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SECTION 1. Subtitle B, Title
3, Insurance Code, is amended by adding Chapter 231 to read as follows:
CHAPTER 231. TAX CREDIT
FOR INVESTMENT IN CERTAIN COMMUNITIES
SUBCHAPTER A. GENERAL
PROVISIONS
Sec. 231.001. GENERAL
DEFINITIONS. In this chapter:
(1) "Administrator" means the Texas Economic Development
and Tourism Office in the office of the governor.
(2) "Applicable
percentage" means zero percent for the first two credit allowance
dates, seven percent for the third credit allowance date, and eight percent
for the next four credit allowance dates.
(3)
"Comptroller" means the comptroller of public accounts.
(4) "Credit
allowance date" means, with respect to any qualified equity
investment:
(A) the date on which the
investment is initially made; and
(B) the anniversary of
that date in each of the six years immediately following that date.
(5) "Purchase
price" means the amount paid to the issuer of a qualified equity
investment for the qualified equity investment.
(6) "State premium
tax liability" means any tax liability incurred by an entity under this subtitle.
Sec. 231.002. DEFINITION:
LONG-TERM DEBT SECURITY. (a) In this chapter, "long-term debt
security" means a debt instrument issued by a qualified community
development entity, at par value or a premium, with an original maturity
date not earlier than the seventh year after the date on which the debt
instrument is issued, with no acceleration of repayment, amortization, or
prepayment features before its original maturity date.
(b) 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 on which the debt instrument
is issued and ending on the final credit allowance date in an amount that
exceeds the cumulative operating income, as defined by regulations adopted
under Section 45D, Internal Revenue Code of 1986, of the qualified
community development entity for that period before giving effect to the
expense of the cash interest payments.
(c) This section does not
limit the holder's ability to accelerate payments on the debt instrument in situations where the
issuer has defaulted on covenants designed to ensure compliance with this
chapter or Section 45D, Internal Revenue Code of 1986.
Sec. 231.003. DEFINITION:
QUALIFIED ACTIVE LOW-INCOME COMMUNITY BUSINESS. (a) In this chapter,
"qualified active low-income community business" has the meaning
assigned by Section 45D, Internal Revenue Code of 1986, and 26 C.F.R.
Section 1.45D-1, except that the term is limited to those businesses meeting the Small Business Administration
size eligibility standards established by 13 C.F.R. Sections 121.101-121.201 at the time the qualified low-income
community investment is made.
(b) A business is
considered a qualified active low-income community business for the
duration of the qualified community development entity's investment in, or
loan to, the business if the 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, other than the Small Business Administration size standards,
throughout the entire period of the investment or loan.
(c) A business that
derives or projects to derive 15 percent or more of its annual revenue from
the rental or sale of real estate is not a qualified active low-income
community business for purposes of this chapter. This exclusion does not
apply to a business that is controlled by, or under common control with, an
affiliated entity if the affiliated entity:
(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 business.
Sec. 231.004. DEFINITION:
QUALIFIED COMMUNITY DEVELOPMENT ENTITY. In this chapter, "qualified
community development entity" has the meaning assigned by Section 45D,
Internal Revenue Code of 1986, provided that the entity has entered into,
for the current year or any prior year, an allocation agreement with the
community development financial institutions fund of the U.S. Treasury
Department with respect to credits authorized by Section 45D, Internal
Revenue Code of 1986, which includes this state in the service area set
forth in the allocation agreement. The term includes a subsidiary qualified community development
entity of a qualified community
development entity.
Sec. 231.005. DEFINITION:
QUALIFIED EQUITY INVESTMENT. (a) An investment or security is a
"qualified equity investment" for purposes of this chapter if:
(1) the investment or
security is an equity investment in, or long-term debt security issued by,
a qualified community development entity;
(2) the investment or
security is acquired on or after October 1, 2013, at its original issuance
solely in exchange for cash;
(3) not later than the
first anniversary of the initial credit allowance date at least one hundred
percent of the investment's or security's cash purchase price is used by
the issuer to make qualified low-income community investments in qualified
active low-income community businesses located in this state; and
(4) the investment or
security is designated by the issuer as a qualified equity investment under
this section and is certified by the administrator
as not exceeding the limitation provided by Section 231.104.
(b) Qualified equity
investment includes an investment or security that does not satisfy the
requirements of Subsection (a) if the investment or security was a
qualified equity investment in the hands of a prior holder.
Sec. 231.006. DEFINITION:
QUALIFIED LOW-INCOME COMMUNITY INVESTMENT.
No
equivalent provision.
Sec. 231.007. NEW MARKETS
PERFORMANCE GUARANTEE ACCOUNT. The new markets performance guarantee
account is established as a special account outside the state treasury.
The comptroller shall administer the account, and shall deposit a
refundable performance fee received
from a qualified community development entity under Subchapter E into the
account.
No
equivalent provision.
SUBCHAPTER B. TAX CREDIT
Sec. 231.051. CREDIT
ESTABLISHED. (a) An entity that makes
a qualified equity investment earns a vested right to credit against the entity's state premium tax liability on a premium tax report filed under this subtitle
that may be claimed as provided by this section.
