Senate Bill sb1762

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    Florida Senate - 2007                                  SB 1762

    By Senator Ring





    32-907-07                                            See HB 83

  1                      A bill to be entitled

  2         An act relating to capital formation; creating

  3         a new pt. X of ch. 288, F.S.; providing a short

  4         title; providing legislative findings and

  5         intent; providing definitions; creating the

  6         Florida Capital Investment Trust as a state

  7         beneficiary public trust; providing for

  8         administration by a board of trustees;

  9         providing for appointment of board members;

10         providing for terms; providing for serving

11         without compensation; providing for travel and

12         other direct expenses; providing criteria for

13         trustees; providing for powers and duties of

14         trustees; providing for hiring employees;

15         providing for meetings of the board;

16         authorizing the trust to receive, hold, use,

17         transfer, and sell certain tax credits for

18         certain purposes; providing requirements and

19         limitations; authorizing the Department of

20         Revenue to adopt rules for certain purposes;

21         requiring Enterprise Florida, Inc., to

22         facilitate establishment of the Florida

23         Opportunity Fund Management Corporation;

24         specifying criteria of the corporation;

25         providing for appointment of a board of

26         directors selection committee; providing for

27         selection of a board of directors of the

28         corporation by Enterprise Florida, Inc.;

29         specifying criteria; providing for terms and

30         requirements of directors; providing purposes

31         of the corporation; providing duties and

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         responsibilities of the corporation;

 2         authorizing the corporation to charge a

 3         management fee for certain purposes; providing

 4         for travel and other direct expenses; providing

 5         for powers of the corporation; creating the

 6         Florida Opportunity Fund as a for-profit,

 7         limited partnership or a limited liability

 8         corporation to be organized and incorporated by

 9         the Florida Opportunity Fund Management

10         Corporation; authorizing certain entities to

11         contract with Enterprise Florida, Inc., for

12         certain purposes; providing investment

13         requirements for the fund; requiring the board

14         of trustees to issue annual reports on

15         activities of the fund; providing report

16         requirements; amending s. 213.053, F.S.;

17         authorizing the Department of Revenue to

18         provide certain tax credit information to the

19         board of trustees; amending s. 220.02, F.S.;

20         including tax credits transferred or sold by

21         the board of trustees within the priority list

22         of applied credits against certain taxes;

23         amending s. 624.509, F.S.; including tax

24         credits transferred or sold by the board of

25         trustees within the order of taking credits or

26         deductions against the insurance premium tax;

27         providing an appropriation; providing an

28         effective date.

29  

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

31  

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         Section 1.  Parts X and XI of chapter 288, Florida

 2  Statutes, are redesignated as parts XI and XII, respectively,

 3  and a new part X of that chapter, consisting of sections

 4  288.9621, 288.9622, 288.9623, 288.9624, 288.9625, 288.9626,

 5  288.9627, and 288.9628, is created to read:

 6                              PART X

 7                    FLORIDA CAPITAL FORMATION

 8         288.9621  Short title.--This part may be cited as the

 9  "Florida Capital Formation Act."

10         288.9622  Findings and intent.--

11         (1)  The Legislature finds and declares that there is

12  need to increase the availability of seed capital and early

13  stage venture equity capital for emerging companies in the

14  state, including, without limitation, enterprises in life

15  sciences, information technology, advanced manufacturing

16  processes, aviation and aerospace, and homeland security and

17  defense, as well as other strategic technologies.

18         (2)  It is the intent of the Legislature that this part

19  serve to mobilize private investment in a broad variety of

20  venture capital partnerships in diversified industries and

21  geographies; retain private-sector investment criteria focused

22  on rate of return; use the services of highly qualified

23  managers in the venture capital industry regardless of

24  location; facilitate the organization of the Florida

25  Opportunity Fund as a fund-of-funds investor in seed and early

26  stage venture capital and angel funds; and precipitate capital

27  investment and extensions of credit to and in the Florida

28  Opportunity Fund.

29         (3)  It is the intent of the Legislature to mobilize

30  venture equity capital for investment in such a manner as to

31  result in a significant potential to create new businesses and

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1  jobs in this state that are based on high growth potential

 2  technologies, products, or services and that will further

 3  diversify the economy of this state.

 4         288.9623  Definitions.--As used in this part:

 5         (1)  "Board" means the board of trustees of the Florida

 6  Capital Investment Trust.

 7         (2)  "Certificate" means a contract between the trust

 8  and a designated investor evidencing the terms of a guarantee

 9  or incentive granted to a designated investor.

10         (3)  "Corporation" means the Florida Opportunity Fund

11  Management Corporation created under this part.

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

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

14  Opportunity Fund or is a party to a certificate or who is a

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

16  certificate.

17         (5)  "Florida Capital Investment Trust" or "trust"

18  means a state beneficiary public trust created under this

19  part.

