SB-0931, As Passed House, December 12, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SENATE BILL No. 931

 

 

November 29, 2007, Introduced by Senator McMANUS and referred to the Committee on Finance.

 

 

 

     A bill to amend 2003 PA 296, entitled

 

"Michigan early stage venture investment act of 2003,"

 

by amending sections 17, 19, and 23 (MCL 125.2247, 125.2249, and

 

125.2253), as amended by 2005 PA 102.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

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

 

early stage venture investment corporation shall enter into

 

agreements with investors.

 

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

 

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

 

repayment schedule.

 

     (b) A negotiated amount or negotiated return on qualified

 

investment by the investor over the term of the agreement.

 


     (c) A maximum amount of tax vouchers that the investor may use

 

to pay a liability under the single business tax act, 1975 PA 228,

 

MCL 208.1 to 208.145, a successor tax to the single business tax

 

act, 1975 PA 228, MCL 208.1 to 208.145 the Michigan business tax

 

act, 2007 PA 36, MCL 208.1101 to 208.1601, or under the income tax

 

act of 1967, 1967 PA 281, MCL 206.1 to 206.532, and the first year

 

in which that tax voucher may be used to pay a liability under the

 

single business tax act, 1975 PA 228, MCL 208.1 to 208.145, the

 

Michigan business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, or

 

the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532,

 

including any withholding tax imposed on the investor under the

 

income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532.

 

     (3) The Michigan early stage venture investment corporation

 

shall notify the department of treasury when agreements are entered

 

into under this section and send a copy of each agreement to the

 

department of treasury. After making the determination required

 

under section 23(2), the department of treasury shall issue an

 

approval letter to the investor that states that the investor is

 

entitled to a tax voucher that is equal to the difference between

 

the amount actually repaid and the amount set as the repayment due

 

in the agreement entered into by the investor and the Michigan

 

early stage venture investment corporation.

 

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

 

the funds raised based on the agreements made under this section

 

and from the proceeds of investments made by the fund.

 

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

 

investors that have tax voucher certificates issued pursuant to

 


section 23 may use the tax voucher to pay a liability owed by the

 

investor under the single Michigan business tax act, 1975 PA 228,

 

MCL 208.1 to 208.145 2007 PA 36, MCL 208.1101 to 208.1601, or the

 

income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, as

 

provided in this act, up to an amount equal to the difference

 

between the amount actually repaid and the amount set as the

 

repayment due in the agreement entered into by the taxpayer and the

 

Michigan early stage venture investment corporation. The Michigan

 

early stage venture investment corporation shall notify the

 

department of treasury when tax voucher certificates are issued

 

under section 23(5).

 

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

 

to specific funds or assets of the Michigan early stage venture

 

investment corporation.

 

     (7) The Michigan early stage venture investment corporation

 

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

 

those securities.

 

     (8) The Michigan early stage venture investment corporation

 

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

 

advisors, or investment advisor representatives when carrying out

 

their duties and responsibilities under this act.

 

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

 

corporation shall create a Michigan early stage venture investment

 

fund, which shall be a restricted fund.

 

     (2) The fund manager shall establish an investment plan

 

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

 

using the following criteria:

 


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

 

commitments of the fund shall be invested in any single venture

 

capital company.

 

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

 

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

 

least $2.00 will be invested in qualified businesses for every

 

$1.00 of principal for which tax vouchers may be used to pay a

 

liability under the single business tax act, 1975 PA 228, MCL 208.1

 

to 208.145, a successor tax to the single business tax act, 1975 PA

 

228, MCL 208.1 to 208.145 the Michigan business tax act, 2007 PA

 

36, MCL 208.1101 to 208.1601, or the income tax act of 1967, 1967

 

PA 281, MCL 206.1 to 206.532.

 

     (c) That investments facilitate the transfer of technologies

 

from the state's various universities and research institutions.

 

     (d) Any other professional portfolio management criteria that

 

the fund manager and board consider appropriate.

 

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

 

on an evaluation, which shall consider the following criteria:

 

     (i) The retention of those businesses which that would be

 

likely to leave this state absent the investment.

 

     (ii) The revitalization and diversification of the economic

 

base of this state.

 

     (iii) Generating and retaining jobs and investment in this

 

state.

 

     (3) Consistent with the plan established under subsection (2),

 

the fund manager shall select venture capital companies from among

 

those venture capital companies that apply for money from the fund

 


considering the following criteria:

 

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

 

generating above-average returns through investing in qualified

 

businesses.

 

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

 

soliciting investments. The level of investment from the fund

 

committed to each venture capital company shall not be more than

 

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

 

management.

 

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

 

relates to the investment plan criteria under subsection (2)(b).

 

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

 

this state as determined by the Michigan early stage venture

 

investment corporation.

 

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

 

qualified businesses, as determined at the point of initial

 

investment, a percentage of invested capital equal to or greater

 

than the percentage of invested capital that the venture capital

 

company received from the fund.

 

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

 

owned businesses in its investment activities.

 

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

 

corporation shall determine which investors are eligible for tax

 

vouchers under the single business tax act, 1975 PA 228, MCL 208.1

 

to 208.145, the Michigan business tax act, 2007 PA 36, MCL 208.1101

 

to 208.1601, and the income tax act of 1967, 1967 PA 281, MCL 206.1

 

to 206.532, and the amount of the tax voucher or vouchers allowed

 


to each investor.

