(1)
Investment tax credit for an equity investment in a qualifying business
or community-based seed capital fund.
a.
Equity investments in a qualifying
business or community-based seed capital fund before January 1, 2011.
See rule
123-2.1 (15E) for the discussion
of the investment tax credit for an equity investment in a qualifying business
or community-based seed capital fund, along with the issuance of tax credit
certificates by the Iowa capital investment board, for equity investments made
before January 1, 2011. For equity investments made in a qualifying business
prior to January 1, 2004, only direct investments made by an individual are
eligible for the investment tax credit. Individuals receiving income from a
revocable trust's investment in a qualifying business are eligible for the
investment tax credit for the portion of the revocable trust's equity
investment in a qualifying business.
b.
Equity investments in a qualifying
business or community-based seed capital fund on or after January 1, 2011, and
before July 2, 2015. For equity investments made on or after January
1, 2011, see 261-Chapter 115 for information regarding eligibility for
qualifying businesses and community-based seed capital funds, applications for
the investment tax credit for equity investments in a qualifying business or
community-based seed capital fund, and the issuance of tax credit certificates
by the economic development authority.
(1)
Certificate issuance. The department of revenue will be notified by the
economic development authority when the tax credit certificates are
issued.
(2) Amount of the tax
credit. The credit is equal to 20 percent of the taxpayer's equity investment
in a qualifying business or community-based seed capital fund.
(3) Year in which the tax credit may be
claimed. An investment shall be deemed to have been made on the same date as
the date of acquisition of the equity interest as determined by the Internal
Revenue Code. For investments made prior to January 1, 2014, a taxpayer shall
not claim the tax credit prior to the third tax year following the tax year in
which the investment is made. For investments made in qualifying businesses on
or after January 1, 2014, the credit can be claimed in the year of the
investment. However, for investments made in qualifying businesses during the
2014 calendar year, the credit cannot be redeemed prior to January 1, 2016. For
example, if an individual taxpayer whose tax year ends on December 31, 2012,
makes an equity investment during the 2012 calendar year, the individual
taxpayer cannot claim the tax credit until the tax year ending December 31,
2015. However, if the taxpayer dies prior to redeeming the tax credit, the
remaining tax credit may be redeemed on the decedent's final income tax return.
For fiscal years beginning July 1, 2011, the amount of tax credits authorized
cannot exceed $2 million. The tax credit certificate must be included with the
taxpayer's return for the tax year in which the credit may be redeemed as
stated on the tax credit certificate.
(4) Carried over tax credits. If a tax credit
is carried over and issued for the tax year immediately following the year in
which the investment was made because the $2 million cap has been reached, the
tax credit may be claimed by the taxpayer for the third tax year following the
tax year for which the credit is issued. For example, if an individual taxpayer
makes an equity investment in December 2012 and the $2 million cap for the
fiscal year ending June 30, 2013, had already been reached, the tax credit will
be issued for the tax year ending December 31, 2013, and cannot be redeemed
until the tax year ending December 31, 2016.
(5) Limitations. Any credit in excess of the
tax liability for the tax year may be credited to the tax liability for the
following five years or until used, whichever is the earlier. The tax credit
cannot be carried back to a tax year prior to the tax year in which the
taxpayer claims the tax credit. The tax credit is not transferable to any other
taxpayer.
(6) Pro rata tax credit
claims for certain business entities. For equity investments made in a
community-based seed capital fund or equity investments made in a qualifying
business on or after January 1, 2004, an individual may claim the credit if the
investment was made by a partnership, S corporation, limited liability company,
or an estate or trust electing to have the income directly taxed to the
individual. The amount claimed by an individual must be based on the
individual's pro rata share of the individual's earnings of the partnership, S
corporation, limited liability company, or estate or trust.
c.
Equity investments in a
qualifying business on or after July 2, 2015. For equity investments
made on or after July 2, 2015, see 261-Chapter 115 for information regarding
eligibility for qualifying businesses, applications for the investment tax
credit for equity investments in a qualifying business, and the issuance of tax
credit certificates by the economic development authority.
