Senate Bill No. 289
(By Senators McCabe, Browning, Foster, Oliverio, Kessler,
Stollings, Plymale, Williams, Jenkins, Bowman and Caruth)
[Originating in the Committee on Economic Development;
reported March 2, 2009.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §5E-3-1, §5E-3-2,
§5E-3-3, §5E-3-4, §5E-3-5, §5E-3-6, §5E-3-7, §5E-3-8, §5E-3-9,
and §5E-3-10; and to amend and reenact §31-15-6 of said code,
all relating to the creation of an innovation and development
program; providing a short title and declaration of policy;
setting forth purposes; providing definitions; authorizing and
directing the Economic Development Authority to propose rules
to implement its provisions and provide for the effective and
efficient administration of the program; authorizing the
authority to provide technical and professional assistance to
entrepreneurs in the state; authorizing the authority to make
qualified investments and loans; authorizing recoverable
revenue credits to private investors for investments in qualified investment companies pursuant to rules to be
promulgated by the authority; creating a revolving fund to
deposit all profits collected by the Economic Development
Authority; and specifying disclosure, conflict of interest and
confidentiality standards for the operation of the innovation
and development program.
Be it enacted by the Legislature of West Virginia
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §5E-3-1, §5E-3-2,
§5E-3-3, §5E-3-4, §5E-3-5, §5E-3-6, §5E-3-7, §5E-3-8, §5E-3-9 and
§5E-3-10; and that §31-15-6 of said code be amended and reenacted,
all to read as follows:
CHAPTER 5E. VENTURE CAPITAL COMPANY.
ARTICLE 3. INNOVATION AND DEVELOPMENT ACT.
§5E-3-1. Short title.
This article may be cited as the "West Virginia Innovation and
§5E-3-2. Declaration of policy.
(a) The Legislature finds and declares that the West Virginia
economy can be strengthened by the establishment of a technology
based economic development program that is tailored to West
Virginia's specific markets, opportunities and challenges in
establishing innovation driven enterprises.
(b) The Legislature further finds that West Virginia's specific markets, opportunities and challenges in establishing innovation
driven enterprises can best be addressed by the establishment and
operation of a technology based economic development program as set
forth in this article.
(a) The purpose of this article is to promote the development
of the human resources and the diversification of the economy of
West Virginia, by strengthening the foundations of West Virginia's
distinctive market environment, by building on West Virginia's
established industrial and economic base and establishing a long
term program that will result in a strong, viable and high-growth
economy in West Virginia.
(b) This article establishes an economic development program
that is designed to:
(1) Help build and nurture entrepreneurial support structures
and attract executives to lead West Virginia-based companies;
(2) Support the formation and deployment of private equity at
all stages of the business development lifecycle, including seed
capital, venture capital and other equity and normal bank debt that
can help emerging as well as mature businesses remain, adapt and
grow in West Virginia;
(3) Be flexible in terms of who may access program resources,
how it is accessed;
(4) Operate according to clearly expressed standards designed
to grow, build and keep businesses in West Virginia;
(5) Provide measurable results and hold participants
(6) Leverage existing programs and resources in all regions of
(7) Operate as a "fund of funds" by investing in qualified
investment companies and receiving a return on such investments from
distributions from participating companies;
(8) Support angel networks and the funding of seed and venture
capital funds, specifically including community development venture
capital companies; and
(9) Provide for a return on the state's investment by sharing
the return of capital and profits with private limited partners.
As used in this article, the following terms have the meanings
ascribed to them in this article, unless the context in which the
term is used clearly requires another meaning or a specific
different definition is provided:
(1) "Authority" means the West Virginia Economic Development
Authority, established under article fifteen, chapter thirty-one of
this code, or any successor to all or any substantial part of its
powers and duties.
(2) "Qualified Investment Company" means an angel network, seed
capital, venture capital or other private equity fund that has been
qualified by the authority.
(3) "Recoverable revenue credits" means credits awarded by the authority pursuant to section seven of this article of which
entitles the state to receive not less than forty percent of the
profits allocable to the tax-advantage portions of the investment.
(4) "State" means the State of West Virginia.
§5E-3-5. Rules - Report of findings to Joint Committee on
Government and Finance.
The authority shall propose rules, for legislative approval in
accordance with article three, chapter twenty-nine-a of this code
to carry out the policy and purposes of this article, to provide any
necessary clarification of the provisions of this article and to
efficiently provide for the general administration of this article.
