BILL REQ. #: H-2459.1
| State of Washington | 60th Legislature | 2007 Regular Session |
READ FIRST TIME 2/28/07.
AN ACT Relating to the creation of certified capital companies to promote economic development through investment in start-up and emerging Washington businesses; amending RCW 48.13.240; adding a new section to chapter 48.14 RCW; adding a new chapter to Title 43 RCW; creating a new section; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 (1) Washington has many world class
companies within its borders producing family wage jobs and benefits.
Growing and retaining small businesses that are currently located
within the state are the most expedient forms of economic development.
Small businesses employ over fifty percent of nonfarm private sector
employees in the state, and are an important source of new job
creation. Washington continues to be home to entrepreneurs and
innovative technologies. However, according to the United States small
business administration, only two-thirds of small businesses are still
operating after three years. The future success and development of
many of the state's emerging businesses depends on access to capital.
(2) The legislature finds that new sources of prudently targeted
private equity investments would promote economic development by
strengthening the local venture capital infrastructure, increasing
access to capital for local companies, supporting emerging businesses,
and creating jobs for Washington citizens. Targeted venture capital
has the potential to hasten the transformation of research and
development concepts into commercially viable products and services,
expedite the expansion of small Washington firms, enlarge the state's
tax base, and develop these businesses into significant contributors to
the Washington economy. This act is intended to assist small start-up
enterprises to succeed in their business and to contribute to the
future of Washington.
NEW SECTION. Sec. 2
(1) "Affiliate" shall have the meaning set forth in RCW 48.31B.005
and 48.31C.010.
(2) "Allocation date" means the date on which the certified capital
is allocated by the department to the investors of a certified capital
company under section 6 of this act.
(3) "Certified capital" means an amount of cash that:
(a) Is invested by a certified investor in a certified capital
company; and
(b) Fully funds the purchase price of a qualified debt instrument
issued by the certified capital company.
(4) "Certified capital company" means a partnership, corporation,
trust, or limited liability company, organized on a for-profit basis,
that: (a) Has its principal office located or is headquartered in
Washington; (b) has as its primary business activity the investment of
cash in qualified businesses; and (c) is certified by the department as
meeting the provisions of this act.
(5) "Certified investor" means any insurer as defined in RCW
48.01.050 that invests certified capital pursuant to an allocation by
the department under section 6 of this act.
(6) "Department" means the department of financial institutions.
(7) "Director" means the director of the department of financial
institutions.
(8) "Person" means any natural person or entity, including but not
limited to a corporation, general or limited partnership, trust, or
limited liability company.
(9)(a) "Qualified business" means a business that is independently
owned and operated and meets the requirements of (a)(i) through (vi) of
this subsection:
(i) It is headquartered in Washington, its principal business
operations are located in Washington, and at least fifty percent of its
employees are in Washington;
(ii) That has no more than one hundred employees;
(iii) It is unable to obtain conventional financing, which means
that the business has failed in an attempt to obtain funding for a loan
from a bank or other commercial lender, or that the business cannot
reasonably be expected to qualify for such financing under the
standards of commercial lending;
(iv) Is not predominantly engaged in: (A) Professional services
provided by accountants, doctors, or lawyers; (B) banking or lending;
(C) real estate development; (D) insurance; (E) oil and gas
exploration; (F) direct gambling activities; (G) making loans to or
investments in a certified capital company or an affiliate;
(v) Is not a franchise of and has not been organized by a certified
capital company or an affiliate of a certified capital company; and has
no financial relationship with the certified capital company or any
affiliate of the certified capital company prior to the certified
capital company's first qualified investment in the business and will
not have any such relationship after the initial qualified investment
other than as created by that investment and any subsequent investments
in the business made by the certified capital company or its
affiliates;
(vi) Any business that is classified as a qualified business at the
time of the first qualified investment in the business shall remain
classified as a qualified business, may receive continuing qualified
investments from any certified capital company, and such continuing
investments shall be qualified investments even though the business may
not meet the definition of a qualified business at the time of such
continuing investments; except the business shall not be eligible to
receive further qualified investments if:
(A) It has relocated its headquarters or principal business
operations outside of Washington; or
(B) Less than seventy-five percent of the funds expended from its
prior qualified investments have been used to establish and support its
Washington operations, except for advertising, promotions, and sales
purposes, which may be conducted outside of Washington.