20         (6)  "Florida Opportunity Fund" or "fund" means the

21  private, for-profit limited partnership or limited liability

22  company in which a designated investor purchases an equity

23  interest or to which a designated investor extends credit.

24         (7)  "Tax credit" means a contingent tax credit issued

25  under this part or subsequent legislative action that is

26  available to offset tax liabilities imposed by this state,

27  provided the proceeds of such tax are payable to the General

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

29  liabilities imposed by a political subdivision within this

30  state.

31         288.9624  Florida Capital Investment Trust.--

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         (1)  The Florida Capital Investment Trust is created as

 2  a state beneficiary public trust to be administered by the

 3  board. The exercise by the board of powers conferred by this

 4  part is deemed and held to be the performance of essential

 5  public purposes.

 6         (2)(a)  The board shall consist of five voting trustees

 7  and two nonvoting ex officio trustees. A majority of voting

 8  trustees shall constitute a quorum.

 9         (b)  Three voting trustees shall be appointed by the

10  Governor, one voting trustee shall be appointed by the

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

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

13  Governor shall appoint one trustee to a term ending April 30,

14  2008, and two trustees to terms ending April 30, 2010. The

15  President of the Senate and the Speaker of the House of

16  Representatives shall each appoint one trustee to a term

17  ending April 30, 2009. Thereafter, each voting trustee shall

18  be appointed for a 3-year term.

19         (c)  One nonvoting ex officio trustee shall be the

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

21  officio trustee shall be the designee of the Florida Research

22  Consortium. Ex officio trustees serve annual terms at the

23  pleasure of their appointing organizations and may be

24  reappointed. A trustee's term shall end on April 30 of his or

25  her term expiration year.

26         (d)  Vacancies shall be filled in the same manner as

27  the appointment of the original trustee to whom a successor is

28  sought. Trustees whose terms have expired may continue to

29  serve until their replacements have been duly appointed.

30         (3)  Trustees shall serve on the board without

31  compensation in the form of fees, per diem, or salary.

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1  Trustees may receive compensation or reimbursement for direct

 2  expenses, mileage, and other travel expenses related to the

 3  performance of their duties pursuant to s. 112.061. Trustees

 4  shall be selected based upon demonstrated expertise and

 5  competence in the supervision of early stage investment

 6  managers, the fiduciary management of funds, the

 7  administration and management of a publicly listed company, or

 8  experience and competence in public accounting, auditing, and

 9  fiduciary responsibilities. Trustees may not have an interest

10  in any entity to which a certificate is issued.

11         (4)  The board may engage consultants, expend funds,

12  invest funds, contract, bond or insure against loss, provide

13  guarantees or other incentives, hold transferable tax credits,

14  sell tax credits, or enter into any financial or other

15  transaction or perform any other act necessary to carry out

16  its purpose under this part. The board, in conjunction with

17  the Department of Revenue, shall develop a system for

18  registration of any tax credits received by the trust and

19  transferred under this part. The board shall also create a

20  system of documentation that permits verification that any tax

21  credit claimed upon a tax return is validly held by the person

22  claiming such tax credit and properly taken in the year of

23  claim and that any transfers of the tax credit are made in

24  accordance with the requirements of this part.

25         (5)  If the board elects to hire employees, such

26  persons shall be selected by the board based upon knowledge

27  and leadership in the field for which the person performs

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

29  guarantees to designated investors or for other services such

30  that the board's operations may be conducted without

31  subsequent legislative appropriation.

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         288.9625  Issuance of tax credits.--

 2         (1)  The trust shall receive and hold for the purposes

 3  of this part tax credits under this part that may be used to

 4  reduce any tax liability imposed by the state under chapter

 5  212, chapter 220, s. 624.509, or s. 624.510. The total amount

 6  of tax credits issued and transferred to the trust is $75

 7  million. The tax credits shall be transferable by the board as

 8  provided in this part, provided no such transferred tax credit

 9  shall be exercisable before July 1, 2012, or after July 1,

10  2037.

11         (2)  The board may transfer and sell tax credits solely

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

13  certificate obligation issued by the board. The board shall

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

15  the Speaker of the House of Representatives, and the

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

17  transferred. The board shall be notified immediately of any

18  transfers of tax credits by persons or businesses other than

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

20  writing, of such transfers.

21         (3)  The board shall ensure that no more than $20

22  million in tax credits is transferred that may be claimed and

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

24  any single state fiscal year. The board shall clearly indicate

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

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

27  or years during which the credit may be claimed. Tax credits

28  may be transferred in increments of no less than $100,000. A

29  copy of the document transferring the tax credit shall be

30  transmitted to the executive director of the Department of

31  Revenue, who shall allow the credit to be claimed against tax

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1  liabilities of the person or business consistent with the

 2  terms appearing in the transfer document.

