| |
| |
|
|
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. |