Current through Register Vol. XLI, No. 50, December 13, 2024
Section 117-1-3 - Procedure to Become a Qualified West Virginia Capital Company3.1. General Rule. -- In order to be designated a Qualified West Virginia Capital Company, the Act requires that an Applicant be a Certified Company. An Applicant is a Certified Company upon the Authority certifying that the Applicant is a profit or nonprofit entity organized and existing under the laws of the State of West Virginia and created for the purpose of making venture or risk capital available for Qualified Investments; provided that, the certification is unnecessary in the case of Development Corporations, which by that status are considered Certified Companies. For purposes of implementing the tax credit program established by the Act and to facilitate the process of qualification by the Authority, the Authority shall combine the processes of (1) certifying applicants as Certified Companies, and (2) designating Certified Companies as Qualified West Virginia Capital Companies under the Act, into a one step procedure.3.2. Requirements for Qualified Company. -- The following requirements apply as indicated to all Qualified Companies and Applicants:3.2.a. Certification. -- A Qualified Company shall be a Certified West Virginia Capital Company;3.2.b. Business Office. -- An Applicant or Qualified Company shall have a reasonably accessible business office located within the State of West Virginia, which office has a listed telephone number and is open to the public during normal business hours;3.2.c. Amount of Capital base. -- An Applicant or Qualified Company shall have a capital base of at least One Million Dollars, but not greater than Four Million Dollars, which must be raised after July 1, 1986. If the amount of the investment in an Applicant or Qualified Company in any fiscal year exceeds Four Million Dollars, the amount in excess of Four Million Dollars is not eligible for tax credits under the Act for that fiscal year. A capital base of a Qualified Company which falls below the minimum requirement of One Million Dollars due to the uncollectability and write-off of a qualified investment is not in violation of the One Million Dollar minimum requirement set forth in this Subdivision and in W. Va. Code § 5E-1-7(d);3.2.d. Maintenance of Capital Base. -- After designation as a Qualified Company, a Qualified Company which is not a SBIC shall maintain all of its capital base, as defined in this Rule, except that which has been invested in Qualified Investments, in bank accounts and financial institutions which are located in the State of West Virginia, in any other interest bearing instruments with a maturity of less than one (1) year which are obtained from and managed by a West Virginia corporation, or in a fund authorized by the Authority pursuant to W. Va. Code § 5E-2-4(b) in accordance with Subsection 6.1 of this Rule. For purposes of this Rule, the phrase "interest bearing instruments with a maturity of less than one (1) year which are obtained from and managed by a West Virginia corporation" includes, by way of example and not by way of limitation, direct investment in interest bearing money management or similar accounts or certificates of deposit maturing in one (1) year or less obtained from a West Virginia branch office of a brokerage firm;3.2.e. Limitation on Debt Investment in Capital Base. -- No more than twenty-five (25%) percent of each separate capital base of an Applicant or Qualified Company which is not a SBIC shall be in the form of full recourse, interest bearing demand notes. The notes shall be backed by an irrevocable letter of credit or bond from a reputable source, as determined by the Authority;3.2.f. Stated Purpose. -- An Applicant or Qualified Company's stated purpose shall be to encourage and assist in the creation, development or expansion of West Virginia businesses;3.2.g. Funds. 1. An Applicant which is not a SBIC shall establish an escrow account located in West Virginia. All funds invested in an Applicant which is not a SBIC shall be deposited and held in the escrow account for the period of time between their receipt by the Applicant and the designation of the Applicant as a Qualified Company.2. A Qualified Company which is not a SBIC, seeking to establish a separate capital base or increase its capital base, shall establish a separate escrow account located in West Virginia for each separate capital base or each increase to capital base sought. All funds invested in a Qualified Company which is not a SBIC relative to a separate capital base or increase to capital base shall be deposited and held in the applicable escrow account for the period of time between their receipt by the Qualified Company and the designation as qualified of the respective separate capital base or increase to capital base.3. A Qualified Company which is a SBIC seeking to establish a separate capital base or increase its capital base, shall submit to the Authority small business administration capital certificates totaling the amount of the separate capital base or increased capital base.4. Funds may not be invested by the Applicant or the Qualified Company until the Authority designates the Applicant a Qualified