 3         (4)  If the tax liabilities of the taxpayer are

 4  insufficient to exhaust the tax credit for which the taxpayer

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

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

 7  claimed in the year designated for claiming the credit on the

 8  transfer document, any return for the year in which the credit

 9  was eligible to be claimed may be amended to claim the credit

10  within the time specified by ss. 95.091 and 215.26.

11         (5)  Persons or businesses to which tax credits under

12  this section are transferred shall retain documentation

13  supporting eligibility to claim the tax credits and evidence

14  of the transfer of the tax credits, if applicable, until the

15  time period provided to audit the tax returns on which the tax

16  credits were claimed has passed.

17         (6)  The Department of Revenue, in conjunction with the

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

19  documentation required to claim tax credits granted or

20  transferred under this section and may establish guidelines as

21  to the requisites for an affirmative showing of qualification

22  for tax credits granted or transferred under this section.

23         (7)  An insurance company claiming a credit against

24  premium tax liability under this section shall not be required

25  to pay any additional retaliatory tax levied pursuant to s.

26  624.5091 as a result of claiming such credit. Because credits

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

28  624.5091 does not limit such credit in any manner.

29         (8)  Any original sale of tax credits by the board

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

31  full face value of the credits.

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         288.9626  Florida Opportunity Fund Management

 2  Corporation.--

 3         (1)  At the request of the board, Enterprise Florida,

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

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

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

 7  corporation's sole member. The corporation is not a public

 8  corporation or instrumentality of the state.

 9         (2)  The vice chair of Enterprise Florida, Inc., shall

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

11  appointment committee. The appointment committee shall select

12  five initial members of a board of directors for the

13  corporation. The persons elected to the initial board of

14  directors by the appointment committee shall include persons

15  who have expertise in the area of the selection and

16  supervision of early stage investment managers or in the

17  fiduciary management of investment funds and other areas of

18  expertise as deemed appropriate by the appointment committee.

19  After election of the initial board of directors, vacancies on

20  the board of directors of the corporation shall be elected by

21  the board of directors of Enterprise Florida, Inc., and shall

22  serve terms as provided in the corporation's organizational

23  documents. Members of the board of directors shall be subject

24  to any restrictions on conflicts of interest specified in the

25  organizational documents and shall have no interest in any

26  venture capital investment fund allocation manager selected by

27  the corporation pursuant to the provisions of this part or in

28  any investments made by the Florida Opportunity Fund.

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

30  organize the Florida Opportunity Fund, select an early stage

31  venture capital investment fund allocation manager, negotiate

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1  the terms of a contract with the venture capital investment

 2  fund allocation manager, execute the contract with the

 3  selected venture capital investment fund allocation manager on

 4  behalf of the Florida Opportunity Fund, manage the business

 5  affairs of the Florida Opportunity Fund, such as accounting,

 6  audit, insurance, and related requirements, receive investment

 7  returns from the Florida Opportunity Fund, and reinvest the

 8  investment returns in the Florida Opportunity Fund in order to

 9  provide additional venture capital investments designed to

10  result in a significant potential to create new businesses and

11  jobs in this state and further diversify the economy of this

12  state.

13         (4)  Upon organization, the corporation shall conduct a

14  national solicitation for investment plan proposals from

15  qualified venture capital investment fund allocation managers

16  for the raising and investing of capital by the corporation.

17  Any proposed investment plan shall address the applicant's

18  level of experience, quality of management, investment

19  philosophy and process, provability of success in fundraising,

20  prior investment fund results, and plan for achieving the

21  purposes of this part. The corporation shall select only a

22  venture capital investment fund allocation manager with

23  demonstrated expertise in the management and fund allocation

24  of investments in venture capital funds.

25         (5)  The corporation may charge a management fee on

26  assets under management in the Florida Opportunity Fund. The

27  fee shall be in addition to any fee charged to the Florida

28  Opportunity Fund by the venture capital investment fund

29  allocation manager, but the fee shall be charged only to pay

30  for reasonable and necessary costs of the corporation.

31  

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         (6)  Directors of the corporation shall be compensated

 2  for direct expenses and mileage pursuant to s. 112.061 but

 3  shall not receive a fee or salary for service as directors.

 4         (7)  The corporation shall have all powers granted

 5  under its organizational documents and shall indemnify

 6  directors to the broadest extent permissible under the laws of

 7  this state.

 8         288.9627  Florida Opportunity Fund.--

 9         (1)  The Florida Opportunity Fund is created as a

10  for-profit limited partnership or limited liability

11  corporation that shall be organized and incorporated in this

12  state by the Florida Opportunity Fund Management Corporation

13  upon request by the board. The board, the corporation, or the

14  fund may contract with Enterprise Florida, Inc., for provision

15  of services necessary for continuing operations.

