HLS 11RS-938 ORIGINAL
Page 1 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
Regular Session, 2011
HOUSE BILL NO. 555
BY REPRESENTATIVE ELLINGTON
TAX CREDITS: Creates the Louisiana Entrepreneurial Assistance and Development
(LEAD) Program for tax credits for venture capital investments
AN ACT1
To enact R.S. 22:832.1 and Chapter 55 of Title 51 of the Louisiana Revised Statutes of2
1950, to be comprised of R.S. 51:3110 through 3117, relative to tax credits; to3
establish the Louisiana Entrepreneurial Assistance and Development Program to4
provide a credit against insurance premium tax for certain venture capital investors;5
to provide for administration of the program by the department of economic6
development; to provide for applications and to establish criteria for approval; to7
establish criteria for investments; to provide for reporting; to provide for other8
requirements and limitations; and to provide for related matters.9
Be it enacted by the Legislature of Louisiana:10
Section 1. R.S. 22:832.1 is hereby enacted to read as follows:11
§832.1 Insurance Premium Tax; Louisiana Entrepreneurial Assistance and12
Development Program; tax credit for investors13
A. There is hereby authorized a tax credit against premium tax for an investor14
that makes an investment of eligible capital and receives certification for a tax credit15
pursuant to the provisions of R.S. 51:3111. The credit shall be earned in the year16
that the investment is made. The amount of the credit shall be equal to seventy-five17
percent of the amount of the investment. The premium tax credit shall be available18
for, but not limited to, taxes charges on insurance premiums under R.S. 22:831, 836,19
838, and 842.20 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 2 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
B. In any one taxable year, no more than twenty-five percent of the total1
premium tax credit which is earned with respect to a particular investment may be2
used, provided that:3
(1) The taxpayer may not utilize credits in any taxable year in excess of its4
premium tax liability for such taxable year.5
(2) The tax credits shall not initially be applicable against premium tax6
liability generated in any calendar year until the third calendar year after the year in7
which the investment of eligible capital was made pursuant to the requirements of8
the Louisiana Entrepreneurial Assistance and Development Program as provided in9
R.S. 51:3110, et seq. 10
(3) The premium tax credit shall not be applicable against any estimated11
premium tax payments on or before April 15, 2015.12
C. In accordance with the limitations provided in this Chapter, premium tax13
credits available under this Section may be carried forward for use in future years.14
D. Any investor who earns a premium tax credit pursuant to this Section shall15
be allowed to transfer such credits to any insurance company, which tax credits shall16
be subject to the forfeiture provisions of R.S. 51:3116. Within thirty days after the17
transfer of tax credits, the original holder of the tax credits shall notify the18
department in writing of the name of the new holder of the tax credits and the19
amount of tax credits transferred, the price of such credits, the date the transfer20
occurred, the tax identification number of the transferee, and the remaining balance21
of credits held by the transferor. In the event such notice is not received by the22
department within the thirty day period, the transfer or sale shall be void. 23
Section 2. Chapter 55 of Title 51 of the Louisiana Revised Statutes of 1950, to be24
comprised of R.S. 51:3110 through 3117 is hereby enacted to read as follows: 25
§3110. Louisiana Entrepreneurial Assistance and Development Program 26
This Chapter may be cited as the "Louisiana Entrepreneurial Assistance and27
Development Program".28 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 3 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
A. Recognizing the need to bring venture and expansion capital to the1
entrepreneurs of Louisiana both to combat the current economic downtown and2
resulting difficulties in securing capital from traditional sources and to ensure the3
Louisiana-based development of the small and medium sized businesses that have4
traditionally created the vast majority of new jobs nationwide, the legislature deems5
it in the public interest to enact the Louisiana Entrepreneurial Assistance and6
Development Program (LEAD) to provide an incentive to attract venture and7
expansion capital to eligible businesses.8
B. As used in this Chapter:9
(1) "Allocation date" means the date a LEAD fund receives an investment of10
eligible capital equaling the amount of eligible capital allocated to its investors11
pursuant to R.S. 51:3112;12
(2) "Department" means the department of economic development;13
(3) "Eligible business" means a business that:14
(a) At the time of a LEAD fund's initial investment therein:15
(i) Has one hundred or fewer full-time employees; 16
(ii) Has at least eighty percent of its employees domiciled in Louisiana or at17
least eighty percent of its payroll paid to employees domiciled in Louisiana; and18
(iii) Is not engaged in any of the following: retail sales, real estate19
development, gaming, natural resource extraction or exploration, the business of20
insurance, banking or lending, or the provision of professional services provided by21
accountants, lawyers, or physicians; and 22
(b) Has either:23
(i) A net worth less than five million dollars at the time of such investment;24
or 25
(ii) Fifteen million dollars or less in net income in the fiscal year26
immediately preceding such investment;27 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 4 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
(4) "Eligible capital" means an investment of cash by aan investor in a LEAD1