Company, or designates as qualified the separate capital base or increase to capital base sought, as applicable. In the case of companies which are not SBICs, where the Authority does not designate the Applicant a Qualified Company, or designate as qualified the separate capital base or increase to capital base sought, the escrowed funds shall be returned to the investors, if requested by the investors;3.2.h. Disclosure to Investors. -- An Applicant or Qualified Company, when soliciting funds for its capital base, shall disclose that no tax credit for the investor's investment will be available until the Authority either designates the Applicant a Qualified Company or designates as qualified a separate capital base or an increase to capital base, and issues to the Qualified Company notice of the qualification and a Certificate of tax credit; and3.2.i. Business Registration Certificate. -- An Applicant or Qualified Company shall hold a valid West Virginia business registration certificate pursuant to W. Va. Code§ 11-12-1 et seq., or be exempt from registration.3.3. Application Requirements. -- An Applicant shall make written application for designation as a Qualified West Virginia Capital Company to the Authority on application forms provided by the Director. The application form shall be signed and verified by the Applicant or by a duly authorized officer, partner, limited liability company member or manager or trustee of the Applicant and contain the following information: 3.3.a. The full legal name of the Applicant;3.3.b. The mailing and office addresses and telephone numbers of the Applicant's principal office in this State; and if different, the mailing and office addresses and telephone numbers of the Applicant's principal place of business;3.3.c. Information that the Applicant's purpose is to encourage and assist in the creation, development or expansion of West Virginia businesses;3.3.d. A certified copy of the Applicant's Certificate of Incorporation, and Articles of Incorporation or Corporate Charter; a certified copy of the Applicant's certificate of formation of limited or general partnership; a certified copy of the Applicant's Articles of Organization of a limited liability company; documents that evidence the creation of a trust; or any other evidence that the Applicant is organized and existing under the laws of the State of West Virginia;3.3.e. The titles, names, addresses and telephone numbers of the Applicant and the Applicant's directors and officers; or general, limited and managing partners; or limited liability company managers; or trustees. The addresses shall include street and number, city or town, state and zip code;3.3.f. The names, addresses and telephone numbers of all of the Applicant's investors, including street and number, city or town, state and zip code, and the income tax return filing status of each investor, including whether each investor is a fiscal or calendar year taxpayer; and each investor's employer identification or social security number; and for investors that are partnerships, S Corporations, limited liability companies or individual joint investors, the information required under this Subdivision for all partners, shareholders, members and individuals;3.3.g. Information that the Applicant has disclosed to all investors that a tax credit is not available for the investor's investment in an Applicant until the Authority has designated the Applicant a Qualified West Virginia Capital Company and the investor has received a certificate authorizing the tax credit approved by the Authority for each fiscal year;3.3.h. Information that the Applicant has disclosed to all investors that the State of West Virginia is not liable in any manner for any damages which may result from or arise out of the provisions of the Act, this Rule, or the application of the Act or this rule;3.3.i. As applicable, a statement that the Applicant will use its capital base, as defined in this Rule, to make qualified investments in accordance with the schedule set forth in W. Va. Code § 5E-1-12 and Subsection 6.3 of this Rule;3.3.j. A statement that the Applicant will comply with all requirements of the Act and this Rule, including without limitation, investment of its capital base in accordance with the provisions of the Act and this Rule.3.3.k. If the Applicant is a corporation, information on the aggregate number of shares which it has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if any, within a class;3.3.l. Information stating the total capital base of the Applicant and how the value has been determined;3.3.m. Information regarding whether the Applicant has been involuntarily decertified under Subsections 7.7 through 7.9 of this Rule and whether any of the Applicant's directors, officers, general partners, managing partners, limited liability company members or managers, trustees or investors have ever served as directors, officers, general partners, managing partners, limited liability company members or managers or trustees of any decertified Qualified Company;3.3.n. In the case of Applicants which are not SBICs, information that the Applicant has established an equity escrow account in West Virginia into which funds invested by