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H0684...............................................by REVENUE AND TAXATION
VENTURE CAPITAL TAX CREDIT - Adds to existing law to provide incentives
for targeted growth through the allowance of a venture capital tax credit; to
create the Idaho Venture Investment Fund; to provide that the Department of
Commerce is charged with the selection of a
venture capital advisory committee; to provide for the selection of an investor
group with the capacity to support raising and investing up to $30,000,000; to
provide for reports and audits; and to provide for management.
02/26 House intro - 1st rdg - to printing
02/27 Rpt prt - to Rev/Tax
03/06 Rpt out - rec d/p - to 2nd rdg
03/07 2nd rdg - to 3rd rdg
Rls susp - PASSED - 53-13-4
AYES -- Aikele, Barraclough, Bieter, Black, Block, Boe, Bolz,
Bradford, Bruneel, Campbell, Collins, Crow, Cuddy, Deal, Denney,
Ellis, Ellsworth, Eskridge, Field(13), Gagner, Gould, Hadley,
Henbest, Higgins, Jaquet, Jones, Kellogg(Duncan), Kunz, Langford,
Loertscher, Mader, Martinez, McKague, Meyer, Montgomery, Pischner,
Pomeroy, Raybould, Ridinger, Roberts, Robison, Sali, Sellman,
Shepherd, Smith(33), Smith(23), Smylie, Stone, Tilman, Trail,
Wheeler, Young, Mr. Speaker
NAYS -- Barrett, Bedke, Bell, Callister, Clark, Field(20), Hammond,
Kendell, Lake, Moyle, Pearce, Schaefer, Stevenson
Absent and excused -- Harwood, Hornbeck, Mortensen, Wood
Floor Sponsors - Mader & Gagner
Title apvd - to Senate
03/08 Senate intro - 1st rdg - to Loc Gov
03/12 Rpt out - rec d/p - to 2nd rdg
03/13 2nd rdg - to 3rd rdg
03/15 3rd rdg - PASSED - 29-4-2
AYES -- Andreason, Boatright, Branch Brandt, Bunderson, Burtenshaw,
Cameron, Darrington, Davis, Deide, Dunklin, Frasure, Geddes, Goedde,
Hill, Ipsen, King-Barrutia, Little, Lodge, Marley, Richardson, Risch,
Sandy, Sorensen, Stegner, Stennett, Thorne, Wheeler, Williams
NAYS -- Keough, Noh, Schroeder, Sims
Absent and excused -- Hawkins, Ingram
Floor Sponsor - Bunderson
Title apvd - to House
03/15 To enrol
Rpt enrol - Sp signed - Pres signed
03/18 To Governor
03/27 Governor VETOED
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 684
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCENTIVES FOR TARGETED GROWTH THROUGH VENTURE CAPITAL TAX CREDIT;
3 PROVIDING A STATEMENT OF LEGISLATIVE INTENT; AMENDING TITLE 63, IDAHO
4 CODE, BY THE ADDITION OF A NEW CHAPTER 43, TITLE 63, IDAHO CODE, TO PRO-
5 VIDE A SHORT TITLE, TO DEFINE TERMS, TO REQUIRE AN ANNUAL REPORT, TO
6 AUTHORIZE ADOPTION OF RULES AND AUDITS, TO PROVIDE FOR ESTABLISHMENT OF
7 THE IDAHO VENTURE INVESTMENT FUND, TO PROVIDE FOR APPOINTMENT OF AN ADVI-
8 SORY COMMITTEE AND TO PROVIDE DUTIES, TO AUTHORIZE A VENTURE CAPITAL TAX
9 CREDIT IN AN AMOUNT PROVIDED, TO GOVERN THE DETERMINATION OF THE CREDIT
10 ALLOWED AND TO PROVIDE FOR SELECTION OF THE INVESTOR GROUP, TO REQUIRE AN
11 ANNUAL REPORT AND TO PROVIDE THAT THE PROVISIONS OF THIS CHAPTER ARE NOT A
12 RESTRICTION OR LIMITATION ON DEPARTMENT POWERS.
13 Be It Enacted by the Legislature of the State of Idaho:
14 SECTION 1. LEGISLATIVE INTENT. The Legislature finds that the economy of
15 the state is enhanced when venture capital is available to start-up busi-
16 nesses. Therefore, it is the intent of the Legislature to provide for the cre-
17 ation of a venture capital tax credit to promote the availability of institu-
18 tional funds for venture capital in the state.
