House Bill hb0293e2

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                                       CS/HB 293, Second Engrossed



  1                      A bill to be entitled

  2         An act relating to the Certified Capital

  3         Company Act; amending s. 288.99, F.S.;

  4         redefining the terms "early stage technology

  5         business" and "qualified distribution";

  6         defining the terms "Program One" and "Program

  7         Two"; revising procedures and dates for

  8         certification and decertification under Program

  9         One and Program Two; revising the process for

10         earning premium tax credits; providing a

11         limitation on tax credits under Program Two;

12         authorizing the Department of Banking and

13         Finance to levy a fine; providing for

14         distributions under both programs; providing an

15         effective date.

16

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

18

19         Section 1.  Subsections (3) and (4), paragraphs (a) and

20  (b) of subsection (5), paragraph (a) of subsection (6),

21  paragraphs (a), (c), (d), (e), (f), (g), and (h) of subsection

22  (7), paragraph (a) of subsection (8), paragraphs (a) and (b)

23  of subsection (9), and paragraph (f) of subsection (10) of

24  section 288.99, Florida Statutes, are amended, and paragraph

25  (i) is added to subsection (7) of that section, to read:

26         288.99  Certified Capital Company Act.--

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

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

29         1.  Any person directly or indirectly beneficially

30  owning, whether through rights, options, convertible

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


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                                       CS/HB 293, Second Engrossed



  1  15 10 percent or more of the outstanding voting securities or

  2  other ownership interests of the insurance company;

  3         2.  Any person 15 10 percent or more of whose

  4  outstanding voting securities or other ownership interest is

  5  directly or indirectly beneficially owned, whether through

  6  rights, options, convertible interests, or otherwise,

  7  controlled, or held with power to vote by the insurance

  8  company;

  9         3.  Any person directly or indirectly controlling,

10  controlled by, or under common control with the insurance

11  company;

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

13  general partner; or

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

15  or agent of the insurance company or an immediate family

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

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

18  a certified investor in a certified capital company which

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

20  interest in the certified capital company or a qualified debt

21  instrument issued by the certified capital company.

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

23  partnership, or limited liability company which:

24         1.  Is certified by the department in accordance with

25  this act.

26         2.  Receives investments of certified capital from two

27  or more unaffiliated certified investors.

28         3.  Makes qualified investments as its primary

29  activity.

30

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                                       CS/HB 293, Second Engrossed



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

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

  3  contributes certified capital.

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

  5  Finance.

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

  7  Tourism, Trade, and Economic Development.

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

  9  qualified business that is either:

10         1.  Involved, at the time of the certified capital

11  company's initial investment in such business, in activities

12  related to developing initial product or service offerings,

13  such as prototype development or the establishment of initial

14  production or service processes;. The term includes a

15  qualified business that is

16         2.  Less than 2 years old and has, together with its

17  affiliates, less than $3 million in annual revenues for the

18  fiscal year immediately preceding the initial investment by

19  the certified capital company on a consolidated basis, as

20  determined in accordance with generally accepted accounting

21  principles;. The term also includes

22         3.  The Florida Black Business Investment Board;,

23         4.  Any entity that is majority-owned majority owned by

24  the Florida Black Business Investment Board;, or

25         5.  Any entity in which the Florida Black Business

26  Investment Board holds a majority voting interest on the board

27  of directors.

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

29  Economic Development.

30

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                                       CS/HB 293, Second Engrossed



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

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

  3  624.509.

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

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

  6  liability company, or any other person with equivalent

  7  executive functions.

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

  9  the following conditions as evidenced by documentation

10  required by department rule:

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

12  principal business operations are located in this state.  For

13  the purpose of this act, the terms "headquartered" and

14  "principal business operations" mean that at least 75 percent

15  of the employees are located in the state.

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

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

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

19  Standards Used to Define Small Business Concerns" of the

20  United States Small Business Administration which is involved

21  in manufacturing, processing or assembling products,

22  conducting research and development, or providing services.

