Senate Bill sb2280c1
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Florida Senate - 2007 CS for SB 2280
By the Committee on Commerce; and Senator Bennett
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1 A bill to be entitled
2 An act relating to insurance premium and
3 corporate income tax credits; creating part XII
4 of ch. 288, F.S., consisting of ss. 288.991 and
5 288.992, F.S.; providing definitions; providing
6 that taxpayers who hold a qualified equity
7 investment on a credit allowance date of the
8 investment are entitled to a nonrefundable,
9 nontransferable tax credit for the taxable year
10 in which the credit allowance date falls;
11 providing for calculating the amount of the tax
12 credit; limiting the amount of the tax credit
13 which may be redeemed in a fiscal year;
14 providing for carryforward of tax credits;
15 providing for the redemption of tax credits
16 earned by certain business entities and by the
17 partners, members, or shareholders of those
18 entities; authorizing a taxpayer to carry over
19 any amount of the tax credit that the taxpayer
20 is prohibited from redeeming in a taxable year
21 to any subsequent taxable year; requiring the
22 issuer of a qualified equity investment to
23 certify to the Department of Revenue the
24 anticipated dollar amount of investments to be
25 made in this state during a specified period
26 following the initial credit allowance date;
27 requiring the department to limit the monetary
28 amount of qualified equity investments to a
29 level necessary to limit the use of tax credits
30 to a specified amount in each fiscal year;
31 providing a basis for such limitation;
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1 authorizing the department to adjust tax
2 credits under certain circumstances; requiring
3 certifications to be accompanied by audited
4 financial statements and notarized affidavits;
5 requiring taxpayers to make an irrevocable
6 election as to the taxes to which to apply the
7 credit; requiring the department to recapture
8 tax credits from certain taxpayers under
9 certain circumstances; requiring the department
10 to adopt rules; requiring the department to
11 administer the allocation of tax credits for
12 certain qualified investments in a specified
13 manner; requiring certain community development
14 entities to report certain information to the
15 department; requiring the department to file
16 annual reports on certain community
17 investments; authorizing the department to
18 conduct examinations and audits to verify
19 receipt and application of tax credits;
20 authorizing the department to pursue recovery
21 of certain funds; authorizing the department to
22 revoke or modify certain decisions relating to
23 eligibility for tax credits under certain
24 circumstances; providing grounds for forfeiture
25 of tax credits under certain circumstances;
26 requiring taxpayers to return forfeited tax
27 credits under certain circumstances; providing
28 for recovery of tax deficiencies under certain
29 circumstances; providing for applicant
30 liability for costs and fees relating to
31 investigations of fraudulent claims; providing
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1 for taxpayer liability for reimbursement of
2 fraudulently claimed tax credits; providing a
3 penalty; providing for taxpayer liability for
4 costs for investigating and prosecuting
5 fraudulent claims; providing for future repeal;
6 providing for continuation of certain tax
7 credit carryforwards; amending s. 220.02, F.S.;
8 revising legislative intent with respect to the
9 order of tax credits to conform; amending s.
10 220.13, F.S.; revising a definition to conform;
11 providing an effective date.
12
13 Be It Enacted by the Legislature of the State of Florida:
14
15 Section 1. Part XII of chapter 288, Florida Statutes,
16 consisting of sections 288.991 and 288.992, is created to
17 read:
18 288.991 New Markets Tax Credit Act.--This part may be
19 cited as the "New Markets Tax Credit Act."
20 288.992 New markets tax credit.--
21 (1) As used in this section, the term:
22 (a) "Adjusted purchase price" means the product of the
23 amount paid to the issuer of a qualified equity investment for
24 such qualified equity investment and a fraction the numerator
25 of which is the dollar amount of qualified low-income
26 community investments held by the issuer in this state as of
27 the credit allowance date during the applicable tax year and
28 the denominator of which is the total dollar amount of
29 qualified low-income community investments held by the issuer
30 as of the credit allowance date during the applicable tax
31 year.
