Under revised Louisiana Revenue Ruling 08-011, who earned, allocated, transferred, and risked recapture of Louisiana New Markets Tax Credits?

Plain-English summary

Revised Louisiana Revenue Ruling 08-011 answered 14 questions about who qualified for, earned, allocated, transferred, and risked recapture of Louisiana New Markets Tax Credits. It superseded the original October 21, 2008 version and incorporated provisions from two later legislative sessions.

The revised ruling changed an important timing position: credits were earned on each applicable credit allowance date, rather than all being earned on the initial investment date. A footnote preserved earlier private letter rulings that had relied on the original position.

Federal qualification and the holder rule

Louisiana's program piggybacked on the federal New Markets Tax Credit. A qualified equity investment, qualified low-income community investment, qualified low-income community business, and qualified business used the federal Section 45D meanings. An investment did not qualify for Louisiana unless it was designated and eligible as a federal QEI for the same amount.

The person holding a QEI on a credit allowance date could claim the Louisiana credit earned on that date. For post-July 1, 2007 QEIs, the allowance dates were the initial investment date and its first two anniversaries; pre-July 2007 QEIs used the initial date and six anniversaries.

LLC allocations and transfers

Louisiana followed an LLC's federal tax classification. An LLC taxed as a partnership passed income, loss, credits, and deductions through under its operating agreement or, without one, by distributive share. Special allocations of State NMTCs in an operating agreement were respected. A federally disregarded single-member LLC was also disregarded for Louisiana purposes, so its sole member earned the credits.

The ruling distinguished three transactions:

• A person owning an interest in the investor on an allowance date could receive credits, subject to the operating agreement then in effect.
• Credits already earned but not claimed or transferred could be transferred to another Louisiana taxpayer under La. R.S. 47:6016(F).
• Rights to credits not yet earned on future allowance dates could be transferred only by transferring an interest in the investor.

The ruling instructed transferors to use New Markets Transfer Form R-10613 and update the original investor's credit summary sheet within 30 days. A later user should verify those historical procedures before relying on them.

It also found no requirement that proceeds from selling a member's investor interest be reinvested in that investor.

When credits were earned and basis effects

The revised ruling said the credit was earned on each allowance date when the person held a QEI that had been invested in a qualified low-income business. The amount earned on that date was the adjusted purchase price multiplied by the applicable statutory percentage.

Federal basis was not itself part of the Louisiana credit computation. But federal basis adjustments could affect Louisiana taxable income because Louisiana income began with federal income and expense items. A federal Section 45D basis reduction did not reduce the availability of the state credits.

Period-specific percentages and caps

QEIs before July 1, 2007

Credits were earned across seven allowance dates: 1% on each of the first three and 2% on each of the last four. The Department could not grant more than $5 million of credits per year.

The pre-2007 adjusted-purchase-price wording required values from the immediately preceding allowance date, which produced a zero-divided-by-zero calculation on the initial date. Treating that as absurd, the Department applied the definition amended by Act 379 of 2008 to earlier credits.

QEIs after July 1, 2007 and before April 1, 2008

The ruling described 10% of the QEI as available on each of the first two allowance dates and 5% on the third. The maximum QLICIs issued by a single business for this period and included in the calculation was $15 million.

The adjusted-purchase-price fraction compared Louisiana QLICIs with total QLICIs. The Department concluded that a later, separate QEI inside or outside Louisiana should not reduce the adjusted purchase price for the specific QEI whose Louisiana credits were being calculated.

QEIs on or after April 1, 2008

For QEIs issued from April 1, 2008 through November 30, 2009, the per-project QEI cap was $5 million, corresponding to $1.25 million in state credits. For QEIs issued on or after December 1, 2009, the per-project QEI cap was $7.5 million.

The program's aggregate credit cap was $50 million: up to $25 million from April through December 2008, up to $12.5 million plus earlier unissued credits from January through November 2009, and the remaining scheduled amount plus earlier unissued credits from December 2009 through December 2010.

The ruling separately described QLICI limits for a single business and its affiliates: $5 million for QEIs from April 1, 2008 through November 30, 2009 and $7.5 million for QEIs on or after December 1, 2009. A $15 million limit applied to QLICIs consistent with Department of Economic Development target industries. Limits from an earlier QEI period did not prevent a business from issuing another QLICI funded from a QEI in a later period.

