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Regular Session, 2011 ENROLLED
SENATE BILL NO. 265
BY SENATOR RISER
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 3133, 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 for the recovery of certain administrative costs; to provide criteria for issuers8
in which investments will be made; 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. 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 secretary of the Louisiana14
Department of Economic Development receives the written certification15
provided for in R.S. 51:3123(7) that the investment will achieve revenue16
neutrality, earn a vested premium tax credit equal to seventy-five percent of the17
amount of the investment. The premium tax credit shall be available for but18
not limited to, taxes charged on insurance premiums under R.S. 22:831, 836,19
838, and 842. Notwithstanding any other provision of law to the contrary, the20
premium tax credit shall not be available for taxes charged on insurance21
premiums under R.S. 22:345, 439, 833, 835, 837, and 1476.22
B. In any one taxable year, no more than twenty-five percent of the total23
premium tax credit earned with respect to a particular investment described in24
Subsection A of this Section may be used, provided that:25
(1) An insurer may not utilize credits in any taxable year in excess of its26 SB NO. 265 ENROLLED
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premium tax liability for such taxable year.1
(2) The premium tax credits shall not initially be applicable against2
premium tax liability generated in any calendar year until the third calendar3
year after the year in which the investment of eligible capital was made4
pursuant to R.S. 51:3121, et seq.5
(3) The premium tax credit shall not be applicable against any estimated6
premium tax payments due prior to April 15, 2015.7
C. Subject to the limitations in Paragraph (B)(1) of this Section,8
premium tax credits available under this Section may be carried forward for9
use in future years.10
D.(1) Any investor who holds a premium tax credit described in this11
Section shall be allowed to transfer such credits to any insurance company12
subject to the forfeiture provisions of R.S. 51:3121, et seq. Within thirty days13
after the transfer of tax credits, the original holder of the tax credits shall notify14
the department in writing of all of the following information:15
(a) The name of the new holder of the tax credits.16
(b) The amount of tax credits transferred.17
(c) The price of such tax credits.18
(d) The date the transfer occurred.19
(e) The tax identification number of the transferee.20
(f) The remaining balance of credits held by the transferor.21
(2) In the event such notice is not received by the Department of22
Insurance within the thirty-day period, the transfer of sale shall be void.23
Section 2. Chapter 55 of Title 51 of the Louisiana Revised Statutes in 1950,24
comprised of R.S. 51:3121 through 3133 is hereby enacted to read as follows:25
CHAPTER 55. LOUISIANA ENTREPRENEURIAL26
ASSISTANCE AND DEVELOPMENT27
§3121. Short title28
This Chapter may be cited as the "Louisiana Entrepreneurial Assistance29
and Development" program.30 SB NO. 265 ENROLLED
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§3122. Findings1
A. The legislature recognizes the need to bring venture and expansion2
capital to the entrepreneurs of Louisiana to combat the current economic3
downturn and resulting difficulties in securing capital from traditional sources.4
B. The legislature further finds that to ensure the Louisiana-based5
development of the small and medium sized businesses that have traditionally6
created the vast majority of new jobs nationwide, it is in the public interest of7
the state to enact the Louisiana Entrepreneurial Assistance and Development8
program (LEAD) to provide an incentive to attract venture and expansion9
capital to eligible businesses.10
§3123. Definitions11
As used in this Chapter, the following terms shall have the following12
meanings, unless the context clearly indicates otherwise:13
(1) "Allocation date" means the date a LEAD fund receives an14
investment of eligible capital equaling the amount of eligible capital allocated15
to its investors pursuant to this Chapter.16
(2) "Department" means the Louisiana Department of Economic17
Development.18
(3) "Eligible business" means a business to which all of the following19
apply:20
(a) At the time of a LEAD fund's initial investment therein, meets all of21
the following criteria:22
(i) A business which employs one hundred or fewer full-time employees.23
(ii) A business which has at least eighty percent of its employees24
domiciled in Louisiana or at least eighty percent of its payroll paid to employees25
domiciled in Louisiana.26
(iii) A business that is not engaged in any of the following: retail sales,27
real estate development, gaming, natural resource extraction or exploration,28
