AB531: Bill Text

Certification

Current law requires a person applying for certification as a certified capital company to have a net worth, at the time of application, of at least $500,000 and at least $500,000 in cash, cash equivalents, and marketable securities. This bill requires a person to meet these requirements both at the time of application and on the date on which the person is certified. The bill also requires the person to agree to maintain in this state an investment office and staff actively engaged in making investments.

Current law permits a certified capital company to voluntarily decertify in either of two circumstances: 1) At least ten years have passed since the last certified capital investment was made in the certified capital company; or 2) the certified capital company has placed in qualified investments an amount equal to 100% of the certified capital investments it received. This bill deletes the authority to voluntarily decertify as described in item 1.

Qualified businesses, qualified investments, and nonqualified investments

Currently, at least 75% of the employees of a qualified business must be employed in this state. This bill provides that, alternatively, at least 75% of the total payroll of the qualified business must be paid to employees who are employed in this state.

Currently, a certified capital company is permitted to request a written opinion from the department that a business in which the certified capital company proposes to invest is a qualified business. This bill requires a certified capital company to obtain such an opinion before making an investment in any business.

Current law requires a qualified business to agree to certain conditions in order to receive an investment from a certified capital company. The qualified business must agree not to use the proceeds from the investment to relocate its operations; not to relocate its headquarters outside of this state as long as the certified capital company holds the investment; to maintain at least 75% of its employees in this state (or, under the bill, to pay at least 75% of its total payroll to employees in this state); and, with certain exceptions, to maintain at least 75% of its employees at work sites that were maintained by the qualified business at the time that the investment was made. This bill specifies the consequences that apply if a certified capital company makes an investment in a qualified business and the qualified business thereafter violates one of these conditions. Under the bill:

1. The violation does not affect the certified capital company's compliance with the deadlines for making qualifying investments.

2. One hundred percent of the amount of each qualified investment is counted toward the certified capital company's compliance with the deadlines for making qualifying investments.

3. If the violation occurs within the first year after the qualified investment was made, no amount of the qualified investment may be counted toward the certified capital company's satisfaction of the percentage requirements that trigger the authority of the certified capital company to make distributions or decertify.

4. If the violation occurs more than one year, but three years or less, after the qualified investment was made, only 25% of the amount of the qualified investment shall be counted toward the certified capital company's satisfaction of the percentage requirements that trigger the authority of the certified capital company to make distributions or decertify.

5. If the violation occurs more than three years, but five years or less, after the qualified investment was made, only 50% of the amount of the qualified investment shall be counted toward the certified capital company's satisfaction of the percentage requirements that trigger the authority of the certified capital company to make distributions or decertify.

6. If the violation occurs more than five years after the qualified investment was made, 90% of the amount of the qualified investment shall be counted toward the certified capital company's satisfaction of the percentage requirements that trigger the authority of the certified capital company to make distributions or decertify.

The bill, though, permits the department to grant an exception to the requirements under items 3. to 6. above and not reduce the amount of the qualified investment that is counted toward the certified capital company's satisfaction of the applicable percentage requirements, if the qualified business violates the conditions requiring the qualified business to maintain at least 75% of its employees in this state, to pay at least 75% of its total payroll to employees in this state, or to maintain at least 75% of its employees at work sites that were maintained by the qualified business at the time that the investment was made. The department may not grant an exception if the department determines that the qualified business is locating employees at new sites to take advantage of lower wage rates in the areas where those sites are located.

Currently, any certified capital investments in a certified capital company that are not invested in qualified investments may be held or invested as the certified capital company considers appropriate, except that the certified capital company may not invest the funds in an insurance company or an affiliate of an insurance company. This bill provides, instead, that a certified capital company may invest such funds only in the following:

1. Cash that is deposited in a federally insured financial institution.

2. Certificates of deposit in a federally insured financial institution.

3. Investment securities that are obligations of the United States or its agencies or instrumentalities, or that are obligations that are guaranteed fully as to principal and interest by the United States.

4. Debt instruments that are rated at least "AA," "A1," or "P1," or the equivalent, by a nationally recognized credit rating organization.

5. Debt instruments that are issued by, or guaranteed with respect to payment by, an entity whose unsecured indebtedness is rated at least "AA" or the equivalent by a nationally recognized credit rating organization and are not subordinated to other unsecured indebtedness of the issuer or guarantor.

6. Obligations of the state or any political subdivision of the state.

7. Interests in money market funds, the portfolios of which are limited to cash and obligations in which the certified capital company could invest the funds directly.

8. A small business investment company that is approved by the department.

9. Any other investments approved in advance in writing by the department.

Performance evaluation audit

This bill requests the Joint Legislative Audit Committee to direct the Legislative Audit Bureau to perform a performance evaluation audit of the certified capital company program.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB531, s. 1 Section 1. 71.45 (2) (a) 10. of the statutes is amended to read:

AB531,6,6 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dd) to (1dx) and (7) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g) and the amount of credit computed under s. 71.47 (1), (3), (4), and (5).

