Bill Text: NY A05949 | 2009-2010 | General Assembly | Introduced
Bill Title: An act to amend the tax law, in relation to the creation of a local seed capital fund investment credit
Sponsorship: Slight Partisan Bill (Democrat 4-2)
Status: (Introduced - Dead) 2010-01-06 - referred to ways and means [A05949 Detail]
Download: New_York-2009-A05949-Introduced.html
S T A T E O F N E W Y O R K
________________________________________________________________________
5949
2009-2010 Regular Sessions
I N A S S E M B L Y
February 23, 2009
___________
Introduced by M. of A. ESPAILLAT, TOWNS, SCHROEDER -- Multi-Sponsored by
-- M. of A. ALFANO, BARRA, SWEENEY -- read once and referred to the
Committee on Ways and Means
AN ACT to amend the tax law, in relation to the creation of a local seed
capital fund investment credit
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. Short title. This act shall be known and may be cited as
2 "NYSEEDS".
3 S 2. Legislative findings and intent. The legislature finds and
4 declares that most funding for technology development in the phase
5 between invention and commercialization comes from corporations, the
6 federal government, and especially from individual, private equity,
7 "angel" investors, and not from traditional venture capitalists. In
8 general, funding for early-stage technology development is lagging, and
9 in New York state, this lag has been particularly large. Markets for
10 allocating risk capital to early stage technology ventures are notori-
11 ously inefficient; information on investment opportunities for entrepre-
12 neurs and investors is difficult to find; the ability for investors in
13 early-stage technology ventures to fully achieve appropriate returns
14 from their investments is limited; and many other uncertainties limit
15 investment potential. When these uncertainties are primarily technical
16 and technological, individual investors have additional difficulties in
17 evaluating potential deals. Recently, the problem of finding early-stage
18 financing has been exacerbated by the economic downturn and contraction
19 of all venture capital markets.
20 Increasing the amount and availability of seed capital funding in New
21 York state will stimulate new growth and economic recovery. To accom-
22 plish this task, the state needs to assist New York entrepreneurs and
23 business angels by providing assistance to bring inventions to the
24 market. The "NYSEEDS" tax credit is designed to encourage the investment
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08388-01-9
A. 5949 2
1 of New York venture funds in start-up New York companies by bringing
2 together entrepreneurs and local business angels to grow more jobs in
3 New York state. It will help angel investors maximize their investments,
4 increase early stage capital and investments in new start-ups in the
5 state, and stimulate the formation of desperately needed seed capital at
6 the crucial early phase of business development. It is essential that
7 New York state act to provide all necessary support to growing busi-
8 nesses in the "new economy".
9 S 3. The tax law is amended by adding a new section 11-a to read as
10 follows:
