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Indicates Matter Stricken
Indicates New Matter
Indicates Matter Stricken
Indicates New Matter
AMENDED
June 4, 2003
S. 560
Introduced by Senators Leatherman, Ritchie, Knotts, Grooms, Verdin, Giese, Branton, Mescher, McConnell, McGill, J. Verne Smith, Alexander, Martin, Short, Moore, Ravenel, O'Dell, Drummond, Hayes and Setzler
S. Printed 6/4/03--H.
Read the first time May 6, 2003.
TO ENACT THE SOUTH CAROLINA LIFE SCIENCES ACT, BY DEFINING A LIFE SCIENCES FACILITY AND PROVIDING THAT A LIFE SCIENCES FACILITY PROJECT IN WHICH IS INVESTED AT LEAST ONE HUNDRED MILLION DOLLARS AND AT WHICH AT LEAST TWO HUNDRED NEW JOBS ARE CREATED WITH ANNUAL CASH COMPENSATION AT LEAST ONE HUNDRED FIFTY PERCENT OF AVERAGE PER CAPITA INCOME IN THIS STATE IS ELIGIBLE FOR EMPLOYEE RELOCATION EXPENSE REIMBURSEMENT AND THE WAIVER ALLOWED ON THE LIMIT FOR JOB DEVELOPMENT CREDITS FOR PURPOSES OF THE ENTERPRISE ZONE ACT OF 1995, TO ALLOW A TAXPAYER OPERATING A LIFE SCIENCES FACILITY TO ENTER INTO AN AGREEMENT WITH THE DEPARTMENT OF REVENUE NOT TO EXCEED FIFTEEN YEARS DURATION FOR ALLOCATION AND APPORTIONMENT FOR PURPOSES OF CORPORATE INCOME TAX, TO AMEND SECTION 12-37-930, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DEPRECIATION ALLOWANCE FOR PURPOSES OF THE PROPERTY TAX, SO AS TO INCREASE THE ANNUAL DEPRECIATION ALLOWANCE FOR USE OF CLEAN ROOMS FROM TEN TO FIFTEEN PERCENT AND TO PROVIDE A TWENTY PERCENT ANNUAL DEPRECIATION ALLOWANCE FOR MACHINERY AND EQUIPMENT USED FOR MANUFACTURING IN A LIFE SCIENCES FACILITY AND TO DEFINE "LIFE SCIENCES FACILITY", TO AMEND SECTIONS 11-41-20, 11-41-30, AND 11-41-70, RELATING TO THE STATE GENERAL OBLIGATION ECONOMIC DEVELOPMENT BOND ACT, SO AS TO REVISE ITS FINDINGS, DEFINITIONS, AND NOTICE REQUIREMENTS TO ALLOW SUCH BONDS TO BE USED FOR INFRASTRUCTURE FOR A LIFE SCIENCES FACILITY IN A PROJECT IN WHICH IS INVESTED AT LEAST ONE HUNDRED MILLION DOLLARS AND AT WHICH AT LEAST TWO HUNDRED NEW JOBS ARE CREATED WITH AN ANNUAL CASH COMPENSATION AT LEAST TWICE PER CAPITA INCOME IN THE STATE AND PROVIDE THAT, WHILE INFRASTRUCTURE PROVIDED BY THESE BONDS MUST RELATE SPECIFICALLY TO THE PROJECT, SUCH INFRASTRUCTURE IS NOT REQUIRED TO BE LOCATED AT THE PROJECT, AND TO AMEND SECTION 11-41-120, RELATING TO FORMALITIES IN THE ISSUING OF THESE BONDS, SO AS TO REVISE THESE REQUIREMENTS.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. (A) This section may be cited as the South Carolina Life Sciences Act.
(B) For purposes of this section, a "life sciences facility" means a business engaged in pharmaceutical, medicine, and related laboratory instrument manufacturing, processing, or research and development. Included in this definition are the following North American Industrial Classification Systems, NAICS Codes published by the Office of Management and Budget of the federal government:
(1) 3254 Pharmaceutical and Medical Manufacturing;
(2) 334516 Analytical Laboratory Instrument Manufacturing.
