HB-5921, As Passed House, April 22, 2010

SUBSTITUTE FOR

HOUSE BILL NO. 5921

A bill to amend 1967 PA 281, entitled

"Income tax act of 1967,"

(MCL 206.1 to 206.532) by adding section 278.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 278. (1) Subject to the limitations provided under this

section, for tax years that begin after December 31, 2009 and end

before January 1, 2014, a taxpayer that makes a qualified

investment in a qualified business during the tax year may claim a

credit against the tax imposed by this act equal to 25% of that

qualified investment.

(2) To qualify for the credit under this section, the taxpayer

shall request certification from the Michigan strategic fund within

60 days of making the investment. A taxpayer shall not claim a

credit under this section unless the Michigan strategic fund has

issued a certificate to the taxpayer. The board shall not approve a

credit under this section for a taxpayer who has been convicted of

a felony if the board determines that the conviction will have a

material impact on the ability of the taxpayer to participate in a

qualified investment. The Michigan strategic fund shall not certify

more than $1,000,000.00 in qualified investments in any 1 qualified

business. The taxpayer shall attach the certificate to the annual

return filed under this act on which a credit under this section is

claimed. The certificate required under this subsection shall

specify all of the following:

(a) The total amount of investment made during the tax year by

the taxpayer in each qualified business.

(b) The total amount of qualified investments made in each

qualified business if different from the previous amount.

taxpayer is allowed to claim for the designated tax year.

(3) A taxpayer shall not claim a credit of more than

$500,000.00 based on an investment in any 1 qualified business and

shall not claim a credit of more than $500,000.00 for qualified

investments in all qualified businesses in any 1 year. The credit

allowed under this section shall be taken by the taxpayer in equal

installments over 2 years beginning with the tax year in which the

certification was issued.

(4) The total amount of credits that the Michigan strategic

fund may certify under this section per calendar year shall not

exceed $10,000,000.00. If the Michigan strategic fund approves a

total of all credits for investments under this section of less

than $10,000,000.00 in a calendar year, the Michigan strategic fund

may carry forward the difference between the $10,000,000.00 and the

total of all credits for all investments approved in the

immediately preceding calendar year and certify additional credits

in the immediately succeeding calendar year.

(5) If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

portion of the credit that exceeds the tax liability of the

taxpayer for the tax year shall not be refunded but may be carried

forward to offset tax liability under this act in subsequent tax

years for a period not to exceed 15 tax years or until used up,

whichever occurs first.

(6) The board shall develop an application and approval

process in order to certify investments under this section and

adopt a program describing parameters and criteria to be used for

approving investments. As part of that program adoption, the board

may do any of the following:

(a) Apportion the annual aggregate credit described in this

section to include set-asides by credit size and early stage and

other business categories.

(b) Develop a method to define, register, and approve angel

investor groups, seed capital firms, and venture capital firms.

considered an investment alongside or through an approved angel

group, seed capital firm, or venture capital firm.

(7) As used in this section:

(a) "Board" means the board of directors of the Michigan

strategic fund.

(b) "Michigan strategic fund" means the Michigan strategic

fund as described in the Michigan strategic fund act, 1984 PA 270,

MCL 125.2001 to 125.2093.

certifies as in compliance with all of the following at the time of

the investment:

(i) The business is a seed or early stage business as defined

in section 3 of the Michigan early stage venture investment act of

2003, 2003 PA 296, MCL 125.2233.

(ii) The business has, or will have as determined by the board,

its headquarters in this state, is domiciled in this state, and has

a majority of its employees working in this state.

(iii) The business has a preinvestment valuation of less than

$10,000,000.00 and has fewer than 100 full-time equivalent

employees.

(iv) The business has been in existence less than 5 years. This

subparagraph does not apply to a business in which the business

activity is derived from research at an institution of higher

education located within this state or an organization exempt from

federal taxation under section 501(c)(3) of the internal revenue

code and that is located within this state. As used in this

subparagraph, a public or private college or university that awards

a bachelor's degree or other degrees is an institution of higher

education.

(v) The business is an economic base employer as determined by

the board.

(d) "Qualified investment" means an investment of at least

$15,000.00 certified by the Michigan strategic fund that is made

alongside of, or through, a seed venture capital or angel investor

group that is registered with and approved by the Michigan

strategic fund and is not in a business in which any member of the

investor's family is an employee or owner of the business or in

which the investor or any member of the investor's family has a

preexisting fiduciary relationship with the business.

Enacting section 1. This amendatory act shall be known as the

"small business investment credit".