PRIOR PRINTER'S NO. 1678 PRINTER'S NO. 2157
No. 1359 Session of 2003
INTRODUCED BY CALTAGIRONE, TANGRETTI, THOMAS, GEORGE, FABRIZIO,
DeLUCA, LEH, BELFANTI, LEACH, READSHAW, WASHINGTON, HORSEY,
FREEMAN, GRUCELA, PISTELLA, SANTONI, HARHAI, WANSACZ, JAMES,
SAINATO, YOUNGBLOOD, JOSEPHS AND PRESTON, MAY 6, 2003
AS REPORTED FROM COMMITTEE ON COMMERCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, JUNE 23, 2003
AN ACT
1 Creating the Pennsylvania State Investment Authority; providing
2 for loans to venture capital companies, for certified capital
3 companies and for working capital loan guarantees; and making
4 an appropriation.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Short title.
8 This act shall be known and may be cited as the Pennsylvania
9 State Investment Authority Act.
10 Section 2. Definitions.
11 The following words and phrases when used in this act shall
12 have the meanings given to them in this section unless the
13 context clearly indicates otherwise:
14 "AFFILIATE." ANY OF THE FOLLOWING: <--
15 (1) A PERSON, DIRECTLY OR INDIRECTLY BENEFICIALLY
16 OWNING, WHETHER THROUGH RIGHTS, OPTIONS, CONVERTIBLE
17 INTERESTS OR OTHERWISE, CONTROLLING OR HOLDING POWER TO VOTE
1 15% OR MORE OF THE OUTSTANDING VOTING SECURITIES OR OTHER
2 VOTING OWNERSHIP INTERESTS OF A CERTIFIED CAPITAL COMPANY OR
3 INSURANCE COMPANY.
4 (2) A PERSON, 15% OR MORE OF WHOSE OUTSTANDING VOTING
5 SECURITIES OR OTHER VOTING OWNERSHIP INTERESTS ARE DIRECTLY
6 OR INDIRECTLY BENEFICIALLY OWNED, WHETHER THROUGH RIGHTS,
7 OPTIONS, CONVERTIBLE INTERESTS OR OTHERWISE, CONTROLLED OR
8 HELD WITH POWER TO VOTE BY A CERTIFIED CAPITAL COMPANY OR
9 INSURANCE COMPANY.
10 (3) A PERSON DIRECTLY OR INDIRECTLY CONTROLLING,
11 CONTROLLED BY OR UNDER COMMON CONTROL WITH THE CERTIFIED
12 CAPITAL COMPANY OR INSURANCE COMPANY.
13 (4) A PARTNERSHIP OR LIMITED LIABILITY COMPANY IN WHICH
14 A CERTIFIED CAPITAL COMPANY OR INSURANCE COMPANY IS A GENERAL
15 PARTNER, MANAGER OR MANAGING MEMBER.
16 (5) A PERSON WHO IS AN OFFICER, DIRECTOR, EMPLOYEE OR
17 AGENT OF A CERTIFIED CAPITAL COMPANY OR INSURANCE COMPANY OR
18 AN IMMEDIATE FAMILY MEMBER OF THE OFFICER, DIRECTOR, EMPLOYEE
19 OR AGENT.
20 "ALLOCATION DATE." THE DATE ON WHICH THE PENNSYLVANIA STATE
21 INVESTMENT AUTHORITY ALLOCATES TAX CREDITS TO CERTIFIED
22 INVESTORS OF A CERTIFIED CAPITAL COMPANY PURSUANT TO SECTION 8.
23 "Authority." The Pennsylvania State Investment Authority
24 created in section 3.
25 "Certified capital company." A venture capital company which <--
26 has been certified by the Pennsylvania State Investment
27 Authority as a certified capital company in accordance with the
28 provisions of this act.
29 "Board." The Board of Directors of the Pennsylvania State
30 Investment Authority.
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1 "Certified capital." An investment in a certified capital <--
2 company, to be utilized by the certified capital company for
3 investments in qualified businesses and subject to the tax
4 credit guarantees provided for in this act.
5 "CERTIFIED CAPITAL." AN INVESTMENT OF CASH BY A CERTIFIED <--
6 INVESTOR IN A CERTIFIED CAPITAL COMPANY WHICH FULLY FUNDS THE
7 PURCHASE PRICE OF AN EQUITY INTEREST IN THE CERTIFIED CAPITAL
8 COMPANY OR A QUALIFIED DEBT INSTRUMENT ISSUED BY THE CERTIFIED
9 CAPITAL COMPANY.
10 "CERTIFIED CAPITAL COMPANY." A PARTNERSHIP, CORPORATION,
11 TRUST OR LIMITED LIABILITY COMPANY, WHETHER ORGANIZED ON A FOR-
12 PROFIT OR NOT-FOR-PROFIT BASIS, THAT HAS AS ITS PRIMARY BUSINESS
13 ACTIVITY THE INVESTMENT OF CASH IN QUALIFIED BUSINESSES AND THAT
14 IS CERTIFIED AS A CERTIFIED CAPITAL COMPANY BY THE PENNSYLVANIA
15 STATE INVESTMENT AUTHORITY BY MEETING THE REQUIREMENTS OF
16 SECTION 6(A).
17 "CERTIFIED INVESTOR." AN INSURANCE COMPANY THAT INVESTS
18 CERTIFIED CAPITAL PURSUANT TO AN ALLOCATION OF TAX CREDITS UNDER
19 SECTION 8.
20 "Company." A partnership, corporation, limited partnership,
21 trust or limited liability company or other form of business
22 entity as approved by regulation of the Pennsylvania State
23 Investment Authority.
24 "Fund." The Venture Capital Fund created under section 5. <--
25 "Qualified business." A company which meets the following
26 requirements at the time of an investment in the company by a
27 certified capital company:
28 (1) Maintains its main corporate office or other primary
29 business headquarters within this Commonwealth.
30 (2) Maintains its principle place of business and
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1 principle business operations within this Commonwealth.
2 (3) Agrees to utilize the investment from the certified
3 capital company for business operations within this
4 Commonwealth.
5 (4) Employs 100 or fewer persons.
6 "EARLY STAGE BUSINESS." A BUSINESS OR ENTERPRISE THAT ALONE <--
7 OR IN ANY COMBINATION WITH ANOTHER ENTITY HAS LESS THAN 20
8 EMPLOYEES, IS IN DEVELOPMENT OR HAS BEEN OPERATIONAL FOR LESS
9 THAN SEVEN YEARS AND IS IN NEED OF CAPITAL FOR PRESTARTUP,
10 STARTUP, SURVIVAL, EXPANSION, NEW PRODUCT DEVELOPMENT OR SIMILAR
11 BUSINESS PURPOSES.
12 "EXPERIENCED INVESTOR." A NATURAL PERSON WITH AT LEAST FOUR
13 YEARS OF EXPERIENCE MAKING VENTURE CAPITAL INVESTMENTS, WHICH
14 MAY INCLUDE INVESTMENTS MADE IN CONNECTION WITH A FEDERALLY
15 SPONSORED OR STATE-SPONSORED VENTURE CAPITAL PROGRAM.
16 "FUND." THE VENTURE CAPITAL FUND CREATED UNDER SECTION 5.
17 "PERMISSIBLE INVESTMENTS." ANY OF THE FOLLOWING:
18 (1) DEPOSITS WITH A FINANCIAL INSTITUTION THAT IS A
19 MEMBER OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
20 (2) CERTIFICATES OF DEPOSIT ISSUED BY A FINANCIAL
21 INSTITUTION THAT IS A MEMBER OF THE FEDERAL DEPOSIT INSURANCE
22 CORPORATION.
23 (3) INVESTMENT SECURITIES THAT ARE OBLIGATIONS OF THE
24 UNITED STATES, ITS AGENCIES OR INSTRUMENTALITIES OR
25 OBLIGATIONS THAT ARE GUARANTEED FULLY AS TO PRINCIPAL AND
26 INTEREST BY THE UNITED STATES.
27 (4) COMMERCIAL PAPER RATED AT LEAST A1, P1 OR THE
28 EQUIVALENT BY AT LEAST ONE NATIONALLY RECOGNIZED RATING
29 ORGANIZATION.
30 (5) DEBT INSTRUMENTS RATED AT LEAST AA OR THE EQUIVALENT
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1 BY A NATIONALLY RECOGNIZED RATING ORGANIZATION OR ISSUED BY
2 OR GUARANTEED WITH RESPECT TO PAYMENT BY AN ENTITY WHOSE
3 UNSECURED INDEBTEDNESS IS RATED AT LEAST AA OR THE EQUIVALENT
4 BY A NATIONALLY RECOGNIZED CREDIT RATING ORGANIZATION, AND
5 WHICH IS NOT SUBORDINATED TO OTHER UNSECURED INDEBTEDNESS OF
6 THE ISSUER OR GUARANTOR.
7 (6) OBLIGATIONS OF THE COMMONWEALTH OR ANY MUNICIPALITY
8 LOCATED IN THIS COMMONWEALTH OR ANY POLITICAL SUBDIVISION
9 THEREOF.
10 (7) INTERESTS IN MONEY MARKET FUNDS OR OTHER MUTUAL
11 FUNDS, THE PORTFOLIOS OF WHICH ARE LIMITED TO CASH AND
12 PERMISSIBLE INVESTMENTS.
13 (8) SWAPS OR OTHER HEDGING TRANSACTIONS WITH A
14 COUNTERPARTY RATED AT LEAST A OR ITS EQUIVALENT BY A
15 NATIONALLY RECOGNIZED RATING AGENCY DESIGNED TO REALIZE OR
16 PROTECT THE VALUE OF A QUALIFIED INVESTMENT.
17 (9) ANY OTHER INVESTMENTS APPROVED IN ADVANCE AND IN
18 WRITING BY THE PENNSYLVANIA STATE INVESTMENT AUTHORITY.
19 "PERSON." A NATURAL PERSON, CORPORATION, GENERAL OR LIMITED
20 PARTNERSHIP, TRUST, LIMITED LIABILITY COMPANY OR OTHER ENTITY.
21 "QUALIFIED BUSINESS." A BUSINESS THAT MEETS ALL OF THE
22 FOLLOWING CONDITIONS AS OF THE TIME OF A CERTIFIED CAPITAL
23 COMPANY'S FIRST INVESTMENT IN SUCH BUSINESS:
24 (1) IT IS HEADQUARTERED AND HAS ITS PRINCIPAL BUSINESS
25 OPERATIONS LOCATED IN THIS COMMONWEALTH.
26 (2) IT IS A SMALL BUSINESS CONCERN THAT MEETS THE
27 REQUIREMENTS OF THE UNITED STATES SMALL BUSINESS
28 ADMINISTRATION'S QUALIFICATION SIZE STANDARDS FOR ITS VENTURE
29 CAPITAL PROGRAM, AS DEFINED IN 13 C.F.R. 121.301(C) (RELATING
30 TO WHAT SIZE STANDARDS APPLICABLE TO FINANCIAL ASSISTANCE
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1 PROGRAMS).