(C)(1) For all purposes of Chapter 10, Title 12 of the 1976 Code, the Enterprise Zone Act of 1995, including all definitions applicable to that chapter:
(a) Employee relocation expenses that qualify for reimbursement pursuant to Section 12-10-80(C)(3)(f) of the 1976 Code include such expenses associated with a new or expanded life sciences facility investing a minimum of one hundred million dollars in the project, as defined in Section 12-10-30(8) of the 1976 Code, and creating at least two hundred new full-time jobs at the project with an average annual cash compensation of at least one hundred fifty percent of annual per capita income in this State or the county in which the facility is located, whichever is less. Per capita income must be determined using the most recent per capita income data available as of the end of the taxable year in which the jobs are filled.
(b) The waiver that may be approved by the Coordinating Council for Economic Development pursuant to Section 12-10-80(D)(2) of the 1976 Code on maximum job development credits that may be claimed also may be approved for a life sciences facility meeting the requirements of subitem (a) of this subsection. In determining whether to approve a waiver for such a facility, the Coordinating Council for Economic Development shall consider the creditworthiness of the business and economic viability of the project, as defined in Section 12-10-30(8) of the 1976 Code.
(2) The provisions of item (1) of this subsection apply with respect to capital investment made and new jobs created after June 30, 2004, and before July 1, 2008.
(D) In the case of a taxpayer establishing a life sciences facility meeting the requirements of subsection (C)(1)(a) of this section, the South Carolina Department of Revenue, in its discretion, may enter into an agreement with the taxpayer pursuant to Section 12-6-2320 of the 1976 Code for a period not to exceed fifteen years if the facility otherwise meets the requirements of that section.
SECTION 2. A. Section 12-37-930(34) of the 1976 Code, as last amended by Section 3(Q)2, Act 399 of 2000, is further amended to read:
"34. Use of Clean Rooms ............... 10% 15%
A manufacturer who uses a Class 100 or better clean room, as that term is defined in Federal Standard 209E, in manufacturing its product may elect an annual allowance for depreciation for property tax purposes of ten fifteen percent on clean room modules and associated mechanical systems, and on process piping, wiring environmental systems, and water purification systems associated with the clean room instead of a depreciation allowance for which the manufacturer otherwise is entitled. Included are waffle flooring, wall and ceiling panels, foundation improvements that isolate the clean room to control vibrations, clean air handling and filtration systems, piping systems for fluids and gases used in the manufacturing process and in the clean room that touch the product during the process, flat panel displays, and liquid crystal displays, process equipment energy control systems, ultra pure water processing and wastewater recycling systems, and safety alarm and monitoring systems.
35. Life sciences............................. 20%
Includes machinery and equipment used directly in the manufacturing process by a life sciences facility. For purposes of this item, life sciences facility means a business engaged in pharmaceutical, medicine, and related laboratory instrument manufacturing, processing, or research and development that invests a minimum of one hundred million dollars in the project, as defined in Section 12-10-30(8), and creates at least two hundred new full-time jobs at the project with an average cash compensation level of at least one hundred fifty percent of the annual per capita income in this State or the county in which the facility is located, whichever is less. Per capita income must be determined using the most recent per capita income data available as of the end of the taxable year in which the jobs are filled. Included in this definition are the following North American Industrial Classification Systems, NAICS Codes published by the Office of Management and Budget of the federal government:
(i) 3254 Pharmaceutical and Medical Manufacturing;
(ii) 334516 Analytical Laboratory Instrument Manufacturing."
B. In the case of machinery and equipment otherwise eligible for the depreciation allowed pursuant to Section 12-37-930 of the 1976 Code, as amended in subsection A of this section, if the project with which the machinery and equipment is associated is the subject of an inducement agreement between the project sponsor and the county, the initial inducement agreement must have been entered into between these parties after September 1, 2003.
SECTION 3. A . Chapter 41, Title 11 of the 1976 Code, is amended by adding:
"Section 11-41-45. No economic development bonds shall be issued pursuant to this chapter to defray the cost of research and development facilities unless the research university that shall own the research and development facilities demonstrates to the secretary that it has available funds which shall be applied to defray the cost of the research and development facilities in an amount equal to one-half of the principal amount of the economic development bonds. The matching funds required under this section must be made available as the secretary determines."
