AN ACT Relating to business and industrial development corporations; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.16 RCW; adding new sections to chapter 48.14 RCW; adding a new chapter to Title 31 RCW; creating a new section; making appropriations; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. INTENT. The legislature finds that the vitality of the state economy is dependent on the ability of existing, growing, and new firms in the state to generate enough quality employment opportunities for the state's citizens. This task requires the availability of needed capital at the appropriate stage of development for the new firms and growing firms that are the major source of innovations and new jobs in the state. The state has a critical interest in increasing employment opportunities, retaining existing employment, assisting new and growing enterprises, and promoting an environment in which entrepreneurship can flourish. The limited availability of capital to viable firms that do not meet current commercial bank or venture capital criteria for loans or equity investments restricts the state's efforts to pursue these goals. Without access to appropriate and adequate financing at each stage of an enterprise's development, talented entrepreneurs and promising firms are unable to remain competitive or to gain access to the new markets essential for their long-term growth.

The legislature further finds that the availability of capital to finance the expansion of enterprises is particularly crucial for the creation of new employment opportunities. The state has an interest in the accessibility in the state's credit markets of long-term financing and investment involving greater risk than bank financing but promising lower return than venture capital investment. To ensure the availability of capital to permit the expansion of new and growing enterprises in Washington state, the legislature authorizes the creation of business and industrial development corporations which is a new form of regulated financing entity, provides for technical assistance to ensure their soundness, and authorizes incentives for investments in business and industrial development corporations which provide financing in the state, and authorizes greater incentives for investments in business and industrial development corporations which provide financing in economically distressed areas of the state.

NEW SECTION. Sec. 2. DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter:

(1) "Corporation" means a Washington business and industrial development corporation created under this chapter.

(2) "Financial institution" means any banking corporation or trust company, national banking association, savings and loan association, insurance company or related corporation, partnership, foundation, or other institution engaged primarily in lending or investing funds.

(3) "Board of directors" means the board of directors of the corporation created under this chapter.

(4) "Loan limit" means for any financial institution, the maximum amount permitted to be outstanding at one time on loans made by such financial institution to the corporation, as determined under the provisions of this chapter.

(5) "Business" means an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, cooperative, corporation, or any other organization operating in this state, and paying more than fifty percent of its contributions or payments for the purposes of unemployment insurance to this state.

(6) "Associate" means, if used with respect to a corporation:

(a) A controlling person, director, officer, agent, or advisor of that corporation.

(b) A director, officer, or partner of a person referred to in (a) of this subsection.

(c) A person who controls, is controlled by, or is under common control with a person referred to in (a) of this subsection directly or indirectly through one or more intermediaries.

(d) Any close relative of any person referred to in (a) of this subsection.

(e) A person of which a person referred to in (a) through (d) of this subsection is a director or officer.

(f) A person in which a person referred to in (a) through (d) of this subsection, or any combination of those persons acting in concert, owns or controls, directly or indirectly, a twenty percent or greater equity interest.

For the purposes of this subsection (6)(f), a person who is in a relationship referred to in this subsection within six months before or after a corporation provides financing assistance shall be considered to be in that relationship as of the date that corporation provides that financing assistance.

If a corporation, in order to protect its interests, designates a person to serve as a director of, officer of, or in any capacity in the management of a business to which that corporation provides financing assistance, that person shall not, on that account, be considered to have a relationship with that business. This exception does not apply if the person has, directly or indirectly, any other financial interest in the business or if the person, at any time before the corporation provides the financing assistance, served as a director of, officer of, or in any other capacity in the management of the business for a period of thirty days or more.

(7) "Close relative" means a parent, child, sibling, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, or sister-in- law.

NEW SECTION. Sec. 3. FORMATION. Seven or more persons, a majority of whom shall be residents of this state, who may desire to create a business and industrial development corporation under the provisions of this chapter, for the purpose of promoting, developing and advancing the prosperity and economic welfare of the state and, to that end, to exercise the powers and privileges hereinafter provided, may be incorporated by filing in the office of the secretary of state, as hereinafter provided, articles of incorporation. The articles of incorporation shall contain:

(1) The name of the corporation, which shall include the words "Business and Industrial Development Corporation of Washington."

