Senate Bill 1512c1

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    Florida Senate - 1998                           CS for SB 1512

    By the Committee on Banking and Insurance and Senator Latvala





    311-1847-98

  1                      A bill to be entitled

  2         An act relating to certified capital companies;

  3         amending s. 14.2015, F.S.; requiring the Office

  4         of Tourism, Trade, and Economic Development of

  5         the Executive Office of the Governor to

  6         administer tax credits; creating s. 288.99,

  7         F.S.; creating the "Certified Capital Company

  8         Act"; providing a short title; providing a

  9         purpose; providing definitions; providing

10         certification procedures; providing deadlines;

11         requiring an application fee; providing grounds

12         for application denial or decertification;

13         requiring the Department of Banking and Finance

14         to enforce certification and decertification

15         procedures; requiring certification reports

16         filed with the Office of Tourism, Trade, and

17         Economic Development; requiring an annual

18         renewal fee; specifying investment benchmarks;

19         specifying depositories for funds not invested

20         in qualified businesses; providing a credit

21         against premium tax liability; specifying

22         effect of credit on retaliatory tax; providing

23         an aggregate premium tax credit cap; providing

24         a tax credit allocation formula; requiring

25         forfeiture of tax credits under certain

26         circumstances; providing for an annual report

27         by each certified capital company; requiring

28         the Office of Tourism, Trade, and Economic

29         Development to review and verify annual

30         reports; authorizing the Department of Revenue

31         to audit and examine books of certified capital

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    Florida Senate - 1998                           CS for SB 1512
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  1         companies and investors; providing for

  2         distributions to debt holders; requiring the

  3         Department of Banking and Finance to conduct

  4         annual reviews of certified capital companies;

  5         providing decertification procedures; providing

  6         a cure period; providing recapture of tax

  7         credits under certain circumstances; providing

  8         a schedule for tax credit recapture and

  9         penalties; providing for transfer of tax

10         credits; requiring the Office of Tourism,

11         Trade, and Economic Development to annually

12         report to the Governor and the Legislature;

13         providing for application and renewal fees;

14         providing rulemaking authority; creating s.

15         287.0932, F.S.; exempting certain insurers from

16         assessments and premium tax; providing

17         appropriations; providing effective dates.

18

19  Be It Enacted by the Legislature of the State of Florida:

20

21         Section 1.  Paragraphs (g) and (j) of subsection (2) of

22  section 14.2015, Florida Statutes, are amended to read:

23         14.2015  Office of Tourism, Trade, and Economic

24  Development; creation; powers and duties.--

25         (2)  The purpose of the Office of Tourism, Trade, and

26  Economic Development is to assist the Governor in working with

27  the Legislature, state agencies, business leaders, and

28  economic development professionals to formulate and implement

29  coherent and consistent policies and strategies designed to

30  provide economic opportunities for all Floridians.  To

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    Florida Senate - 1998                           CS for SB 1512
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  1  accomplish such purposes, the Office of Tourism, Trade, and

  2  Economic Development shall:

  3         (g)1.  Administer the Florida Enterprise Zone Act under

  4  ss. 290.001-290.016, the community contribution tax credit

  5  program under ss. 220.183 and 624.5105, the tax refund program

  6  for qualified target industry businesses under s. 288.106,

  7  contracts for transportation projects under s. 288.063, the

  8  sports franchise facility program under s. 288.1162, the

  9  professional golf hall of fame facility program under s.

10  288.1168, the Florida Jobs Siting Act under ss.

11  403.950-403.972, the Rural Community Development Revolving

12  Loan Fund under s. 288.065, the Regional Rural Development

13  Grants Program under s. 288.018, the Certified Capital Company

14  Act under s. 288.99, the Florida State Rural Development

15  Council, and the Rural Economic Development Initiative.

16         2.  The office may enter into contracts in connection

17  with the fulfillment of its duties concerning the Florida

18  First Business Bond Pool under chapter 159, tax incentives

19  under chapters 212 and 220, tax incentives under the Certified

20  Capital Company Act in chapter 288, foreign offices under

21  chapter 288, the Enterprise Zone program under chapter 290,

22  the Seaport Employment Training program under chapter 311, the

23  Florida Professional Sports Team License Plates under chapter

24  320, Spaceport Florida under chapter 331, Job Siting and

25  Expedited Permitting under chapter 403, and in carrying out

26  other functions that are specifically assigned to the office

27  by law.

28         (j)  Promulgate rules to carry out its functions in

29  connection with the administration of the Qualified Target

30  Industry program, the Qualified Defense Contractor program,

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    Florida Senate - 1998                           CS for SB 1512
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  1  the Certified Capital Company Act, the Enterprise Zone

  2  program, and the Florida First Business Bond pool.

  3         Section 2.  Section 288.99, Florida Statutes, is

  4  created to read:

  5         288.99  Certified Capital Company Act.--

  6         (1)  SHORT TITLE.--This section may be cited as the

  7  "Certified Capital Company Act."

