Introduced Version
HOUSE BILL No. 1612
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3.1-33.5.
Synopsis: Rural business growth. Establishes a state tax credit (credit)
for certain capital investments made in rural funds. Establishes
procedures for a rural fund to apply to the Indiana economic
development corporation (IEDC) for certification of a capital
investment as eligible for a credit provided by the bill. Requires a rural
fund to pay a nonrefundable application fee of $5,000 to the IEDC.
Provides that the credit is an amount equal to: (1) the applicable
percentage for the credit allowance date; multiplied by (2) the purchase
price paid to the rural fund for the capital investment. Sets forth the
maximum annual amount of credits that may be certified. Provides that
the credit is subject to recapture. Requires a rural fund that has
received a credit to submit reports on an annual basis to the IEDC over
the credit allowance period.
Effective: July 1, 2025.
Lindauer
January 21, 2025, read first time and referred to Committee on Ways and Means.
2025 IN 1612—LS 7730/DI 129 Introduced
First Regular Session of the 124th General Assembly (2025)
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HOUSE BILL No. 1612
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Be it enacted by the General Assembly of the State of Indiana:
1 SECTION 1. IC 6-3.1-33.5 IS ADDED TO THE INDIANA CODE
2 AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
3 JULY 1, 2025]:
4 Chapter 33.5. Rural Fund Capital Investment Tax Credit
5 Sec. 1. The state tax credit provided by this chapter applies to
6 taxable years beginning after December 31, 2025. However,
7 beginning with the period set forth in section 3(a) of this chapter,
8 the corporation may begin to receive applications for the credit
9 provided by this chapter.
10 Sec. 2. The following definitions apply throughout this chapter:
11 (1) "Affiliate" means an entity that directly, or indirectly
12 through one (1) or more intermediaries, controls, or is
13 controlled by, or is under the common control with, another
14 entity. An entity is controlled by another entity if the
15 controlling entity holds, directly or indirectly, the majority of
16 voting or ownership interest in the controlled entity or has
17 control over day-to-day operations of the controlled entity by
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1 contract or by law.
2 (2) "Applicable percentage" means zero percent (0%) for the
3 first two (2) credit allowance dates, and fifteen percent (15%)
4 for the next four (4) credit allowance dates.
5 (3) "Capital investment" means any equity investment in a
6 rural fund by a rural investor that:
7 (A) is acquired after June 30, 2025, at its original issuance
8 solely in exchange for cash;
9 (B) has one hundred percent (100%) of its cash purchase
10 price used by the rural fund to make qualified investments
11 in eligible businesses located in Indiana by the third
12 anniversary of the initial credit allowance date; and
13 (C) is designated by the rural fund as a capital investment
14 that is certified by the corporation under sections 3
15 through 5 of this chapter, including any capital investment
16 that does not satisfy section 3(b)(1) of this chapter if the
17 investment was a capital investment in the hands of a prior
18 holder.
19 (4) "Corporation " means the Indiana economic development
20 corporation established by IC 5-28-3-1.
21 (5) "Credit allowance date" means the date on which the
22 corporation provides the certification set forth in section 5(a)
23 of this chapter and each of the five (5) anniversary dates of
24 that date thereafter.
25 (6) "Department" refers to the department of state revenue.
26 (7) "Eligible business" means a business that, at the time of
27 the initial qualified investment in the business:
28 (A) has fewer than two hundred fifty (250) employees; and
29 (B) has its principal business operations in a rural area of
30 Indiana.
31 Any business classified as an eligible business at the time of
32 the initial investment in the business by a rural fund shall
33 remain classified as an eligible business and may receive
34 follow-on investments from any rural fund. The follow-on
35 investments shall be qualified investments even though the
36 business may not meet the definition of an "eligible business"
37 at the time of the follow-on investment.
38 (8) "Principal business operations" means the location where
39 at least sixty percent (60%) of a business's employees work or
40 where employees who are paid at least sixty percent (60%) of
41 the business's payroll work. A business that has agreed to
42 relocate employees using the proceeds of a qualified
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1 investment to establish its principal business operations in a
2 new location shall be deemed to have its principal business
3 operations in the new location if it satisfied the requirements
4 of this subdivision not later than one hundred eighty (180)
5 days after receiving a qualified investment.
6 (9) "Purchase price" means the amount paid to the rural fund
7 that issues a capital investment, which shall not exceed the
8 amount of capital investment authority certified under
9 sections 3 through 5 of this chapter.
