Text: HF00512 Text: HF00514 Text: HF00500 - HF00599 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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1 1 Section 1. NEW SECTION. 15E.221 SHORT TITLE.
1 2 This division shall be known and may be cited as the
1 3 "Certified Capital Companies Act".
1 4 Sec. 2. NEW SECTION. 15E.222 DEFINITIONS.
1 5 As used in this division, unless the context otherwise
1 6 requires:
1 7 1. "Affiliate" means, with respect to a certified capital
1 8 company or a certified investor, any of the following:
1 9 a. A person who, directly or indirectly, owns, controls,
1 10 or holds power to vote, ten percent or more of the outstanding
1 11 voting securities or other voting ownership interests of the
1 12 certified capital company or certified investor.
1 13 b. A person, ten percent of whose outstanding voting
1 14 securities or other voting ownership interests are directly or
1 15 indirectly owned, controlled, or held with power to vote by
1 16 the certified capital company or certified investor.
1 17 c. A person directly or indirectly controlling, controlled
1 18 by, or under common control with, the certified capital
1 19 company or certified investor.
1 20 d. A partnership in which the certified capital company or
1 21 certified investor is a general partner.
1 22 e. A person who is an officer, director, or agent of the
1 23 certified capital company or certified investor, or is an
1 24 immediate family member of such an officer, director, or
1 25 agent.
1 26 2. "Certified capital company" means a person that is
1 27 certified by the department pursuant to section 15E.223.
1 28 3. "Certified capital company tax credit" means the tax
1 29 credit made available under section 15E.232.
1 30 4. "Certified capital investment" means an investment in a
1 31 certified capital company that is certified pursuant to
1 32 section 15E.224, subsection 2, and that fully funds either the
1 33 investor's equity interest in a certified capital company or a
1 34 qualified debt instrument that a certified capital company
1 35 issues.
2 1 5. "Certified investor" means a person who makes a
2 2 certified capital investment.
2 3 6. "Department" means the department of economic
2 4 development as created in section 15.101.
2 5 7. "Director" means the director of the department or the
2 6 director's designee.
2 7 8. "Investment date" means, with respect to each
2 8 investment pool, the date on which the last certified capital
2 9 investment that is part of that investment pool was invested
2 10 in the certified capital company.
2 11 9. "Investment pool" means the aggregate of all certified
2 12 capital investments in a certified capital company that are
2 13 made as part of the same transaction, except that investments
2 14 received more than thirty days apart shall not be considered
2 15 part of the same investment pool.
2 16 10. "Qualified business" means a business which is a
2 17 qualified business under section 15E.225.
2 18 11. "Qualified debt instrument" means a debt instrument
2 19 that meets all of the following criteria:
2 20 a. A certified capital company issues the instrument at
2 21 par value or at a premium.
2 22 b. The instrument has an original maturity date of at
2 23 least five years from the date on which it was issued.
2 24 c. The instrument has a repayment schedule that is no
2 25 faster than a level principal amortization and, until the
2 26 certified capital company may make distributions other than
2 27 qualified distributions, the interest, distribution, or
2 28 payment features of which are not related to the certified
2 29 capital company's profitability or the performance of its
2 30 investment portfolio.
2 31 12. "Qualified distribution" means a distribution or
2 32 payment by certified capital company to its equity holders for
2 33 any of the following:
2 34 a. The costs of forming, syndicating, managing, or
2 35 operating the certified capital company.
3 1 b. An annual management fee that does not exceed two and
3 2 one-half percent of the certified capital company's total
3 3 certified capital.
3 4 c. Reasonable and necessary fees paid for professional
3 5 services related to the operation of the certified capital
3 6 company.
3 7 d. A projected increase in federal or state taxes,
3 8 including penalties and interest on those taxes, of the equity
3 9 owners of the certified capital company if those amounts are
3 10 related to the certified capital company's ownership,
3 11 management, or operation.
3 12 13. "Qualified investment" means an investment in a
3 13 qualified business by a certified capital company that meets
3 14 the requirements under section 15E.226, subsection 1.
3 15 Sec. 3. NEW SECTION. 15E.223 CERTIFICATION OF CERTIFIED
3 16 CAPITAL COMPANIES.
3 17 1. A person applying to become a certified capital company
3 18 shall submit an application to the department. The department
3 19 shall grant or deny an application for certification within
3 20 thirty days of the date of application. If the department
3 21 denies the application, the department shall include with the
3 22 denial a detailed description of the grounds for the refusal,
3 23 including suggestions for removal of those grounds.