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1 (b) "Applicable percentage" means zero percent for the
2 first credit allowance date and 8.33 percent for each of the
3 next six credit allowance dates.
4 (c) "Credit allowance date" means:
5 1. The date on which any qualified equity investment
6 is initially made; and
7 2. Each of the six subsequent anniversary dates of the
8 date upon which the qualified equity investment was initially
9 made.
10 (d) "Long-term debt security" means any debt
11 instrument issued by a qualified community development entity,
12 at par value or a premium, having an original maturity date of
13 at least 7 years following the date of its issuance, with no
14 acceleration of repayment, amortization, or prepayment
15 features before its original maturity date, and having no
16 distribution, payment, or interest features related to the
17 profitability of the qualified community development entity or
18 the performance of the qualified community development
19 entity's investment portfolio. This paragraph does not limit
20 the holder's ability to accelerate payments on the debt
21 instrument in situations in which the issuer has defaulted on
22 covenants designed to ensure compliance with this section or
23 s. 45D of the Internal Revenue Code of 1986, as amended.
24 (e) "Low-income community" means with respect to any
25 population census tract if within this state:
26 1. The poverty rate of such tract is at least 20
27 percent;
28 2. In the case of a tract not located within a
29 metropolitan area, the median family income for such tract
30 does not exceed 80 percent of statewide median family income;
31 or
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1 3. In the case of a tract located within a
2 metropolitan area, the median family income for such a tract
3 does not exceed 80 percent of the greater of statewide median
4 family income or the metropolitan area median income.
5 (f) "Qualified active low-income community business"
6 has the same meaning as in s. 45D of the Internal Revenue Code
7 of 1986, as amended. Any business that derives or projects to
8 derive 15 percent or more of its annual revenue from the
9 rental or sale of real estate is not a qualified active
10 low-income community business. The term does not include any
11 trade or business consisting predominantly of the development
12 or holding of intangibles for sale or license; any trade or
13 business consisting of the operation of any private or
14 commercial golf course, country club, massage parlor, hot tub
15 facility, suntan facility, racetrack or other facility used
16 for gambling, or any store the principal business of which is
17 the sale of alcoholic beverages for consumption off premises;
18 or any trade or business the principal activity of which is
19 farming if the sum of the aggregate unadjusted bases or, if
20 greater, the fair market value, of the assets owned by the
21 taxpayer which are used in such trade or business, and the
22 aggregate value of the assets leased by a taxpayer used in
23 such trade or business, exceeds $500,000. For the purposes of
24 this paragraph, two or more trades or businesses shall be
25 treated as a single trade or business.
26 (g) "Qualified community development entity" has the
27 same meaning as in s. 45D of the Internal Revenue Code of
28 1986, as amended. However, an entity that has never entered
29 into an allocation agreement with the Community Development
30 Financial Institutions Fund of the United States Treasury
31 Department with respect to credits authorized by s. 45D of the
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1 Internal Revenue Code of 1986, as amended, is not a qualified
2 community development entity. A qualified community
3 development entity is often referred to as an "issuer" in this
4 section.
5 (h) "Qualified equity investment" means any equity
6 investment or long-term debt security issued by a qualified
7 community development entity including an equity investment
8 that was a qualified equity investment when in the possession
9 of a prior holder or:
10 1. Is acquired on or after July 1, 2007, at its
11 original issuance solely in exchange for cash;
12 2. Has at least 85 percent of its cash purchase price
13 used by the issuer to make qualified low-income community
14 investments; and
15 3. Is designated by the issuer as a qualified equity
16 investment pursuant to this section, regardless of whether it
17 also has been designated as a qualified equity investment
18 under s. 45D of the Internal Revenue Code of 1986, as amended.
19 All applicable provisions of s. 45D of the Internal Revenue
20 Code of 1986, as amended, shall remain in full force.
21 (i) "Qualified low-income community investment" means
22 any capital or equity investment in or loan to any qualified
23 active low-income community business made after July 1, 2007.
