Current through Register Vol. XLI, No. 50, December 13, 2024
Section 117-1-7 - Audits, Reports, Confidentiality, Examination, Failure to Comply, Penalties, Decertification7.1. Annual Audit and Report. -- For each Qualified Company, an audit of each of its capital bases designated as qualified shall be conducted annually by a certified public accountant, beginning at the end of the first fiscal year of the Company, and each year thereafter until the Qualified Company is decertified by the Authority. An audit of any of a Qualified Company's capital bases may be consolidated and submitted with audits of any other of its capital bases required under this Subsection, so long as information required under the Act and this Rule with respect to each capital base is separate and distinct. Provided that, in the case of the capital base of a designated Qualified Company or a separate capital base or increase to capital base designated as qualified, prior to the 1991 amendments to the Act, audits with respect to the qualified capital bases need not be conducted after the expiration of a five year period beginning from the date of the last of the designations if the Qualified Company is not then actively investing but is instead merely maintaining existing investments pursuant to the requirements of the Act and this Rule. In those cases, in lieu of audits, the Qualified Company shall annually file internally prepared unaudited financial statements accompanied by an affidavit setting forth (1) the name of the Qualified Company; (2) the name and title of the affiant; (3) that the affidavit is submitted in connection with the internally prepared financial statements of the Qualified Company; (4) the time period covered by the financial statements; (5) that there have been no material or significant changes in the Qualified Company's Qualified Investments for the time period specified, or what, if any, changes have occurred; and (6) that the financial statements are true, complete and accurate.7.2. General Requirements for Audits. -- The following requirements apply to Audits of the Qualified Company: 7.2.a. Independent CPA. -- The certified public accountant shall be independent of the Qualified Company being examined to ensure that the audit report will be impartial, in fact and in appearance.7.2.b. Working Papers; Standards. -- In performing the audit, the accountant shall prepare working papers in accordance with the generally accepted accounting standards of field work. Working papers for an audit shall be retained by the accountant for a minimum of three (3) years from the date of the audit report, or longer if notified in writing by the Authority before the end of the three (3) year period. The Qualified Company shall make its audit working papers available upon written request of the Authority or the Director. The audit shall be conducted in accordance with generally accepted auditing and accounting principles and any other guidelines the Authority may prescribe.7.2.c. Report Contents. -- The audit report shall address the methods of operation and conduct of the business of the Qualified Company and report on the Qualified Company's compliance with the requirements of the Act and this Rule and, in the case of SBICs, with the provisions of the Small Business Investment Act, 15 U.S.C. §§ 661 et seq., as amended, and the federal regulations promulgated under that Act. In particular the report shall address whether the company has made proper and timely investments. Any instances of noncompliance shall be specifically cited. If the accountant finds that the Company has been in compliance, the accountant shall make a positive statement to that effect.7.2.d. Submission of Report. -- The Qualified Company shall submit three certified copies of the audit report no later than ninety (90) days from the end of each fiscal year, together with three copies of a descriptive narrative of the Qualified Company's activities, its methods of operation and the general conduct of the Company, and three copies of its financial statements.7.2.e. Bound Report. -- Each copy of the audit report and narrative statement shall be bound in a durable cover. The name of the Qualified Company and the time period covered by the report shall be visibly printed on the front cover of the report.7.2.f. Other Requirements. -- The Authority may dictate other audit requirements from time to time.7.3. Confidentiality. 7.3.a. General Rule. -- All information submitted to the Authority is confidential and not subject to public disclosure when filed with the Authority, except as otherwise provided in Subsection 7.3 of this Rule and in W. Va. Code §§ 5E-1-8 and 5E-1-21.7.3.b. Application Information. -- All information submitted to the Authority pursuant to (i) application for designation as a Qualified Company (ii) application for designation as qualified of a separate capital base pursuant to Subsection 4.1 of this Rule, and (iii) application for designation as qualified of an increase to capital base pursuant to Subsection 4.2 of this Rule, and documents related to the applications, are confidential and not subject to public disclosure when filed with the Authority, except the following:1. The full legal name of the entity making the application;2. The mailing and office addresses and telephone number of the applicant;3. The name of a person to contact for the applicant;4. The names of all directors, officers, managers or managing partners of the applicant;5. Whether the applicant has the policy of restricting its investment to particular areas of the state, and if so, a description of the particular areas, or whether the applicant has no restriction and may invest statewide;6. Whether the applicant has the policy of restricting the type of its investments to debt investments, equity investments, capital leases or any combination of those investments; and7. The amount of the capital base of the applicant designated as qualified by the Authority.7.3.c. Report Information. -- All information submitted to the Authority in regard to the semi-annual reports required by Subsection 