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AN ACT relating to the New Markets Development Program tax credit. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 141.433 is amended to read as follows: 3
(1) A qualified community development entity that seeks to have an equity investment 4
or long-term debt security certified as a qualified equity investment and eligible for 5
the tax credit permitted by KRS 141.434 shall apply to the department. The 6
qualified community development entity shall submit an application on a form that 7
the department provides that shall include but not be limited to: 8
(a) The name, address, tax identification number, and evidence of the 9
certification of the entity as a qualified community development entity; 10
(b) A copy of an allocation agreement executed by the entity or its controlling 11
entity and the Community Development Financial Institutions Fund, which 12
includes the Commonwealth of Kentucky in its service area; 13
(c) A certificate executed by an executive officer of the entity attesting that the 14
allocation agreement remains in effect and has not been revoked or canceled 15
by the Community Development Financial Institutions Fund; 16
(d) A description of the proposed amount, structure, and purchaser of the equity 17
investment or long-term debt security; 18
(e) The name and tax identification number of any person or entity eligible to 19
utilize tax credits as a result of the issuance of the qualified equity investment; 20
(f) Information regarding the proposed use of proceeds from the issuance of the 21
qualified equity investment; 22
(g) A nonrefundable application fee in an amount set by the department. This fee 23
shall be paid to the department and shall be required of each application 24
submitted; and 25
(h) In the case of applications submitted on or after January 1, 2014, the 26
refundable performance fee required by subsection (8) of this section. 27 UNOFFICIAL COPY 24 RS BR 1628
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(2) The department shall review applications in the order in which they are received. 1
Within thirty (30) days after receipt of a completed application containing the 2
information necessary for the department to certify a potential qualified equity 3
investment, including the payment of the application fee, the department shall 4
approve or deny the application. If the department intends to deny the application, it 5
shall inform the qualified community development entity, by written notice sent via 6
certified mail and any other such means deemed feasible by the department, of the 7
grounds for the denial. Upon receipt of the notice of intended denial by the 8
qualified community development entity: 9
(a) If the qualified community development entity provides any additional 10
information required by the department or otherwise completes its application 11
within fifteen (15) days, the application shall be considered completed as of 12
the original date of submission, however the department shall have an 13
additional thirty (30) days to either approve or deny the application as 14
completed; or 15
(b) If the qualified community development entity fails to provide the information 16
or complete its application within the fifteen (15) day period, the application 17
shall be deemed denied and must be resubmitted in full with a new 18
submission date. 19
(3) If the application is deemed complete, the department shall certify the proposed 20
equity investment or long-term debt security as a qualified equity investment and 21
eligible for tax credits under KRS 141.432 to 141.434, subject to the annual cap 22
limitations contained in KRS 141.434. The department shall provide written notice 23
sent via certified mail and any other means deemed feasible by the department, of 24
the certification to the qualified community development entity. The notice shall 25
include the names of those taxpayers who are eligible to claim the credits and their 26
respective credit amounts. If the names of the persons or entities that are eligible to 27 UNOFFICIAL COPY 24 RS BR 1628
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claim the credits change due to a transfer of a qualified equity investment or a 1
change in an allocation pursuant to KRS 141.434, the qualified community 2
development entity shall notify the department of such change. 3
(4) Within ninety (90) days after receipt of the notice of certification, the qualified 4
community development entity shall issue the qualified equity investment and 5
receive cash in the amount of the certified purchase price. The qualified community 6
development entity shall provide the department with evidence of the receipt of the 7
cash investment within ten (10) business days after receipt. If the qualified 8
community development entity does not receive the cash investment and issue the 9
qualified equity investment within ninety (90) days following receipt of the 10
certification notice, the certification shall lapse, and the entity may not issue the 11
qualified equity investment without reapplying to the department for certification. 12
A certification that lapses shall revert back to the department and may be reissued 13
only in accordance with the application process outlined in this section. 14
(5) The department shall certify qualified equity investments in the order applications 15
are received by the department. Applications received on the same day shall be 16
deemed to have been received simultaneously. For applications received on the 17
same day and deemed complete, the department shall certify, consistent with 18
remaining tax credit capacity, qualified equity investments in proportionate 19
percentages based upon the ratio of the amount of qualified equity investment 20
requested in an application to the total amount of qualified equity investments 21
requested in all applications received on the same day. If a pending request cannot 22
be fully certified because of the limitations contained in KRS 141.434, the 23
department shall certify the portion that may be certified unless the qualified 24