  8         (2)  PURPOSE.--The primary purpose of this act is to

  9  stimulate a substantial increase in venture capital

10  investments in this state by providing an incentive for

11  insurance companies to invest in certified capital companies

12  in this state which, in turn, will make investments in new

13  businesses or in expanding businesses.  The increase in

14  investment capital flowing into new or expanding businesses is

15  intended to contribute to employment growth, create jobs which

16  exceed the average wage for the county in which the jobs are

17  created, and expand or diversify the economic base of this

18  state.

19         (3)  DEFINITIONS.--As used in this section, the term:

20         (a)  "Affiliate of an insurance company" means:

21         1.  Any person directly or indirectly beneficially

22  owning, whether through rights, options, convertible

23  interests, or otherwise, controlling, or holding power to vote

24  10 percent or more of the outstanding voting securities or

25  other ownership interests of the insurance company;

26         2.  Any person 10 percent or more of whose outstanding

27  voting securities or other ownership interest is directly or

28  indirectly beneficially owned, whether through rights,

29  options, convertible interests, or otherwise, controlled, or

30  held with power to vote by the insurance company;

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    Florida Senate - 1998                           CS for SB 1512
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  1         3.  Any person directly or indirectly controlling,

  2  controlled by, or under common control with the insurance

  3  company;

  4         4.  A partnership in which the insurance company is a

  5  general partner; or

  6         5.  Any person who is a principal, director, employee,

  7  or agent of the insurance company or an immediate family

  8  member of the principal, director, employee, or agent.

  9         (b)  "Certified capital" means an investment of cash by

10  a certified investor in a certified capital company which

11  fully funds the purchase price of either or both its equity

12  interest in the certified capital company or a qualified debt

13  instrument issued by the certified capital company.

14         (c)  "Certified capital company" means a corporation,

15  partnership, or limited liability company which:

16         1.  Is certified by the department in accordance with

17  this act.

18         2.  Receives investments of certified capital.

19         3.  Makes qualified investments as its primary

20  activity.

21         (d)  "Certified investor" means any insurance company

22  subject to premium tax liability pursuant to s. 624.509 that

23  contributes certified capital.

24         (e)  "Department" means the Department of Banking and

25  Finance.

26         (f)  "Director" means the director of the Office of

27  Tourism, Trade, and Economic Development.

28         (g)  "Office" means the Office of Tourism, Trade, and

29  Economic Development.

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    Florida Senate - 1998                           CS for SB 1512
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  1         (h)  "Premium tax liability" means any liability

  2  incurred by an insurance company under the provisions of s.

  3  624.509.

  4         (i)  "Principal" means an executive officer of a

  5  corporation, partner of a partnership, manager of a limited

  6  liability company, or any other person with equivalent

  7  executive functions.

  8         (j)  "Qualified business" means a business that meets

  9  the following conditions:

10         1.  The business is headquartered in this state and its

11  principal business operations are located in this state.

12         2.  At the time a certified capital company makes an

13  initial investment in a business, the business is a small

14  business concern as defined in 13 C.F.R., s. 121.201, "Size

15  Standards Used to Define Small Business Concerns" of the

16  United States Small Business Administration.

17

18  A business predominantly engaged in professional services

19  provided by accountants, lawyers, or physicians does not

20  constitute a qualified business.

21         (k)  "Qualified debt instrument" means a debt

22  instrument, or a hybrid of a debt instrument, issued by a

23  certified capital company, at par value or a premium, with an

24  original maturity date of at least 5 years after the date of

25  issuance, a repayment schedule which is no faster than a level

26  principal amortization over a 5-year period, and interest,

27  distribution, or payment features which are not related to the

28  profitability of the certified capital company or the

29  performance of the certified capital company's investment

30  portfolio.

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    Florida Senate - 1998                           CS for SB 1512
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  1         (l)  "Qualified distribution" means any distribution or

  2  payment to equity holders of a certified capital company for:

  3         1.  Costs and expenses of forming, syndicating,

  4  managing, and operating the certified capital company,

  5  including an annual management fee in an amount that does not

  6  exceed 2.5 percent of the certified capital of the certified

  7  capital company, plus reasonable and necessary fees in

  8  accordance with industry custom for professional services,

  9  including, but not limited to, legal and accounting services,

10  related to the operation of the certified capital company.

11         2.  Any projected increase in federal or state taxes,

12  including penalties and interest related to state and federal

13  income taxes, of the equity owners of a certified capital

14  company resulting from the earnings or other tax liability of

15  the certified capital company to the extent that the increase

16  is related to the ownership, management, or operation of a

17  certified capital company.