B. Section 11-41-20(3) of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"(3) In order to foster economic development and to encourage the creation of high-paying jobs in the life sciences industry and to encourage the creation of research and development facilities for life sciences at research universities within the State, it is in the best interests of the State that the limitation on general obligation debt imposed by Article X, Section 13(6)(c) be increased to five and one-half percent with the additional debt service capacity available at any time as a consequence of the increase available only for the repayment of general obligation bonds issued to provide infrastructure required for significant economic development projects within the State, including those related to the life sciences industry that create high-paying jobs and meet certain investment criteria and to provide for the creation of research and development facilities within the limitations provided in this chapter; and that a designated principal amount of general obligation bonds issued pursuant to the existing debt limit and the debt limit as increased by this section be provided additional constitutional authorization pursuant to Article X, Section 13(5) of the Constitution of this State, 1895."
C. Section 11-41-30 of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"Section 11-41-30. As used in this chapter:
(1) 'Department' means the State Department of Commerce.
(2)(a) 'Economic development project' or 'project' means a project in this State as defined in Section 12-44-30(16) in which a total of at least four hundred million dollars is invested in the project by the sponsor and at least four hundred new jobs are created at the project by the sponsor. To qualify as an economic development project for purposes of this chapter, the investment and job creation requirements must be attained no later than the eighth year after the project first begins operations.
(b) 'Project' also includes a life sciences facility in this State defined as a business engaged in pharmaceutical, medicine, and related laboratory instrument manufacturing, processing, or research and development. Included in this definition are the following North American Industrial Classification Systems, NAICS Codes published by the Office of Management and Budget of the federal government:
(i) 3254 Pharmaceutical and Medical Manufacturing;
(ii) 334516 Analytical Laboratory Instrument Manufacturing.
With respect to a life sciences facility, the sponsor must invest in the project at least one hundred million dollars and create at the project at least two hundred new jobs with an average annual cash compensation level of at least twice the annual per capita income in this State. Per capita income must be determined by using the most recent per capita income data available at the time the request for funding is made pursuant to this chapter.
'Project' also includes USC-Sumter for the purposes of implementation of its four-year degree programs. Subject to the approval of the department and notwithstanding any other requirement concerning investment, USC-Sumter is eligible for funding of not more than one hundred thousand dollars to provide additional infrastructure and technology services at USC-Sumter in order to better serve the constituencies serviced by USC-Sumter.
(c) To qualify as an economic development project under either subitem (a) or (b) of this item for purposes of this chapter, the investment and job creation requirements must be attained no later than the eighth year after the project first begins operations.
(d) 'Project' also includes a four-year culinary arts program at Trident Technical College established pursuant to Section 59-53-425. Subject to the approval of the Department and notwithstanding the requirements provided in Section 11-41-30. This program is entitled to funding of no more than one hundred thousand dollars.
(3) 'Infrastructure' must relate specifically to, but is not required to be located at, the economic development project and means:
(a) land acquisition;
(b) site preparation;
(c) road and highway improvements;
(d) rail spur construction;
(e) water service;
(f) wastewater treatment;
(g) employee training which may include equipment used for such purpose;
(h) environmental mitigation; and
(i) training and research facilities and the necessary equipment therefor.
(4) 'Investment' means money expended by the sponsor on capital assets directly related to the economic development project and does not include amounts expended in aid of the project by the State pursuant to this chapter or otherwise, or amounts expended in aid of the project by a county, municipality, or a special purpose district, however financed.
(5) (7) 'New job' means a full-time job created in this State at an economic development project. The term does not include a job created when an employee is shifted from an existing location in this State to a new or expanded facility whether the transferred job is from, or to, a project of the sponsor or a related person. A related person includes any entity or person that bears a relationship to the sponsor as described in Section 267 of the Internal Revenue Code of 1986. Full time means a job requiring a minimum of thirty-five hours of an employee's time a week for the entire normal year of sponsor operations or a job requiring a minimum of thirty-five hours of an employee's time a week for a year if the employee was hired initially for or transferred to the project. Two half-time jobs are considered one full-time job. A half-time job is a job requiring a minimum of twenty hours of an employee's time a week otherwise meeting the full-time job requirements.