Recapture and application procedure

For QEIs made after July 1, 2007, the Department read the recapture provision's reference to maintaining Louisiana QLICIs through “all anniversaries” as meaning through the first two anniversaries. It likewise required avoiding federal NMTC recapture through the second anniversary. After that date, the state credits were no longer subject to recapture under La. R.S. 47:6016(G), according to the ruling.

The ruling also said that after January 1, 2009 the Department would no longer accept private letter ruling requests as State NMTC applications. Applications had to go to the Taxpayer Services Division, with Louisiana Economic Development certification or proof of deemed certification before credits would be issued.

What this means for you

Investors, CDEs, and LLC members

Separate ownership, allocation, transfer, and earning-date questions. The ruling treated an operating-agreement allocation differently from selling an earned credit or transferring rights to a future credit.

Credit purchasers

Confirm that the credit had already been earned and remained unclaimed and untransferred. Future allowance-date rights followed an ownership interest in the investor under this ruling.

Accountants and tax professionals

Do not use the 2009 percentages, project caps, aggregate schedule, form number, recapture period, or application channel without checking current law and current Department instructions.

Common questions

Q: Did federal qualification control Louisiana qualification?

A: Yes. The investment had to qualify and be designated for the same amount under federal Section 45D.

Q: When did the revised ruling say credits were earned?

A: On each applicable credit allowance date, not entirely on the initial investment date.

Q: Could an LLC specially allocate credits?

A: Yes. The ruling respected allocations stated in the operating agreement.

Q: Could future credits be sold directly?

A: No. The right to credits not yet earned could be transferred only through an interest in the investor.

Q: How long did post-July 2007 state recapture exposure last under the ruling?

A: Through the second anniversary of the initial QEI date.

Q: Did this version replace the original RR 08-011?

A: Yes. Its historical note expressly says it superseded the October 21, 2008 version.

Citations and references

• La. R.S. 47:6016(B)(1)-(4) — adjusted purchase price, percentages, allowance dates, federal definitions, and project limits
• La. R.S. 47:6016(C) — QEI holder's right to claim
• La. R.S. 47:6016(E) — allocation schedule and aggregate program cap
• La. R.S. 47:6016(F) — transfer of unused credits
• La. R.S. 47:6016(G) — recapture conditions
• La. R.S. 47:204 — partnership flow-through items and allocations
• 26 U.S.C. section 45D — federal New Markets Tax Credit
• Treas. Reg. section 301.7701-3 — entity classification
• Louisiana Civil Code article 9; Richard v. Hall, 874 So. 2d 131 (La. 2004); SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So. 2d 294 (La. 2001) — absurd-results analysis
• Act 379 of the 2008 Regular Session — adjusted-purchase-price amendment applied by the ruling
• Act 4 of the 2008 Second Extraordinary Session and Act 463 of the 2009 Regular Session — amendments incorporated into this revised ruling
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 08-011

Original ruling text

Historical Note: The original version of this Revenue Ruling was published October 21, 2008. This
revenue ruling has been amended to include provisions from Act 4 of the 2008 Second Extraordinary
Session and Act 463 of the 2009 Regular Session. This Revenue Ruling supersedes the original version
published October 21, 2008.

Revenue Ruling
No. 08-011
October 8, 2009
Corporation Income Tax, Corporation Franchise Tax, Individual Income Tax
Frequently Asked Questions Regarding Louisiana New Markets Tax Credits
The purpose of this ruling is to address common issues regarding Louisiana New Markets Tax
Credits. The issues and responses detailed below represent the department’s position and should
serve as guidance to taxpayers applying for and claiming Louisiana New Markets Tax Credits.
The Louisiana New Markets Tax Credit is a credit for persons that have a qualified equity
investment (QEI) in a qualified community development entity (CDE) on a credit allowance
date. Among the requirements for a QEI is that substantially all of the investment must be used
by the CDE to make qualified low-income community investments (QLICI) in Louisiana.
1.

What qualifies as a “qualified equity investment” under La. R.S. 47:6016?

The Louisiana New Markets Tax Credit piggybacks the Federal New Markets Tax Credit
(Federal NMTC). La. R.S. 47:6016(B)(4) provides that the QEI, QLICI, qualified low-income
community business (QALICB) and "qualified business" shall have the same meaning given to
them in Section 45D of the Internal Revenue Code…” and that “[n]o investment shall be
considered a QEI unless it has also been designated as a QEI for the same amount and is eligible
for tax credits according to the provisions of Section 45D of the Internal Revenue Code.”
Therefore, Louisiana’s determination of a QEI and a QLICI is dependent upon the federal
determination and if an investment qualifies as a QEI and QLICI for federal NMTC purposes,
the investment qualifies as a QEI and a QLICI under Louisiana law as well.
2.

