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Regular Session, 2013
SENATE BILL NO. 244
BY SENATOR RISER
TAX/TAXATION. Authorizes the issuance of New Market Jobs Tax Credits. (8/1/13)
AN ACT1
To enact R.S. 47:6016.1, relative to new markets tax credits; to create a new markets jobs2
tax credit; to authorize a premium tax credit for investments in low-income3
community development; to provide for the amount of the tax credit; to provide for4
eligibility for and usage of the tax credit; and to provide for related matters.5
Be it enacted by the Legislature of Louisiana:6
Section 1. R.S. 47:6016.1 is hereby enacted to read as follows:7
ยง6016.1. Louisiana New Markets Jobs Act; premium tax credit8
A. The provisions of this Section shall be known as and may be cited as9
the "Louisiana New Markets Jobs Act".10
B. As used in this Section, the following words, terms, and phrases have11
the meaning ascribed to them unless a different meaning is clearly indicated in12
the context:13
(1) "Applicable percentage" means zero percent for the first two credit14
allowance dates and ten percent for the next four credit allowance dates and15
zero percent for the final crredit allowance date.16
(2) "Credit allowance date" means, with respect to any qualified equity17 SB NO. 244
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investment, the following:1
(a) The date on which such investment is initially made.2
(b) Each of the six anniversary dates of such date thereafter.3
(3) "Department" means the Department of Revenue.4
(4) "Purchase price" means the amount paid to the issuer of a qualified5
equity investment for such qualified equity investment.6
(5) "Qualified active low-income community business" has the meaning7
given such term in Section 45D of the Internal Revenue Code of 1986, as8
amended, and 26 CFR Sec. 1.45D-1. 9
(6) "Qualified community development entity" has the meaning given10
such term in Section 45D of the Internal Revenue Code of 1986, as amended;11
provided the entity has entered into, for the current year or any prior year, an12
allocation agreement with the Community Development Financial Institutions13
Fund of the U.S. Treasury Department with respect to credits authorized by14
Section 45D of the Internal Revenue Code of 1986, as amended, which includes15
the state of Louisiana within the service area set forth in the allocation16
agreement. The term shall include qualified community development entities17
that are controlled by or under common control with the qualified community18
development.19
(7) "Qualified equity investment" means any equity investment in a20
qualified community development entity that meets each of the following21
criteria:22
(a) Is acquired after August 1, 2013, at its original issuance solely in23
exchange for cash or, if not so acquired, was a qualified equity investment in the24
hands of a prior holder.25
(b) Has at least one hundred percent of its cash purchase price used by26
the issuer to make qualified low-income community investments in qualified27
active low-income community businesses located in this state by the first28
anniversary of the initial credit allowance date.29 SB NO. 244
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(c) Is designated by the issuer as a qualified equity investment under this1
Paragraph and is certified by the department as not exceeding the limitation2
contained in Paragraph (E)(5) of this Section.3
(8) "Qualified low-income community investment" means any capital4
or equity investment in, or loan to, any qualified active low-income community5
business. With respect to any one qualified active low-income community6
business, the maximum amount of qualified low-income community investments7
made in that business, on a collective basis with all of its affiliates that may be8
counted towards satisfaction of Subparagraph (7)(b) of this Subsection is ten9
million dollars whether issued by one or several qualified community10
development entities. Any amounts returned or repaid by the qualified active11
low-income community business to a qualified community development entity12
may be reinvested in such qualified active low-income community business by13
the qualified community development entity and not be counted against the ten14
million dollar limit as set forth in this Paragraph.15
(9) "State premium tax liability" means any liability incurred by any16
entity under the provisions of R.S. 22:831, 836, 838 and 842 or, if the tax17
liability under R.S. 22:831, 836, 838 and 842 is eliminated or reduced, the term18
shall also mean any tax liability imposed by the state on an insurance company19
or other person that had premium tax liability under the laws of this state.20
C.(1) Any entity that makes a qualified equity investment is vested with21
an earned credit against state premium tax liability that may be utilized as22
follows:23
(a) On each credit allowance date of the qualified equity investment the24
entity, or subsequent holder of the qualified equity investment, shall be entitled25
to utilize a portion of the credit during the taxable year including the credit26
allowance date.27
(b) The credit amount shall be equal to the applicable percentage for28
such credit allowance date multiplied by the purchase price paid to the issuer29 SB NO. 244
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of the qualified equity investment.1
