81R10343 CBH-D
 
  By: Solomons H.B. No. 2459
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to tax credits for business development in low-income
  communities.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 171, Tax Code, is amended by adding
  Subchapter J-1 to read as follows:
  SUBCHAPTER J-1. CREDIT FOR BUSINESS DEVELOPMENT IN LOW-INCOME
  COMMUNITIES
         Sec. 171.521.  DEFINITIONS. In this subchapter:
               (1)  "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 anniversary dates of that
  date.
               (2)  "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 of at least
  seven years from the date of its issuance, with no acceleration of
  repayment, amortization, or prepayment features before its
  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 sum of the cash interest payments and the
  cumulative operating income, as defined by regulations adopted
  under Section 45D, Internal Revenue Code of 1986, as amended, of the
  qualified community development entity for that period.   This
  subdivision does not limit the holder's ability to accelerate
  payments on the debt instrument in situations in which the
  qualified community development entity has defaulted on covenants
  designed to ensure compliance with this subchapter or Section 45D,
  Internal Revenue Code of 1986, as amended.
               (3)  "Purchase price" means the amount of cash paid to a
  qualified community development entity that issues a qualified
  equity investment for the qualified equity investment.
               (4)  "Qualified active low-income community business"
  has the meaning assigned by Section 45D(d)(2), Internal Revenue
  Code of 1986, as amended. A business shall be 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. The term excludes any business that derives or projects to
  derive 15 percent or more of its 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 15
  percent or more of its annual revenue from the rental or sale of
  real estate; and
                     (B)  is the primary tenant of the real estate
  leased from the first business.
               (5)  "Qualified community development entity" has the
  meaning assigned by Section 45D(c), Internal Revenue Code of 1986,
  as amended, provided that the entity has entered into, or is
  controlled by an entity that has entered into, an allocation
  agreement with the Community Development Financial Institutions
  Fund of the United States Treasury with respect to credits
  authorized by Section 45D, Internal Revenue Code of 1986, as
  amended, that includes this state within the service area provided
  in the allocation agreement.
               (6)  "Qualified equity investment" means:
                     (A)  any equity investment in, or long-term debt
  security issued by, a qualified community development entity that:
                           (i)  is acquired after September 1, 2009, at
  its original issuance solely in exchange for cash;
                           (ii)  has at least 85 percent of its cash
  purchase price used by the issuer to make qualified low-income
  community investments in qualified active low-income community
  businesses located in this state by the first anniversary of the
  initial credit allowance date; and
                           (iii)  is designated by the issuer as a
  qualified equity investment under this subdivision and is certified
  by the comptroller as not exceeding the limitation contained in
  Section 171.522(a); and
                     (B)  any qualified equity investment that does not
  meet the requirements of Paragraph (A) if the investment was a
  qualified equity investment in the hands of a prior holder.
               (7)  "Qualified low-income community investment" means
  any capital or equity investment in, or loan to, any qualified
  active low-income community business made after September 1, 2009.
         Sec. 171.522.  TOTAL AMOUNT OF CREDITS THAT MAY BE CLAIMED.
  (a) Notwithstanding any other provision of this subchapter, the
  total amount of tax credits that may be claimed by a taxable entity
  under both this subchapter and Chapter 231, Insurance Code, in a
  state fiscal year may not exceed $40 million, not including any
  carryforward amounts authorized by Section 171.526 or by Section
  231.006, Insurance Code.
         (b)  The comptroller by rule shall prescribe procedures by
  which the comptroller may allocate credits under this subchapter
  and Chapter 231, Insurance Code.
         Sec. 171.523.  QUALIFICATION FOR CREDIT. (a) A taxable
  entity qualifies for and is entitled to a credit under this
  subchapter on a report if the taxable entity holds a qualified
  equity investment on a credit allowance date that occurs during the
  period on which the report is based.
         (b)  A taxable entity that holds a qualified equity
  investment may claim a credit under this subchapter for not more
  than seven consecutive reports beginning with the report based on
  the period during which the taxable entity first holds the
  investment on a credit allowance date.