(b) On each credit
allowance date of a qualified equity investment, the entity, or a subsequent holder of the
qualified equity investment, may claim a portion of the credit during the
tax year of that credit allowance date.
(c) The credit amount is
equal to the applicable percentage for the credit allowance date multiplied
by the purchase price paid to the issuer of the qualified equity
investment.
(d) The amount of the
credit claimed by an entity may not
exceed the amount of the entity's
state premium tax liability for the tax year for which the credit is
claimed.
Any amount of tax credit
that the entity is prohibited from
claiming in a tax year as a result of this subsection may be carried
forward for use in a subsequent tax year.
Sec. 231.052.
TRANSFERABILITY. (a) A tax credit claimed under this chapter is not refundable
or saleable.
(b) 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 the entity for their direct use in accordance with an agreement
among the partners, members, or shareholders. An allocation under this
subsection does not constitute a sale for purposes of this chapter.
Sec. 231.053. RETALIATORY
TAX. (a) 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.
(b) In addition to the
exclusion provided by Subsection (a), an
entity claiming a credit under this chapter is not required to pay
any additional tax that may arise as a result of claiming that credit.
SUBCHAPTER C.
CERTIFICATION OF QUALIFIED EQUITY INVESTMENTS
Sec. 231.101.
CERTIFICATION OF QUALIFIED EQUITY INVESTMENTS.
(a) A qualified community
development entity that seeks to have an equity investment or long-term
debt security certified as a qualified equity investment eligible for tax
credits under this chapter must apply to the administrator
as provided by this section.
(b) An application under
this section must include the following:
(1) evidence of the
applicant's certification as a qualified community development entity,
including evidence of the service area of the entity that includes this
state;
(2) a copy of an
allocation agreement executed by the applicant, or its controlling entity,
and the community development financial institutions fund;
(3) a certificate
executed by an executive officer of the applicant attesting that the
allocation agreement remains in effect and has not been revoked or canceled
by the community development financial institutions fund;
(4) a description of the
proposed amount and structure, and of the purchaser, of the qualified
equity investment;
(5) identifying
information for an entity that will
earn tax credits as a result of the issuance of the qualified equity investment;
(6) examples of the types
of qualified active low-income community businesses in which the applicant,
its controlling entity, or affiliates of its controlling entity have
invested under the federal New Markets Tax Credit Program, except that an
applicant is not required to disclose the identity of a specific qualified
active low-income community business in which the applicant intends to
invest;
(7) a nonrefundable
application fee of $5,000 to be paid to the administrator;
and
(8) the refundable
performance fee of $500,000 required
by Subchapter E.
Sec. 231.102. ACTION ON
APPLICATION. (a) Not later than the 30th day after the date an
application under Section 231.101 is received, the administrator shall grant or deny the application in full or
in part.
(b) If the administrator denies part of the
application, the administrator shall
inform the applicant of the grounds for denial.
(c) If the applicant
provides additional information required by the administrator or otherwise completes the application not later
than the 15th day after the date of the notice of denial, the application
is considered completed as of the date on which it was originally
submitted. If the qualified community development entity fails to provide
the information or complete its application before that date, the
application is denied and must be resubmitted in full and has a new
submission date.
Sec. 231.103.
CERTIFICATION OF QUALIFIED EQUITY INVESTMENT. (a) If an application under
Section 231.102 is approved, the administrator shall certify the proposed
equity investment or long-term debt security as a qualified equity
investment that is eligible for tax credits under this chapter, subject to
Section 231.104.
(b) The administrator shall provide written notice
of the certification to the qualified community development entity and to the comptroller.
(c) The notice must
include the names of those entities who
earned the credits and their respective credit amounts.
If the names of the
entities that are eligible to claim the credits change due to a transfer of
a qualified equity investment or an allocation under Section 231.052, the
qualified community development entity shall notify the administrator of the change, and on receipt of the
notice, the administrator shall notify the comptroller.
(d) The administrator shall certify qualified equity
investments in the order in which applications are received by the administrator.
Applications received on
the same day are considered to have been received simultaneously. For
applications that are complete and received on the same day, the administrator shall certify, consistent with
remaining qualified equity investment capacity, the qualified equity
investments in proportionate percentages based on the proportion that the amount
of qualified equity investment requested in an application bears to the
total amount of qualified equity investments requested in all applications
received on the same day.
Sec. 231.104. LIMIT ON
CERTIFIED INVESTMENTS. Not more than $750 million in qualified equity
investments may be certified under Section 231.103 at any time.
If a pending request
cannot be fully certified due to this limit, the administrator shall certify the portion that can be certified
unless the qualified community development entity elects to withdraw the
request rather than receive partial certification.
Sec. 231.105. TRANSFER OF
INVESTMENT AUTHORITY. An approved applicant may transfer all or a portion
of its certified qualified equity investment authority to its controlling
entity or a subsidiary qualified
community development entity of the
controlling entity, if the applicant:
(1) provides the
information required in the application with respect to the recipient of
the transfer; and
(2) notifies the administrator of the transfer not later than
the 30th day after the date of the transfer.
