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Regular Session, 2011
SENATE BILL NO. 265
BY SENATOR RISER
ECONOMIC DEVELOPMENT. Provides relative to premium tax credits under the
Louisiana Entrepreneurial Assistance and Development (LEAD) program. (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. 51:3121 through 3132, relative to the Louisiana3
Entrepreneurial Assistance and Development program (LEAD); to create the4
program; to provide for a tax reduction for investors who make investments of5
eligible capital under the program; to provide for approval of LEAD funds by the6
department of economic development and to establish criteria for such approval; to7
provide criteria for issuers in which investments will be made; and to provide for8
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. 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 that the investment is made, earn a vested14
premium tax credit equal to seventy-five percent of the amount of the15
investment. The premium tax credit shall be available for but not limited to,16 SB NO. 265
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taxes charged on insurance premiums under R.S. 22:831, 836, 838, and 842.1
Notwithstanding any other provision of law to the contrary, the premium tax2
credit shall not be available for taxes charged on insurance premiums under3
R.S. 22:345, 439, 833, 835, 837, and 1476.4
B. In any one taxable year, no more than twenty-five percent of the total5
premium tax credit earned with respect to a particular investment described in6
Subsection A of this Section may be used, provided that:7
(1) An insurer may not utilize credits in any taxable year in excess of its8
premium tax liability for such taxable year.9
(2) The premium tax credits shall not initially be applicable against10
premium tax liability generated in any calendar year until the third calendar11
year after the year in which the investment of eligible capital was made12
pursuant to R.S. 51:3121, et seq.13
(3) The premium tax credit shall not be applicable against any estimated14
premium tax payments due prior to April 15, 2015.15
C. Subject to the limitations in R.S. 22:832.1(B)(1), premium tax credits16
available under this Section may be carried forward for use in future years.17
D.(1) Any investor who holds a premium tax credit described in this18
Section shall be allowed to transfer such credits to any insurance company19
subject to the forfeiture provisions of R.S. 51:3121, et seq. Within thirty days20
after the transfer of tax credits, the original holder of the tax credits shall notify21
the department in writing of all of the following information:22
(a) The name of the new holder of the tax credits.23
(b) The amount of tax credits transferred.24
(c) The price of such tax credits.25
(d) The date the transfer occurred.26
(e) The tax identification number of the transferee.27
(f) The remaining balance of credits held by the transferor.28
(2) In the event such notice is not received by the Department of29 SB NO. 265
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Insurance within the thirty-day period, the transfer of sale shall be void.1
Section 2. Chapter 55 of Title 51, comprised of R.S. 51:3121 through 3132 is hereby2
enacted to read as follows:3
CHAPTER 55. LOUISIANA ENTREPRENEURIAL4
ASSISTANCE AND DEVELOPMENT5
§3121. Short title6
This Chapter may be cited as the "Louisiana Entrepreneurial Assistance7
and Development" program.8
§3122. Findings9
A. The legislature recognizes the need to bring venture and expansion10
capital to the entrepreneurs of Louisiana to combat the current economic11
downturn and resulting difficulties in securing capital from traditional sources.12
B. The legislature further finds that to ensure the Louisiana-based13
development of the small and medium sized businesses that have traditionally14
created the vast majority of new jobs nationwide, it is in the public interest of15
the state to enact the Louisiana Entrepreneurial Assistance and Development16
program (LEAD) to provide an incentive to attract venture and expansion17
capital to eligible businesses.18
§3123. Definitions19
As used in this Chapter, the following terms shall have the following20
meanings, unless the context clearly indicates otherwise:21
(1) "Allocation date" means the date a LEAD fund receives an22
investment of eligible capital equaling the amount of eligible capital allocated23
to its investors pursuant to this Chapter.24
(2) "Department" means the Louisiana Department of Economic25
Development.26
(3) "Eligible business" means a business to which all of the following27
apply:28
(a) At the time of a LEAD fund's initial investment therein, meets all of29 SB NO. 265
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the following criteria:1
(i) A business which employs one hundred or fewer full-time employees.2
