8 CCR 1501-2
STATEMENT OF BASIS AND STATUTORY AUTHORITY These rules implement the Certified Capital Companies’ Program pursuant to 10-3.5-101 through 10-3.5- 110, 24-48.5-106 and 10-1-103, C.R.S. This program was created by the Colorado State Legislature with the primary purpose being to provide assistance in the formation of new businesses and the expansion of existing businesses that create jobs in the state by providing an incentive for insurance companies to invest in Certified Capital Companies. The Certified Capital Companies will then invest the funds in Colorado Businesses.
Insurance companies will invest cash in Certified Capital Companies, which are for-profit companies, which have received certification from the Colorado Office of Economic Development to do business under this program. The Certified Capital Companies will then invest in certain types of Colorado Businesses utilizing the cash they received from the insurance companies to make these investments. Although the Colorado Statute and this regulation direct the Certified Capital Companies’ investment to certain types of Colorado Businesses, the Certified Capital Companies will retain a large amount of flexibility in the decision making process in terms of which businesses receive investment funding from this program. Once a business is determined to be generally eligible under the Statute and this regulation, the Certified Capital Companies have final decision making authority as to whether to invest in such business. A Certified Capital Company may not make any investments in Colorado Businesses, using funds from this program, until it has received its certification from the Colorado Office of Economic Development and until investing insurance companies have received vested Premium Tax Credit Allocations in exchange for their cash investment in the Certified Capital Company. In exchange for the insurance companies’ cash investment in Certified Capital Companies, this program authorizes the Allocation of Premium Tax Credits to insurance companies as an incentive for insurance companies to invest in Certified Capital Companies. The legislature authorized a Premium Tax Credit Allocation Pool of $100 million for this program. Additionally, the Statute further divided the Pool into a $25 million Rural Pool and a $75 million Statewide Pool. The $25 million Rural Pool shall be available for investment in Designated Rural Counties in Colorado. The $75 million Statewide Pool shall be available for investment statewide throughout Colorado. The Colorado Office of Economic Development has fully allocated all of the premium tax credits for the Program as of April 15, 2002. PURPOSE OF REGULATION This regulation implements the Certified Capital Companies’ Program pursuant to 10-3.5-101 through 10- 3.5-110, 24-48.5-106 and 10-1-103, C.R.S. in which the Statute requires that the Colorado Office of Economic Development promulgate such regulation. This regulation clarifies certain definitions and provides for new definitions as needed. It describes the requirements for maintaining its status as a Certified Capital Company and the process for decertification for failure to comply with certain legislative requirements. This regulation provides requirements for the insurance company’s cash investment in a Certified Capital Company. It provides for technical corrections and amendments to statutes. It describes the Premium Tax Credit Allocation Process, the methods for claiming Premium Tax Credits, and the process for transferring or selling Premium Tax Credits. It details the Distributions Review, which describes a method for calculating the internal rate of return or the 15% calculations pursuant to 103-3.5- 108, C.R.S., to be conducted by the Colorado Office of Economic Development and the required reports Certified Capital Companies must file with the Colorado Office of Economic Development. By promulgating this regulation, the Colorado Office of Economic Development will increase public access to information, public participation in the formulation of administrative policy and procedures, and increase public accountability of the Colorado Office of Economic Development. DEFINITIONS 10-3.5-103, C.R.S.
The following language provides definitions for terms provided under 10-3.5-101 through 10-3.5-110, 24- 48.5-106 and 10-1-103, C.R.S. that were utilized in the Statute for this program and provides new definitions, both of which are necessary for the implementation of the CAPCOs’ Program by the Colorado Office of Economic Development. The following words and terms shall have the meanings provided herein, unless the context clearly indicates otherwise. “Applicant” means one who applies to be a Certified Capital Company. Applicant can also mean proposed Certified Capital Company. If the Office approves Applicant’s request, then the Applicant’s status shall change to a Certified Capital Company.