(2) The amount of the credit claimed by an entity shall not exceed the2
amount of the entity's state premium tax liability for the tax year for which the3
credit is claimed. Any amount of tax credit that the entity is prohibited from4
claiming in a taxable year as a result of this Paragraph may be carried forward5
for use in future taxable years for a period not to exceed ten years.6
D.(1) Tax credits earned by a partnership, limited liability company, S-7
corporation, or other pass through entity may be allocated to the partners,8
members, or shareholders of the entity for their direct use in accordance with9
the provisions of any agreement among the partners, members, or shareholders.10
(2)(a) Any tax credits not previously claimed by a taxpayer against its11
premium tax may be transferred or sold to another Louisiana taxpayer, subject12
to the following conditions:13
(i) A single transfer or sale may involve one or more transferees.14
(ii) Transferors and transferees shall submit to the department, in15
writing, a notification of any transfer or sale of tax credits within thirty days16
after the transfer or sale of the tax credits which notice contains the amount of17
the remaining tax credit balance after transfer, all tax identification numbers18
for both transferor and transferee, the date of the transfer, the amount19
transferred, the price paid by the transferee to the transferor, and any other20
information required by the department.21
(b) Failure to comply with this Paragraph shall result in the22
disallowance of the tax credit until the taxpayers are in full compliance.23
(c) The transfer or sale of this credit does not extend the time in which24
the credit can be used. The carry forward period for a credit that is transferred25
or sold begins on the date on which the credit was originally earned.26
(d) To the extent that the transferor did not have rights to claim or use27
the credit at the time of the transfer, the department shall either disallow the28
credit claimed by the transferee or recapture the credit from the transferee.29 SB NO. 244
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E.(1) A qualified community development entity that seeks to have an1
equity investment designated as a qualified equity investment and eligible for2
tax credits under this Section shall apply to the department. The qualified3
community development entity shall include on a form prescribed by the4
department each of the following in or attached to its application:5
(a) Evidence of the applicant's certification as a qualified community6
development entity, including evidence that Louisiana is contained in the service7
area of the entity.8
(b) A copy of the allocation agreement executed by an applicant, or its9
controlling entity, and the Community Development Financial Institutions10
Fund.11
(c) A certificate executed by an executive officer of the applicant12
attesting that the allocation agreement remains in effect and has not otherwise13
been revoked or cancelled by the Community Development Financial14
Institutions Fund.15
(d) A description of the proposed amount, structure, and purchaser of16
the qualified equity investment.17
(e) Identifying information for any entity that will earn tax credits as a18
result of the issuance of the qualified equity investment.19
(2) Within thirty days after receipt of a completed application20
containing the information set forth in Paragraph (1) of this Subsection,21
including the deposit as required in Subsection H of this Section, the22
department shall grant or deny the application in full or in part. If the23
department denies any part of the application, it shall inform the qualified24
community development entity of the grounds for the denial. If the qualified25
community development entity provides additional information required by the26
department or otherwise completes its application within fifteen days of the27
notice of denial, the application shall be considered completed as of the original28
date of the submission. If the qualified community development entity fails to29 SB NO. 244
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provide the information or complete its application within the fifteen day1
period, the application remains denied and must be resubmitted in full with a2
new submission date, and the department shall refund the performance deposit.3
(3) If the application is granted, the department shall certify the4
proposed equity investment as a qualified equity investment that is eligible for5
tax credits under this Section, subject to the limitations contained in Paragraph6
(5) of this Subsection. The department shall provide written notice of the7
certification to the qualified community development entity. The notice shall8
include the names of those entities who will earn the credits and their respective9
credit amounts. If the names of the entities that are eligible to utilize the credits10
change due to a transfer of a qualified equity investment or an allocation11
pursuant to Paragraph (D)(1), the qualified community development entity shall12
notify the department of the change.13
(4) The department shall certify qualified equity investments in the14
order in which applications are received by the department. Applications15
received on the same day shall be deemed to have been received simultaneously.16