(2) The location of the principal office of the corporation, but such corporation may have offices in such other places within the state as may be fixed by the board of directors.

(3) The purposes for which the corporation is founded, which shall be to provide moderate risk financing and management assistance to businesses operating primarily in Washington state to increase job opportunities for Washington citizens and the prosperity of the state. In furtherance of these purposes, the corporation may provide a range of financing assistance.

(4) The names and post office addresses of the members of the first board of directors, who, unless otherwise provided by the articles of incorporation or the bylaws, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified.

(5) Any provision which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting and regulating the powers of the corporation, the directors, stockholders or any class of the stockholders, including, but not limited to a list of the officers, and provisions governing the issuance of stock certificates to replace lost or destroyed certificates.

(6) The amount of authorized capital stock and the number of shares into which it is divided, the par value of each share and the amount of capital with which it will commence business and, if there is more than one class of stock, a description of the different classes; the names and post office addresses of the subscribers of stock and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of capital with which the corporation shall commence business which shall not be less than two million dollars, except as otherwise provided in this chapter. The articles of incorporation may also contain any provision consistent with the laws of this state for the regulation of the affairs of the corporation.

(7) The articles of incorporation shall be in writing, subscribed by not less than five natural persons competent to contract and acknowledged by each of the subscribers before an officer authorized to take acknowledgments and filed in the office of the secretary of state for approval. A duplicate copy so subscribed and acknowledged may also be filed.

NEW SECTION. Sec. 4. CERTIFICATION. The articles of incorporation shall recite that the corporation is organized under this chapter.

The secretary of state shall not approve articles of incorporation for a corporation organized under this chapter until the state supervisor of banking has certified the corporation as eligible to operate as a business and industrial development corporation under this chapter.

A person transacting business in this state shall not use a name or title which indicates that the person is a business and industrial development corporation including, but not limited to, the use of the term "BIDCO", and shall otherwise represent that the person is a business and industrial development corporation until such time as the person has been certified as a business and industrial development corporation.

A corporation shall be certified by the state supervisor of banking as eligible to operate under this chapter upon meeting the following conditions:

(a) The corporation has paid a three thousand dollar certification fee to the state supervisor of banking;

(b) The corporation has submitted a business plan which includes at least three years of detailed financial projections and other relevant information;

(c) The corporation has provided information about the character and competence of each director and officer of the corporation; and

(d) The supervisor finds that the corporation will be run competently, will be run in accordance with its articles of incorporation, has a net worth and lendable funds sufficient to provide financing assistance, and that the directors and officers of the corporation have agreed to comply with the terms of this chapter. In making the finding under this subsection, the supervisor shall:

(i) Consult with the director of trade and economic development and the director of community development;

(ii) Require a minimum net worth of one and one-half million dollars and an additional one and one-half million dollars in lendable funds or an enforceable pledge for one and one-half million dollars in lendable funds unless the supervisor finds that special circumstances render lesser amounts adequate for the corporation to meet the intent of this chapter and operate according to its business plan.

Whenever the articles of incorporation shall have been filed in the office of the secretary of state and approved by the secretary and all taxes, fees and charges, have been paid, as required by law, the subscribers, their successors and assigns shall constitute a corporation, and said corporation shall then be authorized to commence business, and stock thereof to the extent herein or hereafter duly authorized may from time to time be issued.

NEW SECTION. Sec. 5. TECHNICAL ASSISTANCE TO NEW BIDCOS. The director of trade and economic development is authorized to provide technical assistance and advice to persons forming corporations under this chapter. The director of trade and economic development is authorized to enter into contracts to carry out the purposes of this section. The director of trade and economic development may contract with the department of community development to undertake a portion of the activities necessary to carry out the purposes of this section.

