If investors put money into a North Carolina business in November or December 1993 and the Secretary of State registered the business as a Qualified Business Venture later in December, did the investors qualify for the state Qualified Business Venture investment tax credit?
Plain-English summary
Richardson Sports Limited Partnership (the ownership entity for the new NFL Carolina Panthers franchise being formed at the time) applied to be registered as a Qualified Business Venture (QBV) under NC's small-business investment tax credit regime. The partnership filed its application on November 24, 1993, the Secretary of State received it December 22, 1993, and registered the partnership the same day. Partner investments had gone into an escrow account in November 1993 and were actually invested into the business on December 2, 1993.
The Secretary of State's office asked the AG whether those investments qualified for the tax credit under N.C.G.S. § 105-163.011, given that the partnership wasn't formally registered as a QBV until later in December (after the investments had already flowed from escrow). Chief Counsel John R. McArthur, with Chief Deputy AG Andrew A. Vanore, Jr., concluded that they did.
The opinion walked through some shifting prior guidance. A 1987 informal opinion (Laton to Massey) had said a business must be certified by the Securities Division before an investment in it qualified. A 1991 informal memo (Boylan to Hodges at NC Revenue) said the timing was looser: SOS approval at any point during the calendar year of investment qualified the investment for next-year's credit. Boylan briefly withdrew that memo because of the 1987 letter, but in this 1994 opinion the AG's office formally adopted the Boylan reading as official policy.
The reasoning rested on the annual accounting cycle of the income tax. The QBV credit was structured so that it could not be claimed in the year of the investment, only the year after. That timing made an in-pari-materia case for treating the year-of-investment registration window as sufficient. The AG framed strict prospectivity (investment must follow registration) as inconsistent with that annual-accounting design.
Critically, the AG flagged that the rule was about to change. Effective January 1, 1994, the General Assembly added N.C.G.S. § 105-163.013(b)(6), providing that "[t]he effective date of registration for a qualified business venture whose application is accepted for registration is the filing date of its application. No credit is allowed under this Division for an investment made before the effective date of the registration or after the registration is revoked." So for the 1993 tax year, the Boylan rule applied; for 1994 and after, the stricter rule applied.
Currency note
This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Qualified Business Venture tax credit framework in N.C.G.S. § 105-163.010 et seq. has been amended numerous times since 1994, including changes to per-investor caps, qualifying business definitions, and ultimately the sunset/repeal of the broader investment tax credit. A current question about NC angel-investor or QBV-style credits should be analyzed against the current statute and current Department of Revenue guidance, not against this opinion.
Background and statutory framework
NC created the Qualified Business Venture investment tax credit in the late 1980s to encourage in-state equity investment in small, high-growth businesses. The mechanics combined two state agencies: the Secretary of State's Securities Division registered eligible businesses as QBVs after reviewing application materials; the Department of Revenue administered the credit on individual and corporate returns. Eligible investors received a tax credit on their NC income tax return for qualifying investments in QBV-registered businesses.
The QBV credit had a deliberate one-year lag: investors could not claim the credit in the year they invested, only in the year that began after the calendar year of investment. The structure encouraged investors to hold through the registration and qualification process before claiming the benefit, and gave Revenue time to confirm the QBV status of the recipient business.
The Richardson Sports situation tested a timing edge case: investments routed through escrow before registration, finalized after escrow release but before the same calendar year's QBV registration. Under the loose "any time during the year" Boylan rule, those investments qualified. Under the strict "must invest after the registration" rule, they would not. The AG's 1994 opinion confirmed the loose rule for pre-1994 investments and signaled the strict rule for 1994 and after.
Common questions
Why was a 1994 opinion looking at a 1993 investment?
The QBV credit could not be claimed in the year of the investment. Richardson Sports investors would have been claiming the credit on their 1994 tax returns (filed in 1995) for their 1993 investments. The Secretary of State needed to know in early 1994 whether to support those credit claims, hence the January 5, 1994 opinion.
Did this opinion grandfather investors who relied on the looser rule?
Yes, in effect. The AG officially adopted the Boylan interpretation for investments made through December 31, 1993. The new § 105-163.013(b)(6) only kicked in on January 1, 1994, so 1993 investors retained the benefit of the more permissive timing.
What happened to Richardson Sports?
Richardson Sports Limited Partnership owned the Carolina Panthers, the NFL expansion franchise awarded to Charlotte in October 1993. The partnership structure was used in part to assemble investor capital under the QBV framework. The franchise began play in 1995 and has gone through several ownership transitions since.
Is this credit still on the books?
NC's investment-credit framework has been substantially restructured. The QBV credit specifically and related state angel-investor incentives have been amended, capped, and (for portions of the regime) sunsetted. A modern investor in a NC small business should check whether any current credit applies under the present statute.
Source
- Landing page: https://ncdoj.gov/opinions/richardson-sports-limited-partnership-qualifiedbusiness-venture-credit/
Citations
- N.C. Gen. Stat. § 105-163.010 et seq.