Sec. 231.106. ISSUANCE OF
QUALIFIED EQUITY INVESTMENT. (a) Not later than the 30th day after the
date the applicant receives notice of certification, the qualified
community development entity or a recipient of a transfer under Section
231.105 shall issue the qualified equity investment and receive cash in the
amount certified.
(b) The qualified
community development entity or a recipient of a transfer under Section
231.105 must provide the administrator
with evidence of the receipt of the cash investment not later than the 10th
business day after the date the cash investment is received.
Sec. 231.107. LAPSE OF
CERTIFICATION. (a) If the qualified community development entity or a
recipient of a transfer under Section 231.105 does not receive the cash
investment and issue the qualified equity investment before the 30th day
after the date the certification notice is received as required by Section
231.106, the certification lapses and the entity may not issue the
qualified equity investment without reapplying to the administrator for certification.
(b) If a certification
lapses under this section, the administrator
shall reissue the certified amount, giving preference to an applicant whose
allocation was reduced under Section 231.104.
If more than one applicant
had its allocation reduced, the administrator
shall reissue the certified amount on a pro rata basis. After the
allocation to applicants whose allocation was reduced under Section
231.104, the administrator shall
reissue any certified amount that remains in accordance with the
application process.
SUBCHAPTER D. RECAPTURE OF
PREMIUM TAX CREDIT
Sec. 231.151. RECAPTURE.
(a) Subject to Section 231.152, the comptroller shall recapture the amount
of a tax credit claimed on a premium tax report filed under this subtitle
from the entity that claims the credit
if:
(1) any amount of a
federal tax credit available with respect to a qualified equity investment
that is eligible for a credit under this chapter is recaptured under
Section 45D, Internal Revenue Code of 1986, in which case the comptroller's
recapture must be proportionate to the federal recapture with respect to
the qualified equity investment;
(2) the issuer redeems or
makes principal repayment with respect to a qualified equity investment
before the seventh anniversary of the date the qualified equity investment
is issued, in which case the comptroller's recapture must be proportionate
to the amount of the redemption or repayment with respect to the qualified
equity investment;
(3) the issuer fails to
invest an amount equal to 100 percent of the purchase price of the
qualified equity investment in qualified low-income community investments
in this state during the 12-month period immediately following the date the
qualified equity investment is issued or to maintain at least 100 percent
of that level of investment in qualified low-income community investments
in this state until the last credit allowance date for the qualified equity
investment; or
(4) at any time before
the final credit allowance date of a qualified equity investment, the
issuer uses the cash proceeds of the qualified equity investment to make
qualified low-income community investments in any one qualified active
low-income community business, including affiliated qualified active
low-income community businesses, exclusive of reinvestments of capital
returned or repaid with respect to earlier investments in the qualified
active low-income community business and its affiliates, in excess of 25
percent of the cash proceeds.
(b) For purposes of this
chapter, an investment is considered held by an issuer even if the
investment has been sold or repaid if the issuer reinvests an amount equal
to the capital returned to or recovered by the issuer from the original
investment, exclusive of any profits realized, in another qualified
low-income community investment not later than the 12th month after the
date the issuer receives the capital.
(c) An issuer is not required
to reinvest capital returned from a qualified low-income community
investment after the sixth anniversary of the date the qualified equity
investment is issued, the proceeds of which were used to make the qualified
low-income community investment, and the qualified low-income community
investment is considered held by the issuer through the seventh anniversary
of the date the qualified equity investment was issued.
Sec. 231.152. NOTICE OF
NONCOMPLIANCE. (a) The comptroller shall notify an entity that has claimed a tax credit on a premium tax report
if the credit is subject to recapture under Section 231.151.
(b) The comptroller may
not recapture a tax credit under this subchapter if the qualified community
development entity cures the noncompliance described by Section 231.151
before the 180th day after the date the entity
receives notice under Subsection (a).
SUBCHAPTER E. PERFORMANCE FEE
Sec. 231.201. PERFORMANCE
FEE REQUIRED. A qualified community
development entity that seeks to have
an equity investment or long-term debt security certified as a qualified
equity investment eligible for tax credits under this chapter must pay a fee in the amount of $500,000 to the comptroller for deposit in the new
markets performance guarantee account.
Sec. 231.202. FORFEITURE
OF FEE.
(a) A qualified community
development entity that pays a
performance fee under Section 231.201
shall forfeit the fee in its entirety
if:
(1) the entity and its subsidiary qualified community
development entities
fail to issue the total
amount of qualified equity investments certified by the administrator and receive cash in the total
amount certified under Section 231.103; or
(2) the entity or a subsidiary qualified community
development entity
that issues a qualified
equity investment certified under Section 231.103 fails to meet the
investment requirement under Section 231.151(a)(3) by the second credit
allowance date of the qualified equity investment.
(b) The comptroller shall
notify an entity that has paid a fee
under Section 231.201 if the fee is
subject to forfeiture under this section.
(c) A fee is not subject to forfeiture under
Subsection (a)(2) if the entity cures
the noncompliance before the 180th day after the date the entity receives notice under Subsection (b).
