INTRODUCED BY REPRESENTATIVES SCHEVE, RIZZO AND MAY (108) (Co-sponsors).
Read 1st time January 27, 1999, and 1000 copies ordered printed.
ANNE C. WALKER, Chief Clerk
Relating to the establishment of the Missouri new enterprise creation act.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section 1. Sections 1 to 6 of this act shall be known and may be cited as the "Missouri New Enterprise Creation Act".
Section 2. As used in sections 1 to 6 of this act, the following terms mean:
(1) "Board", the Missouri seed capital investment board, as established pursuant to section 3 of this act;
(2) "Committed contributions", the total amount of qualified contributions that are committed to a qualifying fund by contractual agreement;
(3) "Department", the department of economic development;
(4) "Director", the director of the department of economic development;
(5) "Follow-up capital", capital provided to a qualified business in which a qualified fund has previously invested seed capital or start-up capital. No more than forty percent of the qualified contributions to a qualified fund may be used for follow-up capital;
(6) "Person", any individual, corporation, partnership, limited liability company or other entity;
(7) "Positive cash flow", total cash receipts from sales or services, but not from investments or loans, exceeding total cash expenditures as calculated on a fiscal year basis;
(8) "Qualified business", any independently owned and operated business which is headquartered and located in Missouri and which is involved in or intends to be involved in commerce for the purpose of manufacturing, processing or assembling products, conducting research and development, or providing services in interstate commerce. Such a business shall maintain its headquarters in Missouri for a period of at least three years from the date of receipt of a qualified investment or be subject to penalties pursuant to section 620.017, RSMo;
(9) "Qualified contribution", cash contributions to a qualified fund pursuant to the terms of contractual agreements made between the qualified fund and a qualified economic development organization authorized by the board to enter into such contracts;
(10) "Qualified economic development organization", any corporation organized pursuant to the provisions of chapter 355, RSMo, that, as of January 1, 1991, had obtained a contract with the department to operate an innovation center to promote, assist and coordinate the research and development of new services, products or processes in this state, or any corporation organized pursuant to the provisions of chapter 355, RSMo, and located in a municipality with a population of between one hundred forty thousand and one hundred fifty thousand as of the 1990 decennial census, that obtains a contract with the department to operate such an innovation center;
(11) "Qualified fund", a fund established by any corporation, partnership, joint venture, unincorporated association, trust or other organization established pursuant to the laws of Missouri and approved by the board;
(12) "Qualified investment", any investment of seed capital, start-up capital or follow-up capital in a qualified business that does not cause more than ten percent of all the qualified contributions to a qualified fund to be invested in a single qualified business;
(13) "Seed capital", capital provided to a qualified business for research, development and precommercialization activities to prove a concept for a new product, process or service, and for activities related thereto; provided that, seed capital shall not be provided to any business which in a past fiscal year has experienced a positive cash flow;
(14) "Start-up capital", capital provided to a qualified business for use in preproduction product development, service development or initial marketing thereof; provided that, start-up capital shall not be provided to any business which has experienced a positive cash flow in a past fiscal year;
(15) "Uninvested capital", that portion of any qualified contribution to a qualified fund, other than management fees not to exceed three percent per year of committed contributions, qualified investments and other expenses or fees authorized by the board, that is not invested as a qualified investment within ten years of its receipt.
Section 3. There is hereby established the Missouri seed capital investment board, to be composed of not more than eleven persons. Five qualified economic development organizations shall respectively be represented by one member appointed by each organization. Six members shall be appointed by the governor. Of these, one shall represent a major public research university located within the state, one shall represent a major private research university located within the state and the remaining four members shall have backgrounds in technology, banking, small business development or tax credit administration. The six members appointed by the governor shall serve terms of three years; except that, of those first appointed, two shall serve for a term of three years, two for a term of two years and two for a term of one year. The members of the board shall annually elect one of its members who has been appointed by the governor as chairman of the board. At any meeting of the board, six members must be present to constitute a quorum. The department shall provide support services necessary to carry out the duties of the board.
Section 4. 1. The Missouri seed capital and commercialization strategy shall be jointly developed and approved by the boards of directors of all of the qualified economic development organizations and submitted as one plan to the board for its approval. The board shall not approve any qualified fund unless such fund is described in the Missouri seed capital and commercialization strategy. The strategy shall include a proposal for the establishment and operation of between one and five qualified funds in Missouri. The initial strategy shall be submitted to the board no later than July 1, 2000, and shall be approved or rejected by the board within three months of receipt. No tax credits authorized pursuant to the provisions of this act shall be awarded until such strategy has been approved by the board.
2. As soon as practicable after the board approves the Missouri seed capital and commercialization strategy, the department shall authorize the use of up to forty million dollars in tax credits by the approved qualified funds.
3. The board shall approve the professional managers employed by the qualified funds according to criteria similar to that used by the U.S. Small Business Administration's Small Business Investment Corporation Program.
4. The department may promulgate any rules and regulations necessary to administer the provisions of sections 1 to 6 of this act. No rule or regulation or portion of a rule or regulation promulgated pursuant to the authority of this section shall become effective unless it has been promulgated pursuant to the provisions of chapter 536, RSMo.
Section 5. 1. The board may authorize each qualified economic development organization to enter into contractual agreements with any qualified fund allowing such qualified fund to offer tax credits authorized pursuant to the provisions of sections 1 to 6 of this act to those persons making qualified contributions to the qualified fund. All tax credits authorized pursuant to sections 1 to 6 of this act shall be administered by the department.
2. Each qualified fund shall, pursuant to the strategy approved by the board, enter into a contract with one or more qualified economic development organizations which shall entitle all qualified economic development organizations in existence at that time to receive and share equally not less than sixty percent of all distributions of equity and dividends or other earnings of the fund generated by qualified contributions. Such contracts shall require the qualified funds to transfer to the board all distributions of dividends or other earnings of the fund that are owed to any qualified economic development organization that has dissolved or has ceased doing business for a period of one year or more.
3. All distributions of dividends, earnings, equity or the like owed pursuant to the provisions of sections 1 to 6 of this act to a qualified economic development organization by any qualified fund shall be paid to the qualified economic development organization. The qualified economic development organization shall use such payments solely for reinvestment in qualified funds in order to provide ongoing seed capital, start-up capital and follow-up capital for Missouri businesses. No qualified economic development organization may transfer any dividends, earnings, equity or the like owed it pursuant to sections 1 to 6 of this act to any other person or entity without the approval of the board.
Section 6. 1. The sole purpose of each qualified fund is to make investments. One hundred percent of investments made from qualified contributions shall be qualified investments.
2. Any person who makes a qualified contribution to a qualified fund shall receive a tax credit against the tax otherwise due pursuant to chapter 143, RSMo, chapter 147, RSMo, or chapter 148, RSMo, other than taxes withheld pursuant to sections 143.191 to 143.265, RSMo, in an amount equal to one hundred percent of such person's qualified contribution.
3. Such person shall submit to the department an application for the tax credit on a form provided by the department. The department shall award tax credits in the order the applications are received and based upon the strategy approved by the board. Tax credits issued pursuant to this section may be claimed for the tax year in which the qualified contribution is made or in any of the following ten years, and may be assigned, transferred or sold.
4. There is hereby imposed on each qualified fund a tax equal to fifteen percent of the
qualified fund's uninvested capital at the close of such qualified fund's tax year. For
purposes of tax computation, any distribution made by a qualified fund during a tax year is
deemed made at the end of such tax year. Each tax year, every qualified fund shall remit
the tax imposed by this section to the director of the department of revenue for deposit in
the state treasury to the credit of the general revenue fund.