BILL NUMBER: SB 32 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 11, 2013
INTRODUCED BY Senator Price
DECEMBER 3, 2012
An act to add Section 66024.5 to the Education Code,
relating to public postsecondary education Division
3.5 (commencing with Section 28960) to Title 4 of, and to repeal
Section 28968 of, the Corporations Code, and to add and repeal
Sections 12211, 17053.50, and 23650 of the Revenue and Taxation Code,
relatin g to business investment .
LEGISLATIVE COUNSEL'S DIGEST
SB 32, as amended, Price. Public postsecondary education:
student costs. Business investment: tax credits.
Existing laws governing the taxation of insurers, the Personal
Income Tax Law, and the Corporation Tax Law, allow various credits
against the taxes imposed by those laws. The Capital Access Company
Law provides for licensing and regulation by the Commissioner of
Corporations of capital access companies, which provide risk capital
and management assistance to business entities.
This bill would enact the California Jobs Act, which would require
the Treasurer to sell tax credits to taxpayers in an auction
designed and supervised by the Treasurer, as specified. This bill
would require the proceeds from the sale of the tax credits to be
deposited in the California Jobs Act Investment Fund, created by the
bill. This bill would, for taxable years beginning on or after
January 1, 2015, and before January 1, 2023, allow a credit against
the tax imposed upon insurers and against the taxes imposed under the
Personal Income Tax Law and the Corporation Tax Law, equal to the
amount stated on the written instrument used by the Treasurer to
evidence the sale of tax credits, as provided.
This bill would create the California Jobs Act Board, as
specified, and would require the board to designate capital access
companies as qualified capital access companies, as specified. This
bill would authorize capital access companies to apply to the board
for designation, as specified. This bill would require revenues
deposited in the California Jobs Act Investment Fund to be available,
upon appropriation by the Legislature, for allocation by the board,
as specified, to qualified capital access companies for the purpose
of making investments in qualified businesses, as defined. This bill
would authorize the board to charge certain fees to cover the board's
costs in carrying out its responsibilities. This bill would impose
certain duties upon qualified capital access companies, including a
duty to make specified investments in qualified businesses, as
specified. This bill would authorize the board to revoke any
designation as a qualified access company and to assess a penalty, as
specified, for any qualified capital access company that fails to
perform any duty. This bill would require the board to report to the
Legislature the results of the act, as provided.
Existing law, known as the Donahoe Higher Education Act, provides
for a public postsecondary education system in this state. This
system consists of the University of California, the California State
University, and the California Community Colleges. Existing law
authorizes these institutions to require that mandatory systemwide
fees, among other fees, be paid by students at these institutions.
The provisions of the act apply to the University of California only
to the extent that the Regents of the University of California act by
resolution to make them applicable.
This bill would require the Trustees of the California State
University, and would request the Regents of the University of
California, to explore innovative ways of offering a bachelor's
degree to an individual student at a cost, as specified, in an amount
of no more than $10,000.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 3.5 (commencing with Section
28960) is added to Title 4 of the Corporations Code
, to read:
DIVISION 3.5. California Jobs Act
28960. This division shall be known and may be cited as the
California Jobs Act.
28961. For purposes of this division, all of the following
definitions shall apply:
(a) "Board" means the California Jobs Act Board established
pursuant to Section 28962.
(b) "Capital access company" means a capital access company
licensed under the Capital Access Company Law (Chapter 1 (commencing
with Section 28000) of Division 3).
(c) "Fund manager" means a person or entity that manages a
qualified capital access company.
(d) "Investment" means an investment of cash by a qualified
capital access company in a qualified business for the purchase of
equity, equity options, warrants, or debt convertible to equity. An
investment in a debt instrument whose terms are substantially
equivalent to terms typically found in debt financing provided by
banks to profitable companies, including security interests in
tangible assets with readily discernible orderly liquidation value in
excess of the loan amount or personal guarantees, shall not be
deemed as a qualified investment.
(e) "Investor" means any investor in a capital access company that
invests in a qualified business.
(f) "Percentage interest" means the ratio of each investor's
investment in a qualified capital access company to the total
investments by all investors.
(g) "Qualified business" means a business that satisfied the
requirement specified in subdivision (c) of Section 28966.
(h) "Qualified capital access company" means a capital access
company designated as a qualified capital access company pursuant to
Section 28964.