(b) A qualified business shall also include a qualified
microenterprise development organization that also meets the
requirements of (a)(v) of this subsection.
(c) An entity shall be considered "independently owned and
operated" unless more than fifty percent of the entity's equity
interests are owned directly or indirectly by another business entity
except if such other business entity itself meets the requirements of
being a qualified business.
(10) "Qualified debt instrument" means a debt instrument issued by
a certified capital company, at par value or a premium, with an
original maturity date of at least five years from the date of
issuance, a repayment schedule which is not faster than a level
principal amortization over five years, and interest, distribution, or
payment features which are not related to the profitability of the
certified capital company or the performance of the certified capital
company's investment portfolio. In addition, the qualified debt
instrument shall not allow for the cash prepayment of interest on the
debt instrument unless the qualified debt instrument or the issuer
thereof is in default with respect to the terms of the investment and
must be rated within the highest rating category of the securities
valuation office of the national association of insurance
commissioners.
(11) "Qualified distribution" means any distribution or payment by
a certified capital company in connection with the following, provided
that no distribution or payment permitted by (a) or (b) of this
subsection be made to a certified investor or an affiliate of a
certified investor:
(a) Reasonable costs and expenses of forming, syndicating, and
organizing the certified capital company, including reasonable and
necessary fees paid for professional services, including, but not
limited to, legal and accounting services, related to the formation of
the certified capital company, and the costs of financing and insuring
the obligations of the certified capital company so long as, at the
time the certified capital company initially receives its investment of
certified capital from its certified investors, the certified capital
company has cash equal to at least fifty percent of the amount of
certified capital such certified capital company initially received as
investment from its certified investors;
(b) Reasonable costs and expenses of managing and operating the
certified capital company, including any management fee, which in the
aggregate must not exceed two percent of certified capital.
(c) Reasonable and necessary fees in accordance with industry
custom for professional services, including but not limited to legal
and accounting services, related to the operation of the certified
capital company; except that such professional services shall not be
construed to include lobbying or governmental relations;
(d) Any increase or projected increase in federal or state taxes,
including penalties and related interest, of the equity owners of a
certified capital company resulting from the earnings or other tax
liability of the certified capital company to the extent that the
increase is related to the ownership, management, or operation of a
certified capital company;
(e) Payments to debt holders of a certified capital company may be
made without restriction with respect to repayments of principal and
interest on indebtedness owed to them by a certified capital company,
including indebtedness of the certified capital company on which
certified investors earned tax credits: PROVIDED, That no more than
fifty percent of a certified capital company's certified capital may be
used to purchase United States treasury securities, other investment
grade securities, a guaranty, indemnity, bond, insurance policy or
other payment undertaking, or combination thereof: PROVIDED FURTHER,
That nothing in this subsection shall be construed to limit a certified
capital company or its affiliates from expending noncertified capital
for such instruments or in satisfaction of indebtedness to its
certified investors. A debt holder that is also a certified investor
or equity holder of a certified capital company may receive payments
with respect to such debt without any restriction whatsoever.
(12) "Qualified investment" means the investment of cash by a
certified capital company in a qualified business or a qualified
microenterprise development organization for the purchase of any debt,
debt participation, equity, or hybrid security, of any nature and
description whatsoever, including a debt instrument or security which
has the characteristics of debt but which provides for conversion into
equity or equity participation instruments such as options or warrants.
