SB0076

SENATE BILL 76

50th legislature - STATE OF NEW MEXICO - second session, 2012

INTRODUCED BY

Mary Kay Papen

AN ACT

RELATING TO TAXATION; PROVIDING CORPORATE INCOME TAX OR PREMIUM TAX CREDITS FOR TAXPAYERS WHO QUALIFY FOR FEDERAL NEW MARKETS TAX CREDITS AND WHO INVEST IN LOANS AND OTHER FINANCING FOR BUSINESSES IN CERTAIN LOW-INCOME AREAS; PROVIDING FOR TAX CREDIT CERTIFICATES TO BE TIERED OVER SEVEN YEARS WITH FIVE YEARS OF ALLOWABLE CARRYOVER; PROVIDING THAT TAXPAYER ELIGIBILITY BE DETERMINED AND TAX CREDIT CERTIFICATES BE ISSUED BY THE NEW MEXICO FINANCE AUTHORITY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. A new section of the Statewide Economic Development Finance Act is enacted to read:

"[NEW MATERIAL] ADMINISTRATION OF STATE NEW MARKETS TAX CREDITS BY THE NEW MEXICO FINANCE AUTHORITY.--

A. The authority shall receive applications for and determine the eligibility of taxpayers to receive new markets tax credits, to certify a qualified equity investment made by a taxpayer and to issue certificates of eligibility to an eligible taxpayer.

B. The authority shall review taxpayer eligibility on an annual basis. The authority shall notify the taxation and revenue department or the insurance division of the public regulation commission when a taxpayer loses its eligibility to receive a new markets tax credit by providing a final notice of decertification to the taxation and revenue department, the insurance division of the public regulation commission, the qualified community development entity and the taxpayer within two weeks of decertifying the qualified equity investment.

C. The maximum amount of aggregate new markets tax credits allowable in a calendar year is sixteen million dollars ($16,000,000). The authority shall coordinate at least monthly with the taxation and revenue department and the insurance division of the public regulation commission to maintain a record of the cumulative amount of claims for the state new markets corporate income tax credits and state new markets premium tax credits that have been approved. To provide guidance to qualified community development entities regarding the amount of credit capacity remaining in a year, the authority shall post monthly on the authority's web site the aggregate amount of state new markets corporate income tax credits and state new markets premium tax credits claimed and authorized for that year.

D. Prior to October 31, 2012, the authority shall establish by rule the procedures and forms for a qualified community development entity to apply for certification of a qualified equity investment for a new markets tax credit. The rules and forms shall be presented to the New Mexico finance authority oversight committee for its comments and approval during the 2012 legislative interim.

E. Prior to October 31, 2012, the authority shall establish by rule the minimum application requirements and specific standards for qualifying for the new markets tax credits that will produce the maximum long-term economic benefits for the state. The rules shall be presented to the New Mexico finance authority oversight committee for its comments and approval during the 2012 legislative interim.

F. Prior to October 31, 2012, the authority shall establish by rule the conditions and procedures for certification and decertification of a qualified equity investment. The rules shall be presented to the New Mexico finance authority oversight committee for its comments and approval during the 2012 legislative interim.

G. The authority shall provide a form on which a qualified community development entity shall indicate:

(1) the name, address and tax identification number of the qualified community development entity and evidence of the entity's federal certification as a qualified community development entity;

(2) a description of the proposed purchase price and structure, amount and purchaser of the equity investment;

(3) an acknowledgment and waiver allowing information from the application and a taxpayer's tax returns, reports and filings to be used for the authority's report to the legislature about the effectiveness of the new markets tax credits;

(4) the name and tax identification number of any taxpayer that the qualified community development entity reasonably expects to be eligible to claim the new markets tax credit allowed as a result of the issuance of the qualified equity investment;

(5) information about the type of qualified active low-income community businesses in which the qualified equity investment will likely be made, including, when applicable and known, a detailed description of:

(a) the type of businesses to receive the qualified equity investment;

(b) the location of the businesses to receive the qualified equity investment;

(d) the physical infrastructure that may be created or preserved; and

(6) any other information required by the authority in its rules.

