SB-0834, As Passed Senate, December 4, 2003                                 

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                              SUBSTITUTE FOR                                    

                                                                                

                           SENATE BILL NO. 834                                  

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 A bill to promote investment in certain businesses; to                            

                                                                                

    promote economic development in this state; to provide for a                

                                                                                

    Michigan early stage venture investment corporation; to prescribe           

                                                                                

    the powers and duties of a Michigan early stage venture                     

                                                                                

    investment corporation; to prescribe the powers and duties of               

                                                                                

    certain public officers and departments; to establish the                   

                                                                                

    Michigan early stage venture investment fund and other funds; to            

                                                                                

    provide for tax credits and incentives; to authorize certain                

                                                                                

    investments; to provide for the expiration of the fund; to                  

                                                                                

    provide or allow for appropriations; and to provide penalties and           

                                                                                

    remedies.                                                                   

                                                                                

                THE PEOPLE OF THE STATE OF MICHIGAN ENACT:                      

                                                                                

1       Sec. 1.  This act shall be known and may be cited as the                    

                                                                                

2   "Michigan early stage venture investment act of 2003".                      

                                                                                

3       Sec. 2.  (1) The legislature finds all of the following:                    

                                                                                


                                                                                

1       (a) There exists a need to promote the economic health of                   

                                                                                

2   this state by assisting in the creation of new jobs, new                    

                                                                                

3   businesses, and new industries within this state and through the            

                                                                                

4   investment in certain businesses that focus on areas including,             

                                                                                

5   but not limited to, alternative energy technology,                          

                                                                                

6   high-technology, and health care.                                           

                                                                                

7       (b) Investing in businesses that are early stage growth                     

                                                                                

8   companies and promoting economic growth in the state assist the             

                                                                                

9   state in carrying out its essential governmental functions and as           

                                                                                

10  such are essential public purposes.                                         

                                                                                

11      (c) Investments in certain businesses promote the retention                 

                                                                                

12  of businesses and jobs that would be likely to leave the state              

                                                                                

13  absent the investment, revitalize and diversify the economic base           

                                                                                

14  of this state, generate and retain jobs and investment in this              

                                                                                

15  state, and help to effectuate legislative and governmental                  

                                                                                

16  programs to promote economic growth in this state.                          

                                                                                

17      (d) Agreements with private corporations such as Michigan                   

                                                                                

18  early stage venture investment corporations can assist the state            

                                                                                

19  by raising capital and investing that capital in venture capital            

                                                                                

20  firms with the intent to benefit this state's early stage growth            

                                                                                

21  companies thus facilitating economic growth and development and             

                                                                                

22  other government programs and supporting essential public                   

                                                                                

23  purposes.                                                                   

                                                                                

24      (2) It is hereby declared that the purposes of this act are                 

                                                                                

25  as follows:                                                                 

                                                                                

26      (a) To promote a healthy economic climate in this state by                  

                                                                                

27  fostering job creation, retention, and expansion through the                


                                                                                

1   promotion of investment in certain businesses.                              

                                                                                

2       (b) To allow the state to enter into agreements with Michigan               

                                                                                

3   early stage venture investment corporations to promote a healthy            

                                                                                

4   economic climate in this state.                                             

                                                                                

5       Sec. 3.  As used in this act:                                               

                                                                                

6       (a) "Alternative energy technology" means that term as                      

                                                                                

7   defined in section 2(d) of the Michigan next energy authority               

                                                                                

8   act, 2002 PA 593, MCL 207.822.                                              

                                                                                

9       (b) "Board" means the Michigan early stage venture investment               

                                                                                

10  corporation board of directors.                                             

                                                                                

11      (c) "Conflict of interest" means a situation in which the                   

                                                                                

12  private interest of a director, employee, or agent of the board             

                                                                                

13  may influence the judgment of the director, employee, or agent in           

                                                                                

14  the performance of his or her duties or responsibilities under              

                                                                                

15  this act.  A conflict of interest includes, but is not limited              

                                                                                

16  to, the following:                                                          

                                                                                

17                                                                               (i) Any conduct that would lead a reasonable person, knowing                        

                                                                                

18  all of the circumstances, to conclude that the director,                    

                                                                                

19  employee, or agent of the board has an interest related to an               

                                                                                

20  action that the board is taking under this act.                             

                                                                                

21      (ii) Acceptance of compensation other than from the board for                

                                                                                

22  services rendered as part of the official duties as a director,             

                                                                                

23  employee, or agent of the board.                                            

                                                                                

24      (iii) Participation in any business being transacted with or                 

                                                                                

25  before the board in which the director, employee, or agent of the           

                                                                                

26  board or his or her spouse, child, parent, stepparent,                      

                                                                                

27  grandparent, grandchild, brother, sister, parent-in-law,                    


                                                                                

1   brother-in-law, sister-in-law, aunt, uncle, nephew, niece, first            

                                                                                

2   cousin, or second cousin or the spouse of any of the persons                

                                                                                

3   described in this subparagraph has a financial interest.                    

                                                                                

4       (d) "Equity capital" means capital invested in common or                    

                                                                                

5   preferred stock, royalty rights, limited partnership interests,             

                                                                                

6   limited liability company interests, or any other security or               

                                                                                

7   rights that evidence ownership in a private business.                       

