The credit, which is modeled after the federal New Markets Tax Credit program, is available over a seven-year period, and no credits are allowed for the first two years of investment.
The credit is allowed for the next five years, and is 7 percent in the third year, increases to 8 percent for the next four years.
According to the legislation, a “qualified equity investment” is defined as any equity investment in, or long-term debt security issued by, a qualified community development entity that: is acquired after Jan. 1, 2012, at its original issuance solely in exchange for cash; has at least 85 percent of the cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in Nebraska by the first anniversary of the initial credit allowance date; carries the designation of qualified equity investment by the issuer; and is certified by the tax commissioner as not exceeding the $15 million credit limitation
Certifying Equity Investments
For an equity investment or long-term debt security to be designated as a qualified equity investment and eligible for credits, the qualified community development entity must apply to the commissioner. The legislation provides information about the application.
The commissioner will certify qualified equity investments in the order applications are received, and applications received on the same day will be deemed to have been received simultaneously.
However, the credit is subject to recapture if: any amount of the federal tax credit is recaptured; the issuer redeems or makes principal repayment with respect to a qualified equity investment prior to the seventh credit allowance date; or the issuer fails to invest and maintain the level of investment until the last credit allowance date.
The legislation was enacted April 10 and took effect Jan. 1.
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