2 (3) IT HAS AGREED TO USE THE QUALIFIED INVESTMENT
3 PRIMARILY TO SUPPORT BUSINESS OPERATIONS IN THIS
4 COMMONWEALTH, EXCEPT THAT ADVERTISING, SALES AND PROMOTIONAL
5 OPERATIONS MAY BE CONDUCTED OUTSIDE THIS COMMONWEALTH.
6 (4) IT EMPLOYS AT LEAST 80% OF ITS EMPLOYEES IN THIS
7 COMMONWEALTH OR PAYS AT LEAST 80% OF ITS PAYROLL TO EMPLOYEES
8 IN THIS COMMONWEALTH.
9 (5) Has at least 80% of its employees located in this
10 Commonwealth or pays at least 80% of its total payroll to
11 employees located in this Commonwealth.
12 (6) Is not primarily engaged in retail sales, real <--
13 estate development, banking, insurance, lending or the
14 provision of professional services by accountants, attorneys,
15 physicians or other licensed professionals.
16 (7) Meets all requirements and agrees to all terms or
17 conditions established by the Pennsylvania State Investment
18 Authority by regulation.
19 "QUALIFIED DEBT INSTRUMENT." A DEBT INSTRUMENT ISSUED TO A <--
20 CERTIFIED INVESTOR BY A CERTIFIED CAPITAL COMPANY, AT PAR VALUE
21 OR A PREMIUM, WITH AN ORIGINAL MATURITY DATE OF AT LEAST FIVE
22 YEARS FROM DATE OF ISSUANCE AND A REPAYMENT SCHEDULE THAT IS NO
23 FASTER THAN A LEVEL PRINCIPAL AMORTIZATION OVER FIVE YEARS AND
24 THAT CONTAINS NO INTEREST, DISTRIBUTION OR PAYMENT FEATURES THAT
25 ARE RELATED TO THE PROFITABILITY OF THE CERTIFIED CAPITAL
26 COMPANY OR THE PERFORMANCE OF THE CERTIFIED CAPITAL COMPANY'S
27 INVESTMENT PORTFOLIO UNTIL SUCH TIME AS THE CERTIFIED CAPITAL
28 COMPANY IS PERMITTED TO MAKE DISTRIBUTIONS, OTHER THAN QUALIFIED
29 DISTRIBUTIONS, UNDER SECTION 11.
30 "QUALIFIED DISTRIBUTION." ANY DISTRIBUTION OR PAYMENT FROM
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1 CERTIFIED CAPITAL OR PROFITS EARNED THEREON IN CONNECTION WITH
2 ANY OF THE FOLLOWING:
3 (1) COSTS AND EXPENSES OF FORMING, ORGANIZING AND
4 SYNDICATING THE CERTIFIED CAPITAL COMPANY, INCLUDING THE
5 COSTS OF FINANCING AND INSURING THE OBLIGATIONS OF THE
6 CERTIFIED CAPITAL COMPANY SO LONG AS, AT THE TIME THE
7 CERTIFIED CAPITAL COMPANY INITIALLY RECEIVES ITS INVESTMENT
8 OF CERTIFIED CAPITAL FROM ITS CERTIFIED INVESTORS, THE
9 CERTIFIED CAPITAL COMPANY HAS INITIAL CAPITAL AVAILABLE FOR
10 INVESTMENT IN THE FORM OF CASH OR PERMISSIBLE INVESTMENTS
11 EQUAL TO AT LEAST 75% OF THE AMOUNT OF CERTIFIED CAPITAL SUCH
12 CERTIFIED CAPITAL COMPANY INITIALLY RECEIVED AS INVESTMENT
13 FROM ITS CERTIFIED INVESTORS.
14 (2) COSTS AND EXPENSES OF MANAGING AND OPERATING THE
15 CERTIFIED CAPITAL COMPANY, INCLUDING, BUT NOT LIMITED TO,
16 REASONABLE AND NECESSARY FEES PAID FOR PROFESSIONAL SERVICES,
17 SUCH AS LEGAL AND ACCOUNTING SERVICES, RELATED TO THE
18 OPERATION OF THE CERTIFIED CAPITAL COMPANY AND AN ANNUAL
19 MANAGEMENT FEE IN AN AMOUNT THAT DOES NOT EXCEED 2 1/2% OF
20 THE CERTIFIED CAPITAL OF THE CERTIFIED CAPITAL COMPANY.
21 (3) A PROJECTED INCREASE IN FEDERAL OR STATE TAXES,
22 INCLUDING PENALTIES AND INTEREST RELATED TO FEDERAL AND STATE
23 INCOME TAXES, OF THE EQUITY OWNERS OF A CERTIFIED CAPITAL
24 COMPANY RESULTING FROM THE EARNINGS OR OTHER TAX LIABILITY OF
25 THE CERTIFIED CAPITAL COMPANY WITHOUT REGARD TO ANY REVENUES
26 OR EXPENSES FROM OTHER OPERATIONS OF AFFILIATES OF THE
27 CERTIFIED CAPITAL COMPANY, TO THE EXTENT THAT THE INCREASE IS
28 RELATED TO THE OWNERSHIP, MANAGEMENT OR OPERATION OF A
29 CERTIFIED CAPITAL COMPANY OR ISSUANCE, REPAYMENT OR
30 REDEMPTION OF THE QUALIFIED DEBT INSTRUMENTS OF THE CERTIFIED
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1 CAPITAL COMPANY.
2 "QUALIFIED INVESTMENT." THE INVESTMENT OF CASH BY A
3 CERTIFIED CAPITAL COMPANY IN A QUALIFIED BUSINESS FOR THE
4 PURCHASE OF ANY DEBT, DEBT PARTICIPATION, EQUITY OR HYBRID
5 SECURITY OF ANY NATURE AND DESCRIPTION WHATSOEVER, INCLUDING A
6 DEBT INSTRUMENT OR SECURITY WHICH HAS THE CHARACTERISTICS OF
7 DEBT BUT WHICH PROVIDES FOR CONVERSION INTO EQUITY OR EQUITY
8 PARTICIPATION INSTRUMENTS SUCH AS OPTIONS OR WARRANTS. ANY
9 QUALIFIED INVESTMENT IN THE FORM OF A DEBT INSTRUMENT, INCLUDING
10 THOSE OWNED THROUGH DEBT PARTICIPATIONS, MUST HAVE ALL OF THE
11 FOLLOWING:
12 (1) A FINAL STATED MATURITY OF AT LEAST TWO YEARS FROM
13 THE DATE OF ISSUANCE.
14 (2) A REPAYMENT SCHEDULE THAT IS NO FASTER THAN LEVEL
15 PRINCIPAL AMORTIZATION OVER TWO YEARS.
16 (3) SATISFACTION OF ONE OF THE FOLLOWING CONDITIONS:
17 (I) THE QUALIFIED BUSINESS MUST CERTIFY IN AN
18 AFFIDAVIT THAT THE BUSINESS HAS FAILED IN AN ATTEMPT TO
19 OBTAIN FUNDING FOR A LOAN FROM A BANK OR OTHER COMMERCIAL
20 LENDER OR THAT THE BUSINESS CANNOT REASONABLY BE EXPECTED
21 TO QUALIFY FOR FINANCING UNDER THE STANDARDS OF
22 COMMERCIAL LENDING.
23 (II) THE DEBT IS UNSECURED.
24 (III) THE DEBT IS CONVERTIBLE INTO EQUITY SECURITIES
25 OR EQUITY PARTICIPATION INSTRUMENTS INCLUDING OPTIONS OR
26 WARRANTS.
27 "STATE PREMIUM TAX LIABILITY." ANY LIABILITY INCURRED BY AN
28 INSURANCE COMPANY UNDER THE PROVISIONS OF ARTICLE IX OF THE ACT
29 OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF
30 1971.
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1 "TAX CREDIT." THE VESTED CREDIT AGAINST STATE PREMIUM TAX
2 LIABILITY THAT IS EARNED AT THE TIME OF INVESTMENT BY A
3 CERTIFIED INVESTOR IN CONNECTION WITH AN INVESTMENT OF CERTIFIED
4 CAPITAL IN A CERTIFIED CAPITAL COMPANY PURSUANT TO THIS ACT.
5 "TAX CREDIT ALLOCATION CLAIM." A CLAIM FOR ALLOCATION OF TAX
6 CREDITS PREPARED AND EXECUTED BY AN INSURANCE COMPANY ON A FORM
7 PROVIDED BY THE PENNSYLVANIA STATE INVESTMENT AUTHORITY AND
8 FILED BY A CERTIFIED CAPITAL COMPANY WITH THE AUTHORITY. THE
9 FORM SHALL INCLUDE AN AFFIDAVIT FROM THE INSURANCE COMPANY
10 STATING THAT SUCH INSURANCE COMPANY COMPLIES WITH THE
11 REQUIREMENTS OF SECTIONS 6(D) AND 8(G) AND IS LEGALLY BOUND AND
12 IRREVOCABLY COMMITTED TO MAKE AN INVESTMENT OF CERTIFIED CAPITAL
13 IN A CERTIFIED CAPITAL COMPANY IN THE AMOUNT OF ALLOCATED TAX
14 CREDITS EVEN IF SUCH AMOUNT IS LESS THAN THE AMOUNT OF THE
15 CLAIM, SUBJECT ONLY TO THE RECEIPT OF AN ALLOCATION PURSUANT TO
16 SECTION 8.
17 "TAX CREDIT ALLOCATION CLAIM FILING DATE." THE DATE ON WHICH
18 THE PENNSYLVANIA STATE INVESTMENT AUTHORITY WILL FIRST ACCEPT
19 TAX CREDIT ALLOCATION CLAIMS ON BEHALF OF CERTIFIED INVESTORS.
20 "Venture capital company." A company which makes investments
21 in qualified businesses.
22 Section 3. Pennsylvania State Investment Authority.
23 (a) Creation.--There is hereby created a public authority
24 and instrumentality of the Commonwealth known as the
25 Pennsylvania State Investment Authority. The authority shall be
26 a body corporate and politic and exercise the powers of the
27 Commonwealth as an agency of the Commonwealth.
28 (b) Management.--The powers of the authority shall be
29 exercised by the board.
30 (c) Powers.--The authority, through the actions of the
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1 board, shall have power to do all of the following:
2 (1) Adopt bylaws, guidelines and regulations as it deems
3 necessary.
4 (2) Contract and to execute instruments necessary or
5 convenient for the carrying on of its business.
6 (3) Hire staff.
7 (4) Enter into contracts for services necessary for the
8 carrying on of its business.
9 (5) Lease office space and purchase equipment and
10 supplies.
11 (6) Appoint committees and subcommittees as are needed.
12 (7) Sue and be sued, complain and defend in court.
13 (8) Accept funds from all available sources.