H. The application submission shall include:

(1) a copy of the allocation agreement executed by the qualified community development entity, or in the case of a subordinate qualified community development entity, the entity that created the subordinate qualified community development entity, and the federal community development financial institutions fund;

(2) a certificate executed by an executive officer of the qualified community development entity, or in the case of a subordinate qualified community development entity, the entity that created the subordinate qualified community development entity, attesting that the allocation agreement remains in effect and has not been revoked or canceled by the community development financial institutions fund; and

(3) an application fee of twenty thousand dollars ($20,000) that shall be nonrefundable, subject to the provisions of this section, payable to the authority.

I. The authority shall approve applications that comply with this section and its rules in the order that completed applications are received. 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 authority shall certify, consistent with remaining tax credit capacity under the annual cap, qualified equity investments in proportionate percentages based on 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 certified fully because the annual cap has been met, the authority shall certify the portion that may be certified unless the qualified community development entity elects to withdraw its request rather than receive partial credit. A request withdrawn under this subsection shall be accompanied by a refund of fifty percent of the application fee. Withdrawn applications may not be resubmitted. Any new application shall be submitted with the full twenty-thousand-dollar ($20,000) application fee for the qualified community development entity to be considered for a tax credit.

J. Within ninety days of the receipt of an application that the authority determines to be complete, the authority shall grant the application in whole or deny the application in whole or in part. Subject to the limitations in this section, the authority's rules and the new markets tax credits provisions in the Corporate Income and Franchise Tax Act and the New Mexico Insurance Code, the authority shall certify the proposed equity investment or long-term debt security as a qualified equity investment. If the authority denies any part of the application, it shall inform the qualified community development entity of the grounds for the denial. The qualified community development entity shall have fifteen days after the notice of denial to provide any additional information required by the authority to its application. If the qualified community development entity fails to complete its application within the fifteen-day period, the application shall remain denied. Any new application shall be submitted in full with a new submission date, subject to the annual cap of sixteen million dollars ($16,000,000) of aggregate new markets tax credits for the calendar year of the new submission date.

K. Within two weeks of approving the application, the authority shall provide written notice of the certification to the qualified community development entity. The notice shall include the names of the taxpayers that are eligible to use the new markets tax credit, as stated in the application, and their respective tax credit amounts. If the name of a taxpayer or entity that is eligible to use a tax credit changes due to a transfer of a qualified equity investment or a change in an allocation under the allocation agreement between the qualified community development entity and the community development financial institutions fund, the qualified community development entity shall notify the authority of the change.

L. Within thirty days after receiving notice of certification, a qualified community development entity shall issue the qualified equity investment and shall receive cash in the amount of the certified purchase price. The qualified community development entity shall provide the authority with evidence of the receipt of the cash investment within ten business days after receipt.

M. If the qualified community development entity does not receive the cash investment and issue the qualified equity investment within thirty days following receipt of the certification notice, the certification shall lapse, the application shall be permanently rejected and the application fee shall be forfeited. A certification that lapses reverts to the authority and shall not be reissued.

N. Within thirty days of receiving evidence of a qualified community development entity's receipt of cash in the amount of the purchase price of the qualified active low-income community business, the authority shall issue certificates of eligibility to a qualified community development entity, whose qualified equity investment has been certified and has not been decertified, as follows:

(1) a certificate shall not be issued for use in the first and second credit allowance dates of the investment;

(2) a certificate in the amount of seven percent of the amount of the investment shall be issued with a maturity date of December 31 of the third credit allowance date of the investment;

(3) a certificate in the amount of eight percent of the amount of the investment shall be issued with a maturity date of December 31 of the fourth credit allowance date of the investment;

(4) a certificate in the amount of eight percent of the amount of the investment shall be issued with a maturity date of December 31 of the fifth credit allowance date of the investment;

(5) a certificate in the amount of eight percent of the amount of the investment shall be issued with a maturity date of December 31 of the sixth credit allowance date of the investment; and

(6) a certificate in the amount of eight percent of the amount of the investment shall be issued with a maturity date of December 31 of the seventh credit allowance date of the investment.

