Bill Text: CA SB1467 | 2011-2012 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Business investment: tax credits.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced - Dead) 2012-04-18 - Set, first hearing. Hearing canceled at the request of author. [SB1467 Detail]

Download: California-2011-SB1467-Introduced.html

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BILL NUMBER: SB 1467	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator DeSaulnier
   (Coauthor: Senator Vargas)
   (Coauthor: Assembly Member Hueso)

                        FEBRUARY 24, 2012

   An act to add Division 3.5 (commencing with Section 28960) to
Title 4 of the Corporations Code, relating to business investment.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1467, as introduced, DeSaulnier. Business investment: tax
credits.
   Existing law imposes a gross premiums tax on insurers in lieu of
other taxes, with certain exceptions. Existing law provides for
credits against tax liability for certain taxpayers meeting various
requirements. The Capital Access Company Law provides for licensing
and regulation by the Commissioner of Corporations of capital access
companies, which provide risk capital and management assistance to
business entities.
   This bill would enact the California Capital Access Company Credit
Act, which would provide an investment tax credit against insurer
premium tax liability to participating investors, as defined, and
would provide for sale or transfer of the tax credits to other
parties. The bill would provide for a maximum amount of tax credits
of $200,000,000, which could be claimed over specified tax years and
carried forward until tax year 2037. The bill would provide for the
Business, Transportation and Housing Agency to, among other things,
qualify applicants as qualified capital access companies, which would
receive investment commitments from participating investors and make
qualified investments in qualified businesses, subject to approval
by the agency. The bill would specify the process for qualified
distributions to be made by the qualified capital access company to
private investors and the state, with the state share to be deposited
in the General Fund or in the Economic Development Fund, which would
be created by the bill, as specified. The bill would provide for
certain application and certification fees, and impose certain
penalties, and provide for these revenues to be deposited in the
Economic Development Fund. The bill would define various terms for
purposes of the act.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Division 3.5 (commencing with Section 28960) is added
to Title 4 of the Corporations Code, to read:

      DIVISION 3.5.  CALIFORNIA CAPITAL ACCESS COMPANY CREDIT ACT


   28960.  This division shall be known and may be cited as the
California Capital Access Company Credit Act.
   28961.  As used in this division:
   (a) (1) "Affiliate" means either of the following:
   (A) Any person who, directly or indirectly, beneficially owns,
controls, or holds power to vote 15 percent or more of the
outstanding voting securities or other voting ownership interest of a
qualified capital access company or insurance company.
   (B) Any person, 15 percent or more of whose outstanding voting
securities or other voting ownership interests are directly or
indirectly beneficially owned, controlled, or held with power to vote
by a qualified capital access company or insurance company.
   (2) Notwithstanding anything in this subdivision, an investment by
a participating investor in a qualified capital access company
pursuant to an allocation of investment tax credits under this
section does not cause that qualified capital access company to
become an affiliate of that participating investor.
   (b) "Allocation amount" means the total amount of tax credits
allocated to the participating investors in a qualified capital
access company pursuant to this division.
   (c) "Allocation date" means the date on which investment tax
credits under Section 28964 are allocated to the participating
investor of a qualified capital access company under this division.
   (d) "Base investment amount" means fourteen million dollars
($14,000,000) in the case of a qualified capital access company
receiving one allocation of tax credits and twenty-eight million
dollars ($28,000,000) in the case of a qualified capital access
company receiving two allocations of tax credits, which shall be
available in cash or cash equivalents immediately following the
investment by a qualified capital access company's participating
investors and its owners; provided, however, that a contract for
payment of cash or cash equivalents over a specified period of time
shall also be sufficient.
   (e) "Capital access company" means a venture capital fund licensed
by the Department of Corporations under the Capital Access Company
Law (Division 3 (commencing with Section 28000)).
   (f) "Designated capital" means an amount of money that is invested
by a participating investor in a qualified capital access company.
   (g) "Distributable cash" means the excess of the sum of all cash
receipts of all kinds over cash disbursements for operating expenses
and qualified distributions, or reserves therefor. The general
partner may, at its sole discretion, retain reasonable amounts for
working capital and reserves for contingencies and reasonably
foreseeable obligations.
   (h) "Investment period" means the period January 1, 2013, to
December 31, 2021, inclusive.
   (i) "Participating investor" means any insurance company required
to pay the gross premiums tax pursuant to Part 7 of Division 2
(commencing with Section 12001) of the Revenue and Taxation Code that
contributes designated capital pursuant to this division.