The authority may propose additional rules for legislative approval
in accordance with article three, chapter twenty-nine-a of this code
that it considers necessary to provide for the efficient
administration of the recoverable revenue credits awarded to
qualified investment companies under this article. The authority
shall propose rules in conjunction with the Department of Commerce
to require persons receiving any money or recoverable tax credits
pursuant to this article to submit information that is necessary to
determine the effectiveness of this act and whether the act shall
be continued. Beginning July 1, 2010 and on July 1 of each year
thereafter, the authority shall report to the Joint Committee on
Government and Finance its findings obtained from such information.
§5E-3-6. Investments and technical assistance.
(a) From moneys appropriated for such purposes to the
authority, the authority is authorized to provide or pay for
technical and professional assistance to entrepreneurs in the state,
all pursuant to such rules as the authority may propose from time
to time pursuant to the provisions of section five of this article,
and pursuant to such policies and procedures as the authority may
adopt from time to time to effectuate the purposes of this article.
(b) From moneys appropriated for such purposes, the authority
is authorized to make seed capital, venture capital and other equity
investments in qualified investment companies operating in the
state, all pursuant to such rules as the authority may propose from
time to time pursuant to the provisions of section five of this
article, and pursuant to such policies and procedures as the
authority may adopt from time to time to effectuate the purposes of
(c) The authority is authorized to award a total of $2 million
in each fiscal year to fulfill the purposes of this section. Funds
disbursed or awarded under this section shall be awarded pursuant
to a competitive selection and award process designed to further the
purposes of this article, pursuant to such rules as the authority
may propose from time to time pursuant to the provisions of section
five of this article, and pursuant to such policies and procedures
as the authority may adopt from time to time to effectuate the
purposes of this article.
§5E-3-7. Recoverable revenue credits.
(a) To encourage private investors to invest in qualified
investment companies, including seed capital, venture capital and
other private equity funds to build and support innovative
businesses across the state, the authority is authorized to award
a total of $5 million each fiscal year in recoverable revenue
credits. The total amount of recoverable revenue credits authorized
for a single qualified investment company may not exceed $2 million
in any single round of credits allocated by the authority.
(b) Recoverable revenue credits authorized by this section are
intended to provide the state with the opportunity to benefit from
the success of any and all qualified investment companies authorized
under this article, and shall consist of: (1) A tax credit for
private investors in qualified investment companies equal to fifty
percent of the investor's investment, all to be calculated and
applied as set forth in this article, coupled with; (2) the right
in the state to receive not less than forty percent of the profits
allocable to the tax-advantaged portion of investments in any
qualified investment company authorized under this article, all
pursuant to such rules as the authority may propose from time to
time pursuant to the provisions of section five of this article, and
pursuant to such policies and procedures as the authority may adopt
from time to time to effectuate the purposes of this article.
(c) Recoverable revenue credits authorized by this section
shall be allocated pursuant to such rules as the authority may
propose from time to time pursuant to the provisions of section five of this article, and pursuant to such policies and procedures as the
authority may adopt from time to time to effectuate the purposes of
(d) Any investor, including an individual, partnership, limited
liability company, corporation or other entity, who makes an
investment in a qualified investment company authorized by the
authority under this article, which is independently operated by
qualified managers and is not directly or indirectly operated or
managed by the investors, is entitled to a recoverable revenue
credit equal to no more than fifty percent of the investor's
investment in the qualified investment company: Provided,
investors shall receive the recoverable revenue credit without the
approval of the authority. The other terms and conditions of the
credit shall be established by the authority pursuant to such rules
as the authority may propose from time to time under the provisions
of section five of this article, and pursuant to such policies and
procedures as the authority may adopt from time to time to
effectuate the purposes of this article.
(e) The recoverable revenue credits allowed by this article
shall be taken after all other credits allowed by chapter eleven of
this code have been taken. The credits must be taken against the
same taxes and in the same order as set forth in subsections (c)
through (i), inclusive, section five, article thirteen-c, chapter
eleven of this code. The credit for investments by a partnership,
a limited liability company, a corporation electing to be treated as a subchapter S corporation or any other entity which is treated
as a pass through entity under federal and state income tax laws may
be divided pursuant to election of the partners, members,
shareholders or owners.
(f) The recoverable revenue credits allowed under this section
is to be credited against the taxpayer's tax liability for the
taxable year in which the investment is made. If the amount of the
recoverable revenue credit exceeds the taxpayer's tax liability for
the taxable year, the amount of the credit which exceeds the tax
liability for the taxable year may be carried to succeeding taxable
years until used in full, or until forfeited. Recoverable revenue
credits may not be carried forward more than fifteen years.