O. The authority may issue certificates of eligibility resulting in an annual aggregate amount of new markets tax credits not to exceed sixteen million dollars ($16,000,000).

P. A qualified community development entity whose application is approved under this section shall pay to the authority an annual evaluation fee of five thousand dollars ($5,000) on each of the second through seventh anniversary dates of the initial credit allowance and on each year in which the tax credit is carried forward.

Q. The authority shall decertify a qualified equity investment when:

(1) any amount of federal tax credit available with respect to qualified equity investments that are eligible for a tax credit under the Statewide Economic Development Act is recaptured under Section 45D of the Internal Revenue Code of 1986. The final notice of decertification shall include the amount of recapture, which under this paragraph shall be proportionate to the federal recapture with respect to the qualified equity investment, and state that any unused certificates of eligibility are canceled;

(2) the qualified community development entity redeems or makes a principal repayment with respect to qualified equity investments that generated the tax credit prior to the final credit allowance date of the qualified equity investment. The final notice of decertification shall include the amount of recapture, which under this paragraph shall be proportionate to the amount of the redemption or repayment with respect to the qualified equity investment, and state that any unused certificates of eligibility are canceled;

(3) the qualified community development entity fails to invest at least eighty-five percent of the cash purchase price of the qualified equity investment in qualified active low-income community businesses located in the state within twelve months of the issuance of the qualified equity investment and maintain the same level of investment in qualified low-income community investments located in the state until the last credit allowance date for 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 entity even if the investment has been sold or repaid; provided that the entity reinvests an amount equal to the capital returned to or recovered by the entity from the original investment, exclusive of any profits realized, in another qualified low-income community investment located in the state within twelve months of the receipt of the capital. The final notice of decertification shall include the amount of recapture, which under this paragraph shall be the total amount of all tax credits claimed by taxpayers that invested in the qualified equity investment being decertified, and state that any unused certificates of eligibility are canceled; or

(4) the qualified community development entity or taxpayer fails to pay the annual evaluation fee to the authority. The final notice of decertification shall include the amount of recapture, which under this paragraph shall be calculated by the authority under its rules, and state that any unused certificates of eligibility are canceled.

R. The authority shall provide an initial notice of decertification to the qualified community development entity within two weeks of decertifying the qualified equity investment. The qualified community development entity shall have ninety days to cure any deficiency indicated in the authority's initial notice of decertification. If the qualified community development entity fails or is unable to cure the deficiency within the ninety-day period, the authority shall decertify the qualified equity investment and provide a final notice of decertification to the qualified community development entity, any taxpayer that was eligible to claim the credit for the qualified equity investment, the taxation and revenue department and the insurance division of the public regulation commission within two weeks of decertifying the qualified equity investment.

S. The qualified community development entity shall keep sufficiently detailed books and records with respect to the investments made with the proceeds of qualified equity investments to allow the direct tracing of proceeds into qualified low-income community investments in a qualified active low-income community businesses in the state.

T. By July 1, 2014 and each year thereafter, each qualified community development entity that received certificates of eligibility that have not expired shall:

(1) report to the authority information about each qualified active low-income community business, including a detailed description of:

(a) the type of businesses that received the qualified equity investment;

(b) the location of businesses that received the qualified equity investment;

(d) the number of new jobs created;

(e) the number of New Mexico residents employed by the qualified active low-income community business and the aggregate wages paid to them;

(f) the number of nonresidents employed by the qualified active low-income community business and the aggregate wages paid to them; and

(g) any other information required by the authority; and

(2) provide to the authority an audit report prepared by an independent auditor.

U. By October 31, 2014 and each year thereafter, the authority shall:

(1) compile and assess direct tracking data and any other data that allow the authority to assess objectively the effectiveness of the new markets tax credits; and

(2) with the support and assistance of the

legislative finance committee staff, the taxation and revenue department and the insurance division of the public regulation commission, create an annual report that provides an objective assessment of the effectiveness of the new markets tax credits for annual presentation to the New Mexico finance authority oversight committee and the revenue stabilization and tax policy committee.

