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Introduced Version Senate Bill 681 History

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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 681

(By Senators McCabe, Facemyer, Sprouse, Foster and McKenzie)

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[Introduced February 19, 2007; referred to the Committee on Economic Development; and then to the Committee on Finance.]

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A BILL to repeal §5E-1-17 and §5E-1-22 of the Code of West Virginia, 1931, as amended; to repeal §5E-2-7 of said code; and to amend and reenact §5E-1-1, §5E-1-2, §5E-1-4, §5E-1-5 and §5E-1-8 of said code, all relating generally to West Virginia Capital Company Act; renaming said act the Community Redevelopment Act; eliminating authority to grant tax credits to capital companies, economic development and technology advancement centers and West Virginia business development corporations; modifying declaration of policy; removing, deleting, amending or adding definitions of certain terms; allowing tax credits to be awarded to certified West Virginia small business investment companies and certified community development venture capital funds; extinguishing authority of economic development authority to promulgate legislative rules relating to economic development and technology advancement centers; specifying amount of tax credits that may be awarded in the aggregate and to any one company of fund; specifying internal dates; and repealing obsolete language.

Be it enacted by the Legislature of West Virginia:
That §5E-1-17 and §5E-1-22 of the Code of West Virginia, 1931, as amended, be repealed; that §5E-2-7 of said code be repealed; and that §5E-1-1, §5E-1-2, §5E-1-4, §5E-1-5 and §5E-1-8 of said code be amended and reenacted, all to read as follows:
ARTICLE 1. WEST VIRGINIA CAPITAL COMPANY ACT.
§5E-1-1. Short title.
The This article may be cited as the "West Virginia Capital Company Act."
§5E-1-2. Declaration of policy.
(a) The Legislature finds and declares that the West Virginia economy can be strengthened by promoting private investment in West Virginia businesses.
(b) The Legislature further finds that:
(1) Investment of capital in the West Virginia economy can be promoted by making tax credits available to taxpayers investing in West Virginia based small business investment companies or in local or regional community development venture capital companies funds.
(2) Economic development in the West Virginia economy can be stimulated and higher education can be promoted by making tax credits available to taxpayers investing in economic development and technology advancement centers organized to partner with institutions of higher education and qualified pursuant to the provisions of article twelve-a, chapter eighteen-b of this code.
(3) Demands on state revenues restrict the financial ability of this state to make unlimited tax credits available for investment purposes and require that this state place reasonable limits on the total amount of tax credits to be made available for investment incentives;
(4) (3) Establishment of a tax credit program, which gives priority to investments in community development venture capital companies funds and in small business investment companies in the order in which they are qualified certified as such, will encourage investment in West Virginia businesses; and
(5) (4) The promotion of private investment in West Virginia businesses will tend to reduce unemployment by creating new or maintaining existing employment opportunities for the citizens of this state; and
(5) The tax credit program established hereby represents only part of comprehensive program necessary to stimulate indigenous technological innovation, company and capital formation, and wealth creation in West Virginia. The Legislature encourages the authority, the Department of Commerce, and the jobs investment trust to actively collaborate with the private sector and colleges and universities in the state and region, to identify and recommend additional programs and policies that will enhance and develop West Virginia's capacity for innovation and technology entrepreneurship in an integrated, holistic manner, incorporating and leveraging the strengths of all regions of West Virginia, West Virginia's colleges and universities and West Virginia's industrial base; and enhance and develop the marketplace for private equity, such as angel investors, seed capital, venture financing, expansion capital and other sources of equity and subordinated debt.
§5E-1-4. Definitions.
As used in this article, the following terms have the meanings ascribed to them in this section, unless the context in which the term is used clearly requires another meaning or a specific different definition is provided:
(a) "Authority" means the West Virginia economic development authority, provided for in article fifteen, chapter thirty-one of this code.
(b) "Capital base" means equity capital or net worth.
(c) "Certified West Virginia capital company" wherever used in this article after the effective date of the amendments to this section in the year two thousand seven means a certified West Virginia small business investment company or a certified community development venture capital fund.
(d) "Certified West Virginia small business investment company or certified community development venture capital fund" means a community development venture capital fund certified by the authority after the effective date of the amendments to this section in the year two thousand seven or a previously certified small business investment company.