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

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

25  affidavit that:

26         a.  The business is unable to obtain conventional

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

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

29  commercial lender or that the business cannot reasonably be

30  expected to qualify for such financing under the standards of

31  commercial lending;


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                                       CS/HB 293, Second Engrossed



  1         b.  The business plan for the business projects that

  2  the business is reasonably expected to achieve in excess of

  3  $25 million in sales revenue within 5 years after the initial

  4  investment, or the business is located in a designated Front

  5  Porch community, enterprise zone, urban high crime area, rural

  6  job tax credit county, or nationally recognized historic

  7  district;

  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, or the business is located in a

12  designated Front Porch community, enterprise zone, urban high

13  crime area, rural job tax credit county, or nationally

14  recognized historic district; and

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

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

17  For purposes of this subsection, the term "qualified business"

18  also includes the Florida Black Business Investment Board, any

19  entity majority owned by the Florida Black Business Investment

20  Board, or any entity in which the Florida Black Business

21  Investment Board holds a majority voting interest on the board

22  of directors.

23         4.  The term does not include:

24         a.  Any business predominantly engaged in retail sales,

25  real estate development, insurance, banking, lending, or oil

26  and gas exploration.

27         b.  Any business predominantly engaged in professional

28  services provided by accountants, lawyers, or physicians.

29         c.  Any company that has no historical revenues and

30  either has no specific business plan or purpose or has

31  indicated that its business plan is solely to engage in a


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                                       CS/HB 293, Second Engrossed



  1  merger or acquisition with any unidentified company or other

  2  entity.

  3         d.  Any company that has a strategic plan to grow

  4  through the acquisition of firms with substantially similar

  5  business which would result in the planned net loss of

  6  Florida-based jobs over a 12-month period after the

  7  acquisition as determined by the department.

  8

  9  A business predominantly engaged in retail sales, real estate

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

11  exploration, or engaged in professional services provided by

12  accountants, lawyers, or physicians does not constitute a

13  qualified business.

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

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

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

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

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

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

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

21  profitability of the certified capital company or the

22  performance of the certified capital company's investment

23  portfolio.

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

25  payment by to equity holders of a certified capital company

26  for:

27         1.  Reasonable costs and expenses, including

28  professional fees, of forming and, syndicating the certified

29  capital company, if no such costs are paid to a certified

30  investor and the total cash, cash equivalents and other

31  current assets permitted by s. 288.99(5)(b)3.g. that can be


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                                       CS/HB 293, Second Engrossed



  1  converted into cash within 5 business days available to the

  2  certified capital company at the time of receipt of certified

  3  capital from certified investors, after deducting the costs

  4  and expenses of forming and syndicating the certified capital

  5  company, including any payments made over time for obligations

  6  incurred at the time of receipt of certified capital excluding

  7  other future qualified distributions and payments made under

  8  s. 288.99(9)(a), are an amount equal to or greater than 50

  9  percent of the total certified capital allocated to the

10  certified capital pursuant to s. 288.99(7);,

11         2.  Reasonable costs of managing, and operating the

12  certified capital company, not exceeding 5 percent of the

13  certified capital in any 1 year, including an annual

14  management fee in an amount that does not exceed 2.5 percent

15  of the certified capital of the certified capital company;,

16  plus

17         3.  Reasonable and necessary fees in accordance with

18  industry custom for professional services, including, but not

19  limited to, legal and accounting services, related to the

20  operation of the certified capital company; or.

21         4.2.  Any projected increase in federal or state taxes,

22  including penalties and interest related to state and federal

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

24  company resulting from the earnings or other tax liability of

25  the certified capital company to the extent that the increase

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

27  certified capital company.

28         (n)1.  "Qualified investment" means the investment of

29  cash by a certified capital company in a qualified business

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

31  any nature and description whatsoever, including a debt


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                                       CS/HB 293, Second Engrossed



  1  instrument or security that which has the characteristics of

  2  debt but which provides for conversion into equity or equity

  3  participation instruments such as options or warrants.

  4         2.  The term does not include:

  5         a.  Any investment made after the effective date of

  6  this act the contractual terms of which require the repayment

  7  of any portion of the principal in instances, other than

  8  default as determined by department rule, within 12 months

  9  following the initial investment by the certified capital

10  company unless such investment has a repayment schedule no

11  faster than a level principal amortization of at least 2

12  years;

13         b.  Any "follow-on" or "add-on" investment except for

14  the amount by which the new investment is in addition to the

15  amount of the certified capital company's initial investment

16  returned to it other than in the form of interest, dividends,

17  or other types of profit participation or distributions; or

18         c.  Any investment in a qualified business or affiliate

19  of a qualified business that exceeds 15 percent of certified

20  capital.

