House Bill 1575c1

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    Florida House of Representatives - 1998             CS/HB 1575

        By the Committee on Financial Services and Representatives
    Feeney and Livingston





  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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  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; providing

15         appropriations; providing effective dates.

16

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

18

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

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

21         14.2015  Office of Tourism, Trade, and Economic

22  Development; creation; powers and duties.--

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

24  Economic Development is to assist the Governor in working with

25  the Legislature, state agencies, business leaders, and

26  economic development professionals to formulate and implement

27  coherent and consistent policies and strategies designed to

28  provide economic opportunities for all Floridians.  To

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

30  Economic Development shall:

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  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

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  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.--For purposes of this act:

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;

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  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)  "Office" means the Office of Tourism, Trade, and

26  Economic Development.

27         (h)  "Premium tax liability" means any liability

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

29  624.509.

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

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

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  1  liability company, or any other person with equivalent

  2  executive functions.

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

  4  the following conditions:

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

  6  principal business operations are located in this state.

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

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

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

10  Standards Used to Define Small Business Concerns" of the

11  United States Small Business Administration.

12

13  A business predominantly engaged in professional services

14  provided by accountants, lawyers, or physicians does not

15  constitute a qualified business.

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

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

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

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

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

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

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

23  profitability of the certified capital company or the

24  performance of the certified capital company's investment

25  portfolio.

26         (l)  "Qualified distribution" means any distribution or

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

28         1.  Costs and expenses of forming, syndicating,

29  managing, and operating the certified capital company,

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

31  exceed 2.5 percent of the certified capital of the certified

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  1  capital company, plus reasonable and necessary fees in

  2  accordance with industry custom for professional services,

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

  4  related to the operation of the certified capital company.

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

  6  including penalties and interest related to state and federal

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

  8  company resulting from the earnings or other tax liability of

  9  the certified capital company to the extent that the increase

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

11  certified capital company.

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

13  cash by a certified capital company in a qualified business

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

15  any nature and description whatsoever, including a debt

16  instrument or security which has the characteristics of debt

17  but which provides for conversion into equity or equity

18  participation instruments such as options or warrants.

19         (4)  CERTIFICATION; GROUNDS FOR DENIAL OR

20  DECERTIFICATION.--

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

22  corporation, partnership, or limited liability company must be

23  certified by the department pursuant to this act.

24         (b)  An applicant for certification as a certified

25  capital company must file a verified application with the

26  department on or before October 1, 1998, in a form which the

27  department may prescribe by rule.  The applicant shall submit

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

29  The applicant shall provide:

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

31  principal office and each office in this state.

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

  2  the relevant organizational documents, bylaws, and amendments

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

  4         3.  Evidence from the Department of State that the

  5  applicant is registered with the Department of State as

  6  required by law, maintains an active status with the

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

  8  registration revoked, canceled, or withdrawn.

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

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

11  including a certified financial statement prepared in

12  accordance with generally accepted accounting principles

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

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

15  The financial statement shall be audited by an independent

16  certified public accountant.  If the date of the application

17  is more than 90 days after preparation of the applicant's

18  fiscal year-end financial statements, the applicant may file a

19  certified financial statement reviewed by an independent

20  certified public accountant, together with the audited

21  financial statement for the most recent fiscal year.  If the

22  applicant has been in business fewer than 12 months, and has

23  not prepared an audited financial statement, the applicant may

24  file a certified financial statement reviewed by an

25  independent certified public accountant.

26         (c)  Within 90 days after receipt of the completed

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

28  department shall grant or deny certification as a certified

29  capital company.  If the department denies certification

30  within the time period specified, the department shall inform

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

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  1  department has not granted or denied certification within the

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

  3  department shall approve the application if the department

  4  finds that:

  5         1.  The applicant satisfies the requirements of

  6  paragraph (b).

  7         2.  No evidence exists that the applicant has committed

  8  any act specified in paragraph (d).

  9         3.  At least two of the principals have a minimum of 3

10  years of experience managing venture capital investments or a

11  minimum of 3 years of experience in investment banking or

12  business finance with an investment banking or securities

13  firm.

14         (d)  The department may deny certification or decertify

15  a certified capital company if the certified capital company

16  fails to maintain a net worth of at least $500,000 or the

17  department determines that the applicant, or any principal or

18  director of the certified capital company, has:

19         1.  Violated any provision of this act;

20         2.  Made a material misrepresentation or false

21  statement or concealed any essential or material fact from any

22  person during the application process or with respect to

23  information and reports required of certified capital

24  companies under this act;

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

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

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

28  or government, including a fraudulent act in connection with

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

30  with the performance of fiduciary duties in another capacity;

31

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  1         4.  Been adjudicated liable in a civil action on

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

  3  or

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

  5  injunction, suspension, prohibition, revocation, denial,

  6  judgment, or administrative order by any court of competent

  7  jurisdiction, administrative law judge, or any state or

  8  federal agency, national securities, commodities, or option

  9  exchange, or national securities, commodities, or option

10  association, involving a material violation of any federal or

11  state securities or commodities law or any rule or regulation

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

13  national securities, commodities, or options exchange or

14  national securities, commodities, or options association; or

15         b.  Been the subject of any injunction or adverse

16  administrative order by a state or federal agency regulating

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

18  estate, mortgage brokers, or other related or similar

19  industries.