(ii) A business which has at least eighty percent of its employees3
domiciled in Louisiana or at least eighty percent of its payroll paid to employees4
domiciled in Louisiana.5
(iii) A business that is not engaged in any of the following: retail sales,6
real estate development, gaming, natural resource extraction or exploration,7
insurance, banking or lending or the provision of professional services provided8
by accountants, lawyers, or physicians.9
(b) A business which has either a net worth of less than five million10
dollars at the time of such investment or had a net income of fifteen million11
dollars or less in the fiscal year immediately preceding such investment.12
(4) "Eligible capital" means an investment of cash by an investor in a13
LEAD fund that fully funds the purchase price of an equity interest in the14
LEAD fund or a debt instrument issued by a LEAD fund, at par value or a15
premium, that meets all of the following criteria:16
(a) Has an original maturity date at least five years after the date of17
issuance.18
(b) Has a repayment schedule that is not faster than a level principal19
amortization over five years.20
(c) Has no interest, distribution or payment features tied to the21
profitability or to the success of the investments of the LEAD fund until all of22
the requirements of R.S. 51:3130(A) have been satisfied.23
(5) "LEAD fund" means a Louisiana partnership, corporation, trust or24
limited liability company, whether organized on a profit or non-profit basis that25
meets all of the following criteria:26
(a) Fund is managed by at least two principals or persons domiciled in27
Louisiana that have at least five years of experience each in managing venture28
capital or private equity funds, with at least fifteen million dollars of such funds29 SB NO. 265
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having been invested by persons that are unaffiliated with such principals or1
persons.2
(b) Fund has received an equity investment of capital other than eligible3
capital equal to at least two hundred and fifty thousand dollars.4
(c) Fund is not, or will not be after the receipt of eligible capital,5
controlled by or under common control with one or more insurance companies.6
The definition criteria contained in this Subparagraph does not preclude an7
insurance company from exercising its legal rights and remedies, including8
interim management of a LEAD fund with respect to a LEAD fund that is in9
default of its statutory or contractual obligations to the insurance company or10
establishing controls to ensure that the LEAD fund satisfies the requirements11
of this Chapter. An investment of eligible capital shall not be deemed to result12
in insurance company control unless such investment exceeds forty million13
dollars with respect to any one investor.14
(6) "Match" means a cash investment in an eligible business either15
contemporaneous with or subsequent to an investment of eligible capital by a16
LEAD fund in such eligible business, other than an investment made with17
eligible capital either from the LEAD fund or from another LEAD fund.18
(7) "Secretary" means the secretary of the Louisiana Department of19
Economic Development.20
§3124. Premium tax credits21
An investor who makes an investment of eligible capital in a LEAD fund22
that is approved by the department pursuant to R.S. 51:3125 shall earn a vested23
premium tax credit pursuant to R.S. 22:832.1. The premium tax credit is24
earned and vested in the year of investment of eligible capital but is subject to25
the rules on utilization set forth in R.S. 22:832.1 and the forfeiture provisions26
of R.S. 51:3131.27
§3125. Application for certification28
A. On or before November 1, 2011, the secretary shall begin to accept29 SB NO. 265
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applications for certification as a LEAD fund and for allocations of eligible1
capital and tax credits under this Section. Each application shall contain all of2
the following information:3
(1) The amount of eligible capital the applicant proposes to raise.4
(2) A nonrefundable application fee of seven thousand five hundred5
dollars.6
(3) Evidence that the applicant satisfies the requirements for a LEAD7
fund pursuant to R.S. 51:3123(5)(b).8
(4) An affidavit by each investor committing to an investment of eligible9
capital.10
(5) A business plan detailing all of the following:11
(a) The approximate percentage of eligible capital the applicant will12
invest in eligible businesses by the second, fourth, sixth, and eighth13
anniversaries of its allocation date.14
(b) The stage of development and industry segments listed by the North15
American Industrial Classification code in which the applicant will invest.16
(c) The types of investments the applicant will make, including but not17