community development entity elects to withdraw its request rather than receive 25
partial credit. 26
(6) (a) The department may recapture any portion of a tax credit allowed under this 27 UNOFFICIAL COPY 24 RS BR 1628
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section if: 1
1. Any amount of federal tax credit that might be available with respect to 2
the qualified equity investment that generated the tax credit under this 3
section is recaptured under 26 U.S.C. sec. 45D. In such case, the 4
department's recapture shall be proportionate to the federal recapture 5
with respect to the qualified equity investment; 6
2. The qualified community development entity redeems or makes a 7
principal repayment with respect to the qualified equity investment that 8
generated the tax credit prior to the final credit allowance date of the 9
qualified equity investment. In such case, the department's recapture 10
shall be proportionate to the amount of the redemption or repayment 11
with respect to the qualified equity investment; or 12
3. The qualified community development entity fails to invest: 13
a. In the case of a qualified equity investment issued prior to January 14
1, 2014, at least eighty-five percent (85%) of the purchase price of 15
the qualified equity investment in qualified low-income 16
community investments in qualified active low-income 17
community businesses located in the Commonwealth within 18
twenty-four (24) months of the issuance of the qualified equity 19
investment and maintain this level of investment in qualified low-20
income community investments in qualified active low-income 21
community businesses located in the Commonwealth until the last 22
credit allowance date for the qualified equity investment; and 23
b. In the case of a qualified equity investment issued on or after 24
January 1, 2014, at least one hundred percent (100%) of the 25
purchase price of the qualified equity investment in qualified low-26
income community investments in qualified active low-income 27 UNOFFICIAL COPY 24 RS BR 1628
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community businesses located in the Commonwealth within 1
twelve (12) months of the issuance of the qualified equity 2
investment and maintain this level of investment in qualified low-3
income community investments in qualified active low-income 4
community businesses located in the Commonwealth until the last 5
credit allowance date for the qualified equity investment. In this 6
case, the department's recapture shall be proportionate to the 7
amount of the redemption or repayment with respect to the 8
qualified equity investment. 9
For purposes of calculating the amount of qualified low-income 10
community investments held by a qualified community development 11
entity, an investment shall be considered held by the qualified 12
community development entity even if the investment has been sold or 13
repaid; provided that the qualified community development entity 14
reinvests an amount equal to the capital returned to or recovered from 15
the original investment, exclusive of any profits realized, in another 16
qualified active low-income community business in this state within 17
twelve (12) months of the receipt of the capital. Periodic amounts 18
received during a calendar year as repayment of principal on a loan 19
that is a qualified low-income community investment shall be 20
considered continuously held by a qualified community development 21
entity if the amounts are reinvested in another qualified low-income 22
community investment by the end of the following calendar year. A 23
qualified community development entity shall not be required to 24
reinvest capital returned from qualified low-income community 25
investments after the sixth anniversary of the issuance of the qualified 26
equity investment, the proceeds of which were used to make the 27 UNOFFICIAL COPY 24 RS BR 1628
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qualified low-income community investment, and the qualified low-1
income community investment shall be considered held by the issuer 2
through the qualified equity investment's final credit allowance date. 3
(b) The department shall provide written notice sent via certified mail or other 4
means deemed feasible by the department, to the qualified community 5
development entity of any proposed recapture of tax credits pursuant to this 6
subsection. The entity shall have ninety (90) days to cure any deficiency 7
indicated in the department's original recapture notice and avoid such 8
recapture. If the entity fails or is unable to cure the deficiency within the 9
ninety (90) day period, the department shall provide the entity and the 10
taxpayer from whom the credit is to be recaptured with a final order of 11
recapture. Any tax credit for which a final recapture order has been issued 12
shall be recaptured by the department from the taxpayer who claimed the tax 13
credit on a tax return. 14
(7) The department shall through administrative regulations promulgated in accordance 15
with KRS Chapter 13A provide rules to implement the provisions of KRS 141.432 16
to 141.434, and to administer the allocation of tax credits issued for qualified equity 17
investments. 18
(8) (a) On or after January 1, 2014, a qualified community development entity that 19
seeks to have an equity investment or long-term debt security certified as a 20
qualified equity investment and eligible for the tax credit permitted by KRS 21
141.434 shall, as part of the application, pay a refundable performance fee in 22
an amount equal to one-half of one percent (0.5%) of the amount of the equity 23
investment or long-term debt security requested to be certified as a qualified 24
equity investment, not to exceed five hundred thousand dollars ($500,000). 25
(b) This fee shall be in the nature of a security deposit to ensure compliance on 26
the part of a qualified community development entity. The fee shall be paid to 27 UNOFFICIAL COPY 24 RS BR 1628
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the department and deposited in the New Markets performance guarantee 1