16         (2)  The fund shall invest on a fund-of-funds basis and

17  emphasize investment in seed capital and early stage venture

18  capital funds focusing on opportunities in this state. While

19  not precluded from investing in funds with a wider geographic

20  spread of portfolio investment, the fund shall require an

21  investment fund to have a record of investment in this state,

22  be based in this state, or have an office in this state

23  staffed with a full-time, professional venture investment

24  executive to be eligible for investment. The investments by

25  the fund shall be on partnership interests in private venture

26  capital funds and not in direct investments in individual

27  businesses. The fund shall invest in venture capital funds

28  with experienced managers or management teams with

29  demonstrated expertise and a successful history in the

30  investment of early stage venture capital funds. The fund may

31  invest in newly created early stage venture capital funds as

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1  long as the manager or management teams of the funds have

 2  experience, expertise, and a successful history in the

 3  investment of venture capital funds. The Florida Opportunity

 4  Fund may not invest in a fund unless that fund has raised

 5  capital from other sources in an amount greater than the

 6  investment of the Florida Opportunity Fund such that the

 7  amount invested in an entity in this state by the receiving

 8  venture capital fund is at least twice the amount invested by

 9  the corporation. The corporation and its partners or

10  shareholders may negotiate any and all terms and conditions

11  for its investments, including draw back of management fees

12  and other provisions that maximize investment in seed and

13  early stage companies based in this state.

14         (3)  The interest of the corporation in the fund shall

15  be to serve as general partner or manager and to be paid a

16  management fee to cover its costs.

17         (4)  Investments by designated investors in the fund

18  shall be deemed permissible investments for state-chartered

19  banks and for domestic insurance companies under applicable

20  state law.

21         (5)  If the fund is liquidated or has returned all

22  capital to designated investors in accordance with contractual

23  agreements, or if the guarantee capacity of the trust, at the

24  sole discretion of the board, is sufficient for additional

25  certificates, a new funding of the Florida Opportunity Fund

26  may be implemented for subsequent venture capital

27  fund-of-funds investments. If the board takes exception to an

28  additional funding, such additional funding may only be

29  implemented without the benefit of certificates from the

30  board.

31  

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         288.9628  Annual reporting.--The board shall issue an

 2  annual report on the activities conducted by the Florida

 3  Opportunity Fund and present the report to the Governor, the

 4  President of the Senate, and the Speaker of the House of

 5  Representatives. The annual report shall include a copy of the

 6  independent audit of the fund and a valuation of the assets of

 7  the fund and shall review the progress of the investment fund

 8  allocation manager in implementing the fund's investment plan,

 9  the benefits to the state resulting from this program,

10  including the number of businesses created and their

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

12  annual report shall also describe any sale of tax certificates

13  and any sale of tax certificates that is reasonably

14  anticipated by the board to meet its certificate obligations.

15         Section 2.  Paragraph (z) is added to subsection (8) of

16  section 213.053, Florida Statutes, to read:

17         213.053  Confidentiality and information sharing.--

18         (8)  Notwithstanding any other provision of this

19  section, the department may provide:

20         (z)  Information relative to tax credits claimed under

21  part X of chapter 288 to the board of trustees of the Florida

22  Capital Investment Trust in the conduct of the trust's

23  official business.

24  

25  Disclosure of information under this subsection shall be

26  pursuant to a written agreement between the executive director

27  and the agency. Such agencies, governmental or

28  nongovernmental, shall be bound by the same requirements of

29  confidentiality as the Department of Revenue. Breach of

30  confidentiality is a misdemeanor of the first degree,

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

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1         Section 3.  Subsection (8) of section 220.02, Florida

 2  Statutes, is amended to read:

 3         220.02  Legislative intent.--

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

 5  against either the corporate income tax or the franchise tax

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

 7  631.828, those enumerated in s. 220.191, those enumerated in

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

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

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

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

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

13  those enumerated in s. 220.187, those enumerated in s.

14  220.192, and those enumerated in s. 220.193, and those

15  enumerated in part X of chapter 288.

16         Section 4.  Subsection (7) of section 624.509, Florida

17  Statutes, is amended to read:

18         624.509  Premium tax; rate and computation.--

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

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

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

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

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

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

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

26  under part X of chapter 288; and all other available credits

27  and deductions.

28         Section 5.  For fiscal year 2007-2008, the sum of

29  $750,000 is appropriated from the General Revenue Fund to the

30  Florida Capital Investment Trust to be used for startup

31  

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    Florida Senate - 2007                                  SB 1762
    32-907-07                                            See HB 83




 1  activities necessary to implement part X of chapter 288,

 2  Florida Statutes, as created by this act.

 3         Section 6.  This act shall take effect July 1, 2007.

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