Who is entitled to claim the State New Market Tax Credits (State NMTCs)?

La. R.S 47:6016(C) states that any person who holds a QEI on a certain date may claim the State
NMTC. Thus, any person who holds a QEI will be entitled to claim the credits as they are earned
on the initial investment date and subsequent credit allowance dates.
3.

How are the State NMTCs allocated among the members of an LLC?

An LLC is taxed and treated in the same manner for Louisiana income tax purposes as it is taxed
and treated for federal income tax purposes. If an LLC is taxed as a corporation for federal
income tax purposes, then it will be taxed as a corporation for Louisiana income tax purposes. If
an LLC is considered a partnership for federal income tax purposes (the most common situation),
then it is treated as a partnership for Louisiana income tax purposes.

Revenue Ruling 08-011
Page 2 of 10
Furthermore, pursuant to La. R.S. 47:204, items of income, loss, credits and deductions flow
through to partners of a partnership as provided in the operating agreement. In the absence of an
operating agreement, items of income, loss, credits and deductions flow through pursuant to the
partner’s distributive share in the partnership at the end of the partnership’s tax year. If the
partnership’s operating agreement provides for special allocations, they will be permitted for
Louisiana income tax purposes. Therefore, if an LLC is treated as a partnership for income tax
purposes, and such LLC’s operating agreement provides for a special allocation of State NMTCs
to one or more members, State NMTCs will be allocated to such member or members as
provided in the operating agreement and such member or members will be entitled to claim the
credits as they are earned on the initial investment date and subsequent credit allowance dates.
If an LLC is a single member LLC it can elect to be classified as an association or to be
disregarded as an entity separate from its owner. Treas. Reg. § 301.7701-3. If the LLC did not
elect otherwise, it will be a disregarded entity for federal income tax purposes. If the LLC is a
disregarded entity for federal income tax purposes, it will be treated as a disregarded entity for
Louisiana income tax purposes as well. Credits earned by a disregarded entity will be considered
to be earned by the sole member, who will be entitled to claim the credits as they are earned on
the initial investment date and subsequent credit allowance dates.
4.
If new members are admitted to an LLC or if a current member’s interest is
transferred/sold subsequent to the initial credit allowance date, are the new members entitled to
claim State NMTCs?
Any natural or juridical person that owns an interest in an investor in a CDE on a credit
allowance date will be allowed to claim a percentage of credits available to the investor in the
CDE on that date. Credit allowance date means with respect to any QEI the date on which such
investment is initially made and the first two anniversaries of such date and with respect to QEIs
issued prior to July 1, 2007, the date on which the initial investment is made and the first six
anniversaries of such date. La. R.S. 47:6016 (B)(3)
If an operating agreement is in effect at the time of the passing of a credit allowance date, the
credits will flow through as detailed in the operating agreement. For example, if the operating
agreement provides that 100% of the credits will flow through to a member that has a 1% interest
in the LLC or provides that credits shall flow through to the original members which may no
longer be members of the LLC, without regard to federal partnership rules regarding special
allocations, the credits will flow through as detailed in the operating agreement.
5.
May an investor in a CDE or its members transfer/sell to one or more other taxpayers all
or part of the State NMTCs to which it is entitled on each credit allowance date?
La. R.S. 47:6016(F) provides that any tax credits not previously claimed by any taxpayer against
its income or franchise tax may be transferred to another Louisiana taxpayer subject to certain
conditions. If an investor has credits that it has not previously claimed, they may be transferred
as provided in the State NMTC statute and regulations promulgated thereunder.
With regard to credits which have been earned by virtue of the passing of a credit allowance
date, the investor may transfer all or any portion of the credits they are entitled to claim but have
not themselves claimed or transferred.

Revenue Ruling 08-011
Page 3 of 10
With regard to credits which have not been earned yet, but will be earned upon the arrival of
future credit allowance dates, the rights to receive future credits can only be transferred by
transferring an interest in the investor.
When transferring the credits, the transferor should issue to the transferee a New Markets
Transfer Form, R-10613, available on the department’s web page at www.revenue.louisiana.gov.
The transferor/original investor must update their New Markets Tax Credit Summary Sheet,
which will be issued when their application is approved, each time the credit is transferred and
send an updated summary sheet to the Department within 30 days of the sale.
If the transferor is not the original investor, they will not have a Tax Credit Summary Sheet.
They will use the New Markets Transfer Form to notify the department of a sale. The transferee
must submit the New Market Transfer Form with their return to claim the credits.
6.
Must the proceeds from the sale of a member’s interest in an investor, who earned State
NMTCs, be reinvested in that same investor?
No. La. R.S. 47:6016 does not provide that the sales proceeds from the sale of an interest in an
investor, who earned State NMTCs, must be reinvested into that same investor.
7.

