Iowa Administrative Code › Agency 701 - Revenue Department › Title VII - Franchise Tax › Chapter 601 - Filing Returns, Payment of Tax, Penalty and Interest, and Tax Credits › Rule 701-601.11 - Venture Capital Credits

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Investment tax credit for an equity investment in a community-based
				seed capital fund or qualifying business.
a.
Equity investments in a qualifying
				business or community-based seed capital fund before January 1, 2011.
See rule 123-2.1 (15E) for the discussion
				of the investment tax credit for an equity investment in a community-based seed
				capital fund or an equity investment made on or after January 1, 2004, in a
				qualifying business, along with the issuance of tax credit certificates by the
				Iowa capital investment board, for equity investments made before January 1,
				2011.
b.
Equity investments
				in a qualifying business or community-based seed capital fund on or after
				January 1, 2011, and before July 2, 2015.
For equity investments made
				on or after January 1, 2011, see 261-Chapter 115 for information regarding
				eligibility for qualifying businesses and community-based seed capital funds,
				applications for the investment tax credit for equity investments in a
				qualifying business or community-based seed capital fund, and the issuance of
				tax credit certificates by the economic development authority.
(1) Certificate issuance. The department of
				revenue will be notified by the economic development authority when the tax
				credit certificates are issued.
(2)
				Amount of the tax credit. The credit is equal to 20 percent of the taxpayer's
				equity investment in a qualifying business or community-based seed capital
				fund.
(3) Year in which the tax
				credit may be claimed. An investment shall be deemed to have been made on the
				same date as the date of acquisition of the equity interest as determined by
				the Internal Revenue Code. For investments made prior to January 1, 2014, a
				taxpayer shall not claim the tax credit prior to the third tax year following
				the tax year in which the investment is made. For investments made in
				qualifying businesses on or after January 1, 2014, the credit can be claimed in
				the year of the investment, but these investments cannot be redeemed prior to
				January 1, 2016. For example, if a franchise taxpayer whose tax year ends on
				December 31, 2012, makes an equity investment during the 2012 calendar year,
				the franchise taxpayer cannot claim the tax credit until the tax year ending
				December 31, 2015. For fiscal years beginning July 1, 2011, the amount of tax
				credits authorized cannot exceed $2 million. The tax credit certificate must be
				included with the taxpayer's return for the tax year in which the credit may be
				redeemed as stated on the tax credit certificate.
(4) Carried over tax credits. If a tax credit
				is carried over and issued for the tax year immediately following the year in
				which the investment was made because the $2 million cap has been reached, the
				tax credit may be claimed by the taxpayer for the third tax year following the
				tax year for which the credit is issued. For example, if a franchise taxpayer
				whose tax year ends on December 31, 2012, makes an equity investment in
				December 2012 and the $2 million cap for the fiscal year ending June 30, 2013,
				had already been reached, the tax credit will be issued for the tax year ending
				December 31, 2013, and cannot be redeemed until the tax year ending December
				31, 2016.
(5) Limitations. Any
				credit in excess of the tax liability for the tax year may be credited to the
				tax liability for the following five years or until used, whichever is the
				earlier. The tax credit cannot be carried back to a tax year prior to the tax
				year in which the taxpayer claims the tax credit. The tax credit is not
				transferable to any other taxpayer.
(6) Pro rata tax credit claims for certain
				business entities. For equity investments made in a community-based seed
				capital fund and equity investments made on or after January 1, 2004, in a
				qualifying business, an individual may claim the credit if the investment was
				made by a partnership, S corporation, limited liability company, or an estate
				or trust electing to have the income directly taxed to the individual. The
				amount claimed by an individual must be based on the individual's pro rata
				share of the individual's earnings of the partnership, S corporation, limited
				liability company, or estate or trust.
c.
Equity investments in a qualifying
				business on or after July 2, 2015.
For equity investments made on or
				after July 2, 2015, see 261-Chapter 115 for information regarding eligibility
				for qualifying businesses, applications for the investment tax credit for
				equity investments in a qualifying business, and the issuance of tax credit
				certificates by the economic development authority.
(1) Certificate issuance. The department of
				revenue will be notified by the economic development authority when the tax
				credit certificates are issued.
(2)
				Amount of the tax credit. For fiscal years beginning July 1, 2011, the amount
				of the tax credits authorized cannot exceed $2 million. The credit is equal to
				25 percent of the taxpayer's equity investment in a qualifying business. In any
				one calendar year, the amount of tax credits issued for any one qualifying
				business shall not exceed $500,000.
(3) Year in which the credit may be claimed.
				A taxpayer shall not claim a tax credit prior to September 1, 2016. The tax
				credit certificate must be included with the taxpayer's return for the tax year
				in which the credit may be redeemed as stated on the tax credit certificate.
				For the purposes of this paragraph, an investment shall be deemed to have been
				made on the same date as the date of acquisition of the equity interest as
				determined by the Internal Revenue Code.
(4) Pro rata tax credit claims for certain
				business entities. An individual may claim the credit if the investment was
				made by a partnership, S corporation, limited liability company, or an estate
				or trust electing to have the income directly taxed to the individual. The
				amount claimed by an individual must be based on the individual's pro rata
				share of the individual's earnings of the partnership, S corporation, limited
				liability company, or estate or trust. Any credits claimed by an individual are
				subject to the limitations provided in 701-paragraph
				42.22(1)
"c."
(5)
				Carryforward period. For a tax credit claimed against the taxes imposed in Iowa
				Code chapter 422, division V, any tax credit in excess of the taxpayer's
				liability for the tax year may be credited to the tax liability for the
				following three years or until depleted, whichever is earlier.
(6) Refunds, transfers, and carryback
				prohibited. The tax credit cannot be carried back to a tax year prior to the
				tax year in which the taxpayer claims the tax credit. The tax credit is not
				refundable and is not transferable to any other taxpayer.