(6) 'Research and development facility' means a facility, including all necessary dry and wet laboratories, office space, lecture halls, conference rooms, equipment and administrative support spaces owned by a research university that would advance the development of the life sciences industry in the State by providing the necessary infrastructure that would be used by the research university and private entrepreneurs to promote the pursuit of intellectual property, to incubate emerging businesses, and to develop pilot commercial and manufacturing establishments.
(7) 'Research universities' means Clemson University, the Medical University of South Carolina, and the University of South Carolina - Columbia.
(8) 'Secretary' means the secretary of the department.
(5)(9) 'Sponsor' means a sole proprietor, partnership, corporation of any classification, limited liability company, or association taxable as a business entity or any combination of these entities.
(6)(10) 'State general obligation economic development bonds' or 'economic development bonds' or 'bonds' means general obligation bonds of this State issued under the authority of this chapter."
D. Section 11-41-40 of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"Section 11-41-40. To obtain funds for allocation to the department for financing of (1) infrastructure and (2) research and development facilities, there are issued from time to time state general obligation economic development bonds under the conditions prescribed by this chapter."
E. Section 11-41-50 of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"Section 11-41-50. (A) Pursuant to Article X, Section 13(6)(c) of the Constitution of this State, 1895, the General Assembly provides that economic development bonds may be issued under this chapter only at such times as the maximum annual debt service on all general obligation bonds of the State, including economic development bonds outstanding and being issued, but excluding highway bonds, state institution bonds, tax anticipation notes, and bond anticipation notes, must will not exceed five and one-half percent of the general revenues of the State for the fiscal year next preceding, excluding revenues which are authorized to be pledged for state highway bonds and state institution bonds. The State at any time must may not have outstanding issue general obligation bonds, excluding economic development bonds, highway bonds, state institution bonds, tax anticipation notes, and bond anticipation notes, if at the time of issuance the maximum annual debt service on which all such general obligation bonds, outstanding and being issued exceeds five percent of the general revenues of the State for the fiscal year next preceding, excluding revenues which are authorized to be pledged for state highway bonds and state institution bonds.
(B) With respect to the first seven hundred million dollars in principal amount of general obligation bonds issued after the effective date of this chapter within the debt service constraints set forth in subsection (A) of this section, the General Assembly provides additional constitutional authorization for such bonds pursuant to Article X, Section 13(5) of the Constitution of this State, 1895."
F. Section 11-41-60 of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"Section 11-41-60. At the time of issuance of economic development bonds pursuant to this chapter, the maximum annual debt service on such bonds issued pursuant to this chapter outstanding or being issued must not exceed one-half of one percent of the general revenues of this State for the fiscal year next preceding, excluding revenues which are authorized to be pledged for state highway bonds and state institution bonds."
G. Section 11-41-70 of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"Section 11-41-70. (A) Before issuing economic development bonds to defray the cost of infrastructure, the department shall notify the Joint Bond Review Committee and the State Budget and Control Board of the following:
(1) the amount then required for allocation to the department to defray the costs of the proposed infrastructure;
(2) a description of the infrastructure for which the bonds are to be issued, including a certification by the secretary of the department that each the economic development project to benefit from the expenditure of the proceeds of the bonds consists of the following:
(a) an investment in the State by the sponsor at the project of not less than four hundred million dollars and creates creation at the project of no fewer than four hundred new jobs; or
(b) in the case of a life sciences facility, an investment by the sponsor in the project of not less than one hundred million dollars and creation at the project of no fewer than two hundred new jobs with an average cash compensation of at least twice the per capita income in this State. Per capita income must be determined by using the most recent per capita income data available at the time the request for funding is made pursuant to this chapter.
(3) a tentative time schedule setting forth the period of time during which the sum requested is to be expended;
(4) a debt service table showing the annual principal and interest requirements for all bonds then outstanding; and
(5) the total amount of all bonds issued.
