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Proposed Regulation Establishes Guidelines and Filing Requirements for New Markets Development Program Tax Credit

09.27.2010

The Kentucky Department of Revenue (“Department”) recently proposed Administrative Regulation 103 KAR 15:180 (“Regulation”) in an effort to establish guidelines and filing requirements for Kentucky’s New Markets Development Program Tax Credit (“New Markets Tax Credit”).

The New Markets Tax Credit was passed by the Kentucky General Assembly during its 2010 Extraordinary Session and signed into law by the Governor on June 4, 2010.  It is codified in KRS 141.434 and provides a tax credit in an amount equal to thirty-nine percent (39%) of the purchase price of a qualified entity investment for the community development entity (“Entity”) making the investment.  At least eighty-five percent (85%) of the purchase price of the qualified entity investment must be used by the issuer to make qualified low-income community investments in Kentucky.  The tax credit may be carried forward for use in any subsequent year, but may not be sold or transferred.

The proposed Regulation sets forth additional guidelines and filing requirements of an Entity in order for the Department to certify a qualified entity investment and allocate tax credits to the Entity for its qualified entity investment.  It also references Revenue Form 41A720-S80, Application for Certification of Qualified Entity Investments Eligible for Kentucky New Markets Development Program Tax Credit (“Application”), and lists specific information which must be included in the Application.

The proposed Regulation requires the Application be filed with and approved by the Department.  It provides that the Department will notify the applicant of whether the Application has been approved or denied within thirty (30) days of receipt of the Application.  The proposed Regulation also provides that within ninety (90) days after an Application is approved, the Entity must issue qualified entity investments in exchange for cash in the amount of the certified purchase prices contained in the Application.

A public hearing is scheduled for October 26, 2010, and written comments are being accepted until November 1, 2010.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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