11 S 11-A. CERTIFIED SEED CAPITAL FUND. (A) DEFINITIONS. FOR PURPOSES OF
12 THIS SECTION THE FOLLOWING TERMS SHALL MEAN:
13 (1) "INVESTOR" - AN INDIVIDUAL WHO CONTRIBUTES TO A CERTIFIED SEED
14 CAPITAL FUND AND IS ELIGIBLE FOR A TAX CREDIT UNDER SUBSECTION (QQ) OF
15 SECTION SIX HUNDRED SIX OF THIS CHAPTER. "INVESTOR" DOES NOT INCLUDE A
16 PERSON WHO IS A CURRENT OR PREVIOUS OWNER, MEMBER, OR SHAREHOLDER IN A
17 QUALIFIED BUSINESS.
18 (2) "CERTIFIED SEED CAPITAL" - AN INVESTMENT OF CASH BY AN INVESTOR IN
19 A CERTIFIED SEED CAPITAL FUND WHICH FULLY FUNDS THE PURCHASE PRICE OF
20 EITHER OR BOTH ITS EQUITY INTEREST IN THE CERTIFIED SEED CAPITAL FUND OR
21 A QUALIFIED DEBT INSTRUMENT ISSUED BY THE CERTIFIED SEED CAPITAL FUND.
22 (3) "CERTIFIED SEED CAPITAL FUND" - A PARTNERSHIP, CORPORATION, TRUST
23 OR LIMITED LIABILITY COMPANY, ORGANIZED ON A FOR-PROFIT BASIS THAT IS
24 LOCATED, HEADQUARTERED AND LICENSED OR REGISTERED TO CONDUCT BUSINESS IN
25 NEW YORK STATE, THAT HAS AS ITS PRIMARY BUSINESS ACTIVITY THE INVESTMENT
26 OF CASH IN QUALIFIED BUSINESSES AND THAT IS CERTIFIED BY THE COMPTROLLER
27 AS MEETING THE CRITERIA SET FORTH IN SUBDIVISION (B) OF THIS SECTION.
28 (4) "QUALIFIED BUSINESS" - AN INDEPENDENTLY OWNED AND OPERATED BUSI-
29 NESS THAT MEETS ALL OF THE FOLLOWING CONDITIONS AS OF THE TIME OF THE
30 FIRST INVESTMENT IN THE BUSINESS:
31 (A) IT IS HEADQUARTERED IN NEW YORK STATE, AND ITS PRINCIPAL BUSINESS
32 OPERATIONS ARE LOCATED IN NEW YORK STATE, AND THE QUALIFIED INVESTMENT
33 IT RECEIVES IS USED SOLELY TO SUPPORT ITS BUSINESS OPERATIONS IN THE
34 STATE, EXCEPT FOR ADVERTISING, PROMOTIONS AND SALES PURPOSES. IN CASES
35 WHERE THE QUALIFIED INVESTMENT IS MADE IN A START-UP COMPANY SUCH CAPI-
36 TAL MUST BE USED SOLELY TO ESTABLISH AND SUPPORT ITS BUSINESS OPERATIONS
37 IN NEW YORK STATE, EXCEPT FOR ADVERTISING, PROMOTIONS AND SALES
38 PURPOSES.
39 (B) IT HAS EITHER (I) NO MORE THAN TWENTY EMPLOYEES, AT LEAST EIGHTY
40 PERCENT OF WHOM ARE EMPLOYED IN NEW YORK STATE, OR (II) DURING THE
41 FISCAL YEAR IMMEDIATELY PRECEDING THE QUALIFIED INVESTMENT TOGETHER WITH
42 ITS AFFILIATES, GROSS REVENUES OF NO MORE THAN TWO MILLION DOLLARS, ON A
43 CONSOLIDATED BASIS AS DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED
44 ACCOUNTING PRINCIPLES.
45 (C) IT IS INVOLVED IN COMMERCE FOR THE PURPOSE OF DEVELOPING AND MANU-
46 FACTURING PRODUCTS AND SYSTEMS, INCLUDING BUT NOT LIMITED TO HIGH TECH-
47 NOLOGY PRODUCTS AND SYSTEMS SUCH AS COMPUTERS, COMPUTER SOFTWARE,
48 MEDICAL EQUIPMENT, BIOTECHNOLOGY, TELECOMMUNICATIONS EQUIPMENT AND
49 PRODUCTS, PROCESSING OR ASSEMBLING ALL TYPES OF PRODUCTS, CONDUCTING
50 RESEARCH AND DEVELOPMENT ON ALL TYPES OF PRODUCTS OR PROVIDING SERVICES,
51 BUT EXCLUDING REAL ESTATE, REAL ESTATE DEVELOPMENT, INSURANCE AND BUSI-
52 NESSES PREDOMINANTLY ENGAGED IN PROFESSIONAL SERVICES PROVIDED BY
53 ACCOUNTANTS, LAWYERS OR PHYSICIANS.
54 (D) FOR PURPOSES OF THIS PARAGRAPH, THE TERM "INDEPENDENTLY OWNED AND
55 OPERATED BUSINESS" MEANS (I) IN THE CASE OF A CORPORATION, A CORPORATION
56 WHERE NO MORE THAN FIFTY PERCENT OF THE VOTING STOCK OF THE CORPORATION
A. 5949 3
1 IS OWNED OR CONTROLLED, DIRECTLY OR INDIRECTLY, BY A SINGLE CORPORATION,
2 A SINGLE PARTNERSHIP OR A SINGLE LIMITED LIABILITY COMPANY, AND (II) IN
3 THE CASE OF A PARTNERSHIP, ASSOCIATION, OR OTHER ENTITY, WHERE NO MORE
4 THAN FIFTY PERCENT OF THE CAPITAL, PROFITS OR OTHER BENEFICIAL INTEREST
5 IN SUCH PARTNERSHIP, ASSOCIATION OR OTHER ENTITY IS OWNED OR CONTROLLED,
6 DIRECTLY OR INDIRECTLY, BY A SINGLE CORPORATION, A SINGLE PARTNERSHIP OR
7 A SINGLE LIMITED LIABILITY COMPANY.
8 (5) "QUALIFIED INVESTMENT" - THE INVESTMENT OF CASH BY A CERTIFIED
9 SEED CAPITAL FUND IN A QUALIFIED BUSINESS FOR THE PURCHASE OF ANY DEBT,
10 EQUITY OR HYBRID SECURITY, OF ANY NATURE AND DESCRIPTION WHATEVER,
11 INCLUDING A DEBT INSTRUMENT OR SECURITY WHICH HAS THE CHARACTERISTICS OF
12 DEBT BUT WHICH PROVIDES FOR CONVERSION INTO EQUITY OR EQUITY PARTIC-
13 IPATION INSTRUMENTS SUCH AS OPTIONS OR WARRANTS.
14 (6) "COMPTROLLER" - THE COMPTROLLER OF THE STATE OF NEW YORK.
