The New Markets Tax Credit cap for fiscal year June 30, 2017, $5 million of the $10 million credit cap, is now available.
A refundable performance fee is required when a New Markets Tax Credit application is submitted. The refundable performance fee will be an amount equal to one-half of one percent (0.5%) of the amount of the equity investment or long-term debt security requested to be certified as a qualified equity investment, not to exceed five hundred thousand dollars ($500,000).
There is also a $1,000 application fee that should accompany the application. The process for acceptance and consideration of an application is set forth in 103 KAR 15:180E. Please return to this page for future updates on the amount of available tax credit.
The following rules govern DOR’s review of applications received.
Applications must be submitted via hand-delivery, mail, express mail, or courier. The department will not accept an application received via facsimile, CD-ROM, CD, or electronic means. The date that the application is stamped "Received" by the Office of Income Taxation, Division of Corporation Tax, Tax Credits Section, shall be the date that the application is recorded as received pursuant to the provisions of KRS 141.133.
To ensure prompt and proper processing, it is suggested that the following address be used to submit New Markets Tax Credit applications:
Department of Revenue
Division of Corporation Tax
501 High Street
Frankfort, KY 40601-2103
The New Markets Development Program Tax Credit was created to encourage taxpayer investment in low-income communities via a nonrefundable credit against the taxes imposed by KRS141.020, 141.040, 141.0401, 136.320, 136.330, 136.340, 136.350, 136.370, 136.390, or 304.3-270. The qualified community development entity must first submit an application to the DOR and once approved, the qualified community development entity may issue a long-term debt security or receive an equity investment that will result in eligible credit. The person or entity actually making the loan or making the equity investment will be able to claim a credit, subject to a five million ($5,000,000) credit cap each fiscal year, by completing Form 8874(K)-A.
Beginning in 2014 the credit cap increased to ten million ($10,000,000).
The total credit computation is thirty nine percent (39%) of the purchase price or loan amount of the qualified equity investment, broken down as follows for each of the next seven years beginning with the date on which the equity investment is initially made:
- Zero percent (0%) of the purchase price or loan amount may be taken in the first two years including the year in which the investment is initially made;
- Seven percent (7%) of the purchase price or loan amount may be taken in the third year including the year in which the investment is initially made;
- Eight percent (8%) of the purchase price or loan amount may be taken for fourth through seventh years including the year in which the investment is initially made; and
- Any unused approved credit may be carried forward for use in any subsequent tax year.
The qualified community development entity must invest at least eighty five percent (85%) of the funds received via a qualified equity investment in qualified active low-income community businesses located in the Commonwealth of Kentucky within 24 months after the issuance of the investment for years prior to 2014. For years beginning in 2014 the qualified community development entity must invest 100 percent of the funds received via a qualified equity investment in qualified active low-income community businesses located in the Commonwealth of Kentucky within 12 months after the issuance of the investment.
The maximum investment in any individual qualified active low-income community business is ten million dollars ($10,000,000).
A refundable performance fee was added as part of the application process. It is an amount equal to 0.5 percent of the amount of the equity investment or long-term debt security for which the entity is seeking certification, up to a maximum of $500,000. The performance fee is refundable at the written request of the entity if the certification application is denied or the amount of the investment that is certified is less than requested.