S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  7569

                            I N  S E N A T E

                             April 22, 2010
                               ___________

Introduced  by  Sen.  DeFRANCISCO -- read twice and ordered printed, and
  when printed to be committed to the Committee  on  Investigations  and
  Government Operations

AN  ACT to amend the tax law, in relation to the new markets development
  program act

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Short  title. This act shall be known and may be cited as
the "new markets development program act".
  S 2. The tax law is amended by adding a new  article  42  to  read  as
follows:
                               ARTICLE 42
                     NEW MARKETS DEVELOPMENT PROGRAM
SECTION 3050. DEFINITIONS.
        3051. CERTIFICATION  OF QUALIFIED EQUITY INVESTMENTS; INVESTMENT
                ISSUANCE REPORTING.
        3052. USE OF PROCEEDS FROM QUALIFIED INVESTMENTS; RECORDKEEPING.
        3053. NEW MARKETS TAX CREDIT.
        3054. COMMUNITY DEVELOPMENT  ENTITY  REPORTING  AFTER  A  CREDIT
                ALLOWANCE DATE; CERTIFICATION OF TAX CREDIT AMOUNT.
        3055. ANNUAL REPORTING BY A COMMUNITY DEVELOPMENT ENTITY.
        3056. AUDITS AND EXAMINATIONS.
        3057. RECAPTURE AND PENALTIES.
  S 3050. DEFINITIONS. 1. "CREDIT ALLOWANCE DATE" MEANS:
  (A) THE DATE ON WHICH A QUALIFIED EQUITY INVESTMENT IS MADE; AND
  (B) EACH OF THE SIX ANNIVERSARIES OF THE CREDIT ALLOWANCE DATE.
  2. "LONG-TERM DEBT SECURITY" MEANS A DEBT INSTRUMENT ISSUED BY A QUAL-
IFIED COMMUNITY DEVELOPMENT ENTITY AT PAR VALUE OR A PREMIUM WHICH HAS A
MATURITY  DATE  OF  AT LEAST SEVEN YEARS FOLLOWING THE DATE OF ITS ISSU-
ANCE, WITH NO ACCELERATION OF  REPAYMENT,  AMORTIZATION,  OR  PREPAYMENT
FEATURES  PRIOR  TO  ITS  ORIGINAL MATURITY DATE, EXCEPT IN INSTANCES OF
DEFAULT.
  3. "LOW-INCOME COMMUNITY" MEANS ANY POPULATION CENSUS TRACT WITHIN THE
STATE WHERE:

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD16751-04-0

S. 7569                             2

  (A) THE POVERTY RATE OF SUCH TRACT IS AT LEAST TWENTY PERCENT; OR
  (B) IN THE CASE OF A TRACT THAT IS:
  (I)  NOT  LOCATED WITHIN A METROPOLITAN AREA, THE MEDIAN FAMILY INCOME
FOR SUCH TRACT DOES NOT EXCEED EIGHTY PERCENT OF  THE  STATEWIDE  MEDIAN
FAMILY INCOME; OR
  (II)  LOCATED WITHIN A METROPOLITAN AREA, THE MEDIAN FAMILY INCOME FOR
SUCH TRACT DOES NOT EXCEED EIGHTY PERCENT OF THE GREATER OF  THE  STATE-
WIDE MEDIAN FAMILY INCOME OR THE METROPOLITAN AREA MEDIAN INCOME.
  4.  "OFFICE"  MEANS  THE  NEW YORK STATE ECONOMIC DEVELOPMENT SERVICES
OFFICE WITHIN THE NEW YORK STATE DEPARTMENT OF LABOR.
  5. "QUALIFIED EQUITY INVESTMENT" MEANS THE AMOUNT OF CASH  PAID  TO  A
QUALIFIED  COMMUNITY  DEVELOPMENT  ENTITY  IN  EXCHANGE FOR A MEMBERSHIP
INTEREST THEREIN.
  6. "QUALIFIED ACTIVE LOW-INCOME COMMUNITY  BUSINESS"  MEANS  A  CORPO-
RATION,  INCLUDING  A  NONPROFIT  CORPORATION,  PARTNERSHIP  OR  LIMITED
LIABILITY COMPANY THAT:
  (A) (I) DERIVES AT LEAST FIFTY PERCENT OF ITS TOTAL GROSS INCOME  FROM
THE  ACTIVE  CONDUCT OF BUSINESS WITHIN ANY LOW-INCOME COMMUNITY FOR ANY
TAXABLE YEAR. THE REQUIREMENTS OF THIS SUBPARAGRAPH ARE MET IF AN  ENTI-
TY'S  PERCENTAGES  PURSUANT  TO SUBPARAGRAPH (II) OR (III) OF THIS PARA-
GRAPH ARE ABOVE FIFTY PERCENT;
  (II) USES AT LEAST FORTY PERCENT OF  ITS  TANGIBLE  PROPERTY,  WHETHER
OWNED OR LEASED, WITHIN ANY LOW-INCOME COMMUNITY FOR ANY TAXABLE YEAR;
  (III)  PERFORMS  AT  LEAST  FORTY  PERCENT OF ITS SERVICES THROUGH ITS
EMPLOYEES IN A LOW-INCOME COMMUNITY FOR  ANY  TAXABLE  YEAR.  WHERE  ANY
ENTITY  HAS  NO  EMPLOYEES,  THE  REQUIREMENTS  OF THIS SUBPARAGRAPH ARE
SATISFIED IF EIGHTY-FIVE  PERCENT  OF  AN  ENTITY'S  TANGIBLE  PROPERTY,
WHETHER OWNED OR LEASED, IS USED WITHIN ANY LOW-INCOME COMMUNITY FOR ANY
TAXABLE YEAR;
  (IV) ATTRIBUTES LESS THAN FIVE PERCENT OF THE AVERAGE OF THE AGGREGATE
UNADJUSTED  BASES  OF  THE  PROPERTY  OF  THE ENTITY TO COLLECTIBLES, AS
DEFINED IN 26 U.S.C. 408 (M) (2), OTHER THAN COLLECTIBLES THAT ARE  HELD
PRIMARILY  FOR  SALE TO CUSTOMERS IN THE ORDINARY COURSE OF THE BUSINESS
FOR ANY TAXABLE YEAR; AND
  (V) ATTRIBUTES LESS THAN FIVE PERCENT OF THE AVERAGE OF THE  AGGREGATE
UNADJUSTED BASES OF THE PROPERTY OF THE ENTITY TO NONQUALIFIED FINANCIAL
PROPERTY, AS DEFINED IN 26 U.S.C. 1397 (E), FOR ANY TAXABLE YEAR.
  (B) IS REASONABLY EXPECTED BY A QUALIFIED COMMUNITY DEVELOPMENT ENTITY
AT  THE TIME OF AN INVESTMENT TO CONTINUE TO SATISFY THE REQUIREMENTS OF
PARAGRAPHS (A) AND (C) OF THIS  SUBDIVISION  FOR  THE  DURATION  OF  THE
INVESTMENT.
  (C)  SATISFIES  THE  REQUIREMENTS  OF  PARAGRAPHS  (A) AND (B) OF THIS
SUBDIVISION, AND DOES NOT:
  (I) DERIVE OR PROJECT TO DERIVE EIGHTY PERCENT OR MORE OF  ITS  ANNUAL
REVENUE FROM THE RENTAL OR SALE OF RESIDENTIAL REAL ESTATE;
  (II) ENGAGE PREDOMINANTLY IN THE DEVELOPMENT OR HOLDING OF INTANGIBLES
FOR SALE OR LICENSE;
  (III)  OPERATE  A  PRIVATE  OR  COMMERCIAL  GOLF COURSE, COUNTRY CLUB,
MASSAGE PARLOR, HOT TUB FACILITY, SUNTAN FACILITY,  RACETRACK,  GAMBLING
FACILITY,  OR  A  STORE  THE  PRINCIPAL BUSINESS OF WHICH IS THE SALE OF
ALCOHOLIC BEVERAGES FOR CONSUMPTION OFF PREMISES; OR
  (IV) ENGAGE PRINCIPALLY IN FARMING AND OWNS OR LEASES ASSETS  THE  SUM
OF  THE  AGGREGATE  UNADJUSTED  BASIS  OR THE FAIR MARKET VALUE OF WHICH
EXCEEDS FIVE HUNDRED THOUSAND DOLLARS.