15 (B) CERTIFICATION OF A SEED CAPITAL FUND. (1) THE COMPTROLLER SHALL
16 DESIGNATE AND CERTIFY THROUGH A REQUEST FOR PROPOSALS UP TO TEN QUALIFY-
17 ING SEED CAPITAL FUNDS AND TO THE EXTENT POSSIBLE CERTIFY QUALIFYING
18 FUNDS TO REPRESENT THE DIFFERENT REGIONS OF THE STATE. THE COMPTROLLER
19 SHALL AT HIS OR HER DISCRETION SELECT AN APPLICANT BASED ON PAST
20 PERFORMANCES OF THE APPLICANT AS A VENTURE CAPITALIST.
21 (2) THE COMPTROLLER SHALL ESTABLISH BY RULE OR REGULATION THE PROCE-
22 DURES FOR MAKING AN APPLICATION TO BECOME A CERTIFIED SEED CAPITAL FUND.
23 SUCH APPLICATION SHALL INCLUDE A STATEMENT OF THE ANNUAL MANAGEMENT FEE
24 THAT THE APPLICANT INTENDS TO CHARGE, SUCH FEE IN AN AMOUNT NOT TO
25 EXCEED TWO AND A HALF PERCENT OF THE CERTIFIED SEED CAPITAL OF THE
26 CERTIFIED SEED CAPITAL FUND.
27 (3) THE COMPTROLLER MAY CERTIFY PARTNERSHIPS, CORPORATIONS, TRUSTS OR
28 LIMITED LIABILITY COMPANIES, ORGANIZED ON A FOR-PROFIT BASIS, WHICH
29 SUBMIT AN APPLICATION TO BE DESIGNATED AS A CERTIFIED SEED CAPITAL FUND
30 IF SUCH APPLICANT IS LOCATED, HEADQUARTERED AND LICENSED OR REGISTERED
31 TO CONDUCT BUSINESS IN NEW YORK STATE, HAS AS ITS PRIMARY BUSINESS
32 ACTIVITY THE INVESTMENT OF CASH IN QUALIFIED BUSINESSES AND MEETS THE
33 OTHER CRITERIA SET FORTH IN THIS SECTION.
34 (4) A CERTIFIED SEED CAPITAL FUND INITIAL CAPITALIZATION, AT THE TIME
35 OF SEEKING CERTIFICATION, MUST BE FIVE HUNDRED THOUSAND DOLLARS OR MORE.
36 (5) IN ORDER TO RECEIVE CERTIFICATION AND TO BEGIN OPERATION AS A
37 CERTIFIED SEED CAPITAL FUND, EACH FUND MUST PROVIDE TO THE COMPTROLLER
38 CAPITAL COMMITMENTS FROM INVESTORS TOTALING AT LEAST TWO MILLION
39 DOLLARS.
40 (6) A CERTIFIED SEED CAPITAL FUND SHALL HAVE NO FEWER THAN TEN INDI-
41 VIDUAL INVESTORS WHO ARE NOT AFFILIATES, WITH NO SINGLE INVESTOR AND
42 AFFILIATES OF THAT INVESTOR TOGETHER OWNING A TOTAL OF MORE THAN TWEN-
43 TY-FIVE PERCENT OF THE OWNERSHIP INTERESTS OUTSTANDING IN THE FUND.
44 (7) THE COMPTROLLER SHALL REVIEW THE ORGANIZATIONAL DOCUMENTS OF EACH
45 APPLICANT FOR CERTIFICATION AND THE BUSINESS HISTORY OF THE APPLICANT,
46 DETERMINE THAT THE APPLICANT'S CASH, MARKETABLE SECURITIES AND OTHER
47 LIQUID ASSETS ARE AT LEAST FIVE HUNDRED THOUSAND DOLLARS, AND DETERMINE
48 THAT THE OFFICERS AND THE BOARD OF DIRECTORS, GENERAL PARTNERS, TRUS-
49 TEES, MANAGERS, OR MEMBERS ARE TRUSTWORTHY AND ARE THOROUGHLY ACQUAINTED
50 WITH THE REQUIREMENTS OF THIS SUBDIVISION.
51 (8) THE COMPTROLLER SHALL VERIFY THAT AT LEAST TWO PRINCIPALS OF THE
52 CERTIFIED SEED CAPITAL COMPANY OR ANY MANAGER OF THE CERTIFIED SEED FUND
53 EACH HAVE NO LESS THAN FIVE YEARS OF EXPERIENCE IN THE VENTURE CAPITAL
54 OR A VENTURE CAPITAL-RELATED INDUSTRY.
55 (9) ANY OFFERING MATERIAL INVOLVING THE SALE OF SECURITIES OF THE
56 CERTIFIED SEED CAPITAL FUND SHALL INCLUDE THE FOLLOWING STATEMENT:
A. 5949 4
1 "AUTHORIZING THE FORMATION OF A CERTIFIED SEED FUND DOES NOT CONSTI-
2 TUTE THE ENDORSEMENT OF THE STATE OF NEW YORK AS TO EITHER THE QUALITY
3 OF MANAGEMENT OR THE POTENTIAL FOR EARNINGS OF SUCH COMPANY AND THE