21         (o)  "Program One" means the $150 million in premium

22  tax credits issued under this act in 1999, the allocation of

23  such credits under this act, and the regulation of certified

24  capital companies and investments made by them hereunder.

25         (p)  "Program Two" means the $50 million in premium tax

26  credits to be issued under this act on April 1, 2002, the

27  allocation of such credits under this act, and the regulation

28  of certified capital companies and investments made by them

29  hereunder.

30         (4)  CERTIFICATION; GROUNDS FOR DENIAL OR

31  DECERTIFICATION.--


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                                       CS/HB 293, Second Engrossed



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

  2  corporation, partnership, or limited liability company must be

  3  certified by the department pursuant to this act.

  4         (b)  An applicant for certification as a certified

  5  capital company must file a verified application with the

  6  department on or before December 1, 1998, or November 1, 2001,

  7  in the case of applicants for Program Two, in a form which the

  8  department may prescribe by rule.  The applicant shall submit

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

10  The applicant shall provide:

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

12  principal office and each office in this state.

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

14  the relevant organizational documents, bylaws, and amendments

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

16         3.  Evidence from the Department of State that the

17  applicant is registered with the Department of State as

18  required by law, maintains an active status with the

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

20  registration revoked, canceled, or withdrawn.

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

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

23  including an audit report on the financial statements prepared

24  in accordance with generally accepted accounting principles

25  showing net worth capital of not less than $500,000 within 90

26  days prior to after the date the application is submitted to

27  the department. If the date of the application is more than 90

28  days after preparation of the applicant's fiscal year-end

29  financial statements, the applicant may file financial

30  statements reviewed by an independent certified public

31  accountant for the period subsequent to the audit report,


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                                       CS/HB 293, Second Engrossed



  1  together with the audited financial statement for the most

  2  recent fiscal year.  If the applicant has been in business

  3  less than 12 months, and has not prepared an audited financial

  4  statement, the applicant may file a financial statement

  5  reviewed by an independent certified public accountant.

  6         6.  Copies of any offering materials used or proposed

  7  to be used by the applicant in soliciting investments of

  8  certified capital from certified investors.

  9         (c)  On December 31, 1998, or December 31, 2001, in the

10  case of applicants for Program Two, the department shall grant

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

12  department denies certification within the time period

13  specified, the department shall inform the applicant of the

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

15  denied certification within the time specified, the

16  application shall be deemed approved.  The department shall

17  approve the application if the department finds that:

18         1.  The applicant satisfies the requirements of

19  paragraph (b).

20         2.  No evidence exists that the applicant has committed

21  any act specified in paragraph (d).

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

23  years of experience making venture capital investments out of

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

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

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

27  or principal of the certified capital company who has such

28  experience must be primarily located in an office of the

29  certified capital company which is based in this state.

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

31  and raising certified capital as described in its offering


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                                       CS/HB 293, Second Engrossed



  1  materials and other materials submitted to the department

  2  conforms with the requirements of this act.

  3         (d)  The department may deny certification or decertify

  4  a certified capital company if the grounds for decertification

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

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

  7  The department may deny certification or decertify a certified

  8  capital company if the certified capital company fails to

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

10  department determines that the applicant, or any principal or

11  director of the certified capital company, has:

12         1.  Violated any provision of this section;

13         2.  Made a material misrepresentation or false

14  statement or concealed any essential or material fact from any

15  person during the application process or with respect to

16  information and reports required of certified capital

17  companies under this section;

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

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

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

21  or government, including a fraudulent act in connection with

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

23  with the performance of fiduciary duties in another capacity;

24         4.  Been adjudicated liable in a civil action on

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

26  or

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

28  injunction, suspension, prohibition, revocation, denial,

29  judgment, or administrative order by any court of competent

30  jurisdiction, administrative law judge, or any state or

31  federal agency, national securities, commodities, or option


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                                       CS/HB 293, Second Engrossed



  1  exchange, or national securities, commodities, or option

  2  association, involving a material violation of any federal or

  3  state securities or commodities law or any rule or regulation

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

  5  national securities, commodities, or options exchange, or

  6  national securities, commodities, or options association; or

  7         b.  Been the subject of any injunction or adverse

  8  administrative order by a state or federal agency regulating

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

10  estate, mortgage brokers, or other related or similar

11  industries.