S. 7569                             3

  (D) WILL CREATE OR RETAIN JOBS THAT PAY AN AVERAGE WAGE  OF  AT  LEAST
ONE HUNDRED FIFTEEN PERCENT OF THE FEDERAL POVERTY INCOME GUIDELINES FOR
A FAMILY OF FOUR.
  7. "QUALIFIED COMMUNITY DEVELOPMENT ENTITY" MEANS AN ENTITY THAT:
  (A)  IS  CERTIFIED BY THE SECRETARY OF THE UNITED STATES DEPARTMENT OF
THE TREASURY AS A QUALIFIED COMMUNITY DEVELOPMENT ENTITY UNDER 26 U.S.C.
45D; AND
  (B) HAS ENTERED INTO, OR IS CONTROLLED BY AN ENTITY THAT  HAS  ENTERED
INTO,  AN  ALLOCATION AGREEMENT WITH THE COMMUNITY DEVELOPMENT FINANCIAL
INSTITUTIONS FUND OF THE UNITED STATES DEPARTMENT OF THE  TREASURY  WITH
RESPECT  TO  NEW MARKETS TAX CREDITS UNDER 26 U.S.C.  45D AND IS AUTHOR-
IZED TO SERVE BUSINESSES IN THIS STATE UNDER THE AGREEMENT.
  8. "QUALIFIED EQUITY INVESTMENT" MEANS AN EQUITY INVESTMENT IN A QUAL-
IFIED COMMUNITY DEVELOPMENT ENTITY THAT:
  (A) IS ACQUIRED BY A TAXPAYER AT ITS ORIGINAL ISSUE SOLELY IN EXCHANGE
FOR CASH; AND
  (B) IS DESIGNATED BY THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY  AS  A
QUALIFIED  EQUITY INVESTMENT UNDER THIS PARAGRAPH AND IS APPROVED BY THE
OFFICE AS A QUALIFIED INVESTMENT.
  9. "QUALIFIED LOW-INCOME COMMUNITY  INVESTMENT"  MEANS  A  CAPITAL  OR
EQUITY  INVESTMENT IN, OR LOAN TO ANY QUALIFIED ACTIVE LOW-INCOME COMMU-
NITY BUSINESS THAT IS A LONG-TERM DEBT SECURITY.
  S 3051. CERTIFICATION  OF  QUALIFIED  EQUITY  INVESTMENTS;  INVESTMENT
ISSUANCE  REPORTING.  1.    ELIGIBLE  INDUSTRIES.   (A) THE OFFICE SHALL
APPROVE, UPON APPLICATION, THOSE PROPOSED QUALIFIED  EQUITY  INVESTMENTS
BASED  ON  ITS DETERMINATION OF THE POTENTIAL IMPACTS AND/OR BENEFITS TO
THE STATE, REGIONAL AND LOCAL  ECONOMIES  OF  THE  QUALIFIED  LOW-INCOME
COMMUNITY INVESTMENT TO BE MADE WITH THE PROCEEDS OF THE QUALIFIED EQUI-
TY INVESTMENT.
  (B)  A QUALIFIED COMMUNITY DEVELOPMENT ENTITY MAY NOT MAKE A QUALIFIED
LOW-INCOME COMMUNITY INVESTMENT  UNLESS  THE  OFFICE  HAS  APPROVED  THE
APPLICATION FOR THE PROPOSED QUALIFIED EQUITY INVESTMENT.
  2.  APPLICATION.  A QUALIFIED COMMUNITY DEVELOPMENT ENTITY MUST SUBMIT
AN APPLICATION TO THE OFFICE TO APPROVE A PROPOSED INVESTMENT AS A QUAL-
IFIED INVESTMENT.  THE APPLICATION MUST INCLUDE:
  (A) THE NAME, ADDRESS, AND TAX IDENTIFICATION NUMBER OF THE  QUALIFIED
COMMUNITY DEVELOPMENT ENTITY;
  (B) PROOF OF CERTIFICATION AS A QUALIFIED COMMUNITY DEVELOPMENT ENTITY
UNDER 26 U.S.C.  45D;
  (C)  A  COPY OF AN ALLOCATION AGREEMENT EXECUTED BY THE ENTITY, OR ITS
CONTROLLING ENTITY, AND THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS
FUND, WHICH AUTHORIZES THE ENTITY TO SERVE BUSINESSES IN THIS STATE;
  (D) A VERIFIED STATEMENT BY THE CHIEF EXECUTIVE OFFICER OF THE  QUALI-
FIED  COMMUNITY DEVELOPMENT ENTITY THAT THE ALLOCATION AGREEMENT REMAINS
IN EFFECT;
  (E) A DESCRIPTION OF THE PROPOSED AMOUNT, STRUCTURE, AND PURCHASER  OF
THE QUALIFIED EQUITY INVESTMENT;
  (F) THE NAME AND TAX IDENTIFICATION NUMBER OF ANY PERSON AUTHORIZED TO
CLAIM  A  TAX  CREDIT  EARNED  AS A RESULT OF THE MAKING OF THE PROPOSED
QUALIFIED EQUITY INVESTMENT;
  (G) A DETAILED EXPLANATION OF THE PROPOSED USE OF THE PROCEEDS FROM  A
PROPOSED QUALIFIED INVESTMENT, INCLUDING THE QUALIFIED ACTIVE LOW-INCOME
COMMUNITY BUSINESS;
  (H)  A  NONREFUNDABLE APPLICATION FEE OF ONE THOUSAND DOLLARS, PAYABLE
TO THE OFFICE; AND

