As used in this part:

1. (1) “Applicable percentage” means:

   1. (A) Zero percent (0%) for the first two (2) credit allowance dates;
   2. (B) Twelve percent (12%) for the third, fourth, and fifth credit allowance dates; and
   3. (C) Eleven percent (11%) for the sixth and seventh credit allowance dates;
2. (2) “Commission” means the Arkansas Economic Development Commission;

3. (3) “Credit allowance date” means, with respect to a qualified equity investment:

   1. (A) The date on which the qualified equity investment is initially made; and
   2. (B) Each of the subsequent six (6) anniversary dates of the date on which the qualified equity investment was initially made;

4. (4)

   1. (A) “Cure period” means the six-month period prior to enforcement of recapture provisions under Arkansas Code § 15-4-3607 in which qualified community development entities may correct noncompliance issues identified in writing by the Arkansas Economic Development Commission.
   2. (B) The cure period commences on the date of the Arkansas Economic Development Commission notice of noncompliance;

5. (5)

   1. (A) “Eligible businesses” means nonretail businesses engaged in commerce for profit which are classified in one (1) of the categories listed in subdivision (5)(B) of this section below.

   2. (B) Businesses not classified in any of the following categories are deemed ineligible:

      1. (i)

         1. (a) (a) Manufacturers classified in sectors 31-33 in the North American Industry Classification System (NAICS), as in effect January 1, 2007.
         2. (b) (b) Manufacturers classified in sectors 20-39 according to the Standard Industrial Classification (SIC) standards but which are classified under NAICS in another sector;

      2. (ii) Businesses primarily engaged in:

         1. (a) (a) The design and development of prepackaged software;
         2. (b) (b) Digital content production and preservation;
      3. (c) (c) Computer processing and data preparation services; or
      4. (d) (d) Information retrieval services;
      5. (iii) Businesses primarily engaged in motion picture productions;
      6. (iv) A distribution center or intermodal facility;
      7. (v) An office sector business;
      8. (vi) A national or regional corporate headquarters, North American Industry Classification System (NAICS) Code 551114, as in effect January 1, 2007;
      9. (vii) Firms primarily engaged in commercial, physical, and biological research as classified in the North American Industry Classification System (NAICS) code 541710, as in effect January 1, 2007;
      10. (viii) Scientific and technical services business; and
      11. (ix) A nonretail business may be classified as an eligible business by the Arkansas Economic Development Commission if the Director of the Arkansas Economic Development Commission determines that the proposed qualified low-income community investment will have a positive impact on the community;
6. (6) “Letter ruling” means a written interpretation of law to a specific set of facts provided by an applicant requesting the written interpretation from the Arkansas Economic Development Commission;
7. (7) “Long-term debt security” means a debt instrument issued by a qualified community development entity, at par value or a premium, with an original maturity date of at least seven (7) years from the date of its issuance without acceleration of repayment, amortization, or prepayment features before its original maturity date;

8. (8)

   1. (A) “New full-time permanent employee” means a job or position that was created pursuant to the qualified low-income community investment and that is filled by one (1) or more employees who:

      1. (i) Are or will be Arkansas taxpayers; and

      2. (ii)

         1. (a) (a) Work at the qualified active low-income community business premises.
         2. (b) (b) New employees who do not work at the premises may be counted as new full-time permanent employees if they:
9. (1) (1) Otherwise meet the definition of “new full-time permanent employee”; and

10. (2) (2) Are subject to the Arkansas Income Tax Withholding Act of 1965, Arkansas Code § 26-51-901 et seq.

    1. (B) The position or job held by the employee or employees shall have been filled for at least twenty-six (26) consecutive weeks with an average of at least thirty (30) hours per week each tax year during the duration of the investment.
    2. (C) Retained jobs or positions may not be considered new full-time permanent employees unless they meet the definition of “retained job or position” herein.
    3. (D) A contractual employee may qualify as a new full-time permanent employee only when offered a benefits package comparable to a direct employee of the business.