         Sec. 171.524.  MAXIMUM INVESTMENT PER QUALIFIED ACTIVE
  LOW-INCOME COMMUNITY BUSINESS. With respect to any one qualified
  active low-income community business, the maximum amount of
  qualified low-income community investments that may be made in the
  business, on a collective basis with all of its affiliates, with the
  proceeds of qualified equity investments that have been certified
  under this subchapter, is $10 million whether made by one or several
  qualified community development entities.
         Sec. 171.525.  AMOUNT OF ANNUAL CREDIT. (a) Except as
  otherwise provided by this subchapter, the amount of the tax credit
  a taxable entity may claim on a report is equal to:
               (1)  for each of the first two years for which the
  taxable entity may claim the credit, zero percent of the purchase
  price on the applicable credit allowance date;
               (2)  for the third year for which the taxable entity may
  claim the credit, seven percent of the purchase price on the
  applicable credit allowance date; and
               (3)  for the remaining four years for which the taxable
  entity may claim the credit, eight percent of the purchase price on
  the applicable credit allowance date.
         (b)  The total credit claimed under this subchapter for a
  report, including the amount of any carryforward credit under
  Section 171.526, may not exceed the amount of franchise tax due
  after any other applicable credits.
         Sec. 171.526.  CARRYFORWARD. (a) Notwithstanding the
  limitation provided by Section 171.522(a), if a taxable entity is
  eligible for a credit that exceeds the limitation under Section
  171.525(b), the taxable entity may carry the unused credit forward
  for not more than five consecutive reports.
         (b)  A carryforward is considered the remaining portion of a
  credit that cannot be claimed in the current year because of the tax
  limitation under Section 171.525(b). A carryforward is added to the
  next year's credit in determining whether the limitation is met for
  that year. A credit carryforward from a previous report is
  considered to be used before the current year credit.
         (c)  A carryforward may not be added to any subsequent year's
  credit for the purpose of determining the limitation in Section
  171.522(a).
         Sec. 171.527.  CERTIFICATION OF ELIGIBILITY. (a) For the
  initial and each succeeding report in which a credit is claimed
  under this subchapter, the taxable entity shall file with its
  report, on a form provided by the comptroller, information that
  sufficiently demonstrates that the taxable entity is eligible for
  the credit.
         (b)  The burden of establishing entitlement to and the value
  of the credit is on the taxable entity.
         Sec. 171.528.  ASSIGNMENT PROHIBITED. (a) A taxable entity
  may not convey, assign, or transfer the credit allowed under this
  subchapter to another entity unless all of the assets of the taxable
  entity are conveyed, assigned, or transferred in the same
  transaction.
         (b)  Notwithstanding Subsection (a), a tax credit earned by a
  partnership, limited liability company, S corporation, or other
  "pass-through" entity may be allocated to the partners, members, or
  shareholders of that entity and claimed under this subchapter in
  accordance with the provisions of any agreement among the partners,
  members, or shareholders.
         Sec. 171.529.  APPLICATION AND CERTIFICATION PROCEDURE. (a)
  A qualified community development entity that seeks to have an
  equity investment or long-term debt security certified as a
  qualified equity investment and eligible for tax credits shall
  apply to the comptroller. The qualified community development
  entity must submit an application on a form provided by the
  comptroller that includes:
               (1)  the entity's name, address, tax identification
  number, and evidence of its certification as a qualified community
  development entity;
               (2)  a copy of an allocation agreement executed by the
  entity, or its controlling entity, and the Community Development
  Financial Institutions Fund of the United States Treasury that
  includes this state in its service area;
               (3)  a certificate executed by an executive officer of
  the entity attesting that the allocation agreement remains in
  effect and has not been revoked or cancelled by the Community
  Development Financial Institutions Fund of the United States
  Treasury;
               (4)  a description of the proposed amount, structure,
  and purchaser of the equity investment or long-term debt security;
               (5)  the name and tax identification number of any
  person or entity eligible to use tax credits earned as a result of
  the issuance of the qualified equity investment, if known; and
               (6)  information regarding the proposed use of proceeds
  from the issuance of the qualified equity investment, if known.