14 (d) Department services.--The Department of Banking, the
15 Department of Revenue, the Insurance Department and the
16 Department of Community and Economic Development shall provide
17 staffing, facilities, services and supplies to the authority, on
18 terms and conditions as agreed to by the authority and the
19 departments.
20 (e) Duties.--The authority, through the actions of the
21 board, shall have all of the following duties:
22 (1) To make loans to venture capital companies in
23 accordance with section 5.
24 (2) To administer the certified capital company program
25 in accordance with section 6 THE PROVISIONS OF THIS ACT. <--
26 (3) To administer the working capital loan guaranty
27 program in accordance with section 7 14. <--
28 (4) To establish and require audits, disclosures and
29 other review procedures for all activities funded by the
30 authority.
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1 (f) Debt restriction.--Except for the specific provisions of
2 this act concerning certified capital companies and the working
3 capital loan guaranty program, the authority may not issue any
4 bonds, notes or any other obligation evidencing a debt or
5 liability of the authority, the Commonwealth or any of its
6 political subdivisions.
7 Section 4. Board of directors.
8 (a) Members.--The authority shall be governed by a board
9 consisting of 21 22 members. The following persons shall be <--
10 members of the board:
11 (1) The Governor.
12 (2) The Secretary of Community and Economic Development.
13 (3) The Secretary of Banking.
14 (4) The Secretary of Revenue.
15 (5) The Insurance Commissioner.
16 (5.1) THE STATE TREASURER. <--
17 (6) Four representatives from the investment capital
18 sector, to be appointed by the Governor.
19 (7) Three representatives from the banking sector, to be
20 appointed by the Governor.
21 (8) Two representatives from the academic sector, with
22 expertise in capital formation and investment, to be
23 appointed by the Governor.
24 (9) One representative from the legal sector, with
25 expertise in capital formation and investment, to be
26 appointed by the Governor.
27 (10) One representative from the accounting sector, with
28 expertise in capital formation and investment, to be
29 appointed by the Governor.
30 (11) One representative of small businesses, to be
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1 appointed by the Governor.
2 (12) Four members of the General Assembly, appointed as
3 follows:
4 (i) One member appointed by the President pro
5 tempore of the Senate.
6 (ii) One member appointed by the Minority Leader of
7 the Senate.
8 (iii) One member appointed by the Speaker of the
9 House of Representatives.
10 (iv) One member appointed by the Minority Leader of
11 the House of Representatives.
12 (b) Terms.--
13 (1) The Governor, the Secretary of Community and
14 Economic Development, the Secretary of Banking, the Secretary
15 of Revenue and the Insurance Commissioner shall serve for as
16 long as they hold their respective positions.
17 (2) The members of the authority initially appointed by
18 the Governor shall serve for the following terms:
19 (i) Two representatives of the capital investment
20 sector, one representative of the banking sector, one
21 representative from the academic sector and the
22 representative from the accounting sector shall serve
23 terms of four years.
24 (ii) Two representatives of the capital investment
25 sector, two representatives of the banking sector, one
26 representative from the academic sector, the
27 representative from the legal sector and the
28 representative of small businesses shall serve terms of
29 two years.
30 (iii) All of the respective successors to the
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1 persons designated in this subsection shall serve terms
2 of four years or until their successor shall be
3 appointed. Any person appointed to fill a vacancy
4 occurring other than by the expiration of a term shall be
5 appointed for the unexpired term of the member succeeded.
6 (c) Designees.--A public officer of the board may designate
7 an officer or employee of the Commonwealth to represent him or
8 her at meetings of the board. A designee may lawfully vote and
9 otherwise act on behalf of the member of the board. The
10 designation shall be in writing, delivered to the board, and
11 continue in effect until revoked or amended in writing.
12 (d) Compensation.--The members of the board shall receive no
13 compensation for their services but shall be reimbursed for
14 their expenses actually incurred in the performance of their
15 official duties under this act.
16 (e) Organization.--The Secretary of Community and Economic
17 Development shall be the chairman and chief executive officer of
18 the board. The chairman may designate an officer or employee of
19 the department to chair board meetings in his absence. The board
20 shall elect a secretary and treasurer from its members at the
21 first meeting of each calendar year.
22 (f) Quorum.--A majority of the members of the board shall
23 constitute a quorum of the board for the purpose of organizing
24 the board and conducting business. Only members or their
25 designees who are physically present at a meeting or able to
26 participate fully in the deliberations by appropriate
27 telecommunications means shall count toward a quorum of the
28 board. Action shall be taken by a vote of a majority of the
29 members present and voting unless otherwise specified in this
30 act.
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1 (g) Committees.--The board may appoint committees to advise
2 and assist in its work. Committees shall be appointed by the
3 chairman and may consist of members and nonmembers of the board.
4 Committees may review and make recommendations on all actions
5 required by this act to be performed by the board, but may not
6 act in place of the board.
7 Section 5. Loans to venture capital companies.
8 (a) Fund.--There is hereby created a restricted receipts
9 account in the General Fund to be known as the Venture Capital
10 Fund. All amounts in the fund shall be available to the
11 authority for the purpose of making loans to venture capital
12 companies in accordance with the provisions of this section.
13 (b) Authorization.--The authority shall make loans to
14 venture capital companies from the venture capital fund in
15 accordance with the following provisions:
16 (1) Loans shall be structured so as to provide a return
17 of principal and interest to the fund. Loans shall be
18 structured to provide for repayment at specified time periods
19 or at the occurrence of specified events, in an amount which
20 reflects the performance of the venture capital fund.
21 (2) A venture capital company receiving a loan from the
22 authority shall make investments in qualified businesses, in
23 an amount and within such time periods as specified by the
24 authority, but in no event in an amount less than the amount
25 of the loan.
26 (3) A venture capital company receiving a loan from the
27 authority shall comply with any other provisions established
28 by regulation of the authority.
29 (c) Disposition of loan repayments.--All loan repayments
30 under this section shall be deposited in the fund and shall be
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1 available to the authority for making additional loans to
2 venture capital companies.
3 Section 6. Certified capital companies. <--
4 (a) Certification of companies.--The authority shall certify
5 capital companies, qualified businesses and certified capital
6 which meet the requirements of this act and of regulations
7 adopted by the authority. The authority shall establish by
8 regulation the procedures for certification and the fees
9 therefor.
10 (b) Allocation of tax credit guarantees.--The authority
11 shall allocate tax credit guarantees to certified capital
12 companies. The amount allocated to any one certified capital
13 company shall not exceed $10,000,000. Allocations of tax credit
14 guarantees shall be at the discretion of the authority. The fact
15 that a company has been certified shall not create a right to
16 receive tax credit guarantees.
17 (c) Amount of tax credit guarantees.--The total amount of
18 tax credit guarantees allocated by the authority shall not
19 exceed $200,000,000.
20 (d) Requirements for certification.--A certified capital
21 company shall meet the following requirements:
22 (1) The company must maintain an office or place of
23 business in this Commonwealth.
24 (2) At the time of application, the company must have an
25 equity capitalization of at least $500,000, in the form of
26 cash or cash equivalents.
27 (3) The person managing the funds of the company must
28 have at least five years' experience in making venture
29 capital investments on behalf of or as an institutional or
30 accredited investor.
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1 (4) Any other requirement established by regulation of
2 the authority.
3 (e) Activities.--A certified capital company shall engage in
4 the following activities:
5 (1) Within two years of an allocation of tax credit
6 guarantees, the company must invest at least 25% of the
7 amount of the allocation in qualified businesses. Within
8 three years, the amount of the investment shall be at least
9 40% and within four years at least 50%. Any amount of an
10 allocation not invested in qualified businesses within five
11 years of the allocation shall no longer be allocated to the
12 company. Reinvestment of the proceeds from investments in
13 qualified companies into qualified companies shall be
14 considered as a part of the allocation of tax credit
15 guarantees, to the maximum guarantee allocated to a certified
16 capital company. A company which has received an allocation
17 of tax credit guarantees may apply for additional allocations
18 of tax credit guarantees.
19 (2) No more than 20% of the amount of allocated tax
20 credit guarantees may be invested by a capital company in any
21 one qualified business.
22 (3) All certified capital not invested in a qualified
23 business shall be invested in cash deposited with a federally
24 insured financial institution, certificates of deposit of a
25 federally insured financial institution, obligations of the
26 Commonwealth or any political subdivision of the
27 Commonwealth, investment securities that are obligations of
28 the United States or its agencies or instrumentalities or
29 obligations that are guaranteed fully as to principal and
30 interest by the United States, debt instruments rated at
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1 least A or its equivalent by a nationally recognized credit
2 rating organization, or any other investment approved by
3 regulation of the authority.
4 (4) A company receiving tax credit guarantees for its
5 investment in a certified capital company shall not manage
6 the certified capital company, control the direction of
7 investments of the certified capital company or beneficially
8 own or control more than 15% of the outstanding voting
9 securities of the certified capital company.
10 (5) Prior to the investment in qualified businesses of
11 100% of the amount of the allocated tax credit guarantee, a
12 certified capital company may not make any distribution or
13 payment other than for the reasonable costs and expenses of
14 forming, syndicating, managing and operating the company,
15 including reasonable and necessary professional services
16 related to the formation and operation of the company, and an
17 annual management fee in an amount not to exceed 2.5% of the
18 amount of the allocated tax credit guarantee.
19 (6) A certified capital company shall comply with all
20 reporting and auditing requirements as established by
21 regulation of the authority.
22 (7) A certified capital company shall comply with any
23 other requirement established by regulation of the authority.
24 (f) Tax credit guarantee.--A company investing certified
25 capital in a certified capital company shall receive a tax
26 credit guarantee as follows:
27 (1) The guarantee shall be in the amount of the
28 certified capital invested in qualified businesses plus an
29 annual return of 3.5% during the period that the certified
30 capital was invested in a qualified business.
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1 (2) The guarantee shall be calculated at a date five
2 years from the date when 100% of the amount of the allocated
3 tax credit guarantee has been invested by the certified
4 capital company in qualified businesses or ten years after
5 the date when the allocation was made, whichever occurs
6 first.
7 (3) The amount of the tax credit shall be the difference
8 between the total of the amount of certified capital
9 investment and the annual investment rate; and the total
10 value of the investments held by the certified capital
11 company on the date of calculation and the value on the date
12 of calculation of any distributions or payments to the
13 investors in the certified capital company. The value of
14 distributions or payments shall be the amount of the
15 distribution or payment, plus 3.5% per annum, from the date
16 of the distribution or payment to the date of calculation.
17 (4) The amount of the tax credit may be offset against
18 any taxes due to the Commonwealth by the investor, beginning
19 in the tax year when the calculation of the tax credit is
20 made. No more than 50% of the tax credit may be taken in any
21 one year. Any amount of tax credit not taken in a tax year
22 may be carried forward to succeeding tax years.
23 (5) The authority shall calculate and certify tax
24 credits, in accordance with the provisions of this section
25 and regulations adopted by the authority.
