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Introduced Version Senate Bill 609 History

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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 609

(By Senators McCabe, Helmick, Minard, Stollings, Love, Foster, Plymale, Unger and Chafin)

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[Introduced February 7, 2008; referred to the Committee on Economic Development; and then to the Committee on Finance.]

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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 and §5E-3-9, all relating to the creation of an innovation and development program; providing a short title and declaration of policy; setting forth the purposes of the bill; providing definitions; authorizing and directing the Economic Development Authority to propose rules to implement the provisions of the bill and provide for the effective and efficient administration of the innovation and development program created by this article; 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; 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 and §5E-3-9, all to read as follows:
ARTICLE 3. INNOVATION AND DEVELOPMENT ACT.
§5E-3-1. Short title.
This article may be cited as the "West Virginia Innovation and Development Act."
§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.
§5E-3-3. Purposes.
(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 accountable;
(6) Leverage existing programs and resources in all regions of West Virginia;
(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.
§5E-3-4. Definitions.
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, provided in article fifteen, chapter thirty-one of this code.
(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) "State" means the State of West Virginia.
§5E-3-5. Rules.
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.
§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 this article.
(c) The authority is authorized to award a total of two million dollars 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 five million dollars each fiscal year in recoverable revenue credits. The total amount of recoverable revenue credits authorized for a single qualified investment company may not exceed two million dollars 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 this article.
(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. 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 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.
(e) The recoverable revenue credits allowed by this article shall be taken after all other credits allowed by chapter eleven of this code. They 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, 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 beyond 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 one dollar, but not more than fifty thousand dollars;
(2) More than fifty thousand dollars, but not more than one hundred thousand;
(3) More than one hundred thousand dollars, but not more than two hundred fifty thousand dollars;
(4) More than two hundred fifty thousand dollars, but not more than five hundred thousand dollars;
(5) More than five hundred thousand dollars, but not more than one million dollars; and
(6) More than one million dollars.
§5E-3-8. 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.
§5E-3-9. Confidentiality.
(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 Section 1905 of Title 18 of the United States Code as said section reads on the twentieth day of December, one thousand nine hundred ninety, 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 article.



NOTE:
This 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.

This article is new; therefore, strike-throughs and underscoring have been omitted.
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