24 With respect to any one qualified active low-income community
25 business, on a collective basis with all of its affiliates,
26 the maximum amount of investment that any qualified community
27 development entity, on an aggregate basis with all of its
28 affiliates, may use for the calculation of any numerator
29 described in paragraph (a) is $10 million. For purposes of
30 calculating the amount of qualified low-income community
31 investments held by an issuer, an investment is deemed to be
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1 held by an issuer, even if the investment has been sold or
2 repaid, if the issuer reinvests an amount equal to the capital
3 returned to or recovered by the issuer from the original
4 investment, exclusive of any profits realized, in another
5 qualified low-income community investment within 12 months
6 after receipt of such capital. An issuer is not required to
7 reinvest capital returned from qualified low-income community
8 investments after the sixth anniversary of the issuance of the
9 qualified equity investment for which the proceeds were used
10 to make the qualified low-income community investment. The
11 qualified low-income community investment is deemed to be held
12 by the issuer through the seventh anniversary of the qualified
13 equity investment's issuance.
14 (j) "Tax credit" means a credit against the taxes
15 imposed by ss. 220.11 and 624.509.
16 (k) "Taxpayer" means any individual or entity subject
17 to the taxes imposed by s. 220.11 or s. 624.509.
18 (2) A taxpayer holding a qualified equity investment
19 on a credit allowance date of such qualified equity investment
20 is entitled to a tax credit during the taxable year, including
21 the credit allowance date. The tax credit amount is equal to
22 the applicable percentage of the adjusted purchase price paid
23 to the issuer of such qualified equity investment. The amount
24 of the tax credit that may be redeemed in any tax year may not
25 exceed the amount of the taxpayer's state tax liability for
26 such tax year. A tax credit authorized under this section is
27 not refundable or transferable. Tax credits earned by a
28 partnership, limited liability company, S corporation, or
29 other pass-through entity may be allocated to the partners,
30 members, or shareholders of such entity for their direct
31 redemption in accordance with the provisions of any agreement
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1 among such partners, members, or shareholders. Any amount of
2 tax credit that the taxpayer is prohibited by this section
3 from redeeming in a taxable year may be carried forward to any
4 of the taxpayer's subsequent taxable years. The maximum
5 aggregate amount of qualified equity investments that may be
6 allocated by the Department of Revenue may not exceed an
7 amount that would result in taxpayers claiming in any single
8 state fiscal year credits in excess of $15 million. Such
9 limitations on qualified equity investments shall be based
10 solely on the anticipated use of credits without regard for
11 the potential for taxpayers to carry forward tax credits to
12 later tax years.
13 (3) The issuer of the qualified equity investment must
14 certify to the department the anticipated dollar amount of
15 such investments to be made in this state during the first
16 12-month period following the initial credit allowance date.
17 On the second and each subsequent credit allowance date, if
18 the actual dollar amount of the investments is different from
19 the amount estimated, the department shall adjust the credits
20 arising on the second and subsequent credit allowance date to
21 account for any differences. All certifications shall be
22 accompanied by audited financial statements and notarized
23 affidavits provided by the issuer in forms acceptable to the
24 department. A taxpayer shall make, on the date on which a
25 qualified equity investment is initially made, an irrevocable
26 election to apply the credit against taxes due under chapter
27 220 or chapter 624 or against a stated combination of the two
28 taxes. The election shall be binding upon any subsequent
29 holder.
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1 (4) The department shall recapture the tax credit
2 allowed under this section with respect to the qualified
3 equity investment if:
4 (a) Any amount of the federal tax credit available
5 with respect to a qualified equity investment that is eligible
6 for a tax credit under this section is recaptured under s. 45D
7 of the Internal Revenue Code of 1986, as amended. In the event
8 of such recapture by the IRS, the taxpayer shall notify the
9 Department of Revenue of a pending IRS recapture within 20
10 days after receipt of a notice of recapture from the IRS;
11 (b) The issuer redeems or makes any principal
12 repayment with respect to a qualified equity investment before
13 the seventh anniversary of the issuance of the qualified
14 equity investment; or
15 (c) The qualified community development entity fails
16 to maintain at least 85 percent of the proceeds of the
17 qualified equity investment in qualified low-income community
18 investments in this state at any time before the seventh
19 anniversary of the issuance of the qualified equity
20 investment.
