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.