                                                                                

8       (e) "Fund" or "Michigan early stage venture investment fund"                

                                                                                

9   means the fund created in section 19.                                       

                                                                                

10      (f) "High-technology activity" means that term as defined in                

                                                                                

11  section 3(g) of the Michigan economic growth authority act, 1995            

                                                                                

12  PA 24, MCL 207.803.                                                         

                                                                                

13      (g) "Investor" means an individual, firm, bank, financial                   

                                                                                

14  institution, limited partnership, co-partnership, partnership,              

                                                                                

15  joint venture, association, corporation, receiver, estate, trust,           

                                                                                

16  or any other entity that invests in the fund.                               

                                                                                

17      (h) "Michigan economic development corporation" means the                   

                                                                                

18  public body corporate created under section 28 of article VII of            

                                                                                

19  the state constitution of 1963 and the urban cooperation act of             

                                                                                

20  1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512, by a                     

                                                                                

21  contractual interlocal agreement effective April 5, 1999 between            

                                                                                

22  local participating economic development corporations formed                

                                                                                

23  under the economic development corporations act, 1974 PA 338, MCL           

                                                                                

24  125.1601 to 125.1636, and the Michigan strategic fund.  If it is            

                                                                                

25  determined that the Michigan economic development corporation is            

                                                                                

26  unable to perform its duties under this act, those duties shall             

                                                                                

27  be exercised by the Michigan strategic fund.                                


                                                                                

1       (i) "Michigan strategic fund" means the Michigan strategic                  

                                                                                

2   fund as described in the Michigan strategic fund act, 1984 PA               

                                                                                

3   270, MCL 125.2001 to 125.2093.                                              

                                                                                

4       (j) "Near-equity capital" means capital invested in                         

                                                                                

5   unsecured, undersecured, or debt securities or subordinated or              

                                                                                

6   convertible loans.                                                          

                                                                                

7       (k) "Negotiated return on qualified investment" means the                   

                                                                                

8   rate of return agreed upon for investments made by investors in             

                                                                                

9   the fund.                                                                   

                                                                                

10                                                                               (l) "Qualified business" means a seed or early stage business                       

                                                                                

11  that is domiciled in this state, that has its corporate                     

                                                                                

12  headquarters in this state, or the majority of whose employees              

                                                                                

13  work a majority of their time at a site located in this state.              

                                                                                

14      (m) "Qualified investment" means the amount of capital                      

                                                                                

15  invested by an investor in the fund.                                        

                                                                                

16      (n) "Seed or early stage business" means a business that is                 

                                                                                

17  either of the following:                                                    

                                                                                

18                                                                               (i) A business that has not fully established commercial                            

                                                                                

19  operations and may also be engaged in continued research and                

                                                                                

20  product development.                                                        

                                                                                

21      (ii) A business engaged in product, service, or technology                   

                                                                                

22  development and initial manufacturing, marketing, or sales                  

                                                                                

23  activities.                                                                 

                                                                                

24      (o) "Venture capital company" means a corporation,                          

                                                                                

25  partnership, limited liability company, or other legal entity the           

                                                                                

26  primary business activity of which is the investment of equity              

                                                                                

27  capital in businesses that focus on areas, including, but not               


                                                                                

1   limited to, alternative energy technology, high-technology                  

                                                                                

2   activity, or health care.                                                   

                                                                                

3       Sec. 5.  (1) A Michigan early stage venture investment                      

                                                                                

4   corporation is a nonprofit corporation incorporated under the               

                                                                                

5   nonprofit corporation act, 1982 PA 162, MCL 450.2101 to 450.3192,           

                                                                                

6   that meets the registration requirements of this act.                       

                                                                                

7       (2) A Michigan early stage venture investment corporation                   

                                                                                

8   shall be incorporated as a nonprofit corporation that has                   

                                                                                

9   received, on or before September 1, 2004, a favorable                       

                                                                                

10  determination from the internal revenue service that the                    

                                                                                

11  corporation is exempt from taxation under section 501(c)(3) of              

                                                                                

12  the internal revenue code.  The department of treasury may allow            

                                                                                

13  up to 3, 30-day extensions of the date under this section for               

                                                                                

14  purposes reviewing and approving an application for registration            

                                                                                

15  under section 11.                                                           

                                                                                

16      (3) Except as otherwise provided in this act to the contrary,               

                                                                                

17  a Michigan early stage venture investment corporation is subject            

                                                                                

18  to the laws of this state that are applicable to nonprofit                  

                                                                                

19  corporations.                                                               

                                                                                

20      (4) A Michigan early stage venture investment corporation is                

                                                                                

21  a charitable and benevolent institution, and its funds, income,             

                                                                                

22  and property are exempt from taxation by this state or any                  

                                                                                

23  political subdivision of this state.                                        

                                                                                

24      (5) A corporation shall not act as a Michigan early stage                   

                                                                                

25  venture investment corporation except as authorized under this              

                                                                                

26  act.                                                                        

                                                                                

27      Sec. 7.  The articles of incorporation of a Michigan early                  


                                                                                

1   stage venture investment corporation shall contain all of the               

                                                                                

2   following:                                                                  

                                                                                

