2014 Kentucky Revised Statutes
CHAPTER 141 - INCOME TAXES
141.433 Application for New Markets Development Program tax credit.
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<![CDATA[141.433 Application for New Markets Development Program tax credit.
(1)
(2)
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 the tax credit permitted by KRS 141.434 shall apply to the
department. The qualified community development entity shall submit an
application on a form that the department provides that shall include but not be
limited to:
(a) The name, address, tax identification number, and evidence of the
certification of the entity as a qualified community development entity;
(b) A copy of an allocation agreement executed by the entity or its controlling
entity and the Community Development Financial Institutions Fund, which
includes the Commonwealth of Kentucky in its service area;
(c) A certificate executed by an executive officer of the entity attesting that
the allocation agreement remains in effect and has not been revoked or
canceled by the Community Development Financial Institutions Fund;
(d) A description of the proposed amount, structure, and purchaser of the
equity investment or long-term debt security;
(e) The name and tax identification number of any person or entity eligible to
utilize tax credits as a result of the issuance of the qualified equity
investment;
(f) Information regarding the proposed use of proceeds from the issuance of
the qualified equity investment;
(g) A nonrefundable application fee in an amount set by the department. This
fee shall be paid to the department and shall be required of each
application submitted; and
(h) In the case of applications submitted on or after January 1, 2014, the
refundable performance fee required by subsection (8) of this section.
The department shall review applications in the order in which they are
received. Within thirty (30) days after receipt of a completed application
containing the information necessary for the department to certify a potential
qualified equity investment, including the payment of the application fee, the
department shall approve or deny the application. If the department intends to
deny the application, it shall inform the qualified community development entity,
by written notice sent via certified mail and any other such means deemed
feasible by the department, of the grounds for the denial. Upon receipt of the
notice of intended denial by the qualified community development entity:
(a) If the qualified community development entity provides any additional
information required by the department or otherwise completes its
application within fifteen (15) days, the application shall be considered
completed as of the original date of submission, however the department
shall have an additional thirty (30) days to either approve or deny the
application as completed; or
(b) If the qualified community development entity fails to provide the
information or complete its application within the fifteen (15) day period,
the application shall be deemed denied and must be resubmitted in full
with a new submission date.
(3)
(4)
(5)
(6)
If the application is deemed complete, the department shall certify the
proposed equity investment or long-term debt security as a qualified equity
investment and eligible for tax credits under KRS 141.432 to 141.434, subject
to the annual cap limitations contained in KRS 141.434. The department shall
provide written notice sent via certified mail and any other means deemed
feasible by the department, of the certification to the qualified community
development entity. The notice shall include the names of those taxpayers who
are eligible to claim the credits and their respective credit amounts. If the
names of the persons or entities that are eligible to claim the credits change
due to a transfer of a qualified equity investment or a change in an allocation
pursuant to KRS 141.434, the qualified community development entity shall
notify the department of such change.
Within ninety (90) days after receipt of the 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 shall provide the department with evidence of
the receipt of the cash investment within ten (10) business days after receipt. If
the qualified community development entity does not receive the cash
investment and issue the qualified equity investment within ninety (90) 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
department for certification. A certification that lapses shall revert back to the
department and may be reissued only in accordance with the application
process outlined in this section.
The department shall certify qualified equity investments in the order
applications are received by the department. Applications received on the
same day shall be deemed to have been received simultaneously. For
applications received on the same day and deemed complete, the department
shall certify, consistent with remaining tax credit capacity, qualified equity
investments in proportionate percentages based upon 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
contained in KRS 141.434, the department shall certify the portion that may be
certified unless the qualified community development entity elects to withdraw
its request rather than receive partial credit.
(a) The department may recapture any 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 26 U.S.C. sec. 45D. In such case,
the department's recapture shall be proportionate to the federal
recapture with respect to the qualified equity investment;
2.
The qualified community development entity redeems or makes a
principal repayment with respect to the qualified equity investment
that generated the tax credit prior to the final credit allowance date
of the qualified equity investment. In such case, the department's
(b)
recapture shall be proportionate to the amount of the redemption or
repayment with respect to the qualified equity investment; or
3.
The qualified community development entity fails to invest:
a.
In the case of a qualified equity investment issued prior to
January 1, 2014, at least eighty-five percent (85%) of the
purchase price of the qualified equity investment in qualified
low-income community investments in qualified active
low-income community businesses located in the
Commonwealth within twenty-four (24) months of the issuance
of the qualified equity investment and maintain this level of
investment in qualified low-income community investments in
qualified active low-income community businesses located in
the Commonwealth until the last credit allowance date for the
qualified equity investment; and
b.
