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Regular Session, 2011
SENATE BILL NO. 246
BY SENATOR RISER
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
INSURERS. Creates the Louisiana Entrepreneurial Assistance and Development (LEAD)
Program which grants a tax reduction to insurance companies who invest in the fund.
(8/15/11)
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. 51:312 through 3131, relative to the Louisiana3
Entrepreneurial Assistance and Development Program (LEAD); to create the4
program; to provide for a tax reduction for insurers who make investments of eligible5
capital under the program; to provide for approval of LEAD funds by the department6
of economic development and to establish criteria for such approval; to provide7
criteria for issuers in which investments will be made; and to provide for related8
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. Investment tax credit12
A. An investor who makes an investment of eligible capital pursuant to13
R.S. 51:3121, et seq., shall, in the year of investment, earn a vested premium tax14
credit in the year that the investment is made equal to seventy-five percent of15
the amount of the investment. The premium tax credit shall be available for but16
not limited to, taxes charged on insurance premiums under R.S. 22:831, 836,17 SB NO. 246
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838, and 842. Notwithstanding any other provision of law to the contrary, the1
premium tax credit shall not be available for taxes charged on insurance2
premiums under R.S. 22:345, 439, 833, 835, 837, and 1476.3
B. In any one taxable year, no more than twenty-five percent of the total4
premium tax credit earned with respect to a particular investment described in5
Subsection A of this Section may be used, provided that:6
(1) An insurer may not utilize credits in any taxable year in excess of its7
premium tax liability for such taxable year.8
(2) The premium tax credits shall not initially be applicable against9
premium tax liability generated in any calendar year until the third calendar10
year after the year in which the investment of eligible capital was made11
pursuant to R.S. 51:3121, et seq.12
(3) The premium tax credit shall not be applicable against any estimated13
premium tax payments due prior to April 15, 2015.14
C. Subject to the limitations in R.S. 22:832, premium tax credits15
available under this Section may be carried forward for use in future years.16
D. Any investor who holds a premium tax credit described in this17
Section shall be allowed to transfer such credits to any insurance company18
subject to the forfeiture provisions of R.S. 51:3121, et seq. Within thirty days19
after the transfer of tax credits, the original holder of the tax credits and the20
amount of tax credits transferred, the price of such credits, the date the transfer21
occurred, the tax identification number of the transferee, and the remaining22
balance of credits held by the transferor. In the event such notice is not23
received by the Department of Insurance within the thirty-day period, the24
transfer of sale shall be void.25
Section 2. Chapter 55 of Title 51, comprised of R.S. 51:3121 through 3131 is hereby26
enacted to read as follows:27
§3121. Short title28
This Chapter may be cited as the "Louisiana Entrepreneurial Assistance29 SB NO. 246
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and Development Program.1
§3122. Findings; definitions2
A. Recognizing the need to bring venture and expansion capital to the3
entrepreneurs of Louisiana to combat the current economic downturn and4
resulting difficulties in securing capital from traditional sources and to ensure5
the Louisiana-based development of the small and medium sized businesses that6
have traditionally created the vast majority of new jobs nationwide, the7
legislature deems it in the public interest of the state to enact the Louisiana8
Entrepreneurial Assistance and Development Program (LEAD) to provide an9
incentive to attract venture and expansion capital to eligible businesses.10
B. As used in this Chapter, the following terms shall have the following11
meanings, unless the context clearly indicates otherwise:12
(1) "Allocation date" is the date a LEAD fund receives an investment of13
eligible capital equaling the amount of eligible capital allocated to its investors14
pursuant to this Chapter.15
(2) "Department" is the Louisiana Department of Economic16
Development.17
(3) "Eligible business" is a business to which all of the following apply:18
(a) At the time of a LEAD fund's initial investment therein, meets all of19
the following criteria:20
(i) A business which employs one hundred or fewer full-time employees.21