Recoverable revenue credits may not be carried back to prior taxable
years. Any recoverable revenue credit remaining after the fifteenth
taxable year is forfeited.
(g) Recoverable revenue credits allowed under this section may
not be used against any liability the taxpayer may have for
interest, penalties or additions to tax.
(h) Notwithstanding any provision in this code to the contrary,
the Tax Commissioner shall publish in the State Register the name
and address of every taxpayer and the amount, by category, of any
recoverable revenue credit awarded under this article. The
categories by dollar amount of credit received are as follows:
(1) More than $1, but not more than $50,000;
(2) More than $50,000, but not more than $100,000;
(3) More than $100,000, but not more than $250,000;
(4) More than $250,000, but not more than $500,000;
(5) More than $500,000, but not more than $1 million; and
(6) More than $1 million.
§5E-3-8. Creation of revolving fund.
(a) The authority shall deposit all profits collected from
investors receiving recoverable revenue credits, pursuant to section
seven of this article, into a special state treasury fund to be
known as "The Innovation and Development Revolving Fund." The
revolving fund shall be a permanent and perpetual fund administered
by the economic development authority on behalf of the development
office. Expenditures from the fund shall be for the purposes set
forth in this section and made in accordance with appropriations
from the Legislature and pursuant to the provisions of article
three, chapter twelve of this code and after the fulfillment of the
provisions of article two, chapter eleven-b of this code: Provided
That for the fiscal year ending June 30, 2010 expenditures are
authorized from collections and not Legislative appropriations.
(b) (1) The revolving fund shall be governed administered and
accounted for by the directors, officers and managerial staff of the
Economic Development Authority as a special revenue account separate
and distinct from any other moneys, funds or funds owned and managed
by the Economic Development Authority. The revolving fund shall
consist of sub-accounts, as deemed necessary by the Economic
Development Authority, for the deposit of:
(A) All profits collected from investors receiving recoverable
revenue credits, pursuant to section seven of this article; and
(B) All income earned on moneys held in the revolving fund.
(2) Revolving fund amounts not expended at the close of the
fiscal year shall not lapse or revert to the general fund but shall
be carried forward to the next fiscal year. Any interest earnings
on the revolving fund shall become part of the revolving fund and
shall not lapse or revert to the general fund.
(c) Revolving fund moneys shall be used by the Economic
Development Authority to award moneys for the purposes of section
six of this article in an amount not to exceed $2 million annually
and then to reimburse the state for any recoverable tax credits
awarded pursuant to section seven of this article.
§5E-3-9. Conflict of interest.
No officer, member or employee of the authority may be
financially interested, directly or indirectly, in any company or
business receiving technical assistance, investments or recoverable
revenue credits pursuant to the provisions of this article.
(a) The authority shall, by rule, determine which records,
reports, or information obtained from any person or entity under
this article are to be treated by the agency as confidential and not
subject to disclosure, except as hereinafter provided in subsection
(c) of this section: Provided,
That notwithstanding any other provision of law to the contrary, the authority shall make available
to the public the identity of all qualified investment companies
receiving technical assistance or investments pursuant to the
provisions of this article.
(b) Any other records, reports, or information obtained from
any person or entity under this article shall be made available to
the public, except that upon a showing at the time of submission,
satisfactory to the authority, by any person or entity, that
records, reports or information, or a particular part thereof, to
which the authority or any officer, employee or representative
thereof has or will have access under this section, if made public,
would divulge information entitled to protection under 18 U.S.C.
§1905 as that section read on December 20, 1999, such information
or particular portion thereof is confidential in accordance with the
purposes of this section. In submitting data under this article,
a person required to provide such data may designate the data which
he or she believes is entitled to protection under this subsection
and submit such designated data separately from other data submitted
under this article. A designation under this subsection shall be
made in writing and in such manner as the authority may prescribe.
(c) Notwithstanding the foregoing provisions of this section,
any record, report, document, or information may be disclosed to
other officers, employees, or authorized representatives of this
state charged with administering the provisions of this article.
Notwithstanding the previous sentence, and notwithstanding any provision of this article, the provisions of this code regarding
confidentiality and the disclosure of tax returns and tax
information, including specifically section five-d, article ten,
chapter eleven of this code, apply to the authority, its agents and
employees and to information submitted to the authority under this
CHAPTER 31. CORPORATIONS.
ARTICLE 15. WEST VIRGINIA ECONOMIC DEVELOPMENT AUTHORITY.
§31-15-6. General powers of authority.