19 SECTION 2. That Title 63, Idaho Code, be, and the same is hereby amended
20 by the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
21 ter 43, Title 63, Idaho Code, and to read as follows:
22 CHAPTER 43
23 INCENTIVES FOR TARGETED GROWTH
24 63-4301. SHORT TITLE. This chapter shall be known and may be cited as the
25 "Incentives for Targeted Growth Act of 2002."
26 63-4302. DEFINITIONS. For the purposes of this chapter, the following
27 terms have the respective meanings ascribed by this section:
28 (1) "Commission" means the Idaho state tax commission.
29 (2) "Committee" means the venture capital advisory committee created in
30 section 63-4306, Idaho Code.
31 (3) "Department" means the Idaho department of commerce.
32 (4) "Designated investor group" means the investor group selected by the
33 department pursuant to section 63-4307, Idaho Code.
34 (5) "Equity capital" means capital invested in common or preferred stock,
35 royalty rights, limited partnership interests, limited liability company
36 interests, and any other securities or rights that evidence ownership in pri-
37 vate business.
38 (6) "Fund" means the "Idaho venture investment fund" established under
39 section 63-4305, Idaho Code.
40 (7) "Investor group" means any corporation, partnership, limited liabil-
2
1 ity company or other lawfully organized entity.
2 (8) "Near-equity capital" means capital invested in unsecured, under-
3 scored, subordinated or convertible loans or debt securities.
4 (9) "Person" means an individual, corporation, partnership or other law-
5 fully organized entity.
6 (10) "Venture capital fund" means a professionally managed venture capital
7 fund that includes as its investment objectives the investment of equity capi-
8 tal or near equity capital in businesses in this state.
9 (11) "Venture capital tax credit" means a tax credit which is allowed or
10 transferred pursuant to section 63-4307, Idaho Code.
11 (12) "Venture certificate" means the contract between the department and
12 the designated investor group.
13 63-4303. DEPARTMENT TO REPORT ANNUALLY. The department shall report annu-
14 ally to the legislature and the public as to the utilization of the incentives
15 available in this chapter. The report shall be due on the fifth legislative
16 day of each regular session and shall specify the utilization of the incen-
17 tives provided in this chapter.
18 63-4304. DEPARTMENT TO ADOPT RULES AND TO AUDIT COMPANIES. The department
19 shall, in conjunction with the department of finance, adopt rules to carry out
20 the provisions of this chapter and may audit or cause to be audited any tax-
21 payer utilizing the incentives provided herein periodically to monitor compli-
22 ance by them with the conditions precedent to the availability of the incen-
23 tives for each year.
24 63-4305. ESTABLISHMENT OF IDAHO VENTURE INVESTMENT FUND. The department
25 shall establish within the department a separate fund known as the "Idaho Ven-
26 ture Investment Fund."
27 (1) The department shall deposit into the fund the proceeds of the
28 investment by the designated investor group as evidenced by the venture cer-
29 tificate. The department shall issue the venture certificate to the designated
30 investor group and the venture certificate shall provide for a return of prin-
31 cipal and a rate of return thereon as shall be negotiated by the department.
32 (2) The department, after the decision of the designated investor group,
33 shall invest moneys deposited into the fund into venture capital funds
34 selected under section 63-4306, Idaho Code, and, pending such investments, may
35 invest such moneys in the investments permitted under section 67-1210, Idaho
36 Code.
37 (3) The department shall distribute funds received as a return on invest-
38 ment in the venture capital funds to the designated investor group in accor-
39 dance with the terms of the venture certificate.
40 (4) Any remaining moneys shall remain in the venture investment fund as
41 an asset of the state of Idaho, and shall remain in the fund and be reinvested
42 according to subsection (2) of this section.
43 63-4306. DEPARTMENT TO APPOINT ADVISORY COMMITTEE. The department shall
44 appoint a venture capital advisory committee.