investors have been deposited and will be held for the period of time between their investment and the designation of the Applicant by the Authority as a Qualified Company, the location of the account, that the Applicant has disclosed to the investors that no funds will be invested by the Applicant until it has been designated as a Qualified Company and that in the event the Applicant does not qualify, that the funds shall be returned to the investors, if requested by the investors. In the case of Applicants which are SBICs, the Applicant shall provide evidence of the Applicant's small business administration capital certificates totaling the funds to be invested;3.3.o. If any of the investors in the Applicant is a partnership, an S Corporation, a limited liability company or an individual joint investor, the apportionment plan, the employer identification or social security number of those to whom the tax credits are apportioned, and statements signed by each partner, shareholder, member or individual consenting to the apportionment plan; all of which requirements are more fully set out in Subdivision 5.7.f of this Rule;3.3.p. The information required in Subsection 5.1 of this Rule;3.3.q. Information that the Applicant holds a valid West Virginia business registration certificate pursuant to W. Va. Code § 11-12-1 et seq., or is exempt from registration;3.3.r. In the case of an Applicant which is a SBIC, evidence that the Applicant is licensed as a SBIC and a certification that the Applicant will diligently seek to obtain and thereafter diligently seek to invest leverage available to SBICs under the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., as amended; and3.3.s. Any additional information requested by the Authority.3.4. Application Form. -- The form for applying to become a Qualified West Virginia Capital Company may be obtained from the Director at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston WV 25311-1217.3.5. Filing. -- Each Applicant shall file with the Director three (3) complete applications with original signatures.3.6. Application Receipt and Review.3.6.a. Acceptance in General.1. General Rule. During regular business hours of the Authority, applications of all Applicants, whether the Applicants are SBICs or not SBICs, relative to tax credits available in a particular fiscal year shall be received by the Director on a first come, first served basis beginning on July 1 of that fiscal year and continuing thereafter in that fiscal year until all tax credits authorized for that fiscal year by the Act have been exhausted; subject, however, to the specific provisions of Subdivision 3.10 of this Rule. The Director shall record the time and date of receipt of an application. Applications submitted by mail or a courier or delivery service shall be considered to be received at 12:00 noon on the day of delivery, regardless of the time of day of actual delivery; provided that, an application submitted by mail or a courier or delivery service shall be received and accepted by the Director only if the application is delivered after the beginning of the period in which the application would be accepted if delivered in person.2. Time Period for Acceptance of Applications Submitted by SBICs. All applications submitted by Applicants which are SBICs shall be submitted and received by the Director within the first ten (10) days of the fiscal year to allow the Authority to allocate tax credits to successful SBIC applicants within the first thirty (30) days of the fiscal year as required by the provisions of the Act and Subdivision 3.10 of this Rule.3.6.b. Simultaneous Receipt of Applications. 1. Simultaneous Receipt of Applications Submitted by SBICs. -- In the event that, upon the opening for business of the Offices of the Authority on any day, more than one Applicant which is a SBIC is waiting for the Offices to open in order to submit an application, then the applications of all SBIC Applicants waiting shall be considered received simultaneously by the Director.2. Simultaneous Receipt of Applications Submitted by Applicants Which Are Not SBICs. -- In the event that, upon the opening for business of the Offices of the Authority on any day, more than one Applicant which is not a SBIC is waiting for the Offices to open in order to submit an application, then the applications of all non-SBIC Applicants waiting shall be considered received simultaneously by the Director.3.6.c. Review of Applications. 