(B) Before issuing economic development bonds to defray the cost of the research and development facilities, the department shall notify the Joint Bond Review Committee and the State Budget and Control Board of the following:
(1) the amount then required for allocation to the department to defray the costs of the proposed research and development facilities;
(2) a description of the proposed research and development facilities for which the bonds are to be issued, including a certification by the secretary that matching funds required by Section 11-41-45 have been made available by the research university which shall own the research and development facilities and a schedule showing the source and amount of such matching funds;
(3) a tentative time schedule setting forth the period of time during which the sum requested is to be expended;
(4) a debt service table showing the annual principal and interest requirements for all bonds then outstanding; and
(5) the total amount of all bonds issued."
H. Section 11-41-120 of the 1976 Code, as added by Act 254 of 2002, is amended to read:
"Section 11-41-120. All bonds issued under this chapter must be signed by the Governor and the State Treasurer and attested by the Secretary of State. The Governor, and State Treasurer, and Secretary of State may sign these obligations by a facsimile of their signatures. The Great Seal of the State must be affixed to, impressed on, or reproduced upon each of them and each must be attested by the Secretary of State. The delivery of the bonds executed and authenticated, as provided in the resolution, is valid notwithstanding changes in officers or seal occurring after the execution or authentication."
SECTION 4. Beginning January 1, 2005, the Department of Revenue annually shall report to the Joint Committee on Taxation the revenue impact of this act, and the Department of Commerce annually shall report the cost and benefit of this act, together with the job creation and capital investment made by qualifying businesses.
SECTION 5. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 6. Article 5, Chapter 53, Title 59 of the 1976 Code is amended by adding:
"Section 59-53-425. Notwithstanding any other provision of law, the governing commission of Trident Technical College may establish a four-year culinary curriculum program and award baccalaureate degrees in culinary arts for students graduating from this program. This program must be established pursuant to guidelines established by the State Board for Technical and Comprehensive Education in conjunction with the Commission on Higher Education. However, prior approval of either the State Board for Technical and Comprehensive Education or the Commission on Higher Education to establish this program is not required.
In Fiscal Year 2003-2004 funding for this program shall be provided by the State Board for Technical and Comprehensive Education from existing appropriations for instructional programs or from other sources as determined by the state board, only if any funds are available.
Beginning in Fiscal Year 2004-2005 and thereafter, formula funding for this program shall be provided by the State Board for Technical and Comprehensive Education from appropriations to be determined by the General Assembly in a manner consistent with funding for other similar third and fourth years of baccalaureate degrees."
SECTION 7. The 1976 Code is amended by adding:
"Section ____. Notwithstanding any other provision of law, the University of South Carolina-Sumter is authorized to offer four-year degrees at the Sumter campus. The provisions of this section are contingent upon the local governments in USC-Sumter's service area providing additional funding for USC-Sumter of two hundred fifty thousand dollars per year. The degree programs as well as a schedule for their implementation must be established by USC-Sumter in conjunction with the Commission on Higher Education, and the Commission on Higher Education must promulgate regulations to effectuate the intent of this section. However, prior approval of the Commission on Higher Education to establish these degree programs is not required."
SECTION 8. Title 11 of the 1976 Code is amended by adding:
Section 11-45-10. This chapter may be cited as the 'Venture Capital Investment Act of South Carolina'.
Section 11-45-20. The General Assembly desires to increase the availability of equity, near-equity, or seed capital in amounts of one hundred million dollars or more for emerging, expanding, relocating, and restructuring enterprises in the State, so as to help strengthen the state's economic base, and to support the economic development goals of this State as described in the strategic plan of the Department of Commerce to be published annually beginning in 2003. The General Assembly also desires to address the long-term capital needs of small-sized and medium-sized firms, to address the needs of micro enterprises, to expand availability of venture capital, and to increase international trade and export finance opportunities for South Carolina based companies.
Section 11-45-30. For purposes of this chapter:
(1) 'Authority' means the South Carolina Department of Commerce.