limited to debt, equity, convertible debt or debt with equity-like features.18
(6) A revenue impact assessment prepared by an independent third19
party contracted by the department and paid for by the applicant20
demonstrating that the applicant's investments, if made in accordance with its21
business plan, will have a positive or neutral revenue impact on the state taking22
into account the amount and timing of tax credits earned by investors of eligible23
capital in the LEAD fund and the match of one hundred per cent of the eligible24
capital invested by the applicant, which assessment shall include the applicant's25
estimate of the number of jobs that will be created or retained as a result of the26
applicant's investments and matching investments.27
(7) Any offering material involving the sale of securities of the LEAD28
fund, which offering material must include the following statements: "The state29 SB NO. 265
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of Louisiana is not liable for damages to an investor in an issuer participating1
in the Louisiana Entrepreneurial Assistance and Development (LEAD)2
program. Use of the word 'Louisiana' or other terms used in conjunction with3
the LEAD program in an offering does not constitute a recommendation or4
endorsement of the investment by the Louisiana Department of Economic5
Development."6
B.(1) Not later than the thirtieth day after the date an application for7
certification is filed, the secretary shall do either one of the following:8
(a) Issue the certification and notify the applicant of the amount of9
eligible capital and associated tax credits allocated to its investors.10
(b) Refuse to issue the certification and communicate in detail to the11
applicant the grounds for the refusal.12
(2) If an applicant submits an amended application within fifteen days13
of receipt of refusal from the department, the department shall have fifteen14
days from the receipt of such amended application by which to communicate its15
approval or refusal of such amended application to the applicant.16
C.(1) Applications for tax credits pursuant to this Subsubsection shall17
be accepted and approved on a first-come, first-serve basis with all applications18
received on the same date deemed to be received simultaneously.19
(2) The secretary may not allocate more than two hundred million in20
eligible capital under this Chapter.21
(3) If applicants for tax credits received by the department on any date22
exceed the total amount of approval authority remaining under this Chapter on23
such date, the eligible capital and associated tax credits shall be allocated on a24
per applicant basis with each applicant being allocated eligible capital and25
associated tax credits equal to the total amount of requests received for that day26
divided by the total amount of applicants filing applications on such date that27
were approved. If the allocation results in one or more applicants receiving an28
allocation in excess of the amount that was requested, such excess shall be29 SB NO. 265
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reallocated to the remaining applicants from that date on an equal basis until1
the entirety of the allocation has been fully distributed. All applicants that2
share common management or are under common control, whether the3
management or control is accomplished directly or indirectly, shall be treated4
as a single applicant.5
§3126. Report upon receipt of eligible capital6
Each LEAD fund shall report the following items to the secretary:7
(1) The name of each investor from whom eligible capital was received,8
including the investor's tax identification number.9
(2) The amount of eligible capital received from each investor.10
(3) The date on which the eligible capital was received. If a LEAD fund11
does not receive an investment of eligible capital equaling the amount of eligible12
capital allocated to it pursuant to R. S. 51:3125(B) prior to the fifth business day13
after receipt of certification, the LEAD fund shall notify the secretary by14
overnight common carrier delivery service and that portion of eligible capital15
allocated to the investor shall be forfeited. Any forfeited eligible capital shall16
be reallocated pursuant to R.S. 51:3125, provided that if such forfeited eligible17
capital was subject to an allocation in accordance with R.S. 51:3125(C), it shall18
be reallocated first to investors in the other LEAD funds affected by such19
allocation.20
§3127. Department approval of investments in eligible businesses; eligible21
businesses22
A.(1) Prior to making any initial investment in a potential eligible23
business, a LEAD fund shall request a written opinion from the department as24
to whether the business in which it proposes to invest is an eligible business,25