4 STATE OF NEW YORK IS NOT LIABLE FOR DAMAGES OR LOSSES TO A CERTIFIED
5 INVESTOR IN THE COMPANY. USE OF THE WORD 'CERTIFIED' IN AN OFFERING DOES
6 NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE INVESTMENT BY THE
7 STATE OF NEW YORK. INVESTMENTS IN A PROSPECTIVE CERTIFIED SEED FUND
8 PRIOR TO THE TIME SUCH COMPANY IS CERTIFIED WITH RESPECT TO A CERTIFIED
9 SEED CAPITAL COMPANY PROGRAM ARE NOT ELIGIBLE FOR TAX CREDITS. IN THE
10 EVENT CERTAIN STATUTORY PROVISIONS (AS SPECIFIED IN SECTION 11-A OF THE
11 TAX LAW) ARE VIOLATED, THE STATE OF NEW YORK MAY REQUIRE FORFEITURE OF
12 UNUSED TAX CREDITS AND REPAYMENT OF USED TAX CREDITS."
13 (10) WITHIN SIXTY DAYS OF APPLICATION, THE COMPTROLLER SHALL ISSUE THE
14 CERTIFICATION OR SHALL REFUSE THE CERTIFICATION AND COMMUNICATE IN
15 DETAIL TO THE APPLICANT THE GROUNDS FOR THE REFUSAL, INCLUDING
16 SUGGESTIONS FOR THE REMOVAL OF THOSE GROUNDS.
17 (C) REQUIREMENTS FOR CONTINUANCE OF CERTIFICATION. (1) TO CONTINUE TO
18 BE CERTIFIED, A CERTIFIED SEED CAPITAL FUND MUST PROVIDE TO THE COMP-
19 TROLLER ANNUAL AUDITED FINANCIAL STATEMENTS, WHICH SHALL INCLUDE THE
20 OPINION OF AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT, WITHIN NINETY
21 DAYS OF THE CLOSE OF ITS FISCAL YEAR.
22 (2) A CERTIFIED SEED CAPITAL FUND, AT LEAST FIFTEEN WORKING DAYS PRIOR
23 TO MAKING A PROPOSED INVESTMENT IN A SPECIFIC BUSINESS, SHALL CERTIFY IN
24 WRITING TO THE COMPTROLLER THAT THE BUSINESS IN WHICH IT PROPOSES TO
25 INVEST MEETS THE DEFINITION OF A QUALIFIED BUSINESS AS SET FORTH IN
26 PARAGRAPH FOUR OF SUBDIVISION (A) OF THIS SECTION OR, IN THE CASE OF A
27 FOLLOW-ON INVESTMENT, THAT SUCH BUSINESS CONTINUES TO MEET THE REQUIRE-
28 MENTS SET FORTH IN PARAGRAPH THREE OF THIS SUBDIVISION, AND IN EITHER
29 CASE, AN EXPLANATION OF ITS DETERMINATION THAT THE BUSINESS MEETS SUCH
30 REQUIREMENTS. THE CERTIFICATION TO THE COMPTROLLER SHALL INCLUDE A SWORN
31 STATEMENT FROM THE BUSINESS IN WHICH THE CERTIFIED SEED CAPITAL FUND
32 PROPOSES TO INVEST, WHICH STATEMENT SHALL EVIDENCE THE INTENTION OF THE
33 BUSINESS TO MAINTAIN ITS HEADQUARTERS IN NEW YORK AND CONDUCT ITS PRIMA-
34 RY BUSINESS OPERATIONS IN THE STATE OF NEW YORK AFTER THE RECEIPT OF THE
35 INVESTMENT BY THE CERTIFIED SEED CAPITAL FUND. IF THE COMPTROLLER DETER-
36 MINES THAT THE BUSINESS DOES NOT MEET THE DEFINITION OF A QUALIFIED
37 BUSINESS, OR IN THE CASE OF A FOLLOW-ON INVESTMENT, THAT SUCH BUSINESS
38 DOES NOT MEET THE REQUIREMENTS SET FORTH IN PARAGRAPH THREE OF THIS
39 SUBDIVISION, THEN THE COMPTROLLER SHALL, WITHIN THE FIFTEEN WORKING DAYS
40 PERIOD PRIOR TO THE MAKING OF THE PROPOSED INVESTMENT, NOTIFY THE CERTI-
41 FIED SEED CAPITAL FUND OF ITS DETERMINATION AND PROVIDE AN EXPLANATION
42 THEREOF.
43 (3) ANY BUSINESS WHICH IS CLASSIFIED AS A QUALIFIED BUSINESS AT THE
44 TIME OF THE FIRST INVESTMENT IN SUCH BUSINESS BY A CERTIFIED SEED CAPI-
45 TAL FUND SHALL REMAIN CLASSIFIED AS A QUALIFIED BUSINESS AND MAY RECEIVE
46 FOLLOW-ON INVESTMENTS FROM ANY CERTIFIED SEED CAPITAL FUND, AND SUCH
47 FOLLOW-ON INVESTMENTS SHALL BE QUALIFIED INVESTMENTS EVEN THOUGH SUCH
