CHAPTER 115
HOUSE BILL No. 2505*
An Act relating to income taxation; concerning
venture capital; enacting the
Kansas certified capital formation company act.
Be it enacted by the Legislature of the State of Kansas:
Section 1. This act shall be known
and may be cited as the Kansas
certified capital formation company act. The purpose of this act is
to
enhance the development of seed and venture capital in Kansas and
to
support the modernization and expansion of the state's economy. As
used
in this act, unless the context clearly requires otherwise, the
following
terms mean:
(a) ``Affiliate of a certified capital
formation company'' means:
(1) Any person that directly or
indirectly, owns, controls or possesses
the power or ability to vote ten percent or more of the outstanding
voting
securities or other beneficial ownership interests of the Kansas
certified
capital formation company;
(2) any person ten percent or more of
whose outstanding voting se-
curities or other beneficial ownership interests are directly or
indirectly
owned, controlled or possessed with the power to be voted by the
Kansas
certified capital formation company;
(3) any person directly or indirectly
controlling, controlled by, or un-
der common control with the Kansas certified capital formation
company;
(4) any partnership in which the Kansas
certified capital formation
company is a general partner;
(5) any person who is an officer,
director, general partner, managing
member, managing director or agent of the Kansas certified capital
for-
mation company or an immediate family member of such person.
(b) ``Affiliate of an investor''
means:
(1) Any person that directly or
indirectly, owns, controls or possesses
the power or ability to vote ten percent or more of the outstanding
voting
securities or other beneficial ownership interests of the
investor;
(2) any person ten percent or more of
whose outstanding voting se-
curities or other beneficial ownership interests are directly or
indirectly
owned, controlled or possessed with the power to be voted by the
inves-
tor;
(3) any person directly or indirectly
controlling, controlled by or un-
der common control with the investor;
(4) a partnership in which the investor
is a general partner;
(5) any person who is an officer,
director or agent of the investor or
an immediate family member of such officer, director or agent.
(c) ``Applicable percentage'' means
50%.
(d) ``Authorized capital formation
company and authorized CFC''
means a capital formation company that has been designated by the
sec-
retary as having met the requirements of this act necessary to
raise capital
investments but that has not yet received the designation as a
certified
capital formation company.
(e) ``CFC'' means any capital formation
company.
(f) ``Capital in a qualified Kansas
business'' means any at risk invest-
ment in any note, stock, partnership or membership interest or
other form
of equity investment or hybrid security, of any nature and
description
whatsoever, including a debt instrument or security which has the
char-
acteristics of indebtedness but which provides for conversion into
equity
or equity participation instruments such as options or warrants
which are
acquired by a CFC as a result of a transfer of cash to a business,
except
for debt instruments, the proceeds of which were used to acquire
or
which will be used to develop intellectual property, in which case
such
debt instrument may be secured by a lien on the intellectual
property.
Capital in a qualified Kansas business shall not include secured
debt in-
struments.
(g) ``Certified capital'' means cash,
marketable securities, legally en-
forceable commitments of capital subject to call by a capital
formation
company and other assets held by a certified capital formation
company
equal to the amount of certified capital investment made by
investors in
the certified capital formation company.
(h) ``Certified capital formation
company'' means any partnership,
corporation, trust or limited liability company, whether organized
on a
profit or not for profit basis, that is domiciled in and qualified
to conduct
business in Kansas and that has as its primary business activity,
the in-
vestment of cash in qualified Kansas businesses, and which is
certified by
the secretary as satisfying the criteria of this act.
(i) ``Certified capital investment''
means an investment of cash by an
investor which is certified by the secretary made in such manner as
to
acquire a beneficial ownership interest in a Kansas certified
capital for-
mation company.
(j) ``Commissioner'' means the securities
commissioner of Kansas or
persons acting under the supervision of the commissioner.
(k) ``In existence'' means the date of
the first sale of goods or services
by a qualified Kansas business or a business seeking to be so
qualified.
(l) ``Investor'' means any person that
invests cash. If the investor is a
natural person, the investor shall have a net worth of at least
$1,000,000
and such net worth shall be not less than 10 times the amount of
the
investor's certified investment in a CFC. The investor's net worth
shall
not include the value of any equity in the investor's primary
residence.
(m) ``Liquidating distribution'' means
any distribution other than a
qualified distribution.