"Business Day" is defined the same as a working day.
“CAPCO” is a Colorado Certified Capital Company certified pursuant to the Certified Capital Companies’ Program, 10-3.5-101 through 10-3.5-110, 24-48.5-106 and 10-1-103, C.R.S, and specifically pursuant to the definition provided at 10-3.5-103(4), C.R.S. “Capitalization” shall be relevant for the purposes of initial certification pursuant to 10-3.5.-104(2)(c), C.R.S. A CAPCO shall utilize Generally Accepted Accounting Principles (“GAAP” ) in recording Equity Capitalization of the CAPCO. At the time of certification, a CAPCO shall have Equity Capitalization of non- Certified Equity Capital in the amount of $500,000. CAPCOs shall maintain separate and independent records for their non-Certified Equity Capitalization as well as separate and independent records for each Specific Pool of Certified Capital (for example, the Rural Pool and the Statewide Pool as applicable to each CAPCO). Equity Capitalization used in CAPCO Distribution language of this article shall be considered Equity Capitalization from any source at any time. “Colorado Business(es)” are eligible for funding from this program if they meet the eligibility requirements stated under the definition of “Qualified Business” and/or “Qualified Rural Business” under this program’s Statute and this regulation.
“Colorado Economic Development Commission” (“EDC” ) was legislatively created in 1987, pursuant to 24-46-102, C.R.S. as amended, to encourage, promote and stimulate economic development in Colorado.
“Day” means a calendar day as in seven days in a week.
“Designated Rural County” means any county, but not any city and county, in this state that, as of the effective date of this article, has a population of not more than one hundred fifty thousand people and, if the county’s population exceeds twenty thousand people, that has a growth rate that does not exceed the statewide average for the period 1990-2000 by more than twenty-five percent as defined in the two most recent decennial censuses.
(1) Population Estimates for Counties. A Designated Rural County may not have a population of more than 150,000 people as of the effective date of 10-3.5-101 through 10-3.5-110, 24-48.5-106 and 10-1-103, C.R.S., which was June 9, 2001. As of June 9, 2001, the official county population estimates used by the Colorado State Demographer’s Office within the Department of Local Affairs reflect population counts of the 2000 Census. Counties, in Colorado that had in excess of one hundred fifty thousand people on the above date and therefore are NOT “Designated Rural Counties” for the purpose of this program, are as follows with their respective populations: Adams (363,857), Arapahoe (487,967), Boulder (291,288), Denver (554,636), Douglas (175,766), El Paso (516,929), Jefferson (527,056), Larimer (251,494), and Weld (180,936).
(2) County Population Growth. If the county’s population exceeds twenty thousand people, and its population growth rate for the period 1990-2000 exceeds the statewide average by more than twenty-five percent as defined in the most recent decennial censuses, that county will not be considered a “Designated Rural County.” The State of Colorado had a 1990 census population of 3,294,394 and a 2000 census population of 4,301,261, an increase of thirty and six-tenths percent (30.6%). A population growth rate over twenty-five percent (25%) above the statewide growth rate would equal thirty-eight and sixty-five one hundredths percent (38.65%). The following five counties meet these criteria and therefore are NOT “Designated Rural Counties” for the purpose of this program:
(3) City and County. No city and county may be a Designated Rural County. The following counties are cities and counties and therefore are NOT “Designated Rural Counties” : Broomfield and Denver.
(4) Designated Rural Counties. All other counties in Colorado are considered to be a “Designated Rural County” for the purposes of this program until the 2010 decennial census is issued. At that time, all “Designated Rural Counties” shall be reviewed by the Office and an amendment to the rule shall be published if the “Designated Rural Counties” change based on the Office’s review at that time.
“Director” means the Director of the Colorado Office of Economic Development. “Distressed Urban Community” means any county or portion of a county in this state as defined by the Office.
