Senate Bill 1512c2

CODING: Words stricken are deletions; words underlined are additions.



    Florida Senate - 1998                    CS for CS for SB 1512

    By the Committees on Ways and Means; Banking and Insurance;
    and Senators Latvala and Forman




    301-2229A-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

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  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 requirements for distributions;

  6         providing  decertification procedures;

  7         providing a cure period; providing recapture of

  8         tax credits under certain circumstances;

  9         providing a schedule for tax credit recapture

10         and penalties; providing for transfer of tax

11         credits; requiring the Office of Tourism,

12         Trade, and Economic Development to annually

13         report to the Governor and the Legislature;

14         providing for application and renewal fees;

15         providing rulemaking authority; providing

16         appropriations; providing effective dates.

17

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

19

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

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

22         14.2015  Office of Tourism, Trade, and Economic

23  Development; creation; powers and duties.--

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

25  Economic Development is to assist the Governor in working with

26  the Legislature, state agencies, business leaders, and

27  economic development professionals to formulate and implement

28  coherent and consistent policies and strategies designed to

29  provide economic opportunities for all Floridians.  To

30  accomplish such purposes, the Office of Tourism, Trade, and

31  Economic Development shall:

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

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

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

  4  for qualified target industry businesses under s. 288.106,

  5  contracts for transportation projects under s. 288.063, the

  6  sports franchise facility program under s. 288.1162, the

  7  professional golf hall of fame facility program under s.

  8  288.1168, the Florida Jobs Siting Act under ss.

  9  403.950-403.972, the Rural Community Development Revolving

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

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

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

13  Council, and the Rural Economic Development Initiative.

14         2.  The office may enter into contracts in connection

15  with the fulfillment of its duties concerning the Florida

16  First Business Bond Pool under chapter 159, tax incentives

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

18  Capital Company Act in chapter 288, foreign offices under

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

20  the Seaport Employment Training program under chapter 311, the

21  Florida Professional Sports Team License Plates under chapter

22  320, Spaceport Florida under chapter 331, Job Siting and

23  Expedited Permitting under chapter 403, and in carrying out

24  other functions that are specifically assigned to the office

25  by law.

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

27  connection with the administration of the Qualified Target

28  Industry program, the Qualified Defense Contractor program,

29  the Certified Capital Company Act, the Enterprise Zone

30  program, and the Florida First Business Bond pool.

31

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1         Section 2.  Section 288.99, Florida Statutes, is

  2  created to read:

  3         288.99  Certified Capital Company Act.--

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

  5  "Certified Capital Company Act."

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

  7  stimulate a substantial increase in venture capital

  8  investments in this state by providing an incentive for

  9  insurance companies to invest in certified capital companies

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

11  businesses or in expanding businesses.  The increase in

12  investment capital flowing into new or expanding businesses is

13  intended to contribute to employment growth, create jobs which

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

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

16  state.

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

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

19         1.  Any person directly or indirectly beneficially

20  owning, whether through rights, options, convertible

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

22  10 percent or more of the outstanding voting securities or

23  other ownership interests of the insurance company;

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

25  voting securities or other ownership interest is directly or

26  indirectly beneficially owned, whether through rights,

27  options, convertible interests, or otherwise, controlled, or

28  held with power to vote by the insurance company;

29         3.  Any person directly or indirectly controlling,

30  controlled by, or under common control with the insurance

31  company;

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  general partner; or

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

  4  or agent of the insurance company or an immediate family

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

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

  7  a certified investor in a certified capital company which

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

  9  interest in the certified capital company or a qualified debt

10  instrument issued by the certified capital company.

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

12  partnership, or limited liability company which:

13         1.  Is certified by the department in accordance with

14  this act.

15         2.  Receives investments of certified capital.

16         3.  Makes qualified investments as its primary

17  activity.

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

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

20  contributes certified capital.

