Senate Bill sb2668

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    Florida Senate - 2006                                  SB 2668

    By Senator Atwater





    25-1482B-06

  1                      A bill to be entitled

  2         An act relating to capital formation; creating

  3         s. 288.996, F.S., the Florida Capital Formation

  4         Act; providing legislative findings and intent;

  5         providing definitions; creating the Florida

  6         Capital Investment Trust, a state beneficiary

  7         public trust to be administered by the Florida

  8         Capital Investment Trust Board of Trustees;

  9         providing for the membership of the board;

10         providing qualifications and duties of the

11         board of trustees; specifying that the records

12         and meetings of the board are subject to

13         public-records requirements, except as

14         otherwise provided by law; providing for the

15         trust to receive and hold certain tax credits,

16         subject to certain limitations; providing for

17         the transfer and sale of tax credits, subject

18         to certain notice requirements and limitations;

19         authorizing the Department of Revenue to adopt

20         rules governing the documentation required for

21         transferred tax credits; requiring that tax

22         credits be sold by competitive bid; requiring

23         Enterprise Florida, Inc., to facilitate the

24         creation of the Florida Opportunity Fund

25         Management Corporation as a private,

26         not-for-profit corporation; providing for a

27         board of directors for the corporation;

28         providing for filling vacancies on the board of

29         directors and for terms of office; specifying

30         duties of the corporation with respect to the

31         operations of the Florida Opportunity Fund;

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    Florida Senate - 2006                                  SB 2668
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 1         requiring a national solicitation for

 2         investment proposals from venture capital

 3         managers; authorizing certain management fees

 4         and compensation for expenses; establishing the

 5         Florida Opportunity Fund as a for-profit

 6         limited partnership or limited liability

 7         corporation incorporated by the Florida

 8         Opportunity Fund Management Corporation;

 9         providing requirements for investments;

10         providing for the corporation to be paid a

11         management fee; authorizing investments in the

12         fund by state-chartered banks and insurance

13         companies; authorizing additional investments

14         without benefit of certificates from the board;

15         requiring that the board issue an annual report

16         to the Governor and the Legislature; providing

17         an appropriation of funds from the General

18         Revenue Fund to the Florida Capital Investment

19         Trust; amending s. 213.053, F.S.; authorizing

20         the Department of Revenue to provide

21         information to the Florida Capital Investment

22         Trust Board of Trustees concerning claimed tax

23         credits; amending ss. 220.02 and 624.509, F.S.;

24         providing the order for applying the tax credit

25         granted under the act; providing an effective

26         date.

27  

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

29  

30         Section 1.  Section 288.996, Florida Statutes, is

31  created to read:

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    Florida Senate - 2006                                  SB 2668
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 1         (1)  SHORT TITLE.--This section may be cited as the

 2  "Florida Capital Formation Act."

 3         (2)  FINDINGS AND INTENT.--

 4         (a)  The Legislature finds and declares that there is

 5  need to increase the availability of seed and early-stage

 6  venture equity capital for emerging companies in this state,

 7  including, without limitation, enterprises in life sciences,

 8  information technology, advanced manufacturing processes,

 9  aviation and aerospace, homeland security and defense, as well

10  as other strategic technologies.

11         (b)  It is the intent of the Legislature that the

12  Florida Capital Formation Act serve to mobilize private

13  investment in a broad variety of venture capital partnerships

14  in diversified industries and geographies; retain

15  private-sector investment that is focused on rate of return;

16  use the services of highly qualified managers in the venture

17  capital industry, regardless of location; facilitate the

18  organization of the Florida Opportunity Fund as a

19  fund-of-funds investor in seed and early-stage venture capital

20  and angel funds; and precipitate capital investment and

21  extensions of credit to and in the Florida Opportunity Fund.

22         (c)  It is the intent of the Legislature to mobilize

23  venture equity capital for investment in such a manner so as

24  to create a significant potential to establish new businesses

25  and jobs that are based on technologies, products, or services

26  having a high potential for growth and that will further

27  diversify the economy of this state.

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

29         (a)  "Board" means the Florida Capital Investment Trust

30  Board of Trustees.

31  

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    Florida Senate - 2006                                  SB 2668
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 1         (b)  "Certificate" means a contract between the trust

 2  and a designated investor evidencing the terms of a guarantee

 3  or incentive granted to a designated investor.

 4         (c)  "Designated investor" means a person, other than

 5  the board, who purchases an equity interest in the Florida

 6  Opportunity Fund or is a party to a certificate, or who is a

 7  lender to the Florida Opportunity Fund and is a party to a

 8  certificate.