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

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

14         (e)(f)  Any offering material involving the sale of

15  securities of the certified capital company shall include the

16  following statement:  "By authorizing the formation of a

17  certified capital company, the State of Florida does not

18  endorse the quality of management or the potential for

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

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

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

22  recommendation or endorsement of the investment by the State

23  of Florida.  Investments in a certified capital company prior

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

25  premium tax credits.  If applicable provisions of law are

26  violated, the state may require forfeiture of unused premium

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

28  certified investor."

29         (f)(g)  No insurance company or any affiliate of an

30  insurance company shall, directly or indirectly, own (whether

31  through rights, options, convertible interests, or otherwise)


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                                       CS/HB 293, Second Engrossed



  1  15 percent or more of the equity interests of or manage or

  2  control the direction of investments of a certified capital

  3  company.  This prohibition does not preclude a certified

  4  investor, insurance company, or any other party from

  5  exercising its legal rights and remedies, which may include

  6  interim management of a certified capital company, if a

  7  certified capital company is in default of its obligations

  8  under law or its contractual obligations to such certified

  9  investor, insurance company, or other party.

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

11  certified capital company shall pay to the department an

12  annual, nonrefundable renewal certification fee of $5,000. If

13  a certified capital company fails to pay its renewal fee by

14  the specified deadline, it must pay a late fee of $5,000 in

15  addition to the renewal fee on or by January 31 of each year

16  in order to continue its certification in the program. On or

17  before April 30 of each year, each certified capital company

18  shall file audited financial statements with the department.

19  No renewal fees shall be required within 6 months after the

20  date of initial certification.

21         (h)(i)  The department shall administer and provide for

22  the enforcement of certification requirements for certified

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

24  adopt any rules necessary to carry out its duties,

25  obligations, and powers related to certification, renewal of

26  certification, or decertification of certified capital

27  companies and may perform any other acts necessary for the

28  proper administration and enforcement of such duties,

29  obligations, and powers.

30         (i)(j)  Decertification of a certified capital company

31  under this subsection does not affect the ability of certified


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                                       CS/HB 293, Second Engrossed



  1  investors in such certified capital company from claiming

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

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

  4  was duly certified.

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

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

  7  must make qualified investments according to the following

  8  schedule:

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

10  be invested in qualified investments by December 31, 2000, or

11  in the case of certified capital raised under Program Two, by

12  December 31, 2003.

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

14  be invested in qualified investments by December 31, 2001, or

15  in the case of certified capital raised under Program Two, by

16  December 31, 2004.

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

18  be invested in qualified investments by December 31, 2002, or

19  in the case of certified capital raised under Program Two, by

20  December 31, 2005.

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

22  be invested in qualified investments by December 31, 2003, or

23  in the case of certified capital raised under Program Two, by

24  December 31, 2006. At least 50 percent of such qualified

25  investments must be invested in early stage technology

26  businesses.

27         (b)  All capital not invested in qualified investments

28  by the certified capital company:

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

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

31  under s. 517.12, except as set forth in s. 288.99(5)(b)3.g.


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                                       CS/HB 293, Second Engrossed



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

  2  certified capital company or any affiliate of the certified

  3  investor of the certified capital company, except for an

  4  investment permitted by s. 288.99(5)(b)3.g., provided

  5  repayment terms do not permit the obligor to directly or

  6  indirectly manage or control the investment decisions of the

  7  certified capital company.