including whether such investment is consistent with the LEAD fund's business26
plan and satisfies the requirement of R.S. 51:3130(A)(2).27
(2) The department shall have fifteen days either to grant the written28
opinion or to deny the request, in which case it shall give the reasons for its29 SB NO. 265
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denial.1
(3) If the department fails to respond within the fifteen-day period set2
forth above, the proposed investment shall be deemed to be made in an eligible3
business that is consistent with the LEAD fund's business plan and that satisfies4
the requirement of R.S. 51:3130(A)(2) if a written opinion was requested as to5
satisfaction of that requirement.6
B. A LEAD fund may not invest more than fifteen percent of its eligible7
capital in any one eligible business without prior approval of the secretary.8
§3128. Maintenance of certification9
To maintain certification, a LEAD fund shall accomplish all of the10
following items:11
(1) Comply with the investment parameters set forth in its business plan,12
provided a LEAD fund may apply to the secretary to amend its business plan13
based on unavoidable or reasonably unanticipated changes to various14
conditions, including, but not limited to, the general economic climate of the15
state of particular sectors of the economy, technological advances and high16
employment and revenue growth opportunities, with approval for such changes17
not to be unreasonably withheld by the secretary.18
(2) Invest twenty-five percent of its eligible capital in eligible businesses19
by the second anniversary of its allocation date.20
(3) Invest fifty percent of its eligible capital in eligible businesses by the21
fourth anniversary of its allocation date.22
(4) Invest one hundred percent of its eligible capital in eligible businesses23
by the tenth anniversary of its allocation date and satisfy the requirement of24
R.S. 51:3130(A)(2). A LEAD fund shall only invest eligible capital in eligible25
businesses, bank deposits, certificates of deposit or other debt securities issued26
or guaranteed by investment-grade issuers or money market, mutual or27
exchange traded funds whose investments are limited to the foregoing.28
§3129. Annual reporting29 SB NO. 265
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Not later than January thirty-first annually, each LEAD fund shall1
report to the secretary all of the following items:2
(1) The amount of eligible capital remaining at the end of the preceding3
year to be invested in eligible businesses and, with respect to each eligible4
business, its location and two-digit North American Industrial Classification5
System code.6
(2) The percentage of eligible capital invested in businesses that meet the7
requirement of R.S. 51:3130(A)(2).8
(3) All distributions made by the LEAD fund in the preceding year.9
(4) The number of jobs created or retained as a result of the LEAD10
fund's investments in eligible businesses during the preceding year. Each11
LEAD fund shall provide to the secretary an annual audited financial statement12
not later than June thirtieth of each year.13
§3130. Distributions14
A. To make a distribution or payment, other than those listed in15
Subsection B of this Section, a LEAD fund shall have accomplished all of the16
following items:17
(1) Invested one hundred percent of its eligible capital in eligible18
businesses.19
(2) Invested at least fifty percent of its eligible capital in eligible20
businesses that are either one of the following:21
(a) Engaged in the development of initial product or service offerings,22
such as prototype development or establishment of initial production or service23
processes.24
(b) Within one of the following industry segments: digital media or25
software development, next-generation automobiles, specialty health care,26
renewable energy or energy efficiency, water management or next-waive oil and27
gas, or other industry segments approved by the secretary.28
(3) The LEAD fund shall have achieved a match amount, that when29 SB NO. 265
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added to any investments in eligible businesses made by the LEAD fund in1
excess of one hundred percent of its eligible capital, equals at least one hundred2
percent of the LEAD fund's eligible capital.3
B. At any time, a LEAD fund is authorized to make any one of the4
following items:5
(1) Distributions related to the payment of any projected increase in6
federal or state taxes, including penalties and interest related to state and7
federal income taxes, of the equity owners of the LEAD fund resulting from the8
earnings or other tax liability of the LEAD fund to the extent that the increase9
is related to the ownership, management, or operation of the LEAD fund.10
(2) Payments of interest and principal on the debt of the LEAD fund,11