Any qualified investment in the form of a debt instrument, including
those owned through debt participations, must have a final stated
maturity of at least two years from the date of issuance and a
repayment schedule that is no faster than level principal amortization
over two years, however, this does not prohibit (a) the qualified
business from voluntarily prepaying a qualified investment at any time;
or (b) the certified capital company from exercising any of its rights
as a creditor, including the acceleration of the debt owed upon a
default by the qualified business under the terms of the debt
instrument or upon the acquisition, merger, or the sale of all or
substantially all of the assets of the qualified business. With
respect to an investment in a qualified microenterprise development
organization, a certified capital company may only make such investment
after the structure, terms, conditions and use of proceeds of such
investment has been approved by the department.
(13) "Qualified microenterprise development organization" means a
community development corporation or a nonprofit development
organization that has filed a certification with the department that:
(a) The organization is headquartered in Washington;
(b) The organization or its principals have a minimum of two years'
experience in providing access to capital and business education
services to entrepreneurs who are economically disadvantaged; and
(c) Capital investments from the certified capital company will
only be used to provide for the capital needs of businesses licensed in
Washington.
(14) "State premium tax liability" means any liability incurred by
an insurance company under the provisions of RCW 48.14.020 or in the
case of a repeal or a reduction by the state of the liability imposed
by RCW 48.14.020, any other tax liability imposed upon an insurance
company by the state.
NEW SECTION. Sec. 3 A new section is added to chapter 48.14 RCW
to read as follows:
(a) Year 2010 - Ten percent of the certified investor's investment
of certified capital.
(b) Year 2011 - Ten percent of the certified investor's investment
of certified capital.
(c) Year 2012 - Ten percent of the certified investor's investment
of certified capital.
(d) Year 2013 - Ten percent of the certified investor's investment
of certified capital.
(e) Year 2014 - Ten percent of the certified investor's investment
of certified capital.
(f) Year 2016 - Ten percent of the certified investor's investment
of certified capital.
(g) Year 2017 - Ten percent of the certified investor's investment
of certified capital.
(h) Year 2018 - Ten percent of the certified investor's investment
of certified capital.
In any tax year, a certified investor shall also be entitled to
take any amount of unused tax credits carried forward pursuant to this
section. Credits may be used in connection with both final payments
and prepayments of a certified investor's state premium tax liability
but may not be used in connection with prepayments until the first
prepayment of its 2010 state premium tax liability due on June 15,
2010.
(2) A certified investor taking the credit under this section is
subject to all the requirements of chapter 82.32 RCW. The tax credit
that may be applied against state premium tax liability in any one tax
year may not exceed the state premium tax liability of the certified
investor for such tax year. All unused tax credits against state
premium tax liability may be carried forward indefinitely and used in
any subsequent year until the tax credits are utilized in full. The
investment made by a certified investor under this section shall
constitute an investment authorized by chapter 48.13 RCW and shall be
subject to RCW 48.13.240.
(3) A certified investor claiming a tax credit against state
premium tax liability earned through an investment in a certified
capital company shall not be required to pay any additional retaliatory
tax levied pursuant to RCW 48.14.040 as a result of claiming that tax
credit.
(4) A certified investor is not required to reduce the amount of
tax pursuant to the state premium tax liability included by the
certified investor in connection with ratemaking for any insurance
contract written in Washington because of a reduction in the certified
investor's tax liability based on the tax credit allowed under this
act.
(5) If the taxes paid by a certified investor with respect to its
state premium tax liability constitute a credit against any other tax
which is imposed by Washington, the certified investor's credit against
such other tax shall not be reduced by virtue of the reduction in the
certified investor's tax liability based on the tax credit allowed
under this act.
(6) Decertification of a certified capital company shall cause the
disallowance and the recapture of the credit allowed under subsection
(1) of this section. The amount to be disallowed and recaptured shall
be assessed as follows:
(a) Decertification of a certified capital company within two years
of its allocation date and prior to meeting the requirements of section
7(1)(a) of this act shall cause the disallowance of one hundred percent
of the credit allowed under subsection (1) of this section and the tax
for which the credit was used shall be immediately due.