NEW SECTION. Sec. 6. REGULATION BY THE SUPERVISOR OF BANKING. (1) A corporation shall transact its business in a safe and sound manner and shall maintain itself in a safe and sound condition. The supervisor of banking shall revoke the certification of a corporation if the supervisor finds that the corporation has failed to operate or maintain itself in a safe and sound manner or has failed to operate in accordance with its articles of incorporation under section 3(3) of this act, and the corporation may not transact business as a business and industrial development corporation until such time as the supervisor recertifies the corporation consistent with section 4 of this act. The secretary of state shall remove from the active files the incorporation records of a corporation with its certification revoked until such time as the supervisor of banking has recertified the corporation.

(2) In determining whether a corporation is transacting business in a safe and sound manner or has committed an unsafe or unsound act, the supervisor shall consider the risk of a provision of financing assistance to a business firm, within the context of the anticipated higher risks associated with the purposes of corporations organized under this chapter.

(3) Subsection (2) of this section does not limit the authority of the supervisor to:

(a) Determine that a corporation's financing assistance to a single business or group of affiliated firms is in violation of subsection (1) of this section if the amount of that financing assistance is unduly large in relation to the total assets on the total shareholders equity of the corporation.

(b) Require that a corporation maintain a reserve in the amount of anticipated losses.

(c) Require that a corporation have a written financing assistance policy, approved by its board of directors, including credit evaluation and other matters. The supervisor shall not require that a corporation adopt a financing assistance policy that contains standards which prevent the corporation from exercising flexibility in meeting the capital needs of the individual firms.

NEW SECTION. Sec. 7. AUDITS BY SUPERVISOR OF BANKING. The corporation shall be examined at least once every eighteen months by the state supervisor of banking and shall make quarterly reports of its condition to said state supervisor of banking and more frequently upon call of the state supervisor of banking, who in turn shall make copies of such reports available to the state insurance commissioner and the governor; and the corporation shall also furnish such other information as may from time to time be required by the state supervisor of banking and secretary of state. The corporation shall pay the actual cost of said examinations. The state supervisor of banking shall exercise the same power and authority over corporations organized under this chapter as is now exercised over banks and trust companies by the provisions of Title 30 RCW, where the provisions of Title 30 RCW are not in conflict with this chapter. In adopting rules to govern examinations and reports of corporations operating under this chapter, the supervisor of banking shall determine whether or not the corporation is operating within the purposes of the corporation as specified in its articles of incorporation. In making this determination, the supervisor of banking shall consult with the director of trade and economic development and the director of community development or their designee. In regulating corporations under this chapter, the supervisor of banking shall not consider the risk of a provision of financing assistance to a business unless the supervisor determines that the risk is so great compared with the realistically expected return as to constitute gross mismanagement.

The state supervisor of banking shall publish annually and provide to the house trade and economic development committee, house ways and means committee, senate economic development and labor committee and senate ways and means committee information on the impact of this chapter in promoting economic development in Washington. At the minimum, the information shall include aggregate statistics on each of the following:

(1) The number and locations of corporations operating under this chapter;

(2) The number of instances and dollar amount of financing and management assistance given by corporations operating under this chapter to:

(a) All individual businesses assisted;

(b) Types of businesses classified using the standard industrial classification manual;

(d) Businesses located in areas of high unemployment;

(3) The number of jobs created or retained by:

(a) All individual businesses assisted;

(b) Types of businesses classified using the standard industrial classification manual;

(d) Businesses located in areas of high unemployment;

(4) The percentage of each business's total contributions or payments for unemployment insurance made to the state of Washington.

NEW SECTION. Sec. 8. POWERS. The business of a corporation shall be to provide financing and management assistance to businesses operating primarily in Washington state. In furtherance of its business and in addition to the powers now or hereafter conferred on business corporations by the provisions of Title 23A RCW, each corporation shall, subject to the restrictions and limitations herein contained, have the following powers:

(1) To elect, appoint and employ officers, agents and employees; to make contracts and incur liabilities for any of the purposes of the corporation.

