COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 681
(By Senators McCabe, Facemyer, Sprouse, Foster and McKenzie)
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[Originating in the Committee on Finance;
reported February 23, 2007.]
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A BILL to repeal §5E-1-6, §5E-1-7, §5E-1-17 and §5E-1-22 of the
Code of West Virginia, 1931, as amended; to repeal §5E-2-5 of
said code; and to amend and reenact §5E-1-1, §5E-1-2, §5E-1-4,
§5E-1-5 and §5E-1-8 of said code, all relating generally to
West Virginia Capital Company Act; renaming the act the
Community Redevelopment Act; eliminating authority to grant
tax credits to capital companies, economic development and
technology advancement centers and West Virginia business
development corporations; modifying declaration of policy;
removing, deleting, amending or adding definitions of certain
terms; allowing tax credits to be awarded to certified West
Virginia small business investment companies and certified
community development venture capital funds; extinguishing
authority of economic development authority to promulgate
legislative rules relating to economic development and
technology advancement centers; authorizing the Department of
Commerce to promulgate rules to measure the economic and social impacts of the investments; requiring the authority to
prepare an annual report on the economic and social impacts of
the investments; specifying amount of tax credits that may be
awarded in the aggregate and to any one company of fund;
specifying internal dates; and repealing obsolete language.
Be it enacted by the Legislature of West Virginia:
That §5E-1-6, §5E-1-7, §5E-1-17 and §5E-1-22 of the Code of
West Virginia, 1931, as amended, be repealed; that §5E-2-5 of said
code be repealed; and that §5E-1-1, §5E-1-2, §5E-1-4, §5E-1-5 and
§5E-1-8 of said code be amended and reenacted, all to read as
follows:
ARTICLE 1. COMMUNITY REDEVELOPMENT ACT.
§5E-1-1. Short title.
The This article may be cited as the
West Virginia Capital
Company Community Redevelopment Act.
§5E-1-2. Declaration of policy.
(a) The Legislature finds and declares that the West Virginia
economy can be strengthened by promoting private investment in West
Virginia businesses.
(b) The Legislature further finds that:
(1) Investment of capital in the West Virginia economy can be
promoted by making tax credits available to taxpayers investing in
West Virginia-
based small business investment companies or in local
or regional community development venture capital
companies funds.
(2)
Economic development in the West Virginia economy can be
stimulated and higher education can be promoted by making tax credits available to taxpayers investing in economic development
and technology advancement centers organized to partner with
institutions of higher education and qualified pursuant to the
provisions of article twelve-a, chapter eighteen-b of this code.
(3) Demands on state revenues restrict the financial ability
of this state to make unlimited tax credits available for
investment purposes and require that this state place reasonable
limits on the total amount of tax credits to be made available for
investment incentives;
(4) (3) Establishment of a tax credit program, which gives
priority to investments in
community development venture capital
companies funds and in small business investment companies in the
order in which they are
qualified certified as such, will encourage
investment in West Virginia businesses;
and
(5) (4) The promotion of private investment in West Virginia
businesses will tend to reduce unemployment by creating new or
maintaining existing employment opportunities for the citizens of
this state;
and
(5) The tax credit program established in this article
represents only part of comprehensive program necessary to
stimulate indigenous technological innovation, company and capital
formation and wealth creation in West Virginia. The Legislature
encourages the authority, the Department of Commerce and the Jobs
Investment Trust to actively collaborate with the private sector
and colleges and universities in the state and region to identify
and recommend additional programs and policies that will enhance and develop West Virginia's capacity for innovation and technology
entrepreneurship in an integrated, holistic manner, incorporating
and leveraging the strengths of all regions of West Virginia, West
Virginia's colleges and universities and West Virginia's industrial
base; and enhance and develop the marketplace for private equity,
such as angel investors, seed capital, venture financing, expansion
capital and other sources of equity and subordinated debt.
§5E-1-4. Definitions.
As used in this article, the following terms have the meanings
ascribed to them in this section, unless the context in which the
term is used clearly requires another meaning or a specific
different definition is provided:
(a) "Authority" means the West Virginia Economic Development
Authority, provided for in article fifteen, chapter thirty-one of
this code.