(b) Decertification of a certified capital company that has met all
the requirements of section 7(1)(a) of this act but that subsequently
fails to meet the requirements of section 7(1)(b) of this act shall
cause the disallowance of seventy percent of the credit allowed under
subsection (1) of this section and any portion of such credit in excess
of thirty percent that was previously taken shall be immediately due.
(c) Decertification of a certified capital company which, having
met all the requirements of section 7(1) of this act, shall not cause
the disallowance of any credits allowed under subsection (1) of this
section nor the recapture of any portion of such credits that was
previously taken.
(d) If, after twelve years after its allocation date, a certified
capital company has failed to invest at least one hundred percent, on
a cumulative basis, of its certified capital in qualified investments,
the percentage of distributions that the certified capital company
shall be required to pay to the department under section 9(3) of this
act shall increase prospectively to fifty percent.
(7) Revocation of certification from a certified capital company,
before the later of (a) the third anniversary of the allocation date of
the certified capital company or (b) the date on which the certified
capital company satisfies the requirements of section 7(1)(b) of this
act, shall cause the disallowance of one hundred percent of the credits
allowed under subsection (1) of this section and the tax for which the
credit was given is immediately due.
(8) A certified investor, or subsequent transferee, may only
transfer credits earned under this act to an affiliate unless the state
premium tax liability of the certified investor in the year immediately
preceding the proposed transfer is less than seventy-five percent of
the certified investor's state premium tax liability for the tax year
in which it earned the vested premium tax credit. No certified
investor may make more than one transfer in any calendar year. Any
transfer or sale shall not affect the time schedule for claiming the
premium tax credits. Any tax credits recaptured under this section
shall be the liability of the certified investor that actually claimed
the premium tax credits. Each certified capital company shall track
and report all transfers of tax credits using a form approved by the
insurance commissioner that ensures the proper collection of premium
taxes.
Sec. 4 RCW 48.13.240 and 2004 c 88 s 1 are each amended to read
as follows:
(1) An insurer may loan or invest its funds in an aggregate amount
not exceeding the lesser of the following sums: Ten percent of its
assets, or fifty percent of its surplus over its capital and other
liabilities, or if a mutual or reciprocal insurer fifty percent of its
surplus over minimum required surplus, in loans or investments not
otherwise eligible for investment, including qualified debt instruments
as defined in section 2 of this act, and not specifically prohibited by
RCW 48.13.270.
(2) No such loan or investment shall be any item described in RCW
48.12.020.
(3) No such investment in or loan upon the security of any one
person or entity shall exceed the amount specified in subsection (1) of
this section or one percent of the insurer's assets, whichever is the
lesser, except that an investment in a limited liability company formed
under chapter 25.15 RCW to develop real property owned by the insurer
as permitted by RCW 48.13.160 shall not exceed the lesser of the amount
specified in subsection (1) of this section or four percent of the
insurer's assets. This subsection (3) shall not apply to an investment
in the stock of a subsidiary company.
(4) The insurer shall keep a separate record of all investments
acquired under this section.
NEW SECTION. Sec. 5
(2) An applicant is required to:
(a) File an application with the department;
(b) Pay a nonrefundable application fee in the amount of twenty
thousand dollars as described in section 14 of this act at the time of
filing the application, which the department shall deposit in the
certified capital company revolving fund;
(c) Have an equity capitalization at the time of seeking
certification of five hundred thousand dollars or more in the form of
unencumbered cash, marketable securities, or other liquid assets. The
applicant shall submit as part of its application an audited balance
sheet that contains an unqualified opinion of an independent certified
public accountant issued not more than thirty-five days before the
application date that states whether the applicant satisfies this
equity capitalization requirement; and
(d) Have at least two principals or at least two persons employed
to manage the funds who have at least two years of money management
experience in the venture capital industry or two years of experience
in private equity fund management.
(3) The department may certify partnerships, corporations, trusts,
or limited liability companies, organized on a for-profit basis, which
submit an application to be designated as a certified capital company
if such applicant is located, headquartered, and licensed or registered
to conduct business in Washington, has as its primary business activity
the investment of cash in qualified businesses and qualified
microenterprise development organizations, and meets the other criteria
set forth in this act.
