Form D-499 - Application For Tax Credit For Qualified Business Investments Page 2
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General Information
D-499
The information below does not cover all provisions of the law. See North Carolina
Web
General Statutes 105-163.010 through 105-163.015 for additional information.
8-13
A.
Tax Credit - This credit is not allowed to individuals or to pass-
For investments placed initially in escrow, conditioned upon other
through entities for investments in a qualified business if a broker’s
investors’ commitment of additional funds, the date of the investment
is the date the escrowed funds are transferred to the qualified
fee or commission or other similar remuneration is paid or given
directly or indirectly for soliciting the purchase.
business venture.
Individuals - An individual who purchases the equity securities
G.
Forfeiture of Credit - The credit is forfeited by the taxpayer if:
or subordinated debt of a qualified business is allowed a credit
(1) within three years after the investment was made, the taxpayer
participates in the operation of the qualified business. A taxpayer
against the tax for the taxable year equal to 25% of the amount
participates in the operation of the qualified business if the
invested or $50,000, whichever is less. The credit is not allowable
for the year in which the investment was made, but is allowable for
taxpayer, the taxpayer’s spouse, parent, brother or sister, child,
the taxable year beginning during the calendar year following the
or an employee of any of these individuals, or of a business
calendar year in which the investment was made.
controlled by any of these individuals, provides services of any
nature to the qualified business for compensation, whether as
Pass-Through Entities - A pass-through entity that purchases the
an employee, a contractor, or otherwise.
equity securities or subordinated debt of a qualified business is
(2) the registration of the qualified business is revoked because the
qualified business provided false information to the Secretary
allowed a tax credit for the taxable year equal to 25% of the amount
invested or $750,000, whichever is less. This credit is not allowed to
of State on its registration application.
a pass-through entity that has committed capital under management
(3) the taxpayer transfers the securities received in the investment
in excess of $5,000,000. Each individual who is an owner of a
to another person or entity within one year except in the case of
(a) the death of the taxpayer, (b) a final distribution in liquidation,
pass-through entity is allowed a credit equal to his allocated share
of the credits (not to exceed $50,000) for which the pass-through
or (c) a merger, conversion, consolidation, or other similar
entity is eligible. If the owner’s share of the pass-through entity’s
transaction in which no cash or tangible property is received.
credit is limited due to the maximum allowable credit for a taxable
(4) The organization in which the investment was made makes a
redemption of the securities within five years. However, if a
year, the pass-through entity and its owners may not reallocate the
qualified business venture engaged primarily in motion picture
unused credit among the other owners.
film production redeems its stock, the credit is not forfeited if
Investments made as an Individual and as an Individual Owner
the following conditions are met:
of a Pass-through Entity - The aggregate amount of credit allowed
(a) The redemption occurred because the qualified business
venture completed production of a film, sold the film, and
in a single tax year, for investments both as an individual and as an
individual who is an owner of a pass-through entity, is equal to 25%
was liquidated.
(b) Neither the qualified business venture nor a related person
of the amount invested or $50,000.00, whichever is less.
continues to engage in business with respect to the film
B.
Application -
To be eligible for the tax credit, you must
produced by the business.
file this application with the Secretary of Revenue. The
application should be filed on or before April 15 and no later
If the tax credit is forfeited, the taxpayer is liable for all past taxes
than October 15 of the year following the calendar year in which
avoided as a result of the credit, plus interest computed from the
the investment was made. An application filed after October
date the taxes would have been due had the credit not been allowed.
15 will not be accepted. Do not attach this application to your
The past taxes and interest are due 30 days after the date the credit
North Carolina income tax return. The application must be
is forfeited. Any additional tax due as a result of forfeiture of the
mailed separately to the address at the bottom on the front of
credit may be assessed within three years after the date of forfeiture.
this form. The application for a qualified business investment by
a pass-through entity must be filed by the pass-through entity. If
H.
Definitions -
the investment was paid for other than in money, the taxpayer must
include with the application a certified appraisal of the value of the
Control - A person controls an entity if the person owns, directly or
property used to pay for the investment.
indirectly more than ten percent (10%) of the voting securities of that
entity.
C.
Limit - The credit may not exceed the amount of tax liability for
Equity security - Common stock, preferred stock, or an interest in a
the taxable year reduced by the sum of all other credits allowable,
except tax payments. Any unused credit may be carried forward
partnership, or subordinated debt that is convertible into, or entitles the
for the next five succeeding years.
holder to receive upon its exercise, common stock, preferred stock, or
an interest in a partnership.
D.
Ceiling - The
total amount of all
tax credits allowed for
qualified business investments in a calendar year may not exceed
Pass-through entity - An entity or business, including a limited
$7,500,000. The Secretary of Revenue will calculate the total
partnership, a general partnership, a joint venture, a Subchapter S
credits from the applications filed. If the total for the calendar year
Corporation, or a limited liability company, all of which is treated as owned
exceeds $7,500,000, a portion of the credits claimed will be allowed
by individuals or other entities under the federal tax laws, in which the
by allocating the $7,500,000 in proportion to the size of the credit
owners report their share of the income, losses, and credits from the
entity or business on their income tax returns filed with this State. An
claimed by each taxpayer. The Secretary of Revenue will notify each
taxpayer on or before December 31 of the year following the calendar
owner of a pass-through entity is an individual or entity who is treated
year in which the investment was made, if the credit applied for is
as an owner under the federal tax laws.
approved or if the amount of the credit has been reduced.
Qualified Business - A qualified business venture, a qualified grantee
E.
Reduction in Basis - A taxpayer’s basis in the equity securities or
business, or a qualified licensee business.
subordinated debt acquired as a result of an investment in a qualified
Related person - A person described in one of the relationships in
business must be reduced by the amount of allowable credit.
section 267(b) or 707(b) of the Internal Revenue Code.
F.
Registration - A qualified business must be registered with the
Securities Division of the Office of the Secretary of State. Information
Subordinated debt - Indebtedness that (1) by its terms matures five or
on the qualifying conditions under which they are registered can be
more years after its issuance, (2) is not secured, and (3) is subordinated
obtained from the Secretary of State. An investment made prior
to all other indebtedness of the issuer issued or to be issued to a
financial institution other than a financial institution described in G. S.
to the effective date of the registration or after the revocation of the
registration does not qualify for the tax credit. The effective date
105-163.010(5). Any portion of indebtedness that matures earlier than
of registration of a qualified business venture whose application is
five years after its issuance is not subordinated debt. However the
requirement that indebtedness mature five or more years after it was
accepted for registration is 60 days before the date its application is
filed. The effective date of registration for a qualified grantee business
issued is not applicable to the subordinated debt of a qualified business
or qualified licensee business whose application is accepted for
venture that is engaged primarily in motion picture film production.
registration is the filing date of its application.
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