26 SECTION 6. CERTIFICATION. <--
27 (A) GENERAL RULE.--THE AUTHORITY SHALL CERTIFY AS A
28 CERTIFIED CAPITAL COMPANY AN APPLICANT THAT MEETS THE FOLLOWING
29 REQUIREMENTS:
30 (1) THE APPLICANT HAS PAID A NONREFUNDABLE APPLICATION
20030H1359B2157 - 18 -
1 FEE OF $15,000 AT OR BEFORE THE DATE OF FILING ITS
2 APPLICATION WITH THE AUTHORITY.
3 (2) THE APPLICANT'S EQUITY CAPITALIZATION AT THE DATE OF
4 FILING ITS APPLICATION WITH THE AUTHORITY IS AT LEAST
5 $500,000 AND IS IN THE FORM OF UNENCUMBERED CASH OR CASH
6 EQUIVALENTS. AS PART OF ITS APPLICATION, EACH APPLICANT SHALL
7 SUBMIT TO THE AUTHORITY ITS AUDITED BALANCE SHEET AS OF A
8 DATE NO MORE THAN 35 DAYS PRIOR TO THE DATE OF FILING ITS
9 APPLICATION WITH AN UNQUALIFIED OPINION FROM AN INDEPENDENT
10 CERTIFIED PUBLIC ACCOUNTANT AND AN AFFIDAVIT STATING THAT, IF
11 CERTIFIED, IT WILL MAINTAIN AN EQUITY CAPITALIZATION OF AT
12 LEAST $500,000, EXCEPT FOR REDUCTIONS DUE TO QUALIFIED
13 DISTRIBUTIONS, UNTIL THE ALLOCATION DATE.
14 (3) AT LEAST TWO PRINCIPALS OF THE APPLICANT OR AT LEAST
15 TWO PERSONS EMPLOYED OR ENGAGED TO MANAGE THE FUNDS OF THE
16 APPLICANT QUALIFY AS AN EXPERIENCED INVESTOR. AS PART OF ITS
17 APPLICATION, THE APPLICANT SHALL SUBMIT TO THE AUTHORITY AN
18 AFFIDAVIT FROM EACH EXPERIENCED INVESTOR STATING THAT SUCH
19 PERSON'S EXPERIENCE MEETS THE REQUIREMENT OF THIS PARAGRAPH,
20 ATTACHING THE INVESTOR'S DETAILED RESUME OR EQUIVALENT
21 BIOGRAPHIC MATERIAL AND STATING THAT THE INVESTOR HAS NOT
22 VIOLATED FEDERAL OR STATE SECURITIES OR BANKING LAWS OR BEEN
23 CONVICTED OF ANY CRIME INVOLVING FRAUD.
24 (4) THE APPLICANT SHALL SUBMIT WITH THE APPLICATION AN
25 AFFIDAVIT STATING THAT WITHIN 60 DAYS OF THE INVESTMENT OF
26 CERTIFIED CAPITAL IN THE CERTIFIED CAPITAL COMPANY AT LEAST
27 ONE INVESTMENT PROFESSIONAL OF THE CERTIFIED CAPITAL COMPANY
28 SHALL BE PRIMARILY LOCATED IN AN OFFICE OF THE CERTIFIED
29 CAPITAL COMPANY BASED IN THIS COMMONWEALTH.
30 (B) AUTHORITY ACTION.--WITHIN 30 DAYS OF THE RECEIPT OF AN
20030H1359B2157 - 19 -
1 APPLICATION, THE AUTHORITY SHALL EITHER CERTIFY THE APPLICANT AS
2 A CERTIFIED CAPITAL COMPANY OR REFUSE TO SO CERTIFY THE
3 APPLICANT, AND, IN THE CASE OF A REFUSAL, THE AUTHORITY SHALL
4 SPECIFICALLY COMMUNICATE TO THE APPLICANT THE REQUIREMENTS OF
5 SUBSECTION (A) THE APPLICANT FAILED TO SATISFY. AN APPLICANT MAY
6 FILE AN AMENDED APPLICATION WITHIN 15 DAYS OF RECEIPT OF A
7 REFUSAL. WITHIN 15 DAYS FROM RECEIPT OF AN AMENDED APPLICATION,
8 THE AUTHORITY SHALL EITHER CERTIFY THE APPLICANT AS A CERTIFIED
9 CAPITAL COMPANY OR REFUSE TO SO CERTIFY THE APPLICANT. THE
10 AUTHORITY SHALL REVIEW APPLICATIONS IN THE ORDER RECEIVED, AND
11 IN THE EVENT MORE THAN ONE APPLICATION IS RECEIVED BY THE
12 AUTHORITY ON THE SAME DAY, ALL SUCH APPLICATIONS SHALL BE
13 REVIEWED SIMULTANEOUSLY, EXCEPT IN THE CASE OF INCOMPLETE
14 APPLICATIONS.
15 (C) ADDITIONAL MATERIALS.--AS PART OF THE APPLICATION, AN
16 APPLICANT SHALL PROVIDE THE AUTHORITY WITH COPIES OF ITS
17 OFFERING MATERIALS, WHICH MAY BE IN DRAFT OR PRELIMINARY FORM,
18 OR OTHER INFORMATION THAT DESCRIBES IN REASONABLE DETAIL THE
19 STRUCTURE OF ITS QUALIFIED DEBT INSTRUMENTS AND ANY OTHER
20 SECURITIES TO BE ISSUED TO ITS CERTIFIED INVESTORS TO ENABLE THE
21 AUTHORITY TO VERIFY THE CERTIFIED CAPITAL COMPANY'S COMPLIANCE
22 WITH THE REQUIREMENTS OF THIS ACT. ANY OFFERING MATERIAL
23 INVOLVING THE SALE OF SECURITIES OF THE CERTIFIED CAPITAL
24 COMPANY SHALL INCLUDE THE FOLLOWING STATEMENT:
25 BY AUTHORIZING THE FORMATION OF A CERTIFIED CAPITAL
26 COMPANY, THE COMMONWEALTH DOES NOT NECESSARILY ENDORSE
27 THE QUALITY OF MANAGEMENT OR THE POTENTIAL FOR EARNINGS
28 OF SUCH COMPANY AND IS NOT LIABLE FOR DAMAGES OR LOSSES
29 TO A CERTIFIED INVESTOR IN THE COMPANY. USE OF THE WORD
30 CERTIFIED IN AN OFFERING DOES NOT CONSTITUTE A
20030H1359B2157 - 20 -
1 RECOMMENDATION OR ENDORSEMENT OF THE INVESTMENT BY THE
2 PENNSYLVANIA STATE INVESTMENT AUTHORITY. IN THE EVENT
3 APPLICABLE PROVISIONS OF THE CERTIFIED CAPITAL COMPANY
4 ACT ARE VIOLATED, THE COMMONWEALTH MAY REQUIRE FORFEITURE
5 OF UNUSED TAX CREDITS AND REPAYMENT OF USED TAX CREDITS.
6 (D) PROHIBITION.--NO INSURANCE COMPANY OR ANY AFFILIATE OF
7 AN INSURANCE COMPANY SHALL, DIRECTLY OR INDIRECTLY, BENEFICIALLY
8 OWN, WHETHER THROUGH RIGHTS, OPTIONS, CONVERTIBLE INTERESTS OR
9 OTHERWISE, 15% OR MORE OF THE VOTING EQUITY INTERESTS OF OR
10 MANAGE A CERTIFIED CAPITAL COMPANY OR CONTROL THE DIRECTION OF
11 INVESTMENTS FOR A CERTIFIED CAPITAL COMPANY. THIS PROVISION
12 SHALL NOT PRECLUDE A CERTIFIED INVESTOR, INSURANCE COMPANY OR
13 ANY OTHER PARTY FROM:
14 (1) EXERCISING ITS LEGAL RIGHTS AND REMEDIES, WHICH MAY
15 INCLUDE INTERIM MANAGEMENT OF A CERTIFIED CAPITAL COMPANY OR
16 OWNERSHIP OF EQUITY INTERESTS IN EXCESS OF THE LIMITS
17 CONTAINED HEREIN, IN THE EVENT THAT A CERTIFIED CAPITAL
18 COMPANY IS IN DEFAULT OF ITS STATUTORY OBLIGATIONS OR ITS
19 CONTRACTUAL OBLIGATIONS TO A CERTIFIED INVESTOR, INSURANCE
20 COMPANY OR OTHER PERSON; OR
21 (2) ESTABLISHING CONTROLS TO INSURE THAT THE CERTIFIED
22 CAPITAL COMPANY SATISFIES THE REQUIREMENTS OF SECTION 9(A).
23 NOTHING IN THIS SUBSECTION SHALL LIMIT AN INSURANCE COMPANY'S
24 OWNERSHIP OF NONVOTING EQUITY SECURITIES OR OTHER NONVOTING
25 OWNERSHIP INTERESTS OF A CERTIFIED CAPITAL COMPANY.
26 (E) PAYMENT IN FAVOR OF CERTIFIED INVESTORS.--A CERTIFIED
27 CAPITAL COMPANY MAY OBTAIN A GUARANTY, INDEMNITY, BOND,
28 INSURANCE POLICY OR OTHER PAYMENT UNDERTAKING FOR THE BENEFIT OF
29 ITS CERTIFIED INVESTORS FROM ANY ENTITY, EXCEPT THAT IN NO CASE
30 SHALL MORE THAN ONE CERTIFIED INVESTOR OF SUCH CERTIFIED CAPITAL
20030H1359B2157 - 21 -
1 COMPANY OR AFFILIATES OF SUCH CERTIFIED INVESTOR BE ENTITLED TO
2 PROVIDE THE GUARANTY, INDEMNITY, BOND, INSURANCE POLICY OR OTHER
3 PAYMENT UNDERTAKING IN FAVOR OF THE CERTIFIED INVESTORS OF THE
4 CERTIFIED CAPITAL COMPANY AND ITS AFFILIATES IN THIS
5 COMMONWEALTH.
6 SECTION 7. TAX CREDITS.
7 (A) GENERAL RULE.--ANY CERTIFIED INVESTOR WHO MAKES AN
8 INVESTMENT OF CERTIFIED CAPITAL PURSUANT TO AN ALLOCATION OF TAX
9 CREDITS UNDER SECTION 8 SHALL, AT THE TIME OF INVESTMENT, EARN A
10 VESTED CREDIT AGAINST STATE PREMIUM TAX LIABILITY EQUAL TO 100%
11 OF THE CERTIFIED INVESTOR'S INVESTMENT OF CERTIFIED CAPITAL. A
12 CERTIFIED INVESTOR SHALL BE ENTITLED TO TAKE UP TO 10% OF THE
13 VESTED TAX CREDIT TO REDUCE THE CERTIFIED INVESTOR'S STATE
14 PREMIUM TAX LIABILITY FOR ANY TAX YEAR OF THE CERTIFIED INVESTOR
15 BEGINNING WITH THE TAX YEAR COMMENCING ON JANUARY 1, 2007, PLUS
16 ANY AMOUNT OF UNUSED TAX CREDITS CARRIED FORWARD PURSUANT TO
17 SUBSECTION (B) PROVIDED THAT THE TOTAL TAX CREDIT TAKEN IN ANY
18 ONE YEAR SHALL NOT EXCEED 10% OF THE VESTED TAX CREDIT.
19 (B) LIMITATION.--THE TAX CREDIT THAT MAY BE APPLIED AGAINST