 

     (2) The Michigan early stage venture investment corporation

 

shall determine which investors are eligible for tax vouchers under

 

this section and submit proposed tax voucher certificates that meet

 

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

 

approval. The department of treasury shall approve or deny proposed

 

tax voucher certificates within 30 days after receipt of the

 

proposed tax voucher certificates. If the department of treasury

 

denies a proposed tax voucher certificate, the department of

 

treasury shall notify the Michigan early stage venture investment

 

corporation and the investor of the denial and the reason for the

 

denial. If a proposed tax voucher certificate is denied under this

 

subsection, the Michigan early stage venture investment corporation

 

is not prohibited from subsequently submitting a proposed tax

 

voucher certificate on behalf of that same investor. If the

 

department of treasury does not approve or deny the proposed tax

 

voucher certificates within 30 days, the proposed tax voucher

 

certificates are considered approved as submitted. The approval by

 

the department of treasury under this section may be a condition to

 

the effectiveness of the agreement between the investor and the

 

Michigan early stage investment corporation required under section

 

17(1).

 

     (3) At the time permitted under subsection (5), the Michigan

 

early stage venture investment corporation shall issue a tax

 

voucher certificate approved under subsection (2) to each investor

 

in the name of the investor that states all of the following:

 

     (a) The taxpayer is an investor.

 


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

 

the number assigned to the taxpayer by the department of treasury

 

for filing purposes under the single business tax act, 1975 PA 228,

 

MCL 208.1 to 208.145, or the Michigan business tax act, 2007 PA 36,

 

MCL 208.1101 to 208.1601.

 

     (c) The amount of the tax voucher that any taxpayer that uses

 

the tax voucher may use to pay its tax liability under the single

 

business tax act, 1975 PA 228, MCL 208.1 to 208.145, the Michigan

 

business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, or the

 

income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532.

 

     (d) The tax years for which the tax voucher under subdivision

 

(c) may be used and the maximum annual amount that may be used each

 

tax year.

 

     (e) The amount of the tax vouchers that may be used shall not

 

exceed the tax liability under the single business tax act, 1975 PA

 

228, MCL 208.1 to 208.145, the Michigan business tax act, 2007 PA

 

36, MCL 208.1101 to 208.1601, or the income tax act of 1967, 1967

 

PA 281, MCL 206.1 to 206.532, of the taxpayer that uses the tax

 

voucher.

 

     (f) The tax voucher may be transferred in whole or in part.

 

     (g) If the amount of any tax voucher certificate exceeds the

 

investor's tax liability under the single business tax act, 1975 PA

 

228, MCL 208.1 to 208.145, the Michigan business tax act, 2007 PA

 

36, MCL 208.1101 to 208.1601, or the income tax act of 1967, 1967

 

PA 281, MCL 206.1 to 206.532, the amount that exceeds the

 

investor's tax liability may be retained and used to pay a future

 

liability of the investor under the single business tax act, 1975

 


PA 228, MCL 208.1 to 208.145, the Michigan business tax act, 2007

 

PA 36, MCL 208.1101 to 208.1601, or the income tax act of 1967,

 

1967 PA 281, MCL 206.1 to 206.532.

 

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

 

payments and repayments so that no tax voucher is used in any tax

 

year before tax years that begin after December 31, 2008.

 

     (5) The Michigan early stage investment corporation shall

 

issue tax voucher certificates under this section to an investor at

 

the time that the Michigan early stage venture investment

 

corporation determines that, for that investor, it is unable to pay

 

the negotiated amount or the negotiated return on qualified

 

investment of that investor on or before the date on which payment

 

is due. The total of all tax voucher certificates issued under this

 

section shall not exceed the maximum amount allowed under section

 

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

 

or, after December 31, 2007, the maximum amount allowed under

 

section 419(2) of the Michigan business tax act, 2007 PA 36, MCL

 

208.1419.

 

     (6) Tax voucher certificates under this section shall not be

 

issued until December 31, 2008.

 

     (7) A tax voucher certificate issued under subsection (5), or

 

the right to be issued and receive a tax voucher certificate from

 

the Michigan early stage venture investment corporation, may be

 

transferred in whole or in part by a holder to another person if

 

the holder notifies the department of treasury and the Michigan

 

early stage venture investment corporation in writing of the

 

transfer, the amount of the tax voucher certificate to be

 


transferred, and the name and tax identification information

 

provided for under subsection (3) of the proposed transferee. The

 

tax voucher certificate transferred under this subsection shall be

 

made on a form prescribed by the department of treasury. The holder

 

shall send a copy of the completed transfer form to the department

 

of treasury within 60 days after the date of the transfer.

 

     (8) A transfer under this section is irrevocable. If the

 

holder is transferring less than all of the tax voucher certificate

 

to a transferee, the department of treasury may issue new tax

 

voucher certificates to the holder and transferee representing the

 

allocated values of the tax voucher certificates held by the holder

 

and the transferee after the transfer.

 

     (9) A holder of a tax voucher certificate shall attach a copy

 

of the tax voucher certificate and, if applicable, a completed

 

transfer form to its annual return for the tax toward which the tax

 

voucher certificate is used by the holder. If the amount of any tax

 

voucher certificate eligible to be used by a holder is in excess of

 

the holder's tax liability under either the single business tax

 

act, 1975 PA 228, MCL 208.1 to 208.145, the Michigan business tax

 

act, 2007 PA 36, MCL 208.1101 to 208.1601, or the income tax act of

 

1967, 1967 PA 281, MCL 206.1 to 206.532, the excess may be retained

 

and used to pay any future single business tax or income tax

 

liability of the holder.