 9         (d)  "Florida Capital Investment Trust" means a state

10  beneficiary public trust created pursuant to this section.

11         (e)  "Florida Opportunity Fund" means the private,

12  for-profit limited partnership or limited liability company in

13  which a designated investor purchases an equity interest or to

14  which a designated investor extends credit.

15         (f)  "Tax credit" means a contingent tax credit issued

16  pursuant to this section, or subsequent legislative action,

17  which is available to offset tax liabilities imposed by the

18  state if the proceeds of such tax are payable to the General

19  Revenue Fund. A tax credit is not eligible to offset tax

20  liabilities imposed by a political subdivision within this

21  state.

22         (g)  "Trust" means the Florida Capital Investment

23  Trust.

24         (4)  FLORIDA CAPITAL INVESTMENT TRUST.--

25         (a)  There is created the Florida Capital Investment

26  Trust, a state beneficiary public trust to be administered by

27  the Florida Capital Investment Trust Board of Trustees. The

28  exercise by the board of powers conferred by this section

29  shall be deemed and held to be the performance of essential

30  public purposes.

31  

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 1         (b)  The board shall consist of five voting trustees

 2  and two nonvoting, ex officio trustees. A majority of voting

 3  trustees constitutes a quorum.

 4         (c)  Three voting trustees shall be appointed by the

 5  Governor, one voting trustee shall be appointed by the

 6  President of the Senate, and one voting trustee shall be

 7  appointed by the Speaker of the House of Representatives. The

 8  Governor shall appoint trustees to terms ending April 30,

 9  2007, April 30, 2009, and April 30, 2009. The President of the

10  Senate and the Speaker of the House of Representatives shall

11  each appoint trustees to terms ending April 30, 2008.

12  Thereafter, each voting trustee shall be appointed for a

13  3-year term.

14         (d)  One nonvoting, ex officio trustee shall be the

15  designee of Enterprise Florida, Inc., and one nonvoting, ex

16  officio trustee shall be the designee of the Florida Research

17  Consortium. Each ex officio trustee shall be appointed to an

18  annual term at the pleasure of their appointing organizations

19  and may be reappointed. A trustee's term shall end on April 30

20  of his or her term-expiration year. Trustees whose terms have

21  expired may continue to serve until their replacement has been

22  appointed. Vacancies shall be filled in the same manner as the

23  appointment of the original trustee to whom a successor is

24  sought.

25         (e)  Trustees shall serve on the board without

26  compensation in the form of a fee, per diem, or salary.

27  Trustees are entitled to receive compensation or reimbursement

28  for direct expenses, mileage, and other travel expenses

29  related to the performance of their duties in accordance with

30  s. 112.061. Trustees shall be selected based upon demonstrated

31  expertise and competence in the supervision of early-stage

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 1  investment managers, the fiduciary management of funds, the

 2  administration and management of a publicly listed company, or

 3  public accounting, auditing, and fiduciary responsibilities.

 4  Trustees may not have an interest in any entity to which a

 5  certificate is issued.

 6         (f)  The board may engage consultants, expend funds,

 7  invest funds, enter into contracts, bond or insure against

 8  loss, provide guarantees or other incentives, hold

 9  transferable tax credits, sell tax credits, enter into any

10  financial or other transaction, or perform any other act

11  necessary to carry out its purpose as allowed under state law.

12  The board, in conjunction with the Department of Revenue,

13  shall develop a system for the registration of any tax credits

14  received by the trust and transferred pursuant to this

15  section. The board shall also create a system of documentation

16  that permits verification that any tax credit claimed upon a

17  tax return is validly held by the person claiming such tax

18  credit and properly taken in the year of the claim, and that

19  any transfers of the tax credit are made in accordance with

20  the requirements of this section.

21         (g)  If the board elects to employ a staff, such

22  persons shall be selected by the board based upon knowledge

23  and leadership in the field for which the person performs

24  services for the board. The board shall charge fees for its

25  guaranties to designated investors or for other services such

26  that the board's operations may be conducted without

27  subsequent legislative appropriation.

28         (h)  Records and meetings of the board are subject to

29  s. 24, Art. I of the State Constitution and ss. 119.07(1) and

30  286.011, except that the board shall maintain the

31  confidentiality of information concerning securities acquired

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    Florida Senate - 2006                                  SB 2668
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 1  and held by the Florida Opportunity Fund as otherwise provided

 2  by law.