AB531, s. 2 Section 2. 71.47 (7) of the statutes is created to read:

AB531,6,8 71.47 (7) Certified capital company credit. (a) In this subsection:

AB531,6,9 1. "Certified capital company" has the meaning given in s. 560.30 (2).

AB531,6,10 2. "Certified capital investment" has the meaning given in s. 560.30 (4).

AB531,6,11 3. "Investment date" has the meaning given in s. 560.30 (6).

AB531,6,12 4. "Investment pool" has the meaning given in s. 560.30 (7).

AB531,6,13 5. "Qualified investment" has the meaning given in s. 560.30 (11).

AB531,6,19 (b) An insurer who makes a certified capital investment may claim as a credit against the tax imposed under s. 71.43, for 10 years beginning with the year of the investment, an amount equal to either 10% of that investment or the amount by which the sum of the insurer's certified capital investments and the insurer's qualified investments exceeds the insurer's qualified investments in the taxable year before the insurer first claimed the credit under this section, whichever is less.

AB531,6,21 (c) Section 71.28 (4) (e), (f), (g), and (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

AB531,7,2 (d) 1. If a certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to the investment pool, any insurer that has received a credit under this subsection with respect to that investment pool shall repay that credit to the department of revenue and may not claim more credit in respect to that investment pool.

AB531,7,12 2. If a certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 1. with respect to an investment pool but the certified capital company is decertified, or an investment pool is disqualified, under s. 560.37 before the certified capital company fulfills the investment requirement under s. 560.34 (1m) (a) 2. for that investment pool, any insurer that has received a credit under this subsection with respect to that investment pool shall repay all credits that were claimed for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool and may claim no more credits for taxable years after the taxable year that includes the 3rd anniversary of the investment date of the investment pool.

AB531,7,16 (e) An insurer may sell a credit under this subsection to another insurer who is subject to the tax imposed under s. 71.43 if the insurer notifies the commissioner of insurance and the department of revenue of the sale and includes with such notifications copies of the transfer documents.

AB531, s. 3 Section 3. 71.49 (1) (dm) of the statutes is created to read:

AB531,7,18 71.49 (1) (dm) Certified capital company credit under s. 71.47 (7).

AB531, s. 4 Section 4. 560.30 (3) of the statutes is amended to read:

AB531,7,21 560.30 (3) "Certified capital company tax credit" means the tax credit under s. ss. 71.47 (7) and 76.635.

AB531, s. 5 Section 5. 560.30 (10) (d) of the statutes is amended to read:

AB531,8,2 560.30 (10) (d) A projected increase in federal or state taxes, including excluding penalties and interest on those taxes, of the equity owners of the certified capital company if those amounts are related to the certified capital company's ownership, management, or operation.

AB531, s. 6 Section 6. 560.30 (10) (e) of the statutes is created to read:

AB531,8,5 560.30 (10) (e) Reasonable costs associated with applying for qualified federal funding programs, as determined by the department.

AB531, s. 7 Section 7. 560.31 (1) of the statutes is amended to read:

AB531,8,14 560.31 (1) Application. The department shall promulgate rules establishing procedures under which a person may apply to become a certified capital company for receiving certified capital investments under s. 560.32 (2) (b) 1. or a certified capital company for receiving certified capital investments under s. 560.32 (2) (b) 2. The department shall grant or deny an application for certification under this section within 30 days of the date of application. If the department denies certification, the department shall include with the denial a detailed description of the grounds for the refusal, including suggestions for removal of those grounds.

AB531, s. 8 Section 8. 560.31 (2) (b) of the statutes is amended to read:

AB531,8,18 560.31 (2) (b) The At the time of application and on the date on which the person is certified, the person has a net worth, at the time of application, of at least $500,000 and has at least $500,000 in cash, cash equivalents , and marketable securities.

AB531, s. 9 Section 9. 560.31 (2) (g) of the statutes is created to read:

AB531,8,21 560.31 (2) (g) The person agrees to maintain in this state an investment office and staff actively engaged in making investments.

AB531, s. 10 Section 10. 560.32 (2) (b) of the statutes is renumbered 560.32 (2) (b) 1. and amended to read:

AB531,9,2 560.32 (2) (b) 1. The Prior to the effective date of this subdivision .... [revisor inserts date], the department may certify an investment under this subsection only if, after the certification, the department will not have certified a total of more than $50,000,000 in investments under this subsection.

AB531, s. 11 Section 11. 560.32 (2) (b) 2. of the statutes is created to read:

AB531,9,7 560.32 (2) (b) 2. Beginning on the effective date of this subdivision .... [revisor inserts date], the department shall certify investments for which notices have been received under par. (a), up to $300,000,000, excluding any investments certified under subd. 1.

AB531, s. 12 Section 12. 560.32 (2) (c) of the statutes is renumbered 560.32 (2) (c) 1.

AB531, s. 13 Section 13. 560.32 (2) (c) 2. of the statutes is created to read:

AB531,9,14 560.32 (2) (c) 2. The department may not certify an investment under par. (b) 2. if, after the certification, the investor, together with all affiliates of the investor, would have in certified capital investments under par. (b) 2. more than the greater of $10,000,000 or 15% of the total amount of investments that the department may certify under par. (b) 2.

