity investment in the qualified community development entity and any entity, without
4.18regard to whether such entity otherwise constitutes a qualified community development
4.19entity under subdivision 9, paragraph (a), that provides insurance or any other form of
4.20guaranty to the ultimate recipient of tax credits under section 116X.03 with respect to
4.21a recapture or forfeiture of such tax credits under section 116X.06, either directly or
4.22through the guaranty of any other economic benefit that is paid in lieu of the tax credits
4.23allowable under section 116X.03. The determination of whether an entity is an affiliate
4.24shall be made by taking into account all relevant facts and circumstances, including the
4.25description of the proposed amount, structure, and initial purchaser of the qualified equity
4.26investment required by section 116X.05, subdivision 1, paragraph (a), clause (4), and the
4.27determination shall assume that the information provided pursuant to section 116X.05,
4.28subdivision 1, paragraph (a), clause (4), is true and complete as of the date an application
4.29is submitted pursuant to section 116X.05.
4.30 Sec. 3. [116X.03] CREDIT ESTABLISHED.
4.31(a) Any entity that makes a qualified equity investment earns a vested right to credit
4.32against the entity's state premium tax liability on a premium tax report filed under this
4.33section that may be utilized as described in paragraphs (b) to (e).
5.1(b) On each credit allowance date of the qualified equity investment, the entity, or
5.2subsequent holder of the qualified equity investment, shall be entitled to utilize a portion
5.3of the credit during the taxable year, including the credit allowance date.
5.4(c) The credit amount shall be equal to the applicable percentage for the credit
5.5allowance date multiplied by the purchase price paid to the issuer of the qualified equity
5.6investment.
5.7(d) The amount of the credit claimed by an entity shall not exceed the amount of the
5.8entity's state premium tax liability for the tax year for which the credit is claimed. Any
5.9amount of tax credit that the entity is prohibited from claiming in a taxable year as a result
5.10of this chapter may be carried forward for use in any subsequent taxable year.
5.11(e) An entity claiming a credit under this chapter is not required to pay any additional
5.12retaliatory tax levied under section 297I.05 as a result of claiming that credit. In addition,
5.13it is the intent of this act that an entity claiming a credit under this chapter is not required
5.14to pay any additional tax that may arise as a result of claiming that credit.
5.15 Sec. 4. [116X.04] TRANSFERABILITY.
5.16No tax credit claimed under this chapter shall be refundable or saleable on the open
5.17market. However, a participating investor may transfer credits to an affiliated insurance
5.18company, provided that it gives prior written notice to the department. Tax credits earned
5.19by a partnership, limited liability company, S-corporation, or other "pass-through" entity
5.20may be allocated to the partners, members, or shareholders of the entity for their direct
5.21use in accordance with the provisions of any agreement among those partners, members,
5.22or shareholders. Any allocation of tax credits made to a partner, member, or shareholder
5.23in accordance with this section shall not be considered a sale of such tax credits for
5.24purposes of this chapter.
5.25 Sec. 5. [116X.05] CERTIFICATION OF QUALIFIED EQUITY INVESTMENTS.
5.26 Subdivision 1. Application. (a) A qualified community development entity that
5.27seeks to have an equity investment or long-term debt security designated as a qualified
5.28equity investment and eligible for tax credits under this chapter shall apply to the
5.29department. The department shall begin accepting applications on January 1, 2015. The
5.30qualified community development entity shall include the following in its application:
5.31(1) evidence of the applicant's certification as a qualified community development
5.32entity, including evidence of the service area of the entity that includes Minnesota;
6.1(2) a copy of the allocation agreement executed by the applicant, or its controlling
6.2entity, and the Community Development Financial Institutions Fund under section
6.3116X.02, subdivision 9;
6.4(3) a certificate executed by an executive officer of the applicant attesting that the
6.5allocation agreement remains in effect and has not been revoked or canceled by the
6.6Community Development Financial Institutions Fund;
6.7(4) a description of the proposed amount, structure, and initial purchaser of the
6.8qualified equity investment;
6.9(5) the minimum amount of the qualified equity investment the qualified community
6.10development entity is willing to accept in the event the amount proposed to be certified
6.11under clause (4) is less than the applicant's proposed amount of qualified equity investment;
6.12(6) a plan describing the proposed investment of the proceeds of the qualified equity
6.13investment, including the types of qualified active low-income community businesses in
6.14which the applicant expects to invest. Applicants are not required to identify qualified
6.15active low-income community businesses in which they will invest when submitting
6.16an application;
6.17(7) a nonrefundable application fee of $5,000. This fee shall be paid to the
6.18department and shall be required of each application submitted; and
6.19(8) the refundable performance fee required by section 116X.08.