(1) Certificate issuance. The department of
revenue will be notified by the economic development authority when the tax
credit certificates are issued.
(2)
Amount of the tax credit. For fiscal years beginning July 1, 2011, the amount
of the tax credits authorized cannot exceed $2 million. The credit is equal to
25 percent of the taxpayer's equity investment in a qualifying business. In any
one calendar year, the amount of tax credits issued for any one qualifying
business shall not exceed $500,000. The maximum amount of tax credit that may
be issued per calendar year to a natural person and the person's spouse or
dependent shall not exceed $100,000 combined. For purposes of this paragraph,
"dependent" has the same meaning as provided by the Internal Revenue
Code.
(3) Year in which the tax
credit may be claimed. A taxpayer shall not claim a tax credit prior to
September 1, 2016. The tax credit certificate must be included with the
taxpayer's return for the tax year in which the credit may be redeemed as
stated on the tax credit certificate. For purposes of this paragraph, an
investment shall be deemed to have been made on the same date as the date of
acquisition of the equity interest as determined by the Internal Revenue
Code.
(4) Pro rata tax credit
claims for certain business entities. An individual may claim the credit if the
investment was made by a partnership, S corporation, limited liability company,
or an estate or trust electing to have the income directly taxed to the
individual. The amount claimed by an individual must be based on the
individual's pro rata share of the individual's earnings of the partnership, S
corporation, limited liability company, or estate or trust. Any credits claimed
by an individual are subject to the limitations provided in
304.22(1)"c"(2) above.
(5) Refundability. For a tax credit claimed
against the taxes imposed in Iowa Code chapter 422, division II, any tax credit
in excess of the tax liability is refundable. In lieu of claiming a refund, the
taxpayer may elect to have the overpayment shown on the taxpayer's final
completed return credited to the tax liability for the following tax
year.
(6) Transfers and carryback
of tax credits prohibited. The tax credit cannot be carried back to a tax year
prior to the tax year in which the taxpayer claims the tax credit. The tax
credit is not transferable to any other taxpayer.
(2)
Investment tax credit
for an equity investment in a venture capital fund. See rule
123-3.1 (15E) for the discussion
of the investment tax credit for an equity investment in a venture capital
fund, along with the issuance of tax credit certificates by the Iowa capital
investment board. This credit is repealed for investments in venture capital
funds made after July 1, 2010.
The department of revenue will be notified by the Iowa
capital investment board when the tax credit certificates are issued. The tax
credit certificate must be attached to the taxpayer's return for the tax year
in which the credit may be redeemed as stated on the tax credit
certificate.
Any credit in excess of the tax liability for the tax year
may be credited to the tax liability for the following five years or until
used, whichever is the earlier.
For equity investments made in a venture capital fund, an
individual may claim the credit if the investment was made by a partnership, S
corporation, limited liability company, or an estate or trust electing to have
the income directly taxed to the individual. The amount claimed by an
individual must be based on the individual's pro rata share of the individual's
earnings of the partnership, S corporation, limited liability company, or
estate or trust.
(3)
Contingent tax credit for investments in Iowa fund of funds.
See rule
123-4.1 (15E) for the discussion
of the contingent tax credit available for investments made in the Iowa fund of
funds organized by the Iowa capital investment corporation. Tax credit
certificates related to the contingent tax credits will be issued by the Iowa
capital investment board.
The department of revenue will be notified by the Iowa
capital investment board when these tax credit certificates are issued and, if
applicable, when they are redeemed. If the tax credit certificate is redeemed,
the certificate must be attached to the taxpayer's return for the tax year in
which the credit may be redeemed as stated on the tax credit
certificate.
If the tax credit certificate is redeemed, any credit in
excess of the tax liability for the tax year may be credited to the tax
liability for the following seven years or until used, whichever is the
earlier.