18         (m)  "Qualified investment" means the investment of

19  cash by a certified capital company in a qualified business

20  for the purchase of any debt, equity, or hybrid security of

21  any nature and description whatsoever, including a debt

22  instrument or security which has the characteristics of debt

23  but which provides for conversion into equity or equity

24  participation instruments such as options or warrants.

25         (4)  CERTIFICATION; GROUNDS FOR DENIAL OR

26  DECERTIFICATION.--

27         (a)  To operate as a certified capital company, a

28  corporation, partnership, or limited liability company must be

29  certified by the department pursuant to this act.

30         (b)  An applicant for certification as a certified

31  capital company must file a verified application with the

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    Florida Senate - 1998                           CS for SB 1512
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  1  department on or before September 1, 1998, in a form which the

  2  department may prescribe by rule.  The applicant shall submit

  3  a nonrefundable application fee of $7,500 to the department.

  4  The applicant shall provide:

  5         1.  The name of the applicant and the address of its

  6  principal office and each office in this state.

  7         2.  The applicant's form and place of organization and

  8  the relevant organizational documents, bylaws, and amendments

  9  or restatements of such documents, bylaws, or amendments.

10         3.  Evidence from the Department of State that the

11  applicant is registered with the Department of State as

12  required by law, maintains an active status with the

13  Department of State, and has not been dissolved or had its

14  registration revoked, canceled, or withdrawn.

15         4.  The applicant's proposed method of doing business.

16         5.  The applicant's financial condition and history,

17  including an audit report on the financial statements prepared

18  in accordance with generally accepted accounting principles

19  showing net capital of not less than $500,000 within 90 days

20  after the date the application is submitted to the department.

21  If the date of the application is more than 90 days after

22  preparation of the applicant's fiscal year-end financial

23  statements, the applicant may file financial statements

24  reviewed by an independent certified public accountant for the

25  period subsequent to the audit report, together with the

26  audited financial statement for the most recent fiscal year.

27  If the applicant has been in business less than 12 months, and

28  has not prepared an audited financial statement, the applicant

29  may file a financial statement reviewed by an independent

30  certified public accountant.

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    Florida Senate - 1998                           CS for SB 1512
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  1         (c)  Within 90 days after receipt of the completed

  2  application, or December 31, 1998, whichever comes first, the

  3  department shall grant or deny certification as a certified

  4  capital company.  If the department denies certification

  5  within the time period specified, the department shall inform

  6  the applicant of the grounds for the denial.  If the

  7  department has not granted or denied certification within the

  8  time specified, the application shall be deemed approved.  The

  9  department shall approve the application if the department

10  finds that:

11         1.  The applicant satisfies the requirements of

12  paragraph (b).

13         2.  No evidence exists that the applicant has committed

14  any act specified in paragraph (d).

15         3.  At least two of the principals have a minimum of 5

16  years of experience making venture capital investments out of

17  private equity funds, with not less than $20 million being

18  provided by third-party investors for investment in the early

19  stage of operating businesses. At least one full-time manager

20  or principal of the certified capital company who has such

21  experience must be primarily located in an office of the

22  certified capital company which is based in this state.

23         (d)  The department may deny certification or decertify

24  a certified capital company if the grounds for decertification

25  are not removed or corrected within 90 days after the notice

26  of such grounds is received by the certified capital company.

27  The department may deny certification or decertify a certified

28  capital company if the certified capital company fails to

29  maintain a net worth of at least $500,000, or if the

30  department determines that the applicant, or any principal or

31  director of the certified capital company, has:

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    Florida Senate - 1998                           CS for SB 1512
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  1         1.  Violated any provision of this section;

  2         2.  Made a material misrepresentation or false

  3  statement or concealed any essential or material fact from any

  4  person during the application process or with respect to

  5  information and reports required of certified capital

  6  companies under this section;

  7         3.  Been convicted of, or entered a plea of guilty or

  8  nolo contendere to, a crime against the laws of this state or

  9  any other state or of the United States or any other country

10  or government, including a fraudulent act in connection with

11  the operation of a certified capital company, or in connection

12  with the performance of fiduciary duties in another capacity;

13         4.  Been adjudicated liable in a civil action on

14  grounds of fraud, embezzlement, misrepresentation, or deceit;

15  or

16         5.a.  Been the subject of any decision, finding,

17  injunction, suspension, prohibition, revocation, denial,

18  judgment, or administrative order by any court of competent

19  jurisdiction, administrative law judge, or any state or

20  federal agency, national securities, commodities, or option

21  exchange, or national securities, commodities, or option

22  association, involving a material violation of any federal or

23  state securities or commodities law or any rule or regulation

24  adopted under such law, or any rule or regulation of any

25  national securities, commodities, or options exchange or

26  national securities, commodities, or options association; or

27         b.  Been the subject of any injunction or adverse

28  administrative order by a state or federal agency regulating

29  banking, insurance, finance or small loan companies, real

30  estate, mortgage brokers, or other related or similar

31  industries.

