15E.45 - COMMUNITY-BASED SEED CAPITAL FUNDS.
15E.45 COMMUNITY-BASED SEED CAPITAL FUNDS.
1. An investment in a community-based seed capital fund shall
qualify for a tax credit under section 15E.43 provided that all
requirements of sections 15E.43, 15E.44, and this section are met.
2. In order to be a community-based seed capital fund qualifying
under this section, a community-based seed capital fund must meet all
of the following criteria:
a. The fund is a limited partnership or limited liability
company.
b. The fund has, on or after January 1, 2002, a total of both
capital commitments from investors and investments in qualifying
businesses of at least one hundred twenty-five thousand dollars, but
not more than three million dollars. However, if a fund is either a
rural business investment company under the rural business investment
program of the federal Farm Security and Rural Investment Act of
2002, Pub. L. No. 107-171, or an Iowa-based seed capital fund with at
least forty percent of its committed capital subscribed by
community-based seed capital funds, the fund may qualify
notwithstanding having capital in excess of the limits set forth in
this paragraph as long as the fund otherwise meets the requirements
of this subsection.
c. The fund has no fewer than five investors who are not
affiliates, with no single investor and affiliates of that investor
together owning a total of more than twenty-five percent of the
ownership interests outstanding in the fund.
3. a. In order for an investment in a community-based seed
capital fund to qualify for a tax credit, the community-based seed
capital fund in which the investment is made shall, within one
hundred twenty days of the date of the first investment, notify the
board of all of the following:
(1) The names, addresses, equity interests issued, consideration
paid for the interests, and the amount of any tax credits.
(2) All limited partners or members who may initially qualify for
the tax credits.
(3) The earliest year in which the tax credits may be redeemed.
b. The list of limited partners or members who may qualify
for the tax credits shall be amended as new equity interests are sold
or as any information on the list shall change.
4. After verifying the eligibility of the community-based seed
capital fund, the board shall issue a tax credit certificate to be
attached to the taxpayer's tax return. The tax credit certificate
shall contain the taxpayer's name, address, tax identification
number, the amount of the tax credit, the name of the community-based
seed capital fund, and other information required by the department
of revenue. The tax credit certificate, unless rescinded by the
board, shall be accepted by the department of revenue or a local
taxing district, as applicable, as payment for taxes imposed pursuant
to chapter 422, divisions II, III, and V, and chapter 432, and as
payment for the moneys and credits tax imposed pursuant to section
533.329, subject to any conditions or restrictions placed by the
board on the face of the tax credit certificate and subject to the
limitations of section 15E.43.
5. The manager of the community-based seed capital fund shall
have the burden of proof to demonstrate to the board the
community-based seed capital fund's qualifications under this
section, and shall have the obligation to notify the board in a
timely manner of any changes in the qualifications of the
community-based seed capital fund, in the qualifications of any
qualifying business in which the fund has invested, or in the
eligibility of limited partners or members to redeem the investment
tax credits in any year.
6. In the event that a community-based seed capital fund fails to
meet or maintain any requirement set forth in this section, or in the
event that at least thirty-three percent of the invested capital of
the community-based seed capital fund has not been invested in one or
more separate qualifying businesses, measured at the end of the
forty-eighth month after commencing the fund's investing activities,
the board shall rescind any tax credit certificates issued to limited
partners or members and shall notify the department of revenue that
it has done so, and the tax credit certificates shall be null and
void. However, a community-based seed capital fund may apply to the
board for a one-year waiver of the requirements of this subsection.
7. An investor in a community-based seed capital fund shall
receive a tax credit pursuant to this division only for the
investor's investment in the community-based seed capital fund and
shall not receive any additional tax credit for the investor's share
of investments made by the community-based seed capital fund in a
qualifying business or in an Iowa-based seed capital fund with at
least forty percent of its committed capital subscribed by
community-based seed capital funds. However, an investor in a
community-based seed capital fund may receive a tax credit under this
division with respect to a separate direct investment made by the
investor in the same qualifying business in which the community-based
seed capital fund invests.
8. A community-based seed capital fund shall not invest in the
Iowa fund of funds, if organized pursuant to section 15E.65, but may
invest up to sixty percent of its committed capital in an Iowa-based
seed capital fund with at least forty percent of its committed
capital subscribed by community-based seed capital funds. Section History: Recent Form
2002 Acts, ch 1006, §5, 13; 2003 Acts, ch 44, §10; 2003 Acts, ch
145, §286; 2003 Acts, ch 179, §98, 159; 2004 Acts, ch 1148, §5--7;
2005 Acts, ch 157, §3, 4; 2007 Acts, ch 174, §85; 2007 Acts, ch 186,
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Referred to in § 15E.51