ENGROSSED


Senate Bill No. 21

(By Senators Scott and Ross)

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[Introduced January 10, 1996; referred to the Committee

on Small Business; and then to the Committee on Finance.]

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A BILL to amend and reenact sections eight and twenty, article one, chapter five-e of the code of West Virginia, one thousand nine hundred thirty-one, as amended, all relating to the West Virginia capital company act; limiting percentage of total capital base which may be owned by financial institutions; providing limitations on voting by financial institutions; tax credits for qualified companies; limitations on amounts of tax credits; providing an effective date; promulgation of rules; reducing the total amount of tax credits available each fiscal year; removing cap on tax credits; providing for the receipt of applications on a first come first serve basis; providing for review of simultaneously received applications; providing for a lottery where applications exceed available credits; tax credit for investors; manner of taking the tax credit; availability of tax credit; and categorizing credits by dollar amount.

Be it enacted by the Legislature of West Virginia:
That sections eight and twenty, article one, chapter five-e of the code of West Virginia, one thousand nine hundred thirty- one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 1. WEST VIRGINIA CAPITAL COMPANY ACT.
§5E-1-8. Tax credits.

(a) The total amount of tax credits authorized for a single qualified company may not exceed two million dollars. Capitalization of the company may be increased pursuant to a legislative promulgated rule by the authority in accordance with article three, chapter twenty-nine-a of this code. The authority may promulgate an emergency rule in accordance with article three, chapter twenty-nine-a of this code to implement the provisions of this section.
(b) The total credits authorized by the authority for all companies may not exceed a total of ten million dollars each fiscal year: Provided, That for the fiscal year beginning the first day of July, one thousand nine hundred ninety-five, the total credits authorized by the authority for all companies under this section may not exceed a total of seven million five hundred thousand dollars: Provided, however, That for the fiscal year beginning the first day of July, one thousand nine hundred ninety-six, and for each fiscal year thereafter, the total credits authorized by the authority for all companies under this section or this article may not exceed a total of five million dollars each fiscal year: Provided further, That for each fiscal year, the authority shall, for the first one hundred eighty days of the fiscal year, accept applications only from companies who certify in their application that the investment of their entire capital base will be in one or more small business investment corporations organized under the small business investment act: And provided further, That the capital base of any qualified company shall be invested in accordance with the provisions of this article. The authority shall allocate these credits to qualified companies in the order that the companies are qualified: And provided further, That the provisions of this subsection are effective on the twenty-second day of February, one thousand nine hundred ninety-six.
(c) The authority shall receive and accept applications for capital company certification on a first come, first served basis beginning on the first business day of each fiscal year and continuing thereafter on each business day in that fiscal year until all tax credits authorized for that fiscal year have been exhausted. The authority shall record the date of receipt of all applications. In the event that more than one application is received on any business day, the authority shall consider that all applications received on that date were simultaneously received.
(d) The authority shall review all applications in the order of their receipt to determine if they are complete. In the event the authority determines an application to be incomplete, the authority shall notify the applicant, in writing, of the reasons for its determination and shall return the incomplete application to the applicant. The applicant may resubmit the application within fifteen days. If the initial filing was substantially complete, as determined by the authority, the time of filing for the resubmitted application, for purposes of review by the authority, shall be the date of the initial filing. If the initial filing was not substantially complete, the time of filing shall be the date when the resubmitted application is received by the authority.
(e) In the event of simultaneously received applications, the authority shall first review the applications to determine the total tax credits sought by all of those applications. If the total tax credits sought by all the applications exceed the total tax credits then available for that fiscal year, the authority shall, within fifteen days after receipt of the applications, conduct a lottery to determine the order of review of the applications. The authority shall notify, in writing, all applicants that submitted simultaneously received applications of the lottery drawing and provide the applicants the opportunity for their designated representative to attend the lottery drawing. Prior to, or at any time during the lottery process, one or more applicants may, by agreement, voluntarily decrease the amount of tax credits sought by their applications: Provided, That the minimum capitalization requirements of this article continue to be satisfied.
(f) Any investor, including an individual, partnership or corporation who makes a capital investment in a qualified West Virginia capital company, is entitled to a tax credit equal to fifty percent of the investment, except as otherwise provided in this section or in this article. The investor may take the credit allowed by this article after the investor has taken all other credits allowed by chapter eleven of this code. The investor shall take the tax credit against the same taxes and in the same order as set forth in subsections (c) through (i), section five, article thirteen-c, chapter eleven of this code. The credit for investments by a partnership or by a corporation electing to be treated as a subchapter S corporation may be divided pursuant to election of partners or shareholders.
(g) 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 West Virginia capital company 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 forward 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.
(h) The tax credit provided for in this section is available only to those taxpayers whose investment in a qualified West Virginia capital company occurs after the first day of July, one thousand nine hundred eighty-six.
(i) 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.
(j) Notwithstanding any provision of 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 for any tax year beginning on or after the first day of January, one thousand nine hundred ninety-one. The categories by dollar amount of credit received shall be 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;
(6) More than $1,000,000.
§5E-1-20. Limitation on financial institutions.
Not more than forty-nine percent of the total capital base of any capital company may be owned by banks, savings and loan associations, savings banks or other financial institutions, or any affiliate thereof, as investors. No officer, employee or director of any such financial institution may serve on vote as a member of the board of any capital company formed under the provisions of this article if the matter being voted upon affects the financial institution for which the board member serves as an officer, employee or director.