HOUSE BILL No. 5416 December 4, 1997, Introduced by Reps. Jansen, Perricone, Goschka, Mans, Gernaat, Jelinek, Horton, Scranton, Rocca, Jellema, Sikkema, Kukuk, Dalman, McBryde, Hammerstrom, Cropsey, Geiger, Richner, Crissman, Birkholz, McNutt, Green, McManus, DeVuyst, Alley, Cassis, Voorhees and Raczkowski and referred to the Committee on Tax Policy. A bill to amend 1975 PA 228, entitled "Single business tax act," (MCL 208.1 to 208.145) by adding section 39c. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 SEC. 39C. (1) SUBJECT TO SUBSECTIONS (2) TO (6), A TAXPAYER 2 MAY CLAIM A CREDIT AGAINST THE TAX IMPOSED BY THIS ACT EQUAL TO 3 125% OF THE CONTRIBUTED CAPITAL INVESTED BY THE TAXPAYER IN A 4 CERTIFIED CAPITAL COMPANY. 5 (2) FOR PURPOSES OF THIS SECTION, THE TOTAL MAXIMUM AMOUNT 6 OF QUALIFIED INVESTMENT ALLOWED FOR ALL CERTIFIED CAPITAL COM- 7 PANIES IS $100,000,000.00. 8 (3) THE MICHIGAN JOBS COMMISSION SHALL ACCEPT APPLICATION 9 FROM CERTIFIED CAPITAL COMPANIES TO ENGAGE IN QUALIFIED 10 INVESTMENT. THE MICHIGAN JOBS COMMISSION SHALL CERTIFY A 02980'97 RJA 2 1 CERTIFIED CAPITAL COMPANY IF, BASED ON THE COMPANY'S APPLICATION, 2 THE COMPANY MEETS THE CRITERIA IN THIS SECTION. 3 (4) THE MICHIGAN JOBS COMMISSION SHALL ALLOCATE THE INVEST- 4 MENT AMOUNT AVAILABLE UNDER SUBSECTION (2). APPLICATIONS FROM 5 CERTIFIED CAPITAL COMPANIES THAT MEET ALL OF THE CRITERIA IN THIS 6 SECTION SHALL BE CERTIFIED IN THE ORDER IN WHICH APPLICATIONS ARE 7 RECEIVED BY THE MICHIGAN JOBS COMMISSION AND IN THE AMOUNT 8 REQUESTED IF, BY ALLOCATING THE REQUESTED AMOUNT, THE MAXIMUM 9 AMOUNT UNDER SUBSECTION (2) IS NOT EXCEEDED. IF 2 OR MORE APPLI- 10 CATIONS ARE RECEIVED ON THE SAME DAY, THEY ARE CONSIDERED TO HAVE 11 BEEN RECEIVED SIMULTANEOUSLY. IF THE TOTAL MAXIMUM AMOUNT UNDER 12 SUBSECTION (2) WILL BE EXCEEDED BY CERTIFYING APPLICATIONS THAT 13 ARE RECEIVED SIMULTANEOUSLY, THE AMOUNT REQUESTED SHALL BE ALLO- 14 CATED ON A PRO RATA BASIS BETWEEN THOSE APPLICANTS. A CERTIFIED 15 CAPITAL COMPANY THAT IS CERTIFIED BY THE MICHIGAN JOBS COMMISSION 16 MAY SOLICIT INVESTORS FOR THE 18-MONTH PERIOD THAT BEGINS ON THE 17 DATE OF CERTIFICATION. A CERTIFIED CAPITAL COMPANY SHALL FORFEIT 18 ANY PORTION OF ITS ALLOCATION UNDER THIS SUBSECTION THAT IS NOT 19 FUNDED WITHIN 18 MONTHS AFTER ALLOCATION BY THE MICHIGAN JOBS 20 COMMISSION. 21 (5) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT 22 OF CONTRIBUTED CAPITAL THAT CAN BE USED AS QUALIFIED INVESTMENT 23 BY A TAXPAYER TO CALCULATE A CREDIT UNDER THIS SECTION SHALL BE 24 DETERMINED BY THE AMOUNT INVESTED IN A CERTIFIED CAPITAL COMPANY 25 LIMITED TO THE INVESTMENT LIMIT FOR THAT CERTIFIED CAPITAL COM- 26 PANY AS CERTIFIED BY THE MICHIGAN JOBS COMMISSION. 