Sec. 231.203. NEW MARKETS
PERFORMANCE GUARANTEE ACCOUNT. (a) The fee
required by Section 231.201 shall be paid to
the comptroller and held in the new markets performance guarantee account
until the comptroller finds that the qualified community development entity
has complied with the provisions of this chapter.
(b) The qualified
community development entity may request a refund of the fee from the comptroller before the 30th day after the date the entity pays the fee.
(c) The comptroller shall
refund the fee or, if applicable, give
notice of noncompliance, not later than the 30th day after the date of
receiving a request that complies with Subsection (b).
SUBCHAPTER F. LETTER RULING
Sec. 231.251. REQUEST FOR
LETTER RULING. At the request of an applicant or entity, the administrator
or the comptroller shall, with respect to the tax credit program authorized
under this chapter, issue a written letter ruling interpreting the law as
it applies to a specific set of facts provided by the applicant or entity
requesting the interpretation.
Sec. 231.252. RESPONSE TO
REQUEST. (a) The administrator or comptroller shall respond to a request
under Section 231.251 not later than the 60th day after the date the
request is received.
(b) The applicant or
entity may provide a draft letter ruling for the administrator's or
comptroller's consideration.
(c) The applicant or
entity may withdraw the request for a letter ruling, in writing, before the
issuance of the letter ruling.
(d) The administrator or
comptroller may refuse to issue a letter ruling for good cause, but must
list the specific reasons for refusing to issue the letter ruling. Good
cause for refusing to issue a letter ruling under this subsection includes
any of the following:
(1) the applicant or
entity requests the administrator or comptroller to determine whether a
statute is constitutional or a rule complies with law;
(2) the request involves
a hypothetical situation or alternative scenarios;
(3) the facts or issues
presented in the request are unclear, overbroad, insufficient, or otherwise
inappropriate as a basis on which to issue a letter ruling; or
(4) the issue is
currently being considered in a rulemaking procedure, contested case, or
other agency or judicial proceeding that may definitely resolve the issue.
Sec. 231.253. EFFECT OF
LETTER RULING. (a) A letter ruling binds the administrator or
comptroller, as applicable, to the determination reached in the letter
ruling with respect to the applicant or entity that requested the letter
ruling, until the applicant or entity or the applicant's or entity's
shareholders, members, or partners, as applicable, claim all credits issued
to the applicant or entity, if any, on a premium tax report filed under this
subtitle, subject to the terms and conditions set forth in properly
published regulations.
(b) A letter ruling
applies only to the applicant or entity that requests the letter ruling.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
Sec. 231.254.
CONSIDERATION OF INTERNAL REVENUE CODE. In issuing a letter ruling and making other
determinations under this chapter, the administrator
or comptroller shall consider Section 45D, Internal Revenue Code of
1986, and the rules and regulations issued under that code, to the extent
that those provisions are applicable.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
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SECTION 1. Subtitle B, Title
3, Insurance Code, is amended by adding Chapter 231 to read as follows:
CHAPTER 231. TAX CREDIT
FOR INVESTMENT IN CERTAIN COMMUNITIES
SUBCHAPTER A. GENERAL
PROVISIONS
Sec. 231.001. GENERAL
DEFINITIONS. In this chapter:
(1) "Applicable
percentage" means zero percent for the first two credit allowance
dates, seven percent for the third credit allowance date, and eight percent
for the next four credit allowance dates.
(2)
"Comptroller" means the comptroller of public accounts.
(3) "Credit
allowance date" means, with respect to any qualified equity
investment:
(A) the date on which the
investment is initially made; and
(B) the anniversary of
that date in each of the six years immediately following that date.
(4) "Purchase
price" means the amount paid to the issuer of a qualified equity
investment for the qualified equity investment.
(5) "State premium
tax liability" means any premium
tax liability incurred under Chapter 221,
222, 223, or 224.
Sec. 231.002. DEFINITION:
LONG-TERM DEBT SECURITY. (a) In this chapter, "long-term debt
security" means a debt instrument issued by a qualified community
development entity, at par value or a premium, with an original maturity
date not earlier than the seventh year after the date on which the debt
instrument is issued, with no acceleration of repayment, amortization, or
prepayment features before its original maturity date.
(b) The qualified
community development entity that issues a
long-term debt security may not make cash interest payments on the security during the period beginning on the
date on which the security is issued
and ending on the final credit allowance date in an amount that exceeds the
cumulative operating income, as defined by regulations adopted under
Section 45D, Internal Revenue Code of 1986, of the qualified community
development entity for that period before giving effect to the interest expense of the long-term debt security.
(c) This section does not
limit the holder's ability to accelerate payments on a long-term debt security in situations where
the issuer has defaulted on covenants designed to ensure compliance with
this chapter or Section 45D, Internal Revenue Code of 1986.
Sec. 231.003. DEFINITION:
QUALIFIED ACTIVE LOW-INCOME COMMUNITY BUSINESS. (a) In this chapter,
"qualified active low-income community business" has the meaning
assigned by Section 45D, Internal Revenue Code of 1986, and 26 C.F.R.