20 STATE PREMIUM TAX LIABILITY IN ANY ONE TAX YEAR MAY NOT EXCEED
21 THE STATE PREMIUM TAX LIABILITY OF THE CERTIFIED INVESTOR FOR
22 SUCH TAX YEAR. ALL UNUSED TAX CREDITS AGAINST STATE PREMIUM TAX
23 LIABILITY MAY BE CARRIED FORWARD INDEFINITELY AND USED IN ANY
24 SUBSEQUENT YEAR IN ACCORDANCE WITH SUBSECTION (A) UNTIL THE TAX
25 CREDITS ARE UTILIZED IN FULL.
26 (C) RETALIATORY TAXES.--A CERTIFIED INVESTOR CLAIMING A TAX
27 CREDIT AGAINST STATE PREMIUM TAX LIABILITY EARNED THROUGH AN
28 INVESTMENT IN A CERTIFIED CAPITAL COMPANY SHALL NOT BE REQUIRED
29 TO PAY ANY ADDITIONAL RETALIATORY TAX LEVIED PURSUANT TO SECTION
30 212 OF THE ACT OF MAY 17, 1921 (P.L.789, NO.285), KNOWN AS THE
20030H1359B2157 - 22 -
1 INSURANCE DEPARTMENT ACT OF 1921, CLAIMING THAT TAX CREDIT.
2 (D) REDUCTION NOT REQUIRED.--A CERTIFIED INVESTOR IS NOT
3 REQUIRED TO REDUCE THE AMOUNT OF TAX PURSUANT TO THE STATE
4 PREMIUM TAX LIABILITY INCLUDED BY THE CERTIFIED INVESTOR IN
5 CONNECTION WITH RATEMAKING FOR ANY INSURANCE CONTRACT WRITTEN IN
6 THIS COMMONWEALTH AS A RESULT OF A REDUCTION IN THE CERTIFIED
7 INVESTOR'S TAX LIABILITY BASED ON THE TAX CREDIT ALLOWED UNDER
8 THIS ACT.
9 (E) TREATMENT OF CREDITS.--IF THE TAXES PAID BY A CERTIFIED
10 INVESTOR WITH RESPECT TO ITS STATE PREMIUM TAX LIABILITY
11 CONSTITUTE A CREDIT AGAINST ANY OTHER TAX WHICH IS IMPOSED BY
12 THE COMMONWEALTH, THE CERTIFIED INVESTOR'S CREDIT AGAINST SUCH
13 OTHER TAX SHALL NOT BE REDUCED BY VIRTUE OF THE REDUCTION IN THE
14 CERTIFIED INVESTOR'S TAX LIABILITY BASED ON THE TAX CREDIT
15 ALLOWED UNDER THIS ACT.
16 (F) POLICE AND FIREFIGHTER PENSIONS.--THE CREDITS ALLOWED BY
17 THIS SECTION SHALL NOT REDUCE THE AMOUNTS WHICH WOULD OTHERWISE
18 BE PAYABLE FOR FIREMEN'S RELIEF PENSION OR RETIREMENT PURPOSES
19 OR FOR POLICE PENSION, RETIREMENT OR DISABILITY PURPOSES. THE
20 DEPARTMENT OF REVENUE SHALL TRANSFER BY JUNE 30 OF EACH FISCAL
21 YEAR AN AMOUNT EQUAL TO THE CREDITS TAKEN UNDER THIS SECTION BY
22 FOREIGN FIRE AND CASUALTY INSURANCE COMPANIES FROM THE GENERAL
23 FUND TO THE MUNICIPAL PENSION AID FUND OR THE FIRE INSURANCE TAX
24 FUND, AS APPROPRIATE.
25 SECTION 8. AGGREGATE LIMITATIONS ON TAX CREDITS; ALLOCATION.
26 (A) GENERAL RULE.--THE AGGREGATE AMOUNT OF CERTIFIED CAPITAL
27 FOR WHICH TAX CREDITS WILL BE ALLOCATED TO ALL CERTIFIED
28 INVESTORS UNDER THIS ACT SHALL NOT EXCEED THE AMOUNT THAT WOULD
29 ENTITLE ALL CERTIFIED INVESTORS OF CERTIFIED CAPITAL COMPANIES
30 TO TAKE AGGREGATE TAX CREDITS OF $200,000,000 OR $20,000,000 PER
20030H1359B2157 - 23 -
1 YEAR FOR TEN YEARS. NO CERTIFIED CAPITAL COMPANY, ON AN
2 AGGREGATE BASIS WITH ITS AFFILIATES, MAY FILE TAX CREDIT
3 ALLOCATION CLAIMS THAT EXCEED THE MAXIMUM AMOUNT OF CERTIFIED
4 CAPITAL FOR WHICH TAX CREDITS WILL BE ALLOCATED AS PROVIDED IN
5 THIS SUBSECTION.
6 (B) ALLOCATION.--TAX CREDITS SHALL BE ALLOCATED TO CERTIFIED
7 INVESTORS IN THE ORDER THAT THE TAX CREDIT ALLOCATION CLAIMS ARE
8 FILED WITH THE AUTHORITY. ALL TAX CREDIT ALLOCATION CLAIMS FILED
9 WITH THE AUTHORITY ON THE SAME DAY SHALL BE TREATED AS HAVING
10 BEEN FILED CONTEMPORANEOUSLY. ANY TAX CREDIT ALLOCATION CLAIMS
11 FILED WITH THE AUTHORITY PRIOR TO THE TAX CREDIT ALLOCATION
12 CLAIM FILING DATE WILL BE DEEMED TO HAVE BEEN FILED ON THE TAX
13 CREDIT ALLOCATION CLAIM FILING DATE.
14 (C) MULTIPLE TAX CREDIT CLAIMS.--IN THE EVENT THAT TWO OR
15 MORE CERTIFIED CAPITAL COMPANIES FILE TAX CREDIT ALLOCATION
16 CLAIMS WITH THE AUTHORITY ON BEHALF OF THEIR RESPECTIVE
17 CERTIFIED INVESTORS ON THE SAME DAY AND THE AGGREGATE AMOUNT OF
18 SUCH TAX CREDIT ALLOCATION CLAIMS EXCEEDS THE AGGREGATE LIMIT OF
19 TAX CREDITS UNDER SUBSECTION (A) OR SUCH LESSER AMOUNT OF TAX
20 CREDITS THAT REMAIN UNALLOCATED ON SUCH DAY, THEN THE TAX
21 CREDITS SHALL BE ALLOCATED AMONG THE CERTIFIED INVESTORS WHO
22 FILED ON THAT DAY ON A PRO RATA BASIS WITH RESPECT TO THE
23 AMOUNTS CLAIMED. SUBJECT TO SUBSECTION (D), THE PRO RATA
24 ALLOCATION FOR ANY ONE CERTIFIED INVESTOR SHALL BE THE PRODUCT
25 OBTAINED BY MULTIPLYING A NUMBER WHICH IS A FRACTION, THE
26 NUMERATOR OF WHICH IS THE AMOUNT OF THE TAX CREDIT ALLOCATION
27 CLAIM FILED ON BEHALF OF SUCH CERTIFIED INVESTOR AND THE
28 DENOMINATOR OF WHICH IS THE TOTAL OF ALL TAX CREDIT ALLOCATION
29 CLAIMS FILED ON BEHALF OF ALL CERTIFIED INVESTORS ON SUCH DAY,
30 BY A NUMBER WHICH IS THE AGGREGATE LIMIT OF TAX CREDITS UNDER
20030H1359B2157 - 24 -
1 SUBSECTION (A) OR SUCH LESSER AMOUNT OF TAX CREDITS THAT REMAIN
2 UNALLOCATED ON SUCH DAY.
3 (D) LIMITATION.--NO TAX CREDITS SHALL BE ALLOCATED TO THE
4 CERTIFIED INVESTORS OF ANY CERTIFIED CAPITAL COMPANY IF THAT
5 ALLOCATION WOULD RESULT IN LESS THAN 2.5% OR MORE THAN 10% OF
6 THE MAXIMUM AMOUNT OF CERTIFIED CAPITAL FOR WHICH TAX CREDITS
7 WILL BE ALLOCATED UNDER SUBSECTION (A) BEING INVESTED IN SUCH
8 CERTIFIED CAPITAL COMPANY. IF THE CERTIFIED INVESTORS OF ONE OR
9 MORE CERTIFIED CAPITAL COMPANIES THAT FILED TAX CREDIT
10 ALLOCATION CLAIMS DO NOT RECEIVE ALLOCATIONS OF TAX CREDITS BY
11 OPERATION OF THE PREVIOUS SENTENCE, THE PRO RATA ALLOCATION
12 DESCRIBED IN SUBSECTION (C) SHALL BE MADE AS IF THE TAX CREDIT
13 ALLOCATION CLAIMS FILED ON BEHALF OF SUCH CERTIFIED INVESTORS
14 HAD NOT FILED IN THE FIRST PLACE.
15 (E) AUTHORITY ACTION.--WITHIN TEN BUSINESS DAYS AFTER THE
16 AUTHORITY RECEIVES A TAX CREDIT ALLOCATION CLAIM FILED BY A
17 CERTIFIED CAPITAL COMPANY ON BEHALF OF ONE OR MORE OF ITS
18 CERTIFIED INVESTORS, THE AUTHORITY SHALL NOTIFY THE CERTIFIED
19 CAPITAL COMPANY OF THE AMOUNT OF TAX CREDITS ALLOCATED TO EACH
20 OF THE CERTIFIED INVESTORS OF SUCH CERTIFIED CAPITAL COMPANY.
21 (F) INADEQUATE CAPITAL RECEIVED.--IF A CERTIFIED CAPITAL
22 COMPANY DOES NOT RECEIVE AGGREGATE INVESTMENTS OF CERTIFIED
23 CAPITAL EQUALING THE AMOUNT OF TAX CREDITS ALLOCATED TO ITS
24 CERTIFIED INVESTORS WITHIN TEN BUSINESS DAYS OF THE CERTIFIED
25 CAPITAL COMPANY'S RECEIPT OF NOTICE OF ALLOCATION, THEN IT SHALL
26 SO NOTIFY THE AUTHORITY ON OR BEFORE THE NEXT BUSINESS DAY AND
27 THAT PORTION OF THE TAX CREDITS ALLOCATED TO THE CERTIFIED
28 INVESTORS OF SUCH CERTIFIED CAPITAL COMPANY IN EXCESS OF THE
29 AMOUNT OF CERTIFIED CAPITAL INVESTED IN SUCH CERTIFIED CAPITAL
30 COMPANY BY SUCH DATE WILL BE FORFEITED. THE AUTHORITY SHALL THEN
20030H1359B2157 - 25 -
1 REALLOCATE THOSE FORFEITED TAX CREDITS AMONG THE CERTIFIED
2 INVESTORS OF THE OTHER CERTIFIED CAPITAL COMPANIES ON A PRO RATA
3 BASIS WITH RESPECT TO THE TAX CREDIT ALLOCATION CLAIMS FILED ON
4 BEHALF OF SUCH CERTIFIED INVESTORS. IF A CERTIFIED CAPITAL
5 COMPANY DOES NOT RECEIVE INVESTMENTS OF CERTIFIED CAPITAL IN THE
6 AGGREGATE EQUALING OR EXCEEDING 2.5% OF THE MAXIMUM AMOUNT OF
7 CERTIFIED CAPITAL FOR WHICH TAX CREDITS WILL BE ALLOCATED UNDER
