| 1 | A bill to be entitled |
| 2 | An act relating to insurance premium and corporate income |
| 3 | tax credits; providing definitions; providing that |
| 4 | taxpayers who hold a qualified equity investment on a |
| 5 | credit allowance date of the investment are entitled to a |
| 6 | nonrefundable, nontransferable tax credit for the taxable |
| 7 | year in which the credit allowance date falls; providing |
| 8 | for calculating the amount of the tax credit; limiting the |
| 9 | amount of the tax credit that may be redeemed in a fiscal |
| 10 | year; providing for the redemption of tax credits earned |
| 11 | by certain business entities and by the partners, members, |
| 12 | or shareholders of those entities; authorizing a taxpayer |
| 13 | to carry over any amount of the tax credit that the |
| 14 | taxpayer is prohibited from redeeming in a taxable year to |
| 15 | any subsequent taxable year; requiring the issuer of a |
| 16 | qualified equity investment to certify to the Department |
| 17 | of Revenue the anticipated dollar amount of investments to |
| 18 | be made in this state during a specified period following |
| 19 | the initial credit allowance date; requiring the |
| 20 | department to limit the monetary amount of qualified |
| 21 | equity investments to a level necessary to limit the use |
| 22 | of tax credits to a specified amount in each fiscal year; |
| 23 | providing a basis for such limitation; authorizing the |
| 24 | department to adjust tax credits under certain |
| 25 | circumstances; requiring the department to recapture tax |
| 26 | credits from certain taxpayers under certain |
| 27 | circumstances; requiring the department to adopt rules; |
| 28 | requiring the department to administer the allocation of |
| 29 | tax credits for certain qualified investments in a |
| 30 | specified manner; providing an effective date. |
| 31 |
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| 32 | Be It Enacted by the Legislature of the State of Florida: |
| 33 |
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| 34 | Section 1. New markets development program.-- |
| 35 | (1) As used in this section, the term: |
| 36 | (a) "Adjusted purchase price" means the product of the |
| 37 | amount paid to the issuer of a qualified equity investment for |
| 38 | such qualified equity investment and a fraction the numerator of |
| 39 | which is the dollar amount of qualified low-income community |
| 40 | investments held by the issuer in this state as of the credit |
| 41 | allowance date during the applicable tax year and the |
| 42 | denominator of which is the total dollar amount of qualified |
| 43 | low-income community investments held by the issuer as of the |
| 44 | credit allowance date during the applicable tax year. |
| 45 | (b) "Applicable percentage" means zero percent for the |
| 46 | first credit allowance date and 8.33 percent for each of the |
| 47 | next six credit allowance dates. |
| 48 | (c) "Credit allowance date" means: |
| 49 | 1. The date on which any qualified equity investment is |
| 50 | initially made; and |
| 51 | 2. The first anniversary date after the initial investment |
| 52 | date. |
| 53 | (d) "Long-term debt security" means any debt instrument |
| 54 | issued by a qualified community development entity, at par value |
| 55 | or a premium, having an original maturity date of at least 7 |
| 56 | years following the date of its issuance, with no acceleration |
| 57 | of repayment, amortization, or prepayment features before its |
| 58 | original maturity date, and having no distribution, payment, or |
| 59 | interest features related to the profitability of the qualified |
| 60 | community development entity or the performance of the qualified |
| 61 | community development entity's investment portfolio. This |
| 62 | paragraph does not limit the holder's ability to accelerate |
| 63 | payments on the debt instrument in situations in which the |
| 64 | issuer has defaulted on covenants designed to ensure compliance |
| 65 | with this section or s. 45D of the Internal Revenue Code of |
| 66 | 1986, as amended. |
| 67 | (e) "Qualified active low-income community business" has |
| 68 | the same meaning as in s. 45D of the Internal Revenue Code of |
| 69 | 1986, as amended. Any business that derives or projects to |
| 70 | derive 15 percent or more of its annual revenue from the rental |
| 71 | or sale of real estate is not a qualified active low-income |
| 72 | community business. |
| 73 | (f) "Qualified community development entity" has the same |
| 74 | meaning as in s. 45D of the Internal Revenue Code of 1986, as |
| 75 | amended, if such entity has entered into an allocation agreement |
| 76 | with the Community Development Financial Institutions Fund of |
| 77 | the United States Treasury Department with respect to credits |
| 78 | authorized by s. 45D of the Internal Revenue Code of 1986, as |
| 79 | amended. |
| 80 | (g) "Qualified equity investment" means any equity |
| 81 | investment or long-term debt security issued by a qualified |
| 82 | community development entity that was a qualified equity |
| 83 | investment when in the possession of a prior holder or: |
| 84 | 1. Is acquired on or after July 1, 2007, at its original |
| 85 | issuance solely in exchange for cash; |
| 86 | 2. Has at least 85 percent of its cash purchase price used |
| 87 | by the issuer to make qualified low-income community |
| 88 | investments; and |
| 89 | 3. Is designated by the issuer as a qualified equity |
| 90 | investment pursuant to this section, regardless of whether it |
| 91 | also has been designated as a qualified equity investment under |
| 92 | s. 45D of the Internal Revenue Code of 1986, as amended. |
| 93 | (h) "Qualified low-income community investment" means any |