(i) "Tax credit capital" means amounts paid by taxpayers to the
Treasurer in exchange for tax credits pursuant to Section 28963, and
allocated by the board to qualified capital access companies for
investment in qualified businesses pursuant to Section 28966.
(j) "Total capital" means the sum of the tax credit capital and
the capital invested or committed by investors of a qualified capital
access company.
28962. (a) There is in the state government the California Jobs
Act Board.
(b) The board shall consist of seven members, appointed on or
before July 1, 2014, for a term of one year, as follows:
(1) Three members, who shall have at least five years of
experience in managing or consulting with emerging growth companies,
appointed by the Governor.
(2) Two members, who shall have at least five years of experience
in investing in emerging growth companies, appointed by the Senate
Committee on Rules.
(3) Two members, who shall have at least five years of experience
in investing in emerging growth companies, appointed by the Speaker
of the Assembly.
(c) A majority of the members of the board shall be empowered to
act for the board.
(d) Each member of the board shall do both of the following:
(1) File a Form 700 annually with the Fair Political Practices
Commission. Each member of the board shall be considered a reportable
public official for purposes of the Political Reform Act of 1974
(Title 9 (commencing with Section 81000) of the Government Code).
(2) Serve on the board without compensation.
(e) The board may do all of the following:
(1) (A) Employ an executive officer or any other persons as are
necessary to enable the board to properly perform the duties imposed
upon it by this division.
(B) The executive officer shall serve at the pleasure of the board
and shall receive compensation as shall be fixed by the board.
(2) By resolution, delegate to its executive officer, or any other
employee of the board, including, but not limited to, the power to
enter into contracts on behalf of the board.
(3) (A) Adopt, amend, or repeal all rules and regulations
necessary to carry out this division as emergency regulations in
accordance with the rulemaking provisions of the Administrative
Procedure Act (Division 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code).
(B) The adoption, amendment, or repeal of the regulations pursuant
to subparagraph (A) is conclusively presumed to be necessary for the
immediate preservation of the public peace, health, safety, or
general welfare within the meaning of Section 11346.1 of the
Government Code.
(4) Adopt an official seal.
(5) Sue and be sued in its own name.
(6) Employ any necessary measures to collect any allocations of
tax credit capital made to qualified capital access companies for
which the board revokes designation.
28963. (a) The Treasurer shall sell tax credits to taxpayers in
an auction process designed and supervised by the Treasurer to obtain
the highest price for each allocation of tax credits. The aggregate
amount of tax credits sold to all taxpayers shall not exceed two
hundred million dollars ($200,000,000). The Treasurer shall sell tax
credits in amounts not less than ten million dollars ($10,000,000),
but not more than twenty million dollars ($20,000,000), per taxpayer.
(b) The Treasurer shall evidence the sale of tax credits using any
written instrument the Treasurer deems fit for the purpose, and
provide that instrument to the taxpayer within 30 days of sale. The
instrument shall include, but not be limited to, the total amount of
tax credits purchased by the taxpayer, and the tax against which the
taxpayer will claim the credit.
(c) The proceeds from the sale of tax credits shall be deposited
in the California Jobs Act Investment Fund, which is hereby
established in the State Treasury. Revenues in the fund shall be
available, upon appropriation by the Legislature, for allocation by
the board to qualified capital access companies for the purpose of
making investments in qualified businesses.
(d) The Treasurer shall notify both of the following:
(1) The Franchise Tax Board, in the form and manner as prescribed
by the Franchise Tax Board, of the names, identification numbers, and
amount of tax credits purchased by taxpayers that will claim a
credit against the personal income tax or the corporate income tax.
(2) The Department of Insurance, in the form and manner as
prescribed by the Department of Insurance, of the names and amount of
tax credits purchased by taxpayers that will claim a credit against
the tax on insurers.
28964. (a) On or before September 1, 2014, capital access
companies may apply to the board for designation as qualified capital
access companies.
(b) (1) The board shall develop and provide application forms for
use by capital access companies seeking designation as qualified
capital access companies. The board shall adopt uniform procedures
for the submission and review of applications. The application shall
include, but not be limited to, the business name and address of the
qualified business or qualified businesses that the qualified capital
access company will invest in using tax credit capital allocated by
the board.