(ii) A business which has at least eighty percent of its employees22
domiciled in Louisiana or at least eighty percent of its payroll paid to employees23
domiciled in Louisiana.24
(iii) A business that is not engaged in any of the following: retail sales,25
real estate development, gaming, natural resource extraction or exploration,26
insurance, banking or lending or the provision of professional services provided27
by accountants, lawyers, or physicians.28
(b) A business which has either a net worth of less than five million29 SB NO. 246
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dollars at the time of such investment or had a net income of fifteen million1
dollars or less in the fiscal year immediately preceding such investment.2
(4) "Eligible capital" is an investment of cash by an investor in a LEAD3
fund that fully funds the purchase price of an equity interest in the LEAD fund4
or a debt instrument issued by a LEAD fund, at par value or a premium, that5
meets all of the following criteria:6
(a) Has an original maturity date at least five years after the date of7
issuance.8
(b) Has a repayment schedule that is not faster than a level principal9
amortization over five years.10
(c) Has no interest, distribution or payment features tied to the11
profitability or to the success of the investments of the LEAD fund.12
(5) "LEAD fund" is a Louisiana partnership, corporation, trust or13
limited liability company, whether organized on a profit or non-profit basis that14
meets all of the following criteria:15
(a) Fund is managed by at least two principals or persons domiciled in16
Louisiana that have at least five years of experience each in managing venture17
capital or private equity funds, with at least fifteen million dollars of such funds18
having been invested by persons that are unaffiliated with such principals or19
persons.20
(b) Fund has received an equity investment of capital other than eligible21
capital equal to at least five hundred thousand dollars.22
(c) Fund is not, or will not be after the receipt of eligible capital,23
controlled by or under common control with one or more insurance companies.24
This definition criteria contained in this Subparagraph does not preclude an25
insurance company from exercising its legal rights and remedies, including26
interim management of a LEAD fund, if authorized by law, with respect to a27
LEAD fund that is in default of its statutory or contractual obligations to the28
insurance company or establishing controls to ensure that the LEAD fund29 SB NO. 246
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satisfies the requirements of this Chapter. An investment of eligible capital1
shall not be deemed to result in insurance company control unless such2
investment exceeds forty million dollars with respect to any one investor.3
(6) "Match" means a cash investment in an eligible business either4
contemporaneous with or subsequent to an investment of eligible capital by a5
LEAD fund in such eligible business, other than an investment made with6
eligible capital either from the LEAD fund or from another LEAD fund.7
(7) "Secretary" means the secretary of the Louisiana Department of8
Economic Development.9
§3123. Premium tax credits10
An investor who makes an investment of eligible capital in a LEAD fund11
that is approved by the department pursuant to R.S. 51:3124 may claim a12
premium tax credit pursuant to R.S. 22:832.1. The premium tax credit is13
earned and vested in the year of investment of eligible capital but is subject to14
the rules on utilization set forth in R.S. 22:832.1 and the forfeiture provisions15
of R.S. 51:3209.16
§3124. Application for certification17
A. On or before November 1, 2011, the secretary shall begin to accept18
applications for certification as a LEAD fund and for allocations of eligible19
capital and tax credits under this Section. Applications shall contain all of the20
following information:21
(1) The amount of eligible capital the applicant proposes to raise.22
(2) A nonrefundable application fee of seven thousand five hundred23
dollars.24
(3) Evidence that the applicant satisfies the requirements for a LEAD25
fund pursuant to R.S. 51:3122(B)(5).26
(4) An affidavit by each investor committing to an investment of eligible27
capital.28
(5) A business plan detailing: (a) the approximate percentage of eligible29 SB NO. 246
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capital the applicant will invest in eligible businesses by the second, fourth, sixth1
and eighth anniversaries of its allocation date; (b) the stage of development and2
industry segments listed by the North American Industrial Classification code3
in which the applicant will invest; and (c) the types of investments the applicant4