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

22  Finance.

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

24  Tourism, Trade, and Economic Development.

25         (g)  "Early stage technology business" means a

26  qualified business that is involved, at the time of the

27  certified capital company's initial investment in such

28  business, in activities related to developing initial product

29  or service offerings, such as prototype development or the

30  establishment of initial production or service processes. The

31  term includes a qualified business that is less than 2 years

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  old and has, together with its affiliates, less than $3

  2  million in annual revenues for the fiscal year immediately

  3  preceding the initial investment by the certified capital

  4  company on a consolidated basis, as determined in accordance

  5  with generally accepted accounting principles.

  6         (h)  "Office" means the Office of Tourism, Trade, and

  7  Economic Development.

  8         (i)  "Premium tax liability" means any liability

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

10  624.509.

11         (j)  "Principal" means an executive officer of a

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

13  liability company, or any other person with equivalent

14  executive functions.

15         (k)  "Qualified business" means a business that meets

16  the following conditions:

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

18  principal business operations are located in this state.

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

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

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

22  Standards Used to Define Small Business Concerns" of the

23  United States Small Business Administration which is involved

24  in manufacturing, processing or assembling products,

25  conducting research and development, or providing services.

26         3.  At the time a certified capital company makes an

27  initial investment in a business, the business certifies in an

28  affidavit that:

29         a.  The business is unable to obtain conventional

30  financing, which means that the business has failed in an

31  attempt to obtain funding for a loan from a bank or other

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  commercial lender or that the business cannot reasonably be

  2  expected to qualify for such financing under the standards of

  3  commercial lending;

  4         b.  The business plan for the business projects that

  5  the business is reasonably expected to achieve in excess of

  6  $25 million in sales revenue within 5 years after the initial

  7  investment;

  8         c.  The business will maintain its headquarters in this

  9  state for the next 10 years and any new manufacturing facility

10  financed by a qualified investment will remain in this state

11  for the next 10 years; and

12         d.  The business has fewer than 200 employees and at

13  least 75 percent of the employees are employed in this state.

14

15  A business predominantly engaged in retail sales, real estate

16  development, insurance, banking, lending, oil and gas

17  exploration or engaged in professional services provided by

18  accountants, lawyers, or physicians does not constitute a

19  qualified business.

20         (l)  "Qualified debt instrument" means a debt

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

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

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

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

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

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

27  profitability of the certified capital company or the

28  performance of the certified capital company's investment

29  portfolio.

30         (m)  "Qualified distribution" means any distribution or

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

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1         1.  Costs and expenses of forming, syndicating,

  2  managing, and operating the certified capital company,

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

  4  exceed 2.5 percent of the certified capital of the certified

  5  capital company, plus reasonable and necessary fees in

  6  accordance with industry custom for professional services,

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

  8  related to the operation of the certified capital company.

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

10  including penalties and interest related to state and federal

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

12  company resulting from the earnings or other tax liability of

13  the certified capital company to the extent that the increase

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

15  certified capital company.

16         (n)  "Qualified investment" means the investment of

17  cash by a certified capital company in a qualified business

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

19  any nature and description whatsoever, including a debt

20  instrument or security which has the characteristics of debt

21  but which provides for conversion into equity or equity

22  participation instruments such as options or warrants.

23         (4)  CERTIFICATION; GROUNDS FOR DENIAL OR

24  DECERTIFICATION.--

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

26  corporation, partnership, or limited liability company must be

27  certified by the department pursuant to this act.

28         (b)  An applicant for certification as a certified

29  capital company must file a verified application with the

30  department on or before December 1, 1998, in a form which the

31  department may prescribe by rule.  The applicant shall submit

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  The applicant shall provide:

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

  4  principal office and each office in this state.

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

  6  the relevant organizational documents, bylaws, and amendments

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

  8         3.  Evidence from the Department of State that the

  9  applicant is registered with the Department of State as

10  required by law, maintains an active status with the

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

12  registration revoked, canceled, or withdrawn.

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

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

15  including an audit report on the financial statements prepared

16  in accordance with generally accepted accounting principles

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

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

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

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

21  statements, the applicant may file financial statements

22  reviewed by an independent certified public accountant for the

23  period subsequent to the audit report, together with the

24  audited financial statement for the most recent fiscal year.