(2) Within 180 days of the sale of tax credits by the Treasurer
pursuant to Section 28963, the board shall publish notice of the
availability of applications for allocations of tax credit capital
and deadlines for submission of applications
(c) (1) The board shall designate as a qualified capital access
company only those capital access companies that satisfy all of the
following requirements:
(A) Submit an audited balance sheet that contains an unqualified
opinion of an independent certified public accountant issued not more
than 60 days before the application date that states that the
capital access company applying for designation has an equity
capitalization of at least five million dollars ($5,000,000) in the
form of unencumbered cash, marketable securities, and other liquid
assets.
(B) Directly employ at least two managers with five or more years
of investment experience primarily in California-domiciled companies.
(C) Have its principal office in California for the last five
years.
(D) Have a proposed investment strategy for achieving
transformational economic development outcomes through focused
investment of capital in seed or early stage companies with
high-growth potential.
(E) Have a demonstrated ability to lead investment rounds, advise
and mentor entrepreneurs, facilitate follow-on investments, and
execute investment exits.
(2) The board may require a capital access company applying for
designation to provide any information necessary for the board to
designate the capital access company as a qualified capital access
company.
(d) On or before January 1, 2015, at a duly noticed public
hearing, the board shall designate capital access companies selected
as qualified capital access companies. The board shall notify
qualified capital access companies of the designation on or before
February 1, 2015.
(e) (1) The board may charge fees as are reasonably necessary to
cover the board's costs in carrying out its responsibilities under
this division.
(2) Until the time that sufficient revenue is received by the
board pursuant to paragraph (1), the board may borrow any money as
may be required for the purpose of meeting the necessary expenses of
the operation of the board. Any loan made to the board pursuant to
this subdivision shall be repayable solely from revenue received
pursuant to paragraph (1) and shall not constitute a general
obligation for which the faith and credit of the state are pledged.
28965. (a) To retain its designation as a qualified capital
access company, the qualified capital access company shall do all of
the following:
(1) Make investments of no less than 50 percent of its allocation
of tax credit capital in qualified businesses within two years of the
allocation date.
(2) Make investments of no less than 70 percent of its allocation
of tax credit capital in qualified businesses within three years of
the allocation date.
(3) Make investments of no less than 80 percent of its allocation
of tax credit capital in qualified businesses within four years of
the allocation date.
(4) Make investments of no less than 90 percent of its allocation
of tax credit capital in qualified businesses within six years of the
allocation date.
(b) A qualified capital access company shall not do either of the
following:
(1) Invest more than 10 percent of its total tax credit capital in
any one qualified business.
(2) Sell any interest in the qualified business without approval
from the board.
(c) The board may audit any qualified capital access company to
ensure its compliance with this division.
(d) (1) The board may revoke any designation as a qualified
capital access company at any duly noticed public hearing for both of
the following reasons:
(A) The qualified capital access company has misrepresented any
information required by this division.
(B) The qualified capital access company fails to perform any duty
required by this division.
(2) Any qualified capital access company that loses its license as
a capital access company shall be deemed to have lost its
designation as a qualified access company.
(3) Any tax credit capital allocated from the California Jobs Act
Investment Fund to the capital access company for which designation
is revoked shall become immediately due and payable for the company
to the State of California. Any amounts collected shall be deposited
in the General Fund.
(e) The board may assess a penalty of 10 percent or two hundred
fifty thousand dollars ($250,000), whichever is less, of any
qualified capital access company's total capital, for any qualified
capital access company that fails to perform any duty under this
division. Proceeds of penalties shall be deposited in the General
Fund.
28966. (a) Within 180 days of publishing the notice required by
paragraph (2) of subdivision (b) of Section 28964, the board shall
allocate tax credit capital to qualified capital access companies for
the purpose of making investments in qualified businesses.
(b) The board shall allocate tax credit capital to qualified
capital access companies in amounts of not less than ten million
dollars ($10,000,000), but not more than twenty million dollars
($20,000,000), to any one qualified capital access company at the
discretion of the board. Any revenues remaining in the California
Jobs Act Investment Fund when the board has completed allocations of
the tax credit capital shall be deposited in the General Fund.
(c) (1) The board shall allocate tax credit capital to qualified
capital access companies to make investments in qualified businesses
that meet all of the following criteria:
(A) It is a small business concern or a smaller business concern
as defined by the Capital Access Company Law (Chapter 1 (commencing
with Section 28000) of Division 3).
