Section 40-18-6.1
Gain or loss — Special rules for capital gains invested in opportunity zones.
(a) The provisions in 26 U.S.C. § 1400Z-2 shall be applicable to an investment in an approved opportunity fund in calculating both of the following:
(1) The income tax levied by this chapter, or the estimated income tax payment.
(2) The financial institution excise tax found in Chapter 16.
(b) Any approved opportunity fund may enter into a project agreement with ADECA to provide to the fund's investors impact investment tax credits against any tax liability described in subdivisions (1) and (2) of subsection (a). The impact investment tax credits shall be allocated annually, but only to the extent that one or more projects undertaken by the fund are not producing the returns provided in the project agreement. Provided however, the calculation of the impact investment tax credit does not guarantee a rate of return that is more than the 52-week average yield rate for the United States 10-year Treasury Note from the prior calendar year. The project agreement may authorize the fund to allocate the credits among some or all of the owners in any manner specified, regardless of whether the allocation follows rules similar to 26 U.S.C. § 704(b) and the regulations thereunder. Unused credits may carry forward for five years.
(c) The project agreement shall require an approved opportunity fund to obtain investment from a qualified fund and require that the qualified fund receive a fixed portion of any distributions in excess of the amounts stated in the project agreement.
(d)(1) In no event shall the credits allowed under this section exceed $50 million cumulatively. In no event shall the credits be allocated during the first four years of the existence of the fund, but credits may be allocated in the fifth year to account for inadequate aggregate returns during the first four years. Credits may not be allocated to projects in which an approved opportunity fund has committed to invest prior to August 5, 2019.
(2) The project agreement shall provide that ADECA shall receive regular financial performance information about the fund, and the information shall, at a minimum, include all information provided to other investors in the fund. Prior to claiming the credits provided in subdivision (1), a fund shall submit to ADECA a certification as to the financial performance of the fund or assets which are the subject of the project agreement. ADECA may choose to request other information, and the fund shall comply with such requests. Following the examination as it deems necessary, ADECA may certify the information and deliver the same to the Department of Revenue. Thereafter, the Department of Revenue shall allow the credits in the amount determined by ADECA.
(e) ADECA may charge reasonable fees for its negotiation and entry into project agreements provided herein, and it may charge fees for its financial and oversight audits of the funds. ADECA may retain consultants to assist it with the powers and responsibilities delegated to it herein.
(f) For purposes of this section:
(1) “ADECA” shall mean the Department of Economic and Community Affairs.
(2) An “approved opportunity fund” is a fund which meets all the criteria in Section 41-10-46.01(b)(2).
(3) A “qualified fund” is a fund which meets all the criteria in Section 41-10-46.01(b)(3).
(g) ADECA shall not enter into any project agreements under this section after December 31, 2024.
(h) ADECA shall report to the Legislature in the third year following passage of Act 2019-392, and annually thereafter, on the overall economic activity, usage, and impact to the state from opportunity fund investments for which impact investment tax credits have been allowed. The information in the reports shall be consistent with the information required by the Legislature pursuant to, and shall be provided by ADECA to the Legislature in accordance with, Section 40-1-50, and rules adopted thereunder. Information provided pursuant to this section is exempt from the confidentiality provisions of Section 40-2A-10.
(Act 2019-392, §4.)