02980'97 3 1 (6) A TAXPAYER SHALL NOT CLAIM MORE THAN 12.5% OF THE AMOUNT 2 DETERMINED UNDER SUBSECTION (5), EXCLUSIVE OF ANY CARRYFORWARD 3 ALLOWED UNDER SUBSECTION (11), IN ANY 1 TAX YEAR. 4 (7) THE CREDIT ALLOWED UNDER THIS SECTION FOR ANY TAX YEAR 5 SHALL NOT EXCEED 25% OF THE TAXPAYER'S TAX LIABILITY FOR THE TAX 6 YEAR. 7 (8) THE MICHIGAN JOBS COMMISSION SHALL REVOKE THE CERTIFICA- 8 TION OF A CAPITAL COMPANY THAT DOES NOT MEET THE INVESTMENT 9 SCHEDULE CRITERIA UNDER SUBSECTION (9) OR ANY OTHER CRITERIA OR 10 CONDITION REQUIRED UNDER THIS SECTION. IF CERTIFICATION IS 11 REVOKED, THE MICHIGAN JOBS COMMISSION SHALL SPECIFY IN WRITING TO 12 THE COMPANY THE BASIS FOR THE REVOCATION. IF CERTIFICATION IS 13 REVOKED UNDER THIS SECTION, THE CREDITS OF A TAXPAYER THAT ARE 14 BASED ON THAT CERTIFICATION ARE REVOKED AND THE TAXPAYER SHALL 15 NOT CLAIM ANY CREDITS AFTER THE CREDIT CLAIMED IN THE TAX YEAR OF 16 THE REVOCATION. THE MICHIGAN JOBS COMMISSION SHALL NOTIFY A CER- 17 TIFIED CAPITAL COMPANY IN WRITING OF ANY NONCOMPLIANCE WITH THIS 18 SECTION. IF THE COMPANY FAILS TO RECTIFY THE NONCOMPLIANCE 19 BEFORE THE EXPIRATION OF 120 DAYS, THE MICHIGAN JOBS COMMISSION 20 SHALL REVOKE THE COMPANY'S CERTIFICATION. 21 (9) EXCEPT AS PROVIDED IN SUBSECTION (10), EACH CERTIFIED 22 CAPITAL COMPANY THAT RECEIVES AN ALLOCATED AMOUNT UNDER THIS SEC- 23 TION SHALL DO ALL OF THE FOLLOWING TO MAINTAIN CERTIFICATION: 24 (A) ADHERE TO THE FOLLOWING INVESTMENT SCHEDULE: 25 (i) CUMULATIVE INVESTMENT OF CERTIFIED CAPITAL BY THE END OF 26 THE THIRD YEAR AFTER ALLOCATION, 25%. 02980'97 4 1 (ii) CUMULATIVE INVESTMENT OF CERTIFIED CAPITAL BY THE END 2 OF THE FOURTH YEAR AFTER ALLOCATION, 40%. 3 (iii) CUMULATIVE INVESTMENT OF CERTIFIED CAPITAL BY THE END 4 OF THE FIFTH YEAR AFTER ALLOCATION, 50%. 5 (B) UNTIL THE CERTIFIED CAPITAL COMPANY REACHES THE 50% 6 INVESTMENT LEVEL REQUIRED UNDER SUBDIVISION (A), ANNUALLY SUBMIT 7 A REPORT TO THE MICHIGAN JOBS COMMISSION THAT INCLUDES A FINAN- 8 CIAL AND PERFORMANCE REPORT THAT INCLUDES INFORMATION ON NET CON- 9 TRIBUTED CAPITAL, INVESTMENT COMPLIANCE, AND A LIST OF ALL 10 INVESTORS. THE MICHIGAN JOBS COMMISSION MAY AUDIT ANY DATA USED 11 TO SUPPORT THE REPORT. 12 (10) WHEN A CERTIFIED CAPITAL COMPANY REACHES THE 50% 13 INVESTMENT LEVEL REQUIRED UNDER SUBSECTION (9), THE COMPANY IS 14 NOT SUBJECT TO REVOCATION UNDER SUBSECTION (8) OR THE REPORTING 15 REQUIREMENTS UNDER SUBSECTION (9) AFTER THE DATE ON WHICH THE 50% 16 INVESTMENT LEVEL IS ACHIEVED. 17 (11) IF THE CREDIT ALLOWED UNDER THIS SECTION FOR THE TAX 18 YEAR AND ANY UNUSED CARRYFORWARD OF THE CREDIT ALLOWED BY THIS 19 SECTION EXCEED THE TAXPAYER'S TAX LIABILITY FOR THE TAX YEAR, 20 THAT PORTION THAT EXCEEDS THE TAX LIABILITY FOR THE TAX YEAR 21 SHALL NOT BE REFUNDED BUT MAY BE CARRIED FORWARD TO OFFSET TAX 22 LIABILITY IN SUBSEQUENT TAX YEARS UNTIL USED UP. 23 (12) THE CREDIT ALLOWED UNDER THIS SECTION MAY BE SOLD OR 24 TRANSFERRED IN ACCORDANCE WITH REGULATIONS THAT THE MICHIGAN JOBS 25 COMMISSION SHALL ADOPT. A SALE OR TRANSFER OF A CREDIT DOES NOT 26 AFFECT ANY OTHER PROVISION OF THIS SECTION. IF THE CREDIT 27 ALLOWED UNDER THIS SECTION IS SOLD OR TRANSFERRED, THE PURCHASER 02980'97 5 1 IS SUBJECT TO THE LIMITS AND BENEFITS UNDER THIS SECTION IN THE 2 SAME MANNER AS THE SELLER OR TRANSFEROR. 