When are the State NMTCs earned?

La. R.S. 47:6016 provides that a natural or juridical person that holds a qualified equity
investment which, in turn, has been invested in a qualified low income community investment on
a credit allowance date of such investment which occurs during the taxable year may claim a
credit against the person’s Louisiana income or corporation franchise tax for such taxable year
equal to the applicable percentage of the adjusted purchase price paid to the issuer of such
qualified equity investment which, in turn, has been invested in qualified low-income community
investments for such credit allowance date. The credit allowance date is the date on which such
investment is initially made and the applicable anniversaries of such date as provided in La. R.S.
47:6016 (B)(3). Hence, the credit is earned on each credit allowance date that a person holds a
qualified equity investment which in turn has been has been invested in a qualified low income
business. 1 The amount of the credit earned on each credit allowance date is equal to the product
of the multiplying adjusted purchase price by the applicable percentage as provided in La. R.S.
47:6016 (B)(2).

8. Must the holder of the State NMTCs reduce its basis in the investment in a manner
   similar to the basis reduction required for federal credits by 26 USC §45D(h)?
   Basis is not a factor in computing Louisiana income tax liability. However, Louisiana income tax
   liability does begin with federal items of income and expense. To the extent that the basis
   reduction provided for in 26 USC 45(h) impacts the investor’s federal items of income and
   expense, this impact will affect the investor’s Louisiana income as well. Nevertheless, the basis
   reduction provided for in 26 USC 45(h) will not affect the availability of State NMTCs.

1

As of the date of this publication, the department’s position has changed regarding the date the State NMTCs are
earned. Private Letter Rulings that reference the department’s position described in the original version of this
Revenue Ruling are not superseded by this ruling.

Revenue Ruling 08-011
Page 4 of 10
9.

Applicable provisions and treatment for QEIs made prior to July 1, 2007:

State NMTCs are earned on the initial credit allowance dates and six subsequent credit allowance
dates. On the first three credit allowance dates, 1% of the credits earned are allowed. On the last
four credit allowance dates, 2% of the credits earned are allowed. The department is prohibited
from granting more than five million dollars of credits per year.
La. R.S 47:6016(B) also provides for the calculation of the adjusted purchase by stating:
The adjusted purchase price shall mean the product of:
(a) The amount paid to the issuer of the qualified equity investment for such
qualified equity investment and which, in turn, has been invested in qualified lowincome community investments.
(b) A fraction, the numerator of which is the dollar amount of qualified lowincome community investments held by the issuer of the qualified equity
investments in the state determined as of the immediately preceding credit
allowance date, and the denominator of which is the total dollar amount of
qualified low-income community investments made by the issuer determined as
of the immediate preceding credit allowance date.
To apply the statute in calculating the investor’s adjusted purchase price, the investor must
multiply the amount of the QEI which in turn has been invested in a QALICB, by a fraction the
numerator of which is composed of the dollar amount of QLICIs made by the CDE in the state as
of the immediately preceding credit allowance date. However, on the initial credit allowance date
the dollar amount of QLICIs made by the CDE immediately preceding the credit allowance date
is impossible to determine since no investments had been made on the “immediately preceding”
credit allowance date.
Similarly, the denominator of the fraction used to determine the investor’s adjusted purchase
price would be the dollar amount of total QLICIs made by the CDE determined as of the
“immediately preceding” credit allowance date. On the initial credit allowance date the
“immediately preceding” credit allowance date is impossible to determine because on the
immediately preceding credit allowance date, no investment had been made by the investor.
To illustrate the absurd result of a faithful application of the language of La. R.S. 47:6016(B)
prior to the 2007 Regular Session amendments, consider the following example. Investor
Corporation invests $5 million dollars into a CDE that will further invest the $5 million dollars in
a QALICB. The investor hopes to earn State NMTCs in return for the investment.
Under La. R.S. 47:6016(B) the first credit allowance date is the date Investor Corporation makes
the $5 million investment. The credit earned on that date is an applicable percentage times the
adjusted purchase price.
The adjusted purchase price under the language prior to the amendments of the 2007 Regular
Session is the product of $5 million times a fraction. The numerator of the fraction is dollar
amount of QLICIs held by CDE in the state, determined as of the immediately preceding credit
allowance date, and the denominator is the total dollar amount of QLICIs issued to the CDE
determined as of the immediately preceding credit allowance date.