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  1

  2  For purposes of this subparagraph, the department may not deny

  3  registration to any applicant who has been continuously

  4  registered with the department for 5 years from the entry of

  5  such decision, finding, injunction, suspension, prohibition,

  6  revocation, denial, judgment, or administrative order,

  7  provided such decision, finding, injunction, suspension,

  8  prohibition, revocation, denial, judgment, or administrative

  9  order has been timely reported to the department pursuant to

10  the department's rules and regulations.

11         (e)  The certified capital company shall file a copy of

12  its certification with the office by January 15, 1999.

13         (f)  Any offering material involving the sale of

14  securities of the certified capital company shall include the

15  following statement:  "By authorizing the formation of a

16  certified capital company, the State of Florida does not

17  endorse the quality of management or the potential for

18  earnings of such company and is not liable for damages or

19  losses to a certified investor in the company.  Use of the

20  word 'certified' in an offering does not constitute a

21  recommendation or endorsement of the investment by the State

22  of Florida.  Investments in a certified capital company prior

23  to the time such company is certified are not eligible for

24  premium tax credits.  If applicable provisions of law are

25  violated, the state may require forfeiture of unused premium

26  tax credits and repayment of used premium tax credits by the

27  certified investor."

28         (g)  No insurance company or any affiliate of an

29  insurance company shall, directly or indirectly, manage or

30  control the direction of investments of, a certified capital

31  company.  This prohibition does not preclude a certified

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    Florida Senate - 1998                           CS for SB 1512
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  1  investor, insurance company, or any other party from

  2  exercising its legal rights and remedies, which may include

  3  interim management of a certified capital company, if a

  4  certified capital company is in default of its obligations

  5  under law or its contractual obligations to such certified

  6  investor, insurance company, or other party.

  7         (h)  On or before December 31 of each year, each

  8  certified capital company shall pay to the department an

  9  annual, nonrefundable renewal certification fee of $5,000.  No

10  renewal fees shall be required within 6 months after the date

11  of initial certification.

12         (i)  The department shall administer and provide for

13  the enforcement of certification requirements for certified

14  capital companies as provided in this act.  The department may

15  adopt any rules necessary to carry out its duties,

16  obligations, and powers related to certification, renewal of

17  certification, or decertification of certified capital

18  companies and may perform any other acts necessary for the

19  proper administration and enforcement of such duties,

20  obligations, and powers.

21         (j)  Decertification of a certified capital company

22  under this subsection does not affect the ability of certified

23  investors in such certified capital company from claiming

24  future premium tax credits earned as a result of an investment

25  in the certified capital company during the period in which it

26  was duly certified.

27         (5)  INVESTMENTS BY CERTIFIED CAPITAL COMPANIES.--

28         (a)  To remain certified, a certified capital company

29  must make qualified investments according to the following

30  schedule:

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    Florida Senate - 1998                           CS for SB 1512
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  1         1.  At least 20 percent of its certified capital must

  2  be invested in qualified investments by December, 31, 2000.

  3         2.  At least 30 percent of its certified capital must

  4  be invested in qualified investments by December 31, 2001.

  5         3.  At least 40 percent of its certified capital must

  6  be invested in qualified investments by December 31, 2002.

  7         4.  At least 50 percent of its certified capital must

  8  be invested in qualified investments by December 31, 2003. At

  9  least 50 percent of such qualified investments must be

10  invested in qualified businesses having less than $5 million

11  in annual revenues for the fiscal year immediately preceding

12  the investment by the certified capital company.

13         (b)  All capital not invested in qualified investments

14  by the certified capital company:

15         1.  Must be held in a financial institution as defined

16  by s. 655.005(1)(h) or held by a broker-dealer registered

17  under s. 517.12.

18         2.  Must not be invested in a certified investor of the

19  certified capital company or any affiliate of the certified

20  investor of the certified capital company.

21         3.  Must be invested only in:

22         a.  Any United States Treasury obligations;

23         b.  Certificates of deposit or other obligations,

24  maturing within 3 years after acquisition of such certificates

25  or obligations, issued by any financial institution or trust

26  company incorporated under the laws of the United States;

27         c.  Marketable obligations, maturing within 5 years or

28  less after the acquisition of such obligations, which are

29  rated "A" or better by any nationally recognized credit rating

30  agency;

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  1         d.  Mortgage-backed securities, with an average life of

  2  5 years or less, after the acquisition of such securities,

  3  which are rated "A" or better by any nationally recognized

  4  credit rating agency;

  5         e.  Collateralized mortgage obligations and real estate

  6  mortgage investment conduits that are direct obligations of an

  7  agency of the United States Government; are not private-label

  8  issues; are in book-entry form; and do not include the classes

  9  of interest only, principal only, residual, or zero; or

10         f.  Interests in money market funds, the portfolio of

11  which is limited to cash and obligations described in

12  sub-subparagraphs a.-d.