S. 7569                             4

  (I) A STATEMENT THAT THE ENTITY WILL ONLY MAKE A QUALIFIED  LOW-INCOME
COMMUNITY  INVESTMENT  FOR THE PROPOSED USE SET FORTH IN THE APPLICATION
AND TO THE QUALIFIED ACTIVE LOW-INCOME COMMUNITY BUSINESS IDENTIFIED  IN
THE APPLICATION.
  3.  REVIEW.  (A)  THE  OFFICE  SHALL REVIEW APPLICATIONS TO APPROVE AN
INVESTMENT AS A QUALIFIED INVESTMENT IN THE ORDER RECEIVED.  THE  OFFICE
SHALL APPROVE OR DENY AN APPLICATION WITHIN THIRTY DAYS AFTER RECEIPT.
  (B)  IF  THE  OFFICE INTENDS TO DENY THE APPLICATION, THE OFFICE SHALL
INFORM THE APPLICANT OF THE BASIS OF THE PROPOSED DENIAL. THE  APPLICANT
SHALL  HAVE  FIFTEEN  DAYS AFTER IT RECEIVED THE NOTICE OF THE INTENT TO
DENY THE APPLICATION TO SUBMIT A REVISED APPLICATION TO THE OFFICE.  THE
OFFICE SHALL ISSUE A FINAL ORDER APPROVING OR DENYING THE REVISED APPLI-
CATION WITHIN THIRTY DAYS AFTER RECEIPT.
  (C) THE OFFICE MAY NOT APPROVE A CUMULATIVE AMOUNT OF QUALIFIED EQUITY
INVESTMENTS  IN  EXCESS  OF THE TWO HUNDRED MILLION DOLLAR ANNUAL LIMIT,
NOR MORE THAN TEN MILLION  DOLLARS  IN  QUALIFIED  LOW-INCOME  COMMUNITY
INVESTMENT TO ANY ONE QUALIFIED ACTIVE LOW-INCOME COMMUNITY BUSINESS.
  4.  APPROVAL.  (A)  THE OFFICE SHALL PROVIDE A COPY OF THE FINAL ORDER
APPROVING AN INVESTMENT AS A QUALIFIED EQUITY INVESTMENT TO  THE  QUALI-
FIED  COMMUNITY  DEVELOPMENT  ENTITY  AND  TO THE DEPARTMENT. THE NOTICE
SHALL INCLUDE THE IDENTITY OF THE TAXPAYERS WHO ARE  ELIGIBLE  TO  CLAIM
THE TAX CREDITS AND THE AMOUNT THAT MAY BE CLAIMED BY EACH TAXPAYER.
  (B)  THE  OFFICE  MAY  APPROVE AN APPLICATION FOR LESS THAN THE AMOUNT
REQUESTED; AND FOR PART OF THE AMOUNT OF THE PROPOSED INVESTMENT IF  THE
AMOUNT OF TAX CREDITS AVAILABLE IS INSUFFICIENT.
  (C)  IF  MORE THAN ONE APPLICATION IS FOUND TO COMPLY WITH SUBDIVISION
THREE OF THIS SECTION AND THE AMOUNT OF TAX CREDITS AVAILABLE IS  INSUF-