         (b)  The application must be accompanied by a nonrefundable
  application fee of $5,000. The fee shall be paid to the comptroller
  and shall be required for each application submitted.
         (c)  Within 15 days after receipt of a completed application
  containing the information necessary for the comptroller to certify
  a potential qualified equity investment, including the payment of
  the application fee, the comptroller shall grant or deny the
  application in full or in part. If the comptroller denies any part
  of the application, the comptroller 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 comptroller or otherwise completes its
  application within 15 days of the notice of denial, the application
  shall be considered completed as of the original date of
  submission. If the qualified community development entity fails to
  provide the information or complete its application within the
  15-day period, the application remains denied and must be
  resubmitted in full with a new submission date.
         (d)  If the application is considered complete, the
  comptroller shall certify the proposed equity investment or
  long-term debt security as a qualified equity investment and
  eligible for tax credits under this section, subject to the
  limitations provided by Section 171.522(a). The comptroller shall
  provide written notice of the certification to the qualified
  community development entity. The notice shall include the names of
  those taxpayers who are eligible to use the credits and their
  respective credit amounts. If the names of the persons or entities
  that are eligible to use the credits change due to a transfer of a
  qualified equity investment or a change in an allocation under
  Section 171.528(b), the qualified community development entity
  shall notify the comptroller of the change.
         (e)  Within 30 days after receiving notice of certification,
  the qualified community development entity shall issue the
  qualified equity investment and receive cash in the amount of the
  certified purchase price. The qualified community development
  entity must provide the comptroller with evidence of the receipt of
  the cash investment within 10 business days after receipt. If the
  qualified community development entity does not receive the cash
  investment and issue the qualified equity investment within 30 days
  following receipt of the certification notice, the certification
  shall lapse and the entity may not issue the qualified equity
  investment without reapplying to the comptroller for
  certification. A certification that lapses reverts back to the
  comptroller and may be reissued only in accordance with the
  application process prescribed by this section.
         (f)  The comptroller shall certify qualified equity
  investments in the order applications are received by the
  comptroller. Applications received on the same day shall be
  considered to have been received simultaneously. For applications
  received on the same day and considered complete, the comptroller
  shall certify, consistent with remaining tax credit capacity,
  qualified equity investments in proportionate percentages based on
  the ratio of the amount of qualified equity investment requested in
  an application to the total amount of qualified equity investments
  requested in all applications received on the same day. If a pending
  request cannot be fully certified because of the limitations
  prescribed by Section 171.522(a), the comptroller shall certify the
  portion that may be certified unless the qualified community
  development entity elects to withdraw its request rather than
  receive partial credit.
         Sec. 171.530.  RECAPTURE OF CREDIT. (a) The comptroller may
  recapture a portion of a tax credit allowed under this section if:
               (1)  any amount of federal tax credit that might be
  available with respect to the qualified equity investment that
  generated the tax credit under this section is recaptured under
  Section 45D, Internal Revenue Code of 1986, as amended;
               (2)  the qualified community development entity
  redeems or makes a principal repayment with respect to the
  qualified equity investment that generated the tax credit before
  the final credit allowance date of the qualified equity investment;
  or
               (3)  the qualified community development entity fails
  to invest at least 85 percent of the purchase price of the qualified
  equity investment in qualified low-income community investments in
  qualified active low-income community businesses located in this
  state within 12 months of the issuance of the qualified equity
  investment and maintain that level of investment in qualified
  low-income community investments in qualified active low-income
  community businesses located in this state until the last credit
  allowance date for the qualified equity investment.
