Section 41-9-219.4 Recapture of Tax Credit; Notice

(a) The Department of Revenue shall recapture, from the taxpayer that claimed or is entitled to claim the credit on a return, the tax credit allowed under this article if, at any time during the seven-year period beginning on the date of the original issue to the qualified equity investment in a qualified community development entity, one of the following occurs: (1) Where any amount of the federal tax credit available with respect to a qualified equity investment that is eligible for a tax credit under this article is recaptured under Section 45D of the Internal Revenue Code of 1986, as amended, the Department of Revenue’s recapture shall be proportionate to the federal recapture with respect to that qualified equity investment, and may then reallocate the recaptured credits to other qualified taxpayers in the year of recapture, without regard for the annual allocation limitation found in Section 41-9-219.2. (2) The Department of Revenue shall recapture any allocated tax credit where the issuer fails to invest at least 85 percent of the purchase price of the qualified equity investment in qualified low-income community investments in the State of Alabama within 12 months of the issuance of the qualified equity investment and fails to maintain such level of investment in qualified low-income community investments in Alabama until the last credit allowance date for the qualified equity investment. An investment shall be considered held by an issuer even if the investment has been sold or repaid; provided that the issuer reinvests an amount equal to the capital returned to or recovered by the issuer from the original investment, exclusive of any profits realized, in another qualified low-income community investment in this state within 12 months of the receipt of that capital. An issuer shall not be required to reinvest capital returned from low-income community investments after the sixth anniversary of the issuance of the qualified equity investment, the proceeds of which were used to make the qualified low-income community investment, and the qualified low-income community investment shall be considered held by the issuer through the seventh anniversary of the qualified equity investment’s issuance. (3) Subject to the reinvestment provisions to avoid recapture in subdivision (2), the issuer shall redeem or make principal repayment with respect to a qualified equity investment prior to the seventh anniversary of the issuance of such qualified equity investment. The department’s recapture shall be proportionate to the amount of the redemption or repayment with respect to such qualified equity investment. (b) The Department of Revenue shall provide notice in accordance with the procedures outlined in Section 40-2A-7, to the qualified community development entity of any proposed preliminary assessment of recapture of tax credits pursuant to this article. The entity shall have 90 days to cure any deficiency indicated in the Department of Revenue’s preliminary assessment and avoid recapture. If the entity fails or is unable to cure the deficiency within the 90-day period, the Department of Revenue shall provide the entity and the taxpayer from whom the credit is to be recaptured with a final assessment of recapture in accordance with the procedures stated in Section 40-2A-7. Any tax credit for which a final assessment has been issued may be recaptured by the Department of Revenue from the taxpayer who claimed the tax credit on a tax return in accordance with the Taxpayers’ Bill of Rights and the Uniform Revenue Procedures contained in Chapter 2A of Title 40.