For applications that are complete and received on the same day, the17
department shall certify, consistent with remaining qualified equity investment18
capacity, the qualified equity investments in proportionate percentages based19
upon the ratio of the amount of qualified equity investment requested in an20
application to the total amount of qualified equity investments requested in all21
applications received on the same day.22
(5) A total of one hundred twenty-five million dollars of qualified equity23
investment authority shall be available for certification and allocation. The24
department shall accept applications beginning on Novermber 1, 2013, for25
allocation and certification of up to sixty-two million five hundred thousand26
dollars of qualified equity investments. The department shall accept27
applications for the remaining sixty-two million five hundred thousand dollars28
of such authority beginning on November 1, 2014. If a pending request cannot29 SB NO. 244
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be fully certified due to these limits of qualified equity investment authority, the1
department shall certify the portion of qualified equity investment authority2
that may be certified unless the qualified community development entity elects3
to withdraw its request rather than receive partial certification.4
(6) An approved applicant may transfer all or a portion of its certified5
qualified equity investment authority to its controlling entity or any qualified6
community development entity that is controlled by or under common control7
with the applicant, provided that the applicant provides the information8
required in the application with respect to such transferee and the applicant9
notifies the department of such transfer with the notice of receipt of the cash10
investment set forth in Paragraph (7) of this Subsection.11
(7) Within thirty days of the applicant receiving certification of qualified12
equity investment authority, the qualified community development entity or any13
transferee under Paragraph (6) of this Subsection shall issue the qualified14
equity investment, receive cash in the amount of the certified amount and15
designate an amount equal to the certified amount as a federal qualified equity16
investment with the Community Development Financial Institutions Fund. The17
qualified community development entity or transferee under Paragraph (6) of18
this Subsection shall provide the department with evidence of the receipt of the19
cash investment and designation of the qualified equity investment as a federal20
qualified equity investment within five business days after receipt. If the21
qualified community development entity or any transferee pursuant to22
Paragraph (6) of this Subsection does not receive the cash investment within23
thirty days following receipt of the certification notice, the certification shall24
lapse and the entity may not issue the qualified equity investment without25
reapplying to the department for certification. Lapsed certifications revert26
back to the department and shall be reissued, first, pro rata to other applicants27
whose qualified equity investment allocations were reduced pursuant to28
Paragraph (4) of this Subsection and, thereafter, in accordance with the29 SB NO. 244
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application process.1
F. The department shall recapture, from the entity that claimed the2
credit on a return, the tax credit allowed pursuant to this Section if either of the3
following occur:4
(1) Any amount of a federal tax credit available with respect to a5
qualified equity investment that is eligible for a credit under this Section is6
recaptured under Section 45D of the Internal Revenue Code of 1986, as7
amended. In this case, the department's recapture shall be proportionate to the8
federal recapture with respect to the qualified equity investment.9
(2) The issuer fails to invest an amount equal to one hundred percent of10
the purchase price of the qualified equity investment in qualified low-income11
community investments in Louisiana within twelve months of the issuance of the12
qualified equity investment and maintain such level of investment in qualified13
low-income community investments in Louisiana until the last credit allowance14
date for the qualified equity investment. For purposes of this Section, an15
investment shall be considered held by an issuer even if the investment has been16
sold or repaid if the issuer reinvests an amount equal to the capital returned to17
or recovered by the issuer from the original investment, exclusive of any profits18
realized, in another qualified low-income community investment within twelve19
months of the receipt of the capital. Periodic amounts received during a20
calendar year as repayment of principal on a loan that is a qualified low-income21
community investment shall be treated as continuously invested in a qualified22
low-income community investment if the amounts are reinvested in another23
qualified low-income community investment by the end of the following24
calendar year as set forth in 26 CFR Sec. 1.45D-1. An issuer shall not be25
required to reinvest capital returned from qualified low-income community26
investments after the sixth anniversary of the issuance of the qualified equity27