13         (c)  The aggregate amount of all qualified investments

14  made by the certified capital company from the date of its

15  certification shall be considered in the calculation of the

16  percentage requirements under paragraph (a).

17         (6)  PREMIUM TAX CREDIT; AMOUNT; LIMITATIONS.--

18         (a)  Any certified investor who makes an investment of

19  certified capital shall earn a vested credit against premium

20  tax liability equal to 100 percent of the certified capital

21  invested by the certified investor.  Certified investors shall

22  be entitled to use no more than 10 percentage points of the

23  vested premium tax credit, including any carryforward credits

24  under this act, per year beginning with premium tax filings

25  for calendar year 2000.  Any premium tax credits not used by

26  certified investors in any single year may be carried forward

27  and applied against the premium tax liabilities of such

28  investors for subsequent calendar years.  The carryforward

29  credit may be applied against subsequent premium tax filings

30  through calendar year 2017.

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  1         (b)  The credit to be applied against premium tax

  2  liability in any single year may not exceed the premium tax

  3  liability of the certified investor for that taxable year.

  4         (c)  A certified investor claiming a credit against

  5  premium tax liability earned through an investment in a

  6  certified capital company shall not be required to pay any

  7  additional retaliatory tax levied pursuant to s. 624.5091 as a

  8  result of claiming such credit.  Because credits under this

  9  section are available to a certified investor, s. 624.5091

10  does not limit such credit in any manner.

11         (7)  ANNUAL TAX CREDIT; MAXIMUM AMOUNT; ALLOCATION

12  PROCESS.--

13         (a)  The total amount of tax credits which may be

14  allocated by the office shall not exceed $500 million.  The

15  total amount of tax credits which may be used by certified

16  investors under this act shall not exceed $50 million

17  annually.

18         (b)  The office shall be responsible for allocating

19  premium tax credits as provided for in this act to certified

20  capital companies.

21         (c)  Each certified capital company must apply to the

22  office for an allocation of premium tax credits for potential

23  certified investors by February 15, 1999, on a form developed

24  by the office with the cooperation of the Department of

25  Revenue.  The form shall be accompanied by an affidavit from

26  each potential certified investor confirming that the

27  potential certified investor has agreed to make an investment

28  of certified capital in a certified capital company up to a

29  specified amount, subject only to the receipt of a premium tax

30  credit allocation pursuant to this subsection. No allocation

31  shall be made to the potential investors of a certified

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  1  capital company unless such certified capital company has

  2  filed premium tax allocation claims that would result in an

  3  allocation to the potential investors in such certified

  4  capital company of not less than $15 million in the aggregate.

  5         (d)  On or before April 1, 1999, the office shall

  6  inform each certified capital company of its share of total

  7  premium tax credits available for allocation to each of its

  8  potential investors.

  9         (e)  If a certified capital company does not receive

10  certified capital equaling the amount of premium tax credits

11  allocated to a potential certified investor for which the

12  investor filed a premium tax allocation claim within 10

13  business days after the investor received a notice of

14  allocation, the certified capital company shall notify the

15  office by overnight common carrier delivery service of the

16  company's failure to receive the capital.  That portion of the

17  premium tax credits allocated to the certified capital company

18  shall be forfeited.  If the office must make a pro rata

19  allocation under paragraph (f), the office shall reallocate

20  such available credits among the other certified capital

21  companies on the same pro rata basis as the initial

22  allocation.

23         (f)  If the total amount of capital committed by all

24  certified investors to certified capital companies in premium

25  tax allocation claims exceeds the aggregate cap on the amount

26  of credits that may be awarded, the premium tax credits that

27  may be allowed to any one certified investor shall be

28  allocated using the following ratio:

29

30                       A/B = X/$500,000,000

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  1  where the letter "A" represents the total amount of certified

  2  capital certified investors have agreed to invest in any one

  3  certified capital company, the letter "B" represents the

  4  aggregate amount of certified capital that all certified

  5  investors have agreed to invest in all certified capital

  6  companies, the letter "X" is the numerator and represents the

  7  total amount of premium tax credits and certified capital that

  8  may be allocated to a certified capital company in calendar

  9  year 1999, and $500 million is the denominator and represents

10  the total amount of premium tax credits and certified capital

11  that may be allocated to all certified investors in calendar

12  year 1999. Any such premium tax credits are not first

13  available for utilization until annual filings are made in

14  2001 for calendar year 2000, and the tax credits may be used

15  at a rate not to exceed 10 percent annually.

16         (g)  The maximum amount of certified capital for which

17  premium tax allocation claims may be filed on behalf of any

18  certified investor and its affiliates by one or more certified

19  companies may not exceed $50 million.

20         (h)  To the extent that less than $500 million in

21  certified capital is raised in connection with the procedure

22  set forth in paragraphs (c)-(g), the department may adopt

23  rules to allow a subsequent allocation of the remaining

24  premium tax credits authorized under this section.