Section 1.45D-1, except that the term is limited to those businesses that do not exceed the Small Business
Administration size eligibility standards established by 13 C.F.R. Section 121.201 at the time the qualified
low-income community investment is made.
(b) A business is
considered a qualified active low-income community business for the
duration of the qualified community development entity's investment in, or
loan to, the business if the 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, other than the Small Business Administration size standards,
throughout the entire period of the investment or loan.
(c) A business that
derives or projects to derive 15 percent or more of its annual revenue from
the rental or sale of real estate is not a qualified active low-income
community business for purposes of this chapter. This exclusion does not
apply to a business that is controlled by, or under common control with, an
affiliated entity if the affiliated entity:
(1) does not derive or
project to derive 15 percent or more of its annual revenue from the rental
or sale of real estate; and
(2) is the primary tenant
of the real estate leased from the business.
Sec. 231.004. DEFINITION:
QUALIFIED COMMUNITY DEVELOPMENT ENTITY. In this chapter, "qualified
community development entity" has the meaning assigned by Section 45D,
Internal Revenue Code of 1986, provided that the entity has entered into,
for the current year or any prior year, 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, that includes this state in the service
area set forth in the allocation agreement. The term includes a qualified
community development entity that is
controlled by or under common control with another qualified
community development entity described by this section.
Sec. 231.005. DEFINITION:
QUALIFIED EQUITY INVESTMENT. (a) An investment or security is a
"qualified equity investment" for purposes of this chapter if:
(1) the investment or
security is an equity investment in, or long-term debt security issued by,
a qualified community development entity;
(2) the investment or
security is acquired on or after October 1, 2013, at its original issuance
solely in exchange for cash;
(3) not later than the
first anniversary of the initial credit allowance date at least 100 percent
of the investment's or security's cash purchase price is used by the issuer
to make qualified low-income community investments in qualified active
low-income community businesses located in this state; and
(4) the investment or
security is designated by the issuer as a qualified equity investment under
this section and is certified by the comptroller
as not exceeding the limitation provided by Section 231.104.
(b) Qualified equity
investment includes an investment or security that does not satisfy the
requirements of Subsection (a) if the investment or security was a
qualified equity investment in the hands of a prior holder.
Sec. 231.006. DEFINITION:
QUALIFIED LOW-INCOME COMMUNITY INVESTMENT.
Sec. 231.007. DEFINITION:
QUALIFIED INVESTOR. In this chapter, "qualified investor" means
an entity that makes a qualified equity investment as defined by Section
231.005, or an entity that is allocated premium tax credits under Section
231.052(b).
Sec. 231.008. NEW MARKETS
PERFORMANCE GUARANTEE ACCOUNT. The new markets performance guarantee
account is established as a special account outside the state treasury.
The comptroller shall administer the account and shall deposit a refundable
performance deposit received from a
qualified community development entity under Subchapter E into the account.
Sec. 231.009. RULES AND
STANDARDS. (a) The comptroller may adopt rules as necessary to implement
the duties of the comptroller under this chapter.
(b) The comptroller,
acting as the administrator, may:
(1) by rule set limits
and restrictions on the use of the proceeds raised by a qualified community
development entity, consistent with Section 45D, Internal Revenue Code of
1986;
(2) review or audit the
investments of a qualified community development entity on a periodic
basis;
(3) establish limits on
the formation and syndication costs of a qualified community development
entity and the entity's debt instruments;
(4) consistent with
practices under Section 45D, Internal Revenue Code of 1986, establish
limits of a qualified community development entity's operating expenses,
including legal fees, loan sourcing or origination fees, loan servicing
fees, management fees paid to affiliated firms, including non-Texas-based
firms, organizational and formation expenses, and performance bonds; and
(5) limit any original
issue discount on a debt instrument issued by a qualified community
development entity.
SUBCHAPTER B. TAX CREDIT
Sec. 231.051. CREDIT
ESTABLISHED. (a) Subject to Section
231.052(b), a qualified investor that makes a qualified equity
investment earns a vested right to credit against the qualified investor's state premium tax
liability.
(b) On each credit
allowance date of a qualified equity investment, the qualified investor, or a subsequent holder
of the qualified equity investment, may claim a portion of the credit
during the tax year of that credit allowance date.
(c) The credit amount is
equal to the applicable percentage for the credit allowance date multiplied
by the purchase price paid to the issuer of the qualified equity
investment.
(d) The amount of the
credit claimed by a qualified investor
may not exceed the amount of the qualified
investor's state premium tax liability for the tax year for which
the credit is claimed.
Any amount of tax credit
that the qualified investor is
prohibited from claiming in a tax year as a result of this subsection may
be carried forward for use in a subsequent tax year.
Sec. 231.052.
TRANSFERABILITY. (a) A premium tax
credit claimed under this chapter is not refundable or salable.
(b) A premium tax credit earned by or allocated to a partnership, limited
liability company, S corporation, or other pass-through entity may be
allocated to the partners, members, or shareholders of the entity for their
direct use in accordance with an agreement among the partners, members, or
shareholders. An allocation under this subsection does not constitute a
sale for purposes of this chapter.