3       (a) The purposes of the corporation, which shall include, but               

                                                                                

4   are not limited to, all of the following:                                   

                                                                                

5                                                                                (i) To operate and act exclusively for charitable purposes                          

                                                                                

6   with the intent to lessen the financial burdens of the government           

                                                                                

7   of this state.                                                              

                                                                                

8       (ii) To receive and administer funds for the charitable                      

                                                                                

9   purposes under subparagraph (i).                                            

                                                                                

10      (iii) To raise capital and invest that capital in venture                    

                                                                                

11  capital firms with the intent of benefiting Michigan's seed or              

                                                                                

12  early stage businesses.                                                     

                                                                                

13      (iv) To promote the economic health of this state by                         

                                                                                

14  assisting in the creation of new jobs, new businesses, and new              

                                                                                

15  industries within this state and through the investment in                  

                                                                                

16  certain businesses.                                                         

                                                                                

17      (v) To enter into an agreement with this state to promote the               

                                                                                

18  economic health of this state.                                              

                                                                                

19      (b) A provision that the Michigan early stage venture                       

                                                                                

20  investment corporation shall be governed by a board of directors            

                                                                                

21  that complies with the requirements in section 13.                          

                                                                                

22      (c) A provision that provides that, upon dissolution of the                 

                                                                                

23  Michigan early stage venture investment corporation, the property           

                                                                                

24  remaining after providing for debts and obligations of the                  

                                                                                

25  Michigan early stage venture investment corporation shall be                

                                                                                

26  distributed to an organization that qualifies either as a                   

                                                                                

27  governmental unit under section 170(c) of the internal revenue              


                                                                                

1   code or is exempt from tax under section 501(c)(3) of the                   

                                                                                

2   internal revenue code, as designated by the board.  If the board            

                                                                                

3   fails to designate an organization as provided in this                      

                                                                                

4   subdivision, the property remaining shall pass to the state of              

                                                                                

5   Michigan.  For purposes of this subdivision, property remaining             

                                                                                

6   after providing for debts and obligations does not include                  

                                                                                

7   grants, appropriations, or other restricted funds that must be              

                                                                                

8   distributed as required by the source of those funds.                       

                                                                                

9       Sec. 9.  (1) Prior to applying for registration as a                        

                                                                                

10  Michigan early stage venture investment corporation under section           

                                                                                

11  11, a nonprofit corporation shall submit its articles of                    

                                                                                

12  incorporation and any amendments to those articles of                       

                                                                                

13  incorporation to the attorney general for review and                        

                                                                                

14  certification.                                                              

                                                                                

15      (2) The attorney general shall review the information                       

                                                                                

16  submitted pursuant to subsection (1) and, if that information               

                                                                                

17  complies with the requirements of this act, and upon payment of a           

                                                                                

18  fee of $100.00, the attorney general shall issue a certificate of           

                                                                                

19  compliance to the Michigan early stage venture investment                   

                                                                                

20  corporation not later than 60 days after the initial receipt of             

                                                                                

21  the information.                                                            

                                                                                

22      Sec. 11.  (1) To apply for registration as a Michigan early                 

                                                                                

23  stage venture investment corporation, a nonprofit corporation               

                                                                                

24  shall file all of the following with the state treasurer:                   

                                                                                

25      (a) A copy of the articles of incorporation of the nonprofit                

                                                                                

26  corporation and any amendments to those articles of                         

                                                                                

27  incorporation.                                                              


                                                                                

1       (b) The certificate of compliance issued under section 9.                   

                                                                                

2   This subdivision does not apply if the attorney general does not            

                                                                                

3   issue the certificate within the time provided in section 9(2).             

                                                                                

4       (c) A general plan of the proposed activities of the                        

                                                                                

5   nonprofit corporation, including, but not limited to, evidence of           

                                                                                

6   the establishment by the nonprofit corporation of a restricted              

                                                                                

7   fund that shall be known as a Michigan early stage venture                  

                                                                                

8   investment fund.                                                            

                                                                                

9       (d) A copy of the financial statements of the nonprofit                     

                                                                                

10  corporation for the first fiscal year of the nonprofit                      

                                                                                

11  corporation.                                                                

                                                                                

12      (e) A copy of the bylaws of the nonprofit corporation.                      

                                                                                

13      (f) Payment of a fee to the state treasurer of $500.00.                     

                                                                                

14      (2) The state treasurer shall examine the documents filed                   

                                                                                

15  under subsection (1), may conduct any investigation he or she               

                                                                                

16  considers necessary, may request additional oral and written                

                                                                                

17  information from the nonprofit corporation, and may examine under           

                                                                                

18  oath any persons interested in or connected with the nonprofit              

                                                                                

19  corporation seeking to be registered as a Michigan early stage              

                                                                                

20  venture investment corporation.                                             

                                                                                

21      (3) The state treasurer shall register a nonprofit                          

                                                                                

22  corporation as a Michigan early stage venture investment                    

                                                                                

23  corporation if all of the following conditions are met:                     

                                                                                

24      (a) The documents filed under subsection (1) are in proper                  

                                                                                

25  form.                                                                       

                                                                                

26      (b) The articles of incorporation of the nonprofit                          

                                                                                

27  corporation or any amendments to those articles of incorporation            


                                                                                

1   meet the requirements of section 7.                                         

                                                                                

2       (c) The internal revenue service has determined that the                    

                                                                                

3   nonprofit corporation is exempt from taxation under section                 

                                                                                

4   501(c)(3) of the internal revenue code.                                     