25         (8)  ANNUAL TAX CREDIT; CLAIM PROCESS.--

26         (a)  On an annual basis, on or before December 31, each

27  certified capital company shall file with the department and

28  the office, in consultation with the department, on a form

29  prescribed by the office, for each calendar year:

30         1.  The total dollar amount the certified capital

31  company received from certified investors, the identity of the

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  1  certified investors, and the amount received from each

  2  certified investor during the calendar year.

  3         2.  The total dollar amount the certified capital

  4  company invested and the amount invested in qualified

  5  businesses, together with the identity and location of those

  6  businesses and the amount invested in each qualified business.

  7         3.  For informational purposes only, the total number

  8  of permanent, full-time jobs either created or retained by the

  9  qualified business during the calendar year, the average wage

10  of the jobs created or retained, the industry sectors in which

11  the qualified businesses operate, and any additional capital

12  invested in qualified businesses from sources other than

13  certified capital companies.

14         (b)  The form shall be verified by one or more

15  principals of the certified capital company submitting the

16  form.  Verification shall be accomplished as provided in s.

17  92.525(1)(b) and subject to the provisions of s. 92.525(3).

18         (c)  The office shall review the form, and any

19  supplemental documentation, submitted by each certified

20  capital company for the purpose of verifying:

21         1.  That the businesses in which certified capital has

22  been invested by the certified capital company are in fact

23  qualified businesses, and that the amount of certified capital

24  invested by the certified capital company is as represented in

25  the form.

26         2.  The amount of certified capital invested in the

27  certified capital company by the certified investors.

28         3.  The amount of premium tax credit available to

29  certified investors.

30         (d)  The Department of Revenue is authorized to audit

31  and examine the accounts, books, or records of certified

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  1  capital companies and certified investors for the purpose of

  2  ascertaining the correctness of any report and financial

  3  return which has been filed, and to ascertain a certified

  4  capital company's compliance with the tax-related provisions

  5  of this act.

  6         (e)  This subsection shall take effect January 1, 1999.

  7         (9)  DISTRIBUTIONS.--A certified capital company may

  8  make qualified distributions at any time. In order to make a

  9  distribution to its equity holders, other than a qualified

10  distribution, a certified capital company must have invested

11  an amount cumulatively equal to 100 percent of its certified

12  capital in qualified investments. Payments to debt holders of

13  a certified capital company, however, may be made without

14  restriction with respect to repayments of principal and

15  interest on indebtedness owed to them by a certified capital

16  company, including indebtedness of the certified capital

17  company on which certified investors earned premium tax

18  credits. A debt holder that is also a certified investor or

19  equity holder of a certified capital company may receive

20  payments with respect to such debt without restrictions.

21         (10)  DECERTIFICATION.--

22         (a)  The department shall conduct an annual review of

23  each certified capital company to determine if the certified

24  capital company is abiding by the requirements of

25  certification, to advise the certified capital company as to

26  the eligibility status of its qualified investments, and to

27  ensure that no investment has been made in violation of this

28  act. The cost of the annual review shall be paid by each

29  certified capital company.

30         (b)  Any material violation of this section, or a

31  finding that the certified capital company or any principal or

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  1  director thereof has committed any act specified in paragraph

  2  (4)(d), shall be grounds for decertification of the certified

  3  capital company. If the department determines that a certified

  4  capital company is no longer in compliance with the

  5  certification requirements of this act, the department shall,

  6  by written notice, inform the officers of such company that

  7  the company may be subject to decertification 90 days after

  8  the date of mailing of the notice, unless the deficiencies are

  9  corrected and such company is again found to be in compliance

10  with all certification requirements.

11         (c)  At the end of the 90-day grace period, if the

12  certified capital company is still not in compliance with the

13  certification requirements, the department may issue a notice

14  to revoke or suspend the certification or to impose an

15  administrative fine. The department shall advise each

16  respondent of the right to an administrative hearing under

17  chapter 120 prior to final action by the department.

18         (d)  If the department revokes a certification, such

19  revocation shall also deny, suspend, or revoke the

20  certifications of all affiliates of the certified capital

21  company.

22         (e)  Decertification of a certified capital company for

23  failure to meet all requirements for continued certification

24  under paragraph (5)(a) may cause the recapture of premium tax

25  credits previously claimed by such company and the forfeiture

26  of future premium tax credits to be claimed by certified

27  investors with respect to such certified capital company, as

28  follows:

29         1.  Decertification of a certified capital company

30  within 3 years after its certification date shall cause the

31  recapture of all premium tax credits previously claimed by

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  1  such company and the forfeiture of all future premium tax

  2  credits to be claimed by certified investors with respect to

  3  such company.