         (b)  The qualified community development entity shall keep
  sufficiently detailed books and records with respect to the
  investments made with the proceeds of the qualified equity
  investments to allow the direct tracing of the proceeds into
  qualified low-income community investments in qualified active
  low-income community businesses in this state. For purposes of
  calculating the amount of qualified low-income community
  investments held by a qualified community development entity, an
  investment shall be considered held by the qualified community
  development entity even if the investment has been sold or repaid,
  provided that the qualified community development entity reinvests
  an amount equal to the capital returned to or recovered from the
  original investment, exclusive of any profits realized, in another
  qualified active low-income community business in this state within
  12 months of the receipt of the capital.  A qualified community
  development entity may not be 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 shall be considered held by the issuer through the
  qualified equity investment's final credit allowance date.
         (c)  In a situation described by Subsection (a)(1), the
  comptroller's recapture shall be proportionate to the federal
  recapture with respect to the qualified equity investment. In a
  situation described by Subsection (a)(2), the comptroller's
  recapture shall be proportionate to the amount of the redemption or
  repayment with respect to the qualified equity investment.
         (d)  The comptroller shall provide notice to the qualified
  community development entity of any proposed recapture of tax
  credits under this section. The entity shall have 90 days to cure
  any deficiency indicated in the comptroller's original recapture
  notice and avoid the recapture. If the entity fails or is unable to
  cure the deficiency within the 90-day period, the comptroller shall
  provide the entity and the taxpayer from whom the credit is to be
  recaptured with a final order of recapture. Any tax credit for
  which a final recapture order has been issued shall be recaptured by
  the comptroller from the taxpayer who claimed the tax credit on a
  tax return.
         Sec. 171.531.  EXPIRATION.  (a)  This subchapter expires
  December 31, 2013.
         (b)  The expiration of this subchapter does not affect a
  credit that was established under this subchapter due to a
  qualified equity investment that was made before the date this
  subchapter expires. A taxable entity that has any unused credits
  established under this subchapter, including any carryforward
  credits, may continue to apply those credits on or with each
  consecutive report until the date the credit would have expired
  under this subchapter had this subchapter not expired, and this
  subchapter is continued in effect for the purposes of determining
  the amount of the credit the taxable entity may claim and the manner
  in which the taxable entity may claim the credit.
         SECTION 2.  Subtitle B, Title 3, Insurance Code, is amended
  by adding Chapter 231 to read as follows:
  CHAPTER 231. CREDIT FOR BUSINESS DEVELOPMENT IN LOW-INCOME
  COMMUNITIES
         Sec. 231.001.  DEFINITIONS. In this chapter:
               (1)  "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 anniversary dates of that
  date.
               (2)  "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 of at least
  seven years from the date of its issuance, with no acceleration of
  repayment, amortization, or prepayment features before its
  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 sum of the cash interest payments and the
  cumulative operating income, as defined by regulations adopted
  under Section 45D, Internal Revenue Code of 1986, as amended, of the
  qualified community development entity for that period.  This
  subdivision does not limit the holder's ability to accelerate
  payments on the debt instrument in situations in which the
  qualified community development entity has defaulted on covenants
  designed to ensure compliance with this section or Section 45D,
  Internal Revenue Code of 1986, as amended.
               (3)  "Purchase price" means the amount of cash paid to a
  qualified community development entity that issues a qualified
  equity investment for the qualified equity investment.
               (4)  "Qualified active low-income community business"
  has the meaning assigned by Section 45D(d)(2), Internal Revenue
  Code of 1986, as amended. A business shall be 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. The term excludes any business that derives or projects to
  derive 15 percent or more of its 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 15
  percent or more of its annual revenue from the rental or sale of
  real estate; and
                     (B)  is the primary tenant of the real estate
  leased from the first business.
               (5)  "Qualified community development entity" has the
  meaning assigned by Section 45D(c), Internal Revenue Code of 1986,
  as amended, provided that the entity has entered into, or is
  controlled by an entity that has entered into, an allocation
  agreement with the Community Development Financial Institutions
  Fund of the United States Treasury with respect to credits
  authorized by Section 45D, Internal Revenue Code of 1986, as
  amended, that includes this state within the service area provided
  in the allocation agreement.