    4. (E) Self-employed contractors hired by qualified active low-income community businesses to provide professional services may qualify as full-time permanent employees if they:

       1. (i) Were Arkansas taxpayers during the year in which the tax credits were earned; and
       2. (ii) Worked a minimum of one thousand forty (1,040) hours for the qualified active low-income community business in the tax year in which the tax credits were earned;
11. (9) “New Markets Performance Guarantee Fund” means a miscellaneous fund on the books of the Treasurer of State, the Auditor of State, and the Chief Fiscal Officer of the State consisting of fees paid under Arkansas Code § 15-4-3609, grants made by a person, organization, or federal or state government agency, and any other funds provided by law to be used by the Arkansas Economic Development Commission to guarantee qualified community development entities’ performance under the New Markets Jobs Act of 2013, Arkansas Code § 15-4-3601 et seq.;
12. (10) “Purchase price” means the amount paid to the issuer of a qualified equity investment for a qualified equity investment;

13. (11)

    1. (A) “Qualified active low-income community business” means the same as defined in 26 U.S.C. § 45D and 26 C.F.R. § 1.45D-1, as they existed on January 1, 2013, if:

       1. (i) At the time of the qualified community development entity's investment in or loan to the corporation, limited liability company, association, partnership, or other business entity, the corporation, limited liability company, association, partnership, or other business entity meets the United States Small Business Administration size eligibility standards established in 13 C.F.R. § 121.101-201, as it existed on January 1, 2013; and

       2. (ii)

          1. (a) (a) The corporation, limited liability company, association, partnership, or other business entity agrees to retain or create jobs that pay an average wage of at least one hundred fifteen percent (115%) of the federal poverty income guidelines for a family of four (4).
          2. (b) (b) The Arkansas Economic Development Commission may waive this requirement if it determines that an investment in the proposed qualified active low-income community business will have a positive impact on the community.
    2. (B) A corporation, limited liability company, association, partnership, or other business entity will be considered a qualified active low-income community business for the duration of the qualified community development entity's investment in or loan to the corporation, limited liability company, association, partnership, or other business entity if the relevant qualified community development entity reasonably expects, at the time it makes an investment or loan, that the corporation, limited liability company, association, partnership, or other business entity will continue to satisfy the requirements for being a qualified active low-income community business other than the requirements stated in Arkansas Code § 15-4-3602(6)(A)(i) throughout the entire period of the investment or loan.

    3. (C) Qualified active low-income community business does not include the following:

       1. (i)

          1. (a) (a) A corporation, limited liability company, association, partnership, or other business entity that is the beneficiary of an incentive under Arkansas Code § 15-4-2705, § 15-4-2706(b), or § 15-4-2706(c)(2).
          2. (b) (b) The Arkansas Economic Development Commission may waive this requirement if it determines that an investment in the proposed active qualified low-income community business will have a positive impact on the community;

       2. (ii)

          1. (a) (a) Any industry excluded under a rule of the Arkansas Economic Development Commission.
          2. (b) (b) The Arkansas Economic Development Commission may waive this requirement if it determines that an investment in the proposed active qualified low-income community business will have a positive impact on the community; or

       3. (iii)

          1. (a) (a) A corporation, limited liability company, association, partnership, or other business entity that derives or projects to derive at least fifteen percent (15%) of its annual revenue from the rental or sale of real estate.
          2. (b) (b) However, this restriction does not apply to a corporation, limited liability company, association, partnership, or other business entity that is controlled by or under common control with another corporation, limited liability company, association, partnership, or other business entity that:
14. (1) (1) Does not derive or project to derive at least fifteen percent (15%) of its annual revenue from the rental or sale of real estate; and
15. (2) (2) Is the primary tenant of the real estate leased from the corporation, limited liability company, association, partnership, or other business entity;

16. (12)