- N.C. Gen. Stat. § 105-163.011
- N.C. Gen. Stat. § 105-163.013
- N.C. Gen. Stat. § 105-163.013(b)(6) (effective 1994-01-01)
- 1993 Sess. Laws c. 443
Original opinion text
January 5, 1994
Mr. David S. Massey
General Counsel
Department of the Secretary of State
300 N. Salisbury Street
Raleigh, North Carolina 27603-5909
Re: Advisory Opinion; Richardson Sports Limited Partnership; Qualified business venture credit; Division V of Chapter 105 of the General Statutes; N.C.G.S. 105-163.010, et. seq.
Dear Mr. Massey:
Richardson Sports Limited Partnership recently filed an application with the Department of the Secretary of State to register as a Qualified Business Venture in order that the partners might claim a tax credit pursuant to N.C.G.S. 105-163.011. This application was dated 24 November 1993 and was received in the Office of the Secretary of State on 22 December 1993. The Securities Division of the Department of the Secretary of State registered Richardson Sports Limited Partnership as a Qualified Business Venture on 22 December 1993. The partners originally put their investment into an escrow account in the month of November, 1993, although these funds were actually invested into the business from the escrow account on 2 December 1993. You ask our advice whether these investments would qualify for the tax credit allowed in N.C.G.S. 105-163.011.
For reasons which follow, it is our opinion that the partnership is eligible to claim a tax credit.
Pursuant to N.C.G.S. 105-163.011, on or after January, 1988, a taxpayer may make an investment qualifying for the income tax credit. The tax credit is to be taken the year following the investment in a Qualified Business Venture. "The credit may not be taken for the year in which the investment is made but shall be taken for the taxable year beginning during the calendar year following the calendar year in which the investment was made." N.C.G.S. 105-163.011(a) [for the corporate taxpayer] and (b) [for the individual taxpayer]. "To be eligible for the tax credit … the taxpayer must file an application for the credit with the Secretary of Revenue on or before April 15 of the year following the calendar year in which the investment was made." N.C.G.S. 105-163.011(c).
By informal opinion dated 6 October 1987, our office advised you "that a business must be certified by the Securities Division of the Office of the Secretary of State pursuant to N.C. Gen. Stat. § 105-163.094 (now § 105-163.013) before an investment in such a business will qualify for the investment tax credit of N.C. Gen. Stat. § 105-163.092 (now § 105-163.011)." See, letter dated 6 October 1987 addressed to David S. Massey and signed by Donald W. Laton, Associate Attorney General, copy attached.
By informal memorandum dated 24 June 1991 addressed to Michael S. Hodges, Director of the Individual Income Tax Division of the North Carolina Department of Revenue, Special Deputy Attorney General George W. Boylan advised that "it appears that approval by the Secretary of State any time during the year in which the investment is made will entitle a taxpayer to claim the investment credit upon his next year's return." See, memorandum dated 24 June 1991 addressed to Michael S. Hodges from Special Deputy Attorney General George W. Boylan, copy attached. In reaching this conclusion, Mr. Boylan reasoned, "I do not believe that strict prospectivity (the investment credit could only be claimed where the investment occurred after the Secretary of State had approved the investment organization as a Qualified Business Venture) meshes with the annual accounting nature of the income tax and the few existing references to timeliness within these (N.C.G.S. 105-163.010 through 163.014) provisions. The credit may not be taken 'for the year in which the investment is made,' but must be claimed in the next calendar year." By memorandum dated 13 September 1991, Mr. Boylan advised Mr. Hodges that the 24 June 1991 informal memorandum was withdrawn because "the question posed by you was previously answered in a letter opinion to David Massey, dated 6 October 1987." See, memorandum dated 13 September 1991 addressed to Michael S. Hodges from Special Deputy Attorney General George W. Boylan, copy attached.
Today, after careful review and in accordance with the written opinion policy adopted shortly after Attorney General Easley assumed office, we officially adopt as the position of this office the conclusion reached in the 24 June 1991 Boylan to Hodges memorandum — "that approval by the Secretary of State at any time during the year in which the investment is made will entitle a taxpayer to claim the investment credit upon his next year's return."
This conclusion is based upon the pertinent laws in effect through 31 December 1993. Effective 1 January 1994, for the first time the General Assembly specified that for an investment to be eligible for the tax credit, the investment must be made on or after the application to qualify as a Qualified Business Venture is filed with the Secretary of State. "The effective date of registration for a qualified business venture whose application is accepted for registration is the filing date of its application. No credit is allowed under this Division for an investment made before the effective date of the registration or after the registration is revoked." N.C.G.S. 105-163.013(b)(6), which became effective 1 January 1994. See, Chapter 443, 1993 Session Laws.
Should you have any questions, please advise.
John R. McArthur
Chief Counsel
Andrew A. Vanore, Jr.
Chief Deputy Attorney General