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22 Any tax credit that is subject to recapture shall be
23 recaptured from the taxpayer who claimed the tax credit on a
24 tax return.
25 (5)(a) The department may adopt rules by September 30,
26 2007, to administer this section, including recapture
27 provisions on a scaled proportional basis, and to administer
28 the allocation of tax credits issued for qualified equity
29 investments, which shall be conducted on a first-come,
30 first-served basis. Qualified equity investments shall be
31 approved on a first-come, first-served basis by the
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1 department. A community development entity shall submit
2 sufficient documentation as required by the department to
3 demonstrate that the provisions of this section have been met
4 prior to being entitled to receive the credit provided in this
5 section. Such approval shall not be unreasonably withheld.
6 Notice of approval or of any deficiency in the materials
7 submitted to the department shall be mailed to the community
8 development entity within 30 days after submitting such
9 documentation for approval of a qualified equity investment.
10 (b) If the maximum cap on allocation of tax credits of
11 $15 million as provided in subsection (2) is exhausted in any
12 fiscal year, approval of any additional qualified equity
13 investments shall be suspended until such time as the maximum
14 cap on allocation is no longer exhausted. In such case, the
15 department shall notify a community development entity that
16 the qualified equity investment is not being approved due to
17 exhausting the maximum cap on allocation of tax credits. At
18 such time, the community development entity shall elect,
19 within 20 days, to preserve its place in line under the
20 first-come, first-served provision, or withdraw its claim to
21 credits for such qualified equity investment under this
22 section. At such time as additional cap is made available, a
23 qualified equity investment by an entity that preserved its
24 place in line shall be approved if the investment would have
25 been deemed a qualified equity investment at the time of
26 submitting the initial investment documentation for approval.
27 (c) Where the maximum cap on allocation is not yet
28 reached, but a pending request for qualification of an
29 investment would cause the cap to be exhausted and breached if
30 such investment were qualified, the community development
31 entity shall elect whether to receive partial credits, up to
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1 the point of exhausting the cap, until such time as additional
2 cap is made available, or withdraw its claim to credits for
3 such qualified equity investment under this act.
4 (d) The Department of Revenue may adopt rules pursuant
5 to ss. 120.536(1) and 120.54 to administer this section.
6 (e)1. A qualified community development entity that
7 seeks an allocation of credit for a qualified low-income
8 community investment from the department must file an
9 application with the department for each qualified low-income
10 community investment it intends to make, in a form that the
11 department may prescribe by rule. The qualified community
12 development entity shall submit a nonrefundable application
13 fee of $1,000 to the department for each application for an
14 allocation of credit under this section.
15 2. Within 30 days after receipt of a completed
16 application containing all information necessary for the
17 department to make an allocation of credit, including payment
18 of the application fee, the department shall grant or deny the
19 application in full or in part. If the department denies any
20 part of the application, it shall inform the qualified
21 community development entity of the grounds for the denial.
22 (f) Each community development entity that receives
23 qualified equity investments to make qualified low-income
24 community investments in this state shall annually report to
25 the department using the North American Industry
26 Classification System Code, the county, the dollars invested,
27 the number of jobs assisted, and the number of jobs assisted
28 with wages over 100 percent of the federal poverty level for a
29 family of four of each qualified low-income community
30 investment.
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1 (g) The department shall file an annual report on all
2 qualified low-income community investments which includes
3 relevant statistics from the North American Industry
4 Classification System Code, the county or counties where the
5 qualified low-income community investments are located, the
6 amount invested, the number of jobs assisted with wages over
7 100 percent of the federal poverty level for a family of four
8 of each qualified low-income community investment, and the
9 value of applicable state tax credits claimed the previous
10 calendar year. The department shall submit a copy to the
11 Governor, the President of the Senate, and the Speaker of the
12 House of Representatives each January 2, beginning in 2009,
13 and also shall post the annual report on the department's
14 website.
