KRS 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 execu ted 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allocation agreement remains in effect and has not been revoked or canceled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 purc haser 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 prop osed 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 recei pt 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 notic e
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 pur chase 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 in vestment 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 de emed 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 certifi ed 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 loca ted 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 quali fied 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 inv estment 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 b e 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 investm ent 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 o riginal 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 reinve st 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 departm ent, 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 r ules 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 com pliance 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 ultimate ly 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 amoun t 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 possib le
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 a nd 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 inve stment 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 subsec tion (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.