 3         (5)  ISSUANCE OF TAX CREDITS.--

 4         (a)  The trust shall receive and hold for the purposes

 5  of this section tax credits that may be used to reduce any tax

 6  liability imposed under chapter 220, s. 624.509, s. 624.510,

 7  or state sales and use tax imposed under chapter 212. The

 8  total amount of tax credits authorized for transfer to the

 9  trust may not exceed $75 million. The tax credits shall be

10  transferable by the board pursuant to this section; however,

11  such tax credits may not be transferred before July 1, 2011,

12  or after July 1, 2036.

13         (b)  The board may transfer and sell tax credits solely

14  for the purpose of fulfilling, in whole or in part, any

15  certificate obligation issued by the board. The board shall

16  immediately notify the Governor, the President of the Senate,

17  the Speaker of the House of Representatives, and the

18  Department of Revenue in writing, if any tax credit is

19  transferred. The board shall be notified immediately of any

20  transfers of tax credits by persons or businesses other than

21  the board and shall notify the Department of Revenue, in

22  writing, of such transfers.

23         (c)  The board shall ensure that no more than $20

24  million tax credits are transferred which may be claimed and

25  used to reduce taxes payable to the General Revenue Fund for

26  any one state fiscal year. The board shall clearly indicate

27  upon the face of the document transferring the tax credit the

28  principal amount of the tax credit and the state fiscal year

29  or years for which the credit may be claimed. Tax credits may

30  be transferred in increments of not less than $100,000. A copy

31  of the document transferring the tax credit shall be

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 1  transmitted to the executive director of the Department of

 2  Revenue, who shall allow the credit to be claimed against the

 3  tax liabilities of the person or business, consistent with the

 4  terms appearing in the transfer document.

 5         (d)  If the tax liabilities of the taxpayer are

 6  insufficient to exhaust the tax credit for which the taxpayer

 7  is eligible, the balance of the tax credit may be refunded by

 8  the state. If a tax credit granted under this section is not

 9  claimed in the year designated for claiming it on the transfer

10  document, any return for the year in which it was eligible to

11  be claimed may be amended to claim it within the time

12  specified by ss. 95.091 and 215.26.

13         (e)  Persons or businesses to which tax credits under

14  this section are transferred must retain documentation

15  supporting their eligibility to claim the tax credits, and

16  evidence of the transfer of the tax credits, if applicable,

17  until the time provided to audit the tax returns on which the

18  tax credits were claimed has passed.

19         (f)  The Department of Revenue, in conjunction with the

20  board, may adopt rules governing the manner and form of

21  documentation required to claim tax credits granted or

22  transferred under this section, and may establish guidelines

23  as to the requisites for an affirmative showing of

24  qualification for tax credits granted or transferred under

25  this section.

26         (g)  An insurance company claiming a credit against

27  premium tax liability under this section is not required to

28  pay any additional retaliatory tax levied pursuant to s.

29  624.5091 as a result of claiming such credit. Because credits

30  under this section are available to an insurance company, s.

31  624.5091 does not limit such credit in any manner.

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 1         (h)  Any original sale of tax credits by the board

 2  shall be by competitive bidding unless the sale is for the

 3  full face value thereof.

 4         (6)  FLORIDA OPPORTUNITY FUND MANAGEMENT CORPORATION.--

 5         (a)  At the request of the board, Enterprise Florida,

 6  Inc., shall facilitate the creation of the Florida Opportunity

 7  Fund Management Corporation as a private, not-for-profit

 8  corporation. Enterprise Florida, Inc., shall be the

 9  corporation's sole member. The Florida Opportunity Fund

10  Management Corporation is not a public corporation or

11  instrumentality of the state.

12         (b)  The vice chair of Enterprise Florida, Inc., shall

13  select from among its sitting board of directors a five-person

14  appointment committee. The appointment committee shall select

15  five initial directors for the Florida Opportunity Fund

16  Management Corporation. The persons selected for the initial

17  board of directors by the appointment committee shall include

18  persons who have expertise in the area of the selection and

19  supervision of early-stage investment managers or in the

20  fiduciary management of investment funds, and who have

21  expertise in other areas as considered appropriate by the

22  appointment committee. After selection of the initial board of

23  directors, vacancies on the board of directors of the

24  corporation shall be filled by selection of the remaining

25  directors of the corporation. The board of directors shall be

26  appointed to serve terms that may not exceed 4 years as

27  provided in the corporation's organizational documents.