   (j) "Percentage interest" means, with respect to a private
investor, the ratio of the private investor's capital contribution to
the total capital contributions of all private investors, as
adjusted from time to time.
   (k) "Person" means a natural person or an entity, including, but
not limited to, a corporation, general or limited partnership, trust,
or limited liability company.
   (l) "Private investor" means any investor in a capital access
company other than a participating investor or the manager of a
capital access company.
   (m) "Profit share percentage" means allocation of distributable
cash as provided in Section 28968.
   (n) (1) "Qualified business" means a business that is
independently owned and operated and meets all of the following
requirements:
   (A) It is headquartered in California, its principal business
operations are located California, and at least 60 percent of its
employees are located in California.
   (B) It has not more than 100 employees.
   (C) It is not principally engaged in professional services
provided by accountants, doctors, or lawyers; banking or lending;
real estate development; insurance; oil or gas exploration; or direct
gambling activities.
   (D) It is not a franchise of, and has no financial relationship
with, a qualified capital access company or any affiliate of a
qualified capital access company prior to a qualified capital access
company's first qualified investment in the business; provided,
however, that if it continues to fulfill its fiduciary duty to the
program established by this division, then the business may be one in
which the qualified capital access company, its affiliates, or a
separate fund managed by the managers of the capital access company
was invested prior to the allocation of investment tax credits to the
capital access company; and provided, further, that if the qualified
capital access company continues to fulfill its fiduciary duty to
the program established by this division, then the business may be
one in which a separate fund managed by the managers of the qualified
capital access company makes an investment after the investment by
the qualified capital access company.
   (2) (A) The requirements of paragraph (1) may, in the alternative,
be met if the qualified capital access company represents in its
application for funding approval that the business will, in the
definitive purchase agreements to be executed upon closing, agree to
both of the following:
   (i) Commence locating its headquarters, its principal business
operations, and at least 60 percent of its employees in California.
   (ii) Complete all of the required elements of paragraph (1) within
12 months after closing.
   (B) If the business fails to fulfill the commitments specified in
subparagraph (A), the Secretary of Business, Transportation and
Housing may, in the secretary's sole discretion, impose a penalty on
the qualified capital access company. Notwithstanding anything in
this subdivision, the penalty shall be imposed such that the profit
share percentage, as otherwise defined in Section 28968, shall be
amended such that the profit share percentage distributed to the
state by the qualified capital access company shall equal 80 percent
of any distributions arising from the qualified capital access
company's investments, other than qualified distributions or
distributions or repayments of capital contributions by the qualified
capital access company's equity owners who are not participating
investors.
   (3) A business classified as a qualified business at the time of
the first qualified investment in the business shall remain
classified as a qualified business and may receive continuing
qualified investments from any qualified capital access company;
provided, however, that the business continues to meet the
requirements of paragraph (1).
   (o) "Qualified capital access company" means a qualified capital
access company that has been approved to receive an investment tax
credit allocation.
   (p) "Qualified distribution" means any distribution or payment by
a qualified capital access company other than pursuant to a profit
allocation in connection with any of the following:
   (1) Costs and expenses of forming, syndicating, and organizing the
qualified capital access company, including fees paid for
professional services; provided, however, that startup costs shall
not exceed 2 percent of the total capital of the capital access
company or five hundred thousand dollars ($500,000).
   (2) An annual management fee to offset the costs and expenses of
managing and operating a qualified capital access company; provided,
however, that in the first four years following its allocation date,
a qualified capital access company's management fee shall not exceed
2 percent of its base investment amount per annum and in the fifth to
10th years, inclusive, following its allocation date, a qualified
capital access company's management fee per annum shall not exceed 2
percent of the lesser of its base investment amount or its qualified
investments.
   (3) Reasonable and necessary fees in accordance with industry
custom for ongoing professional services, including, but not limited
to, legal and accounting services related to the operation of a
qualified capital access company, not including any lobbying or
governmental relations; provided, however, professional service fees
shall not exceed two hundred thousand dollars ($200,000) annually.
   (4) An increase or projected increase in federal or state taxes of
the private investors of a qualified capital access company
resulting from the earnings or other tax liability of a qualified
capital access company to the extent that the increase is related to
the ownership, management, or operation of a qualified capital access
company; provided, however, that those distributions shall not
exceed that actual tax liability due and payable on that investor's
actual return. Documents supporting the payments shall be provided to
the Franchise Tax Board upon request.