will make, including but not limited to debt, equity, convertible debt and/or5
debt with equity-like features;6
(6) A revenue impact assessment prepared by an independent third party7
contracted by the department and paid for by the applicant demonstrating that8
the applicant's investments, if made in accordance with its business plan, will9
have a positive or neutral revenue impact on the state taking into account the10
amount and timing of tax credits earned by investors of eligible capital in the11
LEAD fund and the Match of one hundred per cent of the eligible capital12
invested by the applicant, which assessment shall include the applicant's13
estimate of the number of jobs that will be created or retained as a result of the14
investment of one hundred per cent of the applicant's eligible capital in eligible15
businesses; and16
(7) Any offering material involving the sale of securities of the LEAD17
fund, which offering material must include the following statements: "The state18
of Louisiana is not liable for damages to an investor in an issuer participating19
in the Louisiana Entrepreneurial Assistance and Development (LEAD)20
Program. Use of the word 'Louisiana' or other terms used in conjunction with21
the LEAD Program in an offering does not constitute a recommendation or22
endorsement of the investment by the Louisiana Department of Economic23
Development".24
B.(1) Not later than the thirtieth day after the date an application for25
certification is filed, the secretary shall do either of the following:26
(a) Issue the certification and notify the applicant of the amount of27
eligible capital and associated tax credits allocated to its investors.28
(b) Refuse to issue the certification and communicate in detail to the29 SB NO. 246
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applicant the grounds for the refusal.1
(2) If an applicant submits an amended application within fifteen days2
of receipt of refusal from the department, the department shall have fifteen3
days from the receipt of such amended application by which to communicate its4
approval or refusal of such amended application to the applicant.5
C.(1) Applications for tax credits pursuant to this Subsection shall be6
accepted and approved on a first-come, first-serve basis with all applications7
received on the same date deemed to be received simultaneously.8
(2) The secretary may not allocate more than two hundred million in9
eligible capital under this Chapter.10
(3) If applicants for tax credits received by the department on any date11
exceed the total amount of approval authority remaining under this Chapter on12
such date, the eligible capital and associated tax credits shall be allocated on a13
pre-rata basis with each applicant allocated eligible capital equal to the amount14
requested by it divided by the total amount of eligible capital requested by15
applicants on such date multiplied by the amount of remaining approval16
authority on such date.17
§3125. Report upon receipt of eligible capital18
Each LEAD fund shall report the following to the secretary:19
(1) The name of each investor from whom eligible capital was received,20
including the investor's tax identification number.21
(2) The amount of eligible capital received from each investor.22
(3) The date on which the eligible capital was received. If a LEAD fund23
does not receive an investment of eligible capital equaling the amount of eligible24
capital allocated to it pursuant to R. S. 51:3125 prior to the fifth business day25
after receipt of certification, the LEAD fund shall notify the secretary by26
overnight common carrier delivery service and that portion of eligible capital27
allocated to the investor shall be forfeited. Any forfeited eligible capital shall28
be reallocated pursuant to R.S. 51:3124, provided that if such forfeited eligible29 SB NO. 246
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capital was subject to a pro-rata allocation under R.S. 51:3122(C), it shall be1
reallocated first to investors in the other LEAD funds affected by such pro-rata2
allocation.3
§3126. Department approval of investments in eligible businesses; eligible4
businesses5
A. Prior to making any initial investment in a potential eligible business,6
a LEAD fund shall request a written opinion from the department as to7
whether the business in which it proposes to invest is an eligible business,8
including whether such investment is consistent with the LEAD fund's business9
plan and satisfies the requirement of R.S. 51:3129(A)(2). The department shall10
have fifteen days either to grant the written opinion or to deny the request, in11
which case it shall give the reasons for its denial. If the department fails to12