3 (13) AS USED IN THIS SECTION: 4 (A) "CERTIFIED CAPITAL COMPANY" OR "COMPANY" MEANS AN ENTITY 5 THAT MEETS ALL OF THE FOLLOWING CRITERIA AND INCLUDES ALL AFFILI- 6 ATES OF THE ENTITY: 7 (i) IS A PARTNERSHIP, CORPORATION, S CORPORATION, LIMITED 8 LIABILITY COMPANY, OR OTHER ENTITY WHETHER ORGANIZED FOR PROFIT 9 OR NOT FOR PROFIT, THAT IS LOCATED, HEADQUARTERED, AND REGISTERED 10 TO CONDUCT BUSINESS IN THIS STATE AND HAS AS ITS PRIMARY BUSINESS 11 ACTIVITY THE INVESTMENT OF CASH IN QUALIFIED MICHIGAN 12 BUSINESSES. 13 (ii) IS CERTIFIED BY THE MICHIGAN JOBS COMMISSION AS A CER- 14 TIFIED CAPITAL COMPANY. 15 (iii) HAS A MINIMUM OF $100,000.00 IN EQUITY CAPITAL. 16 (B) "CONTRIBUTED CAPITAL" MEANS THE AMOUNT CONTRIBUTED BY A 17 TAXPAYER TO A CERTIFIED CAPITAL COMPANY TO MEET THE ALLOCATED 18 AMOUNT AS PROVIDED UNDER SUBSECTION (4) ON WHICH A CREDIT UNDER 19 THIS SECTION IS BASED. CONTRIBUTED CAPITAL IS THE NET AMOUNT OF 20 PREMIUM OR DISCOUNT AND A MINIMUM CAPITAL CONTRIBUTION AMOUNT OF 21 $100,000.00 PER TAXPAYER IS REQUIRED. 22 (C) "QUALIFIED INVESTMENT" MEANS INVESTMENT IN A QUALIFIED 23 MICHIGAN BUSINESS AND INCLUDES ALL OF THE FOLLOWING: 24 (i) COMMON OR PREFERRED EQUITY, WARRANTS, DEBT CONVERTIBLE 25 INTO EQUITY OR EQUITY EQUIVALENTS, AND DEBT WITH EQUITY INCEN- 26 TIVES INCLUDING, BUT NOT LIMITED TO, OPTIONS OR WARRANTS 02980'97 6 1 (ii) SHORT-TERM INVESTMENTS INCLUDING, BUT NOT LIMITED TO, 2 DEBT INSTRUMENTS ISSUED FOR A PERIOD OF LESS THAN 12 MONTHS. 3 (D) "QUALIFIED MICHIGAN BUSINESS" MEANS A BUSINESS THAT 4 MEETS ALL OF THE FOLLOWING CRITERIA: 5 (i) IS LOCATED IN THIS STATE OR CONDUCTS A MAJORITY OF ITS 6 BUSINESS IN THIS STATE AND IS IN NEED OF VENTURE CAPITAL. 7 (ii) IS INVOLVED IN INTERSTATE OR INTRASTATE COMMERCE OR IN 8 RESEARCH AND DEVELOPMENT. 9 (iii) IS NOT A REAL ESTATE COMPANY, INSURANCE COMPANY, OIL 10 AND GAS EXPLORATION OPERATION, FINANCIAL INSTITUTION, OR A PRO- 11 FESSIONAL SERVICES CORPORATION OF ACCOUNTANTS, ATTORNEYS, OR 12 PHYSICIANS. 13 (iv) HAS 500 OR FEWER FULL-TIME EQUIVALENT EMPLOYEES AT THE 14 TIME THE QUALIFIED INVESTMENT IS MADE. 15 (v) HAS NET WORTH OF $20,000,000.00 OR LESS IN THE YEAR 16 IMMEDIATELY PRECEDING THE YEAR IN WHICH THE INVESTMENT IS MADE. 17 (vi) HAS ANNUAL EARNINGS AS ANNUALIZED OVER THE 2 YEARS 18 IMMEDIATELY PRECEDING THE YEAR IN WHICH THE INVESTMENT IS MADE 19 $5,000,000.00 OR LESS. 02980'97 Final page. 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