V. For purposes of assessing the effectiveness of

the new markets tax credits, the inability of the authority to aggregate data due to sample size shall not relieve the authority of the requirement to report all relevant data to the legislature. The authority shall provide notice to qualified community development entities applying for the new markets tax credits that information provided to the authority might be revealed by the authority in reports to the legislature.

W. At four-year intervals beginning in calendar year 2014, the New Mexico finance authority oversight committee and the revenue stabilization and tax policy committee shall review the new markets tax credits for their effectiveness in achieving the goals and meeting the purposes for which the credits were adopted. The review shall be completed by October 31 of the calendar year.

X. As used in this section:

(1) "applicable percentage" means zero percent of the state new markets corporate income tax credit for each of the first two credit allowance dates, seven percent of the state new markets corporate income tax credit for the third credit allowance date and eight percent of the state new markets corporate income tax credit for each of the next four credit allowance dates;

(2) "certificate" means a document issued by the authority stating the maximum amount of a tax credit allowed for a qualified community development entity and for which a taxpayer may be eligible for a calendar year;

(3) "credit allowance date" means, with respect to any qualified equity investment:

(a) the date on which the qualified equity investment is initially made; and

(b) each of the six anniversary dates thereafter;

(4) "direct tracing" means the tracking, by accepted accounting methods, of the proceeds of qualified equity investments into qualified low-income community investments;

(5) "long-term debt security" means any debt instrument issued by a qualified community development entity, at par value or at a premium, with an original maturity date of at least seven years from the date of its issuance, with no acceleration of repayment, amortization or prepayment features prior to its original maturity date. The qualified community development entity that issues the debt instrument shall not make cash interest payments on the debt instrument during the period beginning on the date of issuance and ending on the final credit allowance date in an amount that exceeds the cumulative operating income, as defined by regulations adopted under Section 45D of the Internal Revenue Code of 1986 of the qualified community development entity for that period prior to giving effect to the expense of such cash interest payments. The foregoing shall in no way limit the holder's ability to accelerate payments on the debt instrument in situations where the issuer has defaulted on covenants designed to ensure compliance with this section or Section 45D of the Internal Revenue Code of 1986;

(6) "low-income community" has the same meaning given to that same term in Section 45D of the Internal Revenue Code of 1986;

(7) "new markets tax credit" means a state new markets corporate income tax credit or a state new markets premium tax credit;

(8) "purchase price" means the amount of cash paid to the issuer of a qualified equity investment for the qualified equity investment;

(9) "qualified active low-income community business" has the same meaning given to that same term in Section 45D of the Internal Revenue Code of 1986, except that any business that derives or projects to derive fifteen percent or more of its annual revenue from the rental or sale of real estate shall not be considered a "qualified active low-income community business". This exclusion does not apply to a business that is controlled by, or under common control with, another business if the second business does not derive or project to derive fifteen percent or more of its annual revenue from the rental or sale of real estate and is the primary tenant of the real estate leased from the first business. A business shall be considered a "qualified active low-income community business" for the duration of the qualified community development entity's investment in, or loan to, the business if the entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low-income community business throughout the entire period of the investment or loan;

(10) "qualified community development entity" has the same meaning given to that same term in Section 45D of the Internal Revenue Code of 1986; provided that the qualified community development entity has entered into an allocation agreement with the community development financial institutions fund of the United States department of treasury, with respect to credits authorized by Section 45D of the Internal Revenue Code of 1986, that includes the state within the service area set forth in the allocation agreement. The term shall include a subordinate community development entity established by a qualified community development entity;

(11) "qualified equity investment" means any equity investment in, or long-term debt security issued by, a qualified community development entity that:

(a) is acquired after the effective date of this 2012 act, at its original issuance, solely in exchange for cash, or that was constituted a qualified equity investment in the hands of a prior holder;

(b) has at least eighty-five percent of its cash purchase price used by the qualified community development entity to make qualified low-income community investments in qualified active low-income community businesses located in the state; and

