COMMITTEE SUBSTITUTE

FOR

H. B. 4028

(By Delegates S. Williams and Rutledge)


(Originating in the House Committee

on Banking and Insurance)


[February 2, 1994]

A BILL to amend and reenact section twelve, article one, chapter five-e of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to the West Virginia capital company act and requiring that a portion of capital base funds be maintained in West Virginia bank accounts and financial institutions or in interest bearing instruments issued by a corporation with a place of business in West Virginia.
Be it enacted by the Legislature of West Virginia:

That section twelve, article one, chapter five-e of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 1. WEST VIRGINIA CAPITAL COMPANY ACT.

§ 5E - 1 - 12. Qualified investments; maintenance of residual capital base funds; liquidation or dissolution ; audits; penalties.

(a) A qualified West Virginia capital company must use its capital base to make qualified investments according to the following schedule:

(1) At least thirty-five percent of its capital base within the first year of the date on which the capital company was designated as qualified by the authority;
(2) At least fifty-five percent of its capital base within two years of the date on which the capital company was designated as qualified by the authority; and
(3) At least seventy-five percent of its capital base within three years of the date on which the capital company was designated as qualified by the authority.
(4) All other capital base funds not used to make qualified investments pursuant to this subdivision shall be maintained in bank accounts and financial institutions which are located in the state of West Virginia or in such other interest bearing instruments with a maturity of less than one year which are issued by a corporation with a place of business in West Virginia.
(b) A qualified West Virginia capital company shall maintain its qualified investments for a period of at least five years,: except Provided, That a qualified West Virginia capital company receiving repayment or return of a qualified investment (exclusive of interest, dividends or other earnings on such investment) shall reinvest the company's repaid or returned cost basis in the investment in a qualified investment which remains outstanding for a period of time at least equal to the remainder of the initial five-year term, such reinvestment to be made within twenty-four months from the date of repayment or return, unless a waiver is obtained from the authority prior to the end of said twenty-four month period: Provided, however, That such returned amounts may be accumulated for six months before the aforesaid twenty-four month period commences.
(c) A qualified West Virginia capital company may be dissolved or liquidated only after notice and approval of such dissolution or liquidation by the authority. The authority shall provide by rule a procedure for application for approval to dissolve or liquidate a capital company and such approval shall not be unreasonably withheld, the intention of this provision being to ensure compliance with subsection (b) of this section. Unless waived by the authority, no dissolution or liquidation of any qualified West Virginia capital company may be made if such dissolution or liquidation would cause the provisions of subsection (b) of this section to be violated.
(d) The authority shall annually audit the certified audit of each qualified company, as required by section sixteen of this article, and the results of said audit shall be used to notify the tax commissioner of any companies that are not in compliance with this section.
(e) A qualified West Virginia capital company that fails to make or maintain qualified investments pursuant to this section shall pay to the tax commissioner a penalty equal to all of the tax credits allowed to the taxpayers investing in said company with interest at the rate of one and one-half percent per month, compounded monthly, from the date the tax credits were certified as allocated to the qualified West Virginia capital company. The tax commissioner shall give notice to the company of any penalties under this section. The tax commissioner may abate said penalty upon written request if the capital company establishes reasonable cause for the failure to make qualified investments. The tax commissioner shall deposit any amounts received under this subsection in the state general fund.