1. General Rule. -- The Director shall review all applications in the order of their receipt, subject to Paragraphs 3.6.c.2 and 3.6.c.3 of this Rule, to determine if each application is complete. The Director has sole discretion to determine whether an application is complete. The Director's determination shall be made within forty-five (45) days of the application's receipt; provided, however, that in the case of an application submitted by a SBIC, the Director's determination shall be made within the first twenty (20) days of the fiscal year. In the event that the Director determines an application to be incomplete, the Director shall notify the Applicant, in writing, of the reasons for that determination and shall return the incomplete application to the Applicant. The Applicant may resubmit the application after correcting the deficiencies stated in the notice. If an application, though incomplete, is substantially complete as determined in the sole discretion of the Director, the time of receipt of the resubmitted application, for purposes of review by the Director, shall be considered to be the time of receipt of the initial application if tax credits remain available at the time of resubmission. If an application is not substantially complete as determined in the sole discretion of the Director, the resubmitted application shall be considered received, for purposes of review by the Director, when resubmitted.2. Review of Simultaneously Received Applications Submitted By Applicants Which Are SBICs. -- In the event of simultaneously received applications submitted by Applicants which are SBICs, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications of SBICs. If the total tax credits sought by all the simultaneously received applications submitted by SBICs are less than the SBIC-Designated Tax Credit Amount for that fiscal year, after taking into account applications submitted by SBICs reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications for completeness and the applications shall be considered simultaneously reviewed. If the total tax credits sought by all the simultaneously received applications submitted by SBICs exceed the SBIC-Designated Tax Credit Amount for that fiscal year, after taking into account SBIC applications reviewed previously and determined to be complete or substantially complete, the Director shall, within fifteen (15) days, but not earlier than five (5) days, after the receipt of the applications, conduct a lottery to determine the order of review of the simultaneously received applications of SBICs, as follows: A. The Director shall provide all SBIC Applicants that submitted simultaneously received applications written notice of the lottery and the opportunity for their designated representative to attend the lottery;B. To conduct the lottery, the Director shall: (i) prepare for each SBIC Applicant that submitted a simultaneously received application, on index cards of the same fundamental character, an index card setting forth the Applicant's name and the tax credits sought by the Applicant by its application; (ii) deposit in a container one index card for each Applicant; (iii) select and draw from the container one index card in a manner that the Director may not determine the Applicant set forth on the index card; (iv) announce and record the Applicant whose index card was drawn and the amount of tax credits sought by that Applicant; and (v) repeat steps (iii) and (iv) until all Applicants' cards are drawn from the container;C. Each simultaneously received application submitted by a SBIC shall be then reviewed for completeness by the Director in the order in which it was drawn from the container; andD. Prior to, or at any time during the lottery process, one or more SBIC Applicants, by agreement or otherwise, may voluntarily decrease the amount of tax credits sought by its application, provided the minimum capitalization requirements of the Act and this Rule continue to be satisfied.3. Review of Simultaneously Received Applications Submitted By Applicants Which Are Not SBICs. -- In the event of simultaneously received applications submitted by Applicants which are not SBICs, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications submitted by non-SBICs. In the event that tax credits are allocable under the Act to non-SBICs in a fiscal year, if the total tax credits sought by all the simultaneously received applications submitted by non-SBICs are less than the total tax credits then available for that fiscal year reduced by the SBIC-Designated Tax Credit Amount, after taking into account applications submitted by non-SBICs reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications submitted by non-SBICs for completeness and the applications shall be considered simultaneously reviewed. If the total tax credits sought by all the simultaneously received applications submitted by non-SBICs exceed the total tax credits then available for that fiscal year reduced by the SBIC-Designated Tax Credit Amount, after taking into account applications submitted by non-SBICs reviewed previously and determined to be complete or substantially complete, the Director shall, within fifteen (15) days, but not earlier than five (5) days, after the receipt of the applications, conduct a lottery to determine the order of review of the simultaneously received applications submitted by non-SBICs, as follows:A. The Director shall provide all non-SBIC Applicants that submitted simultaneously received applications written notice of the lottery and the opportunity for their designated representative to attend the lottery;B. To conduct the lottery, the Director shall: (i) prepare for each non-SBIC Applicant that submitted a simultaneously received application, on index cards of the same fundamental character, an index card setting forth the Applicant's name and the tax credits sought by the Applicant by its application; (ii) deposit in a container one index card for each Applicant; (iii) select