fund that fully funds the purchase price of an equity interest in the LEAD fund or a2
debt instrument issued by a LEAD fund, at par value or a premium, that:3
(a) Has an original maturity date at least five years after the date of issuance,4
(b) Has a repayment schedule that is not faster than a level principal5
amortization over five years, and 6
(c) Has no interest, distribution, or payment features tied to the LEAD fund's7
profitability or the success of its investments.8
(5) "LEAD fund" means a Louisiana partnership, corporation, trust, or limited9
liability company, whether organized on a profit or not-for-profit basis, that:10
(a) Is managed by at least two principals or persons domiciled in Louisiana11
that have at least five years of experience each in managing venture capital or private12
equity funds, with at least fifteen million dollars of such funds having been invested13
by persons that are unaffiliated with such principals or persons, and (i) has received14
an equity investment of capital other than eligible capital equal to at least five15
hundred thousand dollars, and (ii) is not, or will not be after the receipt of eligible16
capital, controlled by or under common control with, one or more insurance17
companies. The provision of this definition shall not be interpreted to preclude an18
insurance company from exercising its legal rights and remedies, including interim19
management of a LEAD fund, if authorized by law, with respect to a LEAD fund that20
is in default of its statutory or contractual obligations to the insurance company or21
establishing controls to ensure that the LEAD fund satisfies the requirements of this22
Chapter. An investment of eligible capital shall not result in insurance company23
control unless such investment exceeds forty million dollars per taxpayer;24
(6) "Match" means a cash investment in an eligible business either25
contemporaneous with or subsequent to an investment of eligible capital by a LEAD26
fund in such eligible business, other than an investment made with eligible capital27
either from the LEAD fund or another LEAD fund.28 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 5 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
(7) "Secretary" means the secretary of the department of economic1
department.2
§3111. Louisiana Entrepreneurial Assistance and Development Program; Premium3
tax; tax credits 4
An investor that makes an investment of eligible capital in a LEAD fund that5
is approved by the department pursuant to R.S. 51:3112 may claim a credit against6
premium tax liability as provided in R.S. 22:832.1. The premium tax credit is earned7
in the year of investment of eligible capital, and shall be subject to the rules on8
utilization set forth in R.S. 22:832.1 and the forfeiture provisions of R.S. 51:3116.9
§3112 Application; certification; reporting10
A. On or before November 1, 2011 the secretary shall begin to accept11
applications for certification as a LEAD fund and for allocations of eligible capital12
and tax credits. Applications shall include:13
(1) The amount of eligible capital the applicant proposes to raise;14
(2) A non-refundable application fee of seven thousand five hundred dollars;15
(3) Evidence that the applicant satisfies the requirements of a "LEAD fund"16
as defined in R.S. 51:3110(B)(5).17
(4) An affidavit by each investor committing to an investment of eligible18
capital;19
(5) A business plan detailing: 20
(a) The approximate percentage of eligible capital the applicant will invest21
in eligible businesses by the second, fourth, sixth, and eight anniversaries of its22
allocation date; 23
(b) The stage of development and industry segments listed by the North24
American Industrial Classification System code in which the applicant will invest;25
and 26
(c) The types of investments the applicant will make, including but not27
limited to debt, equity, convertible debt, and debt with equity-like features;28 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 6 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
(6) A revenue impact assessment prepared by an independent third party1
contracted by the department and paid for by the applicant demonstrating that the2
applicant's investments, if made in accordance with its business plan, will have a3
positive or neutral revenue impact on the state taking into account the amount and4
timing of tax credits earned by investors of eligible capital in the LEAD fund and the5
match of one hundred percent of the eligible capital invested by the applicant. The6
assessment shall include the applicant's estimate of the number of jobs that will be7
created or retained as a result of the investment of one hundred percent of the8
applicant's eligible capital in eligible business; and 9
(7) Any offering material involving the sale of securities of a LEAD fund,10
which offering material must include the following statements "The state of11
Louisiana is not liable for damages to an investor in an issuer participating in the12
Louisiana Entrepreneurial Assistance and Development (LEAD) Program. Use of13
the word 'Louisiana' or other terms used in conjunction with the LEAD Program in14
an offering does not constitute a recommendation or endorsement of the investment15
by the Louisiana Department of Economic Development."16
B.(1) Not later than the thirtieth day after the date on which an application17
for certification is received by the department, the secretary shall either:18
(a) Issue the certification and notify the applicant of the amount of eligible19
capital and associated tax credits allocated to its investors, or 20
(b) Refuse to issue the certification and communicate in detail to the21
applicant the grounds for the refusal from the department. If an amended application22
is received by the department, the department shall have fifteen days therefrom by23