(2) To borrow money for any of the purposes of the corporation; to issue therefor its bonds, debentures, notes or other evidence of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust or other lien on its property, franchises, rights and privileges of every kind and nature or any part thereof or interest therein, without securing stockholder approval.

(3) To make loans to any person, firm, corporation, joint-stock company, association or trust, and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and service connected therewith.

(4) To purchase, receive, hold, lease, or otherwise acquire, and to sell, convey, transfer, lease or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, if the real or personal property is for the corporation's use in operating its business, or if the real or personal property is acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations.

(5) To determine the form and the terms and conditions for financing assistance provided by the corporation to a business including, but not limited to forms such as loans; purchase of debt instruments; straight equity investments, such as purchase of common stock or preferred stock; debt with equity features such as warrants to purchase stock, convertible debentures, or receipt of a percent of net income or sales; royalty based financing; guaranteeing of debt; or leasing of property. A corporation may purchase securities of a business either directly or indirectly through an underwriter. A corporation may participate in the program of the small business administration pursuant to section 7(a) of the small business act, (Public Law 85-536, 15 U.S.C. Sec. 636(a)), or any other government program for which the corporation is eligible and which has as its function the provision or facilitation of financing or management assistance to businesses. If a corporation participates in a program referred to in this section, the corporation shall comply with the requirements of that program. Financing assistance provided by a corporation to a business shall be for the business purposes of that business.

(6) To provide management assistance to a business which may encompass both management or technical advice and management or technical services. Management assistance provided by a corporation to a business shall be for the business purposes of that business.

(7) To mortgage, pledge, or otherwise encumber any property, right or things of value, acquired pursuant to the powers contained in subsection (4) or (5) of this section, as security for the payment of any part of the purchase price thereof.

(8) To cooperate with and avail itself of the facilities of the United States department of commerce, the department of trade and economic development, the department of community development, and any other similar state or federal governmental agencies; and to cooperate with and assist, and otherwise encourage organizations in the various communities of the state in the promotion, assistance and development of the business prosperity and economic welfare of such communities or of this state or of any part thereof.

(9) To make donations for charitable educational, research, or similar purposes.

(10) To do all acts and things necessary or convenient to carry out the powers expressly granted in this chapter.

NEW SECTION. Sec. 9. RIGHTS REGARDING BIDCO SHARES. Notwithstanding any rule at common law or any provision of any general or special law or any provision in their respective charters, agreements of association, articles of organization or trust indentures:

Any person including all domestic corporations organized for the purpose of carrying on business within this state and further including without implied limitation public utility companies and insurance companies, and foreign corporations licensed to do business within this state, and all financial institutions as defined herein, and all trustees, are hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of any bonds, securities or other evidences of indebtedness created by, or the shares of the capital stock of, the corporation, and while owners of said stock to exercise all the rights, powers and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state except as otherwise provided in this chapter.

The amount of capital stock of the corporation which any financial institution is authorized to acquire pursuant to the authority granted herein is in addition to the amount of capital stock in corporations which such financial institution may otherwise be authorized to acquire.

NEW SECTION. Sec. 10. BIDCO SHAREHOLDER POWERS. The stockholders of the corporation shall have the following powers of the corporation:

(1) To determine the number of and elect directors as provided in section 12 of this act;

(2) To make, amend and repeal bylaws;

(3) To amend this charter as provided in section 11 of this act;

(4) To dissolve the corporation as provided in section 15 of this act;

(5) To do all things necessary or desirable to secure aid, assistance, loans and other financing from any financial institutions, and from any agency established under the small business investment act of 1958, Public Law 85-699, 85th Congress, or other similar federal laws now or hereafter enacted.

(6) To exercise such other of the powers of the corporation consistent with this chapter as may be conferred on the stockholders by the bylaws.

As to all matters requiring action by the stockholders of the corporation, said stockholders shall vote separately thereon by classes, and, except as otherwise herein provided, such matters shall require the affirmative vote of a majority of the votes to which the stockholders present or represented at the meeting shall be entitled.