(1) For the purpose of this program, a “Distressed Urban Community” shall be any area within the list of counties that is NOT a Designated Rural County in Paragraphs (1), (2) and (3) of the Designated Rural Counties’ definition and that has been designated as an Enterprise Zone by the Colorado Economic Development Commission pursuant to 39-30-103, C.R.S. An Enterprise Zone is an area, which has been nominated by one or more counties, municipalities, and/or cities and counties as economically distressed, and which has been designated as such by the Colorado Economic Development Commission. The specific boundaries of those zones are on record with the local Enterprise Zones Administrators within the designated Enterprise Zones in the State of Colorado.
(2) In the event that a “Distressed Urban Community” ceases to be an Enterprise Zone area as a result of a formal action by the Colorado Economic Development Commission to terminate the area's Enterprise Zone status pursuant to 39-30-103, C.R.S. an investment by a Certified Capital Company shall be considered an investment in a Qualified Business that has its Principal Business Operations located in a Distressed Urban Community if the location was in an Enterprise Zone at the time of the first investment by the Certified Capital Company in said business.
(3) In the event the Enterprise Zone Program is no longer in effect for the State of Colorado, the Office will determine appropriate criteria for consideration as a “Distressed Urban Community” for the purposes of this program and an amendment to the rule shall be published at that time. “Distributions” has the meaning as outlined in the Statute and this regulation, except for the purposes of the internal rate of return calculations or the 15% calculations pursuant to 103-3.5-108, C.R.S. where “Distributions” shall have the meaning specifically defined within this regulation where internal rate of return calculations or the 15% calculations are described. “Distributions Review” means the internal rate of return calculation or the 15% calculations, which the Office shall complete as part of the annual review pursuant to 103-3.5-109, C.R.S. “Full-time Equivalent” means an individual who generally works 2080 hours per calendar year. “Generally Accepted Accounting Principles” (“GAAP” ) means conventions, rules, and procedures that define accepted accounting practice, including broad guidelines as well as detailed procedures. The basic doctrine was set forth by the Accounting Principles Board of the American Institute of Certified Public Accountants, which was superseded in 1973 by the Financial Accounting Standards Board (“FASB” ), an independent self-regulatory organization. GAAP shall be utilized by CAPCO’s in all instances unless an alternative treatment is specified in a specific situation and fully explained in writing by the Independent Certified Public Accountant.
“Headquarters or Headquartered for a CAPCO” means the chief place of business from which policies are made and orders are issued.
Each CAPCO and its managing/operating company (if applicable), receiving such certification from the Office, shall maintain a separate physical site location, contact information and contact persons from any other Certified Capital Company and its respective managing/operating company (if applicable). A CAPCO and its managing/operating company may occupy the same physical site location. “Headquarters or Headquartered for a Qualified Business or a Qualified Rural Business” means the chief place of business from which policies are made and orders are issued. “Immediate Family Member” means spouse, child by birth or adoption, stepchild, stepparent, parent, sibling, legal guardian, significant other or lawful representative. “Indirectly” means deviating from a direct line or relationship, not going straight to the point, not directly aimed at or achieved, as well as any other indirect means or acts. Indirectly may involve one or more intermediaries.
“Investment of Cash” means a transaction, which in substance and in form, results in a CAPCO disbursement of cash. Examples of transactions excluded from this definition are circular transactions as determined by the Office; accruals of principal, interest, royalty or other income; letters of credit; loan guarantees; and loan collection expenses or legal fees incurred by a CAPCO in protecting its collateral interest in an investment.
Investment of Cash further means the commitment of cash in a business in order to earn a financial return. Investing in a business is different and distinct from traditional lending to a business. Investing in a business involves a higher level of risk in exchange for a return exceeding that, which is typical in the banking or lending industry.