(1) A West Virginia business development corporation created pursuant to article fourteen, chapter thirty-one of this code certified by the authority; or
(2) A profit or nonprofit entity organized and existing under the laws of this state, created for the purpose of making venture or risk capital available to qualified investments that has been certified by the authority.
(d) (e) "Qualified investment" means a debt or equity financing of a West Virginia business, but only if the business is engaged in one or more of the following activities: Manufacturing; agricultural production or processing; forestry production or processing; mineral production or processing, except for conventional oil and gas exploration; service industry; transportation; research and development of products or processes associated with any of the activities previously enumerated above; tourism; computer software development companies engaged in the creation of computer software; and wholesale or retail distribution activities within the state. The investment by a certified West Virginia small business investment capital company or a certified community development venture capital fund in purchases of property to be leased by it, as lessor, through a capital lease to a West Virginia business lessee engaged in one of the above enumerated activities is a qualified investment.
(e) "Qualified West Virginia capital company" means a West Virginia capital company that has been designated by the authority as a qualified capital company under the provisions of section six of this article.
(f) "Community development venture capital fund" means a regional or local venture capital fund that makes equity investments, or investments convertible into equity, to finance West Virginia-based companies or West Virginia operations of other companies and has a financial as well as a social mission operating in accordance with the laws of this state which is designated by the authority as a certified community development venture capital fund, and which:
(1) Operates pursuant to the stated purpose of engaging in projects which promote the use of venture capital to create jobs, wealth and entrepreneurial capacity that benefit low-income citizens and distressed communities with limited employment opportunities.
(2) Has investment support from at least one West Virginia-based multiemployer pension funds as defined by the federal Labor Management Relations Act of 1947, as amended, known as the Taft-Hartley Act; and one foundation, established principally to benefit West Virginia, with assets exceeding one hundred million dollars.
(3) Invests exclusively in low-income communities as defined by the federal Community Renewal Tax Relief Act of 2000;
(4) Establishes with each business a community development covenant which requires for the term of the investment that the business will:
(A) Maintain compensation levels for its employees, in any job category, that are at or above eighty percent of the average compensation paid in the region of the state where the employee works, as determined by the West Virginia Bureau of Employment Programs, for his or her respective class of work; and
(B) Provide quality jobs with living wages, healthcare and retirement benefits.
(f) (g) "Small business investment company" means a small business investment company licensed by the United States small business investment administration under the federal small business investment act of 1958, 15 U.S.C. §661, et seq., as amended, and which:
(1) Was organized on or after the first day of January, one thousand nine hundred ninety-nine;
(2) Has applied for licensure by the small business administration as a small business investment company under the small business investment act; and
(3) Has certified to the authority on the application for credits under this act that the company will diligently seek to obtain and thereafter diligently seek to invest leverage available to the small business investment companies under the small business investment act.
(g) (h) "State" means the State of West Virginia.
(h) (i) "Capital lease" means a lease meeting one or more of the following criteria:
(1) The lease transfers ownership of the property to the lessee at the end of the lease term by the lessee's exercise of a purchase option which is de minimis in amount; or
(2) The lease term is equal to seventy-five percent or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last twenty-five percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used; or
(3) Under generally accepted accounting principles, the lessee cannot treat payments to the capital certified West Virginia small business investment company or certified community development venture capital fund any as payments under an operating lease; or
(4) For federal income tax purposes, the parties are required to treat payments as amortization of principal and interest.
(i) "Economic development and technology advancement center" or "center" means an economic development and technology advancement center organized and operating under the laws of this state which has been designated by the authority as a qualified economic development and technology advancement center under the provisions of article twelve-a, chapter eighteen-b of this code.
§5E-1-5. Rules.
The authority shall promulgate rules in accordance with article three, chapter twenty-nine-a of this code to carry out the policy and purposes of this article, it deems necessary 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 promulgate additional rules in accordance with article three, chapter twenty-nine-a of this code that it considers necessary to provide for the efficient administration of the credits allowed for investments in economic development and technology advancement centers.