(n) ``Maximum cumulative investment''
means certified capital in-
vestment of $10,000,000 or such lesser amount as the secretary of
com-
merce and housing may prescribe in accordance with subsection (d)
of
section 4, and amendments thereto.
(o) ``Person'' means any natural person
or any business association,
including but not limited to, a corporation, limited liability
company, gen-
eral or limited partnership or trust.
(p) ``Qualified distribution'' means any
distribution or payment made
by a certified capital formation company for costs and expenses of
form-
ing, syndicating, managing or operating the certified capital
formation
company, including an annual management fee and reasonable and
nec-
essary fees in accordance with industry custom for professional
fees in-
cluding, but not limited to, legal and accounting fees, relating to
operating
the certified capital formation company.
(q) ``Qualified Kansas business''
means:
(1) A business that satisfies the
requirements of subparagraphs (A)
through (F) of this subsection.
(A) Such business is independently owned
and operated and has its
principal business office located in Kansas or, in the case of a
company
domiciled outside the state of Kansas, which certifies that the
company's
principal business office will be located in Kansas within six
months fol-
lowing the date of the initial investment.
(B) At least fifty percent of the
employees of the business shall be
resident in Kansas or, in the case of a company domiciled outside
the
state of Kansas, certifies that at least fifty percent of its
employees will
be resident in Kansas within six months following the date of the
initial
qualified venture capital investment.
(C) Such business is in need of venture
capital and cannot obtain
conventional financing to fund its further development and future
oper-
ations.
(D) Such business shall be engaged in
commerce for the purpose of
manufacturing, processing or assembling or distributing products,
con-
ducting research and development or providing services in
interstate com-
merce.
(E) For businesses involved in commerce
for the purpose of provid-
ing services in interstate commerce, that business must demonstrate
that
more than fifty percent of its gross revenues are derived from
sales out-
side the state of Kansas or provide reasonable documentation that
the
company will derive at least fifty percent of its gross sales
outside the
state within a three-year period.
(F) Such business, at the time of the
initial qualified venture capital
investment, shall have been in existence less than five years and
shall not
have had gross sales in excess of $1,000,000 in any single fiscal
year.
(2) Any business which, subject to
paragraph (a)(5) of section 5, and
amendments thereto, is approved as a qualified Kansas business at
the
time of the first qualified venture capital investment in such
business by
a Kansas certified capital formation company, for a period of five
years
following the date of such first investment, shall continue to be
classified
as a qualified Kansas business and may receive follow-on
investments
from any Kansas certified capital formation company, and such
follow-on
investments shall constitute qualified venture capital investments
even
though such business may not meet other qualifications set forth in
par-
agraph (p)(1)(F) at the time of such follow-on investments.
(3) A qualified Kansas business shall not
include:
(A) Any commercial enterprise primarily
engaged in the sale at retail
of goods or services taxable under the Kansas retailer's sales tax
act; any
service provider set forth in K.S.A. 17-2707, and amendments
thereto;
any bank, savings and loan or lending institution; any real estate,
real
estate development or insurance company; or any commercial
enterprise
deriving its revenues directly from noncommercial customers in
exchange
for personal services;
(B) an entity engaged primarily as a
passive business, in irregular or
noncontinuous operations, any financial instrument that derives
substan-
tially all of its income from passive investments that generate
interest,
dividends, royalties or capital gains or any business arrangement
the effect
of which is to immunize an investor from risk of loss;
(C) a business engaged in oil and gas
exploration and development;
(D) a subsidiary of a certified capital
formation company;
(E) another certified capital formation
company;
(F) an affiliate of the certified capital
formation company;
(G) an investor of the certified capital
formation company or an af-
filiate or subsidiary of an investor of the certified capital
formation com-
pany unless approved in writing by the secretary.
(r) ``Qualified venture capital
investment'' means the investment of
cash by a Kansas certified capital formation company in such a
manner
as to acquire capital in a qualified Kansas business.
(s) ``Secretary'' means the secretary of
commerce and housing or per-
sons under the secretary's direction.
(t) ``Tax credit'' means a credit against
the tax imposed by the Kansas
income tax act, the premium tax or privilege fee imposed pursuant
to
K.S.A. 40-252, and amendments thereto, or the privilege tax as
measured
by net income of financial institutions imposed pursuant to chapter
79,
article 11 of the Kansas Statutes Annotated.