3 24 2. The department shall certify a person as a certified
3 25 capital company if the department determines that all of the
3 26 following conditions have been met and the application is
3 27 competitive with other applications:
3 28 a. The person is a partnership, corporation, trust, or
3 29 limited liability company, whether organized for profit or not
3 30 for profit, that has as its primary business activity the
3 31 investment of cash in qualified businesses.
3 32 b. The person has a net worth, at the time of application,
3 33 of at least five hundred thousand dollars and has at least
3 34 five hundred thousand dollars in cash, cash equivalents, or
3 35 marketable securities. The person shall submit with the
4 1 initial application an audited balance sheet as of a date not
4 2 more than thirty-five days prior to the date the application
4 3 is submitted.
4 4 c. The directors, officers, general partners, trustees,
4 5 managers, members, or persons having a similar function are
4 6 familiar with the requirements of this division.
4 7 d. At least two officers, directors, general partners,
4 8 trustees, managers, or members each have at least two years of
4 9 experience in the venture capital industry.
4 10 e. The person has included, in any offering material
4 11 involving the sale of securities, the statements required
4 12 under section 15E.224, subsection 1.
4 13 f. The person has paid a nonrefundable application fee of
4 14 seven thousand five hundred dollars.
4 15 Sec. 4. NEW SECTION. 15E.224 INVESTMENTS IN CERTIFIED
4 16 CAPITAL COMPANIES.
4 17 1. Any offering material involving the sale of securities
4 18 of a certified capital company shall include all of the
4 19 following statements:
4 20 a. "By authorizing the formation of a certified capital
4 21 company, the state does not necessarily endorse the quality of
4 22 management or the potential for earnings of the company and is
4 23 not liable for damages or losses to a certified investor in
4 24 the company. Use of the word "certified" in an offering is
4 25 not a recommendation or endorsement of the investment by the
4 26 Department of Economic Development."
4 27 b. "Investments in a prospective certified capital company
4 28 prior to the time the company is certified are not eligible
4 29 for a certified capital company investment credit under
4 30 section 15E.232 of the Iowa Code. Investments in a certified
4 31 capital company are not eligible for a certified capital
4 32 company investment tax credit under section 15E.232 of the
4 33 Iowa Code, unless the proposed investment is certified under
4 34 section 15E.224, subsection 2 of the Iowa Code, before the
4 35 investment is made. In the event that certain statutory
5 1 provisions are violated, the state may require forfeiture of
5 2 unused certified capital company investment credits and
5 3 repayment of used certified capital company investment
5 4 credits."
5 5 2. Certification of certified capital investments shall
5 6 occur according to the following procedure:
5 7 a. Application to make a certified capital investment
5 8 shall be by providing notice to the department on a form
5 9 prescribed by the department. The notice shall include the
5 10 name of the person applying for certification, the name of the
5 11 certified capital company, the amount of the proposed
5 12 investment, and any other information specified by the
5 13 department. The notice shall also include an undertaking by
5 14 the person to make the investment within five days after the
5 15 department notifies the person that the investment has been
5 16 certified.
5 17 b. The department may certify an investment under this
5 18 subsection only if, after the certification, the department
5 19 will not have certified a total of more than one hundred
5 20 million in certified capital investments under this
5 21 subsection.
5 22 c. Prior to the first day of the thirteenth month
5 23 beginning after the effective date of this Act, the department
5 24 shall not certify an investment under this subsection if,
5 25 after the certification, the certified investor, together with
5 26 all affiliates of the certified investor, would have invested
5 27 more than ten million dollars in certified capital
5 28 investments.
5 29 d. If, as a result of the limitations under paragraph "b"
5 30 or "c", the department shall not certify the full amount
5 31 requested in applications for certified capital investments
5 32 submitted under paragraph "a", the department shall allocate
5 33 the amounts available for certification in order of priority
5 34 based on the date on which the application was submitted. If
5 35 the amounts available for certification are insufficient to
6 1 certify the full amount of all applications for certified
6 2 capital investments that are submitted on the same day, the
6 3 department shall prorate the available amount on the basis of
6 4 the amount that the investor has committed to invest in the
6 5 certified capital company under paragraph "a".
