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A BILL TO BE ENTITLED
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AN ACT
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relating to tax credits for business development in low-income |
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communities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 171, Tax Code, is amended by adding |
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Subchapter J-1 to read as follows: |
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SUBCHAPTER J-1. CREDIT FOR BUSINESS DEVELOPMENT IN LOW-INCOME |
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COMMUNITIES |
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Sec. 171.521. DEFINITIONS. In this subchapter: |
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(1) "Credit allowance date" means with respect to any |
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qualified equity investment: |
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(A) the date on which the investment is initially |
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made; and |
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(B) each of the six anniversary dates of that |
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date. |
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(2) "Long-term debt security" means any debt |
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instrument issued by a qualified community development entity, at |
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par value or a premium, with an original maturity date of at least |
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seven years from the date of its issuance, with no acceleration of |
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repayment, amortization, or prepayment features before its |
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original maturity date. The qualified community development entity |
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that issues the debt instrument may not make cash interest payments |
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on the debt instrument during the period beginning on the date of |
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issuance and ending on the final credit allowance date in an amount |
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that exceeds the sum of the cash interest payments and the |
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cumulative operating income, as defined by regulations adopted |
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under Section 45D, Internal Revenue Code of 1986, as amended, of the |
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qualified community development entity for that period. This |
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subdivision does not limit the holder's ability to accelerate |
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payments on the debt instrument in situations in which the |
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qualified community development entity has defaulted on covenants |
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designed to ensure compliance with this subchapter or Section 45D, |
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Internal Revenue Code of 1986, as amended. |
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(3) "Purchase price" means the amount of cash paid to a |
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qualified community development entity that issues a qualified |
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equity investment for the qualified equity investment. |
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(4) "Qualified active low-income community business" |
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has the meaning assigned by Section 45D(d)(2), Internal Revenue |
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Code of 1986, as amended. A business shall be considered a |
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qualified active low-income community business for the duration of |
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the qualified community development entity's investment in, or loan |
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to, the business if the entity reasonably expects, at the time it |
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makes the investment or loan, that the business will continue to |
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satisfy the requirements for being a qualified active low-income |
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community business throughout the entire period of the investment |
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or loan. |
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(5) "Qualified community development entity" has the |
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meaning assigned by Section 45D(c), Internal Revenue Code of 1986, |
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as amended, provided that the entity has entered into, or is |
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controlled by an entity that has entered into, an allocation |
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agreement with the Community Development Financial Institutions |
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Fund of the United States Department of the Treasury with respect to |
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credits authorized by Section 45D, Internal Revenue Code of 1986, |
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as amended, that includes this state within the service area |
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provided in the allocation agreement. |
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(6) "Qualified equity investment" means: |
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(A) any equity investment in, or long-term debt |
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security issued by, a qualified community development entity that: |
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(i) is acquired after September 1, 2009, at |
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its original issuance solely in exchange for cash; |
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(ii) has at least 85 percent of its cash |
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purchase price used by the issuer to make qualified low-income |
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community investments in qualified active low-income community |
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businesses located in this state by the first anniversary of the |
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initial credit allowance date; and |
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(iii) is designated by the issuer as a |
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qualified equity investment under this subdivision and is certified |
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by the comptroller as not exceeding the limitation contained in |
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Section 171.522(a); and |
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(B) any qualified equity investment that does not |
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meet the requirements of Paragraph (A) if the investment was a |
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qualified equity investment in the hands of a prior holder. |
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(7) "Qualified low-income community investment" means |
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any capital or equity investment in, or loan to, any qualified |
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active low-income community business made after September 1, 2009. |
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Sec. 171.522. TOTAL AMOUNT OF CREDITS THAT MAY BE CLAIMED. |
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(a) Notwithstanding any other provision of this subchapter, the |
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total amount of tax credits that may be claimed by all entities |
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under both this subchapter and Chapter 231, Insurance Code, in a |
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state fiscal year may not exceed $40 million, not including any |
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carryforward amounts authorized by Section 171.526 or by Section |