Sec. 2. (a) Any investor that makes
a certified capital investment shall
earn a tax credit against state tax liability equal to 50% of the
amount of
such investor's certified capital investment. The investor, or a
person to
whom the credits were duly transferred, shall be entitled to claim
not
more than 10% of the credit per taxable year for taxable years
com-
mencing on and after January 1, 2005. If the amount of the tax
credit
allowed under subsection (a) exceeds the tax liability of the
taxpayer for
any taxable year, such excess amount shall be refunded to the
taxpayer.
(b) No certified capital investment in a
single CFC by any one person
shall be less than $25,000 or more than $2,000,000; nor shall any
one
person's combined investment be deemed in excess of $5,000,000 for
the
purpose of earning tax credits.
(c) The total amount of tax credits which
may be allowed shall not
exceed $20,000,000. The total amount of tax credits which may be
allowed
under this act shall not exceed $2,000,000 per fiscal year.
Sec. 3. (a) The secretary may
authorize and subsequently certify
profit or not-for-profit entities which meet the requirements of
this act.
The secretary shall compile a list of every certified CFC,
including the
address and telephone number of the certified CFC's principal place
of
business. The secretary shall publicize the list in order to inform
Kansas
companies of the availability of potential investment capital.
(b) The secretary shall review the
organizational documents for each
applicant for authorization as a CFC and the business history of
the ap-
plicant to determine:
(1) That at the time of application, the
applicant owns cash, market-
able securities and other liquid assets valued at no less than
$500,000; or
that prior to January 1, 2000, the applicant was designated as an
inno-
vation and commercialization corporation or an affiliate innovation
and
commercialization corporation created under the Kansas technology
en-
terprise corporation innovation and commercialization corporation
pro-
gram; and
(2) that the officers and the board of
directors, general partners, trus-
tees, managing members or managers, as the case may be, are
thoroughly
acquainted with the requirements of this act and acknowledge such
by a
signed certification.
(c) To continue to be certified, the CFC
must own and shall peri-
odically demonstrate to the secretary, as the secretary may
require, that
the liquid asset base for the certified capital formation company
is at least
$500,000 at all times during the CFC's participation in the program
au-
thorized by this act.
(d) With respect to any person who
submits or has submitted an
application for authorization as a CFC, the commissioner shall
investigate
to determine and report to the secretary whether any of the
directors,
trustees, managers, officers, general partners, beneficial owners
of 10%
or more of any class of equity securities or any promoters employed
or
otherwise associated with that person at the time of such
application:
(1) Has been affiliated with any company
that has filed a registration
statement which is subject to a currently effective stop order
entered
pursuant to any state law;
(2) has been convicted of any felony or
misdemeanor in connection
with the purchase or sale of any security or any felony involving
fraud or
deceit including, but not limited to, forgery, embezzlement of
money
under false pretenses, larceny or conspiracy to defraud;
(3) is currently subject to any state
administrative order or judgment
entered by a state securities administrator or is subject to any
state ad-
ministrative order or judgment in which fraud or deceit was found
and
an order or judgment was entered;
(4) is currently subject to any state
administrative order or judgment
which prohibits the use of any exemption from registration in
connection
with the purchase or sale of securities;
(5) is subject to any order, judgment or
decree of any court of com-
petent jurisdiction temporarily or preliminarily restraining or
enjoining,
or is subject to any order, judgment or decree of any court of
competent
jurisdiction permanently restraining or enjoining that person from
engag-
ing in or continuing any conduct or practice in connection with the
pur-
chase or sale of any security, rendering investment advice or
involving the
making or any false filing with any state; and
(6) has been convicted of or pleaded nolo
contendere to any criminal
offense other than a misdemeanor involving motor vehicle
violations.
(e) The secretary shall not authorize any
CFC if the commissioner's
report includes any affirmative findings pursuant to subsection
(d).
(f) The secretary shall review
documentation regarding the qualifi-
cations of the persons who will actively manage the CFC and make
a
determination as to whether such persons possessed sufficient
knowledge
and professional experience in the areas of investment, venture
capital,
business management and evaluation, portfolio management, and
such
other area of expertise to the degree that a reasonable person
would be
confident in such manager's ability to manage the CFC. No
authorization
shall be issued when it is the opinion of the secretary that such
persons
do not possess this requisite degree of knowledge and
expertise.
(g) No investor shall individually, or
collectively with or through one
or more affiliates, by means of ownership, agreement or otherwise,
own,
control or possess the power or ability to cause or direct the
making of
any qualified venture capital investments by a CFC.