account established by this subsection, and retained there as private funds 2
until compliance with the provisions of this subsection has been established or 3
as otherwise provided by this subsection. 4
(c) The fee may be refunded to the qualified community development entity that 5
submitted it as follows: 6
1. In the case of any application that is ultimately denied pursuant to 7
subsection (2) of this section, the department shall refund the full 8
amount of the fee submitted with the denied application; 9
2. In the case of any qualified equity investment that is certified in an 10
amount that is less than the amount requested, due to the limitations 11
contained in KRS 141.434 and pursuant to subsection (5) of this section, 12
the department shall refund a portion of the fee so that only an amount 13
equal to one-half of one percent (0.5%) of the actual certified amount, 14
not to exceed five hundred thousand dollars ($500,000), is retained; and 15
3. In the case of any qualified equity investment that is certified as eligible 16
for tax credits, the qualified community development entity may request 17
a refund of the fee no sooner than thirty (30) days after having met all 18
the requirements of this subsection. The refund request shall be made in 19
writing to the department. The department shall review the refund 20
request within thirty (30) days, and shall either comply with the request 21
and issue the refund of the fee, without interest, if the qualified 22
community development entity has met all the requirements of this 23
subsection, or give written notice to the qualified community 24
development entity that it is noncompliant and subject to possible 25
forfeiture of the fee as provided in this subsection. 26
(d) The qualified community development entity shall forfeit the fee to the 27 UNOFFICIAL COPY 24 RS BR 1628
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Commonwealth as follows: 1
1. The entire amount of the fee shall be forfeited if the qualified 2
community development entity and its subsidiary qualified community 3
development entities fail to issue the total amount of qualified equity 4
investment certified by the department and receive cash in exchange 5
therefor within ninety (90) days after receipt of the notice of 6
certification; and 7
2. A portion of the fee shall be forfeited if the qualified community 8
development entity, or any subsidiary qualified community development 9
entity, that issues a qualified equity investment certified by the 10
department fails to meet the percentage investment requirement under 11
subsection (6) of this section by the first credit allowance date of the 12
qualified equity investment. The forfeiture shall be proportionate to the 13
amount of the qualified equity investment that is not invested as 14
required by subsection (6) of this section. Forfeiture of the fee under this 15
subparagraph shall be subject to the ninety (90) day cure period allowed 16
under subsection (6) of this section. 17
(e) The amount of the fee that is forfeited pursuant to this subsection shall be 18
transferred from the New Markets performance guarantee account and 19
deposited into the general fund. 20
(f) 1. The New Markets performance guarantee account is hereby established 21
as a fiduciary fund within the State Treasury, to be administered by the 22
department solely for the purposes set out in this subsection. 23
2. Notwithstanding KRS 45.229, moneys in the account shall not lapse but 24
shall be retained in the account at all times except as provided by this 25
subsection. 26
Section 2. KRS 141.434 is amended to read as follows: 27 UNOFFICIAL COPY 24 RS BR 1628
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(1) There is hereby created a Kentucky New Markets Development Program tax credit. 1
(2) A person or entity that makes a qualified equity investment earns a vested right to 2
the tax credit created by subsection (1) of this section. The amount of the credit 3
shall be equal to thirty-nine percent (39%) of the purchase price of the qualified 4
equity investment made by the person or entity claiming the credit. The tax credit 5
may be utilized as follows: 6
(a) The holder of the qualified equity investment on a particular credit allowance 7
date of the qualified equity investment, whether it be the original purchaser or 8
subsequent holder of the qualified equity investment, may utilize a portion of 9
the tax credit against its tax liability for the taxable year that includes the 10
credit allowance date equal to the applicable percentage for the credit 11
allowance date multiplied by the purchase price paid for the qualified equity 12
investment; 13
(b) Any tax credit that a taxpayer may not utilize during a particular year may be 14
carried forward for use in any subsequent tax year; and 15
(c) An insurance company claiming a tax credit against the insurance premium 16
tax is not required to pay additional retaliatory tax levied pursuant to KRS 17
304.3-270. 18
(3) No tax credit claimed under this section may be sold or transferred. Tax credits that 19
a partnership, limited liability company, S corporation, or other pass-through entity 20
claims may be allocated to the partners, members, or shareholders of the entity for 21
their direct use in accordance with the provisions of any agreement among the 22
partners, members, or shareholders. 23
(4) The total amount of tax credits that may be awarded by the department pursuant to 24
KRS 141.432 to 141.434 shall be limited to twenty million dollars 25
($20,000,000)[ten million dollars ($10,000,000)] in each fiscal year. Once the 26
department has certified a cumulative amount of qualified equity investments that 27 UNOFFICIAL COPY 24 RS BR 1628
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can result in the utilization of this total amount of tax credits in a fiscal year, the 1
department may not certify any more qualified equity investments. This limitation 2
on qualified equity investments shall be based on scheduled utilization of tax credits 3
without regard to the potential for taxpayers to carry forward tax credits to 4
subsequent tax years. 5