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

26  has not prepared an audited financial statement, the applicant

27  may file a financial statement reviewed by an independent

28  certified public accountant.

29         (c)  On December 31, 1998, the department shall grant

30  or deny certification as a certified capital company.  If the

31  department denies certification within the time period

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  specified, the department shall inform the applicant of the

  2  grounds for the denial.  If the department has not granted or

  3  denied certification within the time specified, the

  4  application shall be deemed approved.  The department shall

  5  approve the application if the department finds that:

  6         1.  The applicant satisfies the requirements of

  7  paragraph (b).

  8         2.  No evidence exists that the applicant has committed

  9  any act specified in paragraph (d).

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

11  years of experience making venture capital investments out of

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

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

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

15  or principal of the certified capital company who has such

16  experience must be primarily located in an office of the

17  certified capital company which is based in this state.

18         (d)  The department may deny certification or decertify

19  a certified capital company if the grounds for decertification

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

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

22  The department may deny certification or decertify a certified

23  capital company if the certified capital company fails to

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

25  department determines that the applicant, or any principal or

26  director of the certified capital company, has:

27         1.  Violated any provision of this section;

28         2.  Made a material misrepresentation or false

29  statement or concealed any essential or material fact from any

30  person during the application process or with respect to

31

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  information and reports required of certified capital

  2  companies under this section;

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

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

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

  6  or government, including a fraudulent act in connection with

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

  8  with the performance of fiduciary duties in another capacity;

  9         4.  Been adjudicated liable in a civil action on

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

11  or

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

13  injunction, suspension, prohibition, revocation, denial,

14  judgment, or administrative order by any court of competent

15  jurisdiction, administrative law judge, or any state or

16  federal agency, national securities, commodities, or option

17  exchange, or national securities, commodities, or option

18  association, involving a material violation of any federal or

19  state securities or commodities law or any rule or regulation

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

21  national securities, commodities, or options exchange or

22  national securities, commodities, or options association; or

23         b.  Been the subject of any injunction or adverse

24  administrative order by a state or federal agency regulating

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

26  estate, mortgage brokers, or other related or similar

27  industries.

28

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

30  registration to any applicant who has been continuously

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

                                  11

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  such decision, finding, injunction, suspension, prohibition,

  2  revocation, denial, judgment, or administrative order,

  3  provided such decision, finding, injunction, suspension,

  4  prohibition, revocation, denial, judgment, or administrative

  5  order has been timely reported to the department pursuant to

  6  the department's rules and regulations.

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

  8  its certification with the office by January 31, 1999.

  9         (f)  Any offering material involving the sale of

10  securities of the certified capital company shall include the

11  following statement:  "By authorizing the formation of a

12  certified capital company, the State of Florida does not

13  endorse the quality of management or the potential for

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

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

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

17  recommendation or endorsement of the investment by the State

18  of Florida.  Investments in a certified capital company prior

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

20  premium tax credits.  If applicable provisions of law are

21  violated, the state may require forfeiture of unused premium

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

23  certified investor."

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

25  insurance company shall, directly or indirectly, manage or

26  control the direction of investments of, a certified capital

27  company.  This prohibition does not preclude a certified

28  investor, insurance company, or any other party from

29  exercising its legal rights and remedies, which may include

30  interim management of a certified capital company, if a

31  certified capital company is in default of its obligations

                                  12

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  under law or its contractual obligations to such certified

  2  investor, insurance company, or other party.

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

  4  certified capital company shall pay to the department an

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

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

  7  of initial certification.

  8         (i)  The department shall administer and provide for

  9  the enforcement of certification requirements for certified

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

11  adopt any rules necessary to carry out its duties,

12  obligations, and powers related to certification, renewal of

13  certification, or decertification of certified capital

14  companies and may perform any other acts necessary for the

15  proper administration and enforcement of such duties,

16  obligations, and powers.

17         (j)  Decertification of a certified capital company

18  under this subsection does not affect the ability of certified

19  investors in such certified capital company from claiming

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

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

22  was duly certified.