48 BUSINESS MAY NOT MEET THE DEFINITION OF A QUALIFIED BUSINESS AT THE TIME
49 OF SUCH FOLLOW-ON INVESTMENTS, PROVIDED, HOWEVER, THAT SUCH BUSINESS
50 CONTINUES TO MEET THE REQUIREMENTS SET FORTH IN SUBPARAGRAPH (A) OR (C)
51 OF PARAGRAPH FOUR OF SUBDIVISION (A) OF THIS SECTION, AND SUCH BUSINESS
52 REAFFIRMS ITS INTENTION TO MAINTAIN ITS HEADQUARTERS IN NEW YORK STATE
53 AND CONDUCT ITS PRIMARY BUSINESS OPERATIONS IN THE STATE OF NEW YORK.
54 (4) DOCUMENTS AND OTHER MATERIALS SUBMITTED BY CERTIFIED SEED CAPITAL
55 FUND OR BY BUSINESSES FOR PURPOSES OF THE CONTINUANCE OF CERTIFICATION
56 SHALL NOT BE PUBLIC RECORDS IF SUCH RECORDS ARE DETERMINED BY THE COMP-
A. 5949 5
1 TROLLER TO BE TRADE OR BUSINESS SECRETS AND SHALL BE MAINTAINED IN A
2 CONFIDENTIAL MANNER BY THE COMPTROLLER.
3 (5) EACH CERTIFIED SEED CAPITAL FUND SHALL REPORT THE FOLLOWING TO THE
4 COMPTROLLER:
5 (A) AS SOON AS PRACTICABLE AFTER THE RECEIPT OF CERTIFIED SEED CAPITAL
6 OR AN IRREVOCABLE FUNDING COMMITMENT SUBJECT ONLY TO THE RECEIPT OF AN
7 ALLOCATION PURSUANT TO SUBDIVISION (G) OF THIS SECTION, (I) THE NAME OF
8 EACH CERTIFIED INVESTOR FROM WHICH THE CERTIFIED CAPITAL WAS RECEIVED,
9 INCLUDING SUCH CERTIFIED INVESTOR'S TAX IDENTIFICATION NUMBER; (II) THE
10 AMOUNT OF EACH CERTIFIED INVESTOR'S INVESTMENT OF CERTIFIED SEED CAPI-
11 TAL; AND (III) THE DATE ON WHICH THE CERTIFIED SEED CAPITAL WAS
12 RECEIVED.
13 (B) ON AN ANNUAL BASIS, ON OR BEFORE JANUARY THIRTY-FIRST OF EACH
14 YEAR, (I) THE AMOUNT OF THE CERTIFIED SEED CAPITAL FUND'S CERTIFIED SEED
15 CAPITAL AT THE END OF THE IMMEDIATELY PRECEDING YEAR; AND (II) ALL QUAL-
16 IFIED INVESTMENTS THAT THE CERTIFIED CAPITAL COMPANY MADE DURING THE
17 PREVIOUS CALENDAR YEAR, INCLUDING THE NUMBER OF EMPLOYEES OF EACH QUALI-
18 FIED BUSINESS IN WHICH IT HAS MADE INVESTMENTS AT THE TIME OF SUCH
19 INVESTMENT AND AS OF DECEMBER FIRST OF THE PRECEDING CALENDAR YEAR.
20 (C) EACH CERTIFIED SEED CAPITAL FUND SHALL PROVIDE TO THE COMPTROLLER
21 ANNUAL AUDITED FINANCIAL STATEMENTS, WHICH SHALL INCLUDE THE OPINION OF
22 AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT, WITHIN NINETY DAYS OF THE
23 CLOSE OF ITS FISCAL YEAR.
24 (D) ON OR BEFORE APRIL FIRST OF EACH YEAR, EACH CERTIFIED SEED CAPITAL
25 FUND SHALL PAY AN ANNUAL, NON-REFUNDABLE CERTIFICATION FEE OF ONE
26 HUNDRED DOLLARS TO THE COMPTROLLER; PROVIDED THAT NO SUCH FEE SHALL BE
27 REQUIRED WITHIN SIX MONTHS OF THE INITIAL CERTIFICATION DATE OF A CERTI-
28 FIED SEED CAPITAL FUND.
29 (6) THE COMPTROLLER SHALL ANNUALLY, BY MARCH FIRST, PREPARE AND SUBMIT
30 TO THE COMMISSIONER A LIST OF PERSONS WHO MAY CLAIM THE TAX CREDIT FOR
31 THE PREVIOUS TAXABLE YEAR AND ANY OTHER INFORMATION NECESSARY FOR THE
32 DEPARTMENT TO DETERMINE ELIGIBILITY FOR SUCH TAX CREDIT.
33 (D) RELOCATION. IN THE EVENT THAT A BUSINESS IN WHICH A QUALIFIED
34 INVESTMENT IS MADE RELOCATES ITS PRINCIPAL BUSINESS OPERATIONS TO ANOTH-
35 ER STATE DURING SUCH INVESTMENT, OR WITHIN THREE MONTHS AFTER THE TERMI-
36 NATION OF SUCH INVESTMENT, THE CUMULATIVE AMOUNT OF QUALIFIED INVESTMENT