20

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

22  registration to any applicant who has been continuously

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

24  such decision, finding, injunction, suspension, prohibition,

25  revocation, denial, judgment, or administrative order,

26  provided such decision, finding, injunction, suspension,

27  prohibition, revocation, denial, judgment, or administrative

28  order has been timely reported to the department pursuant to

29  the department's rules and regulations.

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

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

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  1         (f)  Any offering material involving the sale of

  2  securities of the certified capital company shall include the

  3  following statement:  "By authorizing the formation of a

  4  certified capital company, this state does not endorse the

  5  quality of management or the potential for earnings of such

  6  company and is not liable for damages or losses to a certified

  7  investor in the company.  Use of the word 'certified' in an

  8  offering does not constitute a recommendation or endorsement

  9  of the investment by the State of Florida.  Investments in a

10  certified capital company prior to the time such company is

11  certified are not eligible for premium tax credits.  If

12  applicable provisions of law are violated, the state may

13  require forfeiture of unused premium tax credits and repayment

14  of used premium tax credits by the certified investor."

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

16  insurance company shall be a managing general partner of, or

17  control the direction of investments of, a certified capital

18  company.  This prohibition shall not preclude a certified

19  investor, insurance company, or any other party from

20  exercising its legal rights and remedies, which may include

21  interim management of a certified capital company, if a

22  certified capital company is in default of its obligations

23  under law or its contractual obligations to such certified

24  investor, insurance company, or other party.

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

26  certified capital company shall pay to the department an

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

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

29  of initial certification.

30         (i)  The department shall administer and provide for

31  the enforcement of certification requirements for certified

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

  2  adopt any rules necessary to carry out its duties,

  3  obligations, and powers related to certification, renewal of

  4  certification, or decertification of certified capital

  5  companies and may perform any other acts necessary for the

  6  proper administration and enforcement of such duties,

  7  obligations, and powers.

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

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

10  must make qualified investments according to the following

11  schedule:

12         1.  At least 30 percent of its certified capital must

13  be placed in qualified investments by December 31, 2001.

14         2.  At least 40 percent of its certified capital must

15  be placed in qualified investments by December 31, 2002.

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

17  be placed in qualified investments by December 31, 2003.

18         (b)  All capital not placed in qualified investments by

19  the certified capital company:

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

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

22  under s. 517.12.

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

24  certified capital company or any affiliate of the certified

25  investor of the certified capital company.

26         3.  Must be invested only in:

27         a.  Any U. S. Treasury obligations;

28         b.  Certificates of deposit or other obligations,

29  maturing within 3 years after acquisition of such certificates

30  or obligations, issued by any financial institution or trust

31  company incorporated under the laws of the United States;

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  1         c.  Marketable obligations, maturing within 5 years or

  2  less after the acquisition of such obligations, which are

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

  4  agency;

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

  6  5 years or less, after the acquisition of such securities,

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

  8  credit rating agency; or

  9         e.  Interests in money market funds, the portfolio of

10  which is limited to cash and obligations described in

11  sub-subparagraphs a.-d.

12         (c)  The aggregate amount of all qualified investments

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

14  certification shall be considered in the calculation of the

15  percentage requirements under paragraph (a).

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

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

18  certified capital shall earn a vested credit against premium

19  tax liability equal to 100 percent of the certified capital

20  invested by the certified investor.  Certified investors shall

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

22  vested premium tax credit, including any carryforward credits

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

24  for calendar year 2001.  Any premium tax credits not used by

25  certified investors in any single year may be carried forward

26  and applied against the premium tax liabilities of such

27  investors for subsequent calendar years.  The carryforward

28  credit may be applied against subsequent premium tax filings

29  through calendar year 2017.

30

31

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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.  The amount of any credit

  9  granted under this subsection as well as any credit granted

10  under a comparable program by the foreign or alien insurer's

11  state of domicile, shall be added back to the net insurance

12  premium tax used when calculating such retaliatory tax.

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

14  PROCESS.--

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

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

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

18  investors under this act shall not exceed $50 million

19  annually.

20         (b)  The office shall be responsible for allocating

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

22  capital companies.