28  Members of the board of directors are subject to any

29  restrictions on conflicts of interest specified in the

30  organizational documents and may not have an interest in any

31  venture capital investment fund allocation manager selected by

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 1  the corporation pursuant to this section or in any investments

 2  made by the Florida Opportunity Fund.

 3         (c)  The purposes of the corporation shall be to

 4  organize the Florida Opportunity Fund; to select an

 5  early-stage venture capital investment fund allocation

 6  manager; to negotiate the terms of a contract with the venture

 7  capital investment fund allocation manager; to execute the

 8  contract with the selected venture capital investment fund

 9  manager on behalf of the Florida Opportunity Fund; to manage

10  the business affairs of the Florida Opportunity Fund such as

11  accounting, audit, insurance, and related requirements; to

12  receive investment returns from the Florida Opportunity Fund;

13  and to reinvest the investment returns in additional venture

14  capital investments that are designed to result in significant

15  creation of new businesses and jobs in the state and further

16  diversify the state's economy.

17         (d)  Upon organization, the Florida Opportunity Fund

18  Management Corporation shall conduct a national solicitation

19  for investment plan proposals from qualified venture capital

20  investment fund allocation managers for the raising and

21  investing of capital by the Florida Opportunity Fund

22  Management Corporation. Any proposed investment plan must

23  address the applicant's level of experience, quality of

24  management, investment philosophy and process, provability of

25  success in fundraising, prior investment fund results, and

26  plan for achieving the purposes of this section. The

27  corporation shall select only a venture capital investment

28  fund allocation manager having demonstrated expertise in the

29  management and fund allocation of investments in venture

30  capital funds.

31  

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 1         (e)  The Florida Opportunity Fund Management

 2  Corporation may charge a management fee on assets under

 3  management in the Florida Opportunity Fund. The fee shall be

 4  in addition to any fee charged to the Florida Opportunity Fund

 5  by the venture capital investment fund allocation manager, but

 6  the fee shall be charged only to pay for reasonable and

 7  necessary costs of the Florida Opportunity Fund Management

 8  Corporation.

 9         (f)  Directors of the Florida Opportunity Fund

10  Management Corporation shall be compensated for direct

11  expenses and mileage but may not receive a fee or salary for

12  service as directors.

13         (g)  The corporation shall have all powers granted

14  under its organizational documents and shall indemnify

15  directors to the broadest extent permissible under state law.

16         (7)  FLORIDA OPPORTUNITY FUND.--

17         (a)  The Florida Opportunity Fund is a for-profit

18  limited partnership or limited liability corporation that

19  shall be organized and incorporated in this state by the

20  Florida Opportunity Fund Management Corporation upon the

21  request of the board. The board, the Florida Opportunity Fund

22  Management Corporation, or the Florida Opportunity Fund may

23  contract with Enterprise Florida, Inc., for provision of

24  services necessary for continuing operations.

25         (b)  The Florida Opportunity Fund shall invest on a

26  fund-of-funds basis and emphasize investment in seed and

27  early-stage venture capital funds, focusing on opportunities

28  in this state. While not precluded from investing in funds

29  having a wider geographic spread of portfolio investment, the

30  Florida Opportunity Fund must require an investment fund to

31  show a record of investment in this state, to be based in this

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 1  state, or to have an office in this state which is staffed

 2  with a full-time, professional venture investment executive in

 3  order to be eligible for investment. The investments by the

 4  Florida Opportunity Fund shall be in partnership interests in

 5  private venture capital funds and not in direct investments in

 6  individual businesses. The Florida Opportunity Fund shall

 7  invest in venture capital funds having experienced managers or

 8  management teams with demonstrated expertise and a successful

 9  history in the investment of early-stage venture capital

10  funds. The Florida Opportunity Fund may invest in newly

11  created early-stage venture capital funds as long as the

12  manager or management teams of the funds have experience,

13  expertise, and a successful history in the investment of

14  venture capital funds. The Florida Opportunity Fund may not

15  invest in a fund unless that fund has raised capital from

16  other sources in an amount greater than the investment of the

17  Florida Opportunity Fund. The Florida Opportunity Fund

18  Management Corporation and its partners or shareholders may

19  negotiate any and all terms and conditions for its

20  investments, including the claw back of management fees and

21  other provisions that maximize investment in seed and

22  early-stage Florida-based companies.

23         (c)  The interest of the Florida Opportunity Management

24  Corporation in the Florida Opportunity Fund shall be to serve

25  as general partner or manager and to be paid a management fee

26  to cover its costs.

27         (d)  Investments by designated investors in the Florida

28  Opportunity Fund shall be deemed permissible investments for

29  state-chartered banks and for domestic insurance companies

30  under applicable state law.