FICIENT  FOR  ALL OF THE APPLICATIONS, THE TAX CREDITS AVAILABLE TO EACH
APPLICANT SHALL BE IN SOME PROPORTION THAT EACH PROPOSED QUALIFIED EQUI-
TY INVESTMENT BEARS TO THE TOTAL QUALIFIED EQUITY INVESTMENT OF  ALL  OF
THE PROPOSED QUALIFIED EQUITY INVESTMENTS.
  5.  DURATION  OF  APPROVAL. THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY
MUST ISSUE THE QUALIFIED EQUITY INVESTMENT IN EXCHANGE FOR  CASH  WITHIN
NINETY  DAYS  AFTER  IT  RECEIVED THE ORDER APPROVING AN INVESTMENT AS A
QUALIFIED EQUITY INVESTMENT, OTHERWISE THE ORDER IS VOID.
  6. REPORT OF ISSUANCE OF A QUALIFIED INVESTMENT. THE QUALIFIED  COMMU-
NITY  DEVELOPMENT  ENTITY  MUST  PROVIDE THE OFFICE WITH EVIDENCE OF THE
RECEIPT OF THE CASH IN EXCHANGE  FOR  THE  QUALIFIED  INVESTMENT  WITHIN
THIRTY BUSINESS DAYS AFTER RECEIPT.
  S  3052. USE OF PROCEEDS FROM QUALIFIED INVESTMENTS; RECORDKEEPING. 1.
A QUALIFIED COMMUNITY DEVELOPMENT ENTITY MAY NOT MAKE A  RETURN  ON  THE
QUALIFIED  EQUITY  INVESTMENT IN EXCESS OF THE ENTITY'S OPERATING INCOME
EACH TAXABLE YEAR FOR SIX YEARS FOLLOWING THE ISSUANCE OF THE  QUALIFIED
EQUITY INVESTMENT.
  2.  A  QUALIFIED  COMMUNITY  DEVELOPMENT  ENTITY  SHALL  KEEP DETAILED
RECORDS SHOWING THE USE OF PROCEEDS FROM QUALIFIED EQUITY INVESTMENTS TO
FUND QUALIFIED LOW-INCOME COMMUNITY INVESTMENTS.
  3. A QUALIFIED ACTIVE LOW-INCOME  COMMUNITY  BUSINESS,  INCLUDING  ITS
AFFILIATES,  MAY  NOT RECEIVE MORE THAN TEN MILLION DOLLARS IN QUALIFIED
LOW-INCOME COMMUNITY INVESTMENTS UNDER THIS ARTICLE.
  S 3053. NEW MARKETS TAX CREDIT. 1. A PERSON OR  ENTITY  THAT  MAKES  A
QUALIFIED  EQUITY  INVESTMENT EARNS A VESTED TAX CREDIT PURSUANT TO THIS
ARTICLE AGAINST TAXES IMPOSED UNDER ARTICLES NINE-A  AND  TWENTY-TWO  OF
THIS  CHAPTER  EQUAL TO THIRTY-NINE PERCENT OF THE PURCHASE PRICE OF THE
QUALIFIED INVESTMENT. THE HOLDER OF A QUALIFIED INVESTMENT MAY CLAIM THE
TAX CREDIT AS FOLLOWS:

S. 7569                             5

  (A) THE HOLDER MAY APPLY SEVEN PERCENT OF THE QUALIFIED EQUITY INVEST-
MENT AGAINST ITS TAX LIABILITY IN THE  TAX  YEAR  CONTAINING  THE  THIRD
CREDIT ALLOWANCE DATE.
  (B) THE HOLDER MAY APPLY EIGHT PERCENT OF THE QUALIFIED EQUITY INVEST-
MENT  AGAINST  ITS  TAX LIABILITY IN THE TAX YEARS CONTAINING THE FOURTH
THROUGH SEVENTH CREDIT ALLOWANCE DATES.
  (C) A TAXPAYER MAY NOT CLAIM A TAX CREDIT IN EXCESS OF THE  TAXPAYER'S
TAX  LIABILITY.  IF  THE  CREDIT GRANTED PURSUANT TO THIS SECTION IS NOT
FULLY USED IN ANY SINGLE YEAR BECAUSE OF INSUFFICIENT TAX  LIABILITY  ON
THE PART OF THE TAXPAYER, THE UNUSED AMOUNT MAY BE CARRIED FORWARD FOR A
PERIOD  NOT  TO EXCEED FIVE YEARS. THE CARRYOVER CREDIT MAY BE USED IN A
SUBSEQUENT YEAR WHEN THE TAX IMPOSED FOR SUCH YEAR  EXCEEDS  THE  CREDIT
FOR SUCH YEAR, AFTER APPLYING THE OTHER CREDITS AND UNUSED CREDIT CARRY-
OVERS.  CARRYOVER  CREDIT AMOUNTS SHALL BE TREATED AS UNUSED CREDITS FOR
PURPOSES OF THE TRANSFER OF UNUSED CREDITS PURSUANT TO PARAGRAPH (B)  OF
SUBDIVISION TWO OF THIS SECTION.
  2.  A TAX CREDIT EARNED THROUGH THIS SECTION MAY NOT BE SOLD OR TRANS-
FERRED, EXCEPT AS PROVIDED FOR IN THIS SUBDIVISION.
  (A) A PARTNER, MEMBER OR SHAREHOLDER OF A PARTNERSHIP, LIMITED LIABIL-
ITY COMPANY, S-CORPORATION, OR OTHER "PASS-THROUGH" ENTITY MAY CLAIM THE
TAX CREDIT PURSUANT TO AN AGREEMENT  AMONG  THE  PARTNERS,  MEMBERS,  OR
SHAREHOLDERS.  ANY  CHANGE  IN  THE ALLOCATION OF A TAX CREDIT UNDER THE
AGREEMENT MUST BE REPORTED TO THE OFFICE AND TO THE DEPARTMENT.
  (B) ELIGIBILITY TO CLAIM A TAX CREDIT TRANSFERS TO SUBSEQUENT PURCHAS-
ERS OF AN INTEREST IN A PARTNERSHIP, LIMITED LIABILITY COMPANY, S-CORPO-
RATION OR OTHER "PASS-THROUGH" ENTITY ENTITLED TO CLAIM THE TAX CREDIT.
  S 3054. COMMUNITY DEVELOPMENT ENTITY REPORTING AFTER A  CREDIT  ALLOW-
ANCE  DATE; CERTIFICATION OF TAX CREDIT AMOUNT. 1. A QUALIFIED COMMUNITY
DEVELOPMENT ENTITY THAT HAS ISSUED A QUALIFIED EQUITY  INVESTMENT  SHALL
SUBMIT  THE FOLLOWING TO THE OFFICE WITHIN THIRTY DAYS AFTER EACH CREDIT
ALLOWANCE DATE:
  (A) THE NAME OF THE QUALIFIED ACTIVE LOW-INCOME COMMUNITY BUSINESS  IN
WHICH  A  QUALIFIED  LOW-INCOME  COMMUNITY INVESTMENT WAS MADE SINCE THE
LAST CREDIT ALLOWANCE DATE. THIS SHALL DESCRIBE THE TYPE AND  AMOUNT  OF
INVESTMENT  IN THE BUSINESS AND THE ADDRESS OF THE PRINCIPAL LOCATION OF
THE BUSINESS. THIS MUST BE VERIFIED BY THE CHIEF  EXECUTIVE  OFFICER  OF
THE COMMUNITY DEVELOPMENT ENTITY.
  (B)  BANK  RECORDS,  WIRE  TRANSFER RECORDS, OR SIMILAR DOCUMENTS THAT
PROVIDE EVIDENCE OF THE QUALIFIED LOW-INCOME COMMUNITY  INVESTMENT  MADE
WITH  THE  PROCEEDS  OF THE QUALIFIED EQUITY INVESTMENT. THE REQUIREMENT
PURSUANT TO THIS PARAGRAPH SHALL BE REQUIRED ONLY FOR THE  FIRST  CREDIT
ALLOWANCE DATE.
  (C)  A VERIFIED STATEMENT BY THE CHIEF FINANCIAL OR ACCOUNTING OFFICER
OF THE COMMUNITY DEVELOPMENT ENTITY  THAT  NO  REDEMPTION  OR  PRINCIPAL
REPAYMENT WAS MADE WITH RESPECT TO THE QUALIFIED EQUITY INVESTMENT SINCE
THE PREVIOUS CREDIT ALLOWANCE DATE.
  (D)  INFORMATION RELATING TO THE RECAPTURE OF THE TAX CREDIT SET FORTH
PURSUANT TO THIS ARTICLE SINCE THE LAST CREDIT ALLOWANCE DATE.
  2. THE OFFICE SHALL CERTIFY IN  WRITING  TO  THE  QUALIFIED  COMMUNITY
DEVELOPMENT  ENTITY  AND  TO THE DEPARTMENT THE AMOUNT OF THE TAX CREDIT
AUTHORIZED FOR EACH TAXPAYER ELIGIBLE TO CLAIM THE TAX CREDIT IN THE TAX
YEAR CONTAINING THE LAST CREDIT ALLOWANCE DATE.
  S 3055. ANNUAL REPORTING BY A COMMUNITY DEVELOPMENT ENTITY. A COMMUNI-
TY DEVELOPMENT ENTITY THAT  HAS  ISSUED  A  QUALIFIED  INVESTMENT  SHALL
SUBMIT  AN  ANNUAL REPORT TO THE OFFICE BY APRIL THIRTIETH AFTER THE END

