KRS 154.20-258: Investor entitled to credit -- Amount -- Carry-forward -- Liabilities --

Transferability -- Notification of Department of Revenue -- Additional

credits.

(1) (a) For investment funds approved by the authority prior to January 1, 2023,

an investor shall be entitled to a nonrefundable credit equal to forty

percent (40%) of the investor's proportional ownership share of all

qualified investments made by its investment fund and verified by the

authority. The aggregate tax credit available to any investor shall not

exceed forty percent (40%) of the cash contribution made by the investor

to its investment fund.

(b) For investment funds approved by the authority on or after January 1,

2023, an investor shall be entitled to a nonrefundable credit not to exceed

twenty-five percent (25%) of the investor's proportional ownership share

of all qualified investments made by its investment fund and verified by

the authority.

(c) The credit may be applied against:

1. Both the income tax imposed by KRS 141.020 or 141.040, and the

limited liability entity tax imposed by KRS 141.0401, with the

ordering of the credits as provided in KRS 141.0205;

2. The insurance taxes imposed by KRS 136.320, 136.330, and

304.3-270; and

3. The taxes on financial institutions imposed by KRS 136.300,

136.310, and 136.505.

(2) The tax credit amount that may be claimed by an investor in any tax year shall

not exceed fifty percent (50%) of the initial aggregate credit amount approved

by the authority for the investment fund which would be proportionally available

to the investor. For qualified investments approved on or after January 1, 2022,

an investor may first claim the credit granted in subsection (1) of this section on

the tax return filed for the taxable year in which the qualified investment is

made by the investment fund. No tax credit shall become effective until the

authority notifies the Department of Revenue in accordance with subsection (6)

of this section.

(3) If the credit amount that may be claimed in any tax year, as determined under

subsections (1) and (2) of this section, exceeds the investor's combined tax

liabilities against which the credit may be claimed for that year, the investor

may carry the excess tax credit forward until the tax credit is used, but the

carry-forward of any excess tax credit shall not increase the fifty percent (50%)

limitation established by subsection (2) of this section. Any tax credits not used

within fifteen (15) years of the approval by the authority of the aggregate tax

credit amount available to the investor shall be lost.

(4) The tax credits allowed by this section shall not apply to any liability an investor

may have for interest, penalties, past due taxes, or any other additions to the

investor's tax liability. The holder of the tax credit shall assume any and all

liabilities and responsibilities of the credit.

(5) The tax credits allowed by this section are not transferable, except that:

(a) A nonprofit entity may transfer, for some or no consideration, any or all of

the credits it receives under this section and any related benefits, rights,

responsibilities, and liabilities. Within thirty (30) days of the date of any

transfer of credits pursuant to this subsection, the nonprofit entity shall

notify the authority and the Department of Revenue of:

1. The name, address, and Social Security number or employer

identification number, as may be applicable, of the party to which the

nonprofit entity transferred its credits;

2. The amount of credits transferred; and

3. Any additional information the authority or the Department of

Revenue deems necessary.

(b) If an investor is an entity and is a party to a merger, acquisition,

consolidation, dissolution, liquidation, or similar corporate reorganization,

the tax credits shall pass through to the investor's successor.

(c) If an individual investor dies, the tax credits shall pass to the investor's

estate or beneficiaries in a manner consistent with the transfer of

ownership of the investor's interest in the investment fund.

(6) The tax credit amount that may be claimed by an investor shall reflect only the

investor's participation in qualified investments properly reported to the

authority by the investment fund manager. No tax credit authorized by this

section shall become effective until the Department of Revenue receives

notification from the authority that includes:

(a) A statement that a qualified investment has been made that is in

compliance with KRS 154.20-250 to 154.20-284 and all applicable

regulations; and

(b) A list of each investor in the investment fund that owns a portion of the

small business in which a qualified investment has been made by virtue of

an investment in the investment fund, and each investor's amount of

credit granted to the investor for each qualified investment.

The authority shall, within sixty (60) days of approval of credits, notify the

Department of Revenue of the information required pursuant to this subsection

and notify each investor of the amount of credits granted to that investor, and

the year the credits may first be claimed.

(7) After the date on which investors in an investment fund have cumulatively

received an amount of credits equal to the amount of credits allocated to the

investment fund by the authority, no investor shall receive additional credits by

virtue of its investment in that investment fund unless the investment fund's

allocation of credits is increased by the authority pursuant to an amended

application.