37 SHALL BE REDUCED BY THE AMOUNT OF SUCH QUALIFIED INVESTMENT, FOR THE
38 PURPOSES OF THIS SUBDIVISION ONLY, UNLESS (A) THE CERTIFIED SEED CAPITAL
39 FUND INVESTS AN AMOUNT AT LEAST EQUAL TO THE INVESTMENT OF CERTIFIED
40 SEED CAPITAL IN THE RELOCATED BUSINESS IN A QUALIFIED BUSINESS LOCATED
41 IN NEW YORK STATE WITHIN SIX MONTHS OF THE RELOCATION OR (B) UNLESS THE
42 BUSINESS DEMONSTRATES THAT IT HAS RETURNED ITS PRINCIPAL BUSINESS OPER-
43 ATIONS TO NEW YORK STATE WITHIN THREE MONTHS OF SUCH RELOCATION. A BUSI-
44 NESS SHALL BE DEEMED TO HAVE RELOCATED ITS PRINCIPAL BUSINESS OPERATIONS
45 OUTSIDE NEW YORK STATE IF THE PRIMARY WORKPLACE OF MORE THAN FIFTY
46 PERCENT OF THE EMPLOYEES OF SUCH BUSINESS WITHIN THE STATE IS RELOCATED
47 TO ANOTHER STATE.
48 (E) DECERTIFICATION. (1) THE COMPTROLLER SHALL CONDUCT AN ANNUAL
49 REVIEW OF EACH CERTIFIED SEED CAPITAL FUND TO DETERMINE IF THE CERTIFIED
50 SEED CAPITAL FUND IS ABIDING BY THE REQUIREMENTS OF CERTIFICATION, TO
51 ADVISE THE CERTIFIED SEED CAPITAL FUND AS TO THE ELIGIBILITY STATUS OF
52 ITS QUALIFIED INVESTMENTS, AND TO ENSURE THAT NO INVESTMENT HAS BEEN
53 MADE IN VIOLATION OF THIS SUBDIVISION. THE COST OF THE ANNUAL REVIEW
54 SHALL BE PAID BY EACH CERTIFIED SEED CAPITAL FUND ACCORDING TO A REASON-
55 ABLE FEE SCHEDULE ADOPTED BY THE COMPTROLLER.
A. 5949 6
1 (2) ANY MATERIAL VIOLATION OF SUBDIVISION (C) OF THIS SECTION WITH
2 RESPECT TO A PARTICULAR CERTIFIED SEED CAPITAL FUND SHALL BE GROUNDS FOR
3 DECERTIFICATION OF THE CERTIFIED SEED CAPITAL FUND WITH RESPECT TO SUCH
4 PROGRAM. IF THE COMPTROLLER DETERMINES THAT A CERTIFIED SEED CAPITAL
5 FUND IS NOT IN COMPLIANCE WITH THE REQUIREMENTS OF SUBDIVISION (C) OF
6 THIS SECTION WITH RESPECT TO A PARTICULAR CERTIFIED SEED CAPITAL FUND
7 PROGRAM, IT SHALL, BY WRITTEN NOTICE, INFORM THE OFFICERS OF THE CERTI-
8 FIED SEED CAPITAL FUND THAT THE CERTIFIED SEED CAPITAL FUND WILL BE
9 SUBJECT TO DECERTIFICATION WITH RESPECT TO SUCH PROGRAM IN ONE HUNDRED
10 TWENTY DAYS FROM THE DATE OF MAILING OF THE NOTICE, UNLESS THE DEFICIEN-
11 CIES ARE CORRECTED AND THE CERTIFIED SEED CAPITAL FUND IS AGAIN IN
12 COMPLIANCE WITH ALL REQUIREMENTS FOR CERTIFICATION, AND SHALL SEND A
13 COPY OF SUCH NOTICE TO THE COMMISSIONER.
14 (3) AT THE END OF THE ONE HUNDRED TWENTY DAY GRACE PERIOD, IF THE
15 CERTIFIED SEED CAPITAL FUND IS STILL NOT IN COMPLIANCE WITH SUBDIVISION
16 (C) OF THIS SECTION WITH RESPECT TO THE CERTIFIED SEED CAPITAL FUND
17 PROGRAM, THE COMPTROLLER SHALL SEND A NOTICE OF DECERTIFICATION TO THE
18 CERTIFIED SEED CAPITAL FUND WITH RESPECT TO SUCH PROGRAM AND TO ALL
19 OTHER APPROPRIATE STATE AGENCIES.
20 (4) ONCE A CERTIFIED SEED CAPITAL FUND HAS INVESTED AN AMOUNT CUMULA-
21 TIVELY EQUAL TO ONE HUNDRED PERCENT OF ITS CERTIFIED SEED CAPITAL WITH
22 RESPECT TO THE CERTIFIED SEED CAPITAL FUND PROGRAM IN QUALIFIED INVEST-
23 MENTS AND HAS MET ALL OTHER REQUIREMENTS UNDER THIS SUBDIVISION, THE
24 CERTIFIED SEED CAPITAL FUND SHALL NO LONGER BE SUBJECT TO REGULATION BY
25 THE COMPTROLLER AND SHALL NO LONGER BE SUBJECT TO THE REQUIREMENTS OF
26 SUBDIVISION (C) OF THIS SECTION WITH RESPECT TO SUCH PROGRAM.