respond within the fifteen-day period set fort above, the proposed investment13
shall be deemed an eligible business that is consistent with the LEAD fund's14
business plan and that satisfies the requirement of R.S. 51:3129(A)(2) if a15
written opinion was requested as to satisfaction of that requirement.16
B. A LEAD fund may not invest more than fifteen percent of its eligible17
capital in any one eligible business without prior approval of the secretary.18
§3127. Maintenance of certification19
To maintain certification, a LEAD fund shall accomplish all of the20
following:21
(1) Comply with the investment parameters set forth in its business plan,22
provided a LEAD fund may apply to the secretary to amend its business plan23
based on unavoidable or reasonably unanticipated changes to various24
conditions, including, but not limited to, the general economic climate of the25
state of particular sectors of the economy, technological advances and high26
employment and revenue growth opportunities, with approval for such changes27
not to be unreasonably withheld by the secretary.28
(2) Invest twenty-five percent of its eligible capital in eligible businesses29 SB NO. 246
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by the second anniversary of its allocation date.1
(3) Invest fifty percent of its eligible capital in eligible businesses by the2
fourth anniversary of its allocation date.3
(4) Invest one hundred percent of its eligible capital in eligible businesses4
by the tenth anniversary of its allocation date and satisfied the requirement of5
R.S. 51:3129(A)(2). A LEAD fund shall only invest eligible capital in eligible6
businesses, bank deposits, certificates of deposit or other debt securities issued7
or guaranteed by investment-grade issuers or money market, mutual or8
exchange traded funds whose investments are limited to the foregoing.9
§3128. Annual Reporting10
Not later than January thirty-first annually, each LEAD fund shall11
report to the secretary all of the following:12
(1) The amount of eligible capital remaining at the end of the preceding13
year and, with respect to each eligible business, its location and two-digit North14
American Industrial Classification System code.15
(2) The percentage of eligible capital invested pursuant to the16
commitment set forth in R.S. 51:3125(7).17
(3) All distributions made by the LEAD fund in the preceding year.18
(4) The number of jobs created or retained as a result of the LEAD19
fund's investments in eligible businesses during the preceding year. Each20
LEAD fund shall provide to the secretary annual audited financial statements21
not later than June thirtieth annually.22
§3129. Distributions23
A. To make a distribution or payment, other than those listed in24
Subsection B of this Section, a LEAD fund must have accomplished all of the25
following:26
(1) Invested one hundred percent of its eligible capital in eligible27
businesses.28
(2) Invested at least fifty percent of its eligible capital in eligible29 SB NO. 246
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businesses that are either of the following:1
(a) Engaged in the development of initial product or service offerings,2
such as prototype development or establishment of initial production or service3
processes.4
(b) Within one of the following industry segments: digital media/software5
development, next-generation automobiles, specialty health care, renewable6
energy/energy efficiency, water management or next-waive oil and gas, or other7
industry segments approved by the secretary.8
(3) Such LEAD fund must have achieved a match amount equal to at9
least one hundred percent of the LEAD fund's allocation of eligible capital.10
B. At any time, a LEAD fund is authorized to make any of the following:11
(1) Distributions related to the payment of any projected increase in12
federal or state taxes, including penalties and interest related to state and13
federal income taxes, of the equity owners of the LEAD fund resulting from the14
earnings or other tax liability of the LEAD fund to the extent that the increase15
is related to the ownership, management, or operation of the LEAD fund.16
(2) Payments of interest and principal on the debt of the LEAD fund.17
(3) Payments related to the reasonable costs and expenses of forming,18
syndicating, managing, and operating the fund, provided the distribution or19
payment is not made directly or indirectly to an investor that has invested20
eligible capital in the LEAD fund, including all of the following:21
(a) Reasonable and necessary fees paid for professional services,22
including legal and accounting services, related the formation and operation of23
the LEAD fund.24
(b) An annual management fee in an amount that does not exceed two25