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231.006, Insurance Code. |
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(b) The comptroller by rule shall prescribe procedures by |
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which the comptroller may allocate credits under this subchapter |
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and Chapter 231, Insurance Code. |
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Sec. 171.523. QUALIFICATION FOR CREDIT. (a) A taxable |
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entity qualifies for and is entitled to a credit under this |
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subchapter on a report if the taxable entity purchases a qualified |
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equity investment from a qualified community development entity and |
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holds the qualified equity investment on a credit allowance date |
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that occurs during the period on which the report is based. |
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(b) A taxable entity described by Subsection (a) may claim a |
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credit under this subchapter for not more than seven consecutive |
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reports beginning with the report based on the period during which |
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the taxable entity first holds the investment on a credit allowance |
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date. |
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Sec. 171.524. MAXIMUM INVESTMENT PER QUALIFIED ACTIVE |
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LOW-INCOME COMMUNITY BUSINESS. With respect to any one qualified |
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active low-income community business, the maximum amount of |
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qualified low-income community investments that may be made in the |
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business, on a collective basis with all of its affiliates, with the |
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proceeds of qualified equity investments that have been certified |
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under this subchapter, is $20 million whether made by one or several |
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qualified community development entities. |
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Sec. 171.525. AMOUNT OF ANNUAL CREDIT. (a) Except as |
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otherwise provided by this subchapter, the amount of the tax credit |
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a taxable entity may claim on a report is equal to: |
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(1) for each of the first two years for which the |
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taxable entity may claim the credit, zero percent of the purchase |
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price on the applicable credit allowance date; |
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(2) for the third year for which the taxable entity may |
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claim the credit, seven percent of the purchase price on the |
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applicable credit allowance date; and |
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(3) for the remaining four years for which the taxable |
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entity may claim the credit, eight percent of the purchase price on |
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the applicable credit allowance date. |
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(b) The total credit claimed under this subchapter for a |
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report, including the amount of any carryforward credit under |
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Section 171.526, may not exceed the amount of franchise tax due |
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after any other applicable credits. |
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Sec. 171.526. CARRYFORWARD. (a) Notwithstanding the |
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limitation provided by Section 171.522(a), if a taxable entity is |
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eligible for a credit that exceeds the limitation under Section |
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171.525(b), the taxable entity may carry the unused credit forward |
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for not more than five consecutive reports. |
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(b) A carryforward is considered the remaining portion of a |
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credit that cannot be claimed in the current year because of the tax |
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limitation under Section 171.525(b). A carryforward is added to |
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the next year's credit in determining whether the limitation is met |
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for that year. A credit carryforward from a previous report is |
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considered to be used before the current year credit. |
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(c) A carryforward may not be added to any subsequent year's |
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credit for the purpose of determining the limitation in Section |
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171.522(a). |
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Sec. 171.527. CERTIFICATION OF ELIGIBILITY. (a) For the |
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initial and each succeeding report in which a credit is claimed |
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under this subchapter, the taxable entity shall file with its |
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report, on a form provided by the comptroller, information that |
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sufficiently demonstrates that the taxable entity is eligible for |
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the credit. |
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(b) The burden of establishing entitlement to and the value |
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of the credit is on the taxable entity. |
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Sec. 171.528. ASSIGNMENT PROHIBITED. (a) A taxable entity |
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may not convey, assign, or transfer the credit allowed under this |
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subchapter to another entity unless all of the assets of the taxable |
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entity, including the taxable entity's qualified equity investment |
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to which the credit relates, are conveyed, assigned, or transferred |
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in the same transaction. |
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(b) Notwithstanding Subsection (a), a tax credit earned by a |
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partnership, limited liability company, S corporation, or other |
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"pass-through" entity may be allocated to the partners, members, or |
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shareholders of that entity and claimed under this subchapter in |
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accordance with the provisions of any agreement among the partners, |
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members, or shareholders. |
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Sec. 171.529. APPLICATION AND CERTIFICATION PROCEDURE. |
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(a) A qualified community development entity that seeks to have an |
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equity investment or long-term debt security certified as a |
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qualified equity investment and eligible for tax credits shall |
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apply to the comptroller. The qualified community development |