Stockholders shall have one vote, in person or by proxy, for each share of capital stock held.

NEW SECTION. Sec. 11. AMENDING ARTICLES OF INCORPORATION. The articles of incorporation may be amended by the votes of the stockholders, voting separately by classes, and such amendments shall require approval by the affirmative vote of two-thirds of the votes to which the stockholders shall be entitled: PROVIDED, That no amendment of the articles of incorporation which is inconsistent with the general purposes expressed herein or which authorizes any additional class of capital stock to be issued, or which eliminates or curtails the right of the state supervisor of banking to examine the corporation or the obligation of the corporation to make reports as provided in section 7 of this act, shall be made.

Within thirty days after any meeting at which an amendment of the articles of incorporation has been adopted, articles of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth such amendment and due adoption thereof, shall be submitted to the secretary of state, who shall examine them and if the secretary finds that they conform to the requirements of this chapter, shall so certify and endorse his or her approval thereon. Thereupon, the articles of amendment shall be filed in the office of the secretary of state and no such amendment shall take effect until such articles of amendment shall have been filed as aforesaid.

NEW SECTION. Sec. 12. BOARD OF DIRECTORS. The business and affairs of the corporation shall be managed and conducted by a board of directors, a president, a vice president, a secretary, a treasurer, and such other officers and such agents as the corporation by its bylaws shall authorize. The board of directors shall consist of such number, not less than seven nor more than twenty-one, as shall be determined in the first instance by the incorporators and thereafter annually by the stockholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the stockholders and shall choose and appoint all the agents and officers of the corporation and fill all vacancies except vacancies in the office of director which shall be filled as hereinafter provided. The board of directors shall be elected in the first instance by the incorporators and thereafter at the annual meeting, the day and month of which shall be established by the bylaws of the corporations, or, if no annual meeting shall be held in the year of incorporation, then within ninety days after the approval of the articles of incorporation at a special meeting as hereinafter provided. The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after the election and until their successors are elected and qualified unless sooner removed in accordance with the provisions of the bylaws. Any vacancy in the office of a director shall be filled by the directors.

Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the wilful misconduct of such directors and officers.

NEW SECTION. Sec. 13. FIRST CORPORATE MEETING. The first meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place and purpose of the meeting, a copy of which notice shall be mailed, or delivered, to each incorporator at least five days before the day appointed for the meeting. Said first meeting may be held without such notice upon agreement in writing to that effect signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of said notice or of such unanimous agreement of the incorporators.

At such first meeting, the incorporators shall organize by the choice, by ballot, of a temporary clerk; by the adoption of bylaws, by the election by ballot of directors; and by action upon such other matters within the powers of the corporation as the incorporators may see fit. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. Five of the incorporators shall be a quorum for the transaction of business.

NEW SECTION. Sec. 14. TERM OF BIDCO. Unless otherwise provided in the articles of incorporation, the period of duration of the corporation shall be perpetual, subject, however, to the right of the stockholders to dissolve the corporation prior to the expiration of that period as provided in section 15 of this act.

NEW SECTION. Sec. 15. DISSOLUTION OF CORPORATION. The corporation may upon the affirmative vote of two-thirds of the votes to which the stockholders shall be entitled dissolve the corporation as provided by Title 23A RCW, insofar as Title 23A RCW is not in conflict with the provisions of this chapter. Six months' advance notice of such dissolution must be provided to the supervisor of banking before dissolution takes effect. Upon any dissolution of the corporation, none of the corporation's assets shall be distributed to the stockholders until all sums due the creditors of the corporation have been paid in full.

NEW SECTION. Sec. 16. A new section is added to chapter 82.04 RCW to read as follows:

BUSINESS AND OCCUPATION TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 1 through 15 and 22 through 25 of this act). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl25%

!tl1991!tl20%

!tl1992!tl15%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(3) Credits allowed under this section to any taxpayer shall not exceed the tax otherwise payable under this chapter by the taxpayer for that fiscal year. Any excess credit shall not be carried over to succeeding years.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 17, 18, 19, 20, or 21 of this act.