(b) "Capital base" means equity capital or net worth.
(c) "Certified West Virginia capital company"
wherever used in
this article after the effective date of the amendments to this
section in the year two thousand seven means
a certified West
Virginia small business investment company or a certified community
development venture capital fund.
(d) "Certified West Virginia small business investment company
or certified community development venture capital fund" means a
community development venture capital fund certified by the
authority after the effective date of the amendments to this
section in the year two thousand seven or a previously certified small business investment company.
(1) A West Virginia business development corporation created
pursuant to article fourteen, chapter thirty-one of this code
certified by the authority; or
(2) A profit or nonprofit entity organized and existing under
the laws of this state, created for the purpose of making venture
or risk capital available to qualified investments that has been
certified by the authority.
(d) (e) "Qualified investment" means a debt or equity
financing of a West Virginia business, but only if the business is
engaged in one or more of the following activities: Manufacturing;
agricultural production or processing; forestry production or
processing; mineral production or processing, except for
conventional oil and gas exploration; service industry;
transportation; research and development of products or processes
associated with any of the activities previously enumerated
above
in this subsection; tourism; computer software development
companies engaged in the creation of computer software; and
wholesale or retail distribution activities within the state. The
investment by a
certified West Virginia
small business investment
capital company
or a certified community development venture
capital fund in purchases of property to be leased by it, as
lessor, through a capital lease to a West Virginia business lessee
engaged in one of the above enumerated activities is a qualified
investment.
(e) "Qualified West Virginia capital company" means a West Virginia capital company that has been designated by the authority
as a qualified capital company under the provisions of section six
of this article.
(f) "Community development venture capital fund" means a
regional or local venture capital fund that makes equity
investments, or investments convertible into equity, to finance
West Virginia-based companies or West Virginia operations of other
companies and has a financial as well as a social mission operating
in accordance with the laws of this state which is designated by
the authority as a certified community development venture capital
fund, and which:
(1) Operates pursuant to the stated purpose of engaging in
projects which promote the use of venture capital to create jobs,
wealth and entrepreneurial capacity that benefit low-income
citizens and distressed communities with limited employment
opportunities;
(2) Has investment support from at least one West
Virginia-based multiemployer pension fund as defined by the federal
Labor Management Relations Act of 1947, as amended, known as the
Taft-Hartley Act; and one foundation, established principally to
benefit West Virginia, with assets exceeding one hundred million
dollars;
(3) Invests exclusively in low-income communities as defined
by the federal Community Renewal Tax Relief Act of 2000; and
(4) Establishes with each business a community development
covenant which requires for the term of the investment that the business will:
(A) Maintain compensation levels for its employees, in any job
category, that are at or above eighty percent of the average
compensation paid in the region of the state where the employee
works, as determined by the West Virginia Bureau of Employment
Programs, for his or her respective class of work; and
(B) Provide quality jobs with living wages, health care and
retirement benefits.
(f) (g) "Small business investment company" means a small
business investment company licensed by the United States small
business investment administration under the federal Small Business
Investment Act of 1958, 15 U. S. C. §661,
et seq., as amended,
and
which:
(1) Was organized on or after the first day of January, one
thousand nine hundred ninety-nine;
(2) Has applied for licensure by the Small Business
Administration as a small business investment company under the
Small Business Investment Act; and
(3) Has certified to the authority on the application for
credits under this act that the company will diligently seek to
obtain and thereafter diligently seek to invest leverage available
to the small business investment companies under the Small Business
Investment Act.
(g) (h) "State" means the State of West Virginia.
(h) (i) "Capital lease" means a lease meeting one or more of
the following criteria:
(1) The lease transfers ownership of the property to the
lessee at the end of the lease term by the lessee's exercise of a
purchase option which is de minimis in amount;
or
(2) The lease term is equal to seventy-five percent or more of
the estimated economic life of the leased property. However, if
the beginning of the lease term falls within the last twenty-five
percent of the total estimated economic life of the leased
property, including earlier years of use, this criterion shall not
be used;
or
(3) Under generally accepted accounting principles, the lessee
cannot treat payments to the
capital certified West Virginia small
business investment company
or certified community development
venture capital fund any as payments under an operating lease; or
(4) For federal income tax purposes, the parties are required
to treat payments as amortization of principal and interest.
