May 19, 2005, Introduced by Senator BISHOP and referred to the Committee on Commerce and Labor.
A bill to amend 2003 PA 296, entitled
"Michigan early stage venture investment act of 2003,"
by amending sections 5, 15, 17, and 23 (MCL 125.2235, 125.2245,
125.2247, and 125.2253).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 5. (1) A Michigan early stage venture investment
corporation is a nonprofit corporation incorporated under the
nonprofit corporation act, 1982 PA 162, MCL 450.2101 to 450.3192,
that meets the registration requirements of this act.
(2) A Michigan early stage venture investment corporation
shall be incorporated as a nonprofit corporation that has received
,
on or before September 1, 2004, a favorable determination from
the internal revenue service that the corporation is exempt from
taxation under section 501(c)(3) or 501(c)(4) of the internal
revenue code. The department of treasury may allow up to 3, 30-day
extensions of the date under this section for purposes of reviewing
and approving an application for registration under section 11.
(3) Except as otherwise provided in this act to the contrary,
a Michigan early stage venture investment corporation is subject to
the laws of this state that are applicable to nonprofit
corporations.
(4) A Michigan early stage venture investment corporation is a
charitable and benevolent institution, and its funds, income, and
property are exempt from taxation by this state or any political
subdivision of this state.
(5) A corporation shall not act as a Michigan early stage
venture investment corporation except as authorized under this act.
Sec. 15. (1) Except as otherwise provided in this act, in the
nonprofit corporation act, 1982 PA 162, MCL 450.2101 to 450.3192,
by law, or in its articles of incorporation, a Michigan early stage
venture investment corporation may do or delegate any act
consistent with this act and the purposes of the nonprofit
corporation, including, but not limited to, the following:
(a) Enter into contracts and all necessary activities in the
regular course of business of the Michigan early stage venture
investment corporation.
(b) Charge reasonable fees for the implementation of this act
and the ongoing operation of the Michigan early stage venture
investment corporation.
(c) Perform acts or enter into financial or other transactions
necessary to carry out its powers and duties under this act.
(d) Invest in venture capital funds through equity securities.
(e)
Employ a fund manager fund managers and other
persons it
considers necessary to implement this act. The Michigan early stage
venture investment corporation shall employ only 1 fund manager at
any 1 time.
(2) The fund manager shall exercise the duties of a fiduciary
toward the corporation and shall discharge his or her duties with
the degree of diligence, care, and skill that an ordinarily prudent
person would exercise under the same or similar circumstances in a
like position.
(3) The fund manager shall solicit investors pursuant to
section 17.
(4) The Michigan early stage venture investment corporation
shall require the fund manager to develop procedures to evaluate
types of business and industry for investment purposes and to set
priorities as to which businesses are most likely to meet the
desired outcomes of the investment plan established under section
19 and which businesses conduct activities that are consistent with
the purposes of this act and of the fund. This evaluation shall
include, but not be limited to, the location of the firm and the
direct and indirect impact of the business on the economic
development of this state.
Sec. 17. (1) To secure investment in the fund, the Michigan
early stage venture investment corporation shall enter into
agreements with investors.
(2) Each agreement shall contain all of the following:
(a) An established and agreed-upon investment amount and
repayment schedule.
(b) A guaranteed negotiated amount or negotiated return on
qualified investment by the certified investor over the term of the
agreement.
(c) A maximum amount of credit that the investor may claim
under section 37e of the single business tax act, 1975 PA 228, MCL
208.37e, a successor tax to the single business tax act, 1975 PA
228, MCL 208.1 to 208.145, or under section 270 of the income tax
act of 1967, 1967 PA 281, MCL 206.270, and the first year in which
that credit can be claimed.
(3) The Michigan early stage venture investment corporation
shall notify the department of treasury when agreements are entered
into under this section and send a copy of each agreement to the
department of treasury. The department of treasury shall issue an
approval letter to the investor that states that the investor is
entitled to a tax credit under section 37e of the single business
tax act, 1975 PA 228, MCL 208.37e, that is equal to the difference
between the amount actually repaid and the amount set as the
repayment due in the agreement entered into by the investor and the
fund manager.