(4) The department shall review the organizational documents of
each applicant for certification and the business history of each
applicant, determine that the applicant has satisfied the requirements
of this section, and determine that the officers and the board of
directors, general partners, managers, or members are thoroughly
acquainted with the requirements of this section, and have not been
convicted of, or entered a plea of guilty or nolo contendere to, a
crime against the laws of Washington or any other state or of the
United States or any other country or government, involving a
fraudulent act in connection with the operation of a certified capital
company, or in connection with the performance of fiduciary duties in
another capacity.
(5) Any offering material involving the sale of securities of the
certified capital company shall include the following statement:
"By authorizing the formation of a certified capital company, the
state does not necessarily endorse the quality of management or the
potential for earnings of such company and is not liable for damages or
losses to a certified investor in the company. Use of the word
"certified" in an offering does not constitute a recommendation or
endorsement of the investment by the director of the department of
community, trade, and economic development. If any applicable
provisions of the "certified capital company act" are violated, the
state may require forfeiture of unused premium tax credits and
repayment of used premium tax credits."
(6) Within sixty days after the receipt of an application, the
department shall issue the certification or refuse the certification
and communicate in detail to the applicant the grounds for refusal,
including suggestions for the removal of such grounds. The department
shall begin accepting applications to become a certified capital
company in the certified capital company program on January 30, 2008.
(7)(a) No insurance company or affiliate of an insurance company
shall, directly or indirectly:
(i) Beneficially own, whether through rights, options, convertible
interests, or otherwise, fifteen percent or more of the voting
securities or other voting ownership interest of a certified capital
company;
(ii) Manage a certified capital company; or
(iii) Control the direction of investments for a certified capital
company.
(b) A certified capital company may obtain one or more guaranties,
indemnities, bonds, insurance policies, or other payment undertakings
for the benefit of its certified investors from any entity; except that
in no case shall more than one certified investor of such certified
capital company on an aggregate basis with all affiliates of such
certified investor be entitled to provide such guaranties, indemnities,
bonds, insurance policies, or other payment undertakings in favor of
the certified investors of the certified capital company and its
affiliates in Washington.
(c) This subsection shall not preclude a certified investor,
insurance company, or other party from exercising its legal rights and
remedies, including, without limitation, interim management of a
certified capital company, in the event that a certified capital
company is in default of its statutory obligations or its contractual
obligations to such certified investor, insurance company, or other
party, or from monitoring the certified capital company to ensure its
compliance with section 7 of this act or disallowing any investments
that have not been approved by the department under section 7(2) of
this act.
(8) The department may contract with an independent third party to
review, investigate, and certify that the applications comply with the
provisions of this section.
NEW SECTION. Sec. 6
(2) Tax credits shall be allocated to certified investors in the
order that the tax credit allocation claims are filed with the
department. All tax credit allocation claims filed with the department
on the same day shall be treated as having been filed
contemporaneously. Any tax credit allocation claims filed with the
department prior to the tax credit allocation claim filing date will be
deemed to have been filed on the tax credit allocation claim filing
date. The department will set the initial tax credit allocation claim
filing date to be ninety days after the department begins to accept
applications under section 5 of this act.
(3) In the event that two or more certified capital companies file
tax credit allocation claims with the department on behalf of their
respective certified investors on the same day, and the aggregate
amount of such tax credit allocation claims exceeds the aggregate limit
of tax credits under this section or such lesser amount of tax credits
that remain unallocated on such day, then the tax credits shall be
allocated among the certified investors who filed on that day on a pro
rata basis with respect to the amounts claimed. The pro rata
allocation for any one certified investor shall be the product obtained
by multiplying a fraction, the numerator of which is the amount of the
tax credit allocation claim filed on behalf of such certified investor
and the denominator of which is the total of all tax credit allocation
claims filed on behalf of all certified investors on such day, by the
aggregate limit of tax credits under this section or such lesser amount
of tax credits that remain unallocated on such day.