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

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

25  must make qualified investments according to the following

26  schedule:

27         1.  At least 20 percent of its certified capital must

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

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

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

31

                                  13

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

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

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

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

  5  least 50 percent of such qualified investments must be

  6  invested in early stage technology businesses.

  7         (b)  All capital not invested in qualified investments

  8  by the certified capital company:

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

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

11  under s. 517.12.

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

13  certified capital company or any affiliate of the certified

14  investor of the certified capital company.

15         3.  Must be invested only in:

16         a.  Any United States Treasury obligations;

17         b.  Certificates of deposit or other obligations,

18  maturing within 3 years after acquisition of such certificates

19  or obligations, issued by any financial institution or trust

20  company incorporated under the laws of the United States;

21         c.  Marketable obligations, maturing within 5 years or

22  less after the acquisition of such obligations, which are

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

24  agency;

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

26  5 years or less, after the acquisition of such securities,

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

28  credit rating agency;

29         e.  Collateralized mortgage obligations and real estate

30  mortgage investment conduits that are direct obligations of an

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

                                  14

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

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

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

  4  which is limited to cash and obligations described in

  5  sub-subparagraphs a.-d.

  6         (c)  The aggregate amount of all qualified investments

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

  8  certification shall be considered in the calculation of the

  9  percentage requirements under paragraph (a).

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

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

12  certified capital shall earn a vested credit against premium

13  tax liability equal to 100 percent of the certified capital

14  invested by the certified investor.  Certified investors shall

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

16  vested premium tax credit, including any carryforward credits

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

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

19  certified investors in any single year may be carried forward

20  and applied against the premium tax liabilities of such

21  investors for subsequent calendar years.  The carryforward

22  credit may be applied against subsequent premium tax filings

23  through calendar year 2017.

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

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

26  liability of the certified investor for that taxable year.

27         (c)  A certified investor claiming a credit against

28  premium tax liability earned through an investment in a

29  certified capital company shall not be required to pay any

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

31  result of claiming such credit.  Because credits under this

                                  15

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  does not limit such credit in any manner.

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

  4  PROCESS.--

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

  6  allocated by the office shall not exceed $150 million. The

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

  8  investors under this act shall not exceed $15 million

  9  annually.

10         (b)  The office shall be responsible for allocating

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

12  capital companies.

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

14  office for an allocation of premium tax credits for potential

15  certified investors by March 15, 1999, on a form developed by

16  the office with the cooperation of the Department of Revenue.

17  The form shall be accompanied by an affidavit from each

18  potential certified investor confirming that the potential

19  certified investor has agreed to make an investment of

20  certified capital in a certified capital company up to a

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

22  credit allocation pursuant to this subsection. No allocation

23  shall be made to the potential investors of a certified

24  capital company unless such certified capital company has

25  filed premium tax allocation claims that would result in an

26  allocation to the potential investors in such certified

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

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

29  inform each certified capital company of its share of total

30  premium tax credits available for allocation to each of its

31  potential investors.

                                  16

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  certified capital equaling the amount of premium tax credits

  3  allocated to a potential certified investor for which the

  4  investor filed a premium tax allocation claim within 10

  5  business days after the investor received a notice of

  6  allocation, the certified capital company shall notify the

  7  office by overnight common carrier delivery service of the

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

  9  premium tax credits allocated to the certified capital company

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

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

12  such available credits among the other certified capital

13  companies on the same pro rata basis as the initial

14  allocation.

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

16  certified investors to certified capital companies in premium

17  tax allocation claims exceeds the aggregate cap on the amount

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

19  may be allowed to any one certified investor shall be

20  allocated using the following ratio:

21

22                       A/B = X/$150,000,000

23

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

25  capital certified investors have agreed to invest in any one

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

27  aggregate amount of certified capital that all certified

28  investors have agreed to invest in all certified capital

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

30  total amount of premium tax credits and certified capital that

31  may be allocated to a certified capital company in calendar

                                  17

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  year 1999, and $150 million is the denominator and represents

  2  the total amount of premium tax credits and certified capital

  3  that may be allocated to all certified investors in calendar

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

  5  available for utilization until annual filings are made in

  6  2001 for calendar year 2000, and the tax credits may be used

  7  at a rate not to exceed 10 percent annually.