insurance, banking or lending or the provision of professional services provided29
by accountants, lawyers, or physicians.30 SB NO. 265 ENROLLED
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(b) A business which has either a net worth of less than five million1
dollars at the time of such investment or had a net income of fifteen million2
dollars or less in the fiscal year immediately preceding such investment.3
(4) "Eligible capital" means an investment of cash by an investor in a4
LEAD fund that fully funds the purchase price of an equity interest in the5
LEAD fund or a debt instrument issued by a LEAD fund, at par value or a6
premium, that meets all of the following criteria:7
(a) Has an original maturity date at least five years after the date of8
issuance.9
(b) Has a repayment schedule that is not faster than a level principal10
amortization over five years.11
(c) Has no interest, distribution or payment features tied to the12
profitability or to the success of the investments of the LEAD fund until all of13
the requirements of R.S. 51:3130(A) have been satisfied.14
(5) "LEAD fund" means a Louisiana partnership, corporation, trust or15
limited liability company, whether organized on a profit or non-profit basis that16
meets all of the following criteria:17
(a) Fund is managed by at least two principals or persons domiciled in18
Louisiana that have at least five years of experience each in managing venture19
capital or private equity funds, with at least fifteen million dollars of such funds20
having been invested by persons that are unaffiliated with such principals or21
persons.22
(b) Fund has received an equity investment of capital other than eligible23
capital equal to at least two hundred and fifty thousand dollars.24
(c) Fund is not, or will not be after the receipt of eligible capital,25
controlled by or under common control with one or more insurance companies.26
The definition criteria contained in this Subparagraph do not preclude an27
insurance company from exercising its legal rights and remedies, including28
interim management of a LEAD fund with respect to a LEAD fund that is in29
default of its statutory or contractual obligations to the insurance company or30 SB NO. 265 ENROLLED
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establishing controls to ensure that the LEAD fund satisfies the requirements1
of this Chapter. An investment of eligible capital shall not be deemed to result2
in insurance company control unless such investment exceeds forty million3
dollars with respect to any one investor.4
(6) "Match" means a cash investment in an eligible business either5
contemporaneous with or subsequent to an investment of eligible capital by a6
LEAD fund in such eligible business, other than an investment made with7
eligible capital either from the LEAD fund or from another LEAD fund.8
(7) "Revenue neutrality" means that both the division of administration9
and the legislative fiscal office provide written certification to the secretary that10
they reasonably estimate that the cost to the state of the premium tax credit11
provided to the investor pursuant to R.S. 22:832.1 will be offset by the economic12
impact on the state because of the premium tax credit provided by that Section.13
(8) "Secretary" means the secretary of the Louisiana Department of14
Economic Development.15
§3124. Premium tax credits16
An investor who makes an investment of eligible capital in a LEAD fund17
that is approved by the department pursuant to R.S. 51:3125 shall earn a vested18
premium tax credit pursuant to R.S. 22:832.1 in the year when the secretary19
receives the written certification provided for in R.S. 51:3123(7) that the20
investment will achieve revenue neutrality. The premium tax credit is earned21
and vested in such year but is subject to the rules on utilization set forth in R.S.22
22:832.1 and the forfeiture provisions of R.S. 51:3131.23
§3125. Application for certification24
A. On or before November 1, 2011, the secretary shall begin to accept25
applications for certification as a LEAD fund and for allocations of eligible26
capital and tax credits under this Section. Each application shall contain all of27
the following information:28
(1) The amount of eligible capital the applicant proposes to raise.29
(2) Evidence that the applicant satisfies the requirements for a LEAD30 SB NO. 265 ENROLLED
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fund pursuant to R.S. 51:3123(5)(b).1
(3) An affidavit by each investor committing to an investment of eligible2
capital.3
(4) A business plan detailing all of the following:4
(a) The approximate percentage of eligible capital the applicant will5
invest in eligible businesses by the second, fourth, sixth, and eighth6
anniversaries of its allocation date.7
(b) The stage of development and industry segments listed by the North8
American Industrial Classification code in which the applicant will invest.9
(c) The types of investments the applicant will make, including but not10