(B) Its business headquarters is located in California.
(C) Its principal business activity is located in California.
(D) It does not employ more than 100 persons, directly or
indirectly.
(E) It is not engaged in professional services provided by
accountants, physicians, dentists, or lawyers, or banking, lending,
real estate development, insurance, oil, gas exploration, or direct
gambling activities.
(F) It is not a franchise of, and has no financial relationship
with, and is not part of the commonly controlled group, as defined in
paragraph (3) of subdivision (b) of Section 25106.5 of Title 18 of
the California Code of Regulations, of the qualified capital access
company.
(2) The criteria specified in paragraph (1) shall be deemed
satisfied if the qualified capital access company represents in its
application that the qualified business will meet the criteria upon
closing.
(d) The qualified capital access company receiving tax credit
capital may request the board to certify any business as a qualified
business. The board shall notify the qualified capital access company
within 10 days of its determination of the business as a qualified
business.
(e) The board shall allocate tax credit capital to qualified
capital access companies to make investments only in qualified
businesses in which the qualified capital access company has a
contract with an investor or investors unrelated to the qualified
capital access company to make an irrevocable investment of cash or
cash equivalents in qualified businesses in a total amount identical
to the aggregate amount of proceeds allocated by the board.
(f) Any allocation of tax credit capital made to a qualified
capital access company not yet invested in a qualified business shall
be held in an escrow account maintained by the board. Any
allocations of tax credit capital made to a qualified capital access
company but not invested in a qualified business is forfeited eight
years from the date the board allocates the tax credit capital to the
qualified capital access company, and any such proceeds shall be
recovered and deposited in the General Fund.
28967. (a) A fund manager may, with the approval of the board,
charge a qualified capital access company any of the following fees
and expenses:
(1) Organizational costs and expenses of forming, syndicating, and
organizing the qualified capital access company, including fees paid
for professional services, provided that the startup and offering
costs shall not exceed 2 percent of the total capital of the
qualified capital access company or five hundred thousand dollars
($500,000), whichever is less. In addition, brokerage commissions for
raising capital from investors may not exceed 10 percent of the
capital received by the qualified capital access company.
(2) An annual management fee to manage and operate a qualified
capital access company. The fee shall be paid in the following
manner:
(A) For the first five years following the date of allocation of
tax credit capital, the fee shall not exceed 3 percent of the
qualified capital access company's total capital per annum.
(B) After the first five years following the date of allocation of
tax credit capital, the fee shall not exceed 2 percent of the
qualified capital access company's total capital per annum.
(3) Reasonable and necessary fees charged in accordance with
industry custom for ongoing professional services, including, but not
limited to, legal and accounting services related to the operation
of a qualified capital access company, but not including any lobbying
or government relations.
(b) Qualified capital access companies may make distributions of
cash resulting from gains from investments in qualified businesses at
any time on or before January 1, 2023. In the event that a qualified
capital access company makes that distribution, it shall do so in
the following manner:
(1) First, 75 percent to investors in the qualified capital access
company and 25 percent to the state, to be deposited in the General
Fund, until all investors have received cumulative distributions
equal to 100 percent of his or her investment.
(2) Second, 100 percent to the state, to be deposited in the
General Fund, until the state has received cumulative distributions
equal to 100 percent of the board's allocation of tax credit capital
to that qualified access company.
(3) Third, 20 percent to the manager of the qualified capital
access company, 40 percent to all investors according to their
respective percentage interest, and 40 percent to the state, to be
deposited in the General Fund.
(c) On or before January 1, 2023, the qualified access company
shall liquidate its investments made with tax credit capital and
distribute all remaining cash or assets in kind gained from
investments in accordance with subdivision (b).
28968. (a) On or before January 1, 2023, the board shall report
to the Legislature the results of the California Jobs Act. The report
shall include all of the following:
(1) The number and amounts of investments made.
(2) An estimate of the number of jobs created by the investments.
(3) The number of qualified access companies designated.
(4) The amount of allocations made to each qualified capital
access company.
(5) The amount of cash distributed to the state and deposited in
the General Fund.
(b) (1) The report required pursuant to subdivision (a) shall be
submitted in compliance with Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, this
section is repealed on January 1, 2027.