§5E-1-8. Tax credits.
(a) The total amount of tax credits authorized for a single qualified certified West Virginia small business investment company or certified community development venture capital fund may not exceed two three million dollars. The total amount of tax credits authorized for a single economic development and technology advancement center may not exceed one million dollars. Capitalization of the company or center fund may be increased pursuant to rule of the authority.
(b) (1) The total credits authorized by the authority for all companies and centers may not exceed a total of ten million dollars each fiscal year: Provided, That for the fiscal year beginning on the first day of July, one thousand nine hundred ninety-nine, the total credits authorized for all companies may not exceed a total of six million dollars: Provided, however, That for the fiscal year beginning on the first day of July, two thousand, the total credits authorized for all companies may not exceed a total of four million dollars: Provided further, That for the fiscal year beginning on the first day of July, two thousand one, the total credits authorized for all companies may not exceed a total of four million dollars: And provided further, That for the fiscal year beginning on the first day of July, two thousand two, the total credits authorized for all companies may not exceed a total of three million dollars: And provided further, That for the fiscal year beginning on the first day of July, two thousand three, the total credits authorized for all companies may not exceed a total of three million dollars: And provided further, That for the fiscal year beginning on the first day of July, two thousand four, the total credits authorized for all companies may not exceed a total of one million dollars: And provided further, That for the fiscal year beginning on the first day of July, two thousand five, there shall be no credits authorized: And provided further, That the capital base of any qualified company other than an economic development and technology advancement center qualified under the provisions of article twelve-a, chapter eighteen-b of this code shall be invested in accordance with the provisions of this article. The authority shall allocate these credits to qualified companies and centers in the order that the companies are qualified
(2) Not more than two million dollars of the credits allowed under subdivision (1) of this subsection may be allocated by the authority during each fiscal year to one or more small business investment companies described in this subdivision: Provided, That for the fiscal year beginning on the first day of July, two thousand four, and for the fiscal year beginning on the first day of July, two thousand five, no credits authorized by this section may be allocated by the authority to one or more small business investment companies. After a portion of the credits are allocated to small business investment companies as provided in this section, not more than one million dollars of the credits allowed under subdivision (1) of this subsection may be allocated by the authority during each fiscal year to one or more economic development and technology advancement centers qualified by the authority under article twelve-a, chapter eighteen-b of this code: Provided, however, That for the fiscal year beginning on the first day of July, two thousand four, all of the credits allowed under subdivision (1) of this subsection shall be allocated only to one or more qualified economic development and technology advancement centers: Provided further, That for the fiscal year beginning on the first day of July, two thousand five, no credits allowed under subdivision (1) of this subsection shall be allocated to any qualified economic development and technology advancement center. The remainder of the tax credits allowed during the fiscal year shall be allocated by the authority under the provisions of section four, article two of this chapter: And provided further, That for the fiscal year beginning on the first day of July, two thousand four, and for the fiscal year beginning on the first day of July, two thousand five, no credits authorized by this section may be allocated by the authority to a taxpayer pursuant to the provisions of section four, article two of this chapter. The portion of the tax credits allowed for small business investment companies described in this subdivision shall be allowed only if allocated by the authority during the first ninety days of the fiscal year and may only be allocated to companies that: (A) Were organized on or after the first day of January, one thousand nine hundred ninety-nine; (B) are licensed by the small business administration as a small business investment company under the small business investment act; and (C) have certified in writing to the authority on the application for credits under this act that the company will diligently seek to obtain and thereafter diligently seek to invest leverage available to the small business investment companies under the small business investment act. These credits shall be allocated by the authority in the order that the companies are qualified. The portion of the tax credits allowed for economic development and technology advancement centers described in article twelve-a, chapter eighteen-b of this code shall be similarly allowed only if allocated by the authority during the first ninety days of the fiscal year: And provided further, That solely for the fiscal year beginning