CHAPTER 177
SENATE BILL No. 554
(Amends Chapter 108)
An Act concerning the Kansas venture capital
company act; reauthorizing tax credits for
cash investments in venture capital funds in
which the Kansas technology enterprise
corporation or its subsidiaries is an
investor; amending K.S.A. 1997 Supp. 74-8401, as
amended by section 7 of 1998 Senate Bill 487,
and repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 1997 Supp. 74-8401, as amended by
section 7 of
1998 Senate Bill No. 487, is hereby amended to read as follows:
74-8401.
(a) There shall be allowed as a credit against the tax imposed by
the
Kansas income tax act on the Kansas taxable income of a taxpayer
and
against the tax imposed by K.S.A. 40-252 and amendments thereto
on
insurance companies for cash investment in a certified local seed
capital
pool an amount equal to 25% of such taxpayer's cash investment in
any
such pool in the taxable year in which such investment is made and
the
taxable years following such taxable year until the total amount of
the
credit is used. The amount by which that portion of the credit
allowed
by this section exceeds the taxpayer's liability in any one taxable
year may
be carried forward until the total amount of the credit is used. If
the
taxpayer is a corporation having an election in effect under
subchapter S
of the federal internal revenue code or a partnership, the credit
provided
by this section shall be claimed by the shareholders of such
corporation
or the partners of such partnership in the same manner as such
share-
holders or partners account for their proportionate shares of the
income
or loss of the corporation or partnership.
(b) The total amount of credits allowable pursuant to this
section and
credits allowable pursuant to K.S.A. 74-8205, 74-8206 and 74-8304,
and
amendments thereto, shall be attributable to not more than
$50,000,000
of cash investments in Kansas venture capital companies, Kansas
Venture
Capital, Inc. and local seed capital pools. With respect to the
additional
amount of cash investments made eligible for tax credits by this
act,
$10,000,000 of such amount shall be dedicated and reserved until
De-
cember 31, 1990, for cash investments in a seed capital fund or
funds in
which the Kansas technology enterprise corporation, or its
subsidiaries,
is an investor. The $50,000,000 amount of cash investments now
eligible
for the tax credits allowed pursuant to this section and K.S.A.
74-8205,
74-8206 and 74-8304 and amendments thereto shall be reduced to
the
extent that the total amount of cash investments received by such
seed
capital fund or funds before January 1, 1991, is less than
$10,000,000.
However, any such credits which were not claimed for investments
made
prior to January 1, 1991, may be allowed to a taxpayer for cash
investment
made in Kansas Venture Capital, Inc. pursuant to K.S.A. 74-8205 and
74-
8206, and amendments thereto, not to exceed $2,595,236 of the
$10,000,000 reserved under this subsection for investment in seed
capital
funds in which the Kansas technology enterprise corporation or its
sub-
sidiaries was an investor. A taxpayer may also be allowed a
credit for cash
investment made pursuant to K.S.A. 74-8304, and amendments
thereto
not to exceed $6,012,345 of the $10,000,000 reserved under this
subsection
if such taxpayer first purchases the entire interest of the
Kansas technol-
ogy enterprise corporation or its subsidiaries in Kansas venture
capital
companies established prior to January 1, 1991. However, no
credit shall
be allowed for cash investment which results in the purchase of
the in-
terest of the Kansas technology enterprise corporation or its
subsidiaries
in Kansas venture capital companies established prior to January
1, 1991.
(c) As used in this section, (1) ``local seed capital pool''
means money
invested in a fund established to provide funding for use by small
busi-
nesses for any one or more of the following purposes: (A)
Development
of a prototype product or process; (B) a marketing study to
determine
the feasibility of a new product or process; or (C) a business plan
for the
development and production of a new product or process;
(2) ``Kansas business'' means any small business owned by an
individ-
ual, any partnership, association or corporation domiciled in
Kansas, or
any corporation, even if a wholly owned subsidiary of a foreign
corpora-
tion, that does business primarily in Kansas or does substantially
all of its
production in Kansas.
(d) No credit from income tax liability shall be allowed for
cash in-
vestment in a local seed capital pool unless: (1) The amount of
private
cash investment therein is $200,000 or more; (2) the moneys
necessary
to administer and operate the pool are funded from sources other
than
the private and public cash investments; and (3) funds invested by
the
local seed capital pool shall be invested at 100% in Kansas
businesses.
(e) Public funds may be invested in a local seed capital pool
except
that each dollar of public funds, other than that which may be used
to
administer and operate a pool, shall be matched by not less than $2
of
private cash investment. Public funds shall have a senior position
to any
private cash investment and may receive a lower rate of return than
that
allowable for a private cash investment.
(f) The provisions of this section, and amendments thereto,
shall be
applicable to all taxable years commencing after December 31,
1986.
Sec. 2. K.S.A. 1997 Supp. 74-8401, as amended by section
7 of 1998
Senate Bill No. 487, is hereby repealed.
Sec. 3. This act shall take effect and be in force from
and after its
publication in the statute book.
Approved May 13, 1998
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