(5) Any taxpayer receiving a credit under this section who withdraws all or part of the investment on which the credit was based within three years shall repay the credit in proportion to the withdrawal as provided in section 22 of this act.

NEW SECTION. Sec. 17. A new section is added to chapter 82.16 RCW to read as follows:

PUBLIC UTILITY TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 1 through 15 and 22 through 25 of this act). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl25%

!tl1991!tl20%

!tl1992!tl15%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 16, 18, 19, 20, or 21 of this act.

NEW SECTION. Sec. 18. A new section is added to chapter 48.14 RCW to read as follows:

INSURANCE PREMIUM TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 1 through 15 and 22 through 25 of this act). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl25%

!tl1991!tl20%

!tl1992!tl15%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 16, 17, 19, 20, or 21 of this act.

NEW SECTION. Sec. 19. A new section is added to chapter 82.04 RCW to read as follows:

BUSINESS AND OCCUPATION TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 1 through 15 and 22 through 25 of this act) with at least one-half of the corporation's loans and investments made to businesses located in distressed areas as defined in RCW 82.60.020(3). The amount of allowable credit in each such year shall be as follows:

!tp1,2,2,3 !tl@beFIS!ttCAL!sc ,1YEAR@ee!tj1!tl@beAMOUNT!tt!sc ,1INVESTED@ee

!tl1990!tl35%

!tl1991!tl30%

!tl1992!tl25%

!tl1993!tl!sc ,0010%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 16, 17, 18, 20, or 21 of this act.

NEW SECTION. Sec. 20. A new section is added to chapter 82.16 RCW to read as follows:

PUBLIC UTILITY TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 1 through 15 and 22 through 25 of this act) with at least one-half of the corporation's loans and investments made to businesses located in distressed areas as defined in RCW 82.60.020(3). The amount of allowable credit in each such year shall be as follows:

!tp1,2,2,3 !tl@beFIS!ttCAL!sc ,1YEAR@ee!tj1!tl@beAMOUNT!tt!sc ,1INVESTED@ee

!tl1990!tl35%

!tl1991!tl30%

!tl1992!tl25%

!tl1993!tl!sc ,0010%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 16, 17, 18, 19, or 21 of this act.

NEW SECTION. Sec. 21. A new section is added to chapter 48.14 RCW to read as follows:

INSURANCE PREMIUM TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 1 through 15 and 22 through 25 of this act) with at least one-half of the corporation's loans and investments made to businesses located in distressed areas as defined in RCW 82.60.020(3). The amount of allowable credit in each such year shall be as follows:

!tp1,2,2,3 !tl@beFIS!ttCAL!sc ,1YEAR@ee!tj1!tl@beAMOUNT!tt!sc ,1INVESTED@ee

!tl1990!tl35%

!tl1991!tl30%

!tl1992!tl25%

!tl1993!tl!sc ,0010%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 16, 17, 18, 19, or 20 of this act.

NEW SECTION. Sec. 22. WITHDRAWAL OF INVESTMENTS. (1) Investors that take advantage of the tax credits allowed under sections 16 through 21 of this act, and that withdraw within the first three years of their investment any funds invested in a corporation governed by this chapter, shall be obligated to return to the state treasury a portion of the tax credit granted, with interest, which is equal in proportion to the amount the withdrawn funds represent relative to the total funds invested by the investor.

(2) Any corporation which loses its certification shall be obligated to pay to the state treasurer an amount equal to any tax credits taken by investors in such corporation within three years preceding the loss of certification. Such payment shall be made within eighteen months of the loss of certification unless the corporation is recertified within that time. The obligation to pay the state treasurer created by this section shall be a lien on the assets and capital of a corporation losing its certification and shall have priority over any other liens or security interests.