S. 7569                             6

OF EACH CALENDAR YEAR WHICH INCLUDES A CREDIT ALLOWANCE DATE. THE REPORT
SHALL INCLUDE:
  1.  THE  ENTITY'S  ANNUAL  FINANCIAL  STATEMENTS FOR THE PRECEDING TAX
YEAR, AUDITED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT; AND
  2. OTHER INFORMATION AND DOCUMENTATION REQUIRED BY THE OFFICE TO VERI-
FY CONTINUED CERTIFICATION AS A QUALIFIED COMMUNITY  DEVELOPMENT  ENTITY
UNDER 26 U.S.C. 45D.
  S  3056.  AUDITS  AND EXAMINATIONS. 1. AUDITS. A COMMUNITY DEVELOPMENT
ENTITY THAT ISSUES AN INVESTMENT APPROVED BY THE OFFICE AS  A  QUALIFIED
EQUITY INVESTMENT SHALL BE DEEMED A RECIPIENT OF STATE FINANCIAL ASSIST-
ANCE.
  2. EXAMINATIONS. THE OFFICE MAY CONDUCT EXAMINATIONS TO VERIFY COMPLI-
ANCE WITH THIS ARTICLE.
  S  3057.  RECAPTURE AND PENALTIES. 1. NOTWITHSTANDING ANY LAW, RULE OR
REGULATION TO THE CONTRARY, THE OFFICE SHALL DIRECT  THE  DEPARTMENT  TO
RECAPTURE  ALL  OR  A PORTION OF A TAX CREDIT AUTHORIZED PURSUANT TO THE
NEW MARKETS DEVELOPMENT PROGRAM ACT IF ONE  OR  MORE  OF  THE  FOLLOWING
OCCUR:
  (A)  THE  FEDERAL GOVERNMENT RECAPTURES ALL OF THE FEDERAL NEW MARKETS
TAX CREDIT.  THE RECAPTURE BY THE DEPARTMENT SHALL EQUAL  THE  RECAPTURE
BY THE FEDERAL GOVERNMENT.
  (B)  THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY REDEEMS OR RETURNS ANY
PORTION OF A QUALIFIED EQUITY INVESTMENT BEFORE THE FINAL CREDIT  ALLOW-
ANCE DATE.
  (C)  (I) THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY FAILS TO INVEST AT
LEAST EIGHTY-FIVE PERCENT OF THE QUALIFIED EQUITY INVESTMENT  IN  QUALI-
FIED  LOW-INCOME  COMMUNITY  INVESTMENTS  WITHIN TWELVE MONTHS AFTER THE
ISSUANCE OF A QUALIFIED INVESTMENT, OR SUCH  LARGER  PERCENTAGE  AS  SET
FORTH IN THE ALLOCATION AGREEMENT BETWEEN THE QUALIFIED COMMUNITY DEVEL-
OPMENT  ENTITY AND THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION FUND,
ALSO KNOWN AS THE "SUBSTANTIALLY-ALL REQUIREMENT"; OR
  (II) THE QUALIFIED COMMUNITY  DEVELOPMENT  ENTITY  FAILS  TO  MAINTAIN
EIGHTY-FIVE  PERCENT  OF  THE  QUALIFIED  EQUITY INVESTMENT IN QUALIFIED
LOW-INCOME COMMUNITY INVESTMENTS UNTIL THE LAST  CREDIT  ALLOWANCE  DATE
FOR  A  QUALIFIED  INVESTMENT, OR SUCH LARGER PERCENTAGE AS SET FORTH IN
THE ALLOCATION AGREEMENT BETWEEN  THE  QUALIFIED  COMMUNITY  DEVELOPMENT
ENTITY  AND  THE  COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION FUND, ALSO
KNOWN AS THE "SUBSTANTIALLY-ALL REQUIREMENT";
  FOR THE PURPOSES OF THIS  PARAGRAPH,  AN  INVESTMENT  BY  A  QUALIFIED
COMMUNITY  DEVELOPMENT  ENTITY  INCLUDES  PRINCIPAL  RECOVERED  FROM  AN
INVESTMENT FOR TWELVE MONTHS AFTER ITS RECOVERY OR  PRINCIPAL  RECOVERED
AFTER  THE  SIXTH  CREDIT ALLOWANCE DATE. PRINCIPAL HELD FOR LONGER THAN
TWELVE MONTHS OR RECOVERED BEFORE THE SIXTH CREDIT ALLOWANCE DATE IS NOT
AN INVESTMENT UNLESS IT IS REINVESTED IN A QUALIFIED LOW-INCOME COMMUNI-
TY INVESTMENT IN SUCH TWELVE MONTH PERIOD.
  (D) THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY FAILS  TO  PROVIDE  THE
OFFICE WITH INFORMATION, REPORTS OR DOCUMENTATION REQUIRED BY THIS ARTI-
CLE.
  (E)  THE  OFFICE  DETERMINES  THAT  A TAXPAYER RECEIVED TAX CREDITS TO
WHICH THE TAXPAYER WAS NOT ENTITLED.
  (F) THE QUALIFIED COMMUNITY DEVELOPMENT ENTITY CEASES TO BE  CERTIFIED
AS SUCH BY THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION FUND.
  2. THE OFFICE SHALL PROVIDE NOTICE TO THE QUALIFIED COMMUNITY DEVELOP-
MENT  ENTITY AND THE DEPARTMENT OF A PROPOSED RECAPTURE OF A TAX CREDIT.
THE ENTITY SHALL HAVE NINETY DAYS FOLLOWING THE RECEIPT OF THE NOTICE TO
CURE A DEFICIENCY IDENTIFIED IN THE  NOTICE  AND  AVOID  RECAPTURE.  THE