27 (5) THE COMPTROLLER SHALL SEND WRITTEN NOTICE OF SUCH DECERTIFICATION
28 TO THE ADDRESS OF EACH CERTIFIED INVESTOR WHOSE TAX CREDIT HAS BEEN
29 SUBJECT TO RECAPTURE OR FORFEITURE, USING THE ADDRESS SHOWN ON THE LAST
30 FILING SUBMITTED TO THE COMPTROLLER AND SHALL FORWARD A COPY OF SUCH
31 NOTICE TO THE COMMISSIONER.
32 (F) REVOCATION OF CERTIFICATION. THE COMPTROLLER MAY REVOKE THE
33 CERTIFICATION OF A CERTIFIED SEED CAPITAL FUND IF ANY MATERIAL REPRESEN-
34 TATION TO THE COMPTROLLER IN CONNECTION WITH THE APPLICATION PROCESS
35 PROVES TO HAVE BEEN FALSELY MADE OR IF THE APPLICATION MATERIALLY
36 VIOLATES ANY REQUIREMENT ESTABLISHED BY THE COMPTROLLER PURSUANT TO THIS
37 SUBDIVISION.
38 (G) MAXIMUM PERMITTED INVESTMENTS AND CREDITS. THE AGGREGATE AMOUNT OF
39 TAX CREDIT WHICH TAXPAYERS MAY BE ALLOCATED FOR THEIR INVESTMENT OF
40 CERTIFIED SEED CAPITAL PURSUANT TO THIS SUBDIVISION AND SUBSECTION (QQ)
41 OF SECTION SIX HUNDRED SIX OF THIS CHAPTER MAY NOT EXCEED TWENTY-FIVE
42 MILLION DOLLARS. EACH CERTIFIED SEED CAPITAL FUND SHALL BE INITIALLY
43 AUTHORIZED TO RECEIVE UP TO TEN MILLION DOLLARS IN CERTIFIED SEED CAPI-
44 TAL TO WHICH SUCH TAX CREDITS SHALL APPLY, AND SHALL REPORT TO THE COMP-
45 TROLLER, PURSUANT TO SUBPARAGRAPH (A) OF PARAGRAPH FIVE OF SUBDIVISION
46 (C) OF THIS SECTION, AN AMOUNT NO GREATER THAN TEN MILLION DOLLARS FOR
47 THE PURPOSE OF DETERMINING SUCH TAX CREDITS FOR INVESTORS IN A CERTIFIED
48 SEED CAPITAL FUND. THE TOTAL AMOUNT OF INVESTMENTS BY ANY ONE INDIVIDUAL
49 INVESTOR IN A CERTIFIED SEED CAPITAL FUND THAT IS ELIGIBLE TO RECEIVE
50 SUCH TAX CREDIT SHALL NOT EXCEED TWO HUNDRED FIFTY THOUSAND DOLLARS PER
51 INVESTOR.
52 (H) IF FEWER THAN TEN CERTIFIED SEED CAPITAL FUNDS ARE CERTIFIED BY
53 THE COMPTROLLER BY JANUARY FIRST, TWO THOUSAND TEN THE COMPTROLLER MAY,
54 AT HIS DISCRETION, ALLOCATE ANY REMAINING TAX CREDITS AUTHORIZED UNDER
55 THIS SUBDIVISION TO EXISTING CERTIFIED SEED CAPITAL FUNDS BASED ON A
A. 5949 7
1 DEMONSTRATED NEED FOR VENTURE CAPITAL IN THE REGIONS SERVED BY A SEED
2 CAPITAL FUND REQUESTING SUCH ADDITIONAL ALLOCATION.
3 (I) REPORTS. THE COMPTROLLER SHALL REPORT TO THE GOVERNOR, THE TEMPO-
4 RARY PRESIDENT OF THE SENATE, THE SPEAKER OF THE ASSEMBLY AND THE
5 COMMISSIONER, OR BEFORE JUNE FIRST OF EACH YEAR BEGINNING IN THE YEAR
6 TWO THOUSAND SEVEN, THE NUMBER OF CERTIFIED SEED CAPITAL FUNDS HOLDING
7 CERTIFIED SEED CAPITAL; THE AMOUNT OF CERTIFIED SEED CAPITAL INVESTED IN
8 EACH CERTIFIED SEED CAPITAL FUND; THE CUMULATIVE AMOUNT THAT EACH CERTI-
9 FIED SEED CAPITAL FUND HAS INVESTED AS OF JANUARY FIRST OF THE YEAR TWO
10 THOUSAND ELEVEN, AND THE CUMULATIVE TOTAL EACH YEAR THEREAFTER; THE
11 TOTAL AMOUNT OF TAX CREDITS GRANTED UNDER THIS SECTION EACH YEAR THAT
12 CREDITS HAVE BEEN AWARDED UNDER THIS SECTION AND SUBSECTION (QQ) OF
13 SECTION SIX HUNDRED SIX OF THIS CHAPTER; THE PERFORMANCE OF EACH CERTI-
14 FIED CAPITAL FUND WITH REGARD TO THE REQUIREMENTS FOR RECERTIFICATION
15 SET FORTH IN SUBDIVISION (C) OF THIS SECTION; THE CLASSIFICATION OF