                                                                                

5       (4) If the state treasurer registers the nonprofit                          

                                                                                

6   corporation as a Michigan early stage venture investment                    

                                                                                

7   corporation under this section, the state treasurer shall return            

                                                                                

8   to the nonprofit corporation 1 copy of its articles of                      

                                                                                

9   incorporation and any amendments to those articles of                       

                                                                                

10  incorporation, with a notation indicating that the nonprofit                

                                                                                

11  corporation is registered as a Michigan early stage venture                 

                                                                                

12  investment corporation.                                                     

                                                                                

13      Sec. 13.  (1) A Michigan early stage venture investment                     

                                                                                

14  corporation shall be governed by a board of directors consisting            

                                                                                

15  of 7 directors.  The directors of the board shall be appointed by           

                                                                                

16  the governor with the advice and consent of the senate as                   

                                                                                

17  follows:                                                                    

                                                                                

18      (a) The state treasurer or his or her designee.                             

                                                                                

19      (b) The chief executive officer of the Michigan economic                    

                                                                                

20  development corporation or his or her designee.                             

                                                                                

21      (c) One person recommended by the speaker of the house of                   

                                                                                

22  representatives.                                                            

                                                                                

23      (d) One person recommended by the majority leader of the                    

                                                                                

24  senate.                                                                     

                                                                                

25      (e) One person recommended by a statewide organization exempt               

                                                                                

26  from taxation under section 501(c)(3) of the internal revenue               

                                                                                

27  code, the members of which represent more than 50% of the venture           


                                                                                

1   capital companies in this state and that has a common interest in           

                                                                                

2   stimulating an entrepreneurial environment in this state,                   

                                                                                

3   encouraging investments in new and emerging companies in this               

                                                                                

4   state, and promoting venture capital investing.                             

                                                                                

5       (f) Two people recommended by the governor.                                 

                                                                                

6       (2) Each director appointed under subsection (1)(c) to (f)                  

                                                                                

7   shall serve for a term of 3 years, except that of those directors           

                                                                                

8   first appointed, the director first appointed under subsection              

                                                                                

9   (1)(c) and 1 of the directors first appointed under subsection              

                                                                                

10  (1)(f) shall each serve for a term of 1 year, the director first            

                                                                                

11  appointed under subsection (1)(d) and 1 of the directors first              

                                                                                

12  appointed under subsection (1)(f) shall each serve for a term of            

                                                                                

13  2 years, and the director first appointed under subsection (1)(e)           

                                                                                

14  shall serve for a term of 3 years.  A vacancy on the board at the           

                                                                                

15  end of or during a director's term shall be filled in the same              

                                                                                

16  manner as the original appointment for the remainder of the                 

                                                                                

17  unexpired term or for the new term and until a successor is                 

                                                                                

18  appointed.                                                                  

                                                                                

19      (3) A majority of the directors appointed and serving                       

                                                                                

20  constitute a quorum for the transaction of business at a meeting            

                                                                                

21  of the board.  A majority vote of the directors present and                 

                                                                                

22  serving is required for official action of the board.                       

                                                                                

23      (4) Each director shall prepare and file with the board                     

                                                                                

24  annually on or before October 1 a disclosure form in which the              

                                                                                

25  director discloses any potential conflict of interest under this            

                                                                                

26  act.                                                                        

                                                                                

27      (5) A director, employee, or agent of the board shall not                   


                                                                                

1   engage in any conduct that constitutes a conflict of interest and           

                                                                                

2   shall immediately advise the board in writing of the details of             

                                                                                

3   any incident or circumstances that may present the existence of a           

                                                                                

4   conflict of interest with respect to the performance of the                 

                                                                                

5   board-related work or duty of the director, employee, or agent of           

                                                                                

6   the board.                                                                  

                                                                                

7       (6) A director who has a conflict of interest related to any                

                                                                                

8   matter before the board shall disclose the conflict of interest             

                                                                                

9   before the board takes any action with respect to the matter,               

                                                                                

10  which disclosure shall become a part of the record of the board's           

                                                                                

11  official proceedings.  The director with the conflict of interest           

                                                                                

12  shall refrain from doing all of the following with respect to the           

                                                                                

13  matter that is the basis of the conflict of interest:                       

                                                                                

14      (a) Voting in the board's proceedings related to the matter.                

                                                                                

15      (b) Participating in the board's discussion of and                          

                                                                                

16  deliberation on the matter.                                                 

                                                                                

17      (c) Being present at the meeting when the discussion,                       

                                                                                

18  deliberation, and voting on the matter take place.                          

                                                                                

19      (d) Discussing the matter with any other board member.                      