  4         2.  When a certified capital company meets all

  5  requirements for continued certification under subparagraph

  6  (5)(a)1. and subsequently fails to meet the requirements for

  7  continued certification under the provisions of subparagraph

  8  (5)(a)2., those premium tax credits which have been or will be

  9  taken by certified investors within 3 years after the

10  certification date of the certified capital company shall not

11  be subject to recapture or forfeiture; however, all premium

12  tax credits that have been or will be taken by certified

13  investors after the third anniversary of the certification

14  date of the certified capital company shall be subject to

15  recapture or forfeiture.

16         3.  When a certified capital company meets all

17  requirements for continued certification under subparagraphs

18  (5)(a)1. and 2. and subsequently fails to meet the

19  requirements for continued certification under the

20  subparagraph (5)(a)3., those premium tax credits which have

21  been or will be taken by certified investors within 4 years

22  after the certification date of the certified capital company

23  shall not be subject to recapture or forfeiture; however, all

24  premium tax credits that have been or will be taken by

25  certified investors after the fourth anniversary of the

26  certification date of the certified capital company shall be

27  subject to recapture and forfeiture.

28         4.  If a certified capital company has met all

29  requirements for continued certification under paragraph

30  (5)(a), but such company is subsequently decertified, those

31  premium tax credits which have been or will be taken by

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  1  certified investors within 5 years after the certification

  2  date of such company shall not be subject to recapture or

  3  forfeiture. Those premium tax credits to be taken subsequent

  4  to the 5th year of certification shall be subject to

  5  forfeiture only if the certified capital company is

  6  decertified within 5 years after its certification date.

  7         5.  If a certified capital company has invested an

  8  amount cumulatively equal to 100 percent of its certified

  9  capital in qualified investments, all premium tax credits

10  claimed or to be claimed by its certified investors shall not

11  be subject to recapture or forfeiture.

12         (f)  Decertification of a certified capital company

13  pursuant to subsection (4) or this subsection does not affect

14  the ability of certified investors in such certified capital

15  company to continue to claim future premium tax credits earned

16  as an investment in the certified capital company during the

17  period in which it was duly certified.

18         (g)  The office shall send written notice to the

19  address of each certified investor whose premium tax credit

20  has been subject to recapture or forfeiture, using the address

21  last shown on the last premium tax filing.

22         (h)  The certified investor is responsible for

23  returning to the Department of Revenue any forfeited insurance

24  premium tax credits and such funds shall be paid into the

25  General Revenue Fund of the state.

26         (i)  The certified investor shall file with the

27  Department of Revenue an amended return or such other report

28  as the department may prescribe by regulation and pay any

29  required tax, not later than 60 days after such

30  decertification has been agreed to or finally determined,

31  whichever shall first occur.

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  1         (j)  A notice of deficiency may be issued:

  2         1.  At any time within 5 years after the date such

  3  notification is given; or

  4         2.  At any time if a certified investor fails to notify

  5  the Department of Revenue.

  6

  7  In either case, the amount of any proposed assessment set

  8  forth in such notice shall be limited to the amount of any

  9  deficiency resulting under this act from the recomputation of

10  the certified investor's insurance premium tax and, if

11  applicable, its retaliatory tax for the taxable year giving

12  effect only to the item or items reflected in the

13  decertification adjustment.

14         (k)  Any certified investor who fails to report and

15  timely pay any tax due as a result of the forfeiture of its

16  insurance premium tax credit is in violation of this

17  subsection and is subject to a penalty of 10 percent of any

18  underpayment or delinquent taxes due and payable.

19         (l)  When any taxpayer fails to pay any amount due as a

20  result of the forfeiture of its insurance premium tax credit

21  as provided for in this subsection, on or before the due date

22  as specified in this subsection, interest shall be due on any

23  insurance premium or retaliatory tax deficiency resulting from

24  such forfeiture, at the rate of 12 percent per year from the

25  due date of such amended return until paid.

26         (11)  TRANSFERABILITY.--The claim of a transferee of a

27  certified investor's unused premium tax credit shall be

28  permitted in the same manner and subject to the same

29  provisions and limitations of this act as the original

30  certified investor.  The term "transferee" means any person

31  who:

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  1         (a)  Through the voluntary sale, assignment, or other

  2  transfer of the business or control of the business of the

  3  certified investor, including the sale or other transfer of

  4  stock or assets by merger, consolidation, or dissolution,

  5  succeeds to all or substantially all of the business and

  6  property of the certified investor;

  7         (b)  Becomes by operation of law or otherwise the

  8  parent company of the certified investor; or

  9         (c)  Directly or indirectly owns, whether through

10  rights, options, convertible interests, or otherwise,

11  controls, or holds power to vote 10 percent or more of the

12  outstanding voting securities or other ownership interest of

13  the certified investor.

14         (12)  REPORTING REQUIREMENTS.--

15         (a)  The office shall report on an annual basis to the

16  Governor, the President of the Senate, and the Speaker of the

17  House of Representatives on or before April 1:

18         1.  The total dollar amount each certified capital

19  company received from all certified investors and any other

20  investor, the identity of the certified investors, and the

21  total amount of premium tax credit used by each certified

22  investor for the previous calendar year.

