07 LC 14
9591
House
Bill 435
By:
Representative Martin of the
47th
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Article 2 of Chapter 7 of Title 48 of the Official Code of Georgia
Annotated, relating to the imposition, rate, and computation of income tax, so
as to provide for legislative findings and intent; to provide for an income tax
credit for certain qualified business investments; to provide for definitions;
to provide for conditions and limitations; to provide for powers, duties, and
authority of the state revenue commissioner with respect to the foregoing; to
provide an effective date; to provide for applicability; to repeal conflicting
laws; and for other purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
Article
2 of Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating
to the imposition, rate, and computation of income tax, is amended by adding a
new Code section 48-7-40.27 to read as follows:
"48-7-40.27.
(a)
The General Assembly finds that the welfare of the state is enhanced by a
healthy entrepreneurial business environment and that ready sources of capital
necessary to support this environment are not currently available in the
state.
(b)
The intent of this Code section is to achieve the following:
(1)
To create the Angel Investor Tax Credit Program to encourage third-party
investors to invest in early stage, innovative, wealth-creating
businesses;
(2)
To facilitate the availability of equity investment in businesses in the early
stages of commercial development;
(3)
To expand the economy of the state by enlarging its base of wealth-creating
businesses; and
(4)
To enlarge the number of high quality, high paying jobs within the state both to
attract qualified individuals to move to and work within the state and to retain
young people educated in Georgia.
(c)
As used in this Code section, the term:
(1)
'Investment' means:
(A)
A contribution of cash or cash equivalents in a qualified Georgia business for
common or preferred stock or subordinated debt that is convertible into, or
entitles the holder to receive upon its exercise, common or preferred stock;
(B)
An interest in a partnership in which contribution of proceeds is not secured or
guaranteed and is at risk or otherwise dependent solely upon the success of a
qualified Georgia business and which proceeds are used solely for capital
improvements, research and development, or working capital for such qualified
Georgia business; and
(C)
A contribution of cash or cash equivalents by a pass-through entity domiciled in
this state.
provided,
however, that funds constituting an investment cannot have been raised or be
raised as a result of other tax incentive programs, cannot be composed of funds
raised prior to January 1, 2008, and pooled or organized through capital
placement agreements for the purpose of equity and venture capital investing,
and cannot be composed of pooled capital in the form of hedge funds or
commodities funds. Furthermore, the purchase of equity securities shall not
qualify as an investment if a broker fee or commission or a similar remuneration
is paid or given directly or indirectly for soliciting the
purchase.
(2)
'Investor' means a taxpayer of this state who is an accredited investor as
provided in Rule 501(a) of Regulation D of the Federal Securities Act of
1933.
(3)
'Net income tax liability' means net income tax liability reduced by all other
credits allowed under this chapter.
(4)
'Qualified Georgia business' means a business that is domiciled in this state,
employs 20 or fewer people in this state, has gross annual sales of less than
$500,000.00, has not obtained during its existence more than $1 million in
aggregate gross cash proceeds from the issuance of its equity or debt
investments not including commercial loans from chartered banking or savings and
loan institutions, has a business net worth of less than $3 million, and does
not engage primarily in:
(A)
Retail sales;
(B)
Real estate or construction;
(C)
Professional services;
(D)
Gaming or gambling;
(E)
Natural resource extraction;
(F)
Financial, brokerage, or investment activities; or
(G)
The activities of banks, savings and loan institutions, extension of credit,
business brokerage, or insurance.
(d)
For any investor making an investment there shall be allowed an income tax
credit that shall be deductible from such investor´s net income tax
liability, if any, imposed by this chapter for the taxable year in which the
investment was made and the following two years as provided by this Code
section.
(e)
For any investor that is a pass-through entity and purchases the equity
securities or subordinated debt of a qualified Georgia business directly from
that business there shall be allowed an income tax credit that shall be
deductible from such investor´s net income tax liability, if any, imposed
by this chapter for the taxable year in which the investment was made and the
following two years as provided by this Code section; provided, however, that no
credit under this Code section shall be allowed to a pass-through entity that
has current committed capital under management in excess of $5 million or to a
pass-through entity that is a qualified Georgia business.
(f)
Tax credits claimed pursuant to this Code section shall be allowed as
follows:
(1)
In the year in which the investment was made, not more than 33.3 percent of the
investment;
(2)
In the first year following the year in which the investment was made, not more
than 33.3 percent of the investment plus the difference, if any, between the
amount allowed in the first year and 33.3 percent of the
investment;
(3)
In the second year following the year in which the investment was made, not more
than 33.4 percent of the investment plus the difference, if any, between the
amount allowed in the first and second years and 66.6 percent of the investment;
and
(4)
If the tax credit exceeds the investor´s income tax liability for the three
years that the credit is taken, the excess of the tax credit over liability may
be used as a credit against the investor´s income tax liability in
subsequent years until exhausted.
(g)(1)
The aggregate amount of credit allowed an individual for one or more investments
in a single taxable year under this Code section, whether directly or
indirectly, shall not exceed $100,000.00.
(2)
The aggregate amount of credit allowed for one or more investments in a single
taxable year under this Code section, whether directly or indirectly, shall not
exceed $500,000.00 if the investor is:
(A)
A corporation with assets exceeding $5 million; or
(B)
A trust with assets in excess of $5 million not formed to acquire the securities
offered and whose purchases are managed by a sophisticated
investor.
(h)(1)
The credit claimed under this Code section shall be recaptured if at the close
of any taxable year in the two-year period after the year of the
investment:
(A)
The qualified Georgia business or an interest in such business has been sold by
the investor; or
(B)
The investor has withdrawn the investment wholly or partially from the qualified
Georgia business.
(2)
The credit shall not be recaptured if the qualified Georgia business ceases
business operations.
(3)
The recapture under this subsection shall be equal to 25 percent of the amount
of the total tax credit claimed under this Code section in the preceding taxable
year. The amount of the credit recaptured shall apply only to the investment in
the particular qualified business in which the investment was made. The amount
of the recaptured tax credit determined under this subsection shall be added to
the taxpayer´s income tax liability for the taxable year in which the
recapture occurs under this subsection.
(i)
The commissioner shall be authorized to promulgate any rules and regulations
necessary to implement and administer the provisions of this Code
section.
(j)
The total aggregate amount of all tax credits allowed to investors or
pass-through entities for investments made in a calendar year shall not exceed
$15 million."
SECTION
2.
This
Act shall become effective on January 1, 2008, and shall be applicable to all
taxable years beginning on or after that date.
SECTION
3.
All
laws and parts of laws in conflict with this Act are repealed.