The authority, as a public corporation and governmental
instrumentality exercising public powers of the state, shall have
and may exercise all powers necessary or appropriate to carry out
the purposes of this article, including the power:
(a) To cooperate with industrial development agencies in
efforts to promote the expansion of industrial, commercial,
manufacturing and tourist activity in this state.
(b) To determine, upon the proper application of an industrial
development agency or an enterprise, whether the declared public
purposes of this article have been or will be accomplished by the
establishment by such agency or enterprise of a project in this
(c) To conduct examinations and investigations and to hear
testimony and take proof, under oath or affirmation, at public or
private hearings, on any matter relevant to this article and necessary for information on the establishment of any project.
(d) To issue subpoenas requiring the attendance of witnesses
and the production of books and papers relevant to any hearing
before such authority or one or more members appointed by it to
conduct any hearing.
(e) To apply to the circuit court having venue of such offense
to have punished for contempt any witness who refuses to obey a
subpoena, to be sworn or affirmed or to testify or who commits any
contempt after being summoned to appear.
(f) To authorize any member of the authority to conduct
hearings, administer oaths, take affidavits and issue subpoenas.
(g) To financially assist projects by insuring obligations in
the manner provided in this article through the use of the insurance
(h) To finance any projects by making loans to industrial
development agencies or enterprises upon such terms as the authority
shall deem appropriate: Provided,
That nothing contained in this
subsection (h) or under any other provision in this article shall
be construed as permitting the authority to make loans for working
capital: Provided, however,
That nothing contained in this article
shall be construed as prohibiting the authority from insuring loans
for working capital made to industrial development agencies or to
enterprises by financial institutions: Provided further,
nothing contained in this subsection or any other provision of this
article shall be construed as permitting the authority to refinance existing debt except when such refinancing will result in the
expansion of the enterprise whose debt is to be refinanced or in the
creation of new jobs.
(i) To issue revenue bonds or notes to fulfill the purposes of
this article, and to secure the payment of such bonds or notes, all
as hereinafter provided.
(j) To issue and deliver revenue bonds or notes in exchange for
(k) To borrow money for its purposes and issue bonds or notes
for the money and provide for the rights of the holders of the bonds
or notes or other negotiable instruments, to secure the bonds or
notes by a deed of trust on, or an assignment or pledge of, any or
all of its property and property of the project, including any part
of the security for loans, and the authority may issue and sell its
bonds and notes, by public or private sale, in such principal
amounts as it shall deem necessary to provide funds for any purposes
under this article, including the making of loans for the purposes
set forth in this article.
(l) To maintain such sinking funds and reserves as the board
shall determine appropriate for the purposes of meeting future
monetary obligations and needs of the authority.
(m) To sue and be sued, implead and be impleaded, and complain
and defend in any court.
(n) To adopt, use and alter at will a corporate seal.
(o) To make, amend, repeal and adopt both bylaws and rules
for the management and regulation of its affairs.
(p) To appoint officers, agents and employees and to contract
for and engage the services of consultants.
(q) To make contracts of every kind and nature to execute all
instruments necessary or convenient for carrying on its business.
(r) To accept grants and loans from and enter into contracts
and other transactions with any federal agency.
(s) To take title by conveyance or foreclosure to any project
where acquisition is necessary to protect any loan previously made
by the authority and to sell, by public or private sale, transfer,
lease or convey such project to any enterprise.
(t) To participate in any reorganization proceeding pending
pursuant to the United States Code (being the act of Congress
establishing a uniform system of bankruptcy throughout the United
States, as amended) or in any receivership proceeding in a state or
federal court for the reorganization or liquidation of an
enterprise. The authority may file its claim against any such
enterprise in any of the foregoing proceedings, vote upon any
questions pending therein which requires the approval of the
creditors participating in any reorganization proceeding or
receivership, exchange any evidence of such indebtedness for any
property, security or evidence of indebtedness offered as a part of
the reorganization of such enterprise or of any other entity formed
to acquire the assets thereof and may compromise or reduce the
amount of any indebtedness owing to it as a part of any such reorganization.
(u) To acquire, construct, maintain, improve, repair, replace
and operate projects within this state, as well as streets, roads,
alleys, sidewalks, crosswalks and other means of ingress and egress
to and from projects located within this state.
(v) To acquire, construct, maintain, improve, repair and
replace and operate pipelines, electric transmission lines,
waterlines, sewer lines, electric power substations, waterworks
systems, sewage treatment and disposal facilities and any
combinations thereof for the use and benefit of any enterprise
located within this state.