   (q) "Qualified investment" means the investment of cash by a
qualified capital access company in a qualified business for the
purchase of equity, equity options, warrants, or debt convertible to
equity. An investment by a qualified capital access company in a debt
instrument whose terms are substantially equivalent to terms
typically found in debt financing provided by banks to profitable
companies, such as security interests in tangible assets with readily
discernable orderly liquidation value in excess of the loan amount
or personal guarantees, shall not be deemed as a qualified
investment. Qualified investments determined to be seed or early
stage investments shall be increased by 300 percent for purposes of
determining if a qualified capital access company meets the
investment thresholds in Section 28965.
   (r) "Seed or early stage investment" means an investment in a
company that has a product or service in testing or pilot production
that may or may not be commercially available. The company may or may
not be generating revenues and may have been in business less than
three years at the time of investment.
   (s) "State" means the State of California.
   (t) "State premium tax liability" means any liability incurred by
an insurance company under the provisions of Part 7 (commencing with
Section 12001) of Division 2 of the Revenue and Taxation Code.
   28962.  (a) A participating investor shall earn an investment tax
credit against its state premium tax liability equal to 100 percent
of the investment tax credit allocated to the participating investor
under Section 28964. The participating investor's investment tax
credit shall be earned and vested upon making its investment in the
qualified capital access company. Beginning January 1, 2013, a
participating investor may claim the investment tax credit as
follows:
   (1) In tax years 2014, 2015, 2016, and 2017, an amount equal to 15
percent of the investment tax credit allocated to the participating
investor.
   (2) In tax years 2018, 2019, 2020, and 2021, an amount equal to 10
percent of the investment tax credit allocated to the participating
investor.
   (b) No participating investor's investment tax credit for any
taxable year shall exceed the participating investor's state premium
tax liability for that year. If the amount of the investment tax
credit determined under this section for any taxable year exceeds the
state premium tax liability, then the excess shall be an investment
tax credit carryover to future taxable years until tax year 2037.
Investment tax credits may be used in connection with both final
payments and prepayments of a participating investor's state premium
tax liability. Investment tax credits may be sold or otherwise
transferred by a participating investor to another entity, which may
likewise resell or transfer the tax credits, provided that the
Franchise Tax Board receives written notification within 30 days of
any sale or transfer. However, investment tax credits are not
refundable.
   (c) A participating investor claiming an investment tax credit
under this section is not required to pay any additional retaliatory
tax levied as a result of claiming the investment tax credit.
   (d) A participating investor is not required to reduce the amount
of tax pursuant to the state premium tax liability included by the
participating investor in connection with ratemaking for any
insurance contract written in this state because of a reduction in
the participating investor's tax liability based on the investment
tax credit allowed under this section.
   (e) If the taxes paid by a participating investor with respect to
its state premium tax liability constitute a credit against any other
tax that is imposed by this state, the participating investor's
credit against the other tax shall not be reduced by virtue of the
reduction in the participating investor's tax liability based on the
investment tax credit allowed under this section.
   28963.  (a) The Business, Transportation and Housing Agency, in
consultation with the Franchise Tax Board, shall provide a
standardized format for persons attempting to qualify as a qualified
capital access company.
   (b) An applicant for qualification is required to do all of the
following:
   (1) File an application with the Business, Transportation and
Housing Agency.
   (2) Pay a nonrefundable application fee of seven thousand five
hundred dollars ($7,500) at the time of filing the application, to be
deposited in the Economic Development Fund.
   (3) Submit, as part of its application, an audited balance sheet
that contains an unqualified opinion of an independent certified
public accountant issued not more than 60 days before the application
date that states that the applicant has an equity capitalization of
five million dollars ($5,000,000) or more in the form of unencumbered
cash, marketable securities, or other liquid assets.
   (c) The Business, Transportation and Housing Agency and the
Franchise Tax Board shall review the organizational documents of each
applicant for certification and determine whether the applicant has
satisfied the requirements of this division.
   (d) Within 30 days after the receipt of an application, the
Business, Transportation and Housing Agency shall issue the
certification or refuse the certification and communicate in detail
to the applicant the grounds for refusal, including suggestions for
the removal of those grounds.
   (e) The Business, Transportation and Housing Agency shall begin
accepting applications to become a qualified capital access company
by January 31, 2013. All applications must be submitted to the agency
no later than October 1, 2013.
   28964.  (a) The Business, Transportation and Housing Agency, in
consultation with the Franchise Tax Board, shall provide a
standardized format for a qualified capital access company to apply
for the investment tax credits.