10 (10) "Qualified investment" means any investment in an
11 eligible business or any loan to an eligible business with a
12 stated maturity date of at least one (1) year after the date of
13 issuance, excluding revolving lines of credit and
14 senior-secured debt unless the chief executive or similar
15 officer of the eligible business certifies that the eligible
16 business sought and was denied similar financing from a
17 depository institution or by a rural fund unless, with respect
18 to any one (1) eligible business, the maximum amount of
19 investments made in the business by one (1) or more rural
20 funds, on a collective basis with all of the businesses' affiliates,
21 with the proceeds of the capital investments, are an amount
22 equal to the greater of twenty percent (20%) of the rural
23 fund's capital investment authority or six million five hundred
24 thousand dollars ($6,500,000), exclusive of investments made
25 with repaid or redeemed investments or interest or profits
26 realized on those investments.
27 (11) "Rural area" means:
28 (A) an area other than a municipality with a population of
29 more than fifty thousand (50,000) or an urban area
30 contiguous and adjacent to the municipality;
31 (B) an area determined to be rural in character by the
32 United States Department of Agriculture; or
33 (C) an urban area contiguous or adjacent to a municipality
34 with a population of more than fifty thousand (50,000) if
35 the corporation determines the eligible business is rural in
36 nature, employs employees from rural areas, or is
37 otherwise beneficial to residents of rural areas.
38 (12) "Rural fund" means an entity certified by the
39 corporation under sections 3 through 5 of this chapter.
40 (13) "Rural investor" means an entity that makes a capital
41 investment in a rural fund.
42 (14) "Senior-secured debt" means any loan that is secured by
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1 a first mortgage on real estate with a loan-to-value ratio of
2 less than eighty percent (80%).
3 (15) "State tax liability" means a person's total tax liability
4 that is incurred under:
5 (A) IC 27-1-18-2 (the insurance premiums tax); and
6 (B) IC 27-1-20-12 (the insurance premiums retaliatory
7 tax);
8 as computed after the application of the credits that under
9 IC 6-3.1-1-2 are to be applied before the credit provided by
10 this chapter. An insurance company claiming a credit against
11 the taxes listed in this subdivision is not required to pay any
12 additional retaliatory tax in Indiana as a result of claiming the
13 credit.
14 (16) "Taxpayer" means an entity that has state tax liability.
15 Sec. 3. (a) A rural fund that seeks to have an equity investment
16 certified as a capital investment eligible for a credit allowed under
17 this chapter must apply to the corporation. The corporation shall
18 begin accepting applications within ninety (90) days after July 1,
19 2025.
20 (b) The application must include each of the following:
21 (1) The amount of capital investment requested.
22 (2) A copy of the applicant's or an affiliate of the applicant's
23 license as a rural business investment company under 7 U.S.C.
24 2009cc or as a small business investment company under 15
25 U.S.C. 681 and a certificate executed by an executive officer
26 of the applicant attesting that the license remains in effect and
27 has not been revoked.
28 (3) Evidence that, as of the date the application is submitted,
29 the applicant or affiliates of the applicant have invested at
30 least one hundred million dollars ($100,000,000) in nonpublic
31 companies located in counties within the United States with a
32 population of less than seventy-five thousand (75,000)
33 according to the 2020 federal decennial census. The evidence
34 may be in the form of a list containing the names of the
35 companies, the location of the companies, and the amounts
36 invested by the applicant or affiliates of the applicant.
37 However, an officer of the applicant must certify the list.
38 (4) A business plan that includes a revenue impact assessment
39 projecting state and local tax revenue to be generated by the
40 applicant's proposed qualified investments, prepared by a
41 nationally recognized, third party, independent economic
42 forecasting firm using a dynamic economic forecasting model
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1 that analyzes the applicant's business plan over the ten (10)
2 years following the date the application is submitted to the
3 corporation. The plan must include an estimate of the number
4 of jobs created and jobs retained in Indiana as a result of the
5 applicant's qualified investments.
6 (5) A nonrefundable application fee of five thousand dollars
7 ($5,000) payable to the corporation.
8 Sec. 4. (a) Within thirty (30) days after the receipt of a
9 completed application, the corporation shall grant or deny the
10 application in full or in part. The corporation shall deny the
11 application if any of the following apply:
12 (1) The applicant does not satisfy all the criteria set forth in
13 section 3 of this chapter.
14 (2) The revenue impact assessment submitted with the
15 application does not demonstrate that the applicant's business
16 plan will result in a positive fiscal impact on Indiana over a
17 ten (10) year period that exceeds the cumulative amount of
18 credits that would be issued to the applicant if the application
19 were approved.
20 (3) The corporation has already approved the maximum
21 amount of capital investment authority allowed under section
22 6 of this chapter.
23 (b) If the corporation denies any part of the application, it shall
24 inform the applicant of the grounds for the denial. If the applicant
25 provides any additional information required by the corporation
26 or otherwise completes its application within fifteen (15) days of
27 the notice of denial, the application shall be considered complete as
28 of the original date of submission. If the applicant fails to provide
29 the information or fails to complete its application within the
30 fifteen (15) day period, the application shall remain denied and
31 must be resubmitted with a new submission date and a new
32 application fee.