and draw from the container one index card in a manner that the Director may not determine the Applicant set forth on the index card; (iv) announce and record the Applicant whose index card was drawn and the amount of tax credits sought by that Applicant; and (v) repeat steps (iii) and (iv) until all Applicants' cards are drawn from the container;C. Each simultaneously received application of a non-SBIC shall be then reviewed for completeness by the Director in the order in which it was drawn from the container; andD. Prior to, or at any time during the lottery process, one or more non-SBIC Applicants, by agreement or otherwise, may voluntarily decrease the amount of tax credits sought by its application, provided the minimum capitalization requirements of the Act and this Rule continue to be satisfied.3.7. False Information. -- If an Applicant submits any false or misleading information, the Director may reject the application and deny further consideration of the Applicant for qualification in that and subsequent fiscal years.3.8. Complete Application. -- Upon a determination by the Director that an application is complete, the Director shall place the complete application on the agenda of the next regularly scheduled meeting of the Authority. Complete applications shall be placed on the agenda in the order of their review by the Director.3.9. Action of Authority. -- The Authority shall consider all applications in the order they are placed on the agenda of any regularly scheduled meeting of the Authority. The Authority shall certify as a Certified Company and designate as a Qualified Company those Applicants which meet the requirements of the Act and this Rule. 3.10. Allocation of Tax Credits. -- Upon designating an Applicant a Qualified West Virginia Capital Company, the Authority shall allocate, in the order in which companies are designated by the Authority, available tax credits for the investors in the Qualified Company, subject to Subsection 3.12 of this Rule. Not more than the SBIC-Designated Tax Credit Amount may be allocated during the first thirty (30) days of any fiscal year to one or more SBICs and, in those years in which tax credits are allocable under the Act to non-SBICs, the remainder of the tax credits allocable during the fiscal year which have not been allocated to SBICs during the first thirty (30) days of the fiscal year shall be allocated to Applicants which are not SBICs or as otherwise directed by the Act. For the fiscal year beginning July 1, 2001, no tax credits are allocable under the Act to Applicants which are not SBICs.3.11. Notification of Action. -- The Director shall notify the Applicant in writing of the Authority's action designating or refusing to designate the Applicant a Qualified West Virginia Capital Company. The Director shall issue to a Qualified Company the Certificate of tax credit provided for in Subsection 5.5 of this Rule. The notice to a Qualified Company shall set forth the level of capitalization that qualifies for tax credits under W. Va. Code § 5E-1-8. The notice to an Applicant not designated a Qualified Company shall set forth the reasons for that determination.3.12. Suspension of Qualification Process. -- Notwithstanding the provisions at Subsections 3.6 through 3.11 of this Rule, in any fiscal year, upon the allocation to Qualified Companies of the total tax credits authorized for that fiscal year by the Act, the Authority shall suspend the qualification process and the Director shall reject all subsequently submitted applications. When, in any fiscal year, the total tax credits authorized in that fiscal year by the Act have previously been allocated to Qualified Companies, all applications received and then pending, and all applications thereafter submitted to the Director in that fiscal year shall not be reviewed by the Director or considered by the Authority in that or any subsequent fiscal year. Rather, the Applicant that submitted an application shall submit a new application in a subsequent fiscal year in order to be eligible for tax credits in that subsequent fiscal year. Upon determining that an application will not be reviewed pursuant to this Subsection, the Director shall mail written notice of that determination to the Applicant's principal office in this State.3.13. Additional Applications. -- A Qualified Company which does not seek additional tax credits under Section 4 of this Rule is not required to file any additional application with the Authority to retain its status as a Qualified Company, provided that the Qualified Company remains in compliance with the requirements of the Act and this Rule.3.14. Duty to Supplement. -- Any Applicant or Qualified Company shall immediately supplement any application filed under Section 3 or 4 of this Rule or any other information submitted to the Authority pursuant to this Rule if any material fact contained in the application or information changes. The Authority shall determine if the change constitutes an amendment to an application requiring the consent of the Authority pursuant to Subsection 3.15 of this Rule.3.15. Amendments. - - An applicant may not amend an application without the written consent of the Authority for good cause shown.