8 SUBSECTION (A) WITHIN TEN BUSINESS DAYS OF THE CERTIFIED CAPITAL
9 COMPANY'S RECEIPT OF NOTICE OF ALLOCATION, THEN, AT THE
10 DISCRETION OF THE AUTHORITY, ALL OF THE TAX CREDITS ALLOCATED TO
11 THE CERTIFIED INVESTORS OF THAT CERTIFIED CAPITAL COMPANY MAY BE
12 FORFEITED. IF FORFEITED, THE AUTHORITY SHALL REALLOCATE THOSE
13 TAX CREDITS AMONG THE CERTIFIED INVESTORS OF THE OTHER CERTIFIED
14 CAPITAL COMPANIES ON A PRO RATA BASIS WITH RESPECT TO THE TAX
15 CREDIT ALLOCATION CLAIMS FILED ON BEHALF OF SUCH CERTIFIED
16 INVESTORS. NO REALLOCATION PROVIDED FOR IN THIS SUBSECTION SHALL
17 RESULT IN MORE THAN 10% OF THE MAXIMUM AMOUNT OF CERTIFIED
18 CAPITAL FOR WHICH TAX CREDITS WILL BE ALLOCATED BEING INVESTED
19 IN ANY CERTIFIED CAPITAL COMPANY.
20 (G) MAXIMUM TAX CREDIT CLAIMS.--THE MAXIMUM AMOUNT OF TAX
21 CREDIT ALLOCATION CLAIMS THAT MAY BE FILED ON BEHALF OF ANY ONE
22 CERTIFIED INVESTOR ON AN AGGREGATE BASIS WITH ITS AFFILIATES IN
23 ONE OR MORE CERTIFIED CAPITAL COMPANIES SHALL NOT EXCEED THE
24 LESSER OF THE FOLLOWING:
25 (1) THE GREATER OF $20,000,000 OR 15% OF THE AGGREGATE
26 LIMITATION AS PROVIDED IN SUBSECTION (A).
27 (2) TEN TIMES THE LARGEST ANNUAL STATE PREMIUM TAX
28 LIABILITY INCURRED BY THE CERTIFIED INVESTOR ON AN AGGREGATE
29 BASIS WITH ITS AFFILIATES DURING THE THREE TAX YEARS
30 PRECEDING THE YEAR OF THE ALLOCATION DATE FOR WHICH FINAL
20030H1359B2157 - 26 -
1 RETURNS HAVE BEEN FILED.
2 SECTION 9. QUALIFIED INVESTMENTS.
3 (A) GENERAL RULE.--IN ORDER TO CONTINUE TO BE CERTIFIED AS A
4 CERTIFIED CAPITAL COMPANY, A CERTIFIED CAPITAL COMPANY MUST MAKE
5 QUALIFIED INVESTMENTS ACCORDING TO THE FOLLOWING SCHEDULE:
6 (1) WITHIN THE PERIOD ENDING THREE YEARS AFTER ITS
7 ALLOCATION DATE, A CERTIFIED CAPITAL COMPANY MUST HAVE MADE
8 QUALIFIED INVESTMENTS CUMULATIVELY EQUAL TO AT LEAST 30% OF
9 ITS CERTIFIED CAPITAL. A MINIMUM OF 1/3 OF THE QUALIFIED
10 INVESTMENTS OF A CERTIFIED CAPITAL COMPANY SHALL BE IN
11 QUALIFIED BUSINESSES IN WHICH THE HEADQUARTERS AND AT LEAST
12 80% OF THE EMPLOYEES OF THE QUALIFIED BUSINESS ARE LOCATED IN
13 THIRD THROUGH EIGHTH CLASS COUNTRIES. AT LEAST 25% OF SUCH
14 INVESTMENTS, REGARDLESS OF WHERE THE BUSINESS IS
15 HEADQUARTERED IN THIS COMMONWEALTH, SHALL HAVE BEEN MADE IN
16 QUALIFIED BUSINESSES THAT ARE EARLY STAGE BUSINESSES AT THE
17 TIME OF INVESTMENT.
18 (2) WITHIN THE PERIOD ENDING FIVE YEARS AFTER ITS
19 ALLOCATION DATE, A CERTIFIED CAPITAL COMPANY MUST HAVE MADE
20 QUALIFIED INVESTMENTS CUMULATIVELY EQUAL TO AT LEAST 50% OF
21 ITS CERTIFIED CAPITAL. A MINIMUM OF 1/3 OF THE QUALIFIED
22 INVESTMENTS OF A CERTIFIED CAPITAL COMPANY SHALL BE IN
23 QUALIFIED BUSINESSES IN WHICH THE HEADQUARTERS AND AT LEAST
24 80% OF THE EMPLOYEES OF THE QUALIFIED BUSINESS ARE LOCATED IN
25 THIRD THROUGH EIGHTH COUNTRIES. AT LEAST 25% OF SUCH
26 INVESTMENTS, REGARDLESS OF WHERE THE BUSINESS IS
27 HEADQUARTERED IN THIS COMMONWEALTH, SHALL HAVE BEEN MADE IN
28 QUALIFIED BUSINESSES THAT ARE EARLY STAGE BUSINESSES AT THE
29 TIME OF INVESTMENT.
30 (B) CALCULATION.--THE AGGREGATE CUMULATIVE AMOUNT OF ALL
20030H1359B2157 - 27 -
1 QUALIFIED INVESTMENTS MADE BY THE CERTIFIED CAPITAL COMPANY FROM
2 ITS ALLOCATION DATE WILL BE CONSIDERED IN THE CALCULATION OF THE
3 PERCENTAGE REQUIREMENTS UNDER THIS ACT. FUNDS RECEIVED FROM A
4 QUALIFIED INVESTMENT MAY BE INVESTED IN ANOTHER QUALIFIED
5 INVESTMENT AND SHALL COUNT TOWARD ANY REQUIREMENT IN THIS ACT
6 WITH RESPECT TO INVESTMENTS OF CERTIFIED CAPITAL.
7 (C) WRITTEN OPINION OF AUTHORITY.--PRIOR TO MAKING A
8 PROPOSED INVESTMENT IN A SPECIFIC BUSINESS, A CERTIFIED CAPITAL
9 COMPANY MAY, AT ITS OPTION, REQUEST FROM THE AUTHORITY A WRITTEN
10 OPINION THAT THE PROPOSED INVESTMENT WILL QUALIFY AS A QUALIFIED
11 INVESTMENT. THE AUTHORITY SHALL HAVE 30 BUSINESS DAYS FROM THE
12 RECEIPT OF SUCH A REQUEST TO DETERMINE WHETHER THE PROPOSED
13 INVESTMENT QUALIFIES AS A QUALIFIED INVESTMENT AND TO NOTIFY THE
14 CERTIFIED CAPITAL COMPANY OF ITS DETERMINATION AND AN
15 EXPLANATION THEREOF. IF THE AUTHORITY FAILS TO NOTIFY THE
16 CERTIFIED CAPITAL COMPANY OF ITS DETERMINATION WITHIN THE 30-DAY
17 PERIOD, THE PROPOSED INVESTMENT SHALL BE DEEMED TO BE A
18 QUALIFIED INVESTMENT. IF THE AUTHORITY DETERMINES THAT THE
19 PROPOSED INVESTMENT DOES NOT MEET THE DEFINITION OF A QUALIFIED
20 INVESTMENT, THE AUTHORITY MAY NEVERTHELESS CONSIDER THE PROPOSED
21 INVESTMENT A QUALIFIED INVESTMENT IF THE AUTHORITY DETERMINES
22 THAT THE PROPOSED INVESTMENT WILL FURTHER ECONOMIC DEVELOPMENT
23 IN THIS COMMONWEALTH IN ACCORDANCE WITH THE POLICIES OF THE
24 AUTHORITY.
25 (D) STATUS AS QUALIFIED BUSINESS.--ANY BUSINESS WHICH IS
26 CLASSIFIED AS A QUALIFIED BUSINESS AT THE TIME OF THE FIRST
27 INVESTMENT IN SUCH BUSINESS BY A CERTIFIED CAPITAL COMPANY SHALL
28 REMAIN CLASSIFIED AS A QUALIFIED BUSINESS AND MAY RECEIVE
29 FOLLOW-ON INVESTMENTS FROM ANY CERTIFIED CAPITAL COMPANY, AND
30 SUCH FOLLOW-ON INVESTMENTS SHALL BE QUALIFIED INVESTMENTS EVEN
20030H1359B2157 - 28 -
1 IF SUCH BUSINESS MAY NOT QUALIFY AS A QUALIFIED BUSINESS AT THE
2 TIME OF SUCH FOLLOW-ON INVESTMENTS. A FOLLOW-ON INVESTMENT DOES
3 NOT QUALIFY AS A QUALIFIED INVESTMENT IF, AT THE TIME OF THE
4 FOLLOW-ON INVESTMENT, THE QUALIFIED BUSINESS NO LONGER HAS ITS
5 HEADQUARTERS IN THIS COMMONWEALTH, NO LONGER EMPLOYS AT LEAST
6 80% OF ITS EMPLOYEES IN THIS COMMONWEALTH OR NO LONGER PAYS AT
7 LEAST 80% OF ITS PAYROLL TO EMPLOYEES IN THIS COMMONWEALTH.
8 (E) LIMITATION.--AN INVESTMENT SHALL NOT BE A QUALIFIED
9 INVESTMENT IF THE AGGREGATE INVESTMENT BY THE CERTIFIED CAPITAL
10 COMPANY IN THE QUALIFIED BUSINESS FOLLOWING SUCH INVESTMENT
11 WOULD EXCEED 15% OF THE TOTAL CERTIFIED CAPITAL OF THE CERTIFIED
12 CAPITAL COMPANY AT THE TIME OF INVESTMENT.
13 (F) RESTRICTION ON INVESTMENTS.--ALL CERTIFIED CAPITAL HELD
14 BY THE CERTIFIED CAPITAL COMPANY AND NOT CURRENTLY INVESTED IN
15 QUALIFIED INVESTMENTS BY THE CERTIFIED CAPITAL COMPANY MUST BE
16 INVESTED IN PERMISSIBLE INVESTMENTS. THIS SUBSECTION SHALL NOT
17 APPLY TO SECURITIES RECEIVED BY A CERTIFIED CAPITAL COMPANY IN
18 EXCHANGE FOR A QUALIFIED INVESTMENT PRIOR TO THE CONVERSION OF
19 SUCH SECURITIES INTO CASH OR CASH EQUIVALENTS.
20 SECTION 10. FEES; REPORTS; ANNUAL REVIEW.
21 (A) GENERAL RULE.--EACH CERTIFIED CAPITAL COMPANY SHALL PAY
22 TO THE AUTHORITY AN ANNUAL, NONREFUNDABLE CERTIFICATION FEE OF
23 $5,000 ON OR BEFORE JANUARY 31, OR $10,000 THEREAFTER, EXCEPT
24 THAT NO FEE SHALL BE REQUIRED WITHIN SIX MONTHS OF THE DATE A
25 CERTIFIED CAPITAL COMPANY IS FIRST CERTIFIED BY THE AUTHORITY.
26 (B) REPORTS.--EACH CERTIFIED CAPITAL COMPANY SHALL REPORT
27 THE FOLLOWING TO THE AUTHORITY:
28 (1) WITHIN 30 DAYS AFTER RECEIPT OF CERTIFIED CAPITAL,
29 THE NAME OF EACH CERTIFIED INVESTOR FROM WHICH THE CERTIFIED