(4) Within ten business days after the department receives a tax
credit allocation claim filed by a certified capital company on behalf
of one or more of its certified investors, the department shall notify
the certified capital company of the amount of tax credits allocated to
each of the certified investors of such certified capital company.
(5) In the event a certified capital company does not receive
aggregate investments of certified capital equaling the amount of tax
credits allocated to its certified investors within ten business days
of the certified capital company's receipt of notice of allocation,
then it shall so notify the department on or before the next business
day and that portion of the tax credits allocated to the certified
investors of such certified capital company in excess of the amount of
certified capital invested in such certified capital company by such
date will be forfeited. The department shall then reallocate those
forfeited tax credits among the certified investors of the other
certified capital companies on a pro rata basis with respect to the tax
credit allocation claims filed on behalf of such certified investors.
The department is authorized to levy a fine of not more than fifty
thousand dollars, to be placed in the certified capital company
revolving fund, on any certified investor that does not invest the full
amount of certified capital allocated by the department to such
investor in accordance with the premium tax credit allocation claim
filed on its behalf.
(6) The maximum amount of tax credit allocation claims that may be
filed on behalf of any one certified investor, on an aggregate basis
with its affiliates, in one or more certified capital companies, shall
not exceed the greater of ten million dollars of certified capital or
fifteen percent of the aggregate limitation on certified capital
allocations as provided in this section.
NEW SECTION. Sec. 7
(a) Within two years after the allocation date, an amount equal to
at least twenty-five percent of the certified capital allocable to such
certified capital company must be placed in qualified investments.
(b) Within five years after the allocation date, an amount equal to
at least fifty percent of the certified capital allocable to such
certified capital company must be placed in qualified investments.
(2) Prior to making a proposed qualified investment in a specific
business, a certified capital company shall request from the department
a written opinion that the proposed investment will qualify as a
qualified investment in a qualified business. The department shall
have fifteen business days from the receipt of such a request to
determine whether the proposed investment qualifies as a qualified
investment in a qualified business and to notify the certified capital
company of its determination and an explanation thereof. If the
department fails to notify the certified capital company of its
determination within the fifteen business day period, the proposed
investment shall be deemed to be a qualified investment in a qualified
business. If the department determines that the proposed investment
does not meet the definition of a qualified investment or qualified
business or both, the department may nevertheless consider the proposed
investment a qualified investment, and if necessary the business a
qualified business, if the department determines that the proposed
investment will further state economic development.
(3) All certified capital not placed in qualified investments by
the certified capital company may be held or invested in such manner as
the certified capital company, in its discretion, deems appropriate.
The proceeds of all certified capital returned to a certified capital
company after being originally placed in qualified investments may be
placed again in qualified investments and shall count toward any
requirement of this section with respect to placing certified capital
in qualified investments.
(4) If, within ten years after its allocation date, a certified
capital company has not placed at least one hundred percent of the
certified capital allocable to it in qualified investments, the
certified capital company shall no longer be permitted to distribute
management fees.
(5) No certified capital company shall make a qualified investment
without the specific approval of the department if after the certified
capital company's qualified investment, on an aggregate basis with its
affiliates, would own more than forty-nine percent of the common equity
or voting interests of the qualified business; except that nothing in
this subsection (5) shall preclude a certified capital company from
exercising (a) any right or remedy upon a default by the qualified
business pursuant to an investment contract or (b) any antidilution or
preemptive rights it may have been granted in connection with an
initial qualified investment that can be exercised upon an investment
in the business by a party other than the certified capital company or
an affiliate of the certified capital company.
(6) No qualified investment may be made by a certified capital
company to the extent such investment would cause the company's total
qualified investment outstanding with respect to the qualified business
receiving such investment to exceed fifteen percent of the total
certified capital of the certified capital company at the time of such
investment.