In the case of a qualified equity investment issued on or after
January 1, 2014, at least one hundred percent (100%) of the
purchase price of the qualified equity investment in qualified
low-income community investments in qualified active
low-income community businesses located in the
Commonwealth within twelve (12) months of the issuance of
the qualified equity investment and maintain this level of
investment in qualified low-income community investments in
qualified active low-income community businesses located in
the Commonwealth until the last credit allowance date for the
qualified equity investment. In this case, the department's
recapture shall be proportionate to the amount of the
redemption or repayment with respect to the qualified equity
investment.
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 twelve (12) months of the receipt of the capital. A qualified
community development entity shall 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.
The department shall provide written notice sent via certified mail or other
means deemed feasible by the department, to the qualified community
development entity of any proposed recapture of tax credits pursuant to
(7)
(8)
this subsection. The entity shall have ninety (90) days to cure any
deficiency indicated in the department's original recapture notice and
avoid such recapture. If the entity fails or is unable to cure the deficiency
within the ninety (90) day period, the department 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 department from the taxpayer who
claimed the tax credit on a tax return.
The department shall through administrative regulations promulgated in
accordance with KRS Chapter 13A provide rules to implement the provisions of
KRS 141.432 to 141.434, and to administer the allocation of tax credits issued
for qualified equity investments.
(a) On or after January 1, 2014, 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 the tax credit
permitted by KRS 141.434 shall, as part of the application, pay a
refundable performance fee in an amount equal to one-half of one percent
(0.5%) of the amount of the equity investment or long-term debt security
requested to be certified as a qualified equity investment, not to exceed
five hundred thousand dollars ($500,000).
(b) This fee shall be in the nature of a security deposit to ensure compliance
on the part of a qualified community development entity. The fee shall be
paid to the department and deposited in the New Markets performance
guarantee account established by this subsection, and retained there as
private funds until compliance with the provisions of this subsection has
been established or as otherwise provided by this subsection.
(c) The fee may be refunded to the qualified community development entity
that submitted it as follows:
1.
In the case of any application that is ultimately denied pursuant to
subsection (2) of this section, the department shall refund the full
amount of the fee submitted with the denied application;
2.
In the case of any qualified equity investment that is certified in an
amount that is less than the amount requested, due to the limitations
contained in KRS 141.434 and pursuant to subsection (5) of this
section, the department shall refund a portion of the fee so that only
an amount equal to one-half of one percent (0.5%) of the actual
certified amount, not to exceed five hundred thousand dollars
($500,000), is retained; and
3.
In the case of any qualified equity investment that is certified as
eligible for tax credits, the qualified community development entity
may request a refund of the fee no sooner than thirty (30) days after
having met all the requirements of this subsection. The refund
request shall be made in writing to the department. The department
shall review the refund request within thirty (30) days, and shall
either comply with the request and issue the refund of the fee,
without interest, if the qualified community development entity has
met all the requirements of this subsection, or give written notice to
(d)
(e)
(f)
the qualified community development entity that it is noncompliant
and subject to possible forfeiture of the fee as provided in this
subsection.
The qualified community development entity shall forfeit the fee to the
Commonwealth as follows:
1.
The entire amount of the fee shall be forfeited if the qualified
community development entity and its subsidiary qualified
community development entities fail to issue the total amount of
qualified equity investment certified by the department and receive
cash in exchange therefor within ninety (90) days after receipt of the
notice of certification; and
2.
A portion of the fee shall be forfeited if the qualified community
development entity, or any subsidiary qualified community
development entity, that issues a qualified equity investment
certified by the department fails to meet the percentage investment
requirement under subsection (6) of this section by the first credit
allowance date of the qualified equity investment. The forfeiture shall
be proportionate to the amount of the qualified equity investment
that is not invested as required by subsection (6) of this section.
Forfeiture of the fee under this subparagraph shall be subject to the
ninety (90) day cure period allowed under subsection (6) of this
section.
The amount of the fee that is forfeited pursuant to this subsection shall be
transferred from the New Markets performance guarantee account and
deposited into the general fund.
1.
The New Markets performance guarantee account is hereby
established as a fiduciary fund within the State Treasury, to be
administered by the department solely for the purposes set out in
this subsection.
2.
Notwithstanding KRS 45.229, moneys in the account shall not lapse
but shall be retained in the account at all times except as provided
by this subsection.
Effective:July 15, 2014
History: Amended 2014 Ky. Acts ch. 102, sec. 30, effective July 15, 2014. -Created 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 17, effective June 4, 2010.
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