  8         3.  Must be invested only in:

  9         a.  Any United States Treasury obligations;

10         b.  Certificates of deposit or other obligations,

11  maturing within 3 years after acquisition of such certificates

12  or obligations, issued by any financial institution or trust

13  company incorporated under the laws of the United States;

14         c.  Marketable obligations, maturing within 5 years or

15  less after the acquisition of such obligations, which are

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

17  agency;

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

19  5 years or less, after the acquisition of such securities,

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

21  credit rating agency;

22         e.  Collateralized mortgage obligations and real estate

23  mortgage investment conduits that are direct obligations of an

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

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

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

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

28  which is limited to cash and obligations described in

29  sub-subparagraphs a.-d.; or

30         g.  Obligations that are issued by an insurance company

31  that is not a certified investor of the certified capital


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                                       CS/HB 293, Second Engrossed



  1  company making the investment, that has provided a guarantee

  2  indemnity bond, insurance policy, or other payment undertaking

  3  in favor of the certified capital company's certified

  4  investors as permitted by s. 288.99(3)(m)1. or an affiliate of

  5  such insurance company as defined by s. 288.99(3)(a)3. that is

  6  not a certified investor of the certified capital company

  7  making the investment, provided that such obligations are:

  8         (I)  Issued or guaranteed as to principal by an entity

  9  whose senior debt is rated "AA" or better by Standard & Poor's

10  Ratings Group or such other nationally recognized credit

11  rating agency as the Department may by rule determine;

12         (II)  Not subordinated to other unsecured indebtedness

13  of the issuer or the guarantor;

14         (III)  Invested by such issuing entity in accordance

15  with s. 288.99(5)(b)3.a.-f.; and

16         (IV)  Readily convertible into cash within 5 business

17  days for the purpose of making a Qualified Investment unless

18  such obligations are held to provide a guarantee, indemnity

19  bond, insurance policy, or other payment undertaking in favor

20  of the certified capital company's certified investors as

21  permitted by s. 288.99(3)(m)1.

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

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

24  certified capital shall earn a vested credit against premium

25  tax liability equal to 100 percent of the certified capital

26  invested by the certified investor. Certified investors shall

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

28  vested premium tax credit earned under a particular program,

29  including any carryforward credits from such program under

30  this act, per year beginning with premium tax filings for

31  calendar year 2000 for credits earned under Program One and


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                                       CS/HB 293, Second Engrossed



  1  calendar year 2003 for credits earned under Program Two. Any

  2  premium tax credits not used by certified investors in any

  3  single year may be carried forward and applied against the

  4  premium tax liabilities of such investors for subsequent

  5  calendar years.  The carryforward credit may be applied

  6  against subsequent premium tax filings through calendar year

  7  2017.

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

  9  PROCESS.--

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

11  allocated by the office shall not exceed $150 million with

12  respect to Program One and $50 million with respect to Program

13  Two. The total amount of tax credits which may be used by

14  certified investors under this act shall not exceed $15

15  million annually with respect to credits earned under Program

16  One and $5 million annually with respect to credits earned

17  under Program Two.

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

19  office for an allocation of premium tax credits for potential

20  certified investors by March 15, 1999, or by March 15, 2002,

21  in the case of credits allocable under Program Two, on a form

22  developed by the office with the cooperation of the Department

23  of Revenue.  The form shall be accompanied by an affidavit

24  from each potential certified investor confirming that the

25  potential certified investor has agreed to make an investment

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

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

28  credit allocation pursuant to this subsection. No certified

29  capital company shall submit premium tax allocation claims on

30  behalf of certified investors that in the aggregate would

31  exceed the total dollar amount appropriated by the Legislature


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                                       CS/HB 293, Second Engrossed



  1  for the specific program.  No allocation shall be made to the

  2  potential investors of a certified capital company under

  3  Program Two unless such certified capital company has filed

  4  premium tax allocation claims that would result in an

  5  allocation to the potential investors in such certified

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

  7         (d)  On or before April 1, 1999, or April 1, 2002, in

  8  the case of Program Two, the office shall inform each

  9  certified capital company of its share of total premium tax

10  credits available for allocation to each of its potential

11  investors.

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

13  certified capital equaling the amount of premium tax credits

14  allocated to a potential certified investor for which the

15  investor filed a premium tax allocation claim within 10

16  business days after the investor received a notice of

17  allocation, the certified capital company shall notify the

18  office by overnight common carrier delivery service of the

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

20  premium tax credits allocated to the certified capital company

21  shall be forfeited. The department may levy a fine of not more

22  than $50,000 on any certified investor that does not invest

23  the full amount of certified capital allocated by the

24  department to such investor in accordance with the affidavit

25  filed on its behalf.  If the office must make a pro rata

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

27  such available credits among the other certified capital

28  companies on the same pro rata basis as the initial

29  allocation.

