The original instrument and the following digest, which constitutes no part of the
legislative instrument, were prepared by Danielle Doiron.
DIGEST
Present law taxes insurers based on the amount of premiums, called a "premium tax".
Proposed law creates the Louisiana New Markets Jobs Act which provides an income tax credit
against the premium tax liability for any entity which makes an investment of private capital into
a "qualified community development entity" (QCDE or "entity") located in Louisiana. The
QCDE must have at least 100% of its cash purchase price used by the issuer to make "qualified
low-income community investments" in "qualified active low-income community businesses"
located in the state.
The tax credit is equal to 0% of the purchase price of the "qualified equity investment" (QEI) for
the first two years and 10% of the purchase price for the next four years and 0% for the final year.
The total of all such credits taken cannot exceed the entity's state premium tax liability for the tax
year for which the credit is claimed; however, any credits that are not used are carried forward for
up to 10 years. A total of $125,000,000 of QEI investment authority is available for certification
and allocation by the Department of Revenue. The department is required to accept applications
beginning November 1, 2013, for allocation of up to $62,500,000.00 of QEI.
"Qualified equity investment" (QEI or "investment") is defined as an equity investment in a
"qualified active low-income community business" (QALICB or "business") that meets certain
criteria as set forth in Section 45D of the Internal Revenue Code of 1986, as amended, and 26
CFR Sec. 1.45D-1.
Proposed law provides several definitions, including a "qualified community development entity"
(QCDE or "entity") to mean that which is ascribed in Section 45D of the Internal Revenue Code.
Under federal law, a QALICB is defined as a business located in either a census tract with a
poverty rate of at least 20% or a census tract with a median income that does not exceed 80% of
the benchmark median income. QCDE are privately managed investment entities that have
received New Market Tax Credit allocation authority.
Proposed law provides that the premium tax credits earned by partnerships, limited liability
companies, S-corporations, or other pass through entities can be allocated to the partners,
members, or shareholders of such entities and provides that any unclaimed tax credits are
transferable to one or more transferees.
Proposed law provides that a QCDE entity seeking to have an equity investment designated as a
QEI investment must apply to the Department of Revenue (department) in an application for
certification. Proposed law requires the department to grant or deny such application by a QCDE
entity within 20 days after receipt. Further requires the department to inform such entity of the
grounds for denial of any part of the application, extending such entity the right to provide
additional information or to complete its application within 15 days of notice of the denial. Proposed law requires the department to certify QEI investments in the order in which the
applications are received by the department.
Proposed law requires QCDE entities or their transferees to issue the QEI investment within 30
days of receiving notice of certification. Further requires the entities or their transferees to
provide the department with evidence of the receipt of the cash investment and the designation of
the investment within five business days after receipt. Proposed law provides that in the event
that a QCDE entity or its transferee does not receive the cash investment within 30 days of
receipt of the certification notice, the certification lapses.
Proposed law further requires the department to recapture the tax credit from the entity that
claimed such tax credit following the occurrence of either of the following events:
(1)Any amount of a federal tax credit available with respect to a QEI investment that is
eligible for a credit under proposed law is recaptured under Section 45D of the Internal
Revenue Code, as amended. Proposed law requires the department's recapture to be
proportionate to the federal recapture.
(2)The issuer fails to invest an amount equal to 100% of the purchase price of the QEI
investment in a QLICI investment in Louisiana within 12 months of the issuance of the
QEI investment and to further maintain such level of investment until the last credit
allowance date for the qualified equity investment.
Proposed law provides for a six month cure period before the department recaptures an entity's
credits. A recapture can only occur after the entity has been given notice of noncompliance and
six months from the date of such notice to cure such noncompliance.
Proposed law requires any QCDE entity seeking to have an equity investment qualified must pay
a $500,000 deposit to the department for deposit in the New Markets performance guarantee
account. Proposed law requires the department to hold the $500,000 deposit in the New Markets
performance guarantee account until such time as the entity meets compliance standards set forth
by proposed law. Further allows the entity to request a return of such deposit after 30 days of
meeting compliance requirements.
Proposed law requires QCDE entities that issue QEI investments to submit a report to the
department within the first five business days after the first anniversary of the initial credit
allowance date. Such report must provide documentation as to the investment of 100% of the
purchase price in QLICI investments in a QALICB business located in Louisiana. Proposed law
further requires the entity to submit an annual report to the department within 45 days of the
beginning of the calendar year for the compliance period. The report must include the number of
employment positions created and retained as a result of the investments and the average annual
salary of such positions.
Proposed law authorizes the department to promulgate rules to implement the provisions of
proposed law. Proposed law authorizes the department to notify the Department of Insurance of any insurance
company allocated tax credits hereunder and the amount of such credits.
Proposed law applies to tax returns or reports originally due on or after January 1, 2014.
(Adds R.S. 47:6016.1)