30 CAPITAL WAS RECEIVED, INCLUDING SUCH CERTIFIED INVESTOR'S
20030H1359B2157 - 29 -
1 INSURANCE PREMIUM TAX IDENTIFICATION NUMBER; THE AMOUNT OF
2 EACH CERTIFIED INVESTOR'S INVESTMENT OF CERTIFIED CAPITAL AND
3 TAX CREDITS; AND THE DATE ON WHICH THE CERTIFIED CAPITAL WAS
4 RECEIVED.
5 (2) ON AN ANNUAL BASIS, ON OR BEFORE JANUARY 31, THE
6 AMOUNT OF THE CERTIFIED CAPITAL COMPANY'S CERTIFIED CAPITAL
7 AS OF DECEMBER 31 OF THE IMMEDIATELY PRECEDING YEAR, WHETHER
8 THE CERTIFIED CAPITAL COMPANY HAS INVESTED MORE THAN 15% OF
9 ITS TOTAL CERTIFIED CAPITAL IN ANY ONE QUALIFIED BUSINESS AND
10 A DESCRIPTION OF ALL QUALIFIED INVESTMENTS THAT THE CERTIFIED
11 CAPITAL COMPANY MADE DURING THE PREVIOUS CALENDAR YEAR.
12 (3) WITHIN 90 DAYS OF THE CLOSE OF SUCH CERTIFIED
13 CAPITAL COMPANY'S FISCAL YEAR, ANNUAL AUDITED FINANCIAL
14 STATEMENTS, WHICH SHALL INCLUDE THE OPINION OF AN INDEPENDENT
15 CERTIFIED PUBLIC ACCOUNTANT REGARDING THE FINANCIAL
16 STATEMENTS.
17 (C) ANNUAL REVIEW.--THE AUTHORITY SHALL CONDUCT AN ANNUAL
18 REVIEW OF EACH CERTIFIED CAPITAL COMPANY TO DETERMINE IF THE
19 CERTIFIED CAPITAL COMPANY IS IN COMPLIANCE WITH THIS ACT. THE
20 COST OF THE ANNUAL REVIEW SHALL BE PAID BY EACH CERTIFIED
21 CAPITAL COMPANY ACCORDING TO A REASONABLE FEE SCHEDULE ADOPTED
22 BY THE AUTHORITY.
23 SECTION 11. DISTRIBUTIONS.
24 (A) GENERAL RULE.--A CERTIFIED CAPITAL COMPANY MAY MAKE
25 QUALIFIED DISTRIBUTIONS AT ANY TIME. IN ORDER TO MAKE A
26 DISTRIBUTION FROM CERTIFIED CAPITAL OTHER THAN A QUALIFIED
27 DISTRIBUTION, A CERTIFIED CAPITAL COMPANY MUST HAVE MADE
28 QUALIFIED INVESTMENTS IN AN AMOUNT CUMULATIVELY EQUAL TO AT
29 LEAST 100% OF ITS CERTIFIED CAPITAL. A MINIMUM OF 1/3 OF THE
30 QUALIFIED INVESTMENTS SHALL HAVE BEEN IN QUALIFIED BUSINESSES IN
20030H1359B2157 - 30 -
1 WHICH THE HEADQUARTERS AND AT LEAST 80% OF THE EMPLOYEES OF THE
2 QUALIFIED BUSINESS SHALL HAVE BEEN LOCATED IN THIRD THROUGH
3 EIGHTH CLASS COUNTIES. AT LEAST 25% OF SUCH INVESTMENTS,
4 REGARDLESS OF WHERE THE BUSINESS IS HEADQUARTERED IN THIS
5 COMMONWEALTH AT THE TIME OF INVESTMENT, SHALL HAVE BEEN MADE IN
6 QUALIFIED BUSINESSES THAT WERE EARLY STAGE BUSINESSES AT THE
7 TIME OF INVESTMENT. A CERTIFIED CAPITAL COMPANY MAY MAKE PAYMENT
8 OF PRINCIPAL AND INTEREST ON A QUALIFIED DEBT INSTRUMENT WITHOUT
9 LIMITATION.
10 (B) AUDIT.--ANY PROPOSED DISTRIBUTION FROM A CERTIFIED
11 CAPITAL COMPANY OUT OF CERTIFIED CAPITAL OR PROFITS EARNED
12 THEREON TO ITS CERTIFIED INVESTORS OR EQUITY HOLDERS, OTHER THAN
13 A QUALIFIED DISTRIBUTION OR A PAYMENT OF PRINCIPAL AND INTEREST
14 ON A QUALIFIED DEBT INSTRUMENT MAY BE AUDITED BY A NATIONALLY
15 RECOGNIZED CERTIFIED PUBLIC ACCOUNTING FIRM ACCEPTABLE TO THE
16 AUTHORITY AT THE EXPENSE OF THE CERTIFIED CAPITAL COMPANY IF THE
17 AUTHORITY DIRECTS SUCH AUDIT BE CONDUCTED. IF A CERTIFIED
18 CAPITAL COMPANY MAKES A DISTRIBUTION OTHER THAN A QUALIFIED
19 DISTRIBUTION OR A PAYMENT OF PRINCIPAL AND INTEREST ON A
20 QUALIFIED DEBT INSTRUMENT, THEN THE CERTIFIED CAPITAL COMPANY
21 SHALL PAY TO THE COMMONWEALTH 10% OF SUCH DISTRIBUTION AT THE
22 TIME SUCH CERTIFIED CAPITAL COMPANY MAKES THE PROPOSED
23 DISTRIBUTION UP TO A CUMULATIVE AMOUNT EQUAL TO THE CERTIFIED
24 CAPITAL COMPANY'S CERTIFIED CAPITAL.
25 SECTION 12. DECERTIFICATION.
26 (A) GENERAL RULE.--ANY INTENTIONAL MISSTATEMENT OF MATERIAL
27 FACT IN A CERTIFIED CAPITAL COMPANY'S APPLICATION FOR
28 CERTIFICATION OR ANY MATERIAL VIOLATION OF SECTION 9 OR 11 SHALL
29 BE GROUNDS FOR DECERTIFICATION OF THE CERTIFIED CAPITAL COMPANY
30 SUBJECT TO THE NOTICE AND GRACE PERIOD PROVIDED FOR IN THIS
20030H1359B2157 - 31 -
1 SUBSECTION. IF THE AUTHORITY DETERMINES THAT A CERTIFIED CAPITAL
2 COMPANY INTENTIONALLY MISSTATED A MATERIAL FACT IN ITS
3 APPLICATION FOR CERTIFICATION OR MATERIALLY VIOLATED THE
4 REQUIREMENTS OF SECTION 9 OR 11, THEN IT SHALL INFORM THE
5 OFFICERS OF THE CERTIFIED CAPITAL COMPANY IN WRITING THAT THE
6 CERTIFIED CAPITAL COMPANY MAY BE SUBJECT TO DECERTIFICATION IN
7 30 DAYS FROM THE DATE OF MAILING OF THE NOTICE UNLESS THE
8 DEFICIENCIES ARE CORRECTED AND THE CERTIFIED CAPITAL COMPANY IS
9 AGAIN IN COMPLIANCE WITH ALL REQUIREMENTS FOR CERTIFICATION.
10 (B) CONTINUED NONCOMPLIANCE.--AT THE END OF THE 30-DAY GRACE
11 PERIOD, IF THE CERTIFIED CAPITAL COMPANY IS STILL IN MATERIAL
12 NONCOMPLIANCE WITH SECTION 9 OR 11, THE AUTHORITY MAY SEND A
13 NOTICE OF DECERTIFICATION TO THE CERTIFIED CAPITAL COMPANY AND
14 TO ALL OTHER APPROPRIATE COMMONWEALTH AGENCIES.
15 (C) EFFECT OF DECERTIFICATION.--DECERTIFICATION OF A
16 CERTIFIED CAPITAL COMPANY SHALL CAUSE THE RECAPTURE OF TAX
17 CREDITS PREVIOUSLY CLAIMED AND THE FORFEITURE OF FUTURE TAX
18 CREDITS TO BE CLAIMED BY CERTIFIED INVESTORS WITH RESPECT TO
19 SUCH CERTIFIED CAPITAL COMPANY, AS FOLLOWS:
20 (1) DECERTIFICATION OF A CERTIFIED CAPITAL COMPANY WHICH
21 HAS FAILED TO COMPLY WITH SECTION 9(A)(1) SHALL CAUSE THE
22 RECAPTURE OF ALL TAX CREDITS PREVIOUSLY TAKEN AND THE
23 FORFEITURE OF ALL FUTURE TAX CREDITS TO BE TAKEN BY SUCH
24 CERTIFIED CAPITAL COMPANY'S CERTIFIED INVESTORS.
25 (2) WHEN A CERTIFIED CAPITAL COMPANY MEETS ALL
26 REQUIREMENTS FOR CONTINUED CERTIFICATION UNDER SECTION
27 9(A)(1) AND SUBSEQUENTLY FAILS TO MEET THE REQUIREMENTS FOR
28 CONTINUED CERTIFICATION UNDER THE PROVISIONS OF SECTION
29 9(A)(2), THE FIRST THREE ANNUAL TAX CREDITS WHICH HAVE BEEN
30 OR WILL BE TAKEN BY SUCH CERTIFIED CAPITAL COMPANY'S
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1 CERTIFIED INVESTORS WILL NOT BE SUBJECT TO RECAPTURE OR
2 FORFEITURE, EXCEPT THAT ALL OTHER TAX CREDITS THAT HAVE BEEN
3 OR WILL BE TAKEN BY SUCH CERTIFIED CAPITAL COMPANY'S
4 CERTIFIED INVESTORS SHALL BE SUBJECT TO RECAPTURE OR
5 FORFEITURE.
6 (3) ONCE A CERTIFIED CAPITAL COMPANY HAS MET ALL
7 REQUIREMENTS FOR CONTINUED CERTIFICATION UNDER SECTION
8 9(A)(1) AND (2) AND IS SUBSEQUENTLY DECERTIFIED, THE FIRST
9 FIVE ANNUAL TAX CREDITS WHICH HAVE BEEN OR WILL BE TAKEN BY
10 SUCH CERTIFIED CAPITAL COMPANY'S CERTIFIED INVESTORS WILL NOT
11 BE SUBJECT TO RECAPTURE OR FORFEITURE. SUBSEQUENT TAX CREDITS
12 TO BE TAKEN BY SUCH CERTIFIED CAPITAL COMPANY'S CERTIFIED
13 INVESTORS SHALL BE SUBJECT TO FORFEITURE TO THE EXTENT THEY
14 EXCEED THE AMOUNT OF QUALIFIED INVESTMENTS.
15 (4) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
16 PARAGRAPHS (1), (2) AND (3), ONCE A CERTIFIED CAPITAL COMPANY
17 HAS INVESTED AN AMOUNT CUMULATIVELY EQUAL TO 100% OF ITS
18 CERTIFIED CAPITAL IN QUALIFIED INVESTMENTS, ALL TAX CREDITS
19 WHICH HAVE BEEN OR WILL BE TAKEN BY SUCH CERTIFIED CAPITAL
20 COMPANY'S CERTIFIED INVESTORS SHALL NO LONGER BE SUBJECT TO
21 RECAPTURE OR FORFEITURE.
22 (D) WRITTEN NOTICE.--THE AUTHORITY SHALL SEND WRITTEN NOTICE
23 TO THE ADDRESS OF EACH CERTIFIED INVESTOR WHOSE TAX CREDITS HAVE