(i) "Economic development and technology advancement center"
or "center" means an economic development and technology
advancement center organized and operating under the laws of this
state which has been designated by the authority as a qualified
economic development and technology advancement center under the
provisions of article twelve-a, chapter eighteen-b of this code.
§5E-1-5. Rules.
(a) The authority shall promulgate rules in accordance with
article three, chapter twenty-nine-a of this code to carry out the
policy and purposes of this article
it determines necessary 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 promulgate additional rules in
accordance with article three, chapter twenty-nine-a of this code
that it considers necessary to provide for the efficient
administration of the credits allowed for investments in economic
development and technology advancement centers.
(b) The Department of Commerce, after consultation with the
authority, shall promulgate rules in accordance with article three,
chapter twenty-nine-a of this code designed to measure the economic
and social impacts of investments by certified community
development venture capital funds in West Virginia-based companies
and West Virginia operations of companies as provided in this
article. The information necessary to measure the performance of
this article shall be provided by certified community development
venture capital funds in periodic reports filed with the authority
under section fifteen of this article. The authority shall prepare
a report summarizing the information in the periodic reports and
submit it to the Joint Committee on Government and Finance annually
by the thirtieth day of June.
§5E-1-8. Tax credits.
(a) The total amount of tax credits authorized for a single
qualified certified West Virginia small business investment company
or certified community development venture capital fund may not
exceed
two three million dollars.
The total amount of tax credits
authorized for a single economic development and technology
advancement center may not exceed one million dollars. Capitalization of the company or
center fund may be increased
pursuant to rule of the authority.
(b) (1) The total credits authorized by the authority for all
companies and centers may not exceed a total of ten million dollars
each fiscal year: Provided, That for the fiscal year beginning on
the first day of July, one thousand nine hundred ninety-nine, the
total credits authorized for all companies may not exceed a total
of six million dollars: Provided, however, That for the fiscal
year beginning on the first day of July, two thousand, the total
credits authorized for all companies may not exceed a total of four
million dollars: Provided further, That for the fiscal year
beginning on the first day of July, two thousand one, the total
credits authorized for all companies may not exceed a total of four
million dollars: And provided further, That for the fiscal year
beginning on the first day of July, two thousand two, the total
credits authorized for all companies may not exceed a total of
three million dollars: And provided further, That for the fiscal
year beginning on the first day of July, two thousand three, the
total credits authorized for all companies may not exceed a total
of three million dollars: And provided further, That for the
fiscal year beginning on the first day of July, two thousand four,
the total credits authorized for all companies may not exceed a
total of one million dollars: And provided further, That for the
fiscal year beginning on the first day of July, two thousand five,
there shall be no credits authorized: And provided further, That
the capital base of any qualified company other than an economic development and technology advancement center qualified under the
provisions of article twelve-a, chapter eighteen-b of this code
shall be invested in accordance with the provisions of this
article. The authority shall allocate these credits to qualified
companies and centers in the order that the companies are qualified
(2) Not more than two million dollars of the credits allowed
under subdivision (1) of this subsection may be allocated by the
authority during each fiscal year to one or more small business
investment companies described in this subdivision: Provided, That
for the fiscal year beginning on the first day of July, two
thousand four, and for the fiscal year beginning on the first day
of July, two thousand five, no credits authorized by this section
may be allocated by the authority to one or more small business
investment companies. After a portion of the credits are allocated
to small business investment companies as provided in this section,
not more than one million dollars of the credits allowed under
subdivision (1) of this subsection may be allocated by the
authority during each fiscal year to one or more economic
development and technology advancement centers qualified by the
authority under article twelve-a, chapter eighteen-b of this code:
Provided, however, That for the fiscal year beginning on the first
day of July, two thousand four, all of the credits allowed under
subdivision (1) of this subsection shall be allocated only to one
or more qualified economic development and technology advancement
centers: Provided further, That for the fiscal year beginning on
the first day of July, two thousand five, no credits allowed under subdivision (1) of this subsection shall be allocated to any
qualified economic development and technology advancement center.