(c) is designated by the authority as a qualified equity investment under this 2012 act and is certified by the authority as not exceeding the limitations in the Corporate Income and Franchise Tax Act and the New Mexico Insurance Code;

(12) "qualified low-income community investment" means any capital or equity investment in, or loan to, any qualified active low-income community business by the qualified community development entity. With respect to any one qualified active low-income community business, the maximum amount of qualified low-income community investments made in the qualified active low-income community business, on a collective basis with all of the affiliates of the qualified active low-income community business, that may be counted toward the satisfaction of the definition of a qualified equity investment shall be ten million dollars ($10,000,000) for purposes of calculating the amount of the new markets tax credits, whether issued to one or several qualified community development entities;

(13) "tax credit" means a credit against the tax liability otherwise due under state law; and

(14) "taxpayer" means any investor in a qualified community development entity subject to corporate income taxes imposed pursuant to the Corporate Income and Franchise Tax Act or premium taxes and health insurance premium surtax imposed pursuant to Section 59A-6-2 NMSA 1978."

SECTION 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] TAX CREDIT--QUALIFIED EQUITY INVESTMENT.--

A. A taxpayer that files a New Mexico corporate

income tax return for a taxable year may claim, and the department may allow, a tax credit against the corporate income tax liability equal to thirty-nine percent of the purchase price of a qualified equity investment, subject to the limitations in this section and the Statewide Economic Development Finance Act. The tax credit that may be claimed pursuant to this section may be referred to as the "state new markets corporate income tax credit".

B. The purposes of the state new markets corporate income tax credit are:

(1) to provide a thirty-nine-percent state tax credit for taxpayers that qualify to receive the federal new markets tax credit for the same qualified equity investment in a qualified active low-income community business;

(2) to promote long-term job creation and investment in new, viable businesses; and

(3) to fulfill the goals adopted by the New Mexico finance authority in its federal new markets tax credit program economic impact policies.

C. For any taxable year, the amount of the tax credit claimed by a taxpayer shall not exceed the amount of the taxpayer's corporate income tax liability for that year.

D. A taxpayer claiming a state new markets corporate income tax credit shall not claim any other state tax credit, deduction or exemption for the same qualified equity investment that the taxpayer used to qualify for the state new markets corporate income tax credit.

E. The total aggregate amount of state new markets corporate income tax credits and state new markets premium tax credits awarded to all taxpayers in a calendar year shall not exceed sixteen million dollars ($16,000,000).

F. To claim the state new markets corporate income tax credit, the taxpayer shall provide to the department a certificate of eligibility issued by the New Mexico finance authority to be applied against the taxpayer's corporate income tax liability reported during the taxable year following the date of maturity on the certificate.

G. The department shall coordinate with the insurance division of the public regulation commission and the New Mexico finance authority to maintain a record of the cumulative amount of claims for the state new markets corporate income tax credits and state new markets premium tax credits that have been approved. When the department determines that the aggregate amount of state new markets corporate income tax credits and state new markets premium tax credits awarded to all taxpayers in a calendar year has reached sixteen million dollars ($16,000,000), it shall cease approving any additional claims for the state new markets corporate income tax credit for the calendar year. To provide guidance to qualified community development entities regarding the amount of credit capacity remaining in a year, the department shall post monthly on the department's web site the aggregate amount of state new markets corporate income tax credits and state new markets premium tax credits claimed and authorized for that year.

H. If the amount of the state new markets corporate income tax credit stated on the individual certificate exceeds the taxpayer's corporate income tax liability for the taxable year in which the certificate matures, the excess credit may be carried forward for up to five years from the date of maturity of each certificate. The latest date of the carryforward is twelve years after the first credit allowance date on which the initial qualified equity investment was made.

I. The state new markets corporate income tax credit and the certificate of eligibility may not be sold, exchanged or otherwise transferred to another taxpayer. The credit is not refundable.