6 6 3. A certified investor shall not, individually or with or
6 7 through one or more affiliates, own ten percent or more of the
6 8 equity securities in, be a general partner or manager of, or
6 9 otherwise control the investments of a certified capital
6 10 company. This subsection does not preclude a certified
6 11 investor from exercising its legal rights and remedies,
6 12 including interim management of a certified capital company,
6 13 in the event that a certified capital company is in default of
6 14 its statutory or contractual obligations to the certified
6 15 investor.
6 16 Sec. 5. NEW SECTION. 15E.225 QUALIFIED BUSINESSES.
6 17 1. A business is a qualified business if all of the
6 18 following requirements are met at the time that a certified
6 19 capital company, or any affiliate of the certified capital
6 20 company, makes its first investment in the business:
6 21 a. The business is headquartered in this state and its
6 22 principal business operations are located in this state.
6 23 b. The business is in need of venture capital and is
6 24 unable to obtain conventional financing, as defined by the
6 25 department.
6 26 c. The business has no more than one hundred employees, at
6 27 least seventy-five percent of whom are employed in the state.
6 28 d. During the two most recent fiscal years of the
6 29 business, the business had, together with all of the
6 30 affiliates of the business, an average annual net income,
6 31 after federal income taxes and excluding any carry-over
6 32 losses, of not more than two million dollars as determined in
6 33 accordance with generally accepted accounting principles.
6 34 e. The business has, together with the affiliates of the
6 35 business, a net worth that is not in excess of five million
7 1 dollars.
7 2 f. The business is not predominately engaged in the
7 3 provision of professional services provided by accountants,
7 4 attorneys, or physicians.
7 5 g. The business is not engaged in the development of real
7 6 estate for resale.
7 7 h. The business is not engaged in banking or lending and
7 8 does not make any loans to, or investments in, certified
7 9 capital companies.
7 10 2. A certified capital company may, prior to making an
7 11 investment in a specified business, request a written opinion
7 12 from the department that a business in which it proposes to
7 13 invest is a qualified business. If the department determines
7 14 that the business meets the requirements under subsection 1,
7 15 the department shall issue a written opinion stating that the
7 16 business is a qualified business. If the department
7 17 determines that the business in which the certified capital
7 18 company proposes to invest does not meet the requirements
7 19 under subsection 1, the department may consider the business a
7 20 qualified business and approve the investment if the
7 21 department determines that the proposed investment will
7 22 further economic development in this state.
7 23 Sec. 6. NEW SECTION. 15E.226 OPERATION OF CERTIFIED
7 24 CAPITAL COMPANIES.
7 25 1. In order for a certified capital company to prevent
7 26 disqualification of an investment pool under section 15E.229,
7 27 the certified capital company shall ensure that the investment
7 28 pool makes qualified investments in accordance with the
7 29 schedule under subsection 2. An investment is a qualified
7 30 investment if the investment meets all of the following
7 31 requirements:
7 32 a. The investment is a cash investment in a qualified
7 33 business for the purchase of any of the following:
7 34 (1) An equity security of the qualified business.
7 35 (2) A debt security of the qualified business if the debt
8 1 has a maturity of at least five years and if one of the
8 2 following conditions is met:
8 3 (a) The debt is unsecured.
8 4 (b) The debt is convertible into equity securities or
8 5 equity participation instruments such as options or warrants.
8 6 b. As a condition of the investment, the qualified
8 7 business agrees not to use the proceeds from the investment
8 8 for the purpose of relocating its operations.
8 9 c. As a condition of the investment, the qualified
8 10 business agrees, as long as the certified capital company
8 11 continues to hold the investment, not to relocate its
8 12 headquarters out of this state.
8 13 d. As a condition of the investment, the qualified
8 14 business agrees, as long as the certified capital company
8 15 continues to hold the investment, to maintain at least
8 16 seventy-five percent of its employees in this state.
8 17 e. As a condition of the investment, the qualified
8 18 business agrees, as long as the certified capital company
8 19 continues to hold the investment, to maintain at least
8 20 seventy-five percent of its employees at work sites that were
8 21 maintained by the qualified business at the time that the
8 22 investment was made, unless the qualified business obtains an
8 23 exemption from the department under this paragraph. The
8 24 department may grant an exemption unless it determines that
8 25 the qualified business is locating the employees at new sites
8 26 to take advantage of lower wage rates in the areas where the
8 27 new sites are located.