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

24  office for an allocation of premium tax credits for potential

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

26  by the office with the cooperation of the Department of

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

28  each potential certified investor confirming that the

29  potential certified investor has agreed to make an investment

30  of certified capital in a certified capital company of a

31

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

  2  credit allocation pursuant to this subsection.

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

  4  inform each certified capital company of its share of total

  5  premium tax credits available for allocation to each of its

  6  potential investors.

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

  8  certified capital equaling the amount of premium tax credits

  9  allocated to a potential certified investor for which the

10  investor filed a premium tax allocation claim within 10

11  business days after the investor received a notice of

12  allocation, the certified capital company shall notify the

13  office by overnight common carrier delivery service of the

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

15  premium tax credits allocated to the certified capital company

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

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

18  such available credits among the other certified capital

19  companies on the same pro rata basis as the initial

20  allocation.

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

22  certified investors to certified capital companies in premium

23  tax allocation claims exceeds the aggregate cap on the amount

24  of credits that may be awarded, the percentage increment of

25  premium tax credits that may be used shall be allocated using

26  the following formula:

27

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

29

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

31  capital each certified investor has agreed to invest in a

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

  2  aggregate amount of certified capital that all certified

  3  investors have agreed to invest in all certified capital

  4  companies, the letter "X" represents the total amount of tax

  5  credits that may be allocated to a certified capital company

  6  for use by certified investors beginning fiscal year 2001-2002

  7  in an amount not to exceed 10 percent annually, and $500

  8  million represents the total amount of premium tax credits

  9  that may be used beginning fiscal year 2001-2002 in an amount

10  not to exceed 10 percent annually.

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

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

13  certified capital company shall file with the department and

14  the office, on a form prescribed by the office, for each

15  calendar year:

16         1.  The total dollar amount the certified capital

17  company received from certified investors, the identify of the

18  certified investors, and the amount received from each

19  certified investor during the calendar year.

20         2.  The total dollar amount the certified capital

21  company invested and the amount invested in qualified

22  businesses, together with the identity and location of those

23  businesses and the amount invested in each qualified business.

24         3.  The total number of permanent, full-time jobs

25  either created or retained by the qualified business during

26  the calendar year.

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

28  principals of the certified capital company submitting the

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

30  92.525(1)(b) and subject to the provisions of s. 92.525(3).

31

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

  2  supplemental documentation, submitted by each certified

  3  capital company for the purpose of verifying:

  4         1.  That the businesses in which certified capital has

  5  been invested by the certified capital company are in fact

  6  qualified businesses, and that the amount of certified capital

  7  invested by the certified capital company is as represented in

  8  the form.

  9         2.  The amount of certified capital invested in the

10  certified capital company by the certified investors.

11         3.  The amount of premium tax credit available to

12  certified investors.

13         (d)  By February 1 of the calendar year following the

14  calendar year in which the certified capital company meets the

15  investment benchmarks in subsection (5), the director shall

16  notify each certified investor of the amount of vested premium

17  tax credits such investor may use, and provide each certified

18  investor with a form that may be attached to the investor's

19  premium tax return for the purpose of using the tax credit.

20  Credits shall not result in the payment of refunds if total

21  credits exceed the amount of tax owed.

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

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

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

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  1  distribution to its equity holders, other than a qualified

  2  distribution, a certified capital company must have invested

  3  an amount cumulatively equal to 100 percent of its certified

  4  capital in qualified investments. Payments to debt holders of

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

  6  restriction with respect to repayments of principal and

  7  interest on indebtedness owed to them by a certified capital

  8  company, including indebtedness of the certified capital

  9  company on which certified investors earned premium tax

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

11  equity holder of a certified capital company may receive

12  payments with respect to such debt without restrictions.

13         (10)  DECERTIFICATION.--

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

15  each certified capital company to determine if the certified

16  capital company is abiding by the requirements of

17  certification, to advise the certified capital company as to

18  the eligibility status of its qualified investments, and to

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

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

21  certified capital company.

22         (b)  Any material violation of this act shall be

23  grounds for decertification of the certified capital company.

24  If the department determines that a certified capital company

25  is no longer in compliance with the certification requirements

26  of this act, the department shall, by written notice, inform

27  the officers of such company that the company may be subject

28  to decertification 90 days after the date of mailing of the

29  notice, unless the deficiencies are corrected and such company

30  is again found to be in compliance with all certification

31  requirements.

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  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 decertify such

  4  company and send notice of the decertification to such company

  5  and to all other appropriate state agencies.

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

  7  revocation shall also deny, suspend, or revoke the

  8  certifications of all affiliates of the certified capital

  9  company.

10         (e)  Decertification of a certified capital company may

11  cause the recapture of premium tax credits previously claimed

12  by such company and the forfeiture of future premium tax

13  credits to be claimed by certified investors with respect to

14  such certified capital company, as follows:

15         1.  Decertification of a certified capital company

16  within 3 years after its certification date shall cause the

17  recapture of all premium tax credits previously claimed by

18  such company and the forfeiture of all future premium tax

19  credits to be claimed by certified investors with respect to

20  such company.