investment, the proceeds of which were used to make the qualified low-income28
community investment, and the qualified low-income community investment29 SB NO. 244
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shall be considered held by the issuer through the seventh anniversary of the1
qualified equity investment's issuance.2
G. Enforcement of the recapture provisions of Subsection F of this3
Section shall be subject to a six month cure period. No recapture shall occur4
until the qualified community development entity has been given notice of5
noncompliance by the department and afforded six months from the date of6
such notice to cure the noncompliance.7
H.(1) A qualified community development entity that seeks to have an8
equity investment designated as a qualified equity investment and eligible for9
tax credits pursuant to this Section shall pay a deposit in the amount of five10
hundred thousand dollars to the department for deposit in the New Markets11
performance guarantee account, which is hereby established. The entity shall12
forfeit the deposit in its entirety if either:13
(a) The qualified community development entity and all transferees14
pursuant to Paragraph (E)(6) of this Section fail to issue the total amount of15
qualified equity investments certified by the department and receive cash in the16
total amount certified under Paragraph (E)(5) of this Section within the time17
period set forth in Paragraph (E)(7) of this Section.18
(b) The qualified community development entity or any transferee19
pursuant to Paragraph (E)(6) of this Section that issues a qualified equity20
investment certified pursuant to this Section fails to meet the investment21
requirement under Paragraph (F)(2) of this Section by the second credit22
allowance date of such benefit of the six month cure period established pursuant23
to Subsection G of this Section.24
(2) The deposit required by Paragraph (1) of this Subsection shall be25
deposited with the department and held in the New Markets performance26
guarantee account until the time that compliance with the provisions of this27
Subsection shall have been established. The qualified community development28
entity may request a return of the deposit from the department no earlier than29 SB NO. 244
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thirty days after having met all the requirements of Paragraph (1) of this1
Subsection. The department shall have thirty days to comply with the request2
or give notice of noncompliance.3
I.(1) An entity claiming a credit pursuant to this Section is not required4
to pay any additional retaliatory tax levied by R.S. 22:836 as a result of claiming5
that credit.6
(2) In addition to the exclusion in Paragraph (1) of this Subsection, it is7
the intent of this Section that an entity claiming a credit pursuant to this Section8
is not required to pay any additional tax that may arise as a result of claiming9
that credit.10
J.(1) Qualified community development entities that issue qualified11
equity investments shall submit a report to the department within the first five12
business days after the first anniversary of the initial credit allowance date that13
provides documentation as to the investment of one hundred percent of the14
purchase price in qualified low-income community investments in qualified15
active low-income community businesses located in Louisiana. The report16
required pursuant to the Subsection shall include:17
(a) A bank statement of the qualified community development entity18
evidencing each qualified low-income community investment.19
(b) Evidence that the business was a qualified active low-income20
community business at the time of the qualified low-income community21
investment.22
(2) Thereafter, the qualified community development entity shall submit23
an annual report to the department within forty-five days of the beginning of24
the calendar year during the compliance period. No annual report shall be due25
prior to the first anniversary of the initial credit allowance date. The report26
shall include but is not limited to the following:27
(a) Number of employment positions created and retained as a result of28
qualified low-income community investments.29 SB NO. 244
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(b) Average annual salary of positions described in Subparagraph (a)1
of this Paragraph.2
(3) The qualified community development entity is not required to3
provide the annual report set forth in Paragraph (2) of this Subsection for4
qualified low-income community investments that have been redeemed or5
repaid.6
K.(1) The department may promulgate rules to implement the7
provisions of this Section.8
(2) The department shall issue all forms and notices required hereunder9
in accordance with the provisions of this Section.10
L. The department shall notify the Department of Insurance of any11
insurance company allocated tax credits pursuant to this Section and the12
amount of the tax credits.13
M. The provisions of this Section shall apply only to tax returns or14
reports originally due on or after January 1, 2014.15
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. SB NO. 244
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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. SB NO. 244
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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)