2007 Regular Session
To: Ways and Means
By: Representative Watson, Brown
AN ACT TO PROVIDE FOR AN INCOME TAX AND INSURANCE PREMIUM TAX CREDIT FOR TAXPAYERS THAT PAY A QUALIFIED COMMUNITY DEVELOPMENT ENTITY FOR QUALIFIED EQUITY INVESTMENTS; TO PROVIDE THAT THE AMOUNT OF THE CREDIT SHALL BE EQUAL TO A CERTAIN PERCENTAGE OF THE ADJUSTED PURCHASE PRICE PAID TO THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY FOR THE QUALIFIED EQUITY INVESTMENT; TO PROVIDE THAT THE MAXIMUM AGGREGATE AMOUNT OF THE CREDITS THAT MAY BE ALLOCATED TO ALL TAXPAYERS IN ANY ONE STATE FISCAL YEAR SHALL NOT EXCEED $15,000,000.00 AND THAT THE CREDITS SHALL BE ALLOCATED BY THE MISSISSIPPI DEVELOPMENT AUTHORITY ON A FIRST-COME, FIRST-SERVED BASIS; TO PROVIDE FOR THE RECAPTURE OF ALL OR A PORTION OF THE CREDIT UNDER CERTAIN CIRCUMSTANCES; TO AMEND SECTION 27-15-129, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT THE INVESTMENTS THAT MAY REDUCE A TAXPAYER'S INSURANCE PREMIUM TAX LIABILITY UNDER SUCH SECTION SHALL NOT INCLUDE ANY INVESTMENT FOR WHICH A CREDIT IS ALLOCATED UNDER THIS ACT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. (1) As used in this section:
(a) "Adjusted purchase price" means the investment in the qualified community development entity for the qualified equity investment in projects located in Mississippi:
For the purposes of calculating the amount of qualified low-income community investments held by a qualified community development entity, an investment will be considered held by a 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 by the qualified community development entity from the original investment, exclusive of any profits realized, in another qualified low-income community investment in Mississippi within twelve (12) months of the receipt of such capital. A qualified community development entity will not be required to reinvest capital returned from the 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 will be considered held by the qualified community development entity through the seventh anniversary of the qualified equity investment’s issuance.
(b) "Applicable percentage" means four and one-half percent (4-1/2%) for each of the second through seventh credit allowance dates.
(c) "Credit allowance date" means, with respect to any equity investment:
(i) The date upon which the investment is initially made; and
(ii) Each of the subsequent six (6) anniversary dates of the date upon which the investment is initially made.
(d) "Qualified community development entity" shall have the meaning ascribed to such term in Section 45D of the Internal Revenue Code of 1986, as amended, if the entity has entered into an Allocation Agreement with the Community Development Financial Institutions Fund of the United States Department of the Treasury with respect to credits authorized by Section 45D of the Internal Revenue Code of 1986, as amended.
(e) "Long-term debt security" means any debt instrument issued by a qualified community development entity, at par value of a premium, with an original maturity date of at least seven (7) years from the date of its issuance, with no acceleration of repayment, amortization or prepayment features prior to its original maturity date, and with no distribution, payment or interest features related to the profitability of the qualified community development entity or the performance of the qualified community development entity's investment portfolio; however, this shall in no way limit the holder's ability to accelerate payments of the debt instrument in situations where the qualified community development entity has defaulted on covenants designed to ensure compliance with this section or Section 45D of the Internal Revenue Code of 1986, as amended.
(f) "Qualified active low-income community business" shall have the meaning ascribed to such term in Section 45D of the Internal Revenue Code of 1986, as amended.
(g) "Qualified equity investment" means any equity investment in, or long-term debt security issued by, a qualified community development entity that:
(i) Has been allocated by the Mississippi Development Authority;
(ii) Is acquired after January 1, 2007, at its original issuance solely in exchange for cash;
(iii) Has at least eighty-five percent (85%) of its cash purchase price used by the qualified community development entity to make qualified low-income community investments; and
(iv) Is designated by the qualified community development entity as a qualified equity investment.
(h) "Qualified low-income community investment" shall have the meaning ascribed to such term in Section 45D of the Internal Revenue Code of 1986, as amended.