(7) Documents and other materials submitted by certified capital
companies or by businesses for the purpose of the continuance of
certification shall not be public records if such records are
determined by the department to be trade or business secrets and shall
be maintained in a confidential manner by the department.
(8) The cumulative amount of all qualified investments made by a
certified capital company will be considered in the calculation of the
percentage requirements under this section, provided that any amounts
received by a certified capital company from a qualified business as
(a) commitment fees, closing fees, or other similar fees, excluding
reimbursement of out-of-pocket expenses, such as legal fees and
accounting fees in excess of one percent of the certified capital
company's investment in the qualified business or (b) license fees,
royalties, or similar charges shall not be considered in any percentage
calculations under this section.
NEW SECTION. Sec. 8
(1) On an annual basis, on or before January 31st of each year, (a)
any matter in which the certified capital company has failed to comply
with this section, or the rules adopted by the department, (b) such
other information that the department may reasonably request that will
help the department ascertain the impact of the certified capital
companies both directly and indirectly on the economy of the state of
Washington including but not limited to the number of jobs retained and
created by qualified businesses that have received qualified
investments.
(2) If in its annual report, a certified capital company provides
notification and documentation, including agreed upon procedures, that
it has satisfied the requirements of section 7 of this act that it has
invested fifty percent of its certified capital, the department shall
have sixty days to notify such certified capital company that it has or
has not met such requirement. If the department does not provide such
notification within sixty days, the certified capital company shall
then be deemed to have met such a requirement.
NEW SECTION. Sec. 9
(i) The cumulative amount of all qualified investments of the
certified capital company must equal or exceed an amount equal to one
hundred percent of its certified capital;
(ii) An amount equal to or exceeding twenty-five percent of its
certified capital that has been invested in qualified businesses or
qualified microenterprise development organizations which are either
located in rural counties as defined in RCW 82.14.370, or for any other
counties, in cities with a population of no greater than thirty
thousand.
(b) In addition, certified capital companies are encouraged to set
a target goal for investments in businesses that would otherwise be
eligible for certification by the office of minority and women's
business enterprises or investment through qualified microenterprise
development organizations and shall report to the department on an
annual basis their progress against this voluntary goal.
(2) In the event that a business in which a qualified investment is
made relocates its principal business operations to another state
either during such investment, or upon the earlier of: (a) The end of
the investment holding period with respect to such investment by the
certified capital company or (b) when the certified capital company
reaches one hundred percent investment, the cumulative amount of
qualified investments made by a certified capital company shall be
reduced by the amount of such qualified investment for the purposes of
satisfying the requirements of (b)(i) of this subsection only unless:
(i) The certified capital company invests an amount at least equal to
the investment of certified capital in the relocated business in a
qualified business located in Washington within six months of the
relocation or (ii) the business demonstrates that it has returned its
principal business operations to Washington within three months of such
relocation. A business shall be deemed to have relocated its principal
business operations outside Washington, unless it maintains its
headquarters or the primary workplace of more than fifty percent of the
employees within the state.
(3) A certified capital company shall pay to the department for
deposit in the general fund an amount equal to five percent of all
distributions to the equity holders of the certified capital company
other than qualified distributions and distributions of all equity
contributed to the certified capital company by such equity holders.
Revenues collected under this subsection shall be distributed to and
supplement state-funded programs which assist businesses with start-up,
to commercialize research, business education, modernization services,
and technical services including but not limited to Washington
manufacturing services under chapter 24.50 RCW, Washington technology
center under RCW 28B.20.285, Spokane intercollegiate research and
technology institute under RCW 28B.38.010, and the microenterprise
development program. A certified capital company shall make all
payments required under this subsection concurrently with distributions
to its equity owners; however, nothing contained in this subsection
shall be construed to affect qualified distributions.
NEW SECTION. Sec. 10
(2) Any material violation of section 7 or 8 of this act shall be
grounds for decertification of the certified capital company and the
disallowance of credits as set forth in section 3 of this act.
Additionally, the department may decertify a certified capital company
if any material representation to the department in connection with the
application process proves to have been falsely made, or if the
application materially violates any requirements established by the
department pursuant to this act.