(2) 'Certificate' means a document executed by the fund verifying a tax credit for any year to which a lender is entitled.
(3) 'Equity, near-equity, or seed capital' means capital invested in common or preferred stock, debt with equity conversion rights, royalty rights, limited partnership interests, limited liability company interests, and any other securities or rights that evidence ownership in private business.
(4) 'Fund' means the South Carolina Venture Capital Fund.
(5) 'Investor' means any corporation, limited liability company, or unincorporated business entity, including a general or limited partnership, that is selected by the fund to receive investments from the fund and then make venture capital investments therewith that meet the requirements of this chapter. An investor or a senior member of its management team must be a legal resident of this State and have a minimum of five years' experience in venture capital investing. In addition, substantially all of an investor's business activity shall be venture capital investing.
(6) 'Innovation Fund' means the South Carolina Technology Innovation Fund.
(7) 'Person' means any individual, corporation, partnership, or other lawfully organized entity.
(8) 'Research and development' means laboratory, scientific, or experimental testing and development related to new products, new uses for existing products, or improvements to existing products. Research and development also includes intellectual property, information technology, or technology transfer endeavors. The term does not include efficiency surveys, management studies, consumer surveys, economic surveys, advertising, or promotion, or research in connection with literary, historical, or similar projects.
(9) 'Tax credit' means a credit against a lender's bank tax liability pursuant to Chapter 11, Title 12, or insurance premium tax liability pursuant to Chapter 7, Title 38 or other tax liability under Title 38, as the case may be, or in the case of a repeal or reduction by the State of the tax liability imposed by these sections, any other tax imposed upon such a lender by this State.
(10) 'Venture capital' means equity, near-equity, and seed capital financing including, without limitation, early stage research and development capital for startup enterprises, and other equity, near-equity, or seed capital for growth and expansion of entrepreneurial enterprises.
(11) 'Lender' means a banking institution subject to the income tax on banks under Chapter 11 of Title 12, insurance and insurance companies subject to a state premium tax liability under Chapter 7 of Title 38, and a captive insurance company regulated under Chapter 90 of Title 38.
(12) 'Capital commitment' means the amount of money committed by the fund to an investor for a term of up to ten years, which term may be extended to provide for an orderly liquidation of the investor's portfolio investments.
Section 11-45-40. (A) There is created, within the authority, a separate and distinct fund to be an independent instrumentality exercising essential public functions, and to be known as the 'fund' as defined in Section 11-45-30(4).
(B)(1) The fund must be governed by a board composed of seven directors one of whom must be appointed by the Speaker of the House of Representatives, one of whom must be appointed by the Chairman of the House Ways and Means Committee, one of whom must be appointed by the President Pro Tempore of the Senate, one of whom must be appointed by the Chairman of the Senate Finance Committee, and three of whom must be appointed by the Governor, one of whom shall serve as chairman. No sitting member of the General Assembly may be appointed to serve on the board in any capacity including an ex officio capacity. Directors must be selected based upon outstanding knowledge and leadership, must be knowledgeable in the management of money and finance, and must possess experience in the management of investments similar in nature and in value to those of the fund. Directors serve for a term of office of four years and until their successors are appointed and qualify, except that of the initial directors appointed, the member appointed by the Speaker of the House of Representatives shall serve for an initial term of two years, the members appointed by the President Pro Tempore of the Senate shall serve for an initial term of two years, and one member appointed by the Governor shall serve for an initial term of two years so as to allow the terms of the directors to be staggered.
(2) The directors have the authority to govern the fund in accordance with the requirements of this chapter.