                                                                                

20      (7) Failure of a director to comply with subsection (6)                     

                                                                                

21  constitutes misconduct in office.  A director may be removed from           

                                                                                

22  the board for misconduct by a vote of a majority of the directors           

                                                                                

23  not subject to the vote under this subsection appointed and                 

                                                                                

24  serving on the board.                                                       

                                                                                

25      (8) With respect to management of the affairs and property of               

                                                                                

26  the corporation, each director shall exercise the duties of a               

                                                                                

27  fiduciary toward the corporation and shall discharge his or her             


                                                                                

1   duties with the degree of diligence, care, and skill that an                

                                                                                

2   ordinarily prudent person would exercise under the same or                  

                                                                                

3   similar circumstances in a like position.  In discharging his or            

                                                                                

4   her duties, a director, when acting in good faith, may rely upon            

                                                                                

5   the opinion of counsel.  A director may be removed from the board           

                                                                                

6   for a breach of fiduciary duty by a vote of a majority of the               

                                                                                

7   directors not subject to the vote under this subsection appointed           

                                                                                

8   and serving on the board.                                                   

                                                                                

9       (9) A director of the board or an officer or employee of the                

                                                                                

10  board or Michigan early stage venture investment corporation is             

                                                                                

11  not subject to personal liability when acting in good faith                 

                                                                                

12  within the scope of his or her authority or on account of                   

                                                                                

13  liability of the Michigan early stage venture investment                    

                                                                                

14  corporation, and the board may defend and indemnify a director of           

                                                                                

15  the board or an officer or employee of the board or Michigan                

                                                                                

16  early stage venture investment corporation against liability                

                                                                                

17  arising out of the discharge of his or her official duties.  The            

                                                                                

18  Michigan early stage venture investment corporation may indemnify           

                                                                                

19  and procure insurance indemnifying directors of the board and               

                                                                                

20  other officers and employees of the board or Michigan early stage           

                                                                                

21  venture investment corporation from personal loss or                        

                                                                                

22  accountability for liability asserted by a person with regard to            

                                                                                

23  actions of the board or the failure to act by the board or                  

                                                                                

24  Michigan early stage venture investment corporation.  The                   

                                                                                

25  Michigan early stage venture investment corporation may also                

                                                                                

26  purchase and maintain insurance on behalf of any person against             

                                                                                

27  any liability asserted against the person and incurred by the               


                                                                                

1   person in any capacity or arising out of the status of the person           

                                                                                

2   as a director of the board or an officer or employee of the board           

                                                                                

3   or Michigan early stage venture investment corporation, whether             

                                                                                

4   or not the Michigan early stage venture investment corporation              

                                                                                

5   would have the power to indemnify the person against that                   

                                                                                

6   liability under this subsection.  The board or the Michigan early           

                                                                                

7   stage venture investment corporation may by a majority vote of              

                                                                                

8   the board obligate itself in advance to defend and indemnify                

                                                                                

9   persons.                                                                    

                                                                                

10      Sec. 15.  (1) Except as otherwise provided in this act, in                  

                                                                                

11  the nonprofit corporation act, 1982 PA 162, MCL 450.2101 to                 

                                                                                

12  450.3192, by law, or in its articles of incorporation, a Michigan           

                                                                                

13  early stage venture investment corporation may do or delegate any           

                                                                                

14  act consistent with this act and the purposes of the nonprofit              

                                                                                

15  corporation, including, but not limited to, the following:                  

                                                                                

16      (a) Enter into contracts and all necessary activities in the                

                                                                                

17  regular course of business of the Michigan early stage venture              

                                                                                

18  investment corporation.                                                     

                                                                                

19      (b) Charge reasonable fees for the implementation of this act               

                                                                                

20  and the ongoing operation of the Michigan early stage venture               

                                                                                

21  investment corporation.                                                     

                                                                                

22      (c) Perform acts or enter into financial or other                           

                                                                                

23  transactions necessary to carry out its powers and duties under             

                                                                                

24  this act.                                                                   

                                                                                

25      (d) Invest in venture capital funds through equity                          

                                                                                

26  securities.                                                                 

                                                                                

27      (e) Employ a fund manager and other persons it considers                    


                                                                                

1   necessary to implement this act.  The Michigan early stage                  

                                                                                

2   venture investment corporation shall employ only 1 fund manager             

                                                                                

3   at any 1 time.                                                              

                                                                                

4       (2) The fund manager shall exercise the duties of a fiduciary               

                                                                                

5   toward the corporation and shall discharge his or her duties with           

                                                                                

6   the degree of diligence, care, and skill that an ordinarily                 

                                                                                

7   prudent person would exercise under the same or similar                     

                                                                                

8   circumstances in a like position.                                           

                                                                                

9       (3) The fund manager shall solicit investors pursuant to                    

                                                                                

10  section 17.                                                                 

                                                                                

11      (4) The Michigan early stage venture investment corporation                 

                                                                                

12  shall require the fund manager to develop procedures to evaluate            

                                                                                

13  types of business and industry for investment purposes and to set           

                                                                                

14  priorities as to which businesses are most likely to meet the               

                                                                                

15  desired outcomes of the investment plan established under section           

                                                                                

16  19 and which businesses conduct activities that are consistent              

                                                                                

17  with the purposes of this act and of the fund.  This evaluation             

                                                                                

18  shall include, but not be limited to, the location of the firm              

                                                                                

19  and the direct and indirect impact of the business on the                   

                                                                                

20  economic development of this state.                                         

                                                                                

