Introduced Version
Senate Bill 681 History
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Senate Bill No. 681
(By Senators McCabe, Facemyer, Sprouse, Foster and McKenzie)
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[Introduced February 19, 2007; referred to the Committee on
Economic Development; and then to the Committee on Finance.]
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A BILL to repeal §5E-1-17 and §5E-1-22 of the Code of West
Virginia, 1931, as amended; to repeal §5E-2-7 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 said 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; 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-1-17 and §5E-1-22 of the Code of West Virginia, 1931,
as amended, be repealed; that §5E-2-7 of said code be repealed; and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. WEST VIRGINIA CAPITAL COMPANY ACT.
§5E-1-1. Short title.
The This article may be cited as the "West Virginia Capital
Company 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 hereby 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;
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 funds 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;
(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, healthcare 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.
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 deems 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.
§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 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.
NOTE: The purpose of this bill is to: (1) Eliminate the
authority of the West Virginia Economic Development Authority to
grant tax credits to venture capital companies, economic
development and technology advancement centers and business
development corporations; (2) allow tax credits to be awarded to
certified West Virginia small business investment companies and certified community development venture capital funds; (3) rename
the act the "Community Redevelopment Act;" and (4) allow six
million dollars of tax credits to be awarded during the fiscal year
beginning July 1, 2007, with no more than three million dollars of
credit being awarded to any single certified West Virginia small
business investment company or certified community development
venture capital fund that make investment in West Virginia.
Strike-throughs indicate language that would be stricken from
the present law; and underscoring indicates new language that would
be added.