Artificial loans to inflated investments to get $2 in tax credits for each $1 invested.
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Note: Artificial loans are similar to a Counterfeit loan.

Misrepresenting investments to get $2 in tax credits for each $1 invested.

Sections Loophole elements in the Rural Capital Formation Incentive Act
Section 18.2.d "Capitalization" means the amount of any funds loaned to the qualified rural small business capital company
Section 20.B.4.a & b

1. Authorizing taking tax credits worth 200% of what is claimed to be invested in new business.

Note: The area of the law addressing the 200% limitations is ambiguous leaving it unclear, what, if anything, is in fact limited to 200%.
SECTION 2.G

The credit allowed on funds borrowed by the pass-through entity to make a qualified investment.

Failing to prevent the use of artificial, dummy or fake loans.

An act of omission -- failure to include language clarifying how a loan can to be used. Leaving it "not illegal" to use artificial loans to inflate the claimed investment up to nearly 7 times the actual money invested at risk. 6.66 times the allowed 30% in tax credits comes to 200%.

Note: The area of the law addressing the 200% limitations is ambiguous leaving it unclear, what, if anything, is in fact limited to 200%.
Section 2.B & G
Section 19.B & G
Section 20.B & E

Authorizing the use of borrowed funds

Subtley changing the investment requirement from cash (money at risk) to a new term "qualified investment" and defining "qualified investment" to include using borrowed money. What was "not illegal" was using artificial loans to inflate the claimed investment up to nearly 7 times the actual money invested at risk.

Section 19 Specifies 30% tax credits.

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