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

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

10  certified investor and its affiliates by one or more certified

11  companies may not exceed $15 million.

12         (h)  To the extent that less than $150 million in

13  certified capital is raised in connection with the procedure

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

15  rules to allow a subsequent allocation of the remaining

16  premium tax credits authorized under this section.

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

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

19  certified capital company shall file with the department and

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

21  prescribed by the office, for each calendar year:

22         1.  The total dollar amount the certified capital

23  company received from certified investors, the identity of the

24  certified investors, and the amount received from each

25  certified investor during the calendar year.

26         2.  The total dollar amount the certified capital

27  company invested and the amount invested in qualified

28  businesses, together with the identity and location of those

29  businesses and the amount invested in each qualified business.

30         3.  For informational purposes only, the total number

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

                                  18

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  qualified business during the calendar year, the average wage

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

  3  the qualified businesses operate, and any additional capital

  4  invested in qualified businesses from sources other than

  5  certified capital companies.

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

  7  principals of the certified capital company submitting the

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

  9  92.525(1)(b) and subject to the provisions of s. 92.525(3).

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

11  supplemental documentation, submitted by each certified

12  capital company for the purpose of verifying:

13         1.  That the businesses in which certified capital has

14  been invested by the certified capital company are in fact

15  qualified businesses, and that the amount of certified capital

16  invested by the certified capital company is as represented in

17  the form.

18         2.  The amount of certified capital invested in the

19  certified capital company by the certified investors.

20         3.  The amount of premium tax credit available to

21  certified investors.

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

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

24  capital companies and certified investors for the purpose of

25  ascertaining the correctness of any report and financial

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

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

28  of this act.

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

30         (9)  REQUIREMENT FOR 100 PERCENT INVESTMENT; STATE

31  PARTICIPATION.--

                                  19

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1         (a)  A certified capital company may make qualified

  2  distributions at any time. In order to make a distribution to

  3  its equity holders, other than a qualified distribution, a

  4  certified capital company must have invested an amount

  5  cumulatively equal to 100 percent of its certified capital in

  6  qualified investments. Payments to debt holders of a certified

  7  capital company, however, may be made without restriction with

  8  respect to repayments of principal and interest on

  9  indebtedness owed to them by a certified capital company,

10  including indebtedness of the certified capital company on

11  which certified investors earned premium tax credits. A debt

12  holder that is also a certified investor or equity holder of a

13  certified capital company may receive payments with respect to

14  such debt without restrictions.

15         (b)  Cumulative distributions from a certified capital

16  company to its certified investors and equity holders, other

17  than qualified distributions, in excess of the certified

18  capital company's original certified capital and any

19  additional capital contributions to the certified capital

20  company are subject to audit by a nationally recognized

21  certified public accounting firm acceptable to the department,

22  at the expense of the certified capital company. The audit

23  must determine whether aggregate cumulative distributions from

24  the certified capital company to all certified investors and

25  equity holders, other than qualified distributions, have

26  equaled the sum of the certified capital company's original

27  certified capital and any additional capital contributions to

28  the certified capital company. If at the time of any such

29  distribution made by the certified capital company, such

30  distribution, taken together with all other such distributions

31  made by the certified capital company, other than qualified

                                  20

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1  distributions, exceeds in the aggregate the sum of the

  2  certified capital company's original certified capital and any

  3  additional capital contributions to the certified capital

  4  company, as determined by the audit, then the certified

  5  capital company shall pay to the Department of Revenue 10

  6  percent of the portion of such distribution in excess of such

  7  amount. Payments to the Department of Revenue by a certified

  8  capital company pursuant to this paragraph shall not exceed

  9  the aggregate amount of tax credits utilized by all certified

10  investors in such certified capital company.