21      Sec. 17.  (1) To secure investment in the fund, the Michigan                

                                                                                

22  early stage venture investment corporation shall enter into                 

                                                                                

23  agreements with investors.                                                  

                                                                                

24      (2) Each agreement shall contain all of the following:                      

                                                                                

25      (a) An established and agreed-upon investment amount and                    

                                                                                

26  repayment schedule.                                                         

                                                                                

27      (b) A guaranteed negotiated amount or negotiated return on                  


                                                                                

1   qualified investment by the certified investor over the term of             

                                                                                

2   the agreement.                                                              

                                                                                

3       (c) A maximum amount of credit that the investor may claim                  

                                                                                

4   under section 37e of the single business tax act, 1975 PA 228,              

                                                                                

5   MCL 208.37e, a successor tax to the single business tax act, 1975           

                                                                                

6   PA 228, MCL 208.1 to 208.145, or under section 270 of the income            

                                                                                

7   tax act of 1967, 1967 PA 281, MCL 206.270, and the first year in            

                                                                                

8   which that credit can be claimed.                                           

                                                                                

9       (3) The Michigan early stage venture investment corporation                 

                                                                                

10  shall notify the department of treasury when agreements are                 

                                                                                

11  entered into under this section and send a copy of each agreement           

                                                                                

12  to the department of treasury.  The department of treasury shall            

                                                                                

13  issue an approval letter to the investor that states that the               

                                                                                

14  investor is entitled to a tax credit under section 37e of the               

                                                                                

15  single business tax act, 1975 PA 228, MCL 208.37e, that is equal            

                                                                                

16  to the difference between the amount actually repaid and the                

                                                                                

17  amount set as the repayment due in the agreement entered into by            

                                                                                

18  the investor and the fund manager.                                          

                                                                                

19      (4) The fund shall repay any amounts due from proceeds from                 

                                                                                

20  the funds raised based on the agreements made under this                    

                                                                                

21  section.                                                                    

                                                                                

22      (5) For tax years that begin after December 31, 2008,                       

                                                                                

23  investors that have certificates may claim a credit under section           

                                                                                

24  37e of the single business tax act, 1975 PA 228, MCL 208.37e, or            

                                                                                

25  section 270 of the income tax act of 1967, 1967 PA 281, MCL                 

                                                                                

26  206.270, as otherwise provided in this act, equal to the                    

                                                                                

27  difference between the amount actually repaid and the amount set            


                                                                                

1   as the repayment due in the agreement entered into by the                   

                                                                                

2   taxpayer and the fund manager.  The Michigan early stage venture            

                                                                                

3   investment corporation shall notify the department of treasury              

                                                                                

4   when credit certificates are issued under this section, and upon            

                                                                                

5   notification and approval by the department of treasury under               

                                                                                

6   section 23, the amount of credit allowed pursuant to the credit             

                                                                                

7   certificate becomes a debt of the fund to the state subject to              

                                                                                

8   repayment pursuant to the agreement between the Michigan early              

                                                                                

9   stage venture investment corporation and the department of                  

                                                                                

10  treasury.  A debt under this section shall accrue interest at the           

                                                                                

11  same rate as the interest paid to the investor.                             

                                                                                

12      (6) Repayment of a debt under this section may be restricted                

                                                                                

13  to specific funds or assets of the Michigan early stage venture             

                                                                                

14  investment corporation.                                                     

                                                                                

15      (7) The Michigan early stage venture investment corporation                 

                                                                                

16  may purchase securities and may manage, transfer, or dispose of             

                                                                                

17  those securities.                                                           

                                                                                

18      (8) The Michigan early stage venture investment corporation                 

                                                                                

19  and its directors are not broker-dealers, agents, investment                

                                                                                

20  advisors, or investment advisor representatives when carrying out           

                                                                                

21  their duties and responsibilities under this act.                           

                                                                                

22      Sec. 19.  (1) A Michigan early stage venture investment                     

                                                                                

23  corporation shall create a Michigan early stage venture                     

                                                                                

24  investment fund, which shall be a restricted fund.                          

                                                                                

25      (2) The fund manager shall establish an investment plan                     

                                                                                

26  approved by the board for the investment of the money in the fund           

                                                                                

27  using the following criteria:                                               


                                                                                

1       (a) Not more than 15% of the total capital and outstanding                  

                                                                                

2   commitments of the fund shall be invested in any single venture             

                                                                                

3   capital company.                                                            

                                                                                

4       (b) The fund manager with the approval of the board shall                   

                                                                                

5   undertake to invest the fund in such a way as to promote that at            

                                                                                

6   least $2.00 will be invested in qualified businesses for every              

                                                                                

7   $1.00 of principal for which credits may be claimed under section           

                                                                                

8   37e of the single business tax act, 1975 PA 228, MCL 208.37e, a             

                                                                                

9   successor tax to the single business tax act, 1975 PA 228, MCL              

                                                                                

10  208.1 to 208.145, or section 270 of the income tax act of 1967,             

                                                                                

11  1967 PA 281, MCL 206.270.                                                   

                                                                                

12      (c) That investments facilitate the transfer of technologies                

                                                                                

13  from the state's various universities and research institutions.            

                                                                                

14      (d) Any other professional portfolio management criteria that               

                                                                                

15  the fund manager and board consider appropriate.                            