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entity must submit an application on a form provided by the |
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comptroller that includes: |
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(1) the entity's name, address, tax identification |
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number, and evidence of its certification as a qualified community |
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development entity; |
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(2) a copy of an allocation agreement executed by the |
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entity, or its controlling entity, and the Community Development |
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Financial Institutions Fund of the United States Treasury that |
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includes this state in its service area; |
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(3) a certificate executed by an executive officer of |
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the entity attesting that the allocation agreement remains in |
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effect and has not been revoked or canceled by the Community |
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Development Financial Institutions Fund of the United States |
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Department of the Treasury; |
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(4) a description of the proposed amount, structure, |
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and purchaser of the equity investment or long-term debt security; |
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(5) the name and tax identification number of any |
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entity eligible to claim tax credits as a result of the purchase of |
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the qualified equity investment, if known; |
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(6) information regarding the proposed use of proceeds |
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from the issuance of the qualified equity investment, if known; and |
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(7) an economic impact analysis from an economic |
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expert of the potential qualified equity investment and the |
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proposed use of the proceeds, which must include: |
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(A) an estimate of the amount of revenue to be |
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generated to the state as a result of the qualified equity |
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investment and the proposed use of the proceeds; |
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(B) an estimate of any secondary economic |
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benefits to be generated as a result of the qualified equity |
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investment and the proposed use of the proceeds; and |
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(C) any other information required by the |
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comptroller to make the certification required by Subsection (c). |
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(b) The application must be accompanied by a nonrefundable |
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application fee of $5,000. The fee shall be paid to the comptroller |
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and shall be required for each application submitted. |
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(c) Within 15 days after receipt of a completed application |
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containing the information necessary for the comptroller to certify |
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a potential qualified equity investment, including the payment of |
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the application fee, the comptroller shall grant or deny the |
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application in full or in part. The comptroller may not grant an |
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application in full or in part until the comptroller, based on an |
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evaluation of the economic impact analysis under Subsection (a)(7), |
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certifies that the potential qualified equity investment and the |
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proposed use of the proceeds will have a positive impact on state |
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revenue. If the comptroller denies any part of the application, the |
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comptroller shall inform the qualified community development |
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entity of the grounds for the denial. If the qualified community |
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development entity provides any additional information required by |
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the comptroller or otherwise completes its application within 15 |
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days of the notice of denial, the application shall be considered |
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completed as of the original date of submission. If the qualified |
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community development entity fails to provide the information or |
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complete its application within the 15-day period, the application |
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remains denied and must be resubmitted in full with a new submission |
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date. |
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(d) If the application is considered complete, the |
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comptroller shall certify the proposed equity investment or |
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long-term debt security as a qualified equity investment and |
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eligible for tax credits under this section, subject to the |
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limitations provided by this subchapter. The comptroller shall |
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provide written notice of the certification to the qualified |
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community development entity. The notice shall include the names |
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of those taxable entities who are eligible to claim the credits, if |
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known, and their respective credit amounts. If the names of the |
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taxable entities identified as eligible to claim the credits change |
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due to a transfer of a qualified equity investment under Section |
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171.528(a) or a change in an allocation under Section 171.528(b), |
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the qualified community development entity shall notify the |
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comptroller of the change. |
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(e) Within 30 days after receiving notice of certification, |
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the qualified community development entity shall issue the |
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qualified equity investment and receive cash in the amount of the |
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certified purchase price. The qualified community development |
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entity must provide the comptroller with evidence of the receipt of |
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the cash investment within 10 business days after receipt. If the |
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qualified community development entity does not receive the cash |
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investment and issue the qualified equity investment within 30 days |
