KRS § 141.433 — KY Code / Title XI / Chapter 141 / Section 141.433
141.433 Application for New Markets Development Program tax credit
Status: in_force

141.433 Application for New Markets Development Program tax credit.

(1) 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allocation agreement remains in effect and has not been revoked or canceled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.

(2) 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) 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.

(4) 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.

(5) 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.

(6) (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 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.

(b) 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 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.

(7) 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.

(8) (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 the qualified community

development entity that it is noncompliant and subject to possible

forfeiture of the fee as provided in this subsection.

(d) 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.

(e) 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.

(f) 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.