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(G. S . 105-163.010 - G. S . 105-163.014)

A. T ax Credit

• This credit is not allowed to individuals or to

R egis tration • A Qualified Business Venture and a Qualified

pass• through entities for investments in a qualified business if a

Grantee Business must be registered with the Securities Division of

broker’s fee or commission or other similar remuneration is paid or

the Office of the Secretary of State. Information on the qualifying

given directly or indirectly for soliciting the purchase.

conditions under which they are registered can be obtained from the

Secretary of State. An investment made prior to the effective date of

Individuals • An individual who purchases the equity securities or

the registration or after the revocation of the registration does not

subordinated debt of a qualified business venture or a qualified

qualify for the tax credit. The effective date of registration of a

grantee business is allowed a creditagainst the tax for the taxable year

qualified business whose application is approved for registration is

equal to 25% of the amount invested or $50,000, whichever is less.

the filing date of its application.

The credit is not allowable for the year in which the investment was

made, but is allowable for the taxable year beginning during the

G. F orfeiture of Credit • The credit is forfeited by the taxpayer if:

calendar year following the calendar year in which the investment

(1) within three years after the investment was made, the taxpayer

was made.

participates in the operation of the qualified business. A taxpayer

participates in the operation of the qualified business if the

P as s - T hrough E ntities • A pass- through entity that purchases

taxpayer, the taxpayer’s spouse, parent, brother or sister, child,

the equity securities or subordinated debt of a qualified grantee

or an employee of any of these individuals, or of a business

business or a qualified business venture is allowed a tax credit for the

controlled by any of these individuals, provides services of any

taxable year equal to 25% of the amount invested or $750,000,

nature to the qualified business for compensation, whether as an

whichever is less. This credit is not allowed to a pass- through entity

employee, a contractor, or otherwise.

that has committed capital under management in excess of

(2) the registration of the qualified business is revoked because the

$5,000,000. Each individual who is an owner of a pass- through

qualified business provided false information to the Secretary of

entity is allowed a credit equal to his allocated share of the credits (not

State on its registration application.

to exceed $50,000) for which the pass-through entity is eligible. If

(3) the taxpayer transfers the securities received in the investment to

the owner’s share of the pass- through entity’ s credit is limited due to

another person or entity within one year except in the case of (a)

the maximum allowable credit for a taxable year, the pass-through

the death of the taxpayer, (b) a final distribution in liquidation,

entity and its owners may not reallocate the unused credit among the

or (c) a merger consolidation, or other similar transaction in

other owners.

which no cash or tangible property is received.

(4) The organization in which the investment was made makes a

B . Application • To be eligible for the tax credit, this application

redemption of the securities within five years.

must be filed with the Secretary of Revenue on or before April 15 of

If the tax credit is forfeited, the taxpayer is liable for all past taxes

the year following the calendar year in which the investment was

avoided as a result of the credit, plus interest computed from the date

made. The application for a qualified business investment by a

the taxes would have been due had the credit not been allowed. The

pass- through entity must be filed by the pass- through entity. If the

past taxes and interest are due 30 days after the date the credit is

investment was paid for other than in money, the taxpayer must

forfeited. Any additional tax due as a result of forfeiture of the credit

include with the application a certified appraisal of the value of the

may be assessed within three years after the date of forfeiture.

property used to pay for the investment. Pursuant to rule .0612,

subchapter 6B, Title 17 of the North Carolina Administrative

H. Definitions

Code, the date set for filing the application may be extended

provided a written statement is furnished by April 15 requesting

E quity s ecurity • Common stock, preferred stock, or an interest in

additional time to file the application; however, this application

a partnership, or subordinated debt that is convertible into, or entitles

must be filed by September 15. An extension of time to file an

the holder to receive upon its exercise, common stock, preferred

individual income tax return (Form D- 400) does not extend the

stock, or an interest in a partnership.

time for filing Form D-499.

S ubordinated debt • Indebtedness that (1) by its terms matures

C. L imit • The credit may not exceed the amount of tax liability for

five or more years after it issuance, (2) is not secured, and (3) is

the taxable year reduced by the sum of all other credits allowable,

subordinated to all other indebtedness of the issuer issued or to be

except tax payments. Any unused credit may be carried forward for

issued to a financial institution other than a financial institution

the next five succeeding years. Annual limitations on the amount of

described in G. S. 105- 163.010(5). Any portion of indebtedness that

credit do not apply to unused amounts carried forward.

matures earlier than five years after its issuance is not subordinated

debt.

D. Ceiling • The total amount of all tax credits allowed for qualified

business investments in a calendar year may not exceed $6,000,000.

P as s -through entity • An entity or business, including a limited

The Secretary of Revenue will calculate the total credits from the

partnership, a general partnership, a joint venture, a Subchapter S

applications filed. If the total for the calendar year exceeds

Corporation, or a limited liability company, all of which is treated as

$6,000,000, a portion of the credits claimed will be allowed by

owned by individuals or other entities under the federal tax laws, in

allocating the $6,000,000 in proportion to the size of the credit

which the owners report their share of the income, losses, and credits

claimed by each taxpayer. The Secretary of Revenue will notify each

from the entity or business on their income tax returns filed with this

taxpayer on or before December 31 of the year following the calendar

State. An owner of a pass- through entity is an individual or entity

year in which the investment was made, if the credit applied for is

who is treated as an owner under the federal tax laws.

approved or if the amount of the credit has been reduced.

Control • A person controls an entity if the person owns, directly or

E . R eduction in B as is • A taxpayer’s basis in the equity securities or

indirectly more than ten percent (10%) of the voting securities of that

subordinated debt acquired as a result of an investment in a qualified

entity.

business venture or qualified grantee business must be reduced by the

amount of allowable credit.

Instructions For Form D-499 - Tax Credit For Qualified Business Investments - Georgia Department Of Revenue

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