(3) A conflict of interest is considered to exist if a director of the fund, an officer, agent, or employee thereof, or any for-profit firm or corporation in which a director, officer, agent, or employee of the fund, or any member of his immediate family, as defined in Section 2-17-10(7), is an officer, partner, or principal stockholder engages in business activity with the fund either directly or indirectly in which the director, officer, agent, employee, or firm would personally benefit. In this case, the director, officer, agent, or employee shall refrain from any involvement of any type in regard to the activity including, but not limited to, discussing the proposed activity with another person associated with the entity desiring to engage in the activity with the fund, negotiating any aspects of the proposed activity with the fund, voting on any matter pertaining to the activity, and communicating with other board members, officers, agents, or employees of the fund concerning the activity. When a conflict arises, the director, officer, agent, or employee involved in the conflict, at the discretion of the board, shall resolve the conflict or resign from the position creating the conflict. Directors, officers, agents, and employees of the fund are subject to all provisions of Chapter 17, Title 2 and Chapter 13, Title 8, and the provisions of this item are supplemental to and not in lieu of the provisions of Chapter 17, Title 2 and Chapter 13, Title 8.
(C) The fund must be located within the Department of Commerce and is separate and distinct from the state general fund. The monies deposited in the accounts of the fund must be managed and invested by the directors with the assistance, if necessary, of professionals in the area of financial management and selected by a process as determined by the board of directors.
Section 11-45-50. (A) The fund must seek capital commitments to the fund in accordance with procedures approved by the State Budget and Control Board. The fund may retain an amount annually not to exceed one percent of the capital commitments received for expenses incurred by the fund. Capital contributions received by the fund must be in cash or in immediately available funds and are to be used only as provided by this chapter.
(B) The fund shall retain any fees earned after repayment to lenders to use as a contingency fund for future obligations to lenders and to fulfill additional capital commitments. If at any time a principal or interest payment is due and the fund has insufficient monies to repay same, the fund shall issue tax credit certificates in an amount to meet the obligation as provided for below, and tax credits as stipulated in subsection (C) are hereby established in these required amounts.
(C) These tax credits may be used to offset the lenders' state bank tax or premium tax liability in the event the fund does not meet its obligation to repay the lenders' cash investment together with required interest at the date and time the payment is due. These tax credits may be carried forward without limitation but are not refundable.
(D) The tax credits may also be transferred among bank or insurance company lenders for consideration, and then used by the subsequent holder. These tax credits shall take the form of a certificate issued by the board of the fund stating the amounts, year, and conditions of the tax credits reflected on the certificate.
(E) The board in accepting loans to the fund giving rise to these tax credits shall ensure that no more than fifty million dollars in total tax credit certificates are issued and outstanding at any one time with no more than ten million dollars in tax credit certificates being redeemable for any one year.
(F) The fund is authorized to use the proceeds of loans received from lenders, together with other available monies, for making investments with venture capital investors and for paying and funding services as necessary.
(G) No part of the fund may inure to the benefit of or be distributed to its employees, officers, or board of directors, or to members of their immediate families as this term is defined in Section 2-17-10(7), except that the fund is authorized to pay reasonable compensation for services provided by employees of the fund and out-of-pocket expenses incurred by its employees, officers, or board members, as long as such compensation does not create a conflict of interest pursuant to Section 11-45-40. The provisions of this subsection are supplemental to and not in lieu of the provisions of Chapter 17, Title 2 and Chapter 13, Title 8.
Section 11-45-60. The fund shall solicit from investors plans for the investing of capital in the fund in accordance with the requirements of this chapter. The fund shall consider and select the investment plans and shall select investors qualified to:
(1) make the most effective and efficient utilization of the investment; and
(2) invest in venture capital investments, requiring equity, near-equity, or seed capital which promote the economic development goals of this State as described in the strategic plan of the Department of Commerce adopted and published as of that date.
Section 11-45-70. In order for the board of directors of the fund to place monies of the fund with an investor for the purpose of making a venture capital investment, the following requirements must be met:
(1) No investment by an investor in any one investment may exceed five million dollars or fifteen percent of the committed capital of the investor, whichever is less. In addition, an investor must agree to invest at least an amount equal to the fund's capital commitment to such investor in South Carolina based companies.
(2)(a) While the board of directors of the fund shall give preference to investors, otherwise qualified, that maintain either a headquarters or an office staffed by an investment professional in South Carolina, investments may be made with investors not principally located in South Carolina; provided, that the investors are otherwise qualified under this chapter and have other venture capital investments in South Carolina or in South Carolina based companies at least equal to the total amount of monies placed with that investor by the fund.