J. The department shall recapture from the taxpayer that claimed the state new markets corporate income tax credit any portion of a tax credit claimed against tax liability pursuant to this section when the New Mexico finance authority provides to the department a notice of decertification of the qualified equity investment. Decertification requires the department to recapture any tax credit in the amount stated on the notice of decertification and the forfeiture of any future tax credits to be claimed for the qualified equity investment that is decertified. A recapture shall create a first priority lien on the assets and property of the taxpayer in favor of the state and a recurring tax liability for the taxpayer until the amount of all state new markets corporate income tax credits received by the taxpayer are repaid.

K. Acceptance by a taxpayer of a state new markets corporate income tax credit pursuant to this section is authorization by the taxpayer receiving the credit for the department to reveal information to the legislature necessary to analyze the effectiveness of the state new markets corporate income tax credit.

L. Notwithstanding any other section of law to the

contrary, the department may disclose the number of taxpayers allowed to receive the state new markets corporate income tax credit, the amount of each credit approved and any other information required by the legislature, the New Mexico finance authority or the department to aid in evaluating the effectiveness of the state new markets corporate income tax credit.

M. At four-year intervals beginning in calendar year 2014, the New Mexico finance authority oversight committee and the revenue stabilization and tax policy committee shall review the state new markets corporate income and franchise tax credit and the state new markets premium tax credit for their effectiveness in achieving the goals and achieving the purposes for which the credits were adopted. The review shall be completed by October 31 of the calendar year.

N. As used in this section:

(1) "certificate of eligibility" means a document issued by the New Mexico finance authority stating the maximum amount of a tax credit allowed for a qualified community development entity and for which a taxpayer may be eligible for a calendar year;

(2) "credit allowance date" means, with respect to any qualified equity investment:

(a) the date on which the qualified equity investment is initially made; and

(b) each of the six anniversary dates thereafter;

(3) "long-term debt security" means any debt instrument issued by a qualified community development entity, at par value or at a premium, with an original maturity date of at least seven years from the date of its issuance, with no acceleration of repayment, amortization or prepayment features prior to its original maturity date. The qualified community development entity that issues the debt instrument shall not make cash interest payments on the debt instrument during the period beginning on the date of issuance and ending on the final credit allowance date in an amount that exceeds the cumulative operating income, as defined by regulations adopted under Section 45D of the Internal Revenue Code, of the qualified community development entity for that period prior to giving effect to the expense of such cash interest payments. The foregoing shall in no way limit the holder's ability to accelerate payments on the debt instrument in situations where the issuer has defaulted on covenants designed to ensure compliance with this section or Section 45D of the Internal Revenue Code;

(4) "purchase price" means the amount of cash paid to the issuer of a qualified equity investment for the qualified equity investment;

(5) "qualified active low-income community business" has the same meaning given to that same term in Section 45D of the Internal Revenue Code, except that any business that derives or projects to derive fifteen percent or more of its annual revenue from the rental or sale of real estate shall not be considered a qualified active low-income community business. This exclusion does not apply to a business that is controlled by, or under common control with, another business if the second business does not derive or project to derive fifteen percent or more of its annual revenue from the rental or sale of real estate and is the primary tenant of the real estate leased from the first business. A business shall be considered a qualified active low-income community business for the duration of the qualified community development entity's investment in, or loan to, the business if the qualified community development entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low-income community business throughout the entire period of the investment or loan;

(6) "qualified community development entity" has the same meaning given to that same term in Section 45D of the Internal Revenue Code; provided that the qualified community development entity has entered into an allocation agreement with the community development financial institutions fund of the United States department of treasury, with respect to credits authorized by Section 45D of the Internal Revenue Code, that includes the state within the service area set forth in the allocation agreement. "Qualified community development entity" includes a subordinate community development entity established by a qualified community development entity;

(7) "qualified equity investment" means any equity investment in, or long-term debt security issued by, a qualified community development entity that:

(a) is acquired after the effective date of this 2012 act, at its original issuance, solely in exchange for cash, or that was constituted a qualified equity investment in the hands of a prior holder;

(8) "qualified low-income community investment" means any capital or equity investment in, or loan to, any qualified active low-income community business by the qualified community development entity. With respect to any one qualified active low-income community business, the maximum amount of qualified low-income community investments made in the qualified active low-income community business, on a collective basis with all of the affiliates of the qualified active low-income community business, that may be counted toward the satisfaction of the definition of a qualified equity investment shall be ten million dollars ($10,000,000) for purposes of calculating the amount of the state new markets corporate income tax credit, whether issued to one or several qualified community development entities;

(9) "tax credit" means a credit against the corporate and franchise income tax liability otherwise due under state law; and

(10) "taxpayer" means any investor in a qualified community development entity subject to corporate taxes imposed under the Corporate Income and Franchise Tax Act."