33 Sec. 5. (a) Upon approval of an application, the corporation
34 shall provide a certification of the proposed equity investment as
35 a capital investment eligible for credits under this chapter, subject
36 to the limitations set forth in section 6 of this chapter. The
37 corporation shall provide written notice of the certification to the
38 applicant, which must include the amount of the applicant's capital
39 investment authority and a schedule of credits by year and amount
40 related to the capital investment authority.
41 (b) The corporation shall certify proposed capital investments
42 in the order that the applications are received by the corporation.
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1 Applications received on the same day shall be deemed to have
2 been received simultaneously. For applications that are complete
3 and received on the same day, the corporation shall certify
4 applications in proportionate percentages based upon the ratio of
5 the amount of capital investment authority requested in all
6 applications.
7 Sec. 6. (a) The corporation may not certify capital investment
8 authority under this chapter in an amount that exceeds fifteen
9 million dollars ($15,000,000) in credits to be claimed against state
10 tax liability in any calendar year, excluding any credit amounts
11 carried forward under section 7 of this chapter.
12 (b) Within ninety (90) days of the applicant receiving notice of
13 certification, the rural fund shall issue the capital investment to
14 and receive cash in the amount of the certified amount from a
15 rural investor. At least ten percent (10%) of the rural investor's
16 capital investment shall be composed of capital raised by the rural
17 investor directly or indirectly from sources including directors,
18 members, employees, officers, and affiliates of the rural investor,
19 other than the amount invested by the allocatee claiming the
20 credits in exchange for the allocation of credits. The rural fund
21 shall provide the corporation with evidence of the receipt of the
22 cash investment within ninety-five (95) days of the applicant
23 receiving notice of certification.
24 (c) If the rural fund does not receive the cash investment and
25 issue the capital investment within the time period following
26 receipt of the certification set forth in section 5(a) of this chapter,
27 the certification shall lapse and the rural fund shall not issue the
28 capital investment without reapplying to the corporation for
29 certification. Lapsed certifications shall revert to the corporation
30 and shall be reissued on a pro rata basis to applicants whose
31 capital investment allocations were reduced in accordance with the
32 application process set forth in section 5 of this chapter.
33 Sec. 7. (a) Upon making a capital investment in a rural fund, a
34 rural investor is entitled to a vested credit against the taxpayer's
35 state tax liability that may be used on each credit allowance date of
36 the capital investment in an amount equal to:
37 (1) the applicable percentage for the credit allowance date;
38 multiplied by
39 (2) the purchase price paid to the rural fund for the capital
40 investment.
41 (b) The amount of the credit claimed by a taxpayer shall not
42 exceed the amount of the taxpayer's state tax liability for the tax
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1 year for which the credit is claimed. Any amount of credit that a
2 taxpayer is prohibited from claiming in a tax year as a result of this
3 section may be carried forward for use in any of the five (5)
4 subsequent tax years.
5 (c) The credit shall not be carried back and is not refundable.
6 Sec. 8. No credit claimed under this chapter shall be refundable
7 or saleable on the open market. Credits may be transferred to
8 affiliates of a taxpayer. Credits earned by or allocated to a
9 partnership, limited liability company, or S corporation may be
10 allocated to the partners, members, or shareholders of such an
11 entity for their use in accordance with the provisions of any
12 agreement among such partners, members or shareholders, and a
13 rural fund shall notify the department of taxpayers that are eligible
14 to utilize credits and transfers upon such allocation, change, or
15 transfer. Such allocations shall not be considered a sale for the
16 purpose of this section.
17 Sec. 9. To apply a credit under this chapter against the
18 taxpayer's state tax liability, a taxpayer must claim the credit on
19 the taxpayer's annual state tax return or returns in the manner
20 prescribed by the department. The taxpayer must attach the
21 certification provided by the corporation in accordance with
22 section 5(a) of this chapter and any additional information that the
23 department determines is necessary for the department to
24 determine whether the taxpayer is eligible for the credit.
25 Sec. 10. (a) A credit is subject to recapture if any of the
26 following circumstances apply:
27 (1) The rural fund does not invest:
28 (A) at least sixty percent (60%) of its capital investment
29 authority in qualified investments in Indiana within two (2)
30 years of the credit allowance date; and
31 (B) one hundred percent (100%) of its capital investment
32 authority in qualified investments in Indiana within three
33 (3) years of the credit allowance date.