limited to debt, equity, convertible debt or debt with equity-like features.11
(5) A revenue impact assessment prepared by an independent third12
party contracted by the department and paid for by the applicant13
demonstrating that the applicant's investments, if made in accordance with its14
business plan, will have a positive or neutral revenue impact on the state taking15
into account the amount and timing of tax credits earned by investors of eligible16
capital in the LEAD fund and the match of one hundred percent of the eligible17
capital invested by the applicant, which assessment shall include the applicant's18
estimate of the number of jobs that will be created or retained as a result of the19
applicant's investments and matching investments.20
(6) Any offering material involving the sale of securities of the LEAD21
fund, which offering material must include the following statements: "The state22
of Louisiana is not liable for damages to an investor in an issuer participating23
in the Louisiana Entrepreneurial Assistance and Development (LEAD)24
program. Use of the word 'Louisiana' or other terms used in conjunction with25
the LEAD program in an offering does not constitute a recommendation or26
endorsement of the investment by the Louisiana Department of Economic27
Development."28
B.(1) Not later than the thirtieth day after the date an application for29
certification is filed, the secretary shall do either one of the following:30 SB NO. 265 ENROLLED
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(a) Issue the certification and notify the applicant of the amount of1
eligible capital and associated tax credits allocated to its investors.2
(b) Refuse to issue the certification and communicate in detail to the3
applicant the grounds for the refusal.4
(2) If an applicant submits an amended application within fifteen days5
of receipt of refusal from the department, the department shall have fifteen6
days from the receipt of such amended application by which to communicate its7
approval or refusal of such amended application to the applicant.8
C.(1) Applications for tax credits pursuant to this Section shall be9
accepted and approved on a first-come, first-served basis with all applications10
received on the same date deemed to be received simultaneously.11
(2) The secretary may not allocate more than two hundred million in12
eligible capital under this Chapter.13
(3) If applicants for tax credits received by the department on any date14
exceed the total amount of approval authority remaining under this Chapter on15
such date, the eligible capital and associated tax credits shall be allocated on a16
per applicant basis with each applicant being allocated eligible capital and17
associated tax credits equal to the total amount of requests received for that day18
divided by the total amount of applicants filing applications on such date that19
were approved. If the allocation results in one or more applicants receiving an20
allocation in excess of the amount that was requested, such excess shall be21
reallocated to the remaining applicants from that date on an equal basis until22
the entirety of the allocation has been fully distributed. All applicants that23
share common management or are under common control, whether the24
management or control is accomplished directly or indirectly, shall be treated25
as a single applicant.26
D. Any applicant who receives an allocation of eligible capital shall bear27
any cost, not to exceed fifteen thousand dollars per fiscal year for each28
applicant, which is allocated to it by the secretary to ensure that all costs of the29
Louisiana Department of Economic Development associated with administering30 SB NO. 265 ENROLLED
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the program are reimbursed. The secretary shall allocate such costs based upon1
the proportion that the applicant's allocation of eligible capital bears to the total2
amount of eligible capital allocated. The amounts collected by the secretary3
shall be appropriated to the Louisiana Department of Economic Development.4
§3126. Report upon receipt of eligible capital5
Each LEAD fund shall report the following items to the secretary:6
(1) The name of each investor from whom eligible capital was received,7
including the investor's tax identification number.8
(2) The amount of eligible capital received from each investor.9
(3) The date on which the eligible capital was received. If a LEAD fund10
does not receive an investment of eligible capital equaling the amount of eligible11
capital allocated to it pursuant to R. S. 51:3125(B) prior to the fifth business day12
after receipt of certification, the LEAD fund shall notify the secretary by13
overnight common carrier delivery service and that portion of eligible capital14
allocated to the investor shall be forfeited. Any forfeited eligible capital shall15
be reallocated pursuant to R.S. 51:3125, provided that if such forfeited eligible16