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On the first credit allowance date, which is the date Investor Corporation makes the $5 million
investment, the adjusted purchase price would be $5 million times a fraction. The fraction would
be zero divided by zero, since there was no immediately preceding credit allowance date. In
mathematical terms, zero divided by zero is not anything. It is an “undefined” value. The
calculation required by the statute is impossible. Even if the immediately preceding credit
allowance date were assumed to be the date of the investment, rather than the preceding credit
allowance date, if CDE waits even one day to make the QLICI the fraction would still be zero
divided by zero.
On the second credit allowance date, which is the anniversary of the date on which the initial
investment was made, unless the CDE made its QLICI on the day of the initial investment, the
fraction would be zero divided by zero again. An investor who took the action for which the
Legislature created an incentive would receive none of the incentive.
As a result, applying the fraction to the amount of the QEI, which in turn has been invested in a
QALICB, yields an undefined number. Louisiana Civil Code Article 9 states, “When a law is
clear and unambiguous and its application does not lead to absurd consequences, the law shall be
applied as written and no further interpretation may be made in search of the intent of the
legislature.” Richard v. Hall, 2003-1488 874 So.2d 131 (La. 4/23/04). In this instance, how to
calculate the adjusted purchase price is clear and unambiguous; however, the calculation will
yield an undefined amount, which is absurd.
Because application of La. R.S. 47:6016(B)(1), as written, yields an absurd result, “the letter of
the law must give way to the spirit of the law and the statute so as to produce a reasonable
result.” Hall, (874 So.2d 131 (citing Swat 24, 2000-1695 808 So.2d). Fortunately, during the
2007 Regular Session, the definition of adjusted purchase price was amended to provide as
follows:
(b) A fraction, the numerator of which is the dollar amount of qualified lowincome community investments held by the issuer of the qualified equity
investment in the state, determined as of the credit allowance date for which the
calculation is made, and the denominator of which is the total dollar amount of
qualified low income community investments made by the issuer, determined as
of the credit allowance date for which the calculation is made. …
This amendment corrected the absurdity by removing the wording “immediately preceding”
from the statute. For the purpose of calculating the adjusted purchase price for credits issued
before July 1, 2007, the department will apply the definition of adjusted purchase price as
amended in Act 379 of the 2008 Regular Session.

10. Applicable provisions and treatment for QEIs made after July 1, 2007 and before April
    1, 2008:
    La. R.S. 47:6016 provides that a natural or juridical person that holds a qualified equity
    investment which, in turn, has been invested in a qualified low income community investment on
    a credit allowance date of such investment which occurs during the taxable year may claim a
    credit against the person’s Louisiana income or corporation franchise tax for such taxable year
    equal to the applicable percentage of the adjusted purchase price paid to the issuer of such
    qualified equity investment which, in turn, has been invested in qualified low-income community
    investments for such credit allowance date. The credit allowance date is the date on which such