which to communicate its approval or refusal of such amended application to the24
applicant.25
(2) Applications for tax credits pursuant to this Section shall be accepted and26
approved on a first-come, first -served basis with all applications received on the27
same date deemed to be received simultaneously. No more than two hundred million28
in eligible capital shall be allocated under this program. If applications for tax29 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 7 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
credits received by the department on any date exceed the total amount of approval1
authority remaining under this Chapter on such date, the eligible capital and2
associated tax credits shall be allocated on a pro-rata basis with each amount of3
eligible capital requested by applicants on such date multiplied by the amount of4
remaining approval authority on such date.5
C.(1) Upon the receipt of eligible capital each certified LEAD fund shall6
report to the secretary the following: 7
(a) The name of each investor from whom eligible capital was received,8
including the investor's tax identification number; 9
(b) The amount of eligible capital received from each investor; and10
(c) The date on which the eligible capital was received. 11
(2) If a LEAD fund does not receive an investment of eligible capital12
equaling the amount of eligible capital allocated to it pursuant to Subsection (B)(1)13
of this Section prior to the fifth business day after receipt of certification, the LEAD14
fund shall notify the secretary by overnight common carrier delivery service and that15
portion of eligible capital allocated to the investor shall be forfeited. Any forfeited16
eligible capital shall be reallocated, provided that if such forfeited eligible capital17
was subject to a pro rata allocation, it shall be reallocated first to investors in the18
other LEAD funds affected by such pro rata allocation.19
§3113. Approval of LEAD fund investments in eligible businesses20
A. Prior to making any initial investment in a potential business, a LEAD21
fund shall request a written opinion from the department as to whether the business22
in which it is proposes to invest is an eligible business, including whether such23
investment is consistent with the LEAD fund's business plan and satisfies the24
requirement regarding the investment of eligible capital in eligible business as25
provided in R.S. 51:3115(A)(2). If within fifteen days from the date of receipt of26
the request the department has neither granted nor denied the request, the proposed27
investment shall be deemed an eligible business that is consistent with the LEAD28
fund's business plan and that satisfies the requirement of R.S. 51: 3115(A)(2) if a29 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 8 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
written opinion is requested as to satisfaction of that requirement. The denial of a1
request shall contain reasons for denial.2
B. A LEAD fund may not invest more than fifteen percent of its eligible3
capital in any one eligible business without prior approval of the secretary.4
§3114. LEAD Fund; Maintenance of certification; reporting5
A. To maintain certification, a LEAD fund shall:6
(1) Be in compliance with the investment parameters set forth in its business7
plan, provided a LEAD fund may apply to the secretary to amend its business plan8
based on unavoidable or reasonably unanticipated changes to various conditions,9
including but not limited to the general economic climate of the state or particular10
sectors of the economy, technological advances and high employment and revenue11
growth opportunities, with approval for such changes not to unreasonable withheld12
by the secretary;13
(2) Have invested twenty-five percent of its eligible capital in eligible14
businesses by the second anniversary of its allocation date; 15
(3) Have invested fifty percent of its eligible capital in eligible businesses16
by the fourth anniversary of its allocation date; and 17
(4) Have invested one hundred percent of its eligible capital in eligible18
businesses, bank deposits, certificates of deposit, or other debt securities issues or19
guaranteed by investment-grade issuers or money market, mutual, or exchange20
traded funds whose investments are limited to the foregoing.21
B. Not later than January thirty-first of each year, each LEAD fund shall22
report to the secretary:23
(1) The amount of eligible capital remaining at the end of the preceding year24
to be invested in eligible businesses;25
(2) Each investment in an eligible business, its location, and two-digit North26
American Industrial Classification System code; 27
(3) The percentage of eligible capital invested pursuant to the commitment28
set forth in R.S. 51:3124(7);29 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 9 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
(4) Distributions made by the LEAD fund in the preceding year; and 1
(5) The number of jobs created or retained as a result of the LEAD fund's2
investments in eligible businesses during the preceding year. Each LEAD fund shall3
provide to the secretary annual audited financial statements not later then June4
thirtieth, annually. 5
§3115. LEAD fund; distributions6
A. To make a distribution or payment, other than those listed in Subsection7
(B) of this Section, a LEAD fund must have:8
(1) Invested on hundred percent of its eligible capital in eligible businesses;9
(2) Invested at least fifty percent of its eligible capital in eligible businesses10
that are either 11
(a) Engaged in the development of initial product or service offerings, such12
as prototype development or establishment of initial production or service processes,13
or 14
(b) Within one of the following industry segments: digital media/software15