capital was subject to an allocation in accordance with R.S. 51:3125(C), it shall17
be reallocated first to investors in the other LEAD funds affected by such18
allocation.19
§3127. Department approval of investments in eligible businesses; eligible20
businesses21
A.(1) Prior to making any initial investment in a potential eligible22
business, a LEAD fund shall request a written opinion from the department as23
to whether the business in which it proposes to invest is an eligible business,24
including whether such investment is consistent with the LEAD fund's business25
plan and satisfies the requirement of R.S. 51:3130(A)(2).26
(2) The department shall have fifteen days either to grant the written27
opinion or to deny the request, in which case it shall give the reasons for its28
denial.29
(3) If the department fails to respond within the fifteen-day period set30 SB NO. 265 ENROLLED
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forth above, the proposed investment shall be deemed to be made in an eligible1
business that is consistent with the LEAD fund's business plan and that satisfies2
the requirement of R.S. 51:3130(A)(2) if a written opinion was requested as to3
satisfaction of that requirement.4
B. A LEAD fund may not invest more than fifteen percent of its eligible5
capital in any one eligible business without prior written approval of the6
secretary.7
§3128. Maintenance of certification8
To maintain certification, a LEAD fund shall accomplish all of the9
following items:10
(1) Comply with the investment parameters set forth in its business plan,11
provided a LEAD fund may apply to the secretary to amend its business plan12
based on unavoidable or reasonably unanticipated changes to various13
conditions, including but not limited to the general economic climate of the state14
of particular sectors of the economy, technological advances and high15
employment and revenue growth opportunities, with approval for such changes16
not to be unreasonably withheld by the secretary.17
(2) Invest twenty-five percent of its eligible capital in eligible businesses18
by the second anniversary of its allocation date.19
(3) Invest fifty percent of its eligible capital in eligible businesses by the20
fourth anniversary of its allocation date.21
(4) Invest one hundred percent of its eligible capital in eligible businesses22
by the tenth anniversary of its allocation date and satisfy the requirement of23
R.S. 51:3130(A)(2). A LEAD fund shall invest eligible capital only in eligible24
businesses, bank deposits, certificates of deposit or other debt securities issued25
or guaranteed by investment-grade issuers or money market, mutual or26
exchange traded funds whose investments are limited to the foregoing.27
§3129. Annual reporting28
Not later than January thirty-first annually, each LEAD fund shall29
provide a written report to the secretary and to the Senate Committee on30 SB NO. 265 ENROLLED
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Revenue and Fiscal Affairs and the House Committee on Ways and Means of1
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-wave oil and27
gas, or other industry segments approved by the secretary.28
(3) The LEAD fund shall have achieved a match amount, that when29
added to any investments in eligible businesses made by the LEAD fund in30 SB NO. 265 ENROLLED
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excess of one hundred percent of its eligible capital, equals at least one hundred1
percent of the LEAD fund's eligible capital.2
B. At any time, a LEAD fund is authorized to make any one of the3
following items:4
(1) Distributions related to the payment of any projected increase in5
federal or state taxes, including penalties and interest related to state and6
federal income taxes, of the equity owners of the LEAD fund resulting from the7
earnings or other tax liability of the LEAD fund to the extent that the increase8
is related to the ownership, management, or operation of the LEAD fund.9
(2) Payments of interest and principal on the debt of the LEAD fund,10
subject to the limitation of R.S. 51:3123(4)(c).11
(3) Payments related to the reasonable costs and expenses of forming,12
syndicating, managing, and operating the fund, provided the distribution or13
payment is not made directly or indirectly to an investor that has invested14
eligible capital in the LEAD fund, including all of the following items:15
(a) Reasonable and necessary fees paid for professional services,16
including legal and accounting services, related to the formation and operation17
of the LEAD fund.18
(b) An annual management fee in an amount that does not exceed two19
and one-half percent of the eligible capital of the LEAD fund, provided that a20
LEAD fund may not pay management fees after the tenth anniversary of its21
allocation date if it has not met the requirements set forth in R.S. 51:3128(4).22
C. The state shall receive ten percent of any distribution, other than23
distributions described in Subsection B of this Section and distributions made24