                                                                                

16      (e) Priorities for investment in venture capital may be based               

                                                                                

17  on an evaluation, which shall consider the following criteria:              

                                                                                

18                                                                               (i) The retention of those businesses which would be likely                         

                                                                                

19  to leave this state absent the investment.                                  

                                                                                

20      (ii) The revitalization and diversification of the economic                  

                                                                                

21  base of this state.                                                         

                                                                                

22      (iii) Generating and retaining jobs and investment in this                   

                                                                                

23  state.                                                                      

                                                                                

24      (3) Consistent with the plan established under subsection                   

                                                                                

25  (2), the fund manager shall select venture capital companies from           

                                                                                

26  among those venture capital companies that apply for money from             

                                                                                

27  the fund considering the following criteria:                                


                                                                                

1       (a) The venture capital company's probability of success in                 

                                                                                

2   generating above-average returns through investing in qualified             

                                                                                

3   businesses.                                                                 

                                                                                

4       (b) The venture capital company's probability of success in                 

                                                                                

5   soliciting investments.  The level of investment from the fund              

                                                                                

6   committed to each venture capital company shall not be more than            

                                                                                

7   25% of the venture capital company's total capital under                    

                                                                                

8   management.                                                                 

                                                                                

9       (c) The venture capital company's probability of success as                 

                                                                                

10  it relates to the investment plan criteria under subsection                 

                                                                                

11  (2)(b).                                                                     

                                                                                

12      (d) The venture capital company has a significant presence in               

                                                                                

13  this state as determined by the Michigan early stage venture                

                                                                                

14  investment corporation.                                                     

                                                                                

15      (e) The venture capital company will undertake to invest in                 

                                                                                

16  qualified businesses, as determined at the point of initial                 

                                                                                

17  investment, a percentage of invested capital equal to or greater            

                                                                                

18  than the percentage of invested capital that the venture capital            

                                                                                

19  company received from the fund.                                             

                                                                                

20      (f) The venture capital company's consideration of minority                 

                                                                                

21  owned businesses in its investment activities.                              

                                                                                

22      Sec. 21.  The fund manager shall file a report with the                     

                                                                                

23  Michigan early stage venture investment corporation that includes           

                                                                                

24  an annual financial audit conducted by an independent auditor and           

                                                                                

25  any other financial information and documentation required by the           

                                                                                

26  Michigan early stage venture investment corporation to ensure the           

                                                                                

27  proper administration and investment of the fund.                           


                                                                                

1       Sec. 23.  (1) The Michigan early stage venture investment                   

                                                                                

2   corporation shall determine which investors are eligible for tax            

                                                                                

3   credits under section 37e of the single business tax act, 1975 PA           

                                                                                

4   228, MCL 208.37e, and section 270 of the income tax act of 1967,            

                                                                                

5   1967 PA 281, MCL 206.270, and the amount of the tax credit under            

                                                                                

6   those sections allowed to each investor.                                    

                                                                                

7       (2) The Michigan early stage venture investment corporation                 

                                                                                

8   shall determine which investors are eligible for tax credits                

                                                                                

9   under this section and submit proposed certificates that meet the           

                                                                                

10  criteria under subsection (3) to the department of treasury for             

                                                                                

11  approval.  The department of treasury shall approve or deny                 

                                                                                

12  proposed certificates within 30 days after receipt of the                   

                                                                                

13  certificates.  If the department of treasury denies a proposed              

                                                                                

14  certificate, the department of treasury shall notify the Michigan           

                                                                                

15  early stage venture investment corporation and the investor of              

                                                                                

16  the denial and the reason for the denial.  If a proposed                    

                                                                                

17  certificate is denied under this subsection, the Michigan early             

                                                                                

18  stage venture investment corporation is not prohibited from                 

                                                                                

19  subsequently submitting a proposed certificate on behalf of that            

                                                                                

20  same investor.  If the department of treasury does not approve or           

                                                                                

21  deny the certificates within 30 days, the certificates are                  

                                                                                

22  considered approved.                                                        

                                                                                

23      (3) The Michigan early stage venture investment corporation                 

                                                                                

24  shall issue a certificate approved under subsection (2) to each             

                                                                                

25  investor that states all of the following:                                  

                                                                                

26      (a) The taxpayer is an investor.                                            

                                                                                

27      (b) The taxpayer's federal employer identification number or                


                                                                                

1   the number assigned to the taxpayer by the department of treasury           

                                                                                

2   for filing purposes under the single business tax act, 1975 PA              

                                                                                

3   228, MCL 208.1 to 208.145.                                                  

                                                                                

4       (c) The amount of the tax credit that the taxpayer may claim                

                                                                                

5   against its tax liability under section 37e of the single                   

                                                                                

6   business tax act, 1975 PA 228, MCL 208.37e, or section 270 of the           

                                                                                

7   income tax act of 1967, 1967 PA 281, MCL 206.270.                           