24 BEEN SUBJECT TO RECAPTURE OR FORFEITURE AT SUCH CERTIFIED
25 INVESTOR'S ADDRESS SHOWN ON SUCH CERTIFIED INVESTOR'S LAST
26 PREMIUM TAX FILING.
27 (E) END OF REGULATION BY AUTHORITY.--AFTER A CERTIFIED
28 CAPITAL COMPANY HAS INVESTED AN AMOUNT CUMULATIVELY EQUAL TO
29 100% OF ITS CERTIFIED CAPITAL IN QUALIFIED INVESTMENTS, THE
30 CERTIFIED CAPITAL COMPANY SHALL NO LONGER BE SUBJECT TO
20030H1359B2157 - 33 -
1 REGULATION BY THE AUTHORITY EXCEPT FOR THE REQUIREMENTS OF
2 SECTION 11(B).
3 (F) CERTIFICATION.--IF A CERTIFIED CAPITAL COMPANY CERTIFIES
4 TO THE AUTHORITY ITS GOOD FAITH BELIEF THAT IT HAS COMPLIED WITH
5 SECTION 9(A)(2) OR SUBSECTION (E), THEN THE AUTHORITY SHALL,
6 WITHIN 60 DAYS OF RECEIPT OF SUCH CERTIFICATION, CONDUCT A
7 REVIEW OF THE QUALIFIED INVESTMENTS OF THE CERTIFIED CAPITAL
8 COMPANY AND SHALL CERTIFY IN WRITING TO THE CERTIFIED CAPITAL
9 COMPANY WHETHER THE CERTIFIED CAPITAL COMPANY HAS COMPLIED WITH
10 THE PROVISIONS OF SECTION 9(A)(2) OR SUBSECTION (E), AS THE CASE
11 MAY BE. THE CERTIFIED CAPITAL COMPANY SHALL PAY THE COSTS OF THE
12 REVIEW ACCORDING TO A REASONABLE FEE SCHEDULE ADOPTED BY THE
13 AUTHORITY.
14 SECTION 13. TRANSFERABILITY.
15 THE TAX CREDIT EARNED PURSUANT TO THIS ACT MAY BE TRANSFERRED
16 OR SOLD TO ANY OTHER PERSON WITH STATE PREMIUM TAX LIABILITY.
17 ANY SUCH TRANSFER OR SALE SHALL NOT AFFECT THE TIME SCHEDULE FOR
18 TAKING THE TAX CREDIT AS PROVIDED IN THIS ACT. ANY TAX CREDITS
19 RECAPTURED PURSUANT TO SECTION 12 SHALL BE THE LIABILITY OF THE
20 TAXPAYER THAT ACTUALLY CLAIMED THE TAX CREDITS.
21 Section 7 14. Working Capital Loan Guarantee Program. <--
22 (a) Requirements.--The authority shall administer a working
23 capital loan guarantee program. The granting of loan guarantees
24 shall be at the discretion of the authority, in accordance with
25 the following provisions and such further requirements as
26 established by the authority by regulation:
27 (1) The loan guarantee program shall be limited to
28 companies doing business in this Commonwealth QUALIFIED <--
29 BUSINESSES.
30 (2) The loan guarantee program shall be limited to a
20030H1359B2157 - 34 -
1 guarantee of a working capital line of credit in a total
2 amount of $500,000 to $2,000,000, to be advanced to the
3 borrower by a federally or State-chartered bank located in
4 this Commonwealth.
5 (3) The Commonwealth will guaranty a maximum of 25% of <--
6 the loan amount, on a first-in-last-out basis.
7 (4) The guarantee shall be for a maximum of one year. A
8 lender may apply for additional one-year guarantees
9 subsequent to the expiration of the original guarantee.
10 (3) A GUARANTEED LINE OF CREDIT SHALL BE ELIGIBLE FOR A <--
11 GUARANTEE RELATED TAX CREDIT FOR THE LESSER OF 25% OF THE
12 TOTAL LINE OF CREDIT OFFERED TO A QUALIFIED BUSINESS OR THE
13 AMOUNT OUTSTANDING UNDER THE LINE OF CREDIT. INITIAL ADVANCES
14 UNDER THE LINE OF CREDIT FOR QUALIFIED PURPOSES WILL BE FULLY
15 GUARANTEED UNTIL 25% OF THE LINE OF CREDIT IS ADVANCED. THE
16 GUARANTEE SHALL REMAIN IN EFFECT UNTIL THE LINE OF CREDIT IS
17 PAID IN FULL, THE GUARANTEE PERIOD EXPIRES OR THE LENDER
18 CALLS ON THE GUARANTEE.
19 (4) THE GUARANTEE SHALL BE FOR A MAXIMUM OF THREE YEARS.
20 (5) The lender must advance an amount equal to the
21 guaranteed amount of the line of credit to the borrower. The
22 borrower must use this advance to create inventories or
23 receivables which can be used as a collateral base. A <--
24 BORROWER SHALL HAVE THE RIGHT TO DRAW ADDITIONAL AMOUNTS
25 UNDER THE LINE OF CREDIT FOR THE PURPOSE OF CREATING
26 ADDITIONAL INVENTORIES OR RECEIVABLES WHICH CAN BE USED AS A
27 COLLATERAL BASE.
28 (6) The lender must provide additional advances to the
29 borrower, collateralized at 50% of inventory and 85% of
30 receivables, to the maximum amount of the line of credit.
20030H1359B2157 - 35 -
1 (7) The lender must certify that the line of credit
2 would not be extended to the borrower under standard lending
3 practices without the guarantee.
4 (8) The provision of the loan guarantee must bring the
5 loan within prudent lending standards.
6 (9) The loan proceeds may only be used by the borrower
7 for working capital.
8 (10) The authority may charge a fee to the lender, the
9 borrower or both for the loan guarantee.
10 (11) The lender and borrower must comply with any other
11 requirements established by regulation by the authority.
12 (b) Limit on guarantees.--The authority may not provide
13 total outstanding loan guarantees in an amount in excess of
14 $200,000,000.
15 (c) Certification and collection of loan guarantees.--When a
16 borrower defaults on a guaranteed loan, the authority shall
17 certify the amount of any loan guarantee payable to the lender.
18 The amount certified may be taken as a credit against taxes due
19 to the Commonwealth in the tax year the guarantee is payable <--
20 LOSS IS RECOGNIZED. Any guaranteed amount not taken as a tax <--
21 credit in a given tax year may be carried forward to future tax
22 years, UP TO TEN YEARS. LOSS RECOGNITION MUST ARISE IN THE <--
23 ORDINARY COURSE OF THE LENDER'S OPERATIONS AND BE IN ACCORDANCE
24 WITH REGULATORY AND ACCOUNTING GUIDELINES.
25 (d) Procedures and standards.--The authority shall establish
26 by regulation procedures, additional standards, and fees for
27 working capital loan guarantees.
28 Section 8 15. Program priorities. <--
29 When making loans to venture capital companies pursuant to
30 section 5, providing tax credit guarantees to certified capital
20030H1359B2157 - 36 -
1 companies in accordance with section 6 THE PROVISIONS OF THIS <--
2 ACT and providing working capital loan guarantees pursuant to
3 section 7 14, the authority shall give preference to those <--
4 applicants which will provide investments or loans in areas of
5 this Commonwealth which are underserved by existing private
6 venture capital and investment companies.
7 SECTION 16. REGULATIONS. <--
8 THE AUTHORITY SHALL MAKE AND PROMULGATE THE RULES AND ADOPT
9 THE FORMS NECESSARY TO IMPLEMENT THIS ACT WITHIN 150 DAYS OF THE
10 EFFECTIVE DATE OF THIS ACT. THE RULES SHALL PROVIDE THAT THE
11 AUTHORITY SHALL BEGIN ACCEPTING APPLICATIONS FOR CERTIFICATION
12 AS A CERTIFIED CAPITAL COMPANY NOT LATER THAN 180 DAYS AFTER THE
13 EFFECTIVE DATE OF THIS ACT. THE RULES SHALL ALSO PROVIDE THAT
14 THE TAX CREDIT ALLOCATION CLAIM FILING DATE SHALL BE THE FIRST
15 BUSINESS DAY WHICH OCCURS 90 DAYS AFTER THE DATE ON WHICH THE
16 AUTHORITY BEGINS ACCEPTING APPLICATIONS FOR CERTIFICATION.
17 Section 9 17. Appropriation. <--
18 The amount of $200,000,000 is hereby appropriated from the
19 General Fund to the Venture Capital Fund.
20 Section 10 18. Effective date. <--
21 This act shall take effect immediately.
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