§ 105-163.014. (Repealed for investments made on or after January 1, 2011) Forfeiture of credit. - North Carolina Statutes

§ 105‑163.014. (Repealed for investments made on or after January 1, 2011) Forfeiture ofcredit.

(a)        Participation inBusiness. – A taxpayer who has received a credit under this Part for aninvestment in a qualified business forfeits the credit if, within three yearsafter the investment was made, the taxpayer participates in the operation ofthe qualified business. For the purpose of this section, a taxpayerparticipates in the operation of a qualified business if the taxpayer, thetaxpayer's spouse, parent, sibling, or child, or an employee of any of theseindividuals or of a business controlled by any of these individuals, providesservices of any nature to the qualified business for compensation, whether asan employee, a contractor, or otherwise. However, a person who providesservices to a qualified business, whether as an officer, a member of the boardof directors, or otherwise does not participate in its operation if the personreceives as compensation only reasonable reimbursement of expenses incurred inproviding the services, participation in a stock option or stock bonus plan, orboth.

(b)        False Application.– A taxpayer who has received a credit under this Part for an investment in aqualified business forfeits the credit if the registration of the qualifiedbusiness is revoked because information in the registration application wasfalse at the time the application was filed with the Secretary of State.

(c)        Repealed by SessionLaws 1996, Second Extra Session, c. 14, s. 7.

(d)        Transfer or Redemptionof Investment. – A taxpayer who has received a credit under this Part for aninvestment in a qualified business forfeits the credit in the following cases:

(1)        Within one yearafter the investment was made, the taxpayer transfers any of the securities receivedin the investment that qualified for the tax credit to another person orentity, other than in a transfer resulting from one of the following:

a.         The death of thetaxpayer.

b.         A final distributionin liquidation to the owners of a taxpayer that is a corporation or otherentity.

c.         A merger,conversion, consolidation, or similar transaction requiring approval by theowners of the qualified business under applicable State law, to the extent thetaxpayer does not receive cash or tangible property in the merger, conversion,consolidation, or other similar transaction.

(2)        Except as providedin subsection (d1) of this section, within five years after the investment wasmade, the qualified business in which the investment was made makes aredemption with respect to the securities received in the investment.

In the event the taxpayertransfers fewer than all the securities in a manner that would result in aforfeiture, the amount of the credit that is forfeited is the product obtainedby multiplying the aggregate credit attributable to the investment by afraction whose numerator equals the number of securities transferred and whosedenominator equals the number of securities received on account of theinvestment to which the credit was attributable. In addition, if the redemptionamount is less than the amount invested by the taxpayer in the securities towhich the redemption is attributable, the amount of the credit that isforfeited is further reduced by multiplying it by a fraction whose numeratorequals the redemption amount and whose denominator equals the aggregate amountinvested by the taxpayer in the securities involved in the redemption. The term"redemption amount" means all amounts paid that are treated as adistribution in part or full payment in exchange for securities under section302(a) of the Code.

(d1)      Certain RedemptionsAllowed. – Forfeiture of a credit does not occur under this section if aqualified business venture that engages primarily in motion picture filmproduction makes a redemption with respect to securities received in aninvestment and the following conditions are met:

(1)        The redemptionoccurred because the qualified business venture completed production of a film,sold the film, and was liquidated.

(2)        Neither thequalified business venture nor a related person continues to engage in businesswith respect to the film produced by the qualified business venture.

(e)        Effect ofForfeiture. – A taxpayer who forfeits a credit under this section is liable forall past taxes avoided as a result of the credit plus interest at the rateestablished under G.S. 105‑241.21, computed from the date the taxes wouldhave been due if the credit had not been allowed. The past taxes and interestare due 30 days after the date the credit is forfeited; a taxpayer who fails topay the past taxes and interest by the due date is subject to the penaltiesprovided in G.S. 105‑236. (1987, c. 852, s. 1; 1991, c. 637, s. 5; 1993, c. 443,s. 5; 1996, 2nd Ex. Sess., c. 14, s. 7; 1998‑98, s. 69; 1998‑212,ss. 29A.15(a), 29A.16(a), (b); 1999‑369, s. 5.8; 2003‑414, s. 6;2007‑491, s. 44(1)a.)