SECTION 3. A new section of the New Mexico Insurance Code is enacted to read:

"[NEW MATERIAL] PREMIUM TAX CREDIT--QUALIFIED EQUITY INVESTMENT.--

A. A taxpayer that files a report or return for premium taxes due to the state may claim, and the division may allow, a tax credit against the premium tax liability equal to thirty-nine percent of the purchase price of a qualified equity investment, subject to the limitations in this section and the Statewide Economic Development Finance Act. The tax credit that may be claimed pursuant to this section may be referred to as the "state new markets premium tax credit".

B. The purposes of the state new markets premium tax credit are:

(2) to promote long-term job creation and investment in new, viable businesses; and

(3) to fulfill the goals adopted by the New Mexico finance authority in its federal new markets tax credit program economic impact policies.

C. For any calendar year, the amount of the tax credit claimed by a taxpayer shall not exceed the amount of the taxpayer's state premium tax liability for that year.

D. A taxpayer claiming a state new markets premium tax credit shall not claim any other state tax credit, deduction or exemption for the same qualified equity investment that the taxpayer used to qualify for the state new markets premium tax credit.

E. The total aggregate amount of state new markets premium tax credits and state new markets corporate income tax credits awarded to all taxpayers in a calendar year shall not exceed sixteen million dollars ($16,000,000).

F. To claim the state new markets premium tax credit, the taxpayer shall provide to the division a certificate of eligibility issued by the New Mexico finance authority to be applied against the taxpayer's premium tax liability reported during the calendar year following the date of maturity on the certificate.

G. The division shall coordinate with the department and the New Mexico finance authority to maintain a record of the cumulative amount of claims for the state new markets premium tax credits and state new markets corporate income tax credits that have been approved. When the division determines that the aggregate amount of state new markets premium tax credits and state new markets corporate income tax credits awarded to all taxpayers in a calendar year has reached sixteen million dollars ($16,000,000), it shall cease approving any additional claims for the state new markets premium tax credit for the calendar year. To provide guidance to qualified community development entities regarding the amount of credit capacity remaining in a year, the division shall post monthly on the division's web site the aggregate amount of state new markets premium tax credits and state new markets corporate income tax credits claimed and authorized for that year.

H. If the amount of the state new markets premium tax credit stated on the individual certificate exceeds the taxpayer's premium tax liability for the calendar year in which the certificate matures, the excess credit may be carried forward for up to five years from the date of maturity of each certificate. The latest date of the carryforward is twelve years after the first credit allowance date on which the initial qualified equity investment was made.

I. The state new markets premium tax credit and the certificate of eligibility may not be sold, exchanged or otherwise transferred to another taxpayer. The credit is not refundable.

J. The division shall recapture from the taxpayer that claimed the state new markets premium tax credit any portion of a tax credit claimed against tax liability pursuant to this section when the New Mexico finance authority provides to the division a notice of decertification of the qualified equity investment. Decertification requires the division to recapture any tax credit in the amount stated on the notice of decertification and the forfeiture of any future tax credits to be claimed on the qualified equity investment that is decertified. A recapture shall create a first priority lien on the assets and property of the taxpayer in favor of the state and a recurring tax liability for the taxpayer until the amount of all state new markets premium tax credits received by the taxpayer are repaid.

K. Acceptance by a taxpayer of a state new markets premium tax credit pursuant to this section is authorization by the taxpayer receiving the credit for the department to reveal information to the legislature necessary to analyze the effectiveness of the state new markets premium tax credit.

