Section 10-3.5-108 - Distributions - remittance of portion of proceeds(1) Subject to section 10-3.5-109(2)(a), a certified capital company may make qualified distributions at any time.(2)(a) Subject to section 10-3.5-109(2)(a) and paragraph (b) of this subsection (2), in order to make a distribution occurring on or after May 27, 2004, out of proceeds or gains from qualified investments, proceeds or gains from any other use of certified capital, equity capitalization contributions paid into the certified capital company on or after May 27, 2004, or certified capital allocated to its certified investors on a particular allocation date other than a qualified distribution or a distribution pursuant to paragraph (b) of this subsection (2), a certified capital company shall: (I) Have made qualified investments in an amount cumulatively equal to:(A) One hundred percent of the certified capital allocated to its certified investors on such allocation date and have met the six-month requirement stated in section 10-3.5-107(3)(a); and(B) At least one-third of the certified capital allocated to its certified investors under section 10-3.5-106(2)(a)(II) in qualified businesses that are in the seed or early stage. Seed or early stage investments of certified capital allocated under section 10-3.5-106(2)(a)(II) and section 10-3.5-106(2)(a)(I) shall both count toward meeting the requirement of this sub-subparagraph (B).(II) Have proposed a distribution amount and calculated the amount of the transfers identified in subsection (3) of this section pursuant to rules promulgated by the office; and(III) Make the transfers to the entities designated in paragraphs (c) and (d) of subsection (3) of this section.(b) A certified capital company may make repayments of principal and interest on its indebtedness without any restriction whatsoever, including repayments of indebtedness of the certified capital company on which certified investors earned premium tax credits. A certified capital company may make a distribution:(I) Without any restriction whatsoever to pay any projected increase in federal or state taxes, including penalties and interest related to federal and state income taxes, of the equity owners of a certified capital company resulting from operations or ownership of the certified capital company; or(II) To return any equity capitalization paid into the certified capital company before May 27, 2004, from any equity capitalization contributions paid into the certified capital company before May 27, 2004, proceeds or gains from qualified investments, or proceeds or gains from any other use of certified capital.(3)(a)(I) Subject to subparagraphs (II) and (III) of this paragraph (a), distributions out of proceeds or gains from qualified investments, proceeds or gains from any other use of certified capital, proceeds or gains from equity capitalization contributions, equity capitalization contributions, and certified capital allocated to certified investors on a particular allocation date shall be specifically examined as part of the annual review conducted pursuant to section 10-3.5-109. On the basis of such review, the office shall determine pursuant to rules whether the aggregate total of such distributions, when combined with all tax credits allocated on such allocation date and utilized pursuant to this article, have resulted in an annual internal rate of return exceeding ten percent on the certified capital allocated to the certified investors of the certified capital company on such allocation date plus any additional equity capital contributions to the certified capital company. Equity capital contributions shall not be deemed to include proceeds or gains from: (A) Qualified investments;(B) Any other use of certified capital; or(C) Equity capital contributions.(II) Qualified distributions shall not be subject to the review conducted pursuant to subparagraph (I) of this paragraph (a).(III) The following types of distribution shall specifically be subject to the review conducted pursuant to subparagraph (I) of this paragraph (a):(A) A distribution to pay any projected increase in federal or state taxes of the equity owners of a certified capital company resulting from operations or ownership of the certified capital company;(B) Repayments of principal and interest on a certified capital company's indebtedness, including repayments of indebtedness of the certified capital company on which certified investors earned premium tax credits;(C) A distribution to return any equity capitalization paid into the certified capital company before May 28, 2004;(D) A distribution to return any equity capitalization paid into the certified capital company on or after May 28, 2004; and(E) Any other distribution other than a qualified distribution.