81-03-02.1-12 Seed capital investment credit - Limitations on credit - Carryover.

1. The provisions in this subsection apply to the calculation and administration of the credit under North Dakota Century Code chapter 57-38.5 for tax years beginning before January 1, 2002: a. The credit must first be credited against the taxpayer's income tax liability for the taxpayer's taxable year in which the investment is paid for in full. b. For purposes of applying the annual limitation on the total amount of credits allowed for investments in one qualified business under subsection 6 of North Dakota Century Code section 57-38.5-03, the total amount of investments and the total amount of gross receipts from out-of-state sales must be determined on a calendar year basis. c. For purposes of applying the annual limitation on the total amount of credits allowed for investments in all qualified businesses under North Dakota Century Code section 57-38.5-05, the total amount of investments and related credits must be determined on a calendar year basis. d. For purposes of determining whether a taxpayer has reached the annual minimum or maximum amount of investment for which a credit is allowed under subsection 1 of North Dakota Century Code section 57-38.5-03, the total amount of investments must be determined by aggregating all of the investments made by a taxpayer within the taxpayer's taxable year. e. Every qualified business shall file with the tax commissioner a written report showing the total amount of its gross receipts from out-of-state sales on a calendar year basis. The report must be filed by January thirty-first following the end of each calendar year. If a qualified business fails to file a written report, the total amount of the credit attributable to investments made in that qualified business during the calendar year for which the report 5 was required to be filed must be disallowed until such time as the report is received by the tax commissioner. f. If a taxpayer elects to determine the taxpayer's state income tax liability under North Dakota Century Code section 57-38-30.3, the credit is not allowed in the taxable year of the election or in any subsequent taxable year to which an unused credit may otherwise be carried. g. For purposes of applying subsection 3 of North Dakota Century Code section 57-38.5-03, the amount of the credit which may be carried forward from the taxpayer's taxable year in which the related investment was made is the amount of the credit not allowed because of subsection 2 of North Dakota Century Code section 57-38.5-03. h. If a partnership makes an investment in a qualified business, and if the taxable year of the partnership differs from the taxable year of the partner, the amount of credit allocated to the partner under subsection 4 of North Dakota Century Code section 57-38.5-03 must first be credited in the partner's taxable year in which the partnership's taxable year ends. i. If a taxpayer makes an investment in a qualified business and then sells the investment back to the qualified business within three years of making the investment, the credit must be disallowed. If a taxpayer makes an investment in a qualified business and then sells the investment to a second taxpayer, the credit attributable to the investment must be allowed to the first taxpayer provided the investment is held by the qualified business for three years, and no credit may be allowed to the second taxpayer. j. For purposes of subsection 8 of North Dakota Century Code section 57-38.5-03, "controlling interest" means ownership of over fifty percent of the voting stock and over fifty percent of each class of other stock of the corporation. 2. The provisions in this subsection apply to the calculation and administration of the credit under North Dakota Century Code chapter 57-38.5 for taxable years beginning after December 31, 2001: a. The credit must first be credited against the taxpayer's income tax liability for the taxpayer's taxable year in which the investment is paid for in full. b. For purposes of applying the annual limitation on the total amount of credits allowed for investments in one qualified business under subsection 6 of North Dakota Century Code section 57-38.5-03, the total amount of investments must be determined on a calendar year basis. c. For purposes of applying the annual limitation on the total amount of credits allowed for investments in all qualified businesses under North Dakota Century Code section 57-38.5-05, the total amount of investments and related credits must be determined on a calendar year basis. d. For purposes of determining whether a taxpayer has reached the annual minimum or maximum amount of investment for which a credit is allowed under subsection 1 of North Dakota Century Code section 57-38.5-03, the total amount of investments must be determined by aggregating all of the investments made by a taxpayer within the taxpayer's taxable year. e. For purposes of applying subsection 3 of North Dakota Century Code section 57-38.5-03, the amount of the credit which may be carried forward from the taxpayer's taxable year in which the related investment was made is the amount of the credit not allowed because of subsection 2 of North Dakota Century Code section 57-38.5-03. 6 f. If a partnership makes an investment in a qualified business, and if the taxable year of the partnership differs from the taxable year of the partner, the amount of credit allocated to the partner under subsection 4 of North Dakota Century Code section 57-38.5-03 must first be credited in the partner's taxable year in which the partnership's taxable year ends. g. If a taxpayer makes an investment in a qualified business and then sells the investment back to the qualified business within three years of making the investment, the credit must be disallowed. If a taxpayer makes an investment in a qualified business and then sells the investment to a second taxpayer, the credit attributable to the investment must be allowed to the first taxpayer provided the investment is held by the qualified business for three years, and no credit may be allowed to the second taxpayer. h. For purposes of subsection 8 of North Dakota Century Code section 57-38.5-03, "controlling interest" means ownership of over fifty percent of the voting stock and over fifty percent of each class of other stock of the corporation. History: Effective August 1, 1994; amended effective June 1, 2002. General Authority: NDCC 57-38-56 Law Implemented: NDCC 57-38.5