   (b) Applications shall contain the information as required by the
Franchise Tax Board and the Business, Transportation and Housing
Agency, including statements regarding the ability to obtain the
required investment commitments. Each qualified capital access
company shall submit irrevocable investment commitments from
participating investors and qualified capital access company private
investors in an aggregate amount equal to at least the base
investment amount not later than November 30, 2013. Qualified capital
access companies that are awarded investment tax credits under this
chapter based on the asserted ability to raise the required capital
shall be subject to a fifty-thousand-dollar ($50,000) penalty for
failure to perform. The proceeds from the penalty shall be deposited
into the Economic Development Fund to further the state's economic
development efforts.
   (c) (1) The Franchise Tax Board and the Business, Transportation
and Housing Agency, in consultation with the Treasurer, shall review
the applications and award the investment tax credits to capital
access companies based on the overall strength of their applications
using all of the following criteria:
   (A) (i) The applicant has at least two investment managers with
five or more years of investment experience.
   (ii) The applicant has been based, as defined by having a
principal office, in the state for at least five years or has at
least five years of experience in investing primarily in
California-domiciled companies.
   (iii) The applicant's proposed investment strategy for achieving
transformational economic development outcomes through focused
investments of capital in seed or early stage companies with
high-growth potential.
   (iv) The applicant's demonstrated ability to lead investment
rounds, advise and mentor entrepreneurs, and facilitate follow-on
investments.
   (B) Qualified capital access companies that do not meet the
criteria in clause (ii) of subparagraph (A) may submit a joint
application with an entity that meets the criteria set out in clause
(ii) of subparagraph (A) and that application shall be judged based
on the combined attributes of the joint application.
   (2) The awarding of investment tax credits shall be at the sole
discretion of the Franchise Tax Board and the Secretary of Business,
Transportation and Housing.
   (d) The aggregate amount of investment tax credits to be allocated
to all participating investors of qualified capital access companies
under this chapter shall not exceed two hundred million dollars
($200,000,000). The investment tax credits will be awarded in
twenty-million-dollar ($20,000,000) allocations. No qualified capital
access company, on an aggregate basis with its joint applicants, may
apply for more than two twenty-million-dollar ($20,000,000)
allocations. No participating investor, on an aggregate basis with
its affiliates, may be allocated more than 25 percent of the maximum
amount of investment tax credits authorized hereunder, regardless of
whether the claim is made in connection with one or more than one
qualified capital access company.
   (e) The qualified capital access company shall receive, no later
than December 31, 2013, a written notice from the Business,
Transportation and Housing Agency stating whether or not it has been
approved as a qualified capital access company and, if applicable,
stating the amount of its investment tax credit allocation.
   28965.  (a) (1) To maintain its certification, a qualified capital
access company shall make qualified investments, as follows:
   (A) Within two years after the allocation date, a qualified
capital access company shall have invested an amount equal to at
least 50 percent of its base investment amount in qualified
investments.
   (B) Within three years after the allocation date, a qualified
capital access company shall have invested an amount equal to at
least 70 percent of its base investment amount in qualified
investments.
   (C) Within four years after the allocation date, a qualified
capital access company shall have invested an amount equal to at
least 80 percent of its base investment amount in qualified
investments.
   (D) Within six years or any year thereafter the allocation date, a
qualified capital access company shall have invested an amount equal
to at least 90 percent of its base investment amount in qualified
investments.
   (2) Failure to meet the performance measures set out in paragraph
(1) during any calendar year shall result in a
two-hundred-fifty-thousand-dollar ($250,000) penalty to be imposed
against the qualified capital access company. The proceeds from the
penalty shall be deposited into the Economic Development Fund. Funds
related to the investment tax credit shall not be used to pay the
penalty.
   (b) Prior to making a proposed qualified investment in a specific
business, a qualified capital access company shall request from the
Business, Transportation and Housing Agency a written determination
that the proposed investment will qualify as a qualified investment
in a qualified business or, if applicable, as a seed or early stage
investment. The agency shall notify a qualified capital access
company within 10 business days from the receipt of a request of its
determination. If the agency fails to notify the qualified capital
access company of its determination within 10 business days, the
proposed investment will be deemed to be a qualified investment in a
qualified business and, if applicable, as a seed or early stage
investment. If the agency determines that the proposed investment
does not meet the definition of a qualified investment, qualified
business, or seed or early stage investment, the department may
nevertheless consider the proposed investment a qualified investment,
or a seed or early stage investment and, if necessary, consider the
business a qualified business, if the agency determines that the
proposed investment will further state economic development.