If the tax credit certificate is redeemed, an individual may
claim the credit if the investment was made by a partnership, S corporation,
limited liability company, or an estate or trust electing to have the income
directly taxed to the individual. The amount claimed by an individual must be
based on the individual's pro rata share of the individual's earnings of the
partnership, S corporation, limited liability company, or estate or
trust.
(4)
Innovation fund investment tax credit. See 261-Chapter 116 for
information regarding eligibility for an innovation fund, applications for the
investment tax credit for investments in an innovation fund, and the issuance
of tax credit certificates by the economic development authority.
The department of revenue will be notified by the economic
development authority when the tax credit certificates are issued. The credit
is equal to 20 percent of the taxpayer's equity investment in the form of cash
in an innovation fund for tax years beginning and investments made on or after
January 1, 2011, and before January 1, 2013. For tax years beginning and
investments made on or after January 1, 2013, the taxpayer may claim a tax
credit equal to 25 percent of the taxpayer's equity investment in the form of
cash in an innovation fund. An investment shall be deemed to have been made on
the same date as the date of acquisition of the equity interest as determined
by the Internal Revenue Code. A taxpayer shall claim the tax credit for the tax
year in which the investment is made. For fiscal years beginning July 1, 2011,
the amount of tax credits authorized cannot exceed $8 million. No tax credit
certificates will be issued prior to September 1, 2014. The tax credit
certificate must be attached to the taxpayer's return for the tax year in which
the investment was made as stated on the tax credit certificate.
If a tax credit is carried over and issued for the tax year
immediately following the year in which the investment was made because the $8
million cap has been reached, the tax credit may be claimed by the taxpayer for
the tax year following the tax year for which the credit is issued. For
example, if an individual taxpayer makes an equity investment in December 2013
and the $8 million cap for the fiscal year ending June 30, 2014, had already
been reached, the tax credit will be issued for the tax year ending December
31, 2014, and can be redeemed for the tax year ending December 31, 2014.
Any credit in excess of the tax liability for the tax year
may be credited to the tax liability for the following five years or until
depleted, whichever is the earlier. The tax credit cannot be carried back to a
tax year prior to the tax year in which the taxpayer claims the tax
credit.
The innovation fund tax credit certificate may be transferred
once to any person or entity.
Within 90 days of transfer of the tax credit certificate, the
transferee must submit the transferred tax credit certificate to the
department, along with a statement which contains the transferee's name,
address and tax identification number and the amount of the tax credit being
transferred. Within 30 days of receiving the transferred tax credit certificate
and the statement from the transferee, the department will issue a replacement
tax credit certificate to the transferee. If the transferee is a partnership,
limited liability company, S corporation, or estate or trust claiming the
credit for individual or corporation income tax, the transferee shall provide a
list of the partners, members, shareholders or beneficiaries and information on
how the innovation fund tax credit should be divided among the partners,
members, shareholders or beneficiaries. The transferee shall also provide the
tax identification numbers and addresses of the partners, members, shareholders
or beneficiaries. The replacement tax credit certificate must contain the same
information as that on the original tax credit certificate and must have the
same effective taxable year and the same expiration date as the original tax
credit certificate. The replacement tax credit certificate may reflect a
different tax type than the original tax credit certificate.
The transferee may use the amount of the tax credit for any
tax year for which the original transferor could have claimed the tax credit.
Any consideration received for the transfer of the tax credit certificate shall
not be included in Iowa taxable income for individual income, corporation
income or franchise tax purposes. Any consideration paid for the transfer of
the tax credit certificate shall not be deducted from Iowa taxable income for
individual income, corporation income or franchise tax purposes.
For equity investments made in an innovation fund, an
individual may claim the credit if the investment was made by a partnership, S
corporation, limited liability company, estate or trust electing to have the
income directly taxed to the individual. The amount claimed by an individual
must be based on the individual's pro rata share of the individual's earnings
of the partnership, S corporation, limited liability company, or estate or
trust.
This rule is intended to implement Iowa Code sections
15E.51,
15E.52,
15E.66,
422.11F, and
422.11G and section
15E.43 as amended by 2015 Iowa
Acts, chapter 138.