and one-half percent of the eligible capital of the LEAD fund, provided that a26
LEAD fund may not pay management fees if it fails to meet the requirements27
set forth in R.S. 51:3126(D).28
C. The state shall receive ten percent of any distribution, other than29 SB NO. 246
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distributions described in Paragraph B of this Subsection and distributions1
made to return any equity capital invested in the LEAD fund that is not eligible2
capital. The state's distribution percentage shall increase to either of the3
following:4
(1) Twenty percent if less than eighty percent and more than sixty5
percent of the jobs set forth in the LEAD fund's business plan are created and6
retained.7
(2) Forty percent when sixty percent or less of the jobs set forth in the8
LEAD fund's business plan are created or retained.9
§3130. Decertification and forfeiture10
A. (1) The secretary shall review each annual report to ensure11
compliance with R.S. 51:3127, 3128, and 3129.12
(2) A material violation of R.S. 51:3127, 3128, and 3129 shall be grounds13
for decertification of a LEAD fund.14
(3) If the secretary determines that a LEAD fund is not in compliance15
with R.S. 51:3127, 3128, and 3129, the secretary shall notify the officers of the16
LEAD fund, in writing, that the LEAD fund may be subject to decertification17
after the one hundred twentieth day after the date of mailing of the notice,18
unless the deficiencies are waived by the secretary or are corrected and the19
LEAD fund returns to compliance.20
B. Decertification of a LEAD fund prior to its investment of at least fifty21
percent of its eligible capital in eligible businesses shall cause the forfeiture of22
all tax credits earned under this Chapter. Upon satisfaction of the requirement23
of R.S. 51:312(C), tax credits earned under this Chapter are no longer subject24
to recapture or forfeiture.25
C.(1) Upon satisfying the requirements of R.S. 51:3127(C) and (D), a26
LEAD fund shall provide notice to the department. The department shall,27
within sixty days of receipt of such notice, either confirm that the LEAD fund28
has satisfied such requirement as of such date or provide notice of29 SB NO. 246
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noncompliance and an explanation of any existing deficiencies.1
(2) If the department does not provide such notification within sixty2
days, the LEAD fund shall be deemed to have met all requirements of R.S.3
51:3127(C) and (D).4
(3) Except for distributions made pursuant to R.S. 51:3128(C), a LEAD5
fund that has satisfied the requirement set forth in R.S. 51:3127(D).6
§3131. Administration of the program7
A. The department shall be responsible for all of the following:8
(1) Maintaining and interpreting policy pursuant to the provisions of9
this Chapter.10
(2) Perform the regulatory and examination functions pursuant to the11
provisions of this Chapter.12
(3) Provide for the implementation and administration of the Louisiana13
Entrepreneurial Assistance and Development Program.14
B. (1) The department shall have the authority to adopt, in accordance15
with the provisions of the Administrative Procedure Act, R.S. 49:950, et seq.,16
rules and regulations concerning the implementation and regulation of the17
Louisiana Entrepreneurial Assistance and Development Program.18
(2) The department shall issue advisory rulings, as requested, provided19
that each advisory ruling is limited to the specific facts outlined in the request20
and may be only relied upon by the specific requestor of such ruling.21
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Mary Dozier O'Brien.
DIGEST
Proposed law creates the Louisiana Entrepreneurial Assistance and Development (LEAD)
Program which grants a tax reduction to insurance companies under certain circumstances.
Proposed law provides definitions.
Proposed law provides with respect to premium tax credits, applications for certification as
a LEAD fund, and applications for tax credits.
Proposed law provides for information to be communicated to the secretary of the Louisiana SB NO. 246
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Department of Economic Development once an entity has received eligible capital.
Proposed law provides that a LEAD fund shall not invest more that 15% of it eligible capital
in any one eligible business, without the permission of the secretary of Louisiana DED.
Proposed law provides relative to a fund maintaining its compliance with the conditions set
forth for LEAD funds.
Proposed law provides that the Louisiana DED shall be responsible for the administration
of the program.
Effective August 15, 2011
(Adds R.S. 22:832.1 and R.S. 51:3121-3131)