CHAPTER 203
FORMERLY
HOUSE BILL NO. 416
AN ACT TO AMEND CHAPTER 11 OF TITLE 30 AND CHAPTER 50 OF TITLE 29 OF THE DELAWARE CODE RELATING TO PERSONAL INCOME TAX CREDITS FOR CERTAIN QUALIFIED INVESTMENTS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Title 30 of the Delaware Code by adding thereto a new §1116 to read as follows:
"§1116. Delaware Investment Credit.
A resident and non-resident individual shall be allowed a credit against that individual's tax otherwise due under this chapter in an amount equal to 151. of the individual's investment that is qualified under Subchapter VIII, Chapter 50 of Title 29 of the Delaware Code ('The Delaware Investment Tax Credit Program') and certified as such by the Director of the Delaware Development Office to the Director of Revenue. Notwithstanding §329 of this title to the contrary, determinations by the Delaware Economic Development Authority as to the qualification of any investment under the Delaware Investment Tax Credit Program shall not be appealable to the Tax Appeal Board. In no event shall the credit allowable under this section exceed the tax otherwise due under this chapter. Unused credits under this section may be carried forward four years from the tax year in which they are certified under the Delaware Investment Tax Credit Program."
Section 2. Amend Chapter 50 of Title 29 of the Delaware Code by adding to said Chapter a new Subchapter VIII to read as follows:
"Subchapter VIII.
Delaware Investment Tax Credit Program
§5095. Legislative findings: authorization.
The General Assembly finds that the growth of small businesses in the State results in increased job opportunities for Delaware residents, produces more spending in the State and increases tax bases. Existing or new small businesses and recently displaced Delaware employees beginning new businesses can provide significant economic benefits to the State provided they can obtain sufficient equity financing to carry them from start-up through the initial development phases of a business. In order to encourage the increased availability of risk equity capital to these enterprises, the Delaware Development Office through the Delaware Economic Development Authority is authorized to establish, and issue certifications of eligibility for investors qualifying for the Investment Tax Credit Program.
§5096. Eligibility for tax credits.
The Delaware Economic Development Authority ('the Authority') shall, by rules and regulations, establish the Delaware Investment
Tax Credit Program ('the Program'), which Program shall provide for qualification of businesses to receive investment from individuals obtaining tax credit certification under the Program and for the certification of qualified investments by individuals for tax credits under §1116 of Title 30. The Authority shall by rule or regulation set forth qualifications for participation in the Program in accordance with §5097 and §5098 of this title and may issue rules or regulations relating to such other matters as, in the judgment of the Authority, are necessary or desirable to further the purposes of the Program, not inconsistent with the provisions of this Subchapter. Rules or regulations issued under this Subchapter shall have the force and effect of law.
§5097. Ouallflcation of Businesses seeking investment under the Program.
Without limitation, the requirements for qualifying for receipt of investment capital under the Program shall include the following:
(a) Businesses may apply to the Delaware Economic Development Authority for investment under the Program provided:
Such business had annual gross revenues of $5,000,000 or less during the full twelve month period immediately preceding the date on which it filed its application for investment;
The operation of the business must be the full-time activity of a natural person owning at least 10% of the voting interests in the business;
The investment qualified for certification under this Chapter must be expended on plant, equipment, research and development or acquisition of inventory or raw materials (provided the plant or equipment Is to be Installed, the research and development to occur, and the inventory or raw materials to be accumulated, in Delaware) or for such other purpose as, in the Authority's discretion, promotes the purposes of the Program; and
Such application is made in such form and at such time as the Authority may by regulation prescribe.
(b) No owner of more than 50% of the voting interests in the business nor such owner's spouse, parents, brothers, sisters, or children shall be eligible for tax credit under this Subchapter for investment in such business. For purposes of this subsection, ownership by the spouse, parents, brothers, sisters, or children of an owner shall be attributed to such owner for purposes of determining whether such owner owns more than 50% of the voting interests in the business.
(c) Applications for businesses seeking investment qualifying under
this Chapter shall be subject to approval as follows:
Business applications shall be reviewed by the Council on
Development Finance ('the Council') which shall evaluate such applications based on criteria established by the Authority through its rulemaking authority; and
Based on such review, the Council shall recommend applications for approval by the Chairman of the Delaware Economic Development Authority. No application shall receive any investment qualifying for tax credits under the Program unless and until it has been recommended for approval by a majority of the Council and has been approved by the Chairman of the Delaware Economic Development Authority.