AB531, s. 14 Section 14. 560.33 (1) (intro.) of the statutes is amended to read:

AB531,9,20 560.33 (1) Qualifications. (intro.) A Except as provided in sub. (2), a business is a qualified business if all of the following requirements are met, as of the time that a certified capital company, or any affiliate of the certified capital company, makes its first investment in the business, investment in the business will further economic development in this state or all of the following requirements are met:

AB531, s. 15 Section 15. 560.33 (1) (b) of the statutes is renumbered 560.33 (1) (b) (intro.) and amended to read:

AB531,9,24 560.33 (1) (b) (intro.) The business has no more than 100 employees, at and any of the following applies:

AB531,9,25 1. At least 75% of whom those employees are employed in this state.

AB531, s. 16 Section 16. 560.33 (1) (b) 2. of the statutes is created to read:

AB531,10,3 560.33 (1) (b) 2. At least 75% of the total payroll of the business is paid to employees who are employed in this state.

AB531, s. 17 Section 17. 560.33 (2) of the statutes is amended to read:

AB531,10,16 560.33 (2) Department opinions and exceptions. A certified capital company may shall, prior to making an investment in a specific business, request a written opinion from the department that a business in which it proposes to invest is a qualified business. If the department determines that the business meets the requirements under sub. (1), the department shall issue a written opinion stating that the business is a qualified business Within 15 days of receiving the request, the department shall determine whether the business is a qualified business and, if the business is not a qualified business, notify the certified capital company in writing of the determination and the reasons for the determination. If the department fails to so notify the certified capital company within 15 days of receiving the request, the business shall be deemed a qualified business, notwithstanding any failure to satisfy sub. (1).

AB531, s. 18 Section 18. 560.34 (1) (c) of the statutes is amended to read:

AB531,10,20 560.34 (1) (c) As a condition of the investment, the qualified business agrees, as long as the certified capital corporation company continues to hold the investment, not to relocate its headquarters out of this state.

AB531, s. 19 Section 19. 560.34 (1) (d) of the statutes is renumbered 560.34 (1) (d) (intro.) and amended to read:

AB531,10,25 560.34 (1) (d) (intro.) As a condition of the investment, the qualified business agrees, as long as the certified capital corporation company continues to hold the investment, to maintain do any of the following:

AB531,11,1 1. Maintain at least 75% of its employees in this state.

AB531, s. 20 Section 20. 560.34 (1) (d) 2. of the statutes is created to read:

AB531,11,4 560.34 (1) (d) 2. Pay at least 75% of its total payroll to employees who are employed in this state.

AB531, s. 21 Section 21. 560.34 (1) (e) of the statutes is amended to read:

AB531,11,13 560.34 (1) (e) As a condition of the investment, the qualified business agrees, as long as the certified capital corporation company continues to hold the investment, to maintain at least 75% of its employees at work sites that were maintained by the qualified business at the time that the investment was made, unless the qualified business obtains an exemption from the department under this paragraph. The department may grant an exemption unless it determines that the qualified business is locating the employees at new sites to take advantage of lower wage rates in the areas where the new sites are located.

AB531, s. 22 Section 22. 560.34 (1m) (b) of the statutes is amended to read:

AB531,12,2 560.34 (1m) (b) The proceeds of all capital of a qualified investment returned to a certified capital company by a qualified business may be placed in new qualified investments, which shall count toward the percentage requirements under par. (a) and s. 560.36 (3). The department shall promulgate rules governing the extent to which a reinvestment of proceeds from the sale of a qualified investment in a qualified business may be counted toward the percentage requirements under par. (a) and ss. 560.36 (3) and 560.37 (3m) (a) 2. These rules may provide that reinvested proceeds from the sale of short-term investments shall be only partially counted toward the percentage requirements under par. (a) and ss. 560.36 (3) and 560.37 (3m) (a) 2. The rules may also provide that proceeds from the sale of an investment in a qualified business that are reinvested in that qualified business, or an affiliate of that qualified business, shall be only partially counted toward the percentage requirements under par. (a) and ss. 560.36 (3) and 560.37 (3m) (a) 2.

AB531, s. 23 Section 23. 560.34 (2) of the statutes is renumbered 560.34 (2) (intro.) and amended to read:

AB531,12,10 560.34 (2) (intro.) Nonqualified investments. All certified capital investments in a certified capital company that are not invested in qualified investments may be held or invested by the certified capital company as it considers appropriate, except that a certified capital company may not invest certified capital investments in an insurance company or in an affiliate of an insurance company. only in any of the following:

AB531, s. 24 Section 24. 560.34 (2) (a) to (k) of the statutes are created to read:

AB531,12,13 560.34 (2) (a) Deposits with a federally insured financial institution, as defined in s. 705.01 (3).

AB531,12,15 (b) Certificates of deposit in a federally insured financial institution, as defined in s. 705.01 (3).