subject to the limitation of R.S. 51:3123(4)(c).12
(3) Payments related to the reasonable costs and expenses of forming,13
syndicating, managing, and operating the fund, provided the distribution or14
payment is not made directly or indirectly to an investor that has invested15
eligible capital in the LEAD fund, including all of the following items:16
(a) Reasonable and necessary fees paid for professional services,17
including legal and accounting services, related to the formation and operation18
of the LEAD fund.19
(b) An annual management fee in an amount that does not exceed two20
and one-half percent of the eligible capital of the LEAD fund, provided that a21
LEAD fund may not pay management fees after the tenth anniversary of its22
allocation date if it has not met the requirements set forth in R.S. 51:3128(4).23
C. The state shall receive ten percent of any distribution, other than24
distributions described in Paragraph B of this Subsection and distributions25
made to return any equity capital invested in the LEAD fund that is not eligible26
capital. The state's distribution percentage shall increase to either of the27
following:28
(1) Twenty percent if less than eighty percent and more than sixty29 SB NO. 265
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percent of the jobs set forth in the LEAD fund's business plan are created and1
retained.2
(2) Forty percent when sixty percent or less of the jobs set forth in the3
LEAD fund's business plan are created or retained.4
§3131. Decertification and forfeiture5
A.(1) The secretary shall review each annual report to ensure6
compliance with R.S. 51:3128, 3129, and 3130.7
(2) A material violation of R.S. 51:3128, 3129, or 3130 shall be grounds8
for decertification of a LEAD fund.9
(3) If the secretary determines that a LEAD fund is not in compliance10
with R.S. 51:3128, 3129, or 3130, the secretary shall notify the officers of the11
LEAD fund, in writing, that the LEAD fund may be subject to decertification12
after the one hundred twentieth day after the date of mailing of the notice,13
unless the deficiencies are waived by the secretary or are corrected and the14
LEAD fund returns to compliance.15
B. Decertification of a LEAD fund prior to its investment of at least fifty16
percent of its eligible capital in eligible businesses shall cause the forfeiture of17
all tax credits earned under this Chapter. Upon satisfaction of the requirement18
of R.S. 51:3128(3), tax credits earned under this Chapter are no longer subject19
to recapture or forfeiture.20
C.(1) Upon satisfying the requirements of R.S. 51:3128(3) and (4), a21
LEAD fund shall provide notice to the department. The department shall,22
within sixty days of receipt of such notice, either confirm that the LEAD fund23
has satisfied such requirement as of such date or provide notice of24
noncompliance and an explanation of any existing deficiencies.25
(2) If the department does not provide such notification within sixty26
days, the LEAD fund shall be deemed to have met all requirements of R.S.27
51:3128(3) and (4).28
(3) Except for distributions made pursuant to R.S. 51:3130(C), a LEAD29 SB NO. 265
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fund that has satisfied the requirement set forth in R.S. 51:3128(4) shall no1
longer be subject to regulation under this Chapter.2
§3132. Administration of the program3
A. The department shall be responsible for all of the following:4
(1) Maintaining and interpreting policy pursuant to the provisions of5
this Chapter.6
(2) Perform the regulatory and examination functions pursuant to the7
provisions of this Chapter.8
(3) Provide for the implementation and administration of the Louisiana9
Entrepreneurial Assistance and Development program.10
B. (1) The department shall have the authority to adopt, in accordance11
with the provisions of the Administrative Procedure Act, R.S. 49:950, et seq.,12
rules and regulations concerning the implementation and regulation of the13
Louisiana Entrepreneurial Assistance and Development program.14
(2) The department shall issue advisory rulings, as requested, provided15
that each advisory ruling is limited to the specific facts outlined in the request16
and may be only relied upon by the specific requestor of the ruling.17
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
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
Department of Economic Development.
Proposed law provides relative to a fund maintaining its compliance with the conditions set
forth for LEAD funds. SB NO. 265
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Proposed law provides that the Louisiana Department of Economic Development shall be
responsible for the administration of the program.
Effective August 15, 2011.
(Adds R.S. 22:832.1 and R.S. 51:3121-3132)