6.20 Subd. 2. Consideration of application. Within 30 days after receipt of a completed
6.21application containing the information in subdivision 1, including the payment of the
6.22application fee and the refundable performance fee, the department shall grant or deny the
6.23application in full or in part. If the department denies any part of the application, it shall
6.24inform the qualified community development entity of the grounds for the denial. If the
6.25qualified community development entity provides any additional information required
6.26by the department or otherwise completes its application within 15 days of the notice of
6.27denial, the application shall be considered completed as of the original date of submission.
6.28If the qualified community development entity fails to provide the information or complete
6.29its application within the 15-day period, the application remains denied and must be
6.30resubmitted in full with a new submission date.
6.31 Subd. 3. Certification. If the application required under this section is complete, the
6.32department shall certify the proposed equity investment or long-term debt security as a
6.33qualified equity investment that is eligible for tax credits under this chapter, subject to the
6.34limitations contained in subdivision 5. The department shall provide written notice of the
6.35certification to the qualified community development entity. The notice shall include the
6.36name of the initial purchaser of the qualified equity investment and the credit amount.
7.1Before any tax credits are claimed under this chapter, the qualified community development
7.2entity shall provide written notice to the department of the names of the entities eligible to
7.3claim such credits as a result of holding a qualified equity investment. If the names of the
7.4entities that are eligible to utilize the credits change due to a transfer of a qualified equity
7.5investment or an allocation or affiliate transfer pursuant to section 116X.04, the qualified
7.6community development entity shall notify the department of the change.
7.7 Subd. 4. Amount certified. The department shall certify $250,000,000 in qualified
7.8equity investments. The department shall certify qualified equity investments in the order
7.9applications are received by the department. Applications received on the same day shall
7.10be deemed to have been received simultaneously. For applications that are complete and
7.11received on the same day, the department shall certify, consistent with remaining qualified
7.12equity investment capacity, the qualified equity investments in proportionate percentages
7.13based upon the ratio of the amount of qualified equity investment requested in an
7.14application to the total amount of qualified equity investments requested in all applications
7.15received on the same day. If any amount of qualified equity investment that would be
7.16certified under this section is less than the acceptable minimum amount specified in the
7.17application as required by subdivision 1, clause (5), the application is deemed withdrawn
7.18and the amount of qualified equity investment shall be proportionately allocated among
7.19the other applicants pursuant to this subdivision.
7.20 Subd. 5. Transfer of authority. An approved applicant may transfer all or a
7.21portion of its certified qualified equity investment authority to its controlling entity or any
7.22subsidiary qualified community development entity of the controlling entity, provided
7.23that the applicant provides the information required in the application with respect to
7.24such transferee and the applicant notifies the department of the transfer within 30 days
7.25of the transfer.
7.26 Subd. 6. Cash investment. Within 60 days of the applicant receiving notice
7.27of certification, the qualified community development entity or any transferee under
7.28subdivision 5 shall issue the qualified equity investment and receive cash in the amount of
7.29the certified amount. The qualified community development entity or transferee under
7.30subdivision 5 must provide the department with evidence of the receipt of the cash
7.31investment within ten business days after receipt. If the qualified community development
7.32entity or any transferee under subdivision 5 does not receive the cash investment and issue
7.33the qualified equity investment within 60 days following receipt of the certification notice,
7.34the certification shall lapse and the entity may not issue the qualified equity investment
7.35without reapplying to the department for certification. Lapsed certifications revert back to
7.36the department and shall be reissued, first, pro rata to other applicants whose qualified
8.1equity investment allocations were reduced under subdivision 4 and, thereafter, in
8.2accordance with the application process.
8.3 Sec. 6. [116X.06] DISALLOWANCE OF TAX CREDITS AND PENALTIES.
8.4(a) The department shall disallow the utilization of any tax credits earned as a result
8.5of holding a qualified equity investment, but not yet claimed, if:
8.6(1) the issuer redeems or makes principal repayment with respect to a qualified
8.7equity investment prior to the seventh anniversary of the issuance of the qualified equity
8.8investment. In this case, the department's disallowance of unclaimed tax credits shall be
8.9proportionate to the amount of the redemption or repayment with respect to such qualified
8.10equity investment;
8.11(2) the issuer fails to invest an amount equal to 100 percent of the purchase price
8.12of the qualified equity investment in qualified low-income community investments in
8.13Minnesota within 12 months of the issuance of the qualified equity investment and
8.14maintain at least 100 percent of such level of investment in qualified low-income
8.15community investments in Minnesota until the last credit allowance date for the qualified
8.16equity investment. For purposes of this section, an investment shall be considered held
8.17by an issuer even if the investment has been sold or repaid if the issuer reinvests an
8.18amount equal to the capital returned to or recovered by the issuer from the original
8.19investment, exclusive of any profits realized, in another qualified low-income community
8.20investment within 12 months of the receipt of such capital. An issuer shall not be required
8.21to reinvest capital returned from qualified low-income community investments after the
8.22sixth anniversary of the issuance of the qualified equity investment, the proceeds of which
8.23were used to make the qualified low-income community investment, and the qualified
8.24low-income community investment shall be considered held by the issuer through the
8.25seventh anniversary of the qualified equity investment's issuance; or
8.26(3) there is any violation of section 116X.10.