(w) To acquire watersheds, water and riparian rights,
rights-of-way, easements, licenses and any and all other property,
property rights and appurtenances for the use and benefit of any
enterprise located within this state.
(x) To acquire, by purchase, lease, donation or eminent domain,
any real or personal property, or any right or interest therein, as
may be necessary or convenient to carry out the purposes of the
authority. Title to all property, property rights and interests
acquired by the authority shall be taken in the name of the
(y) To issue renewal notes, or security interests, to issue
bonds to pay notes or security interests and, whenever it deems
refunding expedient, to refund any bonds or notes by the issuance
of new bonds or notes, whether the bonds or notes to be refunded have or have not matured and whether or not the authority originally
issued the bonds or notes to be refunded.
(z) To apply the proceeds from the sale of renewal notes,
security interests or refunding bonds or notes to the purchase,
redemption or payment of the notes, security interests or bonds or
notes to be refunded.
(aa) To accept gifts or grants of property, funds, security
interests, money, materials, labor, supplies or services from the
United States of America or from any governmental unit or any
person, firm or corporation, and to carry out the terms or
provisions of, or make agreements with respect to, or pledge, any
gifts or grants, and to do any and all things necessary, useful,
desirable or convenient in connection with the procuring, acceptance
or disposition of gifts or grants.
(bb) To the extent permitted under its contracts with the
holders of bonds, security interests or notes of the authority, to
consent to any modification of the rate of interest, time of payment
of any installment of principal or interest, security or any other
term of any bond, security interests, note or contract or agreement
of any kind to which the authority is a party.
(cc) To sell loans, security interests or other obligations in
the loan portfolio of the authority. Such security interests shall
be evidenced by instruments issued by the authority. Proceeds from
the sale of loans, security interests, or other obligations may be
used in the same manner and for the same purposes as bond and note revenues.
(dd) To procure insurance against any losses in connection with
its property, operations or assets in such amounts and from such
insurers as the authority deems desirable.
(ee) To sell, license, lease, mortgage, assign, pledge or
donate its property, both real and personal, or any right or
interest therein to another or authorize the possession, occupancy
or use of such property or any right or interest therein by another,
in such manner and upon such terms as it deems appropriate.
(ff) To participate with the state and federal agencies in
efforts to promote the expansion of commercial and industrial
development in this state.
(gg) To finance, organize, conduct, sponsor, participate and
assist in the conduct of special institutes, conferences,
demonstrations and studies relating to the stimulation and formation
of business, industry and trade endeavors.
(hh) To conduct, finance and participate in technological,
business, financial and other studies related to business and
(ii) To conduct, sponsor, finance, participate and assist in
the preparation of business plans, financing plans and other
proposals of new or established businesses suitable for support by
(jj) To prepare, publish and distribute, with or without charge
as the authority may determine, such technical studies, reports, bulletins and other materials as it deems appropriate, subject only
to the maintenance and respect for confidentiality of client
(kk) To exercise such other and additional powers as may be
necessary or appropriate for the exercise of the powers herein
(ll) To exercise all of the powers which a corporation may
lawfully exercise under the laws of this state.
(mm) To contract for the provision of legal services by private
counsel, and notwithstanding the provisions of article three,
chapter five, such counsel may, but is not limited to, represent the
authority in court, negotiate contracts and other agreements on
behalf of the authority, render advice to the authority on any
matter relating thereto, prepare contracts and other agreements, and
provide such other legal services as may be requested by the
(nn) To develop, maintain, operate and apply for the
establishment of foreign trade zones pursuant to and in accordance
with all applicable provisions of federal law.
(oo) To award funds and recoverable revenue credits and to
collect profits on behalf of the state in accordance with the
recoverable revenue credits pursuant to article three, chapter
five-e of this code.
NOTE: The purpose of this bill is to establish a West Virginia innovation and development program, to attract and support capital
investment in innovation-driven enterprises in West Virginia through
a combination of direct annual investment by the state in seed
capital, venture capital and other equity and debt investments in
West Virginia; technical support and assistance to entrepreneurs in
the state; and recoverable revenue credits to private investors to
encourage private investment in seed capital, venture capital and
other private equity funds, such program to be run and such funding
to be awarded through a competitive selection process to be managed
by the West Virginia Economic Development Authority.
§5E-3-1, §5E-3-2, §5E-3-3, §5E-3-4, §5E-3-5, §5E-3-6, §5E-3-7,
§5E-3-8, §5E-3-9, and §5E-3-10 are new; therefore, strike-throughs
and underscoring have been omitted.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would