(h) Within a period of time established
by the secretary after receiv-
ing an application for authorization as a CFC, the secretary shall
either
issue or deny the authorization and communicate in detail to the
applicant
the grounds for the denial, including any suggestions for the
removal of
those grounds.
Sec. 4. (a) A capital formation
company having been authorized by
the secretary pursuant to section 3, and amendments thereto, shall
have
a period of not more than 365 days from the date of receiving
authori-
zation in which to procure certified capital investment.
(b) In order to receive certification by
the secretary, an authorized
capital formation company shall raise a minimum aggregate certified
cap-
ital investment of no less than $5,000,000. In the case of an
authorized
capital formation company formed by an innovation and
commercializa-
tion corporation or an affiliate innovation and commercialization
corpo-
ration created under the KTEC innovation and commercialization
cor-
poration program, such minimum certified capital investment shall
be no
less than $1,000,000.
(c) Total certified capital investment
deemed certified for the pur-
pose of earning tax credits shall not exceed $10,000,000 in a
single capital
formation company.
(d) A CFC is hereby authorized to be
formed for the purpose of
investing exclusively in nonmetropolitan counties as defined in
K.S.A. 74-
5093 and amendments thereto. In the case of a CFC formed for
such
purposes, the secretary may enter into an agreement with the CFC at
the
time of application to establish a lower minimum or maximum
invest-
ment. Upon meeting the established cumulative maximum,
certification
may take place pursuant to subsection (e) of this section.
(e) If during the fund raising period, an
authorized capital formation
company demonstrates to the secretary that the maximum
cumulative
certified capital investment has been met pursuant to this act, the
sec-
retary shall either designate the capital formation company as a
certified
capital formation company and notify the secretary of revenue of
such
certification; or shall deny the certification and notify the
capital forma-
tion company of the basis for denial.
(f) All capital investment deemed
certified for the purpose of earning
tax credits must be certified by the investor to be new moneys in
that
such moneys were not being used for seed or venture capital prior
to
making the investment in a CFC. Any attempt to transfer funds from
an
existing venture capital fund to a CFC for the purposes of earning
a tax
credit shall constitute a violation of this act and may lead to
decertifica-
tion.
(g) No capital investments shall be
certified by the secretary until
such time when the minimum cumulative certified capital
investments
are met.
(h) Upon the end of the fund raising
period as established by the
secretary, capital formation companies that have reached the
minimum
cumulative certified capital investment requirement but have failed
to
reach the maximum cumulative certified capital investment
requirements
shall be certified by the secretary in rank order based on the
amount of
certified capital investment raised by the capital formation
company and
the amount of tax credits available for allocation upon the
secretary's
satisfaction that all such investment was made pursuant to this
act.
(i) The secretary will notify the
department of revenue upon certifi-
cation of a capital formation company.
(j) Designation as an innovation and
commercialization corporation
or an affiliate innovation and commercialization corporation
created un-
der the Kansas technology enterprise corporation shall not relieve
such
entity from compliance with any provisions of this act except where
stated
otherwise.
Sec. 5. (a) To continue to be
certified, a CFC shall make qualified
venture capital investments according to the following
schedule:
(1) Within three years after the date on
which a CFC is certified at
least 33% of its capital originally certified shall be, or have
been, used for
making qualified venture capital investments;
(2) within four years after the date on
which a CFC is certified at
least 66% of its capital originally certified shall be, or have
been, used for
making qualified venture capital investments;
(3) within five years after the date on
which a CFC is certified at least
100% of its total capital originally certified shall be, or have
been, used
for making qualified venture capital investments;
(4) a CFC shall not make an investment in
an affiliate of the CFC or
an affiliate of an investor. For the purposes of this subsection,
if a com-
pany is not an affiliate before a CFC initially invests in the
company, it
shall not be deemed to be an affiliate if such CFC provides
additional
qualified venture capital investment to such company subsequent to
its
initial investment. No corporate officer, employee or shareholder,
no lim-
ited or general partner or other person personally affiliated with
any CFC
shall personally invest in any portfolio company regardless of
whether the
portfolio company is affiliated with the CFC; and
(5) all certified capital which is not
then required to be invested in
qualified venture capital investments or which has been previously
in-
vested in qualified venture capital investments and returned by the
com-
pany, may be held or invested in such manner as the CFC, in its
discre-
tion, deems appropriate. The proceeds of all certified capital
which is
returned to a CFC after it was originally invested in qualified
venture
capital investments, may be invested in other qualified venture
capital
investments and shall be credited toward any requirement in this
act with
respect to placing certified capital in qualified venture capital
invest-
ments.