8 28 2. a. A certified capital company shall ensure that each
8 29 of its investment pools makes qualified investments according
8 30 to the following schedule:
8 31 (1) Within two years after the investment date for a
8 32 particular investment pool, the certified capital company
8 33 shall have made qualified investments cumulatively equal to at
8 34 least twenty-five percent of the investment pool.
8 35 (2) Within three years after the investment date for a
9 1 particular investment pool, the certified capital company
9 2 shall have made qualified investments cumulatively equal to at
9 3 least forty percent of the investment pool.
9 4 (3) Within four years after the investment date for a
9 5 particular investment pool, the certified capital company
9 6 shall have made qualified investments cumulatively equal to at
9 7 least fifty percent of the investment pool.
9 8 b. The proceeds of all capital of a qualified investment
9 9 returned to a certified capital company by a qualified
9 10 business may be placed in new qualified investments, which
9 11 shall count toward the percentage requirements under paragraph
9 12 "a" and section 15E.228, subsection 3. The department shall
9 13 adopt rules governing the extent to which a reinvestment of
9 14 proceeds from the sale of a qualified investment in a
9 15 qualified business may be counted toward the percentage
9 16 requirements under paragraph "a", section 15E.228, subsection
9 17 3, and section 15E.229, subsection 4, paragraph "a",
9 18 subparagraph (2). The rules may also provide that proceeds
9 19 from the sale of an investment in a qualified business that
9 20 are reinvested in that qualified business, or an affiliate of
9 21 the qualified business, shall be only partially counted toward
9 22 the percentage requirements under paragraph "a", section
9 23 15E.228, subsection 3, and section 15E.229, subsection 4,
9 24 paragraph "a", subparagraph (2).
9 25 3. All certified capital investments in a certified
9 26 capital company that are not invested in qualified investments
9 27 may be held or invested by the certified capital company as it
9 28 considers appropriate, except that a certified capital company
9 29 shall not invest certified capital investments in an insurance
9 30 company or in an affiliate of an insurance company.
9 31 4. A certified capital company shall not make a qualified
9 32 investment in a person if, at the time of the investment, more
9 33 than fifteen percent of the total certified capital of the
9 34 certified capital company would be invested in that person and
9 35 affiliates of that person.
10 1 5. A certified capital company shall not be managed or
10 2 controlled by, or have a general partner that is, an insurance
10 3 company or an affiliate of an insurance company.
10 4 Sec. 7. NEW SECTION. 15E.227 REPORTING REQUIREMENTS AND
10 5 FEES.
10 6 1. As soon as practical after the receipt of a certified
10 7 capital investment, a certified capital company shall report
10 8 all of the following to the department:
10 9 a. The name of the certified investor from which the
10 10 certified capital was received, including the certified
10 11 investor's tax identification number.
10 12 b. The amount of the certified capital investment.
10 13 c. The date on which the certified capital investment was
10 14 received by the certified capital company.
10 15 d. The investment date for the investment pool of which
10 16 the certified capital investment will be a part.
10 17 2. As soon as practical after the receipt of information
10 18 by the certified capital company that a qualified business has
10 19 violated an agreement made under section 15E.226, subsection
10 20 1, paragraphs "b" through "e", the certified capital company
10 21 shall notify the department of the violation and the facts
10 22 giving rise to the violation.
10 23 3. On or before January 31 each year, a certified capital
10 24 company shall report all of the following to the department:
10 25 a. The amount of the certified capital company's certified
10 26 capital at the end of the preceding calendar year.
10 27 b. Whether the certified capital company has invested more
10 28 than fifteen percent of its total certified capital in any one
10 29 person.
10 30 c. All qualified investments that the certified capital
10 31 company has made during the previous calendar year and the
10 32 investment pool from which each qualified investment was made.
10 33 4. Within ninety days of the end of the certified capital
10 34 company's fiscal year, the certified capital company shall
10 35 provide to the department a copy of its annual audited
11 1 financial statements, including the opinion of an independent
11 2 certified public accountant. The audit shall address the
11 3 methods of operation and conduct of the business of the
11 4 certified capital company to determine whether the certified
11 5 capital company is complying with this division and the rules
11 6 adopted under this division, including whether certified
11 7 capital investments have been invested in the manner required
11 8 under section 15E.226. The financial statements provided
11 9 under this subsection shall be segregated by investment pool
11 10 and shall be separately audited on that basis to allow the
11 11 department to determine whether the certified capital company
11 12 is in compliance with section 15E.226, subsection 2.