21         2.  When a certified capital company meets all

22  requirements for continued certification under subparagraph

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

24  continued certification under the provisions of subparagraph

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

26  taken by certified investors within 3 years after the

27  certification date of the certified capital company shall not

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

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

30  investors after the third anniversary of the certification

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  1  date of the certified capital company shall be subject to

  2  recapture or forfeiture.

  3         3.  When a certified capital company meets all

  4  requirements for continued certification under subparagraphs

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

  6  requirements for continued certification under the

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

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

  9  after the certification date of the certified capital company

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

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

12  certified investors after the fourth anniversary of the

13  certification date of the certified capital company shall be

14  subject to recapture and forfeiture.

15         4.  If a certified capital company has met all

16  requirements for continued certification under paragraph

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

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

19  certified investors within 5 years after the certification

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

21  forfeiture. Those premium tax credits to be taken subsequent

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

23  forfeiture only if the certified capital company is

24  decertified within 5 years after its certification date.

25         5.  If a certified capital company has invested an

26  amount cumulatively equal to 100 percent of its certified

27  capital in qualified investments, all premium tax credits

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

29  be subject to recapture or forfeiture.

30         (f)  The office shall send written notice to the

31  address of each certified investor whose premium tax credit

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

  2  last shown on the last premium tax filing.

  3         (g)  The certified investor is responsible for

  4  returning to the Department of Revenue any forfeited insurance

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

  6  General Revenue Fund of the state.

  7         (h)  The certified investor shall file with the

  8  Department of Revenue an amended return or such other report

  9  as the department may prescribe by regulation and pay any

10  required tax, not later than 60 days after such

11  decertification has been agreed to or finally determined,

12  whichever shall first occur.

13         (i)  A notice of deficiency may be issued:

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

15  notification is given; or

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

17  the Department of Revenue.

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

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

21  deficiency resulting under this act from the recomputation of

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

23  applicable, its retaliatory tax for the taxable year giving

24  effect only to the item or items reflected in the

25  decertification adjustment.

26         (j)  Any certified investor who fails to report and

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

28  insurance premium tax credit is in violation of this

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

30  underpayment or delinquent taxes due and payable.

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  1         (k)  When any taxpayer fails to pay any amount due as a

  2  result of the forfeiture of its insurance premium tax credit

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

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

  5  insurance premium or retaliatory tax deficiency resulting from

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

  7  due date of such amended return until paid.

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

  9  certified investor's unused premium tax credit shall be

10  permitted in the same manner and subject to the same

11  provisions and limitations of this act as the original

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

13  who:

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

15  transfer of the business or control of the business of the

16  certified investor, including the sale or other transfer of

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

18  succeeds to all or substantially all of the business and

19  property of the certified investor;

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

21  parent company of the certified investor; or

22         (c)  Directly or indirectly owns, whether through

23  rights, options, convertible interests, or otherwise,

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

25  outstanding voting securities or other ownership interest of

26  the certified investor.

27         (12)  REPORTING REQUIREMENTS.--

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

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

30  House of Representatives on or before April 1:

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  1         1.  The total dollar amount each certified capital

  2  company received from all certified investors and any other

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

  4  total amount of premium tax credit used by each certified

  5  investor for the previous calendar year.

  6         2.  The total dollar amount invested by each certified

  7  capital company and that portion invested in qualified

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

  9  amount invested in each qualified business, and the total

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

11  each qualified business.

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

13  certified capital company investments, including the extent to

14  which:

15         a.  Certified capital company investments have

16  contributed to employment growth.

17         b.  The wage level of businesses in which certified

18  capital companies have invested exceed the average wage for

19  the county in which the jobs are located.

20         c.  The investments of the certified capital companies

21  in qualified businesses have contributed to expanding or

22  diversifying the economic base of the state.

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

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

25  into the State Treasury and credited to the General Revenue

26  Fund.

27         (14)  RULEMAKING AUTHORITY.--

28         (a)  The Department of Revenue may adopt any rules

29  necessary to carry out its duties, obligations, and powers

30  related to the tax-related provisions of this act and may

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  1  perform any other acts necessary for the proper administration

  2  and enforcement of such duties, obligations, and powers.

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

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

  5  administration, review, and reporting provisions of this act

  6  and may perform any other acts necessary for the proper

  7  administration and enforcement of such duties, obligations,

  8  and powers.

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

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

11  Department of Banking and Finance to implement this act.

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

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

14  Economic Development to implement this act.

15         Section 5.  Except as otherwise provided herein, this

16  act shall take effect upon becoming a law.

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