| 94 | capital or equity investment in or loan to any qualified active |
| 95 | low-income community business. With respect to any one qualified |
| 96 | active low-income community business, on a collective basis with |
| 97 | all of its affiliates, the maximum amount of investment that any |
| 98 | qualified community development entity, on an aggregate basis |
| 99 | with all of its affiliates, may use for the calculation of any |
| 100 | numerator described in paragraph (a) shall be $10 million. For |
| 101 | purposes of calculating the amount of qualified low-income |
| 102 | community investments held by an issuer, an investment shall be |
| 103 | deemed to be held by an issuer, even if the investment has been |
| 104 | sold or repaid, if the issuer reinvests an amount equal to the |
| 105 | capital returned to or recovered by the issuer from the original |
| 106 | investment, exclusive of any profits realized, in another |
| 107 | qualified low-income community investment within 12 months after |
| 108 | receipt of such capital. An issuer is not required to reinvest |
| 109 | capital returned from qualified low-income community investments |
| 110 | after the sixth anniversary of the issuance of the qualified |
| 111 | equity investment for which the proceeds were used to make the |
| 112 | qualified low-income community investment. The qualified low- |
| 113 | income community investment shall be deemed to be held by the |
| 114 | issuer through the seventh anniversary of the qualified equity |
| 115 | investment's issuance. |
| 116 | (i) "Tax credit" means a credit against the taxes imposed |
| 117 | by ss. 220.11 and 624.509, Florida Statutes. |
| 118 | (j) "Taxpayer" means any individual or entity subject to |
| 119 | the taxes imposed by ss. 220.11 and 624.509, Florida Statutes. |
| 120 | (2) A taxpayer holding a qualified equity investment on a |
| 121 | credit allowance date of such qualified equity investment is |
| 122 | entitled to a tax credit during the taxable year, including the |
| 123 | credit allowance date. The tax credit amount is equal to the |
| 124 | applicable percentage of the adjusted purchase price paid to the |
| 125 | issuer of such qualified equity investment. The amount of the |
| 126 | tax credit that may be redeemed in any tax year may not exceed |
| 127 | the amount of the taxpayer's state tax liability for such tax |
| 128 | year. A tax credit authorized under this section is not |
| 129 | refundable or transferable. Tax credits earned by a partnership, |
| 130 | limited liability company, S corporation, or other "pass- |
| 131 | through" entity may be allocated to the partners, members, or |
| 132 | shareholders of such entity for their direct redemption in |
| 133 | accordance with the provisions of any agreement among the |
| 134 | partners, members, or shareholders. Any amount of tax credit |
| 135 | that the taxpayer is prohibited by this section from redeeming |
| 136 | in a taxable year may be carried forward to any of the |
| 137 | taxpayer's subsequent taxable years. The amount of tax credits |
| 138 | that may be allocated by the Department of Revenue under this |
| 139 | section in each fiscal year may not exceed $15 million. The |
| 140 | Department of Revenue shall limit the monetary amount of |
| 141 | qualified equity investments authorized under this section to a |
| 142 | level necessary to limit use of tax credits to no more than $15 |
| 143 | million of tax credits in any fiscal year. Such limitations on |
| 144 | qualified equity investments shall be based solely on the |
| 145 | anticipated use of credits without regard for the potential of |
| 146 | taxpayers to carry forward tax credits to later tax years. |
| 147 | (3) The issuer of the qualified equity investment must |
| 148 | certify to the department the anticipated dollar amount of such |
| 149 | investments to be made in this state during the first 12-month |
| 150 | period following the initial credit allowance date. On the |
| 151 | second credit allowance date, if the actual dollar amount of the |
| 152 | investments is different from the amount estimated, the |
| 153 | department shall adjust the credits arising on the second |
| 154 | allowance date to account for the difference. |
| 155 | (4) The department shall recapture the tax credit allowed |
| 156 | under this section with respect to the qualified equity |
| 157 | investment if: |
| 158 | (a) Any amount of the federal tax credit available with |
| 159 | respect to a qualified equity investment that is eligible for a |
| 160 | tax credit under this section is recaptured under s. 45D of the |
| 161 | Internal Revenue Code of 1986, as amended; |
| 162 | (b) The issuer redeems or makes any principal repayment |
| 163 | with respect to a qualified equity investment before the seventh |
| 164 | anniversary of the issuance of the qualified equity investment; |
| 165 | or |
| 166 | (c) The qualified community development entity fails to |
| 167 | maintain at least 85 percent of the proceeds of the qualified |
| 168 | equity investment in qualified low-income community investments |
| 169 | in Florida at any time before the seventh anniversary of the |
| 170 | issuance of the qualified equity investment. |
| 171 |
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| 172 | Any tax credit that is subject to recapture shall be recaptured |
| 173 | from the taxpayer who claimed the tax credit on a tax return. |
| 174 | (5) The department shall adopt rules to administer this |
| 175 | section, including recapture provisions on a scaled proportional |
| 176 | basis, and to administer the allocation of tax credits issued |
| 177 | for qualified equity investments, which shall be conducted on a |
| 178 | first-come, first-served basis. |
| 179 | Section 2. This act shall take effect July 1, 2007. |