34 (2) The rural fund fails to maintain qualified investments
35 equal to one hundred percent (100%) of its capital investment
36 authority from the third anniversary until the sixth
37 anniversary of the credit allowance date. For purposes of this
38 subdivision, a qualified investment is considered maintained
39 even if the qualified investment was sold or repaid as long as
40 the rural fund reinvests an amount equal to the capital
41 returned or recovered or repaid by the rural fund from the
42 original investment, exclusive of any profits realized, in other
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1 qualified investments in Indiana within twelve (12) months of
2 receipt of the capital. Amounts received periodically by a
3 rural fund shall be treated as maintained in qualified
4 investments if the amounts are reinvested in one (1) or more
5 qualified investments by the end of the following calendar
6 year. A rural fund is not required to reinvest capital returned
7 from qualified investments after the fifth anniversary of the
8 credit allowance date, and the qualified investments shall be
9 considered maintained by the rural fund through the sixth
10 anniversary of the credit allowance date.
11 (3) Before the earlier of:
12 (A) exiting the program in accordance with this chapter;
13 or
14 (B) thirty (30) days after the sixth anniversary of the credit
15 allowance date;
16 the rural fund makes a distribution or payment that results in
17 the rural fund having less than one hundred percent (100%)
18 of its capital investment authority invested in qualified
19 investments in Indiana or held in cash or other marketable
20 securities.
21 (4) The rural fund violates section 11 of this chapter, in which
22 case the corporation may recapture an amount equal to the
23 amount of the rural fund's capital investment authority found
24 to be in violation of those provisions.
25 (b) Recaptured credits and related capital investment authority
26 shall revert to the corporation and shall be reissued on a pro rata
27 basis to applicants whose capital investment allocations were
28 reduced in accordance with sections 3 through 5 of this chapter.
29 (c) No recapture shall occur until the rural fund has been given
30 notice of noncompliance and afforded six (6) months from the date
31 of the notice to cure the noncompliance.
32 (d) A rural fund, before making a qualified investment, may
33 request from the corporation a written opinion as to whether the
34 business in which it proposes to invest is an eligible business. The
35 corporation, not later than fifteen (15) business days after the date
36 of receipt of the request, shall notify the rural fund of its
37 determination. If the corporation fails to notify the rural fund of its
38 determination by the twentieth business day, the business in which
39 the rural fund proposes to invest shall be deemed an eligible
40 business.
41 Sec. 11. No eligible business that receives a qualified investment
42 under this chapter or any affiliates of the eligible business shall
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1 directly or indirectly:
2 (1) own or have the right to acquire an ownership interest in
3 a rural fund or in a member or affiliate of a rural fund
4 including, but not limited to, a holder of a capital investment
5 issued by a rural fund; or
6 (2) lend to or invest in a rural fund or any member or affiliate
7 of a rural fund including, but not limited to, a holder of
8 capital investment issued by a rural fund, where the proceeds
9 of the loan or investment are directly or indirectly used to
10 fund or refinance the purchase of capital investments under
11 this chapter.
12 Sec. 12. (a) A rural fund shall submit a report to the corporation
13 by June 30 of each calendar year during the credit allowance
14 period.
15 (b) The report following the second anniversary of the initial
16 credit allowance date shall provide documentation as to the
17 investment of at least sixty percent (60%) of the purchase price of
18 such capital investment in qualified investments.
19 (c) The report following the third anniversary of the initial
20 credit allowance date shall provide documentation as to the
21 investment of one hundred percent (100%) of the purchase price
22 of such capital investment in qualified investments. Unless
23 previously reported under this section, the report must also include
24 the following information:
25 (1) The name and location of each eligible business receiving
26 a qualified investment.
27 (2) Bank statements of the rural fund evidencing each
28 qualified investment.
29 (3) A copy of the written opinion of the corporation, as
30 provided in section 10(d) of this chapter, or evidence that the
31 business was an eligible business at the time of the qualified
32 investment, as applicable.
33 (4) The number of jobs created and jobs retained as a result
34 of each qualified investment.
35 (5) The average salary of the jobs described in subdivision (4).
36 (6) Any other information required by the corporation.
37 (d) For all subsequent years, a rural fund shall submit an annual
38 report to the corporation by June 30 of each calendar year during
39 the credit allowance period, which must include the following
40 information:
41 (1) The number of jobs created and jobs retained as a result
42 of qualified investments.
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1 (2) The average annual salary of jobs described in subdivision
2 (1).
3 (3) Any other information required by the corporation.
4 Sec. 13. On or after the sixth anniversary of the credit allowance
5 date, a rural fund may apply to the corporation to exit the program
6 and no longer be subject to the requirements established under this
7 chapter. The corporation shall respond to the exit application
8 within fifteen (15) days of receipt. In evaluating the exit
9 application, the fact that no credits have been recaptured and that
10 the rural fund has not received a notice of recapture that has not
11 been cured as allowed under section 10(c) of this chapter shall be
12 sufficient evidence to prove that the rural fund is eligible for exit.
13 The corporation shall not unreasonably deny an exit application
14 submitted under this section. If an exit application is denied, the
15 notice shall include the reasons for the determination.
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