Revenue Ruling 08-011
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investment is initially made and the applicable anniversaries of such date as provided in La. R.S.
47:6016 (B)(3). La. R.S. 47:6016 also provides that on the first and second credit allowance
dates, only 10% of the QEI invested on the initial credit allowance date is available to be claimed
or transferred. On the third credit allowance date, only 5% of the QEI is available to be claimed
or transferred. Additionally, La. R.S. 47:6016(B) as amended provides for the calculation of the
adjusted purchase by stating:
The adjusted purchase price shall mean the product of:
(a) The amount paid to the issuer of the qualified equity investment for such
qualified equity investment and which, in turn, has been invested in qualified lowincome community investments.
(b) A fraction, the numerator of which is the dollar amount of qualified lowincome community investments held by the issuer of the qualified equity
investment in the state, determined as of the credit allowance date for which the
calculation is made, and the denominator of which is the total dollar amount of
qualified low income community investments made by the issuer, determined as
of the credit allowance date for which the calculation is made. …
La. R.S. 47:6016(B)(1)(b) also provides:
For purposes of the initial credit allowance date only, the issuer of the qualified
low-income community investment will be deemed to hold the amount of
qualified low-income community investments, both in the state and outside the
state, that the issuer projects in the applications for the qualified equity investment
submitted pursuant to subsection E of this Section. If the issuer of the qualified
equity investment fails to make sufficient investments in the state to match such
projections by the first anniversary date of its credit allowance, the state may
disallow or recapture a portion of the credits from the holder of the qualified
equity investment so that the credit earned for the initial credit allowance date
reflects the actual investments made by the issuer.
Lastly, La R.S. 47:6016(B)(1)(c) provides that the maximum amount of QLICIs that may be
issued by a single business shall not exceed $15 million.
Therefore, the adjusted purchase price is the QEI times a fraction. The numerator of the fraction
is dollar amount of QLICI made by the CDE in the state, determined as of credit allowance date
for which the calculation is made or, for the initial credit allowance date, the dollar amount an
investor projects will be made in the state, and the denominator is the total dollar amount of
QLICI made by the CDE determined as of the credit allowance date for which the calculation is
made or, for the initial credit allowance date, the dollar amount an investor projects will be
made.
However, sometimes this calculation yields an absurd result. For example, an investor invests in
a CDE that issues two separate QEIs: QEI A made on December 23, 2005, $10 million invested
in Louisiana; and QEI B made on December 27, 2005, $5 million invested in Texas. One
hundred percent of the QLICIs made from QEI A were invested in Louisiana; however, in the
aggregate, the two QEIs were used to fund QLICIs both inside and outside of Louisiana.

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Applying the statute as written, in order to calculate the initial adjusted purchase price, all of the
QLICIs made by the CDE on or before December 23, 2005 would have to be considered. Only
one of the two QEIs described above was made on or before December 23, 2005, the $10 million
Louisiana investment (QEI A). From the $10 million dollar investment, a total of $10 million in
QLICIs were made, all of which were made for use in Louisiana. Applying the statute as written,
to determine the initial adjusted purchase price, the $10 million investment would be multiplied
by a fraction, the numerator of which is $10 million (the total amount of QLICIs made in
Louisiana on or before December 23, 2005) and the denominator of which is $10 million (the
total amount of QLICIs made by the CDE as of December 23, 2005), which amounts to $10
million multiplied by 100 percent, which equals $10 million. Therefore, in this instance, the
investor’s initial adjusted purchase price is 10 million dollars.
However, once the $5 million QEI B is made and the $5 million QLICI is invested in Texas, then
the ratio for QEI A will be reduced applying the current version of the law. By the next credit
allowance date for QEI A, the new ratio would be as follows: the $10 million investment would
be multiplied by a fraction, the numerator of which is $10 million (the total amount of QLICIs
made in Louisiana on or before December 23, 2006) and the denominator of which is $15
million (the total amount of QLICIs made by the CDE as of December 23, 2006), which amounts
to $10 million multiplied by 66 percent, which equals $6.6 million. Consequently, because QEI
B was invested in another state (Texas), the investor’s adjusted purchase price for QEI A on
December 23, 2006 would only be $6.6 million even though 100 percent of QEI A (10 million
dollars) was made in Louisiana.
Though the law is clear and unambiguous relative to calculating the adjusted price, the result is
unfair and absurd. Louisiana Civil Code Article 9 states, “When a law is clear and unambiguous
and its application does not lead to absurd consequences, the law shall be applied as written and
no further interpretation may be made in search of the intent of the legislature.” Richard v. Hall,
2003-1488, 874 So.2d 131 (La. 4/23/04). Richard v. Hall also provides that, “the letter of the law
must give way to the spirit of the law and the statute so as to produce a reasonable result.” (874
So.2d 131, 148 (citing SWAT 24 Shreveport Bossier, Inc. v. Bond, 2000-1695, p. 12, 808 So.2d
294, 302 (La. 6/29/01)).
La. R.S. 47:6016 provides that the purpose of this legislation is to “encourage and attract private
sector capital investment” to certain areas in the state. However, applying the law as written
would discourage Louisiana investment because there is no way to ensure and protect their
investment. The legislative intent is satisfied by counting only those QLICIs that were made
from specific qualified equity investment for which State NMTCs are sought in the calculation of
the “adjusted purchase price” under La. R.S. 47:6016(B)(1).
Consequently, the adjusted purchase price for an investor will not be adjusted as a result of other
QEIs made by an investor or other investors into a CDE whether such QLICIs are within or
outside of Louisiana.