5.1 of this Rule, including the affidavits required under Subsections 6.1 and 6.2 of this Rule, is confidential and not subject to public disclosure when filed with the Authority, except the following: 1. The name of any Qualified Company that made a Qualified Investment;2. The name, address and phone number of each West Virginia Business receiving a Qualified Investment, specified as to the investing Qualified Company;3. Whether each Qualified Investment from the Qualified Company was a debt investment, equity investment, capital lease or combination of those investments, specified as to the West Virginia Business;4. The qualified activity under Subsection 2.22 of this Rule in which each West Virginia Business receiving a Qualified Investment from the Qualified Company is engaged, specified as to the West Virginia Business; and5. Whether the amount of each Qualified Investment in a West Virginia Business is: (i) not more than $50,000.00; (ii) more than $50,000.00, but not more than $100,000.00; (iii) more than $100,000.00, but not more than $250,000.00; (iv) more than $250,000.00, but not more than $500,000.00; (v) more than $500,000.00, but not more than $1,000,000.00; or (vi) more than $1,000,000.00, specified as to the West Virginia Business.7.3.d. Ruling Request Information. -- All information submitted to the Authority regarding a ruling request pursuant to Section 9 of this Rule is confidential and not subject to public disclosure when filed with the Authority, except that the Authority may, if it so desires, publish or make available to the public a summary of the ruling request provided that all names and other identifying facts are omitted.7.3.e. General Correspondence. -- All general correspondence of or to the Authority is confidential and not subject to public disclosure.7.3.f. Examination & Audit Information. -- All information obtained by or submitted to the Authority in regard to the examination or audit (including audits performed by independent certified public accountants) of a Qualified Company pursuant to W. Va. Code § 5E-1-16 and Subsections 7.1, 7.5 and 7.11 of this Rule is confidential and not subject to public disclosure, except where the public disclosure results from enforcement proceedings contemplated by W. Va. Code § 5E-1-21(b) and (c).7.3.g. Internal Information. -- Unless otherwise provided, all information generated internally by the Authority including, by way of example and not by way of limitation, internal memoranda and reports is confidential and not subject to public disclosure.7.3.h. Tax Information. -- All tax returns and tax return information subject to the nondisclosure restrictions of W. Va. Code § 11-10-5d is confidential, except for the information subject to disclosures authorized, mandated or permitted pursuant to W. Va. Code §§ 5E-1-8, 5E-1-21 or 11-10-5s.7.3.i. Authority Determination. -- In addition to the information described in this Subsection and classified as non-confidential, the Authority may from time to time consider as non-confidential and disclose to the public any information by the execution of a resolution or policy statement that the information is non-confidential.7.3.j. Request for Confidentiality. -- Any person or entity submitting information to the Authority which is classified as non-confidential by this Rule or the Act shall be treated as non-confidential and subject to disclosure unless the person submitting the information makes a showing, satisfactory to the Authority, at the time the information is submitted that the information should be treated as confidential under W. Va. Code § 5E-1-21(b). Any person desiring to make a submission shall indicate in writing what information is requested to be treated in a confidential manner and the basis upon which the treatment is justified. A person making a request may submit the information desired to be treated as confidential separately from other information submitted. If the Authority concurs with the request then the information shall be treated as confidential. If the Authority disagrees with the requested treatment then the person submitting such information shall be notified and given a reasonable opportunity to withdraw the information.7.3.k. Disclosure to State Personnel. -- Notwithstanding any provisions of the Act or this Rule, any record, report, document or information may be disclosed to any officers, employees or authorized representatives of the State of West Virginia charged with administering the provisions of the Act and this Rule and may be disclosed pursuant to proceedings under W. Va. Code § 5E-1-16(b) and Subsection 7.5 of this Rule; provided that, the provisions of the West Virginia Code regarding confidentiality and the disclosure of tax returns and tax information, including without limitation W. Va. Code § 11-10-5d, apply to the Authority, its agents and employees and to information submitted to the Authority under the Act and this Rule.7.4. Annual Authority Review. -- The Authority shall conduct an annual review of the accountant's report and audit required by W. Va. Code § 5E-1-16(a) and Subsection 7.1 of this Rule and any other information filed by a Qualified Company to determine if the company is in compliance with the requirements of the Act and this Rule, to advise the company as to the qualified status of its investments, and to ensure that no investment has been made in violation of W. Va. Code §§ 5E-1-12 and 5E-1-13, and Section 6 of this Rule. Based on the results of the annual review, the Authority shall notify the Tax Commissioner of any Qualified Companies that are not in compliance with the Act or this Rule.7.5. Investigation by Authority. -- The Authority may examine, under oath, any of the officers, directors, partners, owners, limited liability company members or managers, trustees, agents, employees or investors of a Qualified Company regarding the methods of operation and business of the company, and any other matters which the Authority may consider necessary to ensure compliance with the Act and this Rule. The Authority may issue subpoenas and subpoenas