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

31  certified investors to certified capital companies in premium


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                                       CS/HB 293, Second Engrossed



  1  tax allocation claims under Program Two exceeds the aggregate

  2  cap on the amount of credits that may be awarded under Program

  3  Two, the premium tax credits that may be allowed to any one

  4  certified investor under Program Two shall be allocated using

  5  the following ratio:

  6

  7                       A/B = X/$50,000,000

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

  9

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

11  capital certified investors have agreed to invest in any one

12  certified capital company under Program Two, the letter "B"

13  represents the aggregate amount of certified capital that all

14  certified investors have agreed to invest in all certified

15  capital companies under Program Two, the letter "X" is the

16  numerator and represents the total amount of premium tax

17  credits and certified capital that may be allocated to a

18  certified capital company on April 1, 2002 in calendar year

19  1999, and $50 $150 million is the denominator and represents

20  the total amount of premium tax credits and certified capital

21  that may be allocated to all certified investors in calendar

22  year 2002 1999. Any such premium tax credits are not first

23  available for utilization until annual filings are made in

24  2001 for calendar year 2000 in the case of Program One, and

25  until annual filings are made in 2004 for calendar year 2003

26  in the case of Program Two, and the tax credits may be used at

27  a rate not to exceed 10 percent annually per program.

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

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

30  certified investor and its affiliates by one or more certified

31


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                                       CS/HB 293, Second Engrossed



  1  capital companies may not exceed $15 million for Program One,

  2  and $7.5 million for Program Two.

  3         (h)  To the extent that less than $50 $150 million in

  4  certified capital is raised in connection with the procedure

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

  6  rules to allow a subsequent allocation of the remaining

  7  premium tax credits authorized under this section.

  8         (i)  The office shall issue a certification letter for

  9  each certified investor, showing the amount invested in the

10  certified capital company under each program.  The applicable

11  certified capital company shall attest to the validity of the

12  certification letter.

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

14         (a)  On an annual basis, on or before January December

15  31, each certified capital company shall file with the

16  department and the office, in consultation with the

17  department, on a form prescribed by the office, for each

18  calendar year:

19         1.  The total dollar amount the certified capital

20  company received from certified investors, the identity of the

21  certified investors, and the amount received from each

22  certified investor during the immediately preceding calendar

23  year.

24         2.  The total dollar amount the certified capital

25  company invested and the amount invested in qualified

26  businesses, together with the identity and location of those

27  businesses and the amount invested in each qualified business

28  during the immediately preceding calendar year.

29         3.  For informational purposes only, the total number

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

31  qualified business during the immediately preceding calendar


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                                       CS/HB 293, Second Engrossed



  1  year, the average wage of the jobs created or retained, the

  2  industry sectors in which the qualified businesses operate,

  3  and any additional capital invested in qualified businesses

  4  from sources other than certified capital companies.

  5         (9)  REQUIREMENT FOR 100 PERCENT INVESTMENT; STATE

  6  PARTICIPATION.--

  7         (a)  A certified capital company may make qualified

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

  9  its equity holders, other than a qualified distribution out of

10  funds related to a particular program, a certified capital

11  company must have invested an amount cumulatively equal to 100

12  percent of its certified capital raised under such program in

13  qualified investments. Payments to debt holders of a certified

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

15  respect to repayments of principal and interest on

16  indebtedness owed to them by a certified capital company,

17  including indebtedness of the certified capital company on

18  which certified investors earned premium tax credits. A debt

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

20  certified capital company may receive payments with respect to

21  such debt without restrictions.