SEC. 2. Section 12211 is added to the
Revenue and Taxation Code , to read:
12211. (a) For each year beginning on or after January 1, 2015,
and before January 1, 2023, there shall be allowed as a credit
against the amount of tax, as defined in Section 28 of Article XIII
of the California Constitution, equal to the total amount stated on
the written instrument used by the Treasurer to evidence the sale of
the tax credit as required by Section 28968 of the Corporations Code.
The taxpayer may only claim the credit in the following amounts in
the following taxable years:
(1) For taxable years 2015 to 2018, inclusive, an amount equal to
15 percent of the total amount stated on the written instrument
issued by the Treasurer.
(2) For taxable years 2019 to 2022, inclusive, an amount equal to
10 percent of the total amount stated on the written instrument
issued by the Treasurer.
(b) For purposes of determining any tax that may be imposed under
Section 685 of the Insurance Code on a taxpayer not organized under
the laws of this state, the amount of the credit allowed by
subdivision (a) shall be treated as a tax paid under Section 12201 or
Section 28 of Article XIII of the California Constitution.
(c) A credit shall not be allowed by this section unless the
taxpayer provides satisfactory substantiation to, and in the form and
manner as requested by, the Department of Insurance, or any
successor thereof, of the written instrument used by the Treasurer to
evidence the sale of the tax credit as required by Section 28963 of
the Corporations Code.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
next four years, or until the credit has been exhausted, whichever
occurs first.
(e) This section shall remain in effect only until December 1,
2023, and as of that date is repealed.
SEC. 3. Section 17053.50 is added to the
Revenue and Taxation Code , to read:
17053.50. (a) For each taxable year beginning on or after January
1, 2015, and before January 1, 2023, there shall be allowed as a
credit against the "net tax," as defined in Section 17039, an amount
equal to the total amount stated on the written instrument used by
the Treasurer to evidence the sale of tax credits as required by
Section 28968 of the Corporations Code. The taxpayer may only claim
the credit in the following amounts in the following taxable years:
(1) For taxable years 2015 to 2018, inclusive, an amount equal to
15 percent of the total amount stated on the written instrument
issued by the Treasurer.
(2) For taxable years 2019 to 2022, inclusive, an amount equal to
10 percent of the total amount stated on the written instrument
issued by the Treasurer.
(b) A credit shall not be allowed by this section unless the
taxpayer provides satisfactory substantiation to, and in the form and
manner as requested by, the Franchise Tax Board, or any successor
thereof, of the written instrument used by the Treasurer to evidence
the sale of tax credits as required by Section 28963 of the
Corporations Code.
(c) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
for the next four taxable years, or until the credit has been
exhausted, whichever occurs first.
(d) This section shall remain in effect only until December 1,
2023, and as of that date is repealed.
SEC. 4. Section 23650 is added to the
Revenue and Taxation Code , to read:
23650. (a) For each taxable year beginning on or after January 1,
2015, and before January 1, 2023, there shall be allowed as a credit
against the "tax," as defined in Section 23036, an amount equal to
the total amount stated on the written instrument used by the
Treasurer to evidence the sale of tax credits as required by Section
28968 of the Corporations Code. The taxpayer may only claim the
credit in the following amounts in the following taxable years:
(1) For taxable years 2015 to 2018, inclusive, an amount equal to
15 percent of the total amount stated on the written instrument
issued by the Treasurer.
(2) For taxable years 2019 to 2022, inclusive, an amount equal to
10 percent of the total amount stated on the written instrument
issued by the Treasurer.
(b) A credit shall not be allowed by this section unless the
taxpayer provides satisfactory substantiation to, and in the form and
manner as requested by, the Franchise Tax Board, or any successor
thereof, of the written instrument used
by the Treasurer to evidence the sale of tax credits as
required by Section 28963 of the Corporations Code.
(c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
next four taxable years, or until the credit has been exhausted,
whichever occurs first.
(d) This section shall remain in effect only until December 1,
2023, and as of that date is repealed.
SECTION 1. Section 66024.5 is added to the
Education Code, to read:
66024.5. The Trustees of the California State University shall,
and the Regents of the University of California are requested to,
explore innovative ways of offering a bachelor's degree at a cost to
an individual student in an amount of no more than ten thousand
dollars ($10,000). For purposes of this section, these costs shall
include only systemwide fees and text books.