Oklahoma § 68-2357.7 - Credit for investments in qualified venture capital

§ 68-2357.7. Credit for investments in qualified venture capital

companies.

A. For taxable years beginning after December 31, 1986, and

before January 1, 2009, there shall be allowed a credit against the

tax imposed by Section 2355 of this title or Section 624 of Title 36

of the Oklahoma Statutes for investments in qualified venture

capital companies whose purpose is to establish or expand the

development of business and industry within Oklahoma. Provided, tax

credits against liabilities imposed pursuant to Section 624 of Title

36 of the Oklahoma Statutes shall be limited to the amount that

would otherwise be collected and allocated to the General Revenue

Fund of the State Treasury.

B. For purposes of this section:

1. "Qualified venture capital company" means a C corporation,

as defined by the Internal Revenue Code of 1986, as amended,

incorporated pursuant to the laws of Oklahoma or a registered

business partnership with a certificate of partnership filed as

required by law if such corporation or partnership is organized to

provide the direct investment of debt and equity funds to companies

within this state, with its principal place of business located

within this state and which meets the following criteria:

a.

capitalization of not less than Five Million Dollars

($5,000,000.00),

b.

having a purpose and objective of investing at least

seventy-five percent (75%) of its capitalization in

Oklahoma business ventures. The temporary investment

of funds by a qualified venture capital company in

obligations of the United States, state and municipal

bonds, bank certificates of deposit, or money market

Oklahoma Statutes - Title 68. Revenue and Taxation

securities pending investment in Oklahoma business

ventures is hereby authorized, and

c.

investment of not more than ten percent (10%) of its

funds in any one company;

2. "Oklahoma business venture" means a business, incorporated

or unincorporated, which:

a.

has or will have, within one hundred eighty (180) days

after an investment is made by a qualified venture

capital company, at least fifty percent (50%) of its

employees or assets located in Oklahoma,

b.

needs financial assistance in order to commence or

expand such business which provides or intends to

provide goods or services,

c.

is not engaged in oil and gas exploration, real estate

development, real estate sales, retail sales of food

or clothing, farming, ranching, banking, or lending or

investing funds in other businesses. Provided,

however, businesses which provide or intend to provide

goods or services, including, but not limited to,

goods or services involving new technology, equipment,

or techniques to such businesses listed in this

subparagraph, and investments in the development of

tourism facilities in the form of amusement parks,

entertainment parks, theme parks, golf courses, or

museums shall not be subject to said prohibition, and

d.

expends within eighteen (18) months after the date of

the investment at least fifty percent (50%) of the

proceeds of the investment for the acquisition of

tangible or intangible assets which are used in the

active conduct of the trade or business of the

Oklahoma business venture or to provide working

capital for the active conduct of such trade or

business. For purposes of this subparagraph, “working

capital” shall not include consulting, brokerage or

transaction fees. Provided, that the Oklahoma Tax

Commission, upon request and demonstration of need by

a qualified venture capital company or an Oklahoma

business venture, may extend the eighteen-month period

otherwise required by this subparagraph for a period

not to exceed six (6) months. Provided, the

expenditure of the invested funds by the Oklahoma

business venture shall otherwise comply with the

requirements applicable to the usage of tax credits

for investment in the Oklahoma business venture. As

used in this subparagraph, “tangible assets” shall

include the acquisition of real property and the

construction of improvements upon real property if

Oklahoma Statutes - Title 68. Revenue and Taxation

such acquisition and construction otherwise complies

with the requirements applicable to the usage of tax

credits for investment in the Oklahoma business

venture and “intangible assets” shall be limited to

computer software, licenses, patents, copyrights, and

similar items;

3. "Direct investment" means the purchase of securities of a

private company, or securities of a public company if the securities

constitute a new issue of a public company and such public company

had previous year sales of less than Ten Million Dollars

($10,000,000.00); and

4. "Debt and equity funds" means investments in debt

securities; including unsecured, undersecured, subordinated or

convertible loans or debt securities; and/or equity securities,

including common and preferred stock, royalty rights, limited

partnership interest, and any other securities or rights that

evidence ownership in businesses; provided such investment of debt

and equity funds shall not have a repayment schedule that is faster

than a level principal amortization over five (5) years.

