Ala. Admin. Code r. 281-2-1-.08

Current through Register Vol. 43, No. 1, October 31, 2024

Section 281-2-1-.08 - Allocation And Transfer Of Tax Credits

(1) A premium tax credit allocation claim must be prepared and executed by a certified investor in the form prescribed by the ADO, as such form may be amended from time to time by the ADO. With respect to program one, a CAPCO must file the claim with the ADO not later than January 10, 2004 and all premium tax credit allocation claims received by the ADO prior to January 10, 2004, will be deemed to have been received on January 10, 2004. With respect to program two, a CAPCO must file the claim with the ADO no later than March 20, 2008 and all premium tax credit allocation claims received by the ADO prior to March 20, 2008 will be deemed to have been received on March 20, 2008. Each premium tax credit allocation claim form must include an affidavit of the certified investor under which the certified investor becomes legally bound and irrevocably committed to make an investment of certified capital in a CAPCO in the amount allocated even if the amount allocated is less than the amount of the claim, subject only to the receipt of an allocation under Section 19 of the Act.

(2) A certified investor may not claim a premium tax credit under Section 16 of the Act for an investment that has not been funded, even if the certified investor has committed to fund the investment.

(3) Together with the premium tax credit allocation claims of its certified investors for a particular program, each CAPCO must submit a nonrefundable claim fee in the amount of $15,000 in the form of a cashier's check, certified check or company check payable to "Alabama Development Office" which the ADO shall use to offset the administrative costs related to the CAPCO program. The information to be submitted as part a premium tax credit allocation claim is as follows:

(a) The name, address and NAIC number of each investor;

(b) The amount of the investment of certified capital or the amount of a binding letter of intent for the investment of certified capital;

(c) The amount of premium tax credits requested; and

(d) The date the certified capital was received or the date a binding letter of intent was made.

(4) Within ten (10) business days of being notified of the allocation of premium tax credits, a CAPCO must provide the ADO with a written statement certifying that the investment was made within the provisions of the Act and these regulations.

(5) The Director reserves the right to decertify an investment pool of a CAPCO with respect to program one or program two if the allocation of premium tax credits results in such investment pool having certified capital of less than $5,000,000.

(6) Tax credits may be transferred without limitation at any time, other than as set forth in these regulations and in the Act. Within thirty (30) days after the transfer or sale of tax credits, the original holder of the tax credits ("TRANSFEROR") shall notify the ADO in writing of the name of new holder of the tax credits ("TRANSFEREE") the amount of tax credits transferred, the price of such credits, the date the transfer occurred, the tax identification number of transferee, and the remaining balance of credits held by the transferor. In the event such notice is not received by the ADO within the thirty (30) day period, the transfer shall be void.

(7) Tax credits may be sold or transferred only to an insurance company or other person that has state premium tax liability;

(8) If the transferor has an A.M. Best rating less than "A", the ADO may require such transferor to post or provide acceptable security to the ADO for full amount of the tax credits subject to recapture received prior to any transfer. In the event the ADO requires security to be posted or provided such security may be in the form of bonds, bank letter of credit or low risk marketable securities acceptable to the ADO. Such securities will be held by the ADO until the CAPCO has invested one hundred percent (100%) of any investment pool containing the certified capital for which such credits were earned in qualified technology businesses and the annual review of, the CAPCO is completed. If the CAPCO or its related investment pool is decertified, the ADO may immediately draw on that security for the amount, which is required to be repaid as a result of the decertification. There is no requirement for the transferee to provide security for the amount of tax credits received;

(9) Investments made by an insurance company in an applicant with respect to program one or program two, as applicable, prior to the time such certification or recertification is granted with respect to such program, are not eligible for tax credits;

(10) In the event certified capital is invested by an investor in a CAPCO, and such certified capital is not eligible for tax credits due to the limitations of the Act or the limitations imposed by these regulations, the investor may withdraw such certified capital at any time without restriction;

(11) In the event the ADO receives notification of receipt of certified capital from a CAPCO and limitation with respect to which tax credits apply, the ADO shall notify the CAPCO of the total amount of credits which are available within fifteen (15) days. If the CAPCO does not receive investments in certified capital equaling the aggregate amount of tax credits allocated within such period, that portion of the tax credits will be forfeited and department will reallocate the unfunded portion of the tax credits in accordance with Regulation 281-2-1-.08(23).

(12) Once the ADO has made an allocation of tax credits under either program one or program two, which equals in aggregate the maximum amount of credits that may be allowed and allocated to investors in any calendar year with respect to such program, the ADO will not accept and will not consider additional requests for allocation of tax credits for that year.