31  

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 1         (e)  If the Florida Opportunity Fund is liquidated or

 2  has returned all capital to designated investors in accordance

 3  with contractual agreements, or if the guarantee capacity of

 4  the trust, in the sole discretion of the board, is sufficient

 5  for additional certificates, a new funding of the Florida

 6  Opportunity Fund may be implemented for subsequent venture

 7  capital fund-of-funds investments.

 8         (8)  ANNUAL REPORTING.--The board shall issue an annual

 9  report of the activities conducted by the Florida Opportunity

10  Fund and present the report to the Governor, the President of

11  the Senate, and the Speaker of the House of Representatives.

12  The annual report must include a copy of the independent audit

13  of the Florida Opportunity Fund and a valuation of the assets

14  of the Florida Opportunity Fund, a review of the progress of

15  the investment fund allocation manager in implementing its

16  investment plan, the benefits to the state resulting from this

17  program, including the number of businesses created and their

18  associated industry, and the number of jobs created. The

19  annual report must also describe any sale of tax certificates

20  and any sale of tax certificates which is reasonably

21  anticipated by the board to meet its certificate obligations.

22         Section 2.  For the 2006-2007 fiscal year, the sum of

23  $750,000 is appropriated from the General Revenue Fund to the

24  Florida Capital Investment Trust to be used for start-up

25  activities necessary to implement this act.

26         Section 3.  Paragraph (y) is added to subsection (7) of

27  section 213.053, Florida Statutes, to read:

28         213.053  Confidentiality and information sharing.--

29         (7)  Notwithstanding any other provision of this

30  section, the department may provide:

31  

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 1         (y)  Information relative to tax credits claimed under

 2  the provisions of s. 288.996 to the Florida Capital Investment

 3  Trust Board of Trustees in the conduct of its official

 4  business.

 5  

 6  Disclosure of information under this subsection shall be

 7  pursuant to a written agreement between the executive director

 8  and the agency.  Such agencies, governmental or

 9  nongovernmental, shall be bound by the same requirements of

10  confidentiality as the Department of Revenue.  Breach of

11  confidentiality is a misdemeanor of the first degree,

12  punishable as provided by s. 775.082 or s. 775.083.

13         Section 4.  Subsection (8) of section 220.02, Florida

14  Statutes, is amended to read:

15         220.02  Legislative intent.--

16         (8)  It is the intent of the Legislature that credits

17  against either the corporate income tax or the franchise tax

18  be applied in the following order: those enumerated in s.

19  631.828, those enumerated in s. 220.191, those enumerated in

20  s. 220.181, those enumerated in s. 220.183, those enumerated

21  in s. 220.182, those enumerated in s. 220.1895, those

22  enumerated in s. 221.02, those enumerated in s. 220.184, those

23  enumerated in s. 220.186, those enumerated in s. 220.1845,

24  those enumerated in s. 220.19, those enumerated in s. 220.185,

25  and those enumerated in s. 220.187, and those enumerated in s.

26  288.996.

27         Section 5.  Subsection (7) of section 624.509, Florida

28  Statutes, is amended to read:

29         624.509  Premium tax; rate and computation.--

30         (7)  Credits and deductions against the tax imposed by

31  this section shall be taken in the following order: deductions

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 1  for assessments made pursuant to s. 440.51; credits for taxes

 2  paid under ss. 175.101 and 185.08; credits for income taxes

 3  paid under chapter 220, the emergency excise tax paid under

 4  chapter 221 and the credit allowed under subsection (5), as

 5  these credits are limited by subsection (6); credits allowed

 6  under s. 288.996; all other available credits and deductions.

 7         Section 6.  This act shall take effect July 1, 2006.

 8  

 9            *****************************************

10                          SENATE SUMMARY

11    Creates the Florida Capital Investment Trust, a public
      trust to be administered by a board of trustees, for the
12    purpose of receiving and selling tax credits, subject to
      certain limitations. Provides for the creation of the
13    Florida Opportunity Fund, a for-profit partnership or
      corporation to be managed by a management corporation
14    created by Enterprise Florida, Inc. Provides investment
      requirements and authorizes investments in early-stage
15    venture capital funds. Authorizes investments by state
      banks and insurance companies. Requires an annual report
16    to the Governor and the Legislature concerning the
      activities of the fund. Authorizes the Department of
17    Revenue to provide information to the board of trustees
      concerning tax credits. Provides requirements for
18    claiming tax credits. (See bill for details.)

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