8.27(b) Notwithstanding any contrary provision, any tax credits already claimed under
8.28this chapter shall not be subject to recapture upon the occurrence of an event set forth in
8.29paragraph (a), clause (1) or (2).
8.30(c) If the department disallows the utilization of tax credits under this section, it may
8.31also, at its discretion, impose penalties on the qualified community development entity
8.32that issued the qualified equity investment for which tax credits are disallowed, not to
8.33exceed the amount of the refundable performance fee required under section 116X.08
8.34and without regard to whether such fee has been refunded to the qualified community
8.35development entity.
9.1 Sec. 7. [116X.07] NOTICE OF NONCOMPLIANCE.
9.2Enforcement of each of the disallowance and penalty provisions shall be subject
9.3to a six-month cure period. No disallowance or penalty shall occur until the qualified
9.4community development entity shall have been given notice of noncompliance and
9.5afforded six months from the date of the notice to cure the noncompliance.
9.6 Sec. 8. [116X.08] REFUNDABLE PERFORMANCE FEE.
9.7 Subdivision 1. Performance guarantee amount. A qualified community
9.8development entity that seeks to have an equity investment or long-term debt security
9.9designated as a qualified equity investment and eligible for tax credits under this section
9.10shall pay a refundable performance fee to the department for deposit in the new markets
9.11performance guarantee account, which is hereby established. The entity shall forfeit:
9.12(1) the performance fee in its entirety if the qualified community development entity
9.13and its subsidiary qualified community development entities fail to issue the total amount
9.14of qualified equity investments certified by the department and receive cash in the total
9.15amount certified under section 116X.05, subdivision 3; or
9.16(2) the amount of the performance fee equal to the product of the original amount of
9.17the refundable performance fee multiplied by the percentage of the remaining amount of
9.18the proceeds of the qualified equity investment not used to make qualified low-income
9.19equity investments if the qualified community development entity or any subsidiary
9.20qualified community development entity that issues a qualified equity investment certified
9.21under this section fails to meet the investment requirement under section 116X.06 by the
9.22second credit allowance date of such qualified equity investment. Forfeiture of the fee
9.23or any portion thereof under this paragraph shall be subject to the six-month cure period
9.24established under section 116X.07.
9.25 Subd. 2. Request for refund. The fee required under subdivision 1 shall be paid
9.26to the department and held in the new markets performance guarantee account until
9.27compliance with subdivision 1 shall have been established. The qualified community
9.28development entity may request a refund of the fee from the department no sooner than 30
9.29days after having met all the requirements of subdivision 1. The department shall have 30
9.30days to comply with the request or give notice of noncompliance.
9.31 Sec. 9. [116X.09] PREAPPROVAL OF INVESTMENTS.
9.32Before making a proposed qualified low-income community investment, a qualified
9.33community development entity may request from the department a written determination
9.34that the proposed investment will qualify as a qualified low-income community investment
10.1and will satisfy all applicable provisions of this chapter. The department must notify a
10.2qualified community development entity within ten business days from the receipt of a
10.3request of its determination and an explanation thereof. Any determination made by the
10.4department pursuant to this section shall be binding on the department.
10.5 Sec. 10. [116X.10] USE OF PROCEEDS PROHIBITED.
10.6A qualified active low-income community business that receives a qualified
10.7low-income community investment under this chapter, or any affiliates of a qualified
10.8active low-income community business, may not directly or indirectly use the proceeds
10.9of such qualified active low-income community investment to lend to or invest in a
10.10qualified community development entity or member or affiliate of a qualified community
10.11development entity where the proceeds of the loan or investment are directly or indirectly
10.12used to fund or refinance the purchase of a qualified equity investment hereunder.
10.13 Sec. 11. EFFECTIVE DATE.
10.14Sections 1 to 10 are effective the day following final enactment, and apply to
10.15premium tax returns originally due on or after that date.