               (6)  "Qualified equity investment" means:
                     (A)  any equity investment in, or long-term debt
  security issued by, a qualified community development entity that:
                           (i)  is acquired after September 1, 2009, at
  its original issuance solely in exchange for cash;
                           (ii)  has at least 85 percent of its cash
  purchase price used by the issuer to make qualified low-income
  community investments in qualified active low-income community
  businesses located in this state by the first anniversary of the
  initial credit allowance date; and
                           (iii)  is designated by the issuer as a
  qualified equity investment under this subdivision and is certified
  by the comptroller as not exceeding the limitation contained in
  Section 231.002(a); and
                     (B)  any qualified equity investment that does not
  meet the requirements of Paragraph (A) if the investment was a
  qualified equity investment in the hands of a prior holder.
               (7)  "Qualified low-income community investment" means
  any capital or equity investment in, or loan to, any qualified
  active low-income community business made after September 1, 2009.
         Sec. 231.002.  TOTAL AMOUNT OF CREDITS THAT MAY BE CLAIMED.
  (a) Notwithstanding any other provision of this chapter, the total
  amount of tax credits that may be claimed by an entity under both
  this chapter and Chapter 171, Tax Code, in a state fiscal year may
  not exceed $40 million, not including any carryforward amounts
  authorized by Section 171.526, Tax Code, or by Section 231.006 of
  this code.
         (b)  The comptroller by rule shall prescribe procedures by
  which the comptroller may allocate credits under this chapter and
  Subchapter J-1, Chapter 171, Tax Code.
         Sec. 231.003.  QUALIFICATION FOR CREDIT. (a) An entity
  qualifies for and is entitled to a credit under this chapter on a
  report if the entity holds a qualified equity investment on a credit
  allowance date that occurs during the period on which the report is
  based.
         (b)  An entity that holds a qualified equity investment may
  claim a credit under this chapter for not more than seven
  consecutive reports beginning with the report based on the period
  during which the entity first holds the investment on a credit
  allowance date.
         Sec. 231.004.  MAXIMUM INVESTMENT PER QUALIFIED ACTIVE
  LOW-INCOME COMMUNITY BUSINESS. With respect to any one qualified
  active low-income community business, the maximum amount of
  qualified low-income community investments that may be made in the
  business, on a collective basis with all of its affiliates, with the
  proceeds of qualified equity investments that have been certified
  under this chapter, is $10 million whether made by one or several
  qualified community development entities.
         Sec. 231.005.  AMOUNT OF ANNUAL CREDIT. (a) Except as
  otherwise provided by this chapter, the amount of the tax credit an
  entity may claim on a report is equal to:
               (1)  for each of the first two years for which the
  entity may claim the credit, zero percent of the purchase price on
  the applicable credit allowance date;
               (2)  for the third year for which the entity may claim
  the credit, seven percent of the purchase price on the applicable
  credit allowance date; and
               (3)  for the remaining four years for which the entity
  may claim the credit, eight percent of the purchase price on the
  applicable credit allowance date.
         (b)  The total credit claimed under this chapter for a
  report, including the amount of any carryforward credit under
  Section 231.006, may not exceed the amount of tax due after any
  other applicable credits.
         Sec. 231.006.  CARRYFORWARD. (a) Notwithstanding the
  limitation provided by Section 231.002(a), if an entity is eligible
  for a credit that exceeds the limitation under Section 231.005(b),
  the entity may carry the unused credit forward for not more than
  five consecutive reports.
         (b)  A carryforward is considered the remaining portion of a
  credit that cannot be claimed in the current year because of the tax
  limitation under Section 231.005(b). A carryforward is added to the
  next year's credit in determining whether the limitation is met for
  that year. A credit carryforward from a previous report is
  considered to be used before the current year credit.
         (c)  A carryforward may not be added to any subsequent
  year's credit for the purpose of determining the limitation in
  Section 231.002(a).
         Sec. 231.007.  CERTIFICATION OF ELIGIBILITY. (a) For the
  initial and each succeeding report in which a credit is claimed
  under this chapter, the entity shall file with its report, on a form
  provided by the comptroller, information that sufficiently
  demonstrates that the entity is eligible for the credit.