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following receipt of the certification notice, the certification |
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shall lapse and the entity may not issue the qualified equity |
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investment without reapplying to the comptroller for |
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certification. A certification that lapses reverts back to the |
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comptroller and may be reissued only in accordance with the |
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application process prescribed by this section. |
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(f) The comptroller shall certify qualified equity |
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investments in the order applications are received by the |
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comptroller. Applications received on the same day shall be |
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considered to have been received simultaneously. For applications |
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received on the same day and considered complete, the comptroller |
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shall certify, consistent with remaining tax credit capacity, |
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qualified equity investments in proportionate percentages based on |
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the ratio of the amount of qualified equity investment requested in |
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an application to the total amount of qualified equity investments |
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requested in all applications received on the same day. If a |
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pending request cannot be fully certified because of the |
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limitations prescribed by Section 171.522(a), the comptroller |
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shall certify the portion that may be certified unless the |
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qualified community development entity elects to withdraw its |
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request rather than receive partial credit. |
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(g) A qualified community development entity, on a |
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collective basis with all of its affiliated entities listed in its |
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allocation agreement with the Community Development Financial |
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Institutions Fund of the United States Department of the Treasury |
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or subsidiaries of those entities, may not request certification |
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for a qualified equity investment that would entitle the purchaser |
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of the qualified equity investment to have allocated to the |
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purchaser at any time more than 30 percent of the total value of the |
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tax credits that may be claimed under this subchapter. |
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(h) Notwithstanding Subsection (g), a qualified community |
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development entity, alone or on a collective basis with all of its |
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affiliated entities listed in its allocation agreement with the |
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Community Development Financial Institutions Fund of the United |
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States Department of the Treasury or subsidiaries of those |
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entities, may request certification for a qualified equity |
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investment that would entitle the purchaser of the qualified equity |
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investment to have allocated to the purchaser at any time more than |
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30 percent of the total value of the tax credits that may be claimed |
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under this subchapter if: |
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(1) it has been at least 180 days since the date the |
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comptroller certified the qualified community development entity's |
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most recent request under this subchapter; or |
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(2) it has been less than 180 days since the date the |
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comptroller certified the qualified community development entity's |
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most recent request under this subchapter, and the entity |
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demonstrates that the entity has invested substantially all of the |
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purchase price of the qualified equity investments that have been |
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previously certified under this subchapter. |
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Sec. 171.530. RECAPTURE OF CREDIT. (a) The comptroller |
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may recapture a portion of a tax credit allowed under this |
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subchapter if: |
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(1) any amount of federal tax credit that might be |
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available with respect to the qualified equity investment that |
|
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generated the tax credit under this subchapter is recaptured under |
|
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Section 45D, Internal Revenue Code of 1986, as amended; |
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(2) the qualified community development entity |
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redeems or makes a principal repayment with respect to the |
|
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qualified equity investment that generated the tax credit before |
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the final credit allowance date of the qualified equity investment; |
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or |
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(3) the qualified community development entity fails |
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to invest at least 85 percent of the purchase price of the qualified |
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equity investment in qualified low-income community investments in |
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qualified active low-income community businesses located in this |
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state within 12 months of the issuance of the qualified equity |
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investment and maintain that level of investment in qualified |
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low-income community investments in qualified active low-income |
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community businesses located in this state until the last credit |
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allowance date for the qualified equity investment. |
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(b) The qualified community development entity shall keep |
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sufficiently detailed books and records with respect to the |
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investments made with the proceeds of the qualified equity |
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investments to allow the direct tracing of the proceeds into |
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qualified low-income community investments in qualified active |
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low-income community businesses in this state. For purposes of |
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calculating the amount of qualified low-income community |