Sec. 231.053. RETALIATORY
TAX. (a) A qualified investor or a
subsequent holder of a qualified equity investment claiming a premium tax credit under this chapter is not
required to pay any additional retaliatory tax levied under Chapter 281 as
a result of claiming that credit.
(b) In addition to the
exclusion provided by Subsection (a), a
qualified investor or a subsequent holder of the qualified equity
investment claiming a credit under this chapter is not required to
pay any additional tax that may arise as a result of claiming that credit.
SUBCHAPTER C.
CERTIFICATION OF QUALIFIED EQUITY INVESTMENTS
Sec. 231.101. APPLICATION
FOR CERTIFICATION OF QUALIFIED EQUITY INVESTMENT.
(a) A qualified community
development entity that seeks to have an equity investment or long-term
debt security certified as a qualified equity investment eligible for premium tax credits under this chapter must
apply to the comptroller, acting as administrator
under this chapter, as provided by this section.
(b) An application under
this section must include the following:
(1) evidence of the
applicant's certification as a qualified community development entity,
including evidence of the service area of the entity that includes this
state;
(2) a copy of an
allocation agreement executed by the applicant, or its controlling entity,
and the community development financial institutions fund;
(3) a certificate
executed by an executive officer of the applicant attesting that the
allocation agreement remains in effect and has not been revoked or canceled
by the community development financial institutions fund;
(4) a description of the
proposed amount and structure, and of the purchaser, of the qualified
equity investment;
(5) identifying
information for a qualified investor
that will earn premium tax credits as
a result of the issuance of the qualified equity investment;
(6) examples of the types
of qualified active low-income community businesses in which the applicant,
its controlling entity, or affiliates of its controlling entity have
invested under the federal New Markets Tax Credit Program, except that an
applicant is not required to disclose the identity of a specific qualified
active low-income community business in which the applicant intends to
invest;
(7) a nonrefundable
application fee of $5,000 to be paid to the comptroller;
and
(8) the refundable
performance deposit of $500,000
required by Subchapter E.
Sec. 231.102. ACTION ON
APPLICATION. (a) Not later than the 30th day after the date an
application under Section 231.101 is received, the comptroller shall grant or deny the application in full or in
part.
(b) If the comptroller denies part of the application,
the comptroller shall inform the
applicant of the grounds for denial.
(c) If the applicant
provides additional information required by the comptroller or otherwise completes the application not later
than the 15th day after the date of the notice of denial, the application
is considered completed as of the date on which it was originally
submitted. If the qualified community development entity fails to provide
the information or complete its application before that date, the
application is denied and must be resubmitted in full and has a new
submission date.
Sec. 231.103.
CERTIFICATION OF QUALIFIED EQUITY INVESTMENT.
(a) If an application
under Section 231.101 is granted under
Section 231.102, the comptroller shall
certify the proposed equity investment or long-term debt security as a
qualified equity investment that is eligible for premium tax credits under this chapter, subject to Section
231.104.
(b) The comptroller shall provide written notice of
the certification to the qualified community development entity.
(c) The notice must
include the names of those entities that will
earn the credits 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 or an allocation under Section 231.052, the
qualified community development entity shall notify the comptroller of the change.
(d) The comptroller shall certify qualified equity
investments in the order in which applications are received by the comptroller.
Applications received on
the same day are considered to have been received simultaneously. For
applications that are complete and received on the same day, the comptroller shall certify, consistent with
remaining qualified equity investment capacity, the qualified equity
investments in proportionate percentages based on the proportion that the
amount of qualified equity investment requested in an application bears to
the total amount of qualified equity investments requested in all
applications received on the same day.
Sec. 231.104. LIMIT ON
CERTIFIED INVESTMENTS. Not more than $750 million in qualified equity
investments may be certified under Section 231.103.
If a pending request
cannot be fully certified due to this limit, the comptroller shall certify the portion that can be certified
unless the qualified community development entity elects to withdraw the
request rather than receive partial certification.
Sec. 231.105. TRANSFER OF
INVESTMENT AUTHORITY. An approved applicant may transfer all or a portion
of its certified qualified equity investment authority to its controlling
entity or to a qualified community development entity controlled by or under common control with the
applicant, if the applicant:
(1) provides the
information required in the application with respect to the recipient of
the transfer; and
(2) notifies the comptroller of the transfer not later than
the 30th day after the date of the transfer.
Sec. 231.106. ISSUANCE OF
QUALIFIED EQUITY INVESTMENT.
(a) Not later than the
30th day after the date the applicant receives notice of certification, the
qualified community development entity or a recipient of a transfer under
Section 231.105 shall issue the qualified equity investment and receive
cash in the amount certified.
(b) The qualified
community development entity or a recipient of a transfer under Section
231.105 must provide the comptroller
with evidence of the receipt of the cash investment not later than the 10th
business day after the date the cash investment is received.
Sec. 231.107. LAPSE OF
CERTIFICATION. (a) If the qualified community development entity or a
recipient of a transfer under Section 231.105 does not receive the cash
investment and issue the qualified equity investment before the 30th day
after the date the certification notice is received as required by Section
231.106, the certification lapses and the qualified community development
entity may not issue the qualified equity investment without reapplying to
the comptroller for certification.