S. 7569                             7

OFFICE  SHALL  ISSUE  A  FINAL ORDER OF RECAPTURE IF THE ENTITY FAILS TO
CURE A DEFICIENCY WITHIN THE NINETY  DAY  PERIOD.  THE  FINAL  ORDER  OF
RECAPTURE SHALL BE PROVIDED TO THE ENTITY, THE DEPARTMENT, AND A TAXPAY-
ER OTHERWISE AUTHORIZED TO CLAIM THE TAX CREDIT.  RECAPTURED FUNDS SHALL
BE DEPOSITED INTO THE GENERAL FUND.
  3.  IF A QUALIFIED COMMUNITY DEVELOPMENT ENTITY FAILS THE SUBSTANTIAL-
LY-ALL  REQUIREMENT,  THE FAILURE IS NOT A RECAPTURE EVENT IF THE QUALI-
FIED COMMUNITY DEVELOPMENT ENTITY CORRECTS THE FAILURE WITHIN SIX MONTHS
AFTER THE DATE THE QUALIFIED COMMUNITY ENTITY BECOMES AWARE  OR  REASON-
ABLY  SHOULD  HAVE  BECOME  AWARE  OF THE FAILURE. ONLY ONE SUCH CURE IS
PERMITTED FOR EACH QUALIFIED EQUITY INVESTMENT  DURING  THE  SEVEN  YEAR
CREDIT PERIOD.
  4.    AN  ENTITY  THAT SUBMITS FRAUDULENT INFORMATION TO THE OFFICE IS
LIABLE FOR THE COSTS ASSOCIATED WITH THE INVESTIGATION  AND  PROSECUTION
OF  THE FRAUDULENT CLAIM PLUS A PENALTY IN AN AMOUNT EQUAL TO DOUBLE THE
TAX CREDITS CLAIMED BY INVESTORS IN THE ENTITY'S QUALIFIED  INVESTMENTS.
THIS  PENALTY IS IN ADDITION TO ANY OTHER PENALTY THAT MAY BE IMPOSED BY
LAW.
  S 3. This act shall take effect immediately and shall apply to taxable
years beginning on or after January 1, 2011.