15 (h) The Office of Tourism, Trade, and Economic
16 Development shall issue a certification letter for each
17 certified investor, showing the amount invested in the
18 qualified community development entity. The applicable
19 qualified community development entity shall attest to the
20 validity of the certification letter.
21 (6)(a) The department may conduct examinations and
22 audits as provided in s. 213.34 to verify that tax credits
23 under this section have been received and applied according to
24 the requirements of this section. The provisions of s. 213.053
25 apply to examination and audit information. If the department
26 determines that tax credits have not been received, or applied
27 as required by this section, the department may, in addition
28 to the remedies provided in this subsection, pursue recovery
29 of such funds pursuant to the laws and rules governing the
30 assessment of taxes.
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1 (b) The department may revoke or modify any written
2 decision qualifying, certifying, or otherwise granting
3 eligibility for tax credits under this section if it is
4 discovered that the tax credit applicant submitted any false
5 statement, representation, or certification in any
6 application, record, report, plan, or other document filed in
7 an attempt to receive tax credits under this section.
8 (c) A determination by the department, as a result of
9 an audit or examination by the department, that a taxpayer
10 received tax credits pursuant to this section to which the
11 taxpayer was not entitled is grounds for forfeiture of
12 previously claimed and received tax credits. The taxpayer is
13 responsible for returning forfeited tax credits to the
14 department and such funds shall be paid into the General
15 Revenue Fund. If the credit provided for under this section is
16 reduced as a result of an examination or audit by the
17 department, the tax deficiency shall be recovered from the
18 first entity or the surviving or acquiring entity to have
19 claimed the credit up to the amount of the credit taken. Any
20 subsequent deficiencies shall be assessed against any entity
21 acquiring and claiming the credit or, in the case of multiple
22 succeeding entities, in the order of tax credit succession.
23 (d) Any applicant that submits information under this
24 section which includes fraudulent information is liable for
25 reimbursement of the reasonable costs and fees associated with
26 the review, processing, investigation, and prosecution of the
27 fraudulent claim. A taxpayer that obtains a tax credit under
28 this section through a claim that is fraudulent is liable for
29 reimbursement of the credit amount claimed, plus a penalty in
30 an amount double the credit amount claimed, and reimbursement
31 of reasonable costs, which penalty is in addition to any
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1 criminal penalty to which the taxpayer is liable for the same
2 acts. The taxpayer is also liable for costs and fees incurred
3 by the state in investigating and prosecuting the fraudulent
4 claim.
5 (7) This section is repealed July 1, 2014, except that
6 the tax credit carryforward provided in this section shall
7 continue to be valid for the period specified. However, any
8 qualified equity investment made prior to July 1, 2014, is
9 eligible to receive credits on each applicable credit
10 allowance date as provided by this act, even if such credit
11 allowance date comes after July 1, 2014. All unused credits
12 expire on December 31, 2028.
13 Section 2. Subsection (8) of section 220.02, Florida
14 Statutes, is amended to read:
15 220.02 Legislative intent.--
16 (8) It is the intent of the Legislature that credits
17 against either the corporate income tax or the franchise tax
18 be applied in the following order: those enumerated in s.
19 631.828, those enumerated in s. 220.191, those enumerated in
20 s. 220.181, those enumerated in s. 220.183, those enumerated
21 in s. 220.182, those enumerated in s. 220.1895, those
22 enumerated in s. 221.02, those enumerated in s. 220.184, those
23 enumerated in s. 220.186, those enumerated in s. 220.1845,
24 those enumerated in s. 220.19, those enumerated in s. 220.185,
25 those enumerated in s. 220.187, those enumerated in s.
26 220.192, and those enumerated in s. 220.193, and those
27 enumerated in s. 288.992.