(b) A CFC may make qualified
distributions at any time. In order to
lawfully make liquidating distributions, a CFC must have invested
an
aggregate amount equal to 100% of its certified capital in
qualified ven-
ture capital investments or the fair value of its assets plus any
prior qual-
ified and liquidating distributions which equal or exceed 110% of
its cer-
tified capital. In addition, to the extent that marketable
securities have
been received in liquidation of a qualified venture capital
investment,
such securities may be distributed as liquidating distributions.
Notwith-
standing any other provisions of this act, cash liquidating
distributions are
permitted solely for the purpose of providing funds to investors to
pay
income taxes attributable to earnings of the CFC.
(c) Liquidating distributions in excess
of the certified capital forma-
tion company's original certified capital and any additional
capital contri-
butions to the certified capital formation company shall be subject
to audit
by a certified public accounting firm acceptable to the secretary,
at the
expense of the certified capital formation company.
(d) If at the time any liquidating
distribution is made by a CFC, the
aggregate sum of all liquidating distributions of the CFC exceeds
the
aggregate sum of the CFC's original certified capital and any
subsequent
qualified venture capital contributions to the CFC, as determined
by au-
dit, the CFC, prior to any additional distributions, shall pay to
the state
treasurer's office 10% of the proportion of the distribution in
excess of
such amount.
(e) Documents and other materials
submitted by CFC's or by busi-
nesses for purposes of authorization or original certification or
the con-
tinuance of certification as a CFC shall not be public records if
it is
determined by the secretary that disclosure of such information
would
compromise trade secrets of qualified Kansas businesses unless
otherwise
specified in this act.
(f) Each CFC shall report the following
to the secretary:
(1) Within 90 days of the close of the
CFC's fiscal year, annual au-
dited financial statements. The audit shall address the methods of
oper-
ation and conduct of business of the CFC to determine if the CFC
is
complying with the statutes and program rules and that the funds
received
by the CFC have been invested in accordance with the time limits
pro-
vided by this act.
(2) At the end of each quarter, that no
more than 20% of the greater
of: (A) The original certified capital investment in the CFC; or
(B) the
original certified capital investment plus the amount equal to the
net
gains, losses, income and expenses realized by the CFC at such time
shall
be invested by a CFC in a single qualified Kansas business at any
one
time unless the CFC can demonstrate that a greater percentage in a
single
qualified Kansas business at any one time is the result of losses
suffered
by the CFC in other qualified venture capital investments.
(g) Any material related to the sale of
ownership in a CFC or soliciting
investment in a CFC shall include the following statement: ``By
author-
izing or certifying a certified capital formation company, the
State of Kan-
sas does not endorse the quality of management or the potential for
earn-
ings of a particular company. The use of the word ``certified''
or
``authorized'' in an offering does not constitute a recommendation
or en-
dorsement of an investment by the Kansas Securities Commission or
any
other State Official.''
(h) The secretary may establish
reasonable initial filing fees for ap-
plications for authorization and certification pursuant to this act
and may
also establish an annual nonrefundable fee for CFC's seeking
continued
certification.
Sec. 6. (a) To ensure that no
qualified venture capital investment or
investor's certified capital investment has been made in violation
of this
act, the secretary shall conduct an annual review of each CFC to
deter-
mine if the CFC is complying with the requirements of
certification. The
costs of the annual review shall be paid by each CFC according to
a
reasonable fee schedule adopted by the secretary.
(b) Any material violation of this act by
a CFC shall be grounds for
decertification under this section. If the secretary determines
that a CFC
is not in compliance with the requirements for continuing
certification,
the secretary, by written notice, shall inform the officers of the
CFC and
the board of directors, managers, trustees or general partners that
they
shall be decertified within 120 days from the date of mailing of
the notice,
unless they correct the deficiencies detailed in the notice and
demon-
strate to the secretary's satisfaction that the CFC is again in
compliance
with the requirements for certification as determined by the
secretary.
(c) At the end of the 120 day grace
period, if the CFC is still not in
compliance, the secretary may send a notice of decertification to
the CFC
and to the secretary of revenue including a list of the decertified
capital
investments by investor and transferee.