L. Notwithstanding any other section of law to the

contrary, the division may disclose the number of taxpayers allowed to receive the state new markets premium tax credit, the amount of each credit approved and any other information required by the legislature, the New Mexico finance authority or the division to aid in evaluating the effectiveness of the state new markets premium tax credit.

M. At four-year intervals beginning in calendar year 2014, the New Mexico finance authority oversight committee and the revenue stabilization and tax policy committee shall review the state new markets premium tax credit and state new markets corporate income tax credit for their effectiveness in achieving the goals and meeting the purposes for which the credits were adopted. The review shall be completed by October 31 of the calendar year.

N. As used in this section:

(1) "certificate of eligibility" means the document issued by the New Mexico finance authority stating the maximum amount of a tax credit allowed for a qualified community development entity and for which a taxpayer may be eligible for a calendar year;

(2) "credit allowance date" means, with respect to any qualified equity investment:

(a) the date on which the qualified equity investment is initially made; and

(b) each of the six anniversary dates thereafter;

(3) "long-term debt security" means any debt instrument issued by a qualified community development entity, at par value or at a premium, with an original maturity date of at least seven years from the date of its issuance, with no acceleration of repayment, amortization or prepayment features prior to its original maturity date. The qualified community development entity that issues the debt instrument may not make cash interest payments on the debt instrument during the period beginning on the date of issuance and ending on the final credit allowance date in an amount that exceeds the cumulative operating income, as defined by regulations adopted under Section 45D of the Internal Revenue Code of 1986, of the qualified community development entity for that period prior to giving effect to the expense of the cash interest payments. The foregoing shall in no way limit the holder's ability to accelerate payments on the debt instrument in situations where the issuer has defaulted on covenants designed to ensure compliance with this section or Section 45D of the Internal Revenue Code of 1986;

(4) "purchase price" means the amount of cash paid to the issuer of a qualified equity investment for the qualified equity investment;

(5) "qualified active low-income community business" has the same meaning given to that same term in Section 45D of the Internal Revenue Code of 1986, except that any business that derives or projects to derive fifteen percent or more of its annual revenue from the rental or sale of real estate shall not be considered a qualified active low-income community business. This exclusion does not apply to a business that is controlled by, or under common control with, another business if the second business does not derive or project to derive fifteen percent or more of its annual revenue from the rental or sale of real estate and is the primary tenant of the real estate leased from the first business. A business will be considered a qualified active low-income community business for the duration of the qualified community development entity's investment in, or loan to, the business if the entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low-income community business throughout the entire period of the investment or loan;

(6) "qualified community development entity" has the same meaning given to that same term in Section 45D of the Internal Revenue Code of 1986; provided that the qualified community development entity has entered into an allocation agreement with the community development financial institutions fund of the United States department of treasury, with respect to credits authorized by Section 45D of the Internal Revenue Code of 1986 that includes the state within the service area set forth in the allocation agreement. "Qualified community development entity" includes a subordinate community development entity established by a qualified community development entity;

(7) "qualified equity investment" means any equity investment in, or long-term debt security issued by, a qualified community development entity that:

(a) is acquired after the effective date of this 2012 act, at its original issuance, solely in exchange for cash, or that was constituted a qualified equity investment in the hands of a prior holder;

(8) "qualified low-income community investment" means any capital or equity investment in, or loan to, any qualified active low-income community business by the qualified community development entity. With respect to any one qualified active low-income community business, the maximum amount of qualified low-income community investments made in the qualified active low-income community business, on a collective basis with all of the affiliates of the qualified active low-income community business, that may be counted toward the satisfaction of the definition of a qualified equity investment shall be ten million dollars ($10,000,000) for purposes of calculating the amount of the state new markets premium tax credit, whether issued to one or several qualified community development entities;

(9) "tax credit" means a credit against the tax liability otherwise due under state law; and

(10) "taxpayer" means any investor in a qualified community development entity subject to the premium tax and health insurance premium surtax imposed pursuant to Section 59A-6-2 NMSA 1978."

SECTION 4. DELAYED REPEAL.--The provisions of this act are repealed on July 1, 2019.

SECTION 5. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2012.

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