11 13 5. On or before January 31 of each year, a certified
11 14 capital company shall pay a nonrefundable certification fee of
11 15 five thousand dollars to the department, unless January 31 is
11 16 within six months of the date on which the certified capital
11 17 company was certified under section 15E.223.
11 18 6. If the department determines that a document submitted
11 19 by a certified capital company under this section contains a
11 20 trade secret as defined in section 550.2, the information
11 21 shall be treated as a confidential trade secret which is not
11 22 subject to release under section 22.7.
11 23 Sec. 8. NEW SECTION. 15E.228 DISTRIBUTIONS.
11 24 A certified capital company may make a distribution only if
11 25 one of the following conditions is met:
11 26 1. The distribution is a qualified distribution.
11 27 2. The department made a written determination that the
11 28 distribution may be made without adversely affecting the
11 29 ability of the certified capital company to make qualified
11 30 investments in an amount cumulatively equal in the aggregate
11 31 to one hundred percent of the certified capital investment in
11 32 the investment pool from which the distribution is to be made.
11 33 3. The certified capital company has made qualified
11 34 investments in an amount cumulatively equal in the aggregate
11 35 to one hundred percent of the certified capital investments in
12 1 the investment pool.
12 2 4. The distribution is payment of principal or interest
12 3 owed to a debt holder of a certified capital company, even if
12 4 the debt holder is also a holder of equity and even if the
12 5 indebtedness is a certified capital investment.
12 6 Sec. 9. NEW SECTION. 15E.229 COMPLIANCE REVIEWS –
12 7 DECERTIFICATION – DISQUALIFICATION.
12 8 1. The department shall conduct an annual review of each
12 9 certified capital company to determine if the certified
12 10 capital company is complying with the requirements of this
12 11 division, to advise the certified capital company regarding
12 12 the status of its investments as qualified investments, and to
12 13 ensure that an investment has not been made in violation of
12 14 this division. The cost of the annual review shall be paid by
12 15 each certified capital company according to a reasonable fee
12 16 schedule adopted by the department.
12 17 2. Any material violation of section 15E.226, subsection
12 18 2, is a ground for disqualification of the noncomplying
12 19 investment pool. If the department determines that the
12 20 certified capital company is not in compliance with section
12 21 15E.226, subsection 2, with respect to an investment pool, the
12 22 department shall send a written notice to the certified
12 23 capital company and the department of revenue and finance
12 24 stating that the investment pool has been disqualified.
12 25 3. Any material violation of section 15E.226, subsections
12 26 2 through 4, or section 15E.227, subsections 1 through 4, is a
12 27 ground for decertification of the noncomplying certified
12 28 capital company. If the department determines that the
12 29 certified capital company is not in compliance with section
12 30 15E.226, subsections 2 through 4, or section 15E.227,
12 31 subsections 1 through 4, the department shall send a written
12 32 notice to the certified capital company that the certified
12 33 capital company may be subject to decertification in one
12 34 hundred twenty days from the date on which the notice was
12 35 mailed, unless the certified capital company brings itself
13 1 into full compliance. If at the end of the one hundred twenty
13 2 day period the certified capital company has not brought
13 3 itself into full compliance, the department shall send a
13 4 notice to the certified capital company and the commissioner
13 5 of insurance stating that the certified capital company has
13 6 been decertified.
13 7 4. a. A certified capital company may voluntarily
13 8 decertify itself as a certified capital company if any of the
13 9 following conditions are met:
13 10 (1) It has been at least ten years since the last
13 11 certified capital investment was made in the certified capital
13 12 company.
13 13 (2) The certified capital company has placed in qualified
13 14 investments an amount equal to one hundred percent of the
13 15 certified capital investment in the certified capital company.
13 16 b. A certified capital company wishing to decertify itself
13 17 under this subsection shall send a notice to the department
13 18 certifying that the certified capital company is eligible for
13 19 decertification under paragraph "a". The decertification is
13 20 effective on the date that the notice under this paragraph is
13 21 received by the department.
13 22 5. Decertification of a certified capital company or
13 23 disqualification of an investment pool has the effects
13 24 specified in section 15E.232.
13 25 6. The department shall notify a certified investor when
13 26 the certified capital company tax credit arising from a
13 27 certified investment is no longer subject to recapture and
13 28 forfeiture under section 15E.232.
13 29 Sec. 10. NEW SECTION. 15E.230 DEPARTMENT EVALUATION OF
13 30 THE PROGRAM.