   (c) All designated capital not invested in qualified investments
by a qualified capital access company shall be held in an escrow
account maintained by the state and administered through the
Business, Transportation and Housing Agency.
   (d) A qualified capital access company may not invest more than 15
percent of its designated capital in any one qualified business
without the specific approval of the Business, Transportation and
Housing Agency.
   (e) Any amounts that have not been invested by the qualified
capital access company at the end of the investment period shall be
forfeited and paid to the state for deposit in the Economic
Development Fund.
   (f) No qualified capital access company shall sell any interest in
a qualified business to an affiliate unless the qualified capital
access company has first obtained written authorization for the sale
from the Business, Transportation and Housing Agency.
   28966.  An insurance company or affiliate of an insurance company
shall not, directly or indirectly, do any of the following:
   (a) Beneficially own, whether through rights, options, convertible
interest, or otherwise, 15 percent or more of the voting securities
or other voting ownership interest of a qualified capital access
company.
   (b) Manage a qualified capital access company (other than
exercising remedies for default).
   (c) Control the direction of investments for a qualified capital
access company.
   28967.  Qualified distributions from a qualified capital access
company may be made at any time. Distributions other than qualified
distributions from a qualified capital access company may be paid out
annually or upon designated liquidity events as established by the
qualified capital access company. Distributions other than qualified
distributions may not reduce the base investment amount during any
calendar year. The profit share percentage shall be paid to the state
in the same time and manner as all other distributions as provided
in Section 28968. Those payments shall be deposited into the General
Fund or the Economic Development Fund as provided in Section 28968,
as directed by the Secretary of Business, Transportation and Housing.
Investment capital liquidated during a liquidity event shall be
given a one-year redeployment period for purposes of calculating the
investment thresholds in Section 28965.
   28968.  (a) (1) At any time that the qualified capital access
company makes distributions of distributable cash, it shall make the
distributions in the following profit share percentages:
   (A) First, 75 percent of distributable cash to the private
investors, in proportion to their respective percentage interest, and
25 percent to the state, until each private investor has received
cumulative distributions equal to 100 percent of his or her capital
contributions. The amount distributed to the state shall be deposited
in the General Fund.
   (B) Second, 100 percent of distributable cash to the state, until
it has received 100 percent of its tax credit revenue loss
attributable to the qualified capital access company. This amount
shall be deposited in the General Fund.
   (C) Third, 20 percent of distributable cash to the qualified
capital access company manager, and 80 percent of distributable cash
dividend equally between the state and the private investors in
accordance with their respective percentage interest. The amount
distributed to the state shall be deposited in the Economic
Development Fund.
   (2) Losses shall be allocated so that 75 percent of realized
losses are allocated to the state, and 25 percent are allocated to
the private investors in proportion to their respective percentage
interest, until distributions of distributable cash has restored the
capital accounts of the private investors to zero.
   (b) The qualified capital access company and the state shall
structure the qualified distributions and distributions of
distributable cash and final distributions in a manner that minimizes
any related federal tax obligation. To the extent that the profit
share distribution to qualified capital access company private
investors is less than the state's share, pursuant to the profit
share percentage, due to federal income tax liabilities, the final
distribution may be adjusted to equalize the post-tax profit share
payments made during the investment period.
   28969.  (a) Each qualified capital access company shall report all
of the following to the Business, Transportation and Housing Agency:

   (1) As soon as practicable, but no later than 30 days after the
receipt of designated capital:
   (A) The name of each participating investor from which the
designated capital was received, including the participating investor'
s insurance tax identification number.
   (B) The amount of each participating investor's investment of
designated capital.
   (C) The date on which the designated capital was received.
   (2) On an annual basis, on or before January 31 of each year:
   (A) The amount of the qualified capital access company's remaining
uninvested designated capital at the end of the immediately
preceding taxable year.
   (B) Whether or not the qualified capital access company has
invested more than 15 percent of its total designated capital in any
one business.
   (C) All qualified investments that the qualified capital access
company has made in the previous taxable year, including the number
of employees of each qualified business in which it has made
investments at the time of the investment and as of December 1 of the
preceding taxable year.
             (D) For any qualified business where the qualified
capital access company no longer has an investment, the qualified
capital access company must provide employment figures for that
company as of the last day before the investment was terminated.
   (3) Other information that the agency may reasonably request that
will help the agency ascertain the impact of the qualified capital
access company program, both directly and indirectly, on the economy
of the state.