11         (10)  DECERTIFICATION.--

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

13  each certified capital company to determine if the certified

14  capital company is abiding by the requirements of

15  certification, to advise the certified capital company as to

16  the eligibility status of its qualified investments, and to

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

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

19  certified capital company.

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

21  finding that the certified capital company or any principal or

22  director thereof has committed any act specified in paragraph

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

24  capital company. If the department determines that a certified

25  capital company is no longer in compliance with the

26  certification requirements of this act, the department shall,

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

28  the company may be subject to decertification 90 days after

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

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

31  with all certification requirements.

                                  21

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  certified capital company is still not in compliance with the

  3  certification requirements, the department may issue a notice

  4  to revoke or suspend the certification or to impose an

  5  administrative fine. The department shall advise each

  6  respondent of the right to an administrative hearing under

  7  chapter 120 prior to final action by the department.

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

  9  revocation shall also deny, suspend, or revoke the

10  certifications of all affiliates of the certified capital

11  company.

12         (e)  Decertification of a certified capital company for

13  failure to meet all requirements for continued certification

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

15  credits previously claimed by such company and the forfeiture

16  of future premium tax credits to be claimed by certified

17  investors with respect to such certified capital company, as

18  follows:

19         1.  Decertification of a certified capital company

20  within 3 years after its certification date shall cause the

21  recapture of all premium tax credits previously claimed by

22  such company and the forfeiture of all future premium tax

23  credits to be claimed by certified investors with respect to

24  such company.

25         2.  When a certified capital company meets all

26  requirements for continued certification under subparagraph

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

28  continued certification under the provisions of subparagraph

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

30  taken by certified investors within 3 years after the

31  certification date of the certified capital company shall not

                                  22

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

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

  3  investors after the third anniversary of the certification

  4  date of the certified capital company shall be subject to

  5  recapture or forfeiture.

  6         3.  When a certified capital company meets all

  7  requirements for continued certification under subparagraphs

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

  9  requirements for continued certification under the

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

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

12  after the certification date of the certified capital company

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

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

15  certified investors after the fourth anniversary of the

16  certification date of the certified capital company shall be

17  subject to recapture and forfeiture.

18         4.  If a certified capital company has met all

19  requirements for continued certification under paragraph

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

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

22  certified investors within 5 years after the certification

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

24  forfeiture. Those premium tax credits to be taken subsequent

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

26  forfeiture only if the certified capital company is

27  decertified within 5 years after its certification date.

28         5.  If a certified capital company has invested an

29  amount cumulatively equal to 100 percent of its certified

30  capital in qualified investments, all premium tax credits

31

                                  23

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  be subject to recapture or forfeiture.

  3         (f)  Decertification of a certified capital company

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

  5  the ability of certified investors in such certified capital

  6  company to continue to claim future premium tax credits earned

  7  as an investment in the certified capital company during the

  8  period in which it was duly certified.

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

10  address of each certified investor whose premium tax credit

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

12  last shown on the last premium tax filing.

13         (h)  The certified investor is responsible for

14  returning to the Department of Revenue any forfeited insurance

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

16  General Revenue Fund of the state.

17         (i)  The certified investor shall file with the

18  Department of Revenue an amended return or such other report

19  as the department may prescribe by regulation and pay any

20  required tax, not later than 60 days after such

21  decertification has been agreed to or finally determined,

22  whichever shall first occur.

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

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

25  notification is given; or

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

27  the Department of Revenue.

28

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

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

31  deficiency resulting under this act from the recomputation of

                                  24

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

  2  applicable, its retaliatory tax for the taxable year giving

  3  effect only to the item or items reflected in the

  4  decertification adjustment.

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

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

  7  insurance premium tax credit is in violation of this

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

  9  underpayment or delinquent taxes due and payable.

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

11  result of the forfeiture of its insurance premium tax credit

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

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

14  insurance premium or retaliatory tax deficiency resulting from

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

16  due date of such amended return until paid.