23         2.  The total dollar amount invested by each certified

24  capital company and that portion invested in qualified

25  businesses, the identity and location of those businesses, the

26  amount invested in each qualified business, and the total

27  number of permanent, full-time jobs created or retained by

28  each qualified business.

29         3.  The return for the state as a result of the

30  certified capital company investments, including the extent to

31  which:

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  1         a.  Certified capital company investments have

  2  contributed to employment growth.

  3         b.  The wage level of businesses in which certified

  4  capital companies have invested exceed the average wage for

  5  the county in which the jobs are located.

  6         c.  The investments of the certified capital companies

  7  in qualified businesses have contributed to expanding or

  8  diversifying the economic base of the state.

  9         (13)  FEES.--All fees and charges of any nature

10  collected by the department pursuant to this act shall be paid

11  into the State Treasury and credited to the General Revenue

12  Fund.

13         (14)  RULEMAKING AUTHORITY.--

14         (a)  The Department of Revenue may by rule prescribe

15  forms and procedures for the tax credit filings, audits, and

16  forfeiture of premium tax credits described in this section.

17         (b)  The office may adopt any rules necessary to carry

18  out its duties, obligations, and powers related to the

19  administration, review, and reporting provisions of this

20  section and may perform any other acts necessary for the

21  proper administration and enforcement of such duties,

22  obligations, and powers.

23         Section 3.  There is hereby appropriated $240,434 for

24  fiscal year 1998-1999 from the General Revenue Fund to the

25  Department of Banking and Finance and four additional career

26  service positions are authorized within the department for the

27  purpose of enforcing the provisions of this act.

28         Section 4.  There is hereby appropriated $100,000 from

29  the General Revenue Fund to the Office of Tourism, Trade, and

30  Economic Development to implement this act.

31

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  1         Section 5.  Section 287.0932, Florida Statutes, is

  2  created to read:

  3         287.0932  Minority business enterprises.--

  4         (1)  A minority business, which is at least 51 percent

  5  owned by minority persons as described in s. 288.703(3),

  6  desiring to operate or become licensed as a property and

  7  casualty insurer shall be exempt, for a period of 5 years from

  8  the date of receiving authority to transact insurance pursuant

  9  to s. 624.407, from any and all assessments described in s.

10  627.351 and from any requirements of s. 624.509.

11         (2)  For the purpose of meeting the requirements of

12  subsection (1), the insurer must:

13         (a)  Be domiciled in this state;

14         (b)  Have permanent employees in this state;

15         (c)  Have an office in this state; and

16         (d)  Have at least 20 percent of its policies written

17  and located in urban and inner-city areas that are

18  metropolitan statistical areas as defined in 42 U.S.C.

19  12902(5). However, the requirement that the minority persons

20  as described in s. 288.703(3) be permanent residents of this

21  state does not apply to this section and to the requirements

22  set forth in s. 627.3511.

23         (3)  This section expires July 1, 2003.

24         Section 6.  Except as otherwise provided herein, this

25  act shall take effect upon becoming a law.

26

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  1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
  2                         Senate Bill 1512

  3

  4  The Committee Substitute makes the following changes:

  5  1.   Accelerates the deadline for filing an application for
         certification from October 1, 1998, to September 1, 1998;
  6
    2.   Revises the requirements for qualification of the
  7       principles applying for certification;

  8  3.   Provides that decertification of a certified capital
         company does not affect the ability of a certified
  9       investor to continue to claim future premium tax credits
         earned prior to the decertification;
10
    4.   Revises the qualified investment requirements of a
11       certified capital company to decrease the percent of
         qualified investments required by December 31, 2000;
12
    5.   Requires at least 50 percent of such qualified
13       investments must be invested in qualified investments
         with $5 million in annual revenues by December 31, 2003;
14
    6.   Revises the guidelines for investment of capital not
15       invested by certified capital companys;

16  7.   Authorizes certified investors to use no more than 10
         percentage points of the premium tax credit per year
17       beginning with premium tax filings for calendar year
         2000;
18
    8.   Prohibits an allocation to potential investors of the
19       certified capital company, unless such certified capital
         company has filed premium tax allocations resulting a
20       minimum of $15 million;

21  9.   Clarifies the formula to be used for allocation premium
         tax credits in the event oversubscription occurs;
22
    10.  Provides that the maximum amount of certified capital for
23       which premium tax credits may be filed by certified
         capital companys annually is $50 million;
24
    11.  Revises reporting requirements of the certified capital
25       company to include information regarding wages for jobs
         created;
26
    12.  Provides specific rulemaking authority for the Department
27       of Banking and Finance;

28  13.  Authorizes four full-time employees for the Department of
         Banking and Finance.
29

30

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