development, next-generation automobiles, specialty health care, renewable16
energy/energy efficiencies, water management or next-wave oil and gas, or other17
industry segments approved by the secretary; and 18
(3) The LEAD fund shall have achieved a match amount equal to at least one19
hundred percent of the LEAD fund's allocation of eligible capital.20
B. At any time, a LEAD fund may make: 21
(1) Distributions related to the payment of any projected increase in federal22
or state taxes, including penalties and interest related to state and federal income23
taxes, of the equity owners of the LEAD fund resulting from the earning or other tax24
liability of the LEAD fund to the extent that the increase is related to the ownership,25
management, or operation of the LEAD fund; 26
(2) Payments of interest and principal on the debt of the LEAD fund; or (3)27
payments related to the reasonable costs and expenses of forming, syndicating,28
managing, and operating the fund, provided the distribution of payment is not made29 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 10 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
directly or indirectly to an investor that has invested eligible capital in the LEAD1
fund, including: (i) reasonable and necessary fees paid for professional services,2
including legal and accounting services, related tot the formation and operation of3
the LEAD fund; and (ii) an annual management fee in an amount that does not4
exceed two and one-half percent of the eligible capital of the LEAD fund, provided5
that a LEAD fund may not pay management fees if it fails to meet the requirement6
set forth in R.S. 51:3114.7
C. The state shall receive ten percent of any distribution, other than8
distributions described in Subsection (B) of this Section, and any distributions made9
to return an equity capital invested in the LEAD fund that is not eligible capital. The10
state's distribution percentage shall increase to (1) twenty percent if less than eighty11
percent, but more than sixty percent, of the jobs set forth in the LEAD fund's12
business plan are created or retained, and (2) forty percent when sixty percent or less13
of the jobs set forth in the LEAD fund's business plan are created or retained.14
§3116. LEAD fund; decertification and forfeiture15
A. The secretary shall review each annual report to ensure compliance with16
the requirements for maintenance of certification, reporting and distributions as17
provided in R.S.51:3114 and 3115, a material violation of which shall be grounds for18
decertification of the LEAD fund. If the secretary determines that a LEAD fund is19
not in compliance with the foregoing requirements, the secretary shall notify the20
officers of the LEAD fund in writing that the LEAD fund may be subject to21
decertification after the one-hundred-twentieth day after the date of mailing the22
notice, unless the deficiencies are waived by te secretary or are corrected, and the23
LEAD fund returns to compliance with law. 24
B. Decertification of a LEAD fund prior to its investment of at least fifty25
percent of its eligible capital in eligible businesses shall cause the forfeiture of all tax26
credits earned under this Chapter. Upon satisfaction of the requirement of R.S.27
51:3114(A)(3), tax credits earned under this Chapter are no longer subject to28
recapture or forfeiture.29 HLS 11RS-938 ORIGINAL
HB NO. 555
Page 11 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
C. Upon satisfaction of the requirements of either R.S. 51:3114(A)(3) or (4),1
a LEAD fund shall provide notice to the department and the department shall, within2
sixty days or receipt of such notice, either confirm that the LEAD fund has satisfied3
such requirement as of such date or provide notice of noncompliance and an4
explanation of any existing deficiencies. If the department does not provide such5
notification within sixty days, the LEAD fund shall be deemed to have met the6
requirement of R.S. 51:3114(A)(3) or (4). Except for distributions made pursuant7
to R.S.3115(C), a LEAD fund that has satisfied the requirement set forth in R.S.8
51:3114(A)(4) shall no longer be subject to the regulations hereunder.9
§3117. Louisiana Entrepreneurial Assistance and Development Program;10
administration11
The department shall maintain and interpret policy for, perform the12
regulatory and examination functions of, and provide for the implementation and13
administration of the Louisiana Entrepreneurial Assistance and Development14
Program. The department shall have the authority, subject to the Louisiana15
Administrative Procedure Act, to adopt rules concerning the implementation and16
regulation of the program and to issue advisory rulings, as requested, provided each17
advisory ruling is limited to the specific facts outlines in the advisory ruling request18
and may only be relied upon by the specific requesters of such ruling. 19
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Ellington HB No. 555
Abstract: Establishes the Louisiana Entrepreneurial Assistance and Development Program
for tax credits against insurance premium tax for venture capital investors
Proposed law establishes the Louisiana Entrepreneurial Assistance and Development
Program for tax credits against insurance premium tax for venture capital investors. The
amount of the credit is equal to 75% of the amount of eligible investments. The tax credit
must be taken in the year in which it is earned, it is transferrable and may not be carried
forward.
Proposed law provides for application and certification of investors for participation in the
program and receipt of tax credits. HLS 11RS-938 ORIGINAL
HB NO. 555
Page 12 of 12
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
Proposed law authorizes the department of economic development to administer the
program.
(Adds 51:3110 through 3117)