11. Applicable provisions and treatment for to QEI’s made on or after April 2008:
    La. R.S. 47:6016(C) of the State NMTC statute enables any natural or juridical person that holds
    a QEI which, in turn, has been invested in a QALICB on a credit allowance date to claim a credit
    against such person’s Louisiana income or corporate franchise tax liability for such taxable year.
    The State NMTC statute itself is modeled upon, and incorporates part of, the Federal NMTC. For

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purposes of calculating the amount of State NMTCs available on a per project basis, (i) Section
6016(B)(1)(c)(ii) of the State NMTC statute imposes a maximum, per project cap of $5,000,000
in QEI issued on or after April 1, 2008 but before December 1, 2009, which amounts to a per
project cap of $1,250,000 in state NMTCs, and (ii) Section 6016(B)(1)(c)(iii) of the State NMTC
statute imposes a maximum, per project cap of $7,500,000 in QEI issued on or after December 1,
2009. In addition, La. R.S. 47:6016(E) of the state NMTC statute (i) limits the aggregate
amounts of State NMTCs available to all taxpayers to $50,000,000 over the life of the program,
as set forth in the schedule described below. La. R.S. 47:6016(B) as amended also provides for
the calculation of the adjusted purchase by stating:
The adjusted purchase price shall mean the product of:
(a) The amount paid to the issuer of the qualified equity investment for such
qualified equity investment and which, in turn, has been invested in qualified lowincome community investments.
(b) A fraction, the numerator of which is the dollar amount of qualified lowincome community investments held by the issuer of the qualified equity
investment in the state, determined as of the credit allowance date for which the
calculation is made, and the denominator of which is the total dollar amount of
qualified low income community investments made by the issuer, determined as
of the credit allowance date for which the calculation is made.
La. R.S. 47:6016(B)(1)(b) also provides:
For purposes of the initial credit allowance date only, the issuer of the qualified
low-income community investment will be deemed to hold the amount of
qualified low-income community investments, both in the state and outside the
state, that the issuer projects in the applications for the qualified equity investment
submitted pursuant to subsection E of this Section. If the issuer of the qualified
equity investment fails to make sufficient investments in the state to match such
projections by the first anniversary date of its credit allowance, the state may
disallow or recapture a portion of the credits from the holder of the qualified
equity investment so that the credit earned for the initial credit allowance date
reflects the actual investments made by the issuer.
The aggregate amount of credit for all QEIs issued to taxpayers on or after April 1, 2008
shall not exceed fifty million dollars based on the following schedule:
A. A maximum of twenty five million dollars of the total aggregate amount of credit shall
be available for issuance during the period beginning April 1, 2008 and ending
December 31, 2008.
B. A maximum of twelve million five hundred thousand dollars of the total aggregate
amount of the credit plus any unissued credits from any prior taxable year shall be
available for issuance during the period beginning on January 1, 2009 and ending
November 30, 2009.
C. A maximum of twelve million five hundred dollars of the total aggregate amount of
credits, plus any unissued credits from any prior taxable year, shall be available for
issuance beginning December 2009 and ending December 31, 2010.

