LRB-2076/1
MPG&JK:nwn&kjf:md
2011 - 2012 LEGISLATURE
May 13, 2011 - Introduced by Representatives Tauchen, Klenke, Kuglitsch,
Fields, Williams, Kestell, Nygren, Spanbauer, A. Ott, Van Roy, LeMahieu,
Petrowski, Endsley, Bies and Ballweg, cosponsored by Senators Hopper,
Darling, Galloway, Leibham, Schultz, Lazich and Olsen. Referred to
Committee on Jobs, Economy and Small Business.
AB129,2,3
1An Act to amend 1.12 (1) (b), 13.172 (1), 13.48 (13) (a), 13.62 (2), 13.94 (1) (mm),
213.94 (4) (a) 1., 13.95 (intro.), 16.002 (2), 16.004 (4), 16.004 (5), 16.004 (12) (a),
316.045 (1) (a), 16.15 (1) (ab), 16.41 (4), 16.417 (1) (b), 16.52 (7), 16.528 (1) (a),
416.53 (2), 16.54 (9) (a) 1., 16.765 (1), 16.765 (2), 16.765 (5), 16.765 (6), 16.765 (7)
5(intro.), 16.765 (7) (d), 16.765 (8), 16.85 (2), 16.865 (8), 71.05 (6) (a) 15., 71.21
6(4), 71.26 (1) (be), 71.26 (2) (a) 4., 71.34 (1k) (g), 71.45 (2) (a) 10., 76.67 (2), 77.54
7(9a) (a), 77.92 (4), 100.45 (1) (dm), 101.177 (1) (d), 230.03 (3), 281.75 (4) (b) 3.
8and 285.59 (1) (b);
to repeal and recreate 16.417 (1) (b); and
to create 13.94
9(1) (dx), 13.94 (1s) (c) 6., 19.42 (10) (t), 19.42 (13) (p), 20.195, 40.02 (54) (n), 70.11
10(38v), 71.05 (6) (a) 25., 71.05 (6) (a) 26., 71.05 (6) (b) 48., 71.07 (8s), 71.10 (4) (ds),
1171.26 (2) (a) 4c., 71.26 (2) (a) 4d., 71.26 (2) (a) 4e., 71.28 (8s), 71.30 (3) (dn), 71.45
12(2) (a) 10c., 71.45 (2) (a) 10d., 71.45 (2) (a) 10e., 71.47 (8s), 71.49 (1) (dn), 73.033,
1376.634 and chapter 239 of the statutes;
relating to: creation of the Wisconsin
14Venture Capital Authority, creation of the badger jobs fund and the jobs now
1fund certification program, both of which are to be administered by the
2Wisconsin Venture Capital Authority, making an appropriation, and providing
3a penalty.
Analysis by the Legislative Reference Bureau
Wisconsin venture capital authority
This bill creates an authority to be known as the "Wisconsin Venture Capital
Authority" (authority) to oversee programs related to venture capital investment in
Wisconsin businesses.
Composition and General Operation
Board of Directors
Under the bill, the authority is governed by a seven-member board of directors
(board) that consists of the chief executive officer of the Wisconsin Economic
Development Corporation; four members from the private sector nominated by the
governor and appointed with the advice and consent of the senate; one member
appointed by the speaker of the assembly; and one member appointed by the senate
majority leader. The members of the board appointed by the governor, the speaker
of the assembly, and the senate majority leader serve staggered three-year terms
and must have experience that qualifies them to serve on the board. The members
of the board may not be compensated, but the members may be reimbursed for actual
and necessary expenses, including travel expenses, incurred in the performance of
their duties.
The bill gives the board the powers necessary or convenient to carry out its
duties, as well as specific powers to conduct its corporate business. Under the bill,
the authority is a participating employer in the Wisconsin Retirement System. The
board may hire an executive director. The members of the board appointed by the
speaker of the assembly and the senate majority leader, the executive director, if any,
and the manager of the badger jobs fund administered by the authority are subject
to state ethics laws.
Transitional Administration by the Department of Commerce and the
Wisconsin Economic Development Corporation
Under the bill, the Department of Commerce administers the programs created
under the authority until the board is in place and the authority has adequate
personnel to carry out its duties or until the effective date of the 2011-13 biennial
budget act, whichever is later. If as of the effective date of the 2011-13 biennial
budget act the authority has not assumed administration of its programs, the
authority's programs are to be administered by the Wisconsin Economic
Development Corporation until the authority is prepared to assume administration
of those programs.
General Reporting Requirements
Under the bill, the authority must submit an annual report to the legislature
and to the governor that contains all of the following information:
1. An assessment of the success to date of each program administered by the
authority.
2. An accounting of the financial status of each program administered by the
authority, including the opinion of an independent certified public accountant.
3. Any recommendations the authority has for the improvement of each of its
programs.
Badger Jobs Fund
Also under the bill, there is created a fund to be known as the "badger jobs fund"
for the placement of capital with investors who are certified by the authority and who
in turn invest badger jobs fund capital in Wisconsin businesses that meet certain
criteria. The authority must hire a qualified fund manager to manage the badger
jobs fund's investments. The badger jobs fund manager must establish and maintain
an investment policy for the badger jobs fund that the authority reviews and
approves on an annual basis. The authority may pay the fund manager a
management fee of not more than 0.5 percent of the badger jobs fund's total assets.
