Date Requested:February 23, 2009
Time Requested:02:26 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2009R1945 Introduced SB289
CBD Subject: CREATING AN INNOVATION & DEVELOPMENT PROGRAM
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
Legislation creates:
A New Program

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated 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.
    
    As written, the bill authorizes the Economic Development authority to provide or pay for technical and profession assistance to entrepreneurs in the State; make seed capital, venture capital and other equity investments in qualified investment companies operating in the State; and, to award a total of $2 million in each fiscal year pursuant to a competitive selection and award process to promote the development of the human resources and the diversification of the economy of West Virginia. Additionally, the bill authorizes the Economic Development Authority to award a total of $5 million each fiscal year in recoverable revenue credits, which entitles the State to receive not less than 40 percent of the profits allocable to the tax-advantage portions of the investment. The credit would be awarded to private investors in an amount equal to 50 percent of the investment in qualified investment companies.
    
    According to our interpretation, passage of this bill would result in the direct reduction in the General Revenue Fund of $5 million per year attributable to recoverable revenue credit. The State Tax Department does not have access to sufficient information to estimate any profits the State would receive from passage of this bill.
    
    Additional administrative costs to the State Tax Department associated with this bill would be minimal. However, the Economic Development Authority would likely incur additional administrative costs associated with passage of this bill.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -5,000,000 -5,000,000
3. Explanation of above estimates (including long-range effect):
    As written, the bill authorizes the Economic Development Authority to provide or pay for technical and profession assistance to entrepreneurs in the State; make seed capital, venture capital and other equity investments in qualified investment companies operating in the State; and, to award a total of $2 million in each fiscal year pursuant to a competitive selection and award process to promote the development of the human resources and the diversification of the economy of West Virginia. Additionally, the bill authorizes the Economic Development Authority to award a total of $5 million each fiscal year in recoverable revenue credits, which entitles the State to receive not less than 40 percent of the profits allocable to the tax-advantage portions of the investment. The credit would be awarded to private investors in an amount equal to 50 percent of the investment in qualified investment companies.
    
    According to our interpretation, passage of this bill would result in the direct reduction in the General Revenue Fund of $5 million per year attributable to recoverable revenue credit. The State Tax Department does not have access to sufficient information to estimate any profits the State would receive from passage of this bill.
    
    Additional administrative costs to the State Tax Department associated with this bill would be minimal. However, the Economic Development Authority would likely incur additional administrative costs associated with passage of this bill.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated 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.
    
    As written, the bill uses terms such as “Qualified Investment Company,” “angel network,” “private limited partners,” “seed and venture capital funds,” and “community development venture capital companies” without providing an adequate definition of the terms.