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Economic Development Tax Credit Qualifying Criteria

This is far more complicated. Below is the violation of the main requirements for five (5) of the different tax credit types structured for shared investment funds (CAPCOs).


Violations include but not limited to, failing to meet the following requirements.

  1. CFIA Tax Codes View
  2. Qualifying is restricted to investing specific Standard Industrial Classification (SIC) codes.
  3. Failure to document as required by law to justify the tax credit investment claim.
  4. Tax credits are only allowed for the year the funds are invested. The amount of the claim not used as an offset against the taxes of a taxable year may be carried forward for a period not to exceed three (3) taxable years.
  5. Recapture when failure to meet qualifying criteria, including five (5) years. Instead, OTC issues a confidential tax letter ruling declaring a liquidity event (free pass) for tax returns.
  6. Failure to invest at risk.a The credit may also be claimed for funds borrowed by ......... to whom the credit is allocated and has an unlimited and continuing legal obligation to repay the borrowed funds.....` - Section E. below.

(a) Typically the obligation to repay loans is shelled gamed back to the investment target.

The following was extracted from 68 O.S. § 2357.74 (OSCN 2019) Section B., Rural Venture Capital Formation Incentive Act View

Section B is essentially the same for all four of the Capital Formation Incentive Act tax credits 68 O.S. § 2357.62 G, 68 O.S. § 2357.63 E, 68 O.S. § 2357.73 G, 68 O.S. § 2357.74

B. The credit provided for in this section shall be thirty percent (30%) of the qualified investment made in Oklahoma rural small business ventures in conjunction with qualified investment in such ventures made by a qualified rural small business capital company and shall be allowed for the taxable year during which the qualified investment is made in an Oklahoma rural small business venture. If the tax credit allowed pursuant to subsection A of this section exceeds the amount of taxes due or if there are no state taxes due of the taxpayer, the amount of the claim not used as an offset against the taxes of a taxable year may be carried forward for a period not to exceed three (3) taxable years. To qualify for the credit authorized by this section, a qualified investment shall be:

1. Made by a shareholder or partner of a qualified rural small business capital company that has made a qualified investment in an Oklahoma rural small business venture;

2. Invested in the purchase of equity or near-equity in an Oklahoma rural small business venture;

3. Made under the same terms and conditions as the qualified investment made by the qualified rural small business capital company; and

4. Limited to the lesser of:

a. two hundred percent (200%) of any qualified investment by the taxpayer in the qualified rural small business capital company, or

b. two hundred percent (200%) of the qualified investment made by the qualified rural small business capital company in the Oklahoma rural small business venture.

c. No taxpayer may claim the credit provided for in this section for investments made prior to January 1, 2001.

d. No taxpayer may claim the credit authorized by this section for the same qualified investment amount for which any credit is claimed pursuant to either Section 2357.62 or 2357.63 of this title.

e. If a pass-through entity is entitled to a credit under this section, the pass-through entity shall allocate such credit to one or more of the shareholders, partners or members of the pass-through entity; provided, the total of all credits allocated shall not exceed the amount of the credit to which the pass-through entity is entitled. The credit may also be claimed for funds borrowed by the pass-through entity to make a qualified investment if a shareholder, partner or member to whom the credit is allocated has an unlimited and continuing legal obligation to repay the borrowed funds but the allocation may not exceed such shareholder's, partner's or member's pro-rata equity share of the pass-through entity even if the taxpayer's legal obligation to repay the borrowed funds is in excess of such amount. For purposes of the Rural Venture Capital Formation Incentive Act, "pass-through entity" means a corporation that for the applicable tax years is treated as an S corporation under the Internal Revenue Code, general partnership, limited partnership, limited liability partnership, trust, or limited liability company that for the applicable tax year is not taxed as a corporation for federal income tax purposes.

Small Business Capital Formation Incentive Act
§ 2357.60. Short Title
§ 2357.61. Definitions
§ 2357.61a. Moratorium on Tax Credits - Qualified Investment in Qualified Small Business Capital Companies and Ventures
§ 2357.62. Tax Credit for Qualified Investment in Qualified Small Business Capital Companies - Pass-Through Entities
§ 2357.63. Tax Credit for Qualified Investments in Oklahoma Small Business Ventures - Pass-Through Entities
§ 2357.63A. Requirements to Claim Tax Credits - Recapture - Subordinated Debt
§ 2357.63B. Recapture Event
§ 2357.63C. Required Records
§ 2357.63D. Determination Letters
§ 2357.63E. Timing
§ 2357.64. Required Reports - Financial Statements - Penalties
§ 2357.65. Report of Credits Claimed and Allowed
§ 2357.65A. Federally Regulated Investment Companies Duties to the State - Tax Reporting
§ 2357.66. Repealed
§ 2357.67. Repealed
 
Rural Venture Capital Formation Incentive Act
§ 2357.71. Short Title
§ 2357.72. Definitions
§ 2357.72a. Moratorium on Tax Credits - Qualified Investment in Rural Small Business Capital Companies and Ventures
§ 2357.73. Tax Credit for Qualified Investment in Qualified Rural Small Business Capital Companies - Pass-Through Entities
§ 2357.74. Tax Credit for Qualified Investment in Oklahoma Rural Small Business Ventures - Pass-Through Entities
§ 2357.74A. Requirements to Claim Tax Credits - Recapture - Subordinated Debt
§ 2357.74B. Recapture Event
§ 2357.74C. Required Records
§ 2357.74D. Determination Letters
§ 2357.74E. Timing
§ 2357.75. Required Reports - Penalties
§ 2357.76. Report of Credits Claimed and Allowed
§ 2357.76A. Federally Regulated Investment Companies

Small Business Capital Formation Incentive Act

§ 2357.60. Short Title

§ 2357.61. Definitions

§ 2357.61a. Moratorium on Tax Credits - Qualified Investment in Qualified Small Business Capital Companies and Ventures

§ 2357.62. Tax Credit for Qualified Investment in Qualified Small Business Capital Companies - Pass-Through Entities

§ 2357.63. Tax Credit for Qualified Investments in Oklahoma Small Business Ventures - Pass-Through Entities

§ 2357.63A. Requirements to Claim Tax Credits - Recapture - Subordinated Debt

§ 2357.63B. Recapture Event

§ 2357.63C. Required Records

§ 2357.63D. Determination Letters

§ 2357.63E. Timing

§ 2357.65. Report of Credits Claimed and Allowed

§ 2357.65A. Federally Regulated Investment Companies Duties to the State - Tax Reporting

§ 2357.66. Repealed

§ 2357.67. Repealed


Rural Venture Capital Formation Incentive Act

§ 2357.71. Short Title

§ 2357.72. Definitions

§ 2357.72a. Moratorium on Tax Credits - Qualified Investment in Rural Small Business Capital Companies and Ventures

§ 2357.73. Tax Credit for Qualified Investment in Qualified Rural Small Business Capital Companies - Pass-Through Entities

§ 2357.74. Tax Credit for Qualified Investment in Oklahoma Rural Small Business Ventures - Pass-Through Entities

§ 2357.74A. Requirements to Claim Tax Credits - Recapture - Subordinated Debt

§ 2357.74B. Recapture Event

§ 2357.74C. Required Records

§ 2357.74D. Determination Letters

§ 2357.74E. Timing

§ 2357.75. Required Reports - Penalties

§ 2357.76. Report of Credits Claimed and Allowed

§ 2357.76A. Federally Regulated Investment Companies

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