Investor Certification
Under the bill, any person may apply to be certified to receive badger jobs fund
capital. The authority charges such applicants an application fee in an amount
determined by the authority. In determining whether to certify an applicant, the
authority considers the applicant's venture capital experience or other experience
that qualifies the applicant to receive badger jobs fund capital, the past performance
of investments managed by the applicant, the applicant's commitment to investing
in businesses within Wisconsin, and whether the investor is located in Wisconsin or
agrees to maintain an office in Wisconsin.
Investment of Badger Jobs Fund Capital
Under the bill, the authority may invest badger jobs fund capital only in
certified investors. The authority may not commit more than 15 percent of the total
capital that the authority is authorized to raise for the badger jobs fund to a single
certified investor.
The bill provides that a certified investor must contract with the authority
before receiving any capital from the badger jobs fund. Under the contract, the
certified investor must agree to all of the following:
1. The certified investor must commit to maintaining a significant physical
presence in Wisconsin, including an office that is staffed by at least one full-time
employee.
2. The certified investor must invest at least 50 percent of the badger jobs fund
capital it receives only in a business that is headquartered in Wisconsin; that
employs at least 50 percent of its employees in Wisconsin; that agrees to use badger
jobs fund capital only for certain approved purposes; and that is not primarily
engaged in real estate development or sales, insurance, banking, lending, lobbying,
political consulting, professional services, or retail sales, other than direct sales of
products the business itself manufactures.
3. The certified investor may not receive capital from the badger jobs fund that
exceeds 25 percent of the total capital the investor raises from all sources, including
the badger jobs fund.
4. When a certified investor invests badger jobs fund capital in a business, the
certified investor must at least match the badger jobs fund's capital contribution to
that investment with capital the certified investor has raised from other sources.
5. The certified investor may not apply the amount of capital it receives from
the badger jobs fund toward certification for purposes of receiving early stage or
angel investment tax credits from the Department of Commerce.
Issuance of Bonds
The bill authorizes the authority to issue up to $200,000,000 in bonds or other
obligations to raise capital for the badger jobs fund. The authority may contract with
a bondholder to award franchise and income tax credits to a bondholder up to an
amount equal to the amount the authority is unable to pay a bondholder on a bond.
A bondholder may not claim those tax credits until January 1, 2016. Those tax
credits may be carried forward until fully used and may be transferred or sold. The
authority may not award tax credits to bondholders that total more than
$300,000,000.
While the bill specifies that the state is not liable for a debt of the authority, the
bill also contains a moral obligation pledge in which the legislature expresses its
expectation and aspiration that the legislature will make an appropriation to pay a
bondholder the amount of principal and interest or other financing charges the
authority fails to pay on a bond.
The chairperson of the authority's board must notify the Joint Committee on
Finance (JCF) when the authority has reached the $200,000,000 bond limit for the
badger jobs fund and has satisfied 90 percent of its debt to bondholders. The
chairperson must provide a second such notice when the authority has satisfied 100
percent of its total debt to bondholders under the badger jobs fund. If, within 14
working days after the date of the chairperson's second notice, the cochairpersons of
JCF do not notify the authority that the committee has scheduled a meeting to review
dissolution of the badger jobs fund, the authority must dissolve the badger jobs fund
and liquidate all of the badger jobs fund's assets, paying the proceeds to the state for
deposit in the general fund. If JCF does schedule a meeting to consider dissolution,
the authority may dissolve the badger jobs fund only with the approval of JCF.
The authority may reinvest amounts that it receives as returns from its
investments in certified investors only if the authority meets the conditions and
gives the notices described above, and JCF does not approve dissolution of the badger
jobs fund. Any reinvestment must meet the other requirements in the bill with
respect to investments in certified investors.
Tax Revenue from Businesses that Receive Investments
The authority's administration of the badger jobs fund is supported in part by
tax revenue raised from businesses that benefit from the badger jobs fund or from
the certified jobs now fund program described below. Under the bill, the authority
and the Department of Revenue (DOR) are to coordinate with each other to
determine the amount of withholding taxes that each business that receives
investment capital under the badger jobs fund or the certified jobs now fund program
paid for the year prior to the first year in which the business received any such
investment. Then, each year for 15 years following that first year of investment or
until the badger jobs fund is dissolved, whichever occurs first, DOR transfers to the
authority an amount equal to 50 percent of the increase, if any, in withholding taxes
paid by the business over the amount determined, as described above, for the year
prior to that first year of investment.
Reporting Requirements
The bill provides that the authority must include in its annual report to the
legislature and the governor all of the following information specifically relating to
the badger jobs fund:
1. The current investment policy of the badger jobs fund.
2. The badger jobs fund's internal rate of return from its investments in
certified investors.
3. An accounting of the withholding tax revenue received by the authority from
businesses that received investment capital contributed by the badger jobs fund from
a certified investor.
4. An accounting of any compensation, including a management fee, paid to the
badger jobs fund manager during the preceding year.
5. An accounting of the value of tax credits awarded to bondholders during the
preceding year, including a description of the circumstances leading to the award of
the credits and the likelihood that the authority will award additional tax credits to
bondholders in the future.
6. For each certified investor in whom the badger jobs fund invested capital
during the preceding year, the name and address of the investor and the amount of
each investment.
7. The internal rate of return realized by each certified investor.
8. An accounting of any fee a certified investor paid to itself or any principal
or manager during the preceding year.
9. For each business in which a certified investor made an investment of capital
from the badger jobs fund during the preceding year, the name and address of the
business and a description of the nature of the business, the amount of each
investment in the business, an identification of the certified investor who made the
investment, and an accounting of the number of employees the business has hired
since badger job funds capital was first invested in the business.