45 (1) The committee shall consist of the director of the department plus
46 four (4) members who shall be appointed by the director of the department.
47 Members of the committee shall be selected based upon outstanding knowledge
48 and leadership and shall possess experience in the management of investments
49 similar in nature to venture capital. The appointed members shall serve for
50 staggered terms of office of four (4) years. Of the initial members, one (1)
51 member shall serve a term expiring December 31, 2003; one (1) member shall
3
1 serve a term expiring December 31, 2004; one (1) member shall serve a term
2 expiring December 31, 2005; and one (1) member shall serve a term expiring
3 December 31, 2006. Thereafter, terms of office shall be for four (4) years. A
4 vacancy on the committee shall be filled in the same manner as the original
5 appointment except that a person appointed to fill a vacancy shall be
6 appointed to the remainder of the unexpired term. Any member of the committee
7 is eligible for reappointment.
8 (2) Members of the committee shall serve without compensation but shall
9 receive their reasonable and necessary expenses incurred in the conduct of the
10 committee business.
11 (3) The members shall annually elect a chairperson. A majority of the
12 committee shall constitute a quorum, and the affirmative vote of a majority of
13 the members present shall be necessary for any action taken by the committee.
14 No vacancy in the membership of the committee impairs the right of a quorum to
15 exercise all rights and perform all duties of the committee.
16 (4) The committee shall have the authority to advise the department on
17 selection of the designated investor group and the selection of the venture
18 capital funds that will receive investment from the fund.
19 (5) The department shall provide the committee with such technical assis-
20 tance as the committee requires.
21 (6) Any proprietary information submitted to or compiled by the depart-
22 ment or the committee with respect to the marketing plans, financial state-
23 ments, trade secrets, research concepts, methods or projects, or any other
24 proprietary information of persons, firms, associations, partnerships, agen-
25 cies, corporations or other entities shall be confidential, except to the
26 extent that the person or entity that provided such information or that is the
27 subject of such information consents to disclosure. Executive sessions may be
28 held to discuss such materials if deemed necessary by the members of the com-
29 mittee, pursuant to section 67-2345, Idaho Code.
30 63-4307. ALLOWANCE OF VENTURE CAPITAL TAX CREDIT. (1) There shall be
31 allowed to the designated investor group venture capital tax credits. The ven-
32 ture capital tax credits allowed pursuant to this section shall be freely
33 transferable; however, no such tax credit shall be exercisable before January
34 1, 2010, nor after January 1, 2026. Venture capital tax credits may not be
35 claimed except in accordance with the terms of the venture certificate. The
36 venture capital tax credits may be used as a credit against any one (1) or
37 more of the following taxes:
38 (a) The individual income tax levied by chapter 30, title 63, Idaho Code;
39 (b) The corporate income tax levied by chapter 30, title 63, Idaho Code;
40 (c) The income tax levied by section 63-3024, Idaho Code.
41 (2) The department shall certify the amount of venture capital tax cre-
42 dits to be allowed to the designated investor group and the years such venture
43 capital tax credits may first be claimed pursuant to this chapter. The amount
44 of the credits is subject to the following limits:
45 (a) An amount, not to exceed thirty million dollars ($30,000,000), that
46 shall provide a rate of return to the designated investor group at rates
47 of return authorized by the department.
48 (b) A total amount of ten million dollars ($10,000,000) that may be
49 redeemed or used as prepayment in lieu of tax in any calendar year.
50 (c) The tax credits shall not exceed the amount equal to the rate of
51 return set forth in the venture certificate less any distributions to the
52 designated investor group from the fund. The tax credits in this section
53 shall be reduced annually by the total Idaho asset value in the Idaho ven-
54 ture investment fund.