         (b)  The burden of establishing entitlement to and the value
  of the credit is on the entity.
         Sec. 231.008.  ASSIGNMENT PROHIBITED. (a) An entity may not
  convey, assign, or transfer the credit allowed under this chapter
  to another entity unless all of the assets of the taxable entity are
  conveyed, assigned, or transferred in the same transaction.
         (b)  Notwithstanding Subsection (a), a tax credit earned by a
  partnership, limited liability company, S corporation, or other
  "pass-through" entity may be allocated to the partners, members, or
  shareholders of that entity and claimed under this chapter in
  accordance with the provisions of any agreement among the partners,
  members, or shareholders.
         Sec. 231.009.  APPLICATION AND CERTIFICATION PROCEDURE. (a)
  A qualified community development entity that seeks to have an
  equity investment or long-term debt security certified as a
  qualified equity investment and eligible for tax credits shall
  apply to the comptroller. The qualified community development
  entity must submit an application on a form provided by the
  comptroller that includes:
               (1)  the entity's name, address, tax identification
  number, and evidence of its certification as a qualified community
  development entity;
               (2)  a copy of an allocation agreement executed by the
  entity, or its controlling entity, and the Community Development
  Financial Institutions Fund of the United States Treasury that
  includes this state in its service area;
               (3)  a certificate executed by an executive officer of
  the entity attesting that the allocation agreement remains in
  effect and has not been revoked or cancelled by the Community
  Development Financial Institutions Fund of the United States
  Treasury;
               (4)  a description of the proposed amount, structure,
  and purchaser of the equity investment or long-term debt security;
               (5)  the name and tax identification number of any
  person or entity eligible to use tax credits earned as a result of
  the issuance of the qualified equity investment, if known; and
               (6)  information regarding the proposed use of proceeds
  from the issuance of the qualified equity investment, if known.
         (b)  The application must be accompanied by a nonrefundable
  application fee of $5,000. The fee shall be paid to the comptroller
  and shall be required for each application submitted.
         (c)  Within 15 days after receipt of a completed application
  containing the information necessary for the comptroller to certify
  a potential qualified equity investment, including the payment of
  the application fee, the comptroller shall grant or deny the
  application in full or in part. If the comptroller denies any part
  of the application, the comptroller 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 comptroller or otherwise completes its
  application within 15 days of the notice of denial, the application
  shall be considered completed as of the original date of
  submission. If the qualified community development entity fails to
  provide the information or complete its application within the
  15-day period, the application remains denied and must be
  resubmitted in full with a new submission date.
         (d)  If the application is considered complete, the
  comptroller shall certify the proposed equity investment or
  long-term debt security as a qualified equity investment and
  eligible for tax credits under this chapter, subject to the
  limitations provided by Section 231.002(a). The comptroller shall
  provide written notice of the certification to the qualified
  community development entity. The notice shall include the names of
  those taxpayers who are eligible to use the credits and their
  respective credit amounts. If the names of the persons or entities
  that are eligible to use the credits change due to a transfer of a
  qualified equity investment or a change in an allocation under
  Section 231.008(b), the qualified community development entity
  shall notify the comptroller of the change.
         (e)  Within 30 days after receiving notice of certification,
  the qualified community development entity shall issue the
  qualified equity investment and receive cash in the amount of the
  certified purchase price. The qualified community development
  entity must provide the comptroller with evidence of the receipt of
  the cash investment within 10 business days after receipt. If the
  qualified community development entity does not receive the cash
  investment and issue the qualified equity investment within 30 days
  following receipt of the certification notice, the certification
  shall lapse and the entity may not issue the qualified equity
  investment without reapplying to the comptroller for
  certification. A certification that lapses reverts back to the
  comptroller and may be reissued only in accordance with the
  application process provided by this section.
