ZONE CAPITAL CREDIT

The Tax law regarding franchise taxes and personal income tax was amended, for tax years beginning on or after January 1, 1994, to allow the EZ Capital Credit for qualified investments or contributions to an EZ capital corporation, qualified investments in certified zone businesses and contributions of money to cer1ain community development projects. The new EZ capital tax credit is 25% of the following investments and contributions certified by the commissioner of Economic Development:

1. Qualified investments made in, or contributions in the form of donations made to, one or more EZ capital corporations.
2. Qualified investments in certified EZ businesses that during the 12-month period immediately preceding the month in which the investments were made, employed full time within the state an average number of individuals (excluding general executive officers) of 250 or fewer, computed the same as for the Wage Tax Credit. However, investments made by or on behalf of an owner of the business, including, but not limited to a stockholder, partner, or sole proprietor, or any related person, as defined in IRC 465(b)(3)(C) are not qualified investments.
3. Contributions of money to community development projects as defined by regulations promulgated by the commissioner of Economic Development.

Qualified investment means:

1. The contribution of property to a corporation for original issue capital stock or other ownership interest.
2. The contribution of property to a partnership for a partnership interest.
3. The contribution of property to any other type of business entity for an ownership interest.

The total amount of credit allowable to a taxpayer for all years, taken in the aggregate, may not exceed $300,000, and may not exceed $100,000 for the investments and contributions described in each of 1, 2, and 3 above. For franchise tax, the credit or carryover of the credit may not reduce the tax to an amount less than (1) the tax due on the minimum taxable income base or the fixed dollar minimum, whichever is higher for business corporations; (2) the alternative minimum tax for banking corporations; (3) the fixed dollar minimum for insurance corporations. For personal income tax, the credit or carryover of the credit may not exceed the tax imposed pursuant to section 601, less the household credit, the credit for certain household and dependent care services necessary for gainful employment, the credit for income tax paid to another state, and the credit for a resident or nonresident trust beneficiary receiving an accumulation distribution. Any amount of unused credit may be carried forward to the following year or years. However, the amount of credit or carryover of the credit, deducted from the tax otherwise due, may not in the aggregate exceed 500/0 of the taxes imposed under: (1) the franchise taxes (the 500/0 of the tax imposed on insurance corporations is subject to the limitation of section 1505); or (2) the personal income tax (with the tax being computed without regarding to any credit provided by franchise tax or personal income tax provisions).