(4) The fund shall repay any amounts due from proceeds from
the funds raised based on the agreements made under this section.
(5) For tax years that begin after December 31, 2008,
investors that have certificates issued pursuant to section 23 may
claim a credit under section 37e of the single business tax act,
1975 PA 228, MCL 208.37e, or section 270 of the income tax act of
1967, 1967 PA 281, MCL 206.270, as otherwise provided in this act,
equal to the difference between the amount actually repaid and the
amount set as the repayment due in the agreement entered into by
the
taxpayer and the fund manager. The Michigan early stage
venture
investment corporation shall notify the department of
treasury
when credit certificates are issued under section 23, and
upon
notification and approval by the department of treasury under
section
23, the amount of credit allowed pursuant to the credit
certificate
becomes a debt of the fund to the state subject to
repayment
pursuant to the agreement between the Michigan early
stage
venture investment corporation and the department of
treasury.
A debt under this section shall accrue interest at the
same
rate as the interest paid to the investor.
(6) Repayment of a debt under this section may be restricted
to specific funds or assets of the Michigan early stage venture
investment corporation.
(7) The Michigan early stage venture investment corporation
may purchase securities and may manage, transfer, or dispose of
those securities.
(8) The Michigan early stage venture investment corporation
and its directors are not broker-dealers, agents, investment
advisors, or investment advisor representatives when carrying out
their duties and responsibilities under this act.
Sec. 23. (1) The Michigan early stage venture investment
corporation shall determine which investors are eligible for tax
credits under section 37e of the single business tax act, 1975 PA
228, MCL 208.37e, and section 270 of the income tax act of 1967,
1967 PA 281, MCL 206.270, and the amount of the tax credit under
those sections allowed to each investor.
(2) The Michigan early stage venture investment corporation
shall determine which investors are eligible for tax credits under
this section and submit proposed certificates that meet the
criteria under subsection (3) to the department of treasury for
approval. The department of treasury shall approve or deny proposed
certificates within 30 days after receipt of the certificates. If
the department of treasury denies a proposed certificate, the
department of treasury shall notify the Michigan early stage
venture investment corporation and the investor of the denial and
the reason for the denial. If a proposed certificate is denied
under this subsection, the Michigan early stage venture investment
corporation is not prohibited from subsequently submitting a
proposed certificate on behalf of that same investor. If the
department of treasury does not approve or deny the certificates
within 30 days, the certificates are considered approved.
(3) The Michigan early stage venture investment corporation
shall issue a certificate approved under subsection (2) to each
investor that states all of the following:
(a) The taxpayer is an investor.
(b) The taxpayer's federal employer identification number or
the number assigned to the taxpayer by the department of treasury
for filing purposes under the single business tax act, 1975 PA 228,
MCL 208.1 to 208.145.
(c) The amount of the tax credit that the taxpayer may claim
against its tax liability under section 37e of the single business
tax act, 1975 PA 228, MCL 208.37e, or section 270 of the income tax
act of 1967, 1967 PA 281, MCL 206.270.
(d) The tax years for which the credit under subdivision (c)
may be claimed and the maximum annual amount that may be claimed
each tax year.
(e) The tax credit is not refundable.
(f) The tax credit is transferable.
(4) The fund manager shall invest, budget, and plan scheduled
payments and repayments so that no credits are claimed under
section 37e of the single business tax act, 1975 PA 228, MCL
208.37e, in any tax year before tax years that begin after December
31, 2008.
(5) Certificates under this section shall be issued to an
investor at the time that the Michigan early stage venture
investment corporation determines that, for that investor, capital
is not sufficient to meet the guaranteed negotiated amount or the
negotiated return on qualified investment of that investor. The
total of all certificates issued under this section shall not
exceed the maximum amount allowed under section 37e(2) of the
single business tax act, 1975 PA 228, MCL 208.37e.
(6) Certificates under this section shall not be issued until
December 31, 2008 or 5 years after all the requirements under
section 29 have been met, whichever occurs later.