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investments held by a qualified community development entity, an |
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investment shall be considered held by the qualified community |
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development entity even if the investment has been sold or repaid, |
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provided that the qualified community development entity reinvests |
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an amount equal to the capital returned to or recovered from the |
|
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original investment, exclusive of any profits realized, in another |
|
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qualified active low-income community business in this state within |
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12 months of the receipt of the capital. A qualified community |
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|
development entity may not be required to reinvest capital returned |
|
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from qualified low-income community investments after the sixth |
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anniversary of the issuance of the qualified equity investment, the |
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proceeds of which were used to make the qualified low-income |
|
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community investment, and the qualified low-income community |
|
|
investment shall be considered held by the issuer through the |
|
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qualified equity investment's final credit allowance date. |
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(c) In a situation described by Subsection (a)(1), the |
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comptroller's recapture shall be proportionate to the federal |
|
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recapture with respect to the qualified equity investment. In a |
|
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situation described by Subsection (a)(2), the comptroller's |
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recapture shall be proportionate to the amount of the redemption or |
|
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repayment with respect to the qualified equity investment. |
|
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(d) The comptroller shall provide notice to the qualified |
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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 |
|
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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. |
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|
Sec. 171.531. EXPIRATION. (a) This subchapter expires |
|
|
December 31, 2013. |
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|
(b) The expiration of this subchapter does not affect a |
|
|
credit that was established under this subchapter due to the |
|
|
purchase of 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 chapter 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. |
|
|
(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 Department of the 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. |
|
|
(8) "State premium tax liability" means any liability |
|
|
incurred by an entity under Chapters 221 through 226. |
|
|
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 all entities 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 against the entity's state |
|
|
premium tax liability on a premium tax report filed under this |
|
|
subtitle if the entity purchases a qualified equity investment from |
|
|
a qualified community development entity and holds the qualified |
|
|
equity investment on a credit allowance date that occurs during the |
|
|
period on which the report is based. |
|
|
(b) An entity described by Subsection (a) 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 $20 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 entity, |
|
|
including the entity's qualified equity investment to which the |
|
|
credit relates, 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 Department of the |
|
|
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 canceled 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 |
|
|
entity eligible to claim tax credits earned as a result of the |
|
|
purchase of the qualified equity investment, if known; |
|
|
(6) information regarding the proposed use of proceeds |
|
|
from the issuance of the qualified equity investment, if known; and |
|
|
(7) an economic impact analysis from an economic |
|
|
expert of the potential qualified equity investment and the |
|
|
proposed use of the proceeds, which must include: |
|
|
(A) an estimate of the amount of revenue to be |
|
|
generated to the state as a result of the qualified equity |
|
|
investment and the proposed use of the proceeds; |
|
|
(B) an estimate of any secondary economic |
|
|
benefits to be generated as a result of the qualified equity |
|
|
investment and the proposed use of the proceeds; and |
|
|
(C) any other information required by the |
|
|
comptroller to make the certification required by Subsection (c). |
|
|
(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. The comptroller may not grant an |
|
|
application in full or in part until the comptroller, based on an |
|
|
evaluation of the economic impact analysis under Subsection (a)(7), |
|
|
certifies that the potential qualified equity investment and the |
|
|
proposed use of the proceeds will have a positive impact on state |
|
|
revenue. 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 this chapter. The comptroller shall |
|
|
provide written notice of the certification to the qualified |
|
|
community development entity. The notice shall include the names |
|
|
of those entities who are eligible to claim the credits, if known, |
|
|
and their respective credit amounts. If the names of the entities |
|
|
that are eligible to claim the credits change due to a transfer of a |
|
|
qualified equity investment under Section 231.008(a) 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. |
|
|
(g) A qualified community development entity, on a |
|
|
collective basis with all of its affiliated entities listed in its |
|
|
allocation agreement with the Community Development Financial |
|
|
Institutions Fund of the United States Department of the Treasury |
|
|
or subsidiaries of those entities, may not request certification |
|
|
for a qualified equity investment that would entitle the purchaser |
|
|
of the qualified equity investment to have allocated to the |
|
|
purchaser at any time more than 30 percent of the total value of the |
|
|
tax credits that may be claimed under this chapter. |
|
|
(h) Notwithstanding Subsection (g), a qualified community |
|
|
development entity, alone or on a collective basis with all of its |
|
|
affiliated entities listed in its allocation agreement with the |
|
|
Community Development Financial Institutions Fund of the United |
|
|
States Department of the Treasury or subsidiaries of those |
|
|
entities, may request certification for a qualified equity |
|
|
investment that would entitle the purchaser of the qualified equity |
|
|
investment to have allocated to the purchaser at any time more than |
|
|
30 percent of the total value of the tax credits that may be claimed |
|
|
under this chapter if: |
|
|
(1) it has been at least 180 days since the date the |
|
|
comptroller certified the qualified community development entity's |
|
|
most recent request under this chapter; or |
|
|
(2) it has been less than 180 days since the date the |
|
|
comptroller certified the qualified community development entity's |
|
|
most recent request under this chapter, and the entity demonstrates |
|
|
that the entity has invested substantially all of the purchase |
|
|
price of the qualified equity investments that have been previously |
|
|
certified under this chapter. |
|
|
Sec. 231.010. RECAPTURE OF CREDIT. (a) The comptroller |
|
|
may recapture a portion of a tax credit allowed under this chapter |
|
|
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 chapter 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. RETALIATORY TAX. An entity claiming a credit |
|
|
under this chapter is not required to pay any additional |
|
|
retaliatory tax levied under Chapter 281 as a result of claiming |
|
|
that credit. |
|
|
Sec. 231.012. 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 the purchase of 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. |