(b) If a certification
lapses under this section, the comptroller
shall reissue the certified amount, giving preference to an applicant whose
allocation was reduced under Section 231.104.
If more than one applicant
had its allocation reduced, the comptroller
shall reissue the certified amount on a pro rata basis. After the
allocation to applicants whose allocation was reduced under Section
231.104, the comptroller shall reissue
any certified amount that remains in accordance with the application
process.
SUBCHAPTER D. RECAPTURE
OF PREMIUM TAX CREDIT
Sec. 231.151. RECAPTURE.
(a) Subject to Section 231.152, the comptroller shall recapture the amount
of a tax credit claimed on a premium tax report filed under this subtitle
from the qualified investor or a subsequent
holder of the qualified equity investment that claims the credit if:
(1) any amount of a
federal tax credit available with respect to a qualified equity investment
that is eligible for a credit under this chapter is recaptured under
Section 45D, Internal Revenue Code of 1986, in which case the comptroller's
recapture must be proportionate to the federal recapture with respect to
the qualified equity investment;
(2) the issuer redeems or
makes principal repayment with respect to a qualified equity investment
before the seventh anniversary of the date the qualified equity investment
is issued, in which case the comptroller's recapture must be proportionate
to the amount of the redemption or repayment with respect to the qualified
equity investment;
(3) the issuer fails to
invest an amount equal to 100 percent of the purchase price of the
qualified equity investment in qualified low-income community investments
in this state during the 12-month period immediately following the date the
qualified equity investment is issued or to maintain at least 100 percent
of that level of investment in qualified low-income community investments
in this state until the last credit allowance date for the qualified equity
investment; or
(4) at any time before
the final credit allowance date of a qualified equity investment, the
issuer uses the cash proceeds of the qualified equity investment to make
qualified low-income community investments in any one qualified active
low-income community business, including affiliated qualified active
low-income community businesses, exclusive of reinvestments of capital
returned or repaid with respect to earlier investments in the qualified
active low-income community business and its affiliates, in excess of 25
percent of the cash proceeds of all qualified
equity investments issued by the issuer under this chapter.
(b) For purposes of this
chapter, an investment is considered held by an issuer even if the
investment has been sold or repaid if the issuer reinvests an amount equal
to the capital returned to or recovered by the issuer from the original
investment, exclusive of any profits realized, in another qualified
low-income community investment not later than the 12th month after the
date the issuer receives the capital.
(c) An issuer is not
required to reinvest capital returned from a qualified low-income community
investment after the sixth anniversary of the date the qualified equity
investment is issued, the proceeds of which were used to make the qualified
low-income community investment, and the qualified low-income community
investment is considered held by the issuer through the seventh anniversary
of the date the qualified equity investment was issued.
(d) Periodic amounts received during a calendar year as repayment of
principal on a loan that is a qualified low-income community investment
shall be treated as continuously invested in a qualified low-income
community investment if the amounts are reinvested in one or more qualified
low-income community investments not later than the last day of the
following calendar year.
Sec. 231.152. NOTICE OF
NONCOMPLIANCE. (a) The comptroller shall notify a qualified community development entity and a qualified investor that
has claimed a tax credit on a premium tax report if the credit is subject
to recapture under Section 231.151.
(b) The comptroller may
not recapture a tax credit under this subchapter if the qualified community
development entity cures the noncompliance described by Section 231.151
before the 180th day after the date the qualified
community development entity receives notice under Subsection (a).
SUBCHAPTER E. PERFORMANCE
DEPOSIT
Sec. 231.201. PERFORMANCE
DEPOSIT REQUIRED. (a) A qualified
community development entity that submits an
application to have an equity investment or long-term debt security
certified as a qualified equity investment eligible for premium tax credits under this chapter must deposit $500,000 with the comptroller for deposit in the new markets
performance guarantee account.
(b) If the comptroller denies an application described by Subsection
(a) in full, the comptroller shall refund the deposit to the applicant not
later than the 15th day after the date of the denial.
Sec. 231.202. FORFEITURE
OF DEPOSIT. (a) A qualified community
development entity that makes a
performance deposit under Section
231.201(a) shall forfeit the deposit
in its entirety if:
(1) the qualified community development entity and any qualified community development
entity to which a transfer is made by the qualified community development
entity under Section 231.105 fail to issue the total amount of
qualified equity investments certified by the comptroller
and receive cash in the total amount certified under Section 231.103 not later than the date specified by Section 231.106;
or
(2) the qualified community development entity or a
qualified community development entity to which a transfer is made by the
qualified community development entity under Section 231.105 that
issues a qualified equity investment certified under Section 231.103 fails
to meet the investment requirement under Section 231.151(a)(3) by the
second credit allowance date of the qualified equity investment.
(b) The comptroller shall
notify a qualified community development
entity that has made a deposit under Section 231.201(a) if the deposit is subject to forfeiture under this
section.