   (4) Within 180 days of the close of its fiscal year, annual
audited financial statements of the qualified capital access company,
which must include the opinion of an independent certified public
accountant.
   (5) An "agreed upon procedures report" or equivalent regarding the
operations of the qualified capital access company.
   (b) A qualified capital access company shall pay to the Business,
Transportation and Housing Agency an annual, nonrefundable
certification fee of five thousand dollars ($5,000) on or before
April 1, or ten thousand dollars ($10,000) if later. No annual
certification fee is required if the payment date is within six
months of the date a qualified capital access company is first
certified by the agency.
   (c) Upon satisfying of the requirements of paragraph (1) of
subdivision (a) of Section 28965, a qualified capital access company
shall provide notice to the Business, Transportation and Housing
Agency, and the agency shall, within 60 days of receipt of the
notice, either confirm that the qualified capital access company has
satisfied the requirement of that paragraph as of that date or
provide notice of noncompliance and an explanation of any existing
deficiencies. If the agency does not provide such notification within
60 days, the qualified capital access company shall be deemed to
have met the requirement of that paragraph.
   (d) (1) For the purposes of this subdivision, "key person" means
either of the following:
   (A) The qualified capital access company's investment managers
listed in the qualified capital access company's application under
Section 28964.
   (B) The individuals on the list of investment managers as has been
previously approved by the Business, Transportation and Housing
Agency under paragraph (2) or otherwise.
   (2) A qualified capital access company's success shall be deemed
to depend, in particular, on the qualified capital access company's
key person or persons. On or before July 1, 2013, each qualified
capital access company shall provide to the Business, Transportation
and Housing Agency a description of the qualified capital access
company's procedure for choosing a successor should any key person
die, become legally incapacitated, or cease to be involved in the
management of the qualified capital access company for more than 90
consecutive days. In the event that a majority of key persons do die,
become legally incapacitated, or cease to be involved in the
management of the qualified capital access company for more than 90
consecutive days for any reason, the Secretary of Business,
Transportation and Housing, in consultation with the Franchise Tax
Board and the Treasurer or any other appropriate professional
adviser, shall determine whether a new individual or individuals will
be able to assume the role of key person so that the qualified
capital access company's performance will remain unimpaired. If the
secretary determines, in the secretary's sole discretion, that the
key person cannot be adequately replaced and the qualified capital
access company's performance therefor will be impaired, then any
funds not already invested by the qualified capital access company
shall be deposited into an escrow account unless the Franchise Tax
Board certifies, that the total amount of payments deposited in the
General Fund under this division equals or exceeds the total amount
of revenue foregone pursuant to the credits used as provided in
Section 28962. If the Franchise Tax Board has made that
determination, then any funds not already invested by the qualified
capital access company shall be deposited into the Economic
Development Fund to further support the state's economic development
efforts.
   28970.  (a) The Business, Transportation and Housing Agency shall
conduct an annual review of each qualified capital access company to
determine if it is abiding by the requirements of the program and to
ensure that no investments have been made in violation of this
division. The cost of the annual review shall be paid by each
qualified capital access company according to a reasonable fee
schedule adopted by the agency.
   (b) The agency shall provide the qualified capital access company
a summary of findings including any areas of noncompliance. The
qualified capital access company shall have 60 days to cure any areas
of noncompliance. Failure to cure the areas of noncompliance within
60 days shall result in a penalty of ten thousand dollars ($10,000)
per day until the noncompliance is cured. The proceeds from the
penalty shall be deposited into the Economic Development Fund to
further the state's economic development efforts. Funds related to
the investment tax credit shall not be used to pay the penalty
imposed under this section.
   (c) To promote openness and transparency, a copy of each annual
report received by the Business, Transportation and Housing Agency
pursuant to this section shall be posted on the agency's Internet Web
site.
   (d) The Business, Transportation and Housing Agency shall provide
the Treasurer, upon request, a copy of any written findings made in
connection with the annual review required under subdivision (a) and
a copy of the summary of findings provided to the qualified capital
access company pursuant to subdivision (b).
   28971.  The Economic Development Fund is hereby created in the
State Treasury. Money in the fund from application fees pursuant to
paragraph (2) of subdivision (b) of Section 28963 and from
recertification fees pursuant to subdivision (b) of Section 28969
shall be available, upon appropriation by the Legislature, for
administration of this division. Money in the fund from penalties
imposed pursuant to this division or from qualified distributions
pursuant to Section 28968 shall be available, upon appropriation by
the Legislature, to further the state's economic development efforts,
as specified by the Legislature.