§5098. Certification of individuals for tax credits.
Without limitation, the requirements for qualifying for
certification of individuals' investments for tax credits under the Program shall include the following:
(a) Individuals may apply for tax credit certification provided:
Such individual's investment is in a business approved to
receive such investment under §5097 of this title;
Such investment must be not less than $10,000 or more than $100,000 in any one business; provided that this paragraph shall not limit an applicant from making other investments in the business for which a tax credit is not requested; and
Such application shall be made in such form and at such time as the Authority may by regulation prescribe.
(b) Applications by individuals for investment tax credit certification shall not be approved to the extent that:
The investment is in excess of 15% of the actual investment made during any tax year;
Total shares of voting stock received in exchange for
investment certified for tax credits under this Chapter exceed 50% of the voting shares of stock outstanding in the business qualifying for investment under the Program.
No investment in any business shall be certified: (1) unless other investments in the same business qualifying for certification under this Chapter along with said investment amount in the aggregate to at least $25,000, or (2) if such investment along with all investments in the same business already certified under this Chapter exceed $950,000;
No application shall be approved for any investment under whose terms the investor obtains a return of the principal invested at any time prior to the end of five years from the date of the investment or under whose terms the investment is not at risk in the qualifying business.
Notwithstanding this paragraph, the investor may transfer his or her investment at.any time and may transfer any unused tax credits certified under this Chapter but only as part of the transfer of the investment and only so long as the transferor and transferee of the unused credits meet whatever reporting requirements may be established by the Director of Revenue or the Authority, or both; and
The Authority may not issue in the aggregate more than $3,000,000 in tax credit certifications nor may it issue any certifications after December 31, 1995.
§5099. Revocation of qualification or certification
(a) The Delaware Economic Development Authority may, after notice and an opportunity for a hearing, revoke any business' qualification for receipt of investments under this program if the Authority finds:
any material representation made by the business or by any person on behalf of such business in connection with an application under this subchapter was false when made; or
the application otherwise violates any conditions established for such application by the Authority. If any such qualification is revoked, the business and any person making application on behalf of said business shall be required immediately to pay the State of Delaware the full amount of any tax credit certifications authorized for investment in said business whether or not such certificates have yet been used to obtain tax credits, plus a penalty of 100% the amount of such certificates. The validity of tax credit certifications issued for investment in such business shall not be affected by revocation of qualification of said business for participation in the Program.
(b) The Delaware Economic Development Authority may, after notice and an opportunity for a hearing, revoke any tax credit certification issued under this program if the Authority finds:
any material representation made by the applicant for such certification in connection with an application under this subchapter was false when made; or
the application otherwise violates any conditions established for such application by the Authority. If any such certification is revoked, the applicant shall be required immediately to repay the State of Delaware the full amount of any tax credit taken under §1116 of Title 30 as well as a penalty of 100% of such credit. In the event the applicant has transferred unused credits to a transferee, the applicant shall be liable for repayment of the full amount of the certifications plus 100% thereof as penalty. Unless a transferee knew of the falsity of facts represented by the applicant at the time he obtained an interest in unused tax credits, the validity of such unused credits shall not be affected by the revocation of the applicant's certification.
(c) The Authority is authorized to require that any application or such other document as it requires to be filed with the Authority be submitted under penalties of perjury.
Notwithstanding §581 of Title 30, the Director of Revenue may disclose tax return information of any applicant to the Authority whenever the Authority notifies the Director of Revenue that such information is necessary or desirable for any determination required under this Chapter. The Authority may not further disclose any information received under this subsection except to the Council on Development Finance and then only to the extent necessary for the Council to carry out the duties specified in §5097 of this title.
The Authority and the Council on Development Finance shall not disclose to any person, other than in compliance with a proper judicial order, any information contained on any application for qualification for investment other than to any applicant for tax credit certification, provided the business applicant authorizes such disclosure, and to the Director of Revenue."
Section 3. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of this Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.
Section 4. This Act shall be effective upon its enactment into law; provided, however, that qualification of businesses for investments or individuals for tax credit certification shall not occur prior to issuance of rules and regulations under this Act by the Delaware Economic Development Authority.
Approved February 6, 1992.