Revenue Ruling 08-011
Page 9 of 10

12. With respect to the maximum amount of QLICIs that may be issued by a single business:
    The State NMTC statute allows any natural or juridical person that holds a QEI which has been
    invested in a QALICB on a credit allowance date to claim a credit against such person's
    Louisiana income or corporate franchise tax liability for such taxable year. The amount of
    Louisiana credits for which each QEI is eligible is determined by the QEI’s adjusted purchase
    price. The purpose of this calculation is to limit the generation of Louisiana credits to that
    portion of the QEI invested in QLICIs in Louisiana. The State NMTC statute also imposes
    certain limits on the amount of QLICIs that may be issued by a single Louisiana business and
    used to calculate a QEI’s “adjusted purchase price.” In particular, the statute states:
    (i) The maximum amount of [QLICIs] that may be issued by a single business, on an
    aggregate basis with all of its affiliates, and be included in the calculation of the fraction
    described in La. R.S. 47:6016(B)(1)(b) for [QEIs] issued after July 1, 2007, and before
    April 1, 2008, whether to one or more issuers of [QEIs], shall not exceed fifteen million
    dollars.
    (ii) For [QEIs] issued on or after April 1, 2008 and before December 1, 2009, the
    maximum amount of [QLICIs] that may be issued by a single business, on an aggregate
    basis with all of its affiliates, and be included in the calculation of the fraction described
    in La. R.S. 47:6016(B)(1)(b), whether to one or more issuers of [QEIs], shall not exceed
    five million dollars. For [QEIs] issued on or after April 1, 2008, the maximum amount of
    [QLICIs] that may be issued by a single business that are consistent with Department of
    Economic Development target industries shall not exceed fifteen million dollars.
    (iii) For [QEIs] issued on or after December 1, 2009, the maximum amount of [QLICIs]
    that may be issued by a single business, on an aggregate basis with all of its affiliates, and
    be included in the calculation of the fraction described in La. R.S. 47:6016(B)(1)(b)
    whether to one or more issuers of [QEIs], shall not exceed seven million five hundred
    thousand dollars. The maximum amount of [QLICIs] that may be issued by a single
    business that are consistent with Department of Economic Development target industries
    shall not exceed fifteen million dollars.
    Each paragraph quoted above sets forth a limitation on the amount of QLICIs that may be issued
    by a particular QALICB but also states that the limitation is only on what may be “included in
    the calculation of the fraction described in La. R.S. 47:6016(B)(1)(b)” with respect to QEIs
    issued within a particular period. The limitations on the amount of QLICIs that may be issued by
    a single business are tied to the QEIs from which they are made and the period during which the
    QEI was issued. Consequently, a limitation from a prior period would not prevent a QALICB
    from issuing a QLICI in a current period. For example, a single QALICB may (i) issue a QLICI
    in the amount of $15 million to a CDE using the proceeds from a QEI issued between July 1,
    2007 and April 1, 2008 and (ii) issue another QLICI in the amount of $5 million to a CDE (or the
    same CDE), using the proceeds from a QEI issued between April 1, 2008 and December 1, 2009.
13. With respect to recapture of State NMTCs:
    La. R.S. 47:6016(G) of the Statute provides, in pertinent part, that to avoid recapture of State
    NMTCs, (a) the issuer of a QEI that earned State NMTCs must maintain QLICIs in Louisiana
    “in an amount at least equal to the amount used in calculating the credits issued through all

Revenue Ruling 08-011
Page 10 of 10
anniversaries of the credit allowance date of such qualified equity investment” and (b) a
recapture of any federal NMTCs arising out of the QEI must not have occurred.
La. R.S. 47: 6016(B)(3) of the Statute defines “credit allowance date” for qualified equity
investments made after July 1, 2007 as “the date on which such qualified equity investment is
initially made and the first two anniversaries of such date.” Although the “all anniversaries”
language of La. R.S. 47:6016(G) of the statute can be read literally to require the qualified lowincome community investment to be maintained in Louisiana indefinitely (i.e., through “all
anniversaries of the credit allowance date”), this is clearly not the legislative intent because it
would lead to the absurd result that a QLICI would have to be maintained forever. Because the
“all anniversaries” language of La. R.S 47: 6016(G) of the Statute, as written, yields an absurd
result, “the letter of the law must give way to the spirit of the law and the statute so as to produce
a reasonable result.” Richard v. Hall, 2003-1488, 874 So.2d 131 (La. 4/30/2004).
A reasonable interpretation of this language, when viewed in the context of the Statute as a
whole, is that the words “all anniversaries” as used in La. R.S. 47:6016(G) of the Statute refer to
the first two anniversaries of the credit allowance date, as set forth in the definition of “credit
allowance date” in La. R.S 47:6016(B)(3) of the Statute for QEI made after July 1, 2007.
Accordingly, to avoid recapture of State NMTCs for failing to maintain a QLICI in Louisiana,
La. R.S 47:6016(G) of the Statute requires the issuer of a QEI to maintain the QLICI in
Louisiana only until the second anniversary of the date on which the QEI is initially made.
Additionally, to avoid recapture of State NMTCs as a result a federal recapture of NMTCs, La.
R.S. 47:6016 G requires the avoidance of any recapture of the federal NMTCs arising our of the
QEI until the second anniversary date of the date on which the QEI was initially made. After the
second anniversary of the date on which the QEI is initially made, the State NMTCs issued with
respect to the QEI will no longer be subject to recapture under La. R.S. 47: 6016(G).

14. After January 1, 2009, the department will no longer accept private letter ruling request as
    applications for State NMTCs. Applications must be submitted to the Taxpayer Services
    Division. See application: New Markets Tax Credit Application Certification from LED or proof
    of deemed certification must be received by the department before any credits will be issued.
    Interested parties should contact Policy Services Division at 225-219-2780
    Cynthia Bridges
    Secretary
    By:

Nina S. Hunter, Attorney
Policy Services Division

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued to apply principles
of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on
the public. It is a statement of the department's position and is binding on the department until superseded or
modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.