(b) 'South Carolina based companies' for purposes of this section means any corporation, limited liability company, or unincorporated business organization, including a general or limited partnership, that has its principal place of business located in this State and has at least fifty percent of its gross assets and fifty percent of its employees located in this State at the time of the initial investment. If a corporation, limited liability company, or unincorporated business organization is a member of an affiliated group, the gross assets and the number of employees of all of the members of the affiliated group, wherever those assets and employees are located, shall be included for the purpose of determining the percentage of the corporation's, company's, or organization's gross assets and employees located in this State.
(3) When selecting investors with which to place the fund's venture capital investments, the board of directors shall give preference to investors that have on or before the date of the fund's capital commitment, aggregate capital commitments of at least three times the amount of the fund's capital commitment. An investor's capital commitments for purposes of this requirement include private, federal, or other nonstate funds secured by the investor.
(4) Investors must develop a repayment plan based on expected liquidity events of its portfolio investments. All repayments must occur within ten years, subject to extension as described in Section 11-45-30(12).
(5) No investment may violate the provisions of Section 11, Article X of the Constitution of this State.
Section 11-45-80. In addition to and apart from the other duties and functions of the fund, there is created under the administration of the board of directors of the fund, another fund entitled the South Carolina Technology Innovation Fund which shall receive that funding as may be provided by law. The board shall contract with a tax exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, for administration of the Innovation Fund.
The Innovation Fund must be used by the board to:
(1) award small grants for the best and most creative ideas from South Carolina research universities' technology incubators with the awards to be available for eligible students and innovative knowledge-based enterprises that are located in a research university incubator. These grants are to be awarded to inspire and encourage knowledge-based technology and intellectual property transfers from research university faculty and students to the marketplace;
(2) design a major education, marketing, and public relations program to ensure that residents of South Carolina, members of the General Assembly, and potential venture capital investors understand and support the requirements for participation in the fund, the strategic need for venture capital funding, and for grant support for deserving entrepreneurs.
Section 11-45-90. (A) The board shall provide loan, investment, tax credit, and expense reports at least quarterly during the fiscal year to the Governor, the General Assembly, and other appropriate officials and entities.
(B) In addition to the quarterly reports provided in subsection (A), the board shall provide an annual report to the Governor, the General Assembly, and other appropriate officials and entities containing at a minimum the following information:
(1) monies from the fund placed in venture capital investments with approved investors cumulatively and during that fiscal year;
(2) the extent of current loan obligations including principal and interest requirements;
(3) the amount and time lines of tax credit certificates issued both cumulatively and during that fiscal year;
(4) a description of a material interest held by a director, officer, or employee of the fund with respect to the investments or assets of the fund;
(5) a schedule of the rates of return, net of total investment expense, on assets of the fund overall and on assets aggregated by category over the most recent one-year, three-year, five-year, and ten-year periods, to the extent available; and
(6) a schedule of the sum of total investment expense and total general administrative expense for the fiscal year expressed as a percentage of the fair value of assets of the fund on the last day of the fiscal year, and an equivalent percentage for the preceding five fiscal years, if applicable.
(C) These disclosure requirements are cumulative to and do not replace other reporting requirements provided by law.
Section 11-45-100. The fund has the power to promulgate regulations and make a contract, execute a document, perform an act, or enter into a financial or other transaction necessary to implement this chapter."
SECTION 9. Upon certification to the Secretary of State by the President of the Palmetto Seed Capital Corporation that the remaining investments of the private sector limited partners of the Palmetto Seed Capital Fund Limited Partnership have been liquidated, Chapter 44 of Title 41 of the 1976 Code is repealed, and any remaining public assets and liabilities of the Palmetto Seed Capital Corporation shall be transferred to the South Carolina Venture Capital Fund herein created.
SECTION 10. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of Chapter 45 of Title 11 of the 1976 Code, is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of Chapter 45 of Title 11 of the 1976 Code, the General Assembly hereby declaring that it would have passed Chapter 45 of Title 11 of the 1976 Code, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 11. This act takes effect upon approval by the Governor.
This web page was last updated on Thursday, June 25, 2009 at 10:17 A.M.