NEW SECTION. Sec. 23. The department of revenue shall keep a running total of all credits granted under sections 16 through 21 of this act during each fiscal biennium. The department of revenue shall not allow any credits which would cause the tabulation for the biennium beginning July 1, 1989, to exceed two and one-half million dollars, nor to exceed one million dollars for the period from July 1, 1991, through June 30, 1992.

NEW SECTION. Sec. 24. RESTRICTIONS ON BIDCO FINANCIAL ASSISTANCE. (1) A corporation shall not provide, directly or indirectly, financing assistance to:

(a) An associate of the corporation;

(b) Discharge, or to free other money for use in discharging, in whole or in part, an obligation to an associate of that corporation. This section does not apply to a transaction effected by an associate of a corporation in the normal course of that associate's business involving a line of credit or short-term financing assistance.

(c) A business to which an associate of that corporation provides financing assistance, either contemporaneously with, or within one year before or after, the providing of financing assistance by the corporation, if the terms on which the corporation provides financing assistance are less favorable to the corporation than the terms on which the associate provides financing assistance to the business. If the financing assistance provided by the associate of the corporation is of a different kind from the financing assistance provided by the corporation, the burden shall be on the corporation to prove that the terms on which the corporation provided financing assistance were at least as favorable to the corporation as the terms on which the associate provided financing assistance to the business.

This subsection (1)(c) does not apply to any of the following:

(i) If the associate is a controlling person of the corporation and is also the only shareholder of the corporation;

(ii) If the associate is a subsidiary of the corporation; or

(iii) A transaction effected by an associate of a corporation in the normal course of that associate's business involving a line of credit or short-term financing assistance.

(2) For the purposes of this section and section 25 of this act:

(a) "Person" means an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, cooperative, government, agency of a government, or any other organization. If used with respect to acquiring control of or controlling a specified person, person includes a combination of two or more persons acting in concert;

(b) "Control" means, if used with respect to a specified person, the power to direct or cause the direction of, directly or indirectly through one or more intermediaries, the management and policies of that specified person, whether through the ownership of voting securities; by contract, other than a commercial contract for goods or nonmanagement services; or otherwise. A natural person shall not be considered to control a person solely on account of being a director, officer, or employee of that person. A person who, directly or indirectly, owns of record or beneficially holds with power to vote, or holds proxies with discretionary authority to vote, twenty percent or more of the then outstanding voting securities issued by a corporation shall be rebuttably presumed to control that corporation; and

(c) "Controlling person" means, if used with respect to a specified person, a person who controls that specified person, directly or indirectly through one or more intermediaries.

NEW SECTION. Sec. 25. RESTRICTIONS ON BENEFITS. An associate of a corporation shall not receive, directly or indirectly, from a person to whom that corporation provides financing assistance, compensation in connection with the providing of that financing assistance or anything of value for procuring, influencing, or attempting to procure or influence the corporation's action with respect to the providing of the financing assistance. This section does not apply to the receipt of fees by an associate of a corporation for bona fide closing services performed by that associate if all of the following are true:

(1) The associate, with the consent and knowledge of the person to whom the financing assistance is provided, is designated by the corporation to perform the services;

(2) The services are appropriate and necessary in the circumstances;

(3) The fees for the services are approved as reasonable by the corporation; and

(4) The fees for the services are collected by the corporation on behalf of the associate.

NEW SECTION. Sec. 26. Captions as used in this act shall constitute no part of the law.

NEW SECTION. Sec. 27. APPROPRIATIONS. (1) The sum of forty-five thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1989, from the general fund to the department of general administration for the purposes of this act.

(2) The sum of fifty-five thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1989, from the general fund to the department of trade and economic development for the purposes of this act.

NEW SECTION. Sec. 28. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 29. This act shall take effect on July 1, 1988, and shall be effective for taxes imposed July 1, 1989, and thereafter.

NEW SECTION. Sec. 30. Sections 1 through 15 and 22 through 25 of this act shall constitute a new chapter in Title 31 RCW.