4
1 (3) The department shall, in conjunction with the state tax commission,
2 develop a system for registration of any venture capital tax credits allowed
3 or transferred pursuant to this chapter and a system that permits verification
4 that any venture capital tax credit claimed upon a tax return is valid and
5 properly taken in the year of claim, and that any transfers of the venture
6 capital tax credit are made in accordance with the requirements of this chap-
7 ter. Taxpayers may rely upon the provisions of the registration and verifica-
8 tion system developed pursuant to this subsection. Such system shall also per-
9 mit any person claiming a security interest in any venture capital tax credits
10 to record its interest in the registry and, in the event that any venture cap-
11 ital tax credit that is subject to a security interest recorded in the regis-
12 tration and verification system is claimed on a tax return filed with the com-
13 mission, the commission shall, unless a written waiver by the secured creditor
14 is filed with the return, pay the credit to the secured creditor. Such payment
15 shall be made from the state refund fund provided in section 63-3067, Idaho
16 Code, and such funds are hereby continuously appropriated. The commission, in
17 the manner provided by law, shall assess any resulting deficiency in tax. For
18 the purpose of effecting the registration and verification system provided
19 herein and the other provisions of this chapter, the commission may disclose
20 such information as may be necessary notwithstanding the provisions of section
21 63-3076, Idaho Code, and such disclosed information shall be confidential and
22 not subject to disclosure by the department.
23 (4) Notwithstanding any other provisions of law, the department shall
24 have the power to negotiate and enter into the venture certificate and to make
25 any contract, execute any document, perform any act or enter into any finan-
26 cial or other transaction necessary in order to carry out the provisions of
27 this chapter.
28 (5) The venture capital tax credits allowed or transferred pursuant to
29 this chapter shall not be considered a security under section 30-1402(12),
30 Idaho Code.
31 (6) The department may solicit investment plans from qualified investor
32 groups for the raising and investing of capital in accordance with the
33 requirements of this chapter. An investment plan shall address the investor
34 group's level of experience, quality of management, investment philosophy and
35 process, probability of success in fundraising, and plan for achieving the
36 purposes of this chapter. The department shall consider such investment plans
37 and, if at least one (1) investment plan is found to meet the requirements set
38 forth in this section, shall select and certify as the designated investor
39 group, the one (1) investor group deemed best qualified to generate the amount
40 of capital required by this section, and to invest such capital in a private
41 state revolving fund, which will be authorized to make investments in private
42 seed and venture capital partnerships or entities in a manner which will mobi-
43 lize a wide variety of equity capital and near-equity capital to serve the
44 needs of entrepreneurs in the state, expand the private seed and venture capi-
45 tal industry in the state, strengthen the economy of the state, help busi-
46 nesses in the state to gain access to capital resources, help build a signifi-
47 cant, permanent resource available to serve the needs of Idaho businesses and
48 accomplish all these benefits in a way that minimizes the use of venture capi-
49 tal tax credits. The designated investor group, upon certification by the
50 department, shall be authorized to exercise all the rights provided hereunder.
51 63-4308. ANNUAL REPORT. The designated investor group shall publish an
52 annual report, which shall include its annual audit, of the activities con-
53 ducted by the designated investor group pursuant to this chapter, and present
54 the report to the governor, the legislature and the department. The annual
5
1 report shall review the progress of the designated investor group in imple-
2 menting its investment plan and any use or transfer of venture capital tax
3 credits allowed pursuant to this chapter.
4 63-4309. NO LIMITATION ON POWERS OF DEPARTMENT. Nothing contained herein
5 is or shall be construed as a restriction or limitation upon any powers which
6 the department might otherwise have under any other law of this state hereto-
7 fore or hereafter enacted, and the provisions of this chapter are cumulative
8 to such powers. The provisions hereof do and shall be construed to provide a
9 complete, additional and alternative method for the implementation of the
10 chapter as authorized and shall be regarded as supplemental and additional to
11 powers conferred by any other laws.
STATEMENT OF PURPOSE
RS 11747C4
This legislation will increase the availability of venture
capital in the state of Idaho by $30 million.
FISCAL IMPACT
Negative Fiscal Impact - At the end of ten (10) years there is a
minimal probability that the State would be at risk for a portion
of the $30 million.
Positive Fiscal Impact - There is a conservative estimate that
$14-15 million would flow to the State over ten (10) years.
Under normal estimated growth, there is an estimate of $55-60
million that would flow to the State over ten (10) years.
Contact
Name: Rep. Dan Mader
Phone: (208) 332-1000
STATEMENT OF PURPOSE/FISCAL NOTE H 684