Relates to program six certified capital companies; repealer

6 Co-sponsors

• Joseph P. Addabbo Jr.
• Greg Ball
• Mark Grisanti
• Timothy M. Kennedy
• Michael H. Ranzenhofer
• James L. Seward

BILL NUMBER:S5587C

Title of bill

An act to amend the tax law, in relation to program six certified capital companies

Purpose

The purpose of this legislation is to assist New York businesses that require capital not available from traditional commercial banks through all stages of development - prestart-up, start-up, expansion or survival.

Summary of provisions

This legislation authorizes the State to license certified capital companies to raise $150 million in private venture capital from insurance companies, which would then be invested in qualified businesses in exchange for premium tax credits, whose issuance is delayed four years.

In order to qualify for the tax credits, each certified capital company must satisfy a number of requirements in its investment portfolio. These include: Two-thirds of its investment of certified capital must go towards qualified businesses located in underserved areas. Ten percent of its investment must be directed towards qualified seed funds, certified as such by the Superintendent of Financial Services. Fifty percent of its investments must go towards businesses focused on emerging technology products and services. No more than $15 million can be invested towards one individual company.

A certified capital company under CAPCO-6 would be required to return 15 percent of its net profits on qualified investments to the Department of Financial Services.

This legislation also adds to the reporting requirements already present in previous CAPCO programs to ensure compliance with the requirements set forth above.

Existing law

New York State last renewed its CAPCO program in 2005.

Prior legislative history

This is a new bill.

Statement in support

New York's CAPCO was created by the Assembly over a decade ago. It utilizes a premium tax credit incentive to increase investment in venture capital funds focused exclusively on New York businesses. Insurance companies operating in the State can earn tax credits by making investments in small companies that have difficulty accessing traditional funding sources. Since 1998, five CAP CO programs have been certified. Through these five programs, $400 million of private capital has been raised, and the investment from these funds has created or retained over 2,000 jobs and will generate $412 million in tax revenue by 2016. In the current economic

environment, obtaining risk capital for small businesses is extremely challenging. Several. other states are taking steps to create conduits of capital to small businesses, ensuring those businesses prosper and remain in their state. Connecticut recently enacted its own CAPCO program. This legislation, as structured, would generate an immediate $150 million in private venture capital, which would be deployed exclusively within New York based businesses. It would not require the expenditure of any state money until 2015, with tax credits to participating companies being amortized over four years.

Budget implications

While the economic benefits of the program begin almost immediately, the tax credits granted by the State would be delayed four years. There would be no fiscal impact to the State until2015.

Effective date

This bill would take effect immediately.