§ 45D. New markets tax credit
(a)
Allowance of credit
(1)
In general
For purposes of section
38, in the case of a taxpayer who holds a qualified equity investment on a credit allowance date of such investment which occurs during the taxable year, the new markets tax credit determined under this section for such taxable year is an amount equal to the applicable percentage of the amount paid to the qualified community development entity for such investment at its original issue.
(b)
Qualified equity investment
For purposes of this section—
(1)
In general
The term “qualified equity investment” means any equity investment in a qualified community development entity if—
(A)
such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash,
(B)
substantially all of such cash is used by the qualified community development entity to make qualified low-income community investments, and
(C)
such investment is designated for purposes of this section by the qualified community development entity.
Such term shall not include any equity investment issued by a qualified community development entity more than 5 years after the date that such entity receives an allocation under subsection (f). Any allocation not used within such 5-year period may be reallocated by the Secretary under subsection (f).
(2)
Limitation
The maximum amount of equity investments issued by a qualified community development entity which may be designated under paragraph (1)(C) by such entity shall not exceed the portion of the limitation amount allocated under subsection (f) to such entity.
(3)
Safe harbor for determining use of cash
The requirement of paragraph (1)(B) shall be treated as met if at least 85 percent of the aggregate gross assets of the qualified community development entity are invested in qualified low-income community investments.
(4)
Treatment of subsequent purchasers
The term “qualified equity investment” includes any equity investment which would (but for paragraph (1)(A)) be a qualified equity investment in the hands of the taxpayer if such investment was a qualified equity investment in the hands of a prior holder.
(c)
Qualified community development entity
For purposes of this section—
(1)
In general
The term “qualified community development entity” means any domestic corporation or partnership if—
(A)
the primary mission of the entity is serving, or providing investment capital for, low-income communities or low-income persons,
(d)
Qualified low-income community investments
For purposes of this section—
(1)
In general
The term “qualified low-income community investment” means—
(A)
any capital or equity investment in, or loan to, any qualified active low-income community business,
(B)
the purchase from another qualified community development entity of any loan made by such entity which is a qualified low-income community investment,
(2)
Qualified active low-income community business
(A)
In general
For purposes of paragraph (1), the term “qualified active low-income community business” means, with respect to any taxable year, any corporation (including a nonprofit corporation) or partnership if for such year—
(i)
at least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community,
(ii)
a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community,
(iii)
a substantial portion of the services performed for such entity by its employees are performed in any low-income community,
(B)
Proprietorship
Such term shall include any business carried on by an individual as a proprietor if such business would meet the requirements of subparagraph (A) were it incorporated.
(C)
Portions of business may be qualified active low-income community business
The term “qualified active low-income community business” includes any trades or businesses which would qualify as a qualified active low-income community business if such trades or businesses were separately incorporated.
(3)
Qualified business
For purposes of this subsection, the term “qualified business” has the meaning given to such term by section
1397C
(d); except that—
(e)
Low-income community
For purposes of this section—
(1)
In general
The term “low-income community” means any population census tract if—
(B)
Subparagraph (B) shall be applied using possessionwide median family income in the case of census tracts located within a possession of the United States.
(2)
Targeted populations
The Secretary shall prescribe regulations under which 1 or more targeted populations (within the meaning of section 103(20) of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4702
(20))) may be treated as low-income communities. Such regulations shall include procedures for determining which entities are qualified active low-income community businesses with respect to such populations.
(3)
Areas not within census tracts
In the case of an area which is not tracted for population census tracts, the equivalent county divisions (as defined by the Bureau of the Census for purposes of defining poverty areas) shall be used for purposes of determining poverty rates and median family income.
(4)
Tracts with low population
A population census tract with a population of less than 2,000 shall be treated as a low-income community for purposes of this section if such tract—
(5)
Modification of income requirement for census tracts within high migration rural counties
(A)
In general
In the case of a population census tract located within a high migration rural county, paragraph (1)(B)(i) shall be applied by substituting “85 percent” for “80 percent”.
(B)
High migration rural county
For purposes of this paragraph, the term “high migration rural county” means any county which, during the 20-year period ending with the year in which the most recent census was conducted, has a net out-migration of inhabitants from the county of at least 10 percent of the population of the county at the beginning of such period.
(f)
National limitation on amount of investments designated
(1)
In general
There is a new markets tax credit limitation for each calendar year. Such limitation is—
(2)
Allocation of limitation
The limitation under paragraph (1) shall be allocated by the Secretary among qualified community development entities selected by the Secretary. In making allocations under the preceding sentence, the Secretary shall give priority to any entity—
(3)
Carryover of unused limitation
If the new markets tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph (2) for such year, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2016.
(g)
Recapture of credit in certain cases
(1)
In general
If, at any time during the 7-year period beginning on the date of the original issue of a qualified equity investment in a qualified community development entity, there is a recapture event with respect to such investment, then the tax imposed by this chapter for the taxable year in which such event occurs shall be increased by the credit recapture amount.
(2)
Credit recapture amount
For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of—
(A)
the aggregate decrease in the credits allowed to the taxpayer under section
38 for all prior taxable years which would have resulted if no credit had been determined under this section with respect to such investment, plus
(B)
interest at the underpayment rate established under section
6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest described in subparagraph (B).
(3)
Recapture event
For purposes of paragraph (1), there is a recapture event with respect to an equity investment in a qualified community development entity if—
(4)
Special rules
(A)
Tax benefit rule
The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section
39 shall be appropriately adjusted.
(B)
No credits against tax
Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section
55.
(i)
Regulations
The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations—
(1)
which limit the credit for investments which are directly or indirectly subsidized by other Federal tax benefits (including the credit under section
42 and the exclusion from gross income under section
103),
[1] So in original. Probably should be followed by “, and”.