         (f)  The comptroller shall certify qualified equity
  investments in the order applications are received by the
  comptroller. Applications received on the same day shall be
  considered to have been received simultaneously. For applications
  received on the same day and considered complete, the comptroller
  shall certify, consistent with remaining tax credit capacity,
  qualified equity investments in proportionate percentages based on
  the ratio of the amount of qualified equity investment requested in
  an application to the total amount of qualified equity investments
  requested in all applications received on the same day. If a pending
  request cannot be fully certified because of the limitations
  provided by Section 231.002(a), the comptroller shall certify the
  portion that may be certified unless the qualified community
  development entity elects to withdraw its request rather than
  receive partial credit.
         Sec. 231.010.  RECAPTURE OF CREDIT. (a) The comptroller may
  recapture a portion of a tax credit allowed under this section if:
               (1)  any amount of federal tax credit that might be
  available with respect to the qualified equity investment that
  generated the tax credit under this section is recaptured under
  Section 45D, Internal Revenue Code of 1986, as amended;
               (2)  the qualified community development entity
  redeems or makes a principal repayment with respect to the
  qualified equity investment that generated the tax credit before
  the final credit allowance date of such qualified equity
  investment; or
               (3)  the qualified community development entity fails
  to invest at least 85 percent of the purchase price of the qualified
  equity investment in qualified low-income community investments in
  qualified active low-income community businesses located in this
  state within 12 months of the issuance of the qualified equity
  investment and maintain that level of investment in qualified
  low-income community investments in qualified active low-income
  community businesses located in this state until the last credit
  allowance date for the qualified equity investment.
         (b)  The qualified community development entity shall keep
  sufficiently detailed books and records with respect to the
  investments made with the proceeds of the qualified equity
  investments to allow the direct tracing of the proceeds into
  qualified low-income community investments in qualified active
  low-income community businesses in this state. For purposes of
  calculating the amount of qualified low-income community
  investments held by a qualified community development entity, an
  investment shall be considered held by the qualified community
  development entity even if the investment has been sold or repaid,
  provided that the qualified community development entity reinvests
  an amount equal to the capital returned to or recovered from the
  original investment, exclusive of any profits realized, in another
  qualified active low-income community business in this state within
  12 months of the receipt of the capital.  A qualified community
  development entity may not be 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 shall be considered held by the issuer through the
  qualified equity investment's final credit allowance date.
         (c)  In a situation described by Subsection (a)(1), the
  comptroller's recapture shall be proportionate to the federal
  recapture with respect to the qualified equity investment. In a
  situation described by Subsection (a)(2), the comptroller's
  recapture shall be proportionate to the amount of the redemption or
  repayment with respect to the qualified equity investment.
         (d)  The comptroller shall provide notice to the qualified
  community development entity of any proposed recapture of tax
  credits under this section. The entity shall have 90 days to cure
  any deficiency indicated in the comptroller's original recapture
  notice and avoid the recapture. If the entity fails or is unable to
  cure the deficiency within the 90-day period, the comptroller shall
  provide the entity and the taxpayer from whom the credit is to be
  recaptured with a final order of recapture. Any tax credit for
  which a final recapture order has been issued shall be recaptured by
  the comptroller from the taxpayer who claimed the tax credit on a
  tax return.
         Sec. 231.011.  EXPIRATION.  (a)  This chapter expires
  December 31, 2013.
         (b)  The expiration of this chapter does not affect a credit
  that was established under this chapter due to a qualified equity
  investment that was made before the date this chapter expires. An
  entity that has any unused credits established under this chapter,
  including any carryforward credits, may continue to apply those
  credits on or with each consecutive report until the date the credit
  would have expired under this chapter had this chapter not expired,
  and this chapter is continued in effect for the purposes of
  determining the amount of the credit the entity may claim and the
  manner in which the entity may claim the credit.
         SECTION 3.  (a) This Act applies only to a report originally
  due on or after the effective date of this Act.
         (b)  A taxable entity or other entity may claim the credit
  under Subchapter J-1, Chapter 171, Tax Code, or Chapter 231,
  Insurance Code, as added by this Act, only in relation to a
  qualified equity investment issued on or after the effective date
  of this Act.
         SECTION 4.  This Act takes effect January 1, 2010.