(d) Decertification of a CFC prior to the
CFC meeting all require-
ments of paragraphs (1) through (4) of subsection (a) of section 5,
and
amendments thereto, shall cause the recapture of all tax credits
previously
allowed to an investor or transferee and the forfeiture of all
future tax
credits to otherwise be claimed by an investor or transferee with
respect
to any certified capital investment in the decertified CFC.
(e) Decertification of a CFC after it has
met all requirements of par-
agraphs (1) through (4) of subsection (a) of section 5, and
amendments
thereto, shall cause the forfeiture of tax credits commencing with
the
taxable year of the investor or transferee in which the
decertification arose
and for all future taxable years with no recapture of tax credits
allowed
to an investor or transferee with respect to the taxable years
which ended
before the decertification occurred. Once a CFC has invested 100%
of
its certified capital in qualified Kansas businesses, all future
tax credits to
be claimed pursuant to this act by investors or transferees with
respect
to such CFC shall not be subject to recapture.
Sec. 7. The secretary shall prepare
and submit an annual report to
the governor and the legislature no later than October 1 of each
year.
Such report shall be presented to the standing committee on
commerce
in the senate, standing committee on economic development in the
house
of representatives and the joint committee on economic
development.
Such report shall include but not be limited to:
(a) The total dollar amount each CFC
received from all investors
allowed tax credits and any other investors and the identity of all
investors
allowed tax credits;
(b) the total amount invested by each CFC
in qualified Kansas busi-
nesses, the identity and location of those businesses, the amount
invested
in each qualified Kansas business and the total number of permanent
full-
time jobs created or retained by each qualified Kansas business as
a result
of the investment; and
(c) the cumulative amount of any
liquidating disbursements received
by the state from the CFC's.
Sec. 8. The secretary may revoke
the certification of a CFC if any
material representation to the secretary in connection with the
application
process proves to have been falsely made or if the application
materially
violates any requirement established by the secretary.
Sec. 9. (a) Any investor that is
not subject to taxation under the pro-
visions of the Kansas income, privilege or premium tax that makes a
cer-
tified capital investment shall be deemed to acquire an interest in
the
nature of a transferable 50% tax credit. The credit established
pursuant
to this act may be sold or transferred subject to approval by the
secretary.
An investor as described in this section shall not be allowed a
refund for
the interest herein created. Only the full amount of the credit for
any one
investment may be transferred, and the credit may be transferred
only
one time. Documentation of any credit transfer shall be provided to
the
secretary. The secretary shall transmit a copy of such
documentation to
the secretary of revenue.
(b) The secretary, after consulting with
the secretary of revenue, shall
develop such rules and regulations as are necessary to facilitate
the op-
eration of the transfer program consistent with the interest of the
state
in tracking the transfer of ownership and the use of tax credits
earned by
the transferee.
(c) Any such sale or transfer shall not
affect the time schedule for
taking the tax credit, as provided in this act. Any tax credits
recaptured
pursuant to section 6, and amendments thereto, shall be the
liability of
the taxpayer which actually claimed the tax credit. In approving
the sale
or transfer of the tax credit pursuant to this section, the
secretary may
require the transferor or the transferee or both to execute
guarantees or
post bonds with respect to any potential tax credit recapture.
(d) Any payment received for tax credits
pursuant to this section is
taxable income of the transferor of the credit and the amount equal
to
the difference the dollar value of the tax credit transferred minus
the
sales price of the tax credit shall be taxable income of the
transferee.
(e) The secretary shall make and
promulgate rules and regulations
consistent with the provisions of this act as are necessary or
useful to carry
out the provisions of this act.
(f) Every final order, decision, license
or other official act of the sec-
retary pursuant to this act is subject to review in accordance with
the act
for judicial review and civil enforcement of agency actions, K.S.A.
77-601
et seq. and amendments thereto.
(g) In view of the objectives of these
requirements and the underlying
policies of the act, the act is not available with respect to any
transaction
or series of transactions that, although in technical compliance
with these
rules, is part of a plan or scheme to evade the requirements of
this act or
to distort the benefits entitled to be realized under the act. In
such cases,
no investor in any CFC shall be entitled to the benefit of any tax
credits
provided for hereunder.
(h) The offer or sale of a security by a
CFC pursuant to this act shall
be subject to the registration requirements of K.S.A. 17-1254,
17-1255,
17-1257, 17-1258, 17-1259 and 17-1260, and amendments thereto.
Sec. 10. This act shall take effect and be in
force from and after its
publication in the statute book.
Approved May 16, 2002.
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