(2) A taxpayer that holds a qualified equity investment on the credit allowance date of the qualified equity investment shall be entitled to a credit applicable against the taxes imposed by Sections 27-7-5, 27-15-103 and 27-15-109 during the taxable year that includes the credit allowance date. The amount of the credit shall be equal to the applicable percentage of the adjusted purchase price paid to the qualified community development entity for the qualified equity investment in Mississippi. The amount of the credit that may be utilized in any one (1) tax year shall be limited to an amount not greater than the total tax liability of the taxpayer for the taxes imposed by the above-referenced sections. The credit shall not be refundable or transferable. Any unused portion of the credit may be carried forward for seven (7) taxable years beyond the last credit allowance date. The maximum aggregate amount of qualified equity investments that may be allocated by the Mississippi Development Authority may not exceed an amount that would result in taxpayers claiming in any one (1) state fiscal year credits in excess of Fifteen Million Dollars ($15,000,000.00), exclusive of credits that might be carried forward from previous taxable years. The Mississippi Development Authority shall allocate credits within this limit as provided for in subsection (4) of this section.
(3) Tax credits authorized by this section that are earned by a partnership, limited liability company, S-corporation or other similar pass-through entity, may be allocated to the partners, members or shareholders of such entity in accordance with the provisions of any agreement of the partners, members or shareholders.
(4) The qualified community development entity shall apply for credits with the Mississippi Development Authority on forms prescribed by the Mississippi Development Authority. In the application the qualified community development entity shall certify to the Mississippi Development Authority the anticipated dollar amount of the qualified equity investments to be made in this state during the first twelve-month period following the initial credit allowance date. The Mississippi Development Authority shall allocate credits based on the anticipated dollar amount of qualified equity investments as certified in the application on a first-come, first-served basis. If on the second credit allowance date the actual dollar amount of the investments is lower than the amount estimated, the Mississippi Development Authority shall adjust the tax credit allowed under this section. The State Tax Commission may recapture all or a portion of the credit allowed under this section if:
(a) Any amount of federal tax credits available with respect to a qualified equity investment that is eligible for a tax credit under this section is recaptured under Section 45D of the Internal Revenue Code of 1986, as amended; or
(b) The qualified community development entity redeems or makes any principal repayment with respect to a qualified equity investment prior to the seventh anniversary of the issuance of the qualified equity investment.
Any credits that are subject to recapture under this subsection shall be recaptured from the taxpayer that actually claimed the credit.
(5) The Mississippi Development Authority shall promulgate rules and regulations to implement the provisions of this section.
SECTION 2. Section 27-15-129, Mississippi Code of 1972, is amended as follows:
27-15-129. (1) The amount of premium tax payable pursuant to Sections 27-15-103, 27-15-109, 27-15-119 and 83-31-45, Mississippi Code of 1972, shall be reduced from the amount otherwise fixed in such sections if the payer files a sworn statement with the required annual report showing as of the beginning of the reporting period that at least the following amounts of the total admitted assets of the payer were invested and maintained in qualifying Mississippi investments as hereinafter defined in subsection (2) of this section over the period covered by such report:
Percentage of Total Admitted Percentage of Premium
Assets in Qualifying Tax Payable
(2) For the purpose of this section, "a qualifying Mississippi investment" is hereby defined as follows:
(a) Certificates of deposit issued by any bank or savings and loan association domiciled in this state;
(b) Bonds of this state or bonds of municipal, school, road or levee districts, or other political subdivisions of this state;
(c) Loans evidenced by notes and secured by deeds of trust on property located in this state;
(d) Real property located in this state;
(e) Policy loans to residents of Mississippi, or other loans to residents of this state, or to corporations domiciled in this state;
(f) Common or preferred stock, bonds and other evidences of indebtedness of corporations domiciled in this state; and
(g) Cash on deposit in any bank or savings and loan association domiciled in this state.
"A qualifying Mississippi investment" shall not include any investment for which a credit is allocated under Section 1 of House Bill No. 1578, 2007 Regular Session.
(3) If the credits, or any part thereof, authorized by the preceding provisions of this section shall be held by a court of final jurisdiction to be unconstitutional and void for any reason or to make the annual premium taxes levied by Sections 27-15-103, 27-15-109, 27-15-119 and 83-31-45, Mississippi Code of 1972, unlawfully discriminatory or otherwise invalid under the Fourteenth Amendment or the Commerce Clause of the Constitution of the United States or under any state or other Federal Constitutional provisions, it is hereby expressly declared that such fact shall in no way affect the validity of the annual premium taxes levied thereby, and that such provisions would have been enacted even though the Legislature had known this credit section would be held invalid.
(4) This section shall apply to taxes accruing and investments existing from and after July 1, 1985.
SECTION 3. This act shall take effect and be in force from and after January 1, 2007.