                                                                                

8       (d) The tax years for which the credit under subdivision (c)                

                                                                                

9   may be claimed and the maximum annual amount that may be claimed            

                                                                                

10  each tax year.                                                              

                                                                                

11      (e) The tax credit is refundable.                                           

                                                                                

12      (4) The fund manager shall invest, budget, and plan scheduled               

                                                                                

13  payments and repayments so that no credits are claimed under                

                                                                                

14  section 37e of the single business tax act, 1975 PA 228, MCL                

                                                                                

15  208.37e, in any tax year before tax years that begin after                  

                                                                                

16  December 31, 2008.                                                          

                                                                                

17      (5) Certificates under this section shall be issued to an                   

                                                                                

18  investor at the time that the Michigan early stage venture                  

                                                                                

19  investment corporation determines that, for that investor,                  

                                                                                

20  capital is not sufficient to meet the guaranteed negotiated                 

                                                                                

21  amount or the negotiated return on qualified investment of that             

                                                                                

22  investor.  The total of all certificates issued under this                  

                                                                                

23  section shall not exceed the maximum amount allowed under section           

                                                                                

24  37e(2) of the single business tax act, 1975 PA 228, MCL 208.37e.            

                                                                                

25      (6) Certificates under this section shall not be issued until               

                                                                                

26  December 31, 2008 or 5 years after all the requirements under               

                                                                                

27  section 29 have been met, whichever occurs later.                           


                                                                                

1       Sec. 25.  This act shall be construed liberally to                          

                                                                                

2   effectuate the legislative intent and its purposes.  All powers             

                                                                                

3   granted shall be cumulative and not exclusive and shall be                  

                                                                                

4   broadly interpreted to effectuate the intent and purposes and not           

                                                                                

5   as a limitation of powers.                                                  

                                                                                

6       Sec. 27.  The Michigan early stage venture investment                       

                                                                                

7   corporation shall publish an annual report not more than 3 months           

                                                                                

8   after the close of the Michigan early stage venture investment              

                                                                                

9   corporation's fiscal year that includes all of the following:               

                                                                                

10      (a) An enumeration of all investment and related activities                 

                                                                                

11  for the fiscal year.                                                        

                                                                                

12      (b) Documentation and analysis of the implementation and                    

                                                                                

13  status of the Michigan early stage venture investment                       

                                                                                

14  corporation's investment plan and the economic impact of the plan           

                                                                                

15  on this state, including, but not limited to, the following:                

                                                                                

16                                                                               (i) The number of jobs represented by the investments made in                       

                                                                                

17  qualified businesses in this state.                                         

                                                                                

18      (ii) Return on investment generated by investment, the types                 

                                                                                

19  of activities in which investment was made, and the impact of               

                                                                                

20  that investment on the economic base of this state.                         

                                                                                

21      Sec. 29.  Not later than 1 year after the effective date of                 

                                                                                

22  this act or 10 months after the Michigan early stage venture                

                                                                                

23  investment corporation receives a determination from the internal           

                                                                                

24  revenue service that it is exempt from taxation under section               

                                                                                

25  501(c)(3) of the internal revenue code, whichever occurs later,             

                                                                                

26  all of the following shall occur:                                           

                                                                                

27      (a) The Michigan early stage venture investment corporation                 


                                                                                

1   shall be established and the board appointed.                               

                                                                                

2       (b) A fund manager shall be hired by the Michigan early stage               

                                                                                

3   venture investment corporation.                                             

                                                                                

4       (c) An investment plan shall be established.                                

                                                                                

5       (d) Funds shall have been solicited and available for                       

                                                                                

6   investment consistent with the investment plan.                             

                                                                                

7       Sec. 31.  The fund created in section 19 shall expire on                    

                                                                                

8   January 1, 2054.  Any money in the fund, subject to all                     

                                                                                

9   outstanding debts and obligation of the Michigan early stage                

                                                                                

10  venture investment corporation being defeased and satisfied,                

                                                                                

11  shall be distributed as provided in the Michigan early stage                

                                                                                

12  venture investment corporation's articles of incorporation or               

                                                                                

13  amendments to those articles of incorporation transferred to the            

                                                                                

14  general fund of this state on that date.                                    

                                                                                

15      Sec. 33.  This act does not take effect unless all of the                   

                                                                                

16  following bills of the 92nd Legislature are enacted into law:               

                                                                                

17      (a) Senate Bill No. 835.                                                    

                                                                                

18      (b) House Bill No. 5322.                                                    

                                                                                

19      Enacting section 1.  The state of Michigan has engaged in                   

                                                                                

20  activities on a regular basis and for a significant amount of               

                                                                                

21  time intended to promote the overall economic development of the            

                                                                                

22  state.  The cost of funding these activities is recognized as a             

                                                                                

23  burden on this state that can be lessened through the                       

                                                                                

24  establishment and registration of Michigan early stage venture              

                                                                                

25  investment corporations and Michigan early stage venture capital            

                                                                                

26  investment funds.  By working cooperatively with this state,                

                                                                                

27  Michigan early stage venture investment corporations will benefit           


                                                                                

1   the general public, thus assisting this state in carrying out its           

                                                                                

2   essential functions, including the promotion of economic                    

                                                                                

3   development in this state.  If this legislation does not become             

                                                                                

4   law, the opportunity to help carry that burden will be lost to              

                                                                                

5   this state and a greater burden will remain on the government and           

                                                                                

6   the general public for future activities to promote economic                

                                                                                

7   development in this state.