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Kentucky Department of Revenue Adopts Emergency Regulation for New Markets Development Program

By Erica Horn and Stephen Sherman

The General Assembly in 2014 HB 445, amended the New Markets Development Program (“NMDP”) for taxable years beginning on or after January 1, 2014. The Kentucky Department of Revenue has issued an emergency rule, 103 KAR 15:180E, in order to conform to the amendments and to provide community development entities with the forms and procedures necessary to apply for and administer the NMDP tax credits. Very few changes were made to the existing regulation 103 KAR 15:180, with the majority being non-substantive.

The regulation now specifies that in applying for the NMDP, an applicant must also pay a refundable performance fee. The performance fee is equal to one-half of one percent (0.5%) of the amount of the equity investment or long-term debt security requested to be certified as a qualified equity investment. The performance fee may not to exceed five hundred thousand dollars ($500,000).

The regulation further incorporates by reference updated forms for the application and

administration of the NMDP. The following Revenue Forms have been updated by the Department effective May 2014:

  • Revenue Form 41A720-S80, Application for Certification of Qualified Equity Investments Eligible for Kentucky New Markets Development Program Tax Credit
  • Revenue Form 41A720-S81, Notice of Kentucky New Markets Development Program Tax Credit and Certification
  • Revenue Form 41A720-S82, Notice of Kentucky New Markets Development Program Tax Credit Recapture

The emergency regulation became effective June 5, 2014. A permanent regulation is pending.