    1. (A) “Qualified community development entity” means the same as defined in 26 U.S.C. § 45D, as it existed on January 1, 2013, if the corporation, limited liability company, association, partnership, or other business entity has entered into, for the current year or any prior year, an allocation agreement with the Community Development Financial Institutions Fund of the United States Department of the Treasury with respect to credits authorized under 26 U.S.C. § 45D that includes Arkansas within the service area stated in the allocation agreement.
    2. (B) “Qualified community development entity” includes a qualified community development entity that is controlled by or under common control with a qualified community development entity;

17. (13)

    1. (A) “Qualified equity investment” means an equity investment in or a long-term debt security issued by a qualified community development entity that:

       1. (i) Is acquired after April 22, 2013, at its original issue solely in exchange for cash;
       2. (ii) Has at least eighty-five percent (85%) of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in Arkansas by the first anniversary of the initial credit allowance date; and
       3. (iii) Is designated by the issuer as a qualified equity investment under this definition and is certified by the Arkansas Economic Development Commission as not exceeding the limitation stated in Arkansas Code § 15-4-3605(d).
    2. (B) “Qualified equity investment” includes an investment that was not acquired after April 22, 2013, at its original issue solely in exchange for cash if the investment was a qualified equity investment in the hands of a previous holder;
18. (14) “Qualified low-income community investment” means a capital or equity investment in or loan to a qualified active low-income community business;

19. (15) “Retained job or position” means:

    1. (A) An employee hired by qualified active low-income community businesses prior to receiving capital or equity investments from qualified community development entities certified by the Arkansas Economic Development Commission that their proposed equity investment is eligible for a new market tax credit subject to any limitations defined by Arkansas Code § 15-4-3605(d);

    2. (B) For the purpose of revenue impact assessments and reviews, a retained job or position may be counted as a new full-time permanent employee only if:

       1. (i) The retained job or position is within a business that has been in existence in Arkansas for at least two (2) years and has:

          1. (a) (a) Sustained a net loss during the one-year or two-year period prior to the qualified investment of at least twenty percent (20%) of the business’ net worth; or
          2. (b) (b) Violated primary commercial bank loan covenants and has been notified that continued access to credit from such bank has or will be discontinued;
       2. (ii) The retained job or position would have been transferred out-of-state, as evidenced by a written offer and acceptance of relocation assistance from an economic development agency from another state; or
       3. (iii) The Director of the Arkansas Economic Development Commission determines that the potential job loss will significantly affect the local economy, as documented by any additional data requested by the Director of the Arkansas Economic Development Commission to supplement the revenue impact assessment; and

    3. (C)

       1. (i) Retained jobs or positions may account for no more than fifty percent (50%) of all jobs in any revenue impact assessment.
       2. (ii) However, the Arkansas Economic Development Commission may waive this requirement if it determines that an investment in the proposed active qualified low-income community business will have a positive impact on the community;

20. (16)

    1. (A) “Revenue impact assessment” means an economic analysis prepared by a nationally recognized, third-party independent economic forecasting firm utilizing the Regional Economics Models, Inc., or MIG, Inc., model that demonstrates that, over a ten-year period, the qualified low-income community investment will have a revenue positive impact on the state given aggregate utilization of new market tax credits.

    2. (B) Revenue impact assessments shall:

       1. (i) Not include any retained job or position that does not meet the definition of “retained job or position” defined herein;
       2. (ii) Be prepared for all initial qualified low-income community investments made by a QCDE; and
       3. (iii) Only be prepared for reinvestments whenever initial job creation and retention projections were not met as reported on the QCDE’s immediately-preceding annual report or a report containing substitute information and certified by an executive officer of the QCDE; and

21. (17) “State premium tax liability” means:

    1. (A) Tax liability incurred by a corporation, limited liability company, association, partnership, or other business entity under Arkansas Code §§ 23-63-102 and 26-57-601 – 26-57-605, excluding any liability for taxes on a health insurance premium; or
    2. (B) If the state premium tax liability identified above is eliminated or reduced, any tax liability imposed on an insurance company or other person that had premium tax liability under the laws of the state.

Codification Notes: "QCDE" means qualified community development entity.