duces tecum, and administer oaths relative to any the examination.7.6. Non-Compliance Penalty. -- Any Qualified Company that fails to make or maintain Qualified Investments pursuant to this Rule and the Act shall pay to the Tax Commissioner a penalty equal to all of the tax credits authorized on the capital base which the Qualified Company failed to properly invest or maintain with interest at the rate of 1-1/2% per month, compounded monthly, from the date the tax credits were certified as allocated to the West Virginia Qualified Company. The Tax Commissioner shall give notice to the Qualified Company of any penalties assessed under this Subsection. The Tax Commissioner may abate the penalties upon written request of the Qualified Company if the Qualified Company establishes reasonable cause for the failure to make or maintain Qualified Investments. The Tax Commissioner shall deposit any amounts received as penalties under this Subsection to the State general revenue fund. To carry out the provisions of this Section, the Tax Commissioner has all powers and authority granted to him or her under the West Virginia Tax Procedures and Administration Act and the rules promulgated thereunder and the penalty may be assessed and collected in the same manner as other penalties are assessed and collected under that Act.7.7. Involuntary Decertification. -- Failure of a Qualified Company to comply with the provisions of the Act or this Rule is grounds for decertification of the Company by the Authority pursuant to § 5E-1-17 of the Act and this Subsection. 7.7.a. Notice. -- If at any time the Authority determines that a Qualified Company is not in compliance with the requirements of the Act or this Rule, the Authority shall give the Qualified Company written notice of the noncompliance and that the Qualified Company shall be decertified in ninety (90) days from the date of mailing of the notice unless the company satisfactorily corrects the actions of noncompliance or files a petition with the Authority for reconsideration and demands an administrative hearing. The hearing shall be conducted as provided in W. Va. Code § 29A-5-1.7.7.b. Notice of Decertification. -- If a Qualified Company is not in compliance with the Act and this Rule following the ninety (90) day period provided by Subdivision 7.7.a of this Rule and no administrative hearing is demanded by the Qualified Company, the Authority shall send a notice of decertification to the Qualified Company and to the State Tax Commissioner. If an administrative hearing is demanded by the Qualified Company and results in a decision supporting the Authority's decertification actions, the Qualified Company shall be provided a period to cure its noncompliance. The period of noncompliance shall begin on the date of issuance of the decision and extend for ninety (90) days less the number of days from issuance of the notice required by Subdivision 7.7.a to the Qualified Company's filing of its petition and demand for hearing. Involuntary decertification of a Qualified Company causes the forfeiture of any right or interest to qualification for further tax credits under the Act or this Rule for: (i) the decertified company; and (ii) any Applicant, or any Qualified Company seeking designation as qualified of a separate capital base or an increase in its capital base, in which any director, officer, general partner, managing partner, limited liability company member or manager or trustee of the decertified company is a director, officer, general partner, managing partner, limited liability company member or manager, trustee or investor.7.8. Voluntary Decertification Requested by Qualified Company. -- A Qualified Company, which has complied with the provisions of the Act and this Rule including the provisions of W. Va. Code § 5E-1-12(b) and Subsection 6.10 of this Rule, desiring to terminate its status as a Qualified Company under the Act but to remain in existence and not to dissolve or liquidate pursuant to W. Va. Code § 5E-1-12(c) or Section 8 of this Rule shall make written application to the Authority requesting decertification and the revocation of its status as a Qualified Company under the Act. The written application for decertification shall provide information certifying that the Qualified Company has complied with the provisions of the Act and this Rule. A Qualified Company requesting decertification shall provide all information requested by the Authority. The Authority may perform an audit or examination of any Qualified Company requesting decertification in order to ascertain or verify the Qualified Company's compliance with the Act and this Rule. The standard to be used by the Authority to determine compliance with W. Va. Code § 5E-1-12(b) and Subsection 6.10 of this Rule, shall be whether the Qualified Company has maintained for at least five years individual Qualified Investments totaling (1) at least sixty percent (60%) of the capital base from which the investments were made, with regard to the initial capital base of a designated Qualified Company or any separate capital base or increase to capital base designated as qualified, prior to the 1991 amendments to the Act; or (2) at least seventy-five (75%) of the capital base from which the investments were made, with regard to the initial capital base of a designated Qualified Company, or any separate capital base or increase to capital base designated as qualified, subsequent to the 1991 amendments to the Act.7.9. Audits. -- In addition to the annual audit required under W. Va. Code § 5E-1-16(a) and Subsection 7.1 of this Rule, the Authority and the Tax Commissioner may jointly audit any one or more Qualified Companies in any year on a random basis, or for cause, or for any other basis the Authority and Tax Commissioner may select. In addition to any other right or power the Tax Commissioner may have to audit any business in which a Qualified Company has invested or proposes to invest, the Tax Commissioner may audit the business on a random audit selection basis, or for cause, or on any other basis the Tax Commissioner may select.