Date Requested:February 08, 2010
Time Requested:02:39 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2010R1669 Introduced SB476
CBD Subject: WV INNOVATION AND DEVELOPMENT ACT
FUND(S)
General Revenue Fund, The Innovation and Development Revolving Fund
Sources of Revenue
General Fund,Other Fund see above
Legislation creates:
Neither Program nor Fund

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 $1 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. Another provision in the bill provides for a revenue credit equal to no more than 31 percent of a person’s investment in a qualified community development entity. The total amount of credits for investment in a qualified community development entity cannot exceed $2 million in any fiscal year.
    
    According to our interpretation, passage of this bill would result in the direct reduction in the General Revenue Fund of $7 million per year ($5 million attributable to the recoverable revenue credit and $2 million attributable to the community development 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
2010
Increase/Decrease
(use"-")
2011
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 -7,000,000 -7,000,000
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 $1 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. Another provision in the bill provides for a revenue credit equal to no more than 31 percent of a person’s investment in a qualified community development entity. The total amount of credits for investment in a qualified community development entity cannot exceed $2 million in any fiscal year.
    
    According to our interpretation, passage of this bill would result in the direct reduction in the General Revenue Fund of $7 million per year ($5 million attributable to the recoverable revenue credit and $2 million attributable to the community development 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:
kerri.r.petry@wv.gov
    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.
    
    Proposed W. Va. Code §5-3-7(h) requires the State Tax Commissioner to publish in the State Register the names and addresses of every taxpayer of “. . . any recoverable revenue credit awarded . . .,” while proposed W. Va. Code §5-3-7(a) indicates the award of the credits will be made by the Economic Development Authority. Additionally, the bill proposes to add a new subsection (i.e., W. Va. Code §31-15-6(oo)), but that subsection already exists.