February 12, 2015, Introduced by Reps. Pscholka, Kelly, Price, McCready, Poleski, Webber, Heise, Graves, Canfield, Hooker, Forlini, Hughes, Pagel, Bizon, Goike, Brett Roberts, Iden, Outman, Jacobsen, Cole, Johnson, Chatfield, Victory, Garcia, Theis, Bumstead, Sheppard, Singh, Rendon, Cox, Leutheuser, Lauwers, Runestad, McBroom, Kivela, Dillon, Dianda, Zemke, Clemente, Hoadley, Aaron Miller, Pagan, Howrylak, Somerville, Maturen, Vaupel, Schor and Moss and referred to the Committee on Commerce and Trade.
A bill to amend 2003 PA 296, entitled
"Michigan early stage venture investment act of 2003,"
by amending sections 15, 17, and 19 (MCL 125.2245, 125.2247, and
125.2249), section 15 as amended by 2005 PA 102 and sections 17 and
19 as amended by 2007 PA 173.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 15. (1) Except as otherwise provided in this act, in the
nonprofit corporation act, 1982 PA 162, MCL 450.2101 to 450.3192,
by law, or in its articles of incorporation, a Michigan early stage
venture investment corporation may do or delegate any act
consistent with this act and the purposes of the nonprofit
corporation, including, but not limited to, the following:
(a) Enter into contracts and all necessary activities in the
regular course of business of the Michigan early stage venture
investment corporation.
(b) Charge reasonable fees for the implementation of this act
and the ongoing operation of the Michigan early stage venture
investment corporation.
(c) Perform acts or enter into financial or other transactions
necessary to carry out its powers and duties under this act.
(d) Invest in venture capital funds through equity securities.
(e) Employ fund managers and other persons it considers
necessary to implement this act.
(2) The fund manager shall exercise the duties of a fiduciary
toward the corporation and shall discharge his or her duties with
the degree of diligence, care, and skill that an ordinarily prudent
person would exercise under the same or similar circumstances in a
like position.
(3)
The Except as otherwise
provided in section 19(4), the
fund manager shall solicit investors pursuant to section 17.
(4) The Michigan early stage venture investment corporation
shall require the fund manager to develop procedures to evaluate
types of business and industry for investment purposes and to set
priorities as to which businesses are most likely to meet the
desired outcomes of the investment plan established under section
19 and which businesses conduct activities that are consistent with
the purposes of this act and of the fund. This evaluation shall
include, but not be limited to, the location of the firm and the
direct and indirect impact of the business on the economic
development of this state.
Sec.
17. (1) To Subject to
subsection (9), 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, former 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, 206.713, and the first
year in which that tax voucher may be used to pay a liability under
the
single business tax act, former
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,
206.713, including any withholding tax imposed on the
investor under the income tax act of 1967, 1967 PA 281, MCL 206.1
to
206.532.206.713.
(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 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, 206.713,
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.
(9) The Michigan early stage venture investment corporation
shall not enter into any new agreements with investors after
December 31, 2014.
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, former 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 206.532.206.713.
(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 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.
(4) A Michigan early stage venture investment corporation
shall not create a Michigan early stage venture investment fund or
make any new investments in a venture capital company or a
qualified business after December 31, 2014.