on the first day of July, two thousand four, the authority may allocate the tax credits allowed for economic development and technology advancement centers at any time during the fiscal year. Any credits which have not been allocated to qualified companies meeting the requirements of this subdivision relating to small business investment companies or to qualified economic development and technology advancement centers during the first ninety days of the fiscal year shall be made available and allocated by the authority under the provisions of section four, article two of this chapter: And provided further, That for the fiscal year beginning on the first day of July, two thousand four, and for the fiscal year beginning on the first day of July, two thousand five, no credits authorized by this section may be allocated by the authority to a taxpayer pursuant to the provisions of section four, article two of this chapter.
(3) Notwithstanding any provision of this code or legislative rule promulgated thereunder to the contrary, for the fiscal year beginning on the first day of July, two thousand four, and for the fiscal year beginning on the first day of July, two thousand five, the authority has the sole discretion to allocate or refuse to allocate tax credits authorized under this section to any qualified economic development and technology advancement center upon its determination of the extent to which the center will fulfill the purposes of this article. The determination shall be based upon the application of the center, the extent to which the company or center fulfilled those purposes in prior years after receiving tax credits authorized under this section, the extent to which the center is expected to stimulate economic development and high technology research in the chemical industry and such other similarly related criteria as the authority may establish by vote of the majority of authority.
(b) The total credits authorized for all certified West Virginia small business investment companies and certified community development venture capital funds may not exceed a total of six million dollars for fiscal year beginning on the first day of July, two thousand seven. The authority shall allocate these credits to certified West Virginia small business investment companies and certified community development venture capital funds in the order that the authority receives the applications.
(c) Any investor, including an individual, partnership, limited liability company, corporation or other entity who makes a capital investment in a qualified certified West Virginia capital small business investment company or certified community development venture capital fund is entitled to a tax credit equal to fifty percent of the investment, except as otherwise provided in this section or in this article. Provided, That the tax credit available to investors who make a capital investment in an economic development and technology advancement center shall be one hundred percent of the investment The credit allowed by this article shall be taken after all other credits allowed by chapter eleven of this code. It shall 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, 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 entity's partners, members, shareholders or owners.
(d) The tax credit allowed under this section is to be credited against the taxpayer's tax liability for the taxable year in which the investment in a qualified certified West Virginia capital small business investment company or economic development and technology advancement center certified community development venture capital fund is made. If the amount of the tax 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: Provided, That: (i) Tax credits may not be carried forward beyond fifteen years; and (ii) tax credits may not be carried back to prior taxable years. Any tax credit remaining after the fifteenth taxable year is forfeited.
(e) The tax credit provided in this section is available only to those taxpayers whose investment in a qualified West Virginia capital company or economic development and technology advancement center occurs after the first day of July, one thousand nine hundred eighty-six.
(f) (e) The tax credit allowed under this section may not be used against any liability the taxpayer may have for interest, penalties or additions to tax.
(g) (f) 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 credit asserted under this article. The categories by dollar amount of credit received are as follows:
(1) More than $1.00, 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 $1,000,000; and
(6) More than $1,000,000.


NOTE: The purpose of this bill is to: (1) Eliminate the authority of the West Virginia Economic Development Authority to grant tax credits to venture capital companies, economic development and technology advancement centers and business development corporations; (2) allow tax credits to be awarded to certified West Virginia small business investment companies and certified community development venture capital funds; (3) rename the act the "Community Redevelopment Act;" and (4) allow six million dollars of tax credits to be awarded during the fiscal year beginning July 1, 2007, with no more than three million dollars of credit being awarded to any single certified West Virginia small business investment company or certified community development venture capital fund that make investment in West Virginia.

Strike-throughs indicate language that would be stricken from the present law; and underscoring indicates new language that would be added.
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