22         (b)  Cumulative distributions from a certified capital

23  company out of funds related to a particular program to its

24  certified investors and equity holders under such program,

25  other than qualified distributions, in excess of the certified

26  capital company's original certified capital raised under such

27  program and any additional capital contributions to the

28  certified capital company with respect to such program may be

29  audited by a nationally recognized certified public accounting

30  firm acceptable to the department, at the expense of the

31  certified capital company, if the department directs such


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                                       CS/HB 293, Second Engrossed



  1  audit be conducted. The audit shall determine whether

  2  aggregate cumulative distributions from the funds related to a

  3  particular program made by the certified capital company to

  4  all certified investors and equity holders under such program,

  5  other than qualified distributions, have equaled the sum of

  6  the certified capital company's original certified capital

  7  raised under such program and any additional capital

  8  contributions to the certified capital company with respect to

  9  such program.  If at the time of any such distribution made by

10  the certified capital company, such distribution taken

11  together with all other such distributions from the funds

12  related to such program made by the certified capital company,

13  other than qualified distributions, exceeds in the aggregate

14  the sum of the certified capital company's original certified

15  capital raised under such program and any additional capital

16  contributions to the certified capital company with respect to

17  such program, as determined by the audit, the certified

18  capital company shall pay to the Department of Revenue 10

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

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

21  capital company pursuant to this paragraph shall not exceed

22  the aggregate amount of tax credits used by all certified

23  investors in such certified capital company for such program.

24         (10)  DECERTIFICATION.--

25         (f)  Decertification of a certified capital company for

26  failure to meet all requirements for continued certification

27  under paragraph (5)(a) with respect to the certified capital

28  raised under a particular program may cause the recapture of

29  premium tax credits previously claimed by such company under

30  such program and the forfeiture of future premium tax credits

31


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                                       CS/HB 293, Second Engrossed



  1  to be claimed by certified investors under such program with

  2  respect to such certified capital company, as follows:

  3         1.  Decertification of a certified capital company

  4  within 3 years after its certification date with respect to a

  5  particular program shall cause the recapture of all premium

  6  tax credits earned under such program and previously claimed

  7  by such company and the forfeiture of all future premium tax

  8  credits earned under such program which are to be claimed by

  9  certified investors with respect to such company.

10         2.  When a certified capital company meets all

11  requirements for continued certification under subparagraph

12  (5)(a)1. with respect to certified capital raised under a

13  particular program and subsequently fails to meet the

14  requirements for continued certification under the provisions

15  of subparagraph (5)(a)2. with respect to certified capital

16  raised under such program, those premium tax credits earned

17  under such program which have been or will be taken by

18  certified investors within 3 years after the certification

19  date of the certified capital company with respect to such

20  program shall not be subject to recapture or forfeiture;

21  however, all premium tax credits earned under such program

22  that have been or will be taken by certified investors after

23  the third anniversary of the certification date of the

24  certified capital company for such program shall be subject to

25  recapture or forfeiture.

26         3.  When a certified capital company meets all

27  requirements for continued certification under subparagraphs

28  (5)(a)1. and 2. with respect to a particular program and

29  subsequently fails to meet the requirements for continued

30  certification under the subparagraph (5)(a)3. with respect to

31  such program, those premium tax credits earned under such


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                                       CS/HB 293, Second Engrossed



  1  program which have been or will be taken by certified

  2  investors within 4 years after the certification date of the

  3  certified capital company with respect to such program shall

  4  not be subject to recapture or forfeiture; however, all

  5  premium tax credits earned under such program that have been

  6  or will be taken by certified investors after the fourth

  7  anniversary of the certification date of the certified capital

  8  company with respect to such program shall be subject to

  9  recapture and forfeiture.

10         4.  If a certified capital company has met all

11  requirements for continued certification under paragraph

12  (5)(a) with respect to certified capital raised under a

13  particular program, but such company is subsequently

14  decertified, those premium tax credits earned under such

15  program which have been or will be taken by certified

16  investors within 5 years after the certification date of such

17  company with respect to such program shall not be subject to

18  recapture or forfeiture. Those premium tax credits earned

19  under such program and to be taken subsequent to the 5th year

20  of certification with respect to such program shall be subject

21  to forfeiture only if the certified capital company is

22  decertified within 5 years after its certification date with

23  respect to such program.

24         5.  If a certified capital company has invested an

25  amount cumulatively equal to 100 percent of its certified

26  capital raised under a particular program in qualified

27  investments, all premium tax credits claimed or to be claimed

28  by its certified investors under such program shall not be

29  subject to recapture or forfeiture.

30         Section 2.  This act shall take effect July 1, 2001.

31


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