C. The credit provided for in subsection A of this section

shall be twenty percent (20%) of the cash amount invested in

qualified venture capital companies which is subsequently invested

in an Oklahoma business venture by the qualified venture capital

company and may only be claimed for a taxable year during which the

qualified venture capital company makes an investment in an Oklahoma

business venture. The credit shall be allowed for the amount of the

investment in an Oklahoma business venture if the funds are used in

pursuit of a legitimate business purpose of the Oklahoma business

venture consistent with its organizational instrument, bylaws or

other agreement responsible for the governance of the business

venture. The qualified venture capital company shall issue such

reports as the Oklahoma Tax Commission may require attributing the

source of funds of each investment it makes in an Oklahoma business

venture. The Oklahoma Capital Investment Board shall have the

authority to certify an entity as a qualified venture capital

company and to certify an investment to be a qualifying Oklahoma

business venture for purposes of complying with subsection B of this

section. Such certification shall be binding on the Oklahoma Tax

Commission. Such certification shall not be mandatory but may be

requested by any entity that desires to be certified. A reasonable

certification fee may be charged by the Oklahoma Capital Investment

Board for this service. If the tax credit allowed pursuant to

subsection A of this section exceeds the amount of taxes due or if

there are no state taxes due of the taxpayer, the amount of the

claim not used as an offset against the taxes of a taxable year may

be carried forward as a credit against subsequent tax liability for

a period not to exceed three (3) years. No investor in a venture

Oklahoma Statutes - Title 68. Revenue and Taxation

capital company organized after July 1, 1992, may claim tax credits

under the provisions of this section.

D. No taxpayer may claim the credit provided for in subsection

A of this section for investments in qualified venture capital

companies made prior to January 1, 1987.

E. No investor whose capital is guaranteed by the Oklahoma

Capital Investment Board may claim or transfer the credit provided

for in subsection A of this section for investments in such

guaranteed portfolio.

F. The credit provided for in subsection A of this section, to

the extent not previously utilized, shall be freely transferable to

and by subsequent transferees for a period of three (3) years from

the date of investment in the Oklahoma business venture.

G. If a pass-through entity is entitled to a credit under this

section, the pass-through entity shall allocate such credit to one

or more of the shareholders, partners or members of the pass-through

entity; provided, the total of all credits allocated shall not

exceed the amount of the credit to which the pass-through entity is

entitled. The credit may also be claimed for funds borrowed by the

pass-through entity to make a qualified investment if a shareholder,

partner or member to whom the credit is allocated has an unlimited

and continuing legal obligation to repay the borrowed funds but the

allocation may not exceed such shareholder’s, partner’s or member’s

pro-rata equity share of the pass-through entity even if the

taxpayer’s legal obligation to repay the borrowed funds is in excess

of such pro-rata share of such borrowed funds. For purposes of this

act, “pass-through entity” means a corporation that for the

applicable tax years is treated as an S corporation under the

Internal Revenue Code, general partnership, limited partnership,

limited liability partnership, trust or limited liability company

that for the applicable tax year is not taxed as a corporation for

federal income tax purposes.

Added by Laws 1986, c. 265, § 1, eff. Jan. 1, 1987. Amended by Laws

1987, c. 222, § 110, operative July 1, 1987; Laws 1988, 3rd

Ex.Sess., c. 2, § 2, emerg. eff. Sept. 9, 1988; Laws 1989, c. 350, §

3, operative July 1, 1989; Laws 1990, c. 328, § 14, eff. Sept. 1,

1990; Laws 1991, c. 188, § 13, eff. July 1, 1991; Laws 1998, c. 226,

§ 1, eff. Jan. 1, 1999; Laws 2003, c. 181, § 2, eff. Nov. 1, 2003;

Laws 2006, c. 281, § 2, emerg. eff. June 7, 2006; Laws 2008, c. 440,

§ 1.

§68-2357.7A. Commission to file annual report on qualified venture

capital company investment credit.

On or before November 1 of each year subsequent to the effective

date of this act, the Oklahoma Tax Commission shall file a report

with the Speaker of the House of Representatives and the President

Pro Tempore of the Senate. The report shall state the amount of

Oklahoma Statutes - Title 68. Revenue and Taxation

credits actually claimed and allowed pursuant to the provisions of

Section 2357.7 of Title 68 of the Oklahoma Statutes during the

previous calendar year, statistical information on the qualified

investments made by qualified venture capital companies during the

previous year, an estimate of the number of jobs created in this

state during the previous year pursuant to qualified investments

made by qualified venture capital companies, and such other

information as the Tax Commission may deem relevant.

Added by Laws 2006, c. 281, § 3, emerg. eff. June 7, 2006.