(3) Once a certified capital company has invested an amount
cumulatively equal to one hundred percent of its certified capital in
qualified investments and has met all other requirements under this
act, the certified capital company shall no longer be subject to
regulation by the department and shall no longer be subject to section
8 of this act. Upon receiving documented certification by a certified
capital company that it has invested an amount equal to one hundred
percent of its certified capital, the department shall have sixty days
to notify such certified capital company that it has or has not met the
requirements with a reason for such determination if it has not, in the
judgment of the director or the director's designee, met such
requirement. If the department does not provide such notification
within sixty days, the certified capital company shall be deemed to
have met such requirements.
(4) The department shall send written notice of such
decertification to the commissioner and to the address of each
certified investor whose tax credit has been subject to recapture or
forfeiture, using the address shown on the last filing submitted to the
department.
NEW SECTION. Sec. 11
NEW SECTION. Sec. 12
(1) The number of certified capital companies holding certified
capital;
(2) The amount of certified capital invested in each certified
capital company;
(3) The cumulative amount that each certified capital company has
invested as of September 30, 2012, and the cumulative total each year
thereafter;
(4) The cumulative amount that the investments of each certified
capital company have leveraged in terms of capital invested by other
sources of capital in qualified businesses at the same time or
subsequent to investments made by a certified capital company in such
businesses;
(5) The total amount of tax credits granted under this act for each
year the credits have been awarded;
(6) The performance of each certified capital company with regard
to the requirements for continued certification;
(7) The classification of the companies in which each certified
capital company has invested according to industrial sector and size of
company;
(8) The total gross number of jobs created by investments made by
each certified capital company using certified capital and the number
of jobs retained;
(9) The location of the companies in which each certified capital
company has invested;
(10) The total amount invested in qualified microenterprise
development organizations, the number of small businesses that received
financial assistance from these organizations and the number of jobs
created and retained by such businesses;
(11) The total amount invested in businesses that are certified
minority and women-owned and controlled businesses;
(12) Those certified capital companies that have been decertified,
or have had their certification revoked, including the reasons for
decertification or revocation; and
(13) Other information as requested by the joint legislative audit
and review committee.
NEW SECTION. Sec. 13
NEW SECTION. Sec. 14
(1) Every capital company making application for certification as
a certified capital company shall pay to the department an application
fee in an amount of twenty thousand dollars to be deposited in the
certified capital company revolving fund.
(2) For ongoing expenses, the department shall annually estimate
the cost of administering the program established in this act,
including the expenses associated with the employment of one full-time
equivalent to carry out the department's administration. The
department shall annually assess a fee upon every certified capital
company to recoup such expenses which shall be deposited in the
certified capital company revolving fund. Fees shall be assessed among
certified capital companies in accordance with the amount of certified
capital raised by each certified capital company. In estimating the
administration costs for each next fiscal year, the department shall
consider all moneys then in the certified capital company revolving
fund and adjust its assessment so that the nondedicated balance in the
certified capital company revolving fund shall at no time exceed one-half of the estimated administration cost for the coming fiscal year.
The department shall keep accurate records of the costs incurred in
regulating and supervising the several companies subject to regulation
or supervision, and such records shall be open record subject to
inspection by all interested parties. No fee shall be assessed on a
certified capital company that has been decertified or that has
received or been deemed to have received notification under section
10(3) of this act.
(3) Once a certified capital company has met the conditions of
section 10(3) of this act and is no longer subject to regulation by the
department, the certified capital company will no longer be required to
pay regulatory fees under this section.
NEW SECTION. Sec. 15
NEW SECTION. Sec. 16
NEW SECTION. Sec. 17 Sections 1, 2, and 5 through 14 of this act
constitute a new chapter in Title
NEW SECTION. Sec. 18 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. 19 This act is necessary for the immediate
preservation of the public peace, health, or safety, or support of the
state government and its existing public institutions, and takes effect
immediately.