13 31 Beginning on January 31, 2000, and on every January 31 of
13 32 each even-numbered year thereafter, the department shall
13 33 submit a report to the general assembly regarding the program
13 34 under this division. The report shall include all of the
13 35 following:
14 1 1. The total amount of certified capital investments made
14 2 during the previous two calendar years, as well as the total
14 3 amount of certified capital investments made since the
14 4 effective date of this Act.
14 5 2. Statistical information on the qualified investments
14 6 made by certified capital companies during the previous two
14 7 calendar years.
14 8 3. The department's assessment of the number of jobs
14 9 created in this state during the previous two calendar years
14 10 as a result of the certified capital company program under
14 11 this division.
14 12 Sec. 11. NEW SECTION. 15E.231 RULES.
14 13 The department shall adopt rules pursuant to chapter 17A
14 14 necessary to administer this division.
14 15 Sec. 12. NEW SECTION. 15E.232 CERTIFIED CAPITAL COMPANY
14 16 INSURANCE PREMIUM TAX CREDIT.
14 17 1. A certified investor which is an insurance company
14 18 organized under the laws of this state or admitted to do
14 19 business in this state may claim a tax credit against the
14 20 insurance premium tax liability of the certified investor
14 21 under chapter 432, or similar taxes, up to ten percent of the
14 22 amount of the certified capital investment for the calendar
14 23 year in which the certified capital investment was made and up
14 24 to ten percent for each subsequent calendar year until the
14 25 total amount of the certified capital investment has been
14 26 offset against those taxes. Any credit in excess of the tax
14 27 liability for a calendar year may be credited to the tax
14 28 liability for succeeding calendar years until depleted.
14 29 2. If a certified capital company is decertified, or an
14 30 investment pool is disqualified, under section 15E.229, before
14 31 the certified capital company fulfills the investment
14 32 requirement under section 15E.226, subsection 2, paragraph
14 33 "a", subparagraph (1), with respect to the investment pool, a
14 34 certified investor that has received a tax credit under this
14 35 section shall be subject to a recapture tax equal to the tax
15 1 credit claimed with respect to the investment pool. A
15 2 certified investor shall not claim any remaining tax credits
15 3 with respect to that investment pool.
15 4 3. If a certified capital company fulfills the investment
15 5 requirement under section 15E.226, subsection 2, paragraph
15 6 "a", subparagraph (1), with respect to the investment pool but
15 7 the certified capital company is decertified, or an investment
15 8 pool is disqualified under section 15E.229, before the
15 9 certified capital company fulfills the investment requirement
15 10 under section 15E.226, subsection 2, paragraph "a",
15 11 subparagraph (2), for that investment pool, a certified
15 12 investor that has received a tax credit under this section
15 13 with respect to that investment pool shall be subject to a
15 14 recapture tax equivalent to all tax credits claimed under this
15 15 section for taxable years after the taxable year that includes
15 16 the second anniversary of the investment date of the
15 17 investment pool. A certified investor shall not claim any
15 18 remaining tax credits for taxable years after the taxable year
15 19 that includes the second anniversary of the investment date of
15 20 the investment pool.
15 21 4. If a certified capital company fulfills the investment
15 22 requirement under section 15E.226, subsection 2, paragraph
15 23 "a", subparagraphs (1) and (2), with respect to the investment
15 24 pool but the certified capital company is decertified, or an
15 25 investment pool is disqualified under section 15E.229, before
15 26 the certified capital company fulfills the investment
15 27 requirement under section 15E.226, subsection 2, paragraph
15 28 "a", subparagraph (3), for that investment pool, a certified
15 29 investor that has received a tax credit under this section
15 30 with respect to that investment pool shall be subject to a
15 31 recapture tax equivalent to all tax credits claimed under this
15 32 section for taxable years after the taxable year that includes
15 33 the third anniversary of the investment date of the investment
15 34 pool. A certified investor shall not claim any remaining tax
15 35 credits for taxable years after the taxable year that includes
16 1 the third anniversary of the investment date of the investment
16 2 pool.
16 3 5. A certified investor may sell a certified capital
16 4 company tax credit to another insurance company organized
16 5 under the laws of this state or admitted to do business in
16 6 this state if the certified investor notifies the department
16 7 of revenue and finance of the sale and includes with the
16 8 notification a copy of the transfer documents.