16 COMPANIES IN WHICH EACH CERTIFIED SEED CAPITAL FUND HAS INVESTED ACCORD-
17 ING TO INDUSTRIAL SECTOR AND SIZE OF COMPANY; AND THE TOTAL NUMBER OF
18 JOBS CREATED BY INVESTMENTS MADE BY EACH CERTIFIED SEED CAPITAL FUND
19 USING CERTIFIED SEED CAPITAL.
20 (J) RULES AND REGULATIONS. THE COMPTROLLER IN CONSULTATION WITH THE
21 COMMISSIONER SHALL PRESCRIBE SUCH RULES AND REGULATIONS AS HE OR SHE
22 SHALL DEEM NECESSARY IN ORDER TO IMPLEMENT THE PROVISIONS OF THIS
23 SECTION WITHIN ONE HUNDRED TWENTY DAYS OF THE EFFECTIVE DATE OF THIS
24 SECTION.
25 S 4. Section 606 of the tax law is amended by adding a new subsection
26 (qq) to read as follows:
27 (QQ) CREDIT FOR CERTAIN INVESTMENTS IN A CERTIFIED SEED CAPITAL FUND.
28 (1) A TAXPAYER SHALL BE ALLOWED A CREDIT, TO BE COMPUTED AS HEREINAFTER
29 PROVIDED, AGAINST THE TAX IMPOSED BY THIS ARTICLE. THE AMOUNT OF THE
30 CREDIT SHALL BE EQUAL TO TWENTY-FIVE PERCENT OF AN INVESTMENT OF CERTI-
31 FIED SEED CAPITAL IN A CERTIFIED SEED CAPITAL FUND PROGRAM MADE BY THE
32 TAXPAYER PURSUANT TO SECTION ELEVEN-A OF THIS CHAPTER.
33 (2) TWENTY PERCENT OF SUCH CREDIT SHALL BE ALLOWED IN THE TAXABLE YEAR
34 TO WHICH SUCH INVESTMENT IS ALLOCATED PURSUANT TO SUBDIVISION (G) OF
35 SECTION ELEVEN-A OF THIS CHAPTER AND IN EACH OF THE FOUR FOLLOWING TAXA-
36 BLE YEARS, ALTHOUGH SUCH CREDITS SHALL NOT BE FIRST ALLOWED OR INCURRED
37 FOR STATE TAX PURPOSES, UNTIL, AT THE EARLIEST, THE TAX YEAR BEGINNING
38 IN TWO THOUSAND NINE. IN ADDITION, IN ANY TAXABLE YEAR SUBSEQUENT TO
39 THE TAXABLE YEAR FOR WHICH SUCH INVESTMENT IS SO ALLOCATED, ANY AMOUNT
40 CARRIED FORWARD UNDER PARAGRAPH THREE OF THIS SUBSECTION MAY BE CARRIED
41 FORWARD INDEFINITELY UNTIL SUCH CREDITS ARE UTILIZED.
42 (3) IF THE AMOUNT OF CREDIT ALLOWED UNDER THIS SUBSECTION FOR ANY
43 TAXPAYER SHALL EXCEED THE TAXPAYER'S TAX FOR SUCH YEAR, THE EXCESS MAY
44 BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS AND MAY BE DEDUCTED FROM
45 THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS.
46 (4) DECERTIFICATION OF A CERTIFIED SEED CAPITAL FUND FROM A CERTIFIED
47 SEED CAPITAL FUND PROGRAM SHALL CAUSE THE DISALLOWANCE AND THE RECAPTURE
48 OF THE CREDIT ALLOWED UNDER PARAGRAPH ONE OF THIS SUBSECTION.
49 (5) NO CREDIT SHALL BE ALLOWED IN ANY TAX YEAR IN WHICH THE TAXPAYER
50 SHALL, INDIVIDUALLY OR WITH OR THROUGH ONE OR MORE AFFILIATES, BE A
51 MANAGING GENERAL PARTNER OF OR UNDERWRITE OR CONTROL THE DIRECTION OF
52 INVESTMENTS OF A CERTIFIED SEED CAPITAL FUND FOR WHICH THE CREDIT WAS
53 ALLOWED UNDER PARAGRAPH ONE OF THIS SUBSECTION. THIS PROVISION SHALL NOT
54 PRECLUDE A CERTIFIED INVESTOR FROM EXERCISING HIS OR HER LEGAL RIGHTS
55 AND REMEDIES (WHICH MAY INCLUDE INTERIM MANAGEMENT OF A CERTIFIED SEED
56 CAPITAL FUND) IN THE EVENT THAT A CERTIFIED SEED CAPITAL FUND IS IN
A. 5949 8
1 DEFAULT OF ITS STATUTORY OBLIGATIONS OR ITS CONTRACTUAL OBLIGATIONS TO
2 SUCH CERTIFIED INVESTOR. FOR PURPOSES OF THIS PARAGRAPH, AFFILIATE SHALL
3 MEAN A BUSINESS ENTITY IN WHICH THE TAXPAYER HOLDS AT LEAST A TEN
4 PERCENT BENEFICIAL INTEREST.
5 S 5. This act shall take effect immediately.