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

18  certified investor's unused premium tax credit shall be

19  permitted in the same manner and subject to the same

20  provisions and limitations of this act as the original

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

22  who:

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

24  transfer of the business or control of the business of the

25  certified investor, including the sale or other transfer of

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

27  succeeds to all or substantially all of the business and

28  property of the certified investor;

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

30  parent company of the certified investor; or

31

                                  25

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1         (c)  Directly or indirectly owns, whether through

  2  rights, options, convertible interests, or otherwise,

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

  4  outstanding voting securities or other ownership interest of

  5  the certified investor.

  6         (12)  REPORTING REQUIREMENTS.--

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

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

  9  House of Representatives on or before April 1:

10         1.  The total dollar amount each certified capital

11  company received from all certified investors and any other

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

13  total amount of premium tax credit used by each certified

14  investor for the previous calendar year.

15         2.  The total dollar amount invested by each certified

16  capital company and that portion invested in qualified

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

18  amount invested in each qualified business, and the total

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

20  each qualified business.

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

22  certified capital company investments, including the extent to

23  which:

24         a.  Certified capital company investments have

25  contributed to employment growth.

26         b.  The wage level of businesses in which certified

27  capital companies have invested exceed the average wage for

28  the county in which the jobs are located.

29         c.  The investments of the certified capital companies

30  in qualified businesses have contributed to expanding or

31  diversifying the economic base of the state.

                                  26

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




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

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

  3  into the State Treasury and credited to the General Revenue

  4  Fund.

  5         (14)  RULEMAKING AUTHORITY.--

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

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

  8  forfeiture of premium tax credits described in this section,

  9  and for certified capital company payments under paragraph

10  (9)(b).

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

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

13  administration, review, and reporting provisions of this

14  section and may perform any other acts necessary for the

15  proper administration and enforcement of such duties,

16  obligations, and powers.

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

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

19  Department of Banking and Finance and four additional career

20  service positions are authorized within the department for the

21  purpose of enforcing the provisions of this act.

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

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

24  Economic Development to implement this act.

25         Section 5.  Except as otherwise provided in this act,

26  this act shall take effect upon becoming a law.

27

28

29

30

31

                                  27

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 1998                    CS for CS for SB 1512
    301-2229A-98




  1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
  2                            CS/SB 1512

  3

  4  The following substantial changes are made in the committee
    substitute:
  5
    1.   The definition of qualified business is narrowed to
  6       require that the business must be involved in
         manufacturing, processing or assembling products,
  7       conducting research and development or providing
         services. At the time the CAPCO makes its initial
  8       investment, the business must certify that it is unable
         to obtain conventional financing, meaning that it has
  9       been turned down by a commercial lender or cannot
         reasonably be expected to qualify for a commercial loan,
10       that the business plan projects that the business is
         reasonably expected to achieve in excess of $25 million
11       in sales revenue in 5 years, that the business will
         maintain its headquarters in Florida for the next 10
12       years and any new manufacturing facility financed by a
         qualified investment will remain in the state for the
13       next 10 years, and that the business has fewer than 200
         employees at least 75% of which are in Florida. In
14       addition, businesses predominantly engaged in retail
         sales, real estate development, insurance, banking,
15       lending, or oil and gas exploration do not qualify.

16  2.   The requirement that half the investments of a CAPCO must
         be in businesses of less than $5 million annual revenues
17       is changed to require that half of the investments be in
         early stage technology companies. These companies are
18       defined as businesses involved, at the time of the
         certified capital company's initial investment, in
19       activities related to developing initial product or
         service offerings. The term includes businesses less than
20       2 years old with annual revenues less than $3 million.

21  3.   The maximum investment by insurance companies is reduced
         from $500 million to $150 million. This reduces the
22       maximum credit in any one year to $15 million.

23  4.   A requirement is added that, under certain circumstances,
         the CAPCO's would make a payment of a portion of their
24       distributions to the insurance companies and equity
         holders to the state.
25
    5.   The exemption from insurance premium tax for certain
26       minority owned business enterprises is not included in
         the committee substitute.
27

28

29

30

31

                                  28