(b)(I) If the annual internal rate of return determined in accordance with paragraph (a) of this subsection (3) exceeds ten percent, then the certified capital company shall annually: (A) Report to the division of housing in the department of local affairs the amount of money equal to twenty percent of any further distributions, from an item subject to subparagraph (I) or (III) of paragraph (a) of this subsection (3), above the amount required to produce such ten percent return; except that distributions for items described specifically in sub-subparagraph (A), (B), or (C) of subparagraph (III) of paragraph (a) of this subsection (3) shall either be reported to the division of housing or accrued for reporting at a later date as determined by the economic development commission; and except that in no event shall this sub-subparagraph (A) restrict a certified capital company's ability to make repayments of indebtedness, including making repayments of indebtedness of the certified capital company on which certified investors earned premium tax credits; and(B) Make the transfers required pursuant to paragraphs (c) and (d) of this subsection (3).(II) If the annual internal rate of return determined in accordance with paragraph (a) of this subsection (3) does not exceed ten percent, then the certified capital company shall annually: (A) Report to the division of housing in the department of local affairs the amount of money equal to fifteen percent of the proposed distribution amount other than qualified distributions and distributions described in sub-subparagraphs (A), (B), and (C) of subparagraph (III) of paragraph (a) of this subsection (3);(B) Make the transfers required pursuant to paragraphs (c) and (d) of this subsection (3); and(C) Continue the fifteen percent distribution until the certified capital company's internal rate of return exceeds ten percent. At that time, all future transfer amounts shall be calculated using the method described in subparagraph (I) of this paragraph (b). Amounts previously transferred by the certified capital company shall be taken into consideration when determining the net amount of future transfers.(III) The office shall promulgate rules to establish the procedures by which the internal rate of return is calculated and to govern other items such as the timing of distributions and the amount and timing of future capital contributions to the certified capital company to ensure that the calculation of the internal rate of return is accurately calculated.(c) Upon the approval of the state housing board within the division of housing in accordance with rules promulgated by the board, the division shall direct each certified capital company that reports to the division pursuant to paragraph (b) of this subsection (3) to transfer to one or more local housing authorities, public nonprofit corporations, or private nonprofit corporations an amount of money equal to one-half of the amount identified in such report for: (I) Development or redevelopment costs incurred prior to the completion or occupancy of low- or moderate-income housing, as defined in section 24-32-717(4)(b), C.R.S., or for the rehabilitation of such housing;(II) Providing incentives for the additional acquisition, construction, rehabilitation, or renovation of affordable housing that is made available to households of very low incomes and to households of senior citizens and that addresses the special needs of members of these communities, especially in connection with the availability of rental housing;(III) Providing mixed-income housing to better ensure economic integration;(IV) Ensuring the affordability of housing over the long term and helping to preserve project-based federally-authorized rental units;(V) Allowing the state or a local government or any of their agencies to leverage federal, local, and private resources such as low-income housing tax credits, private activity bonds, mortgage revenue bonds, community development block grants, McKinney funds, home funds, private grants, and land donations to increase the pool of capital available to finance the provision of affordable housing;(VI) Providing resources to local governments and other appropriate entities that result in the operation, construction, and renovation of emergency shelters and direct services linked to housing; or(VII) Providing resources to local governments to assist home buyers with the financing of down payments or closing costs.(d) The executive director of the department of human services shall direct each certified capital company that reports to the division pursuant to paragraph (b) of this subsection (3) to transfer to one or more approved community mental health clinics or approved community mental health centers, as defined in section 27-66-101, C.R.S., an amount of money equal to one-half of the amount identified in such report to be used solely for the purposes identified in sections 27-66-103 and 27-66-104(3), C.R.S., taking into account the standards contained in section 27-66-105, C.R.S.L. 2001: Entire article added, p. 1536, § 1, effective June 9. L. 2004: (1) and (2) amended, p. 1247, § 5, effective May 27; (3)(a) and (3)(b) amended, p. 1327, § 2, effective May 28. L. 2010: (3)(d) amended, (SB 10-175), ch. 188, p. 777, §6, effective April 29.