16 9 EXPLANATION
16 10 This bill provides for the creation of certified capital
16 11 companies to make qualified investments in qualified
16 12 businesses.
16 13 The bill provides that a person applying to become a
16 14 certified capital company shall submit an application to the
16 15 department of economic development. The bill provides that
16 16 the application shall be granted upon a finding that the
16 17 application is competitive with other applications, the person
16 18 is a partnership, corporation, trust, or limited liability
16 19 company with a primary business activity of investment of cash
16 20 in qualified businesses, that the person has a net worth of at
16 21 least $500,000 and has at least $500,000 in cash, cash
16 22 equivalents, or marketable securities, that the directors,
16 23 officers, general partners, trustees, managers, or members are
16 24 familiar with the requirements related to certified capital
16 25 companies, that at least two officers, directors, general
16 26 partners, trustees, managers, or members have at least two
16 27 years of experience in the venture capital industry, that
16 28 proper notice requirements have been met in any offering
16 29 material, and that an application fee has been paid.
16 30 The bill provides that a certified capital investment means
16 31 an investment in a certified capital company which is
16 32 certified by the department and fully funds either the
16 33 investor's equity interest in the certified capital company, a
16 34 qualified debt instrument that a certified capital company
16 35 issues, or both. The bill provides that the department shall
17 1 not certify more than $100 million in certified capital
17 2 investments. The bill provides that prior to the first day of
17 3 the thirteenth month beginning after the effective date of the
17 4 bill, a certified investor shall not have invested more than
17 5 $10 million in certified capital investments. The bill
17 6 provides that a certified investor shall not own 10 percent or
17 7 more of the equity securities in, be a general partner or
17 8 manager of, or otherwise control the investments of a
17 9 certified capital company.
17 10 The bill provides that a business is a qualified business
17 11 if the business is headquartered in the state and its
17 12 principal business operations are located in this state, the
17 13 business is in need of venture capital and is unable to obtain
17 14 conventional financing, the business has no more than 100
17 15 employees at least 75 percent of whom are employed in the
17 16 state, the business had a net income during the two most
17 17 recent fiscal years of not more than $2 million, the business
17 18 has a net worth of not more than $5 million, the business is
17 19 not predominately engaged in providing professional services
17 20 by accountants, attorneys, or physicians, the business is not
17 21 engaged in the development of real estate for resale, and the
17 22 business is not engaged in banking or lending.
17 23 The bill provides that an investment by a certified capital
17 24 company is a qualified investment in a qualified business if
17 25 the investment is a cash investment which meets certain
17 26 requirements, the qualified business agrees not to use the
17 27 proceeds for purposes of relocating its business, and the
17 28 qualified business agrees, as long as the certified capital
17 29 company continues to hold the investment, keep its
17 30 headquarters located in this state, maintain at least 75
17 31 percent of its employees in this state, and maintain at least
17 32 75 percent of its employees at work sites that were maintained
17 33 by the qualified business at the time that the investment was
17 34 made unless certain circumstances arise.
17 35 The bill requires certified capital companies to meet
18 1 certain reporting requirements after the receipt of a
18 2 certified capital investment, upon the receipt of information
18 3 that a qualified business has violated an agreement, and
18 4 regarding annual activities and annual audits. The bill
18 5 requires that the reports are to be made to the department of
18 6 economic development.
18 7 The bill provides conditions under which a certified
18 8 capital company may make distributions. The bill requires the
18 9 department of economic development to conduct an annual review
18 10 of each certified capital company. The bill provides for the
18 11 decertification of a certified capital company and the
18 12 disqualification of a noncomplying investment pool. The bill
18 13 requires the department to file a report with the general
18 14 assembly every two years regarding certified capital companies
18 15 and the department's assessment of the impact of certified
18 16 capital companies.
18 17 The bill allows a certified investor to claim an insurance
18 18 premium tax credit equal to the total amount of the certified
18 19 capital investment. The bill prohibits an annual tax credit
18 20 from being claimed that exceeds 10 percent of the total amount
18 21 of the certified capital investment. The bill allows any
18 22 excess credit to be carried over to future years until
18 23 depleted. The bill provides for a recapture tax in the case
18 24 of decertification of a certified capital company or
18 25 disqualification of an investment pool. The bill allows for
18 26 the sale of a certified capital company tax credit.
18 27 LSB 2095YH 78
18 28 tm/jw/5.1
Text: HF00512 Text: HF00514 Text: HF00500 - HF00599 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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