The remainder of the tax credits allowed during the fiscal year
shall be allocated by the authority under the provisions of section
four, article two of this chapter: And provided further, That for
the fiscal year beginning on the first day of July, two thousand
four, and for the fiscal year beginning on the first day of July,
two thousand five, no credits authorized by this section may be
allocated by the authority to a taxpayer pursuant to the provisions
of section four, article two of this chapter. The portion of the
tax credits allowed for small business investment companies
described in this subdivision shall be allowed only if allocated by
the authority during the first ninety days of the fiscal year and
may only be allocated to companies that: (A) Were organized on or
after the first day of January, one thousand nine hundred
ninety-nine; (B) are licensed by the small business administration
as a small business investment company under the small business
investment act; and (C) have certified in writing to the authority
on the application for credits under this act that the company will
diligently seek to obtain and thereafter diligently seek to invest
leverage available to the small business investment companies under
the small business investment act. These credits shall be
allocated by the authority in the order that the companies are
qualified. The portion of the tax credits allowed for economic
development and technology advancement centers described in article
twelve-a, chapter eighteen-b of this code shall be similarly allowed only if allocated by the authority during the first ninety
days of the fiscal year: And provided further, That solely for the
fiscal year beginning on the first day of July, two thousand four,
the authority may allocate the tax credits allowed for economic
development and technology advancement centers at any time during
the fiscal year. Any credits which have not been allocated to
qualified companies meeting the requirements of this subdivision
relating to small business investment companies or to qualified
economic development and technology advancement centers during the
first ninety days of the fiscal year shall be made available and
allocated by the authority under the provisions of section four,
article two of this chapter: And provided further, That for the
fiscal year beginning on the first day of July, two thousand four,
and for the fiscal year beginning on the first day of July, two
thousand five, no credits authorized by this section may be
allocated by the authority to a taxpayer pursuant to the provisions
of section four, article two of this chapter.
(3) Notwithstanding any provision of this code or legislative
rule promulgated thereunder to the contrary, for the fiscal year
beginning on the first day of July, two thousand four, and for the
fiscal year beginning on the first day of July, two thousand five,
the authority has the sole discretion to allocate or refuse to
allocate tax credits authorized under this section to any qualified
economic development and technology advancement center upon its
determination of the extent to which the center will fulfill the
purposes of this article. The determination shall be based upon the application of the center, the extent to which the company or
center fulfilled those purposes in prior years after receiving tax
credits authorized under this section, the extent to which the
center is expected to stimulate economic development and high
technology research in the chemical industry and such other
similarly related criteria as the authority may establish by vote
of the majority of authority.
(b) The total credits authorized for all certified West
Virginia small business investment companies and certified
community development venture capital funds may not exceed a total
of six million dollars for the fiscal year beginning on the first
day of July, two thousand seven. The authority shall allocate
these credits to certified West Virginia small business investment
companies and certified community development venture capital funds
in the order that the authority receives the applications.
(c) Any investor, including an individual, partnership,
limited liability company, corporation or other entity who makes a
capital investment in a
qualified certified West Virginia
capital
small business investment company
or certified community
development venture capital fund is entitled to a tax credit equal
to fifty percent of the investment, except as otherwise provided in
this section or in this article.
Provided, That the tax credit
available to investors who make a capital investment in an economic
development and technology advancement center shall be one hundred
percent of the investment The credit allowed by this article shall
be taken after all other credits allowed by chapter eleven of this code. It 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, 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 entity's partners, members, shareholders or owners.
(d) 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 certified West Virginia
capital small business investment company or
economic development
and technology advancement center certified community development
venture capital fund 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 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.
(e) The tax credit provided in this section is available only
to those taxpayers whose investment in a qualified West Virginia
capital company or economic development and technology advancement
center occurs after the first day of July, one thousand nine
hundred eighty-six.
(f) (e) 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.
(g) (f) 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 credit asserted under this article. The categories by
dollar amount of credit received are 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; and
(6) More than $1,000,000.