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.