to return any equity capital invested in the LEAD fund that is not eligible25
capital. The state's distribution percentage shall increase to either of the26
following:27
(1) Twenty percent if less than eighty percent and more than sixty28
percent of the jobs set forth in the LEAD fund's business plan are created and29
retained.30 SB NO. 265 ENROLLED
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(2) Forty percent when sixty percent or less of the jobs set forth in the1
LEAD fund's business plan are created or retained.2
§3131. Decertification and forfeiture3
A.(1)(a) The secretary shall review each annual report to ensure4
compliance with R.S. 51:3128, 3129, and 3130.5
(b) In addition, the legislative auditor may audit any LEAD fund, the6
eligible businesses in which the LEAD fund has invested, and any investor7
which has earned a premium tax credit from the investment of eligible capital8
pursuant to this Chapter to ensure compliance with R.S. 51:3128, 3129, and9
3130 and R.S. 22:832.1 and any other provision of this Chapter.10
(2) A material violation of R.S. 51:3128, 3129, or 3130 shall be grounds11
for decertification of a LEAD fund.12
(3) If the secretary determines or is provided written notification by the13
legislative auditor that a LEAD fund is not in compliance with R.S. 51:3128,14
3129, or 3130, the secretary shall notify the officers of the LEAD fund, in15
writing, that the LEAD fund may be subject to decertification after the one16
hundred twentieth day after the date of mailing of the notice, unless the17
deficiencies are waived by the secretary or are corrected and the LEAD fund18
returns to compliance. For purposes of this Paragraph, the failure of an eligible19
business to meet the qualifications of this Chapter or to be otherwise in violation20
of any provision of this Chapter, or of an investor which has earned a premium21
tax credit from the investment of eligible capital pursuant to this Chapter to22
comply with the requirements of this Chapter or R.S. 22:832.1 shall be23
considered noncompliance by the LEAD fund.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 of26
all tax credits earned under this Chapter. Upon satisfaction of the requirement27
of R.S. 51:3128(3), tax credits earned under this Chapter are no longer subject28
to recapture or forfeiture.29
C.(1) Upon satisfying the requirements of R.S. 51:3128(3) and (4), a30 SB NO. 265 ENROLLED
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LEAD fund shall provide notice to the department. The department shall,1
within sixty days of receipt of such notice, either confirm that the LEAD fund2
has satisfied such requirement as of such date or provide notice of3
noncompliance and an explanation of any existing deficiencies.4
(2) If the department does not provide such notification within sixty5
days, the LEAD fund shall be deemed to have met all requirements of R.S.6
51:3128(3) and (4).7
(3) Except for distributions made pursuant to R.S. 51:3130(C), a LEAD8
fund that has satisfied the requirement set forth in R.S. 51:3128(4) shall no9
longer be subject to regulation under this Chapter.10
§3132. Administration of the program11
A. The department shall be responsible for all of the following:12
(1) Maintaining and interpreting policy pursuant to the provisions of13
this Chapter.14
(2) Performing the regulatory and examination functions pursuant to15
the provisions of this Chapter.16
(3) Providing for the implementation and administration of the17
Louisiana Entrepreneurial Assistance and Development program.18
B.(1) The department shall have the authority to adopt, in accordance19
with the provisions of the Administrative Procedure Act, R.S. 49:950, et seq.,20
rules and regulations concerning the implementation and regulation of the21
Louisiana Entrepreneurial Assistance and Development program.22
(2) The department shall issue advisory rulings, as requested, provided23
that each advisory ruling is limited to the specific facts outlined in the request24
and may be relied upon only by the specific requestor of the ruling.25
§3133. Report to legislative committees26
The department shall file an annual report with the House Committee27
on Ways and Means and the Senate Committee on Revenue and Fiscal Affairs28
regarding the manner in which all LEAD funds which have received eligible29
capital have invested such capital; the manner in which eligible businesses have30 SB NO. 265 ENROLLED
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the investments been made and the amount thereof; the jobs created by and the1
success or failure of such eligible businesses; the share received by the state of2
LEAD fund distributions; and whether the investment tax credit has achieved3
"revenue neutrality", that is, the cost to the state of the credit will be offset by4
the economic impact on the state.5
PRESIDENT OF THE SENATE
SPEAKER OF THE HOUSE OF REPRESENTATIVES
GOVERNOR OF THE STATE OF LOUISIANA
APPROVED: