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HF 3538

1st Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - 1st Engrossment

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A bill for an act
relating to insurance taxes; providing a credit for investment in start-up and
emerging Minnesota businesses; proposing coding for new law in Minnesota
Statutes, chapters 116J; 297I.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [116J.665] MINNESOTA SMALL BUSINESS INVESTMENT
COMPANY CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given.
new text end

new text begin (b) "Affiliate" means:
new text end

new text begin (1) any person who, directly or indirectly, beneficially owns, controls, or holds power
to vote 15 percent or more of the outstanding voting securities or other voting ownership
interest of a Minnesota small business investment company or insurance company;
new text end

new text begin (2) any person, 15 percent or more of whose outstanding voting securities or other
voting ownership interests are directly or indirectly beneficially owned, controlled, or held
with power to vote by a Minnesota small business investment company or insurance
company;
new text end

new text begin (3) any person who, directly or indirectly, controls, is controlled by, or is under
common control with a Minnesota small business investment company or insurance
company;
new text end

new text begin (4) a partnership or limited liability company in which a Minnesota small business
investment company or insurance company is a general partner, member, or managing
member; or
new text end

new text begin (5) any person who is an officer, director, employee, or agent of a Minnesota small
business investment company or insurance company, or an immediate family member of
such officer, director, employee, or agent.
new text end

new text begin Notwithstanding this subdivision, an investment by a certified investor in a
Minnesota small business investment company pursuant to an allocation of premium
tax credits under this section does not cause that Minnesota small business investment
company to become an affiliate of that certified investor.
new text end

new text begin (c) "Allocation date" means the date on which credits under section 297I.23 are
allocated to the investors of a Minnesota small business investment company under this
section.
new text end

new text begin (d) "Designated capital" means an amount of money that:
new text end

new text begin (1) is invested by a certified investor in a Minnesota small business investment
company; and
new text end

new text begin (2) fully funds the purchase price of either or both certified investor's equity interest
in a Minnesota small business investment company or a qualified debt instrument issued
by a Minnesota small business investment company.
new text end

new text begin (e) "Minnesota small business investment company" means a partnership,
corporation, trust, or limited liability company, organized on a for-profit basis, that:
new text end

new text begin (1) has its principal office located or is headquartered in Minnesota;
new text end

new text begin (2) has as its primary business activity the investment of cash in qualified businesses;
and
new text end

new text begin (3) is certified by the Department of Employment and Economic Development as
meeting the criteria in this section.
new text end

new text begin (f) "Certified investor" means any insurer as defined in section 60A.02, subdivision
4, that contributes designated capital pursuant to this section.
new text end

new text begin (g) "Person" means any natural person or entity, including, but not limited to, a
corporation, general or limited partnership, trust, or limited liability company.
new text end

new text begin (h) (1) "Qualified business" means a business that is independently owned and
operated and meets all of the following requirements:
new text end

new text begin (i) it is headquartered in this state, its principal business operations are located in this
state, and at least 60 percent of its employees are in Minnesota;
new text end

new text begin (ii) it has not more than 100 employees;
new text end

new text begin (iii) it is not predominantly engaged in:
new text end

new text begin (A) professional services provided by accountants, doctors, or lawyers;
new text end

new text begin (B) banking or lending;
new text end

new text begin (C) real estate development;
new text end

new text begin (D) insurance;
new text end

new text begin (E) oil and gas exploration;
new text end

new text begin (F) direct gambling activities; or
new text end

new text begin (G) making loans to or investments in a Minnesota small business investment
company or an affiliate; and
new text end

new text begin (iv) it is not a franchise of and has not been organized by a Minnesota small business
investment company or an affiliate of a Minnesota small business investment company,
and has no financial relationship with a Minnesota small business investment company
or any affiliate of a Minnesota small business investment company prior to a Minnesota
small business investment company's first qualified investment in the business and will not
have any relationship after the initial qualified investment other than as created by that
investment and any subsequent investments in the business made by a Minnesota small
business investment company or its affiliates.
new text end

new text begin (2) A business classified as a qualified business at the time of the first qualified
investment in the business will remain classified as a qualified business and may receive
continuing qualified investments from any Minnesota small business investment company.
Continuing investments must be qualified investments even though the business may not
meet the definition of a qualified business at the time of such continuing investments,
except the business shall not be eligible to receive further qualified investments, if it has:
new text end

new text begin (i) relocated its headquarters or principal business operations outside of this state; or
new text end

new text begin (ii) not expended substantially all of its prior qualified investments to establish and
support its Minnesota operations, except for advertising, promotions, and sales purposes,
which may be conducted outside of Minnesota.
new text end

new text begin (i) "Qualified debt instrument" means a debt instrument issued by a Minnesota small
business investment company, at par value or a premium, with an original maturity date
of at least four years from the date of issuance, a repayment schedule which is not faster
than a level principal amortization over four years, provided that the payments, whether of
principal, interest, or a combination thereof, must not exceed, in any one year, 25 percent
of Minnesota small business capital invested by the debt holder in a Minnesota small
business investment company, on the debt instrument unless the qualified debt instrument
or the issuer thereof is in default with respect to the terms of the investment and must be
rated within the top three rating categories of a rating agency that has been designated
as a nationally recognized statistical rating agency by the United States Securities and
Exchange Commission.
new text end

new text begin (j) "Qualified distribution" means any distribution or payment not made to a certified
investor or affiliate of a certified investor by a Minnesota small business investment
company in connection with the following:
new text end

new text begin (1) reasonable costs and expenses of forming, syndicating, and organizing the
Minnesota small business investment company, including reasonable and necessary fees
paid for professional services, including, but not limited to, legal and accounting services
related to the formation of a Minnesota small business investment company, and the
costs of financing and insuring the obligations of a Minnesota small business investment
company;
new text end

new text begin (2) reasonable costs and expenses of managing and operating a Minnesota small
business investment company, including any management fee, which in the aggregate
must not exceed two percent of designated capital;
new text end

new text begin (3) reasonable and necessary fees in accordance with industry custom for
professional services, including, but not limited to, legal and accounting services related
to the operation of a Minnesota small business investment company, not including any
lobbying or governmental relations;
new text end

new text begin (4) any increase or projected increase in federal or state taxes, including penalties and
related interest of the equity owners of a Minnesota small business investment company
resulting from the earnings or other tax liability of a Minnesota small business investment
company to the extent that the increase is related to the ownership, management, or
operation of a Minnesota small business investment company; or
new text end

new text begin (5) payments to debt holders of a Minnesota small business investment company
may be made without restriction with respect to repayments of principal and interest on
indebtedness owed to them by a Minnesota small business investment company, including
indebtedness of the Minnesota small business investment company on which certified
investors earned tax credits. A debt holder that is also a certified investor or equity holder
of a Minnesota small business investment company may receive payments with respect to
such debt without any restriction whatsoever.
new text end

new text begin (k) "Qualified investment" means the investment of money by a Minnesota small
business investment company in a qualified business for the purchase of any debt,
debt participation, equity, or hybrid security, of any nature and description whatsoever,
including a debt instrument or security that has the characteristics of debt but which
provides for conversion into equity or equity participation instruments such as options
or warrants. Any qualified investment in the form of a debt instrument, including those
owned through debt participations, must have a final stated maturity of at least two years
from the date of issuance and a repayment schedule that is no faster than level principal
amortization over two years, however, this does not prohibit the qualified business
from voluntarily prepaying a qualified investment at any time, or a Minnesota small
business investment company from exercising any of its rights as a creditor, including the
acceleration of the debt owned upon a default by the qualified business under the terms
of the debt instrument or upon the acquisition, merger, or the sale of all or substantially
all of the assets of the qualified business.
new text end

new text begin (l) "Qualified underserved area business" means a business that otherwise would
meet the criteria of a qualified business, but is located in:
new text end

new text begin (1) a rural Minnesota county;
new text end

new text begin (2) the Iron Range of Minnesota; or
new text end

new text begin (3) a low-income community of Minnesota as defined in section 45D(e) of the
Internal Revenue Code.
new text end

new text begin (m) "State premium tax liability" means any liability incurred by an insurance
company under the provisions of chapter 297I or in the case of a repeal or a reduction by
the state of the liability imposed by chapter 297I, any other tax liability imposed upon an
insurance company by the state.
new text end

new text begin (n) "Qualified seed fund" means the rural angel investor network fund established by
the department or the incubator program established at the University of Minnesota.
new text end

new text begin Subd. 2. new text end

new text begin Certification. new text end

new text begin (a) The commissioner must provide a standardized format
for applying for the small business investment credit under section 297I.23.
new text end

new text begin (b) An applicant is required to:
new text end

new text begin (1) file an application with the department;
new text end

new text begin (2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
new text end

new text begin (3) submit as part of its application an audited balance sheet that contains an
unqualified opinion of an independent certified public accountant issued not more than
35 days before the application date that states whether the applicant has an equity
capitalization of $500,000 or more in the form of unencumbered cash, marketable
securities, or other liquid assets; and
new text end

new text begin (4) have at least two principals or persons, at least one of which is primarily located
in Minnesota, employed to manage the funds who each have a minimum of five years
of money management experience in the venture capital or small business investment
industry.
new text end

new text begin (c) The department may certify partnerships, corporations, trusts, or limited
liability companies, organized on a for-profit basis, which submit an application to be
designated as a Minnesota small business investment company if such applicant is located,
headquartered, and licensed or registered to conduct business in Minnesota, has as its
primary business activity the investment of cash in qualified businesses, and meets the
other criteria set forth in this section.
new text end

new text begin (d) The department must review the organizational documents of each applicant for
certification and the business history of each applicant, determine whether the applicant
has satisfied the requirements of this section, and determine whether the officers and the
board of directors, general partners, trustees, managers, or members are trustworthy and
are thoroughly acquainted with the requirements of this section.
new text end

new text begin (e) Within 60 days after the receipt of an application, the department must issue the
certification or refuse the certification and communicate in detail to the applicant the
grounds for refusal, including suggestions for the removal of such grounds.
new text end

new text begin (f) The department must begin accepting applications to become a Minnesota small
business investment company as defined under section 297I.23 on September 30, 2008.
new text end

new text begin Subd. 3. new text end

new text begin Requirements. new text end

new text begin (a) An insurance company or affiliate of an insurance
company must not, directly or indirectly:
new text end

new text begin (1) beneficially own, whether through rights, options, convertible interest, or
otherwise, 15 percent or more of the voting securities or other voting ownership interest of
a Minnesota small business investment company;
new text end

new text begin (2) manage a Minnesota small business investment company; or
new text end

new text begin (3) control the direction of investments for a Minnesota small business investment
company.
new text end

new text begin (b) A Minnesota small business investment company may obtain one or more
guaranties, indemnities, bonds, insurance policies, or other payment undertakings for the
benefit of its certified investors from any entity, except that in no case can more than one
certified investor of a Minnesota small business investment company on an aggregate
basis with all affiliates of such certified investor be entitled to provide such guaranties,
indemnities, bonds, insurance policies, or other payment undertakings in favor of the
certified investors of a Minnesota small business investment company and its affiliates in
this state.
new text end

new text begin (c) This subdivision does not preclude a certified investor, insurance company, or
other party from exercising its legal rights and remedies, including, without limitation,
interim management of a Minnesota small business investment company, in the event that
a Minnesota small business investment company is in default of its statutory obligations
or its contractual obligations to such certified investor, insurance company, or other
party, or from monitoring a Minnesota small business investment company to ensure its
compliance with this section or disallowing any investments that have not been approved
by the department.
new text end

new text begin (d) The department may contract with an independent third party to review,
investigate, and certify that the applications comply with the provisions of this section.
new text end

new text begin Subd. 4. new text end

new text begin Aggregate limitations on investment credits; allocation. new text end

new text begin (a) The
aggregate amount of designated capital for which investment credits will be allocated
to all certified investors under this section must not exceed the amount that would
entitle all certified investors of Minnesota small business investment companies to take
aggregate credits of $80,000,000. No Minnesota small business investment company, on
an aggregate basis with its affiliates, may file credit allocation claims that exceed the
maximum amount of designated capital for which credits will be allocated as provided
in this subdivision.
new text end

new text begin (b) Credits must be allocated to certified investors in the order that the credit
allocation claims are filed with the department. All credit allocation claims filed with the
department on the same day must be treated as having been filed contemporaneously. Any
credit allocation claims filed with the department prior to the credit allocation claim filing
date will be deemed to have been filed on the initial credit allocation claim filing date. The
department will set the initial credit allocation claim filing date to be 90 days after the
department begins to accept applications.
new text end

new text begin (c) In the event that two or more Minnesota small business investment companies
file credit allocation claims with the department on behalf of their respective certified
investors on the same day, and the aggregate amount of credit allocation claims exceeds
the aggregate limit of credits under this section or the lesser amount of credits that remain
unallocated on that day, then the credits shall be allocated among the certified investors
who filed on that day on a pro rata basis with respect to the amounts claimed. The pro rata
allocation for any one certified investor is the product obtained by multiplying a fraction,
the numerator of which is the amount of the credit allocation claim filed on behalf of a
certified investor and the denominator of which is the total of all credit allocation claims
filed on behalf of all certified investors on that day, by the aggregate limit of credits under
this section or the lesser amount of credits that remain unallocated on that day.
new text end

new text begin (d) Within ten business days after the department receives a credit allocation claim
filed by a Minnesota small business investment company on behalf of one or more of its
certified investors, the department must notify the Minnesota small business investment
company of the amount of credits allocated to each of the certified investors of that
Minnesota small business investment company. In the event a Minnesota small business
investment company does not receive aggregate investments of designated capital
equaling the amount of credits allocated to its certified investors within ten business days
of the Minnesota small business investment company's receipt of notice of allocation, then
it shall notify the department on or before the next business day and that portion of the
credits allocated to the certified investors of the Minnesota small business investment
company in excess of the amount of designated capital invested in the Minnesota small
business investment company by that date will be forfeited. The department must then
reallocate those forfeited credits among the certified investors of the other Minnesota small
business investment companies on a pro rata basis with respect to the credit allocation
claims filed on behalf of the certified investors. The commissioner is authorized to levy a
fine of not more than $50,000 on any certified investor that does not invest the full amount
of designated capital allocated by the department to the investor in accordance with the
credit allocation claim filed on its behalf.
new text end

new text begin (e) The maximum amount of credit allocation claims that may be filed on behalf
of any one certified investor on an aggregate basis with its affiliates in one or more
Minnesota small business investment companies, must not exceed ten times the largest
annual state premium tax liability incurred by the approved investor on an aggregate basis
with its affiliates during the three tax years preceding the year of the allocation date for
which final returns have been filed.
new text end

new text begin Subd. 5. new text end

new text begin Requirements for continuance of certification. new text end

new text begin (a) To continue to be
eligible for certification, a Minnesota small business investment company must make
qualified investments as follows:
new text end

new text begin (1) within two years after the allocation date, an amount equal to at least 25 percent
of the designated capital allocable to a Minnesota small business investment company
must be placed in qualified investments; and
new text end

new text begin (2) within three years after the allocation date, an amount equal to at least 40 percent
of the designated capital allocable to a Minnesota small business investment company
must be placed in qualified investments.
new text end

new text begin The aggregate cumulative amount of all qualified investments made by a Minnesota
small business investment company from an allocation date must be considered in the
calculation of these percentage requirements.
new text end

new text begin (b) Prior to making a proposed qualified investment in a specific business, a
Minnesota small business investment company must request from the department a written
determination that the proposed investment will qualify as a qualified investment in a
qualified business. The department must notify a Minnesota small business investment
company within 15 business days from the receipt of a request of its determination and
an explanation thereof. If the department fails to notify the Minnesota small business
investment company of its determination within the 15-business-day period, the proposed
investment must be deemed to be a qualified investment in a qualified business. If the
department determines that the proposed investment does not meet the definition of a
qualified investment or qualified business or both, the department may nevertheless
consider the proposed investment a qualified investment, and if necessary, the business a
qualified business, if the department determines that the proposed investment will further
state economic development.
new text end

new text begin (c) All designated capital not placed in qualified investments by the Minnesota small
business investment company may be held or invested in such manner as the Minnesota
small business investment company, in its discretion, deems appropriate. The proceeds
of all designated capital returned to a Minnesota small business investment company
after being originally placed in qualified investments may be placed again in qualified
investments and counts toward any requirement of this section with respect to placing
designated capital in qualified investments.
new text end

new text begin (d) If, within five years after its allocation date, a Minnesota small business
investment company has not placed at least 60 percent of the designated capital allocable
to it in qualified investments, the Minnesota small business investment company is no
longer permitted to receive management fees.
new text end

new text begin (e) If, within ten years after its allocation date, a Minnesota small business
investment company has not placed at least 100 percent of the designated capital allocable
to it in qualified investments, the Minnesota small business investment company is no
longer permitted to receive management fees.
new text end

new text begin (f) A Minnesota small business investment company must not make a qualified
investment without the specific approval of the department if after the Minnesota small
business investment company's qualified investment, on an aggregate basis with its
affiliates, would own more than 49 percent of the common equity or voting interests of
the qualified business. Nothing in this subdivision precludes a Minnesota small business
investment company from exercising any right or remedy upon a default by the qualified
business pursuant to an investment contract or antidilution or preemptive rights it may
have been granted in connection with an initial qualified investment that can be exercised
upon an investment in the business by a party other than the Minnesota small business
investment company or an affiliate of the Minnesota small business investment company.
new text end

new text begin (g) A Minnesota small business investment company must not invest where
investment would cause the company's total qualified investment outstanding with
respect to the qualified business receiving such investment to exceed 15 percent of the
total designated capital of the Minnesota small business investment company at the time
of the investment.
new text end

new text begin (h) The aggregate cumulative amount of all qualified investments made by a
Minnesota small business investment company will be considered in the calculation of the
percentage requirements under this section. The following must not be considered in any
percentage calculations under this section:
new text end

new text begin (1) commitment fees, closing fees, or other similar fees, excluding reimbursement of
out-of-pocket expenses such as legal fees and accounting fees, in excess of one percent of
the Minnesota small business investment company's investment in the qualified business;
or
new text end

new text begin (2) license fees, royalties, or similar charges.
new text end

new text begin Subd. 6. new text end

new text begin Minnesota small business investment company reporting requirements.
new text end

new text begin (a) Each Minnesota small business investment company must report the following to
the department:
new text end

new text begin (1) as soon as practicable after the receipt of designated capital:
new text end

new text begin (i) the name of each certified investor from which the designated capital was
received, including such certified investor's insurance tax identification number;
new text end

new text begin (ii) the amount of each certified investor's investment of designated capital; and
new text end

new text begin (iii) the date on which the designated capital was received;
new text end

new text begin (2) on an annual basis, on or before January 31 of each year:
new text end

new text begin (i) the amount of the Minnesota small business investment company's designated
capital at the end of the immediately preceding taxable year;
new text end

new text begin (ii) whether or not the Minnesota small business investment company has invested
more than 15 percent of its total designated capital in any one business;
new text end

new text begin (iii) all qualified investments that the Minnesota small business investment company
has made in the previous taxable year, including the number of employees of each
qualified business in which it has made investments at the time of such investment and as
of December 1 of the preceding taxable year; and
new text end

new text begin (iv) for any qualified business where the Minnesota small business investment
company no longer has an investment, the Minnesota small business investment company
must provide employment figures for that company as of the last day before the investment
was terminated;
new text end

new text begin (3) other information that the department may reasonably request that will help the
department ascertain the impact of the Minnesota small business investment companies
both directly and indirectly on the economy of the state of Minnesota, including, but
not limited to, the number of jobs created by qualified businesses that have received
qualified investments;
new text end

new text begin (4) annual audited financial statements, which must include the opinion of an
independent certified public accountant, within 90 days of the close of its fiscal year; and
new text end

new text begin (5) an "agreed upon procedures report" or equivalent regarding the operations of the
Minnesota small business investment company.
new text end

new text begin (b) A Minnesota small business investment company must pay to the department an
annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
No fee is required within six months of the date a Minnesota small business investment
company is first certified by the department.
new text end

new text begin (c) Upon receiving notification and documentation by a Minnesota small business
investment company that it has satisfied the requirements of this subdivision and that it
has invested 50 percent of its designated capital, the department must notify a Minnesota
small business investment company that it has or has not met the requirement within 60
days. If the department does not provide such notification within 60 days, the Minnesota
small business investment company is then deemed to have met the requirement.
new text end

new text begin Subd. 7. new text end

new text begin Distributions. new text end

new text begin (a) A Minnesota small business investment company
may make qualified distributions at any time. In order for a Minnesota small business
investment company to make a distribution other than a qualified distribution to its equity
holders, the aggregate cumulative amount of all qualified investments of the Minnesota
small business investment company must equal or exceed 100 percent of its designated
capital, and of those investments, an amount equal to or exceeding 25 percent must have
been invested in qualified underserved area businesses.
new text end

new text begin (b) A business is deemed to have relocated its principal business operations outside
Minnesota, unless it maintains its headquarters or the primary workplace of more than 50
percent of the employees within the state. In the event that a business in which a qualified
investment is made relocates its principal business operations to another state, either during
an investment or within four years of the time of any investment, whichever is greater,
the cumulative amount of qualified investments made by a Minnesota small business
investment company must be reduced by the amount of the qualified investment, unless:
new text end

new text begin (1) the Minnesota small business investment company invests an amount at least
equal to the investment of designated capital in the relocated business in a qualified
business located in Minnesota within six months of the relocation; or
new text end

new text begin (2) the business demonstrates that it has returned its principal business operations to
Minnesota within three months of the relocation.
new text end

new text begin (c) A Minnesota small business investment company must pay to a qualified
seed fund an amount equal to five percent of all distributions to the equity holders of a
Minnesota small business investment company, other than qualified distributions and
distributions of all equity contributed to a Minnesota small business investment company
by the equity holders. A Minnesota small business investment company must make all
payments required under this paragraph concurrently with distributions to its equity
owners. Nothing contained in this paragraph affects qualified distributions.
new text end

new text begin Subd. 8. new text end

new text begin Decertification. new text end

new text begin (a) The department shall conduct an annual review of
each Minnesota small business investment company to determine if a Minnesota small
business investment company is abiding by the requirements of certification, to advise the
Minnesota small business investment company as to the eligibility status of its qualified
investments, and to ensure that no investment has been made in violation of this section.
The cost of the annual review must be paid by each Minnesota small business investment
company according to a reasonable fee schedule adopted by the department.
new text end

new text begin (b) Any material violation of this section is grounds for decertification of a Minnesota
small business investment company and the disallowance of credits under section 297I.23.
new text end

new text begin (c) Once a Minnesota small business investment company has invested an amount
cumulatively equal to 100 percent of its designated capital in qualified investments and
has met all other requirements under this section, the Minnesota small business investment
company is no longer subject to regulation by the department or the reporting requirements
under subdivision 5. Upon receiving documented certification by a Minnesota small
business investment company that it has invested an amount equal to 100 percent of its
designated capital, the department must notify a Minnesota small business investment
company within 60 days that it has or has not met the requirements with a reason for the
determination if it has not. If the department does not provide notification within 60
days, the Minnesota small business investment company shall be deemed to have met the
requirements.
new text end

new text begin (d) The department must send written notice of a decertification to the commissioner
of revenue and to the address of each certified investor whose tax credit has been subject
to recapture or forfeiture, using the address shown on the last filing submitted to the
department.
new text end

new text begin Subd. 9. new text end

new text begin Revocation of certification. new text end

new text begin The department may revoke the certification
of a Minnesota small business investment company if any material representation to the
department in connection with the application process proves to have been falsely made
or if the application materially violates any requirements established by the department
under this section.
new text end

new text begin Subd. 10. new text end

new text begin Registration requirements. new text end

new text begin All investments for which tax credits are
allowable under this section must be registered or specifically exempt from registration.
new text end

new text begin Subd. 11. new text end

new text begin Reports to governor and legislature. new text end

new text begin The department must make
an annual report to the governor and the chairs and ranking minority members of the
committees having jurisdiction over taxes and economic development. The report must
include:
new text end

new text begin (1) the number of Minnesota small business investment companies holding
designated capital;
new text end

new text begin (2) the amount of designated capital invested in each Minnesota small business
investment company;
new text end

new text begin (3) the cumulative amount that each Minnesota small business investment company
has invested as of January 1, 2009, and the cumulative total each year thereafter;
new text end

new text begin (4) the cumulative amount that the investments of each Minnesota small business
investment company have leveraged in terms of capital invested by other sources of
capital in qualified businesses at the same time or subsequent to investments made by a
Minnesota small business investment company in such businesses;
new text end

new text begin (5) the total amount of credits granted under this section for each year the credits
have been awarded;
new text end

new text begin (6) the performance of each Minnesota small business investment company with
regard to the requirements for continued certification;
new text end

new text begin (7) the classification of the companies in which each Minnesota small business
investment company has invested according to industrial sector and size of company;
new text end

new text begin (8) the total gross number of jobs created by investments made by each Minnesota
small business investment company using designated capital and the number of jobs
retained;
new text end

new text begin (9) the location of the companies in which each Minnesota small business investment
company has invested;
new text end

new text begin (10) the total amount invested in qualified seed funds, the number of small
businesses that received financial assistance from these organizations, and the number of
jobs created and retained by such businesses;
new text end

new text begin (11) those Minnesota small business investment companies that have been
decertified, or have had their certification revoked, including the reasons for decertification
or revocation; and
new text end

new text begin (12) other related information as necessary to evaluate the effect of this section on
economic development.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

new text begin [297I.23] MINNESOTA SMALL BUSINESS INVESTMENT COMPANY
CREDIT.
new text end

new text begin (a) A certified investor as defined under section 116J.665, subdivision 1, is allowed a
credit against the tax imposed in this chapter equal to 80 percent of the certified investor's
investment of designated capital. Beginning January 1, 2013, a certified investor may
claim the credit as follows:
new text end

new text begin (1) in tax year 2013, an amount equal to 20 percent of the certified investor's
investment of designated capital;
new text end

new text begin (2) in tax year 2014, an amount equal to 20 percent of the certified investor's
investment of designated capital;
new text end

new text begin (3) in tax year 2015, an amount equal to 20 percent of the certified investor's
investment of designated capital; and
new text end

new text begin (4) in tax year 2016, an amount equal to 20 percent of the certified investor's
investment of designated capital.
new text end

new text begin (b) The credit for the taxable year must not exceed the liability for tax under this
chapter. If the amount of the credit determined under this section for any taxable years
exceeds the liability for tax under this chapter, the excess shall be an investment credit
carryover to each of the succeeding taxable years. Credits may be used in connection with
both final payments and prepayments of a certified investor's state premium tax liability.
new text end

new text begin (c) A certified investor claiming a credit under this section is not required to pay any
additional retaliatory tax levied as a result of claiming the credit.
new text end

new text begin (d) A certified investor is not required to reduce the amount of tax pursuant to the
state premium tax liability included by the certified investor in connection with ratemaking
for any insurance contract written in this state because of a reduction in the certified
investor's tax liability based on the tax credit allowed under this section.
new text end

new text begin (e) If the taxes paid by a certified investor with respect to its state premium tax
liability constitute a credit against any other tax that is imposed by this state, the certified
investor's credit against the other tax shall not be reduced by virtue of the reduction in the
certified investor's tax liability based on the tax credit allowed under this section.
new text end

new text begin (f) Decertification of a Minnesota small business investment company under section
116J.665, will result in the disallowance and the recapture of the credit allowed under this
section. The amount to be disallowed and recaptured must be assessed as follows:
new text end

new text begin (1) decertification of a Minnesota small business investment company within two
years of its allocation date and prior to meeting the requirements of section 116J.665
results in the disallowance of all of the credit allowed under this section and the tax for
which the credit is immediately due;
new text end

new text begin (2) decertification of a Minnesota small business investment company, which,
having met all the requirements of section 116J.665, subsequently fails to meet the
requirements of that section, results in the disallowance of 50 percent of the credit allowed
under this section, and any portion of the credit in excess of 30 percent that was previously
taken is immediately due;
new text end

new text begin (3) decertification of a Minnesota small business investment company that has
met all the requirements of section 116J.665 does not cause the disallowance of any
credits allowed under this section nor the recapture of any portion of the credits that
was previously taken; and
new text end

new text begin (4) if, after 12 years after its allocation date, a Minnesota small business investment
company has failed to invest at least 100 percent on a cumulative basis of its designated
capital in qualified investments, the percentage of distributions that a Minnesota small
business investment company is required to pay to a qualified seed fund under section
116J.665 must increase prospectively to 50 percent.
new text end

new text begin (g) Revocation of certification from a Minnesota small business investment company
pursuant to section 116J.665, before the later of:
new text end

new text begin (1) the third anniversary of the allocation date of the certified company; or
new text end

new text begin (2) the date on which a Minnesota small business investment company satisfies the
requirements of section 116J.665, results in the disallowance of 100 percent of the credits
allowed under this section and the tax for which the credit was given is immediately due.
new text end

new text begin (h) A certified investor must not transfer, agree to transfer, sell, or agree to sell the
credit under this section until two years from the date on which the certified investor
invested designated capital. After two years from the date of investment, a certified
investor, or subsequent transferee, may only transfer credits earned under this section
to an affiliate unless the state premium tax liability of the certified investor in the year
immediately preceding the proposed transfer is less than 75 percent of the certified
investor's state premium tax liability for the tax year in which it earned the credit. Any
transfer or sale does not affect the time schedule for claiming the credit. Any tax credits
recaptured under this section remain the liability of the certified investor that actually
claimed the credit.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2007.
new text end