28 Section 3. Paragraph (a) of subsection (1) of section
29 220.13, Florida Statutes, is amended to read:
30 220.13 "Adjusted federal income" defined.--
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1 (1) The term "adjusted federal income" means an amount
2 equal to the taxpayer's taxable income as defined in
3 subsection (2), or such taxable income of more than one
4 taxpayer as provided in s. 220.131, for the taxable year,
5 adjusted as follows:
6 (a) Additions.--There shall be added to such taxable
7 income:
8 1. The amount of any tax upon or measured by income,
9 excluding taxes based on gross receipts or revenues, paid or
10 accrued as a liability to the District of Columbia or any
11 state of the United States which is deductible from gross
12 income in the computation of taxable income for the taxable
13 year.
14 2. The amount of interest which is excluded from
15 taxable income under s. 103(a) of the Internal Revenue Code or
16 any other federal law, less the associated expenses disallowed
17 in the computation of taxable income under s. 265 of the
18 Internal Revenue Code or any other law, excluding 60 percent
19 of any amounts included in alternative minimum taxable income,
20 as defined in s. 55(b)(2) of the Internal Revenue Code, if the
21 taxpayer pays tax under s. 220.11(3).
22 3. In the case of a regulated investment company or
23 real estate investment trust, an amount equal to the excess of
24 the net long-term capital gain for the taxable year over the
25 amount of the capital gain dividends attributable to the
26 taxable year.
27 4. That portion of the wages or salaries paid or
28 incurred for the taxable year which is equal to the amount of
29 the credit allowable for the taxable year under s. 220.181.
30 This subparagraph shall expire on the date specified in s.
31 290.016 for the expiration of the Florida Enterprise Zone Act.
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1 5. That portion of the ad valorem school taxes paid or
2 incurred for the taxable year which is equal to the amount of
3 the credit allowable for the taxable year under s. 220.182.
4 This subparagraph shall expire on the date specified in s.
5 290.016 for the expiration of the Florida Enterprise Zone Act.
6 6. The amount of emergency excise tax paid or accrued
7 as a liability to this state under chapter 221 which tax is
8 deductible from gross income in the computation of taxable
9 income for the taxable year.
10 7. That portion of assessments to fund a guaranty
11 association incurred for the taxable year which is equal to
12 the amount of the credit allowable for the taxable year.
13 8. In the case of a nonprofit corporation which holds
14 a pari-mutuel permit and which is exempt from federal income
15 tax as a farmers' cooperative, an amount equal to the excess
16 of the gross income attributable to the pari-mutuel operations
17 over the attributable expenses for the taxable year.
18 9. The amount taken as a credit for the taxable year
19 under s. 220.1895.
20 10. Up to nine percent of the eligible basis of any
21 designated project which is equal to the credit allowable for
22 the taxable year under s. 220.185.
23 11. The amount taken as a credit for the taxable year
24 under s. 220.187.
25 12. The amount taken as a credit for the taxable year
26 under s. 220.192.
27 13. The amount taken as a credit for the taxable year
28 under s. 220.193.
29 14. The amount taken as a credit for the taxable year
30 under s. 288.992.
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1 Section 4. This act shall take effect July 1, 2007 and
2 shall apply to tax years ending after December 31, 2007.
3
4 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
5 Senate Bill 2280
6
7 This CS differs from the bill as filed by:
8 - Rewrites several provisions to clarify their intent and
address issues identified by the Department of Revenue
9 (DOR);
10 - Directs the Governor's Office of Tourism, Trade, and
Economic Development, instead of DOR, to issue
11 certification letters to equity investors;
12 - Specifies that all unused tax credits shall expire
December 31, 2028;
13
- Adds or expands upon a number of definitions for terms
14 used in the bill;
15 - Excludes certain types of businesses from the definition
of "qualified active low-income community business,"
16 among them massage parlors, country clubs and golf
courses, and any business that principally sells liquor
17 for off-premises consumption;
18 - Establishes a $1,000 application fee to defray DOR's
costs to review each application for a qualified
19 community equity investment, and gives DOR 30 days to
make its decision;
20
- Clarifies the information to be included in DOR's annual
21 report to the Governor and Legislature about the program;
and
22
- Establishes that the new tax credits are the last in
23 order to be applied against a taxpayer's state tax
liabilities.
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