(13) A certified investor who makes an investment of certified capital shall in the year of investment earn a vested credit against state premium tax liability equal to one hundred percent (100%) of the certified investor's investment of certified capital, subject to the limits imposed by the Act and these regulations. With respect to certified capital invested pursuant to program one, a certified investor may take up to twelve and one-half percent (12.5%) of the vested premium tax credit in any taxable year of the certified investor beginning on or after January 1, 2006. None of the vested premium tax credit received in program one may be used to offset any state premium tax liability incurred prior to January 1, 2006. With respect to certified capital invested pursuant to program two, a certified investor may take up to five percent (5%) of the vested premium tax credit in any taxable year of the certified investor beginning on or after January 1, 2010; provided that

(i) for any taxable year beginning on or after January 1, 2014, a certified investor may take up to seventeen and one-half percent (17.5%) of the vested premium tax credit until the tax credits taken by such investor equal one hundred percent (100%) of the certified investor's program two certified capital, and

(ii) each certified investor will agree, as a condition to receiving an allocation of certified capital, to refrain from utilizing any credits for taxable year 2010 and to treat those credits as carried forward credits that may be utilized in any taxable year subsequent to 2010. None of the vested premium tax credits received in program two may be used to offset any state premium tax liability incurred prior to January 1, 2010.

(14) The credit to be applied against state premium tax liability in any one (1) year may not exceed the state premium tax liability of the certified investor for the taxable year. Any unused credit against state premium tax liability may be carried forward indefinitely until the premium tax credits are used.

(15) With respect to credits earned pursuant to program one, on each estimated tax payment date falling in a tax year beginning on or after January 1, 2006 a certified investor or permitted transferee of premium tax credits under the Act may credit or deduct a pro rata portion of its premium tax credits for the corresponding tax year against the estimated payments of premium tax liability for such tax year which are required to be made on such date in an amount equal to the pro rata payment of the tax year's premium tax liability required to be made on such payment date. A certified investor or permitted transferee may make a similar adjustment with respect to credits earned pursuant to program two beginning with estimated payment dates falling in a tax year beginning on or after January 1, 2011.

(16) A certified investor claiming a credit against state premium tax liability earned through an investment in a CAPCO is not required to pay any additional retaliatory tax levied by law as a result of claiming that credit. An investment made under the Act is an "Alabama investment" for purposes of the Act.

(17) The total amount of certified capital for which premium tax credits may be allowed under the Act for all years in which premium tax credits are allowed is $100,000,000 with respect to certified capital allocated under program one and $100,000,000 with respect to certified capital allocated under program two. Notwithstanding any provision of the Act to the contrary, the granting of any credits against the insurance premium tax shall not affect the insurance premium tax receipts of the Education Trust Fund which is provided for in Act 93-679, 1993 Regular Session.

(18) A CAPCO and its affiliates may not file premium tax credit allocation claims with respect to a particular program in excess of the maximum amount of certified capital for which premium tax credits may be allowed under such program as provided in the Act.

(19) The maximum amount of premium tax credit allocation claims that may be filed under a particular program on behalf of any one (1) insurance company, on an aggregate basis with its affiliates, in one (1) or more certified capital companies, shall not exceed $15,000,000.

(20) If the total premium tax credits claimed by all certified investors with respect to a particular program exceeds the total limits on premium tax credits for such program established by the Act, the ADO shall allocate the total amount of premium tax credits allowed under the Act to certified investors in certified capital companies on a pro rata basis as set forth below.

(21) The pro rata allocation for each certified investor in connection with a particular program shall be the product of:

(a) A fraction, the numerator of which is the amount of the premium tax credit allocation claim filed on behalf of the investor with respect to a program and the denominator of which is the total amount of all premium tax credit allocation claims filed on behalf of all certified investors with respect to that program.

(b) The total amount of certified capital for which premium tax credits may be allowed for the applicable program under the Act.

(22) On January 25, 2004, the ADO shall notify each CAPCO of the amount of tax credits allocated to each certified investor under program one. On April 4, 2008, the ADO shall notify each CAPCO of the amount of tax credits allocated to each certified investor under program two. Each CAPCO shall notify each certified investor of their premium tax credit allocation under program one or program two, as applicable.

(23) If a CAPCO does not receive an investment of certified capital with respect to either program one or program two, as applicable, equaling the amount of premium tax credits allocated to a certified investor in a program for which it filed a premium tax credit allocation claim before the end of the tenth (10th) business day after the date of receipt of notice of allocation, the CAPCO shall notify the ADO by overnight common carrier delivery service and that portion of capital allocated to the certified investor in that program shall be forfeited. The ADO shall reallocate the forfeited capital among the certified investors in the other certified capital companies that originally received an allocation in that program so that the result after reallocation is the same as if the initial allocation in the program under the Act had been performed without considering the premium tax credit allocation claims that were subsequently forfeited.

(24) In any case under the Act or another law of the State of Alabama in which the assets of a certified investor are examined or considered, the certified capital may be treated as an admitted asset, subject to the applicable statutory valuation procedures.

(25) A certified investor is not required to reduce the amount of premium tax included by the investor in connection with rate making for any insurance contract written in the State of Alabama because of a reduction in the investor's Alabama premium tax derived from the credit granted under the Act.

(26) Within thirty (30) days after the final allocation of all premium tax credits with respect to program one or program two, the ADO will notify the Alabama Department of Insurance of the allocation of premium tax credit to each certified investor with respect to such program. Each CAPCO receiving an allocation shall cooperate with the ADO in making such notification.

F. Neal Wade

Ala. Admin. Code r. 281-2-1-.08

New Rule: Filed July 25, 2003; effective August 29, 2003. Amended: Filed February 6, 2008; effective March 12, 2008.

Statutory Authority:Code of Ala. 1975, as amended; Act 2002-429.