(c) A deposit is not subject to forfeiture under
Subsection (a)(2) if the qualified community
development entity cures the noncompliance before the 180th day
after the date the qualified community
development entity receives notice under Subsection (b).
Sec. 231.203. NEW MARKETS
PERFORMANCE GUARANTEE ACCOUNT. (a) The deposit
required by Section 231.201(a) shall
be made with the comptroller and held
in the new markets performance guarantee account until the comptroller
finds that the qualified community development entity has complied with the
provisions of this chapter.
(b) The qualified
community development entity may request a refund of the deposit from the comptroller not earlier than the 30th day after the date
the requirements that must be satisfied to
avoid forfeiture of the deposit, as described by Section 231.202, are
satisfied.
(c) The comptroller shall
refund the deposit or, if applicable,
give notice of noncompliance not later than the 30th day after the date of
receiving a request that complies with Subsection (b).
SUBCHAPTER F. EVALUATION OF BUSINESS BY COMPTROLLER
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
Sec. 231.251. REQUEST FOR
EVALUATION.
(a) A qualified community
development entity may, before making an investment in a business, request
a written opinion from the comptroller as to whether the business in which
the qualified community development entity proposes to invest would qualify
as a qualified active low-income community business according to Section
231.003.
(b) Not later than the
15th business day after the date of the receipt of a request under
Subsection (a), the comptroller shall:
(1) determine whether the
business meets the definition of a qualified active low-income community
business, as applicable, and notify the qualified community development
entity of the determination and provide an explanation of the
determination; or
(2) notify the qualified
community development entity that the comptroller requires additional time,
which may not exceed 15 days, to review the request and make the
determination.
(c) If the comptroller
fails to notify the qualified community development entity with respect to
the proposed investment within the period as specified by Subsection (b),
the business in which the qualified community development entity proposes
to invest is considered to be a qualified active low-income community
business.
Sec. 231.252.
CONSIDERATION OF INTERNAL REVENUE CODE. In issuing a written opinion and making other
determinations under this chapter, the comptroller shall consider Section
45D, Internal Revenue Code of 1986, and the rules and regulations issued
under that code, to the extent that those provisions are applicable.
SUBCHAPTER G. REPORTING
Sec. 231.301. REPORT TO
COMPTROLLER.
(a) Except as provided by
this subsection, a qualified community development entity that issues a
qualified equity investment under Section 231.106 shall submit an annual
report to the comptroller not later than the fifth business day after the
anniversary of a credit allowance date applicable to the investment. The
qualified community development entity is not required to submit any report
under this section after the annual report following the final applicable
credit allowance date.
(b) The report must:
(1) provide evidence that
the qualified community development entity has not failed to meet the
investment requirement under Section 231.151(a)(3);
(2) include one or more
bank statements for the qualified community development entity that reflect
each qualified low-income community investment made by the qualified
community development entity in connection with the qualified equity
investment;
(3) state the name,
location, and industry code of each qualified active low-income community
business receiving a qualified low-income community investment in
connection with the qualified equity investment and, if the qualified
community development entity did not receive a written opinion under
Section 231.251 with respect to a qualified active low-income community
business, include evidence that the business was a qualified active
low-income community business at the time the qualified low-income
community investment was made;
(4) state the number of
employment positions created and retained as a result of each qualified
low-income community investment made in connection with the qualified
equity investment;
(5) state whether the
qualified community development entity has been subject to a recapture of
any amount of a federal tax credit available under Section 45D, Internal
Revenue Code of 1986, with respect to the qualified equity investment; and
(6) include a copy of the
most recent annual report submitted by the qualified community development
entity to the United States Department of the Treasury regarding Section
45D, Internal Revenue Code of 1986.
(c) A qualified community
development entity that fails to submit a report to the comptroller within
the time prescribed by Subsection (a) shall pay to the comptroller a
penalty equal to:
(1) $25,000; plus
(2) $5,000 for each day
the report is not submitted after the date the report is due under Subsection
(a).
Sec. 231.302.
COMPTROLLER'S REPORT TO THE LEGISLATURE.
(a) The comptroller shall
prepare a biennial report with respect to the implementation of this
chapter.
(b) The report must
include:
(1) the number of
qualified community development entities holding certified qualified equity
investments;
(2) the amount of
qualified equity investments of each qualified community development
entity;
(3) the amount of
qualified low-income community investments each qualified community
development entity has invested in qualified active low-income community
businesses as of the most recent annual report submitted to the comptroller
by the qualified community development entity;
(4) the total amount of
premium tax credits earned under this chapter;
(5) the performance of
each qualified community development entity with respect to reporting
requirements imposed by this chapter; and
(6) with respect to each
qualified active low-income community business in which a qualified
community development entity has invested:
(A) the classification of
the qualified active low-income community business according to the
industrial sector and the size of the business;
(B) the total number of
jobs created by the qualified low-income community investment and the average
wages paid for the jobs; and
(C) the total number of
jobs retained as a result of the qualified low-income community investment
and the average wages paid for the jobs.
(c) The comptroller shall
file the report with the governor, the lieutenant governor, and the speaker
of the house of representatives not later than December 15 of each
even-numbered year.
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