An Investment of Cash by a CAPCO shall have a minimum term of 1 year unless determined otherwise by the Office. This provision is not intended to preclude: 1) a business from repaying the investment, at its sole discretion, on an earlier date or 2) a CAPCO from exercising any of its rights as a creditor. In regards to revolving lines of credit, the highest outstanding balance that has been borrowed by the Qualified Business on any one date within the term of the revolver will be the amount of Qualified Investment dollars that are credited towards the requirements within this program. “Material” means having significant importance as determined by the Office. “Premium Tax Credit Allocation Pool” means the Premium Tax Credit Allocation Pool of $100 million, which has been authorized by the State of Colorado’s Legislature. The Premium Tax Credit Allocation Pool of $100 million dollars shall be referred to as the Pool. Additionally, the Pool has been further divided into a $25 million Rural Pool and a $75 million Statewide Pool and shall be known generally as Specific Pools. The $25 million Rural Pool, shall be available for investment in Designated Rural Counties in Colorado. The $75 million Statewide Pool, shall be available for investment statewide throughout Colorado. The Colorado Office of Economic Development has fully allocated all of the premium tax credits for the Program as of April 15, 2002.
“Principal Office” means the office designated by an entity or person as its principal office in the document most recently delivered by the principal office to the secretary of state for filing and filed by the secretary of state providing such information, including any statement of change of principal office. If the secretary of state does not maintain such information, then the entity or person shall provide such designating information in a format required by the Office. Each CAPCO and its managing/operating company (if applicable), receiving such certification from the Office, shall maintain a separate physical site location, contact information and contact persons from any other Certified Capital Company and its respective managing/operating company (if applicable). A CAPCO and its managing/operating company may occupy the same physical site location. “Principal Business Operations” means more than 50% of the business’ total assets are physically present in Colorado and more than 50% percent of the business' net income is allocable or apportionable to Colorado in accordance with Colorado income tax law regardless of whether such business is taxable or tax-exempt for Colorado income tax purposes. In addition, more than 75% of the business’ existing total salaries, wages and/or other compensation are paid to Colorado employees (calculated on a full-time equivalent basis).
In regard to a Designated Rural County or a Distressed Urban Community, the Principal Business Operations means more than 50% of the business’ total assets are physically present in a Colorado Designated Rural County or Distressed Urban Community, as applicable, and more than 50% percent of the business' net income is allocable or apportionable to Colorado in accordance with Colorado income tax law regardless of whether such business is taxable or tax-exempt for Colorado income tax purposes. In addition, more than 75% of the business’ existing total salaries, wages and/or other compensation are paid to Colorado employees (calculated on a full-time equivalent basis). “Statute” means 10-3.5-101 through 10-3.5-110, 24-48.5-106 and 10-1-103, C.R.S. “Working Days” means a business day in which the Colorado Office of Economic Development is open for normal business. A business day shall begin at 8:30AM Mountain Standard Time or Mountain Daylight Time, as applicable, and shall end at 5:00PM Mountain Standard Time or Mountain Daylight Time, as applicable.
CERTIFIED CAPITAL COMPANY APPLICATION 10-3.5-104, C.R.S. Filing of Certified Capital Company Application 1. An Applicant, seeking certification as a Certified Capital Company, shall file an original paper copy of the application with the Office. No other form (such as e-mail or facsimile) of the application shall be accepted. Pertaining to the Rural Pool and/or the Statewide Pool, all Applicants shall fully complete, execute, and file an application with the Office no earlier than 8:30AM Mountain Standard Time or Mountain Daylight Time, as applicable, on October 31, 2001. Once all Premium Tax Credit Allocations for the Pool have been completed by the Office, additional applications shall not be considered by the Office for the Pool. Applications submitted prior to the stated time and date (whether by hand delivery or otherwise) shall be considered to be received as of the stated time and date.
2. The application format may be obtained directly from the Office in paper copy format, by e-mail with an attached Word file or by accessing the Office’s website at www.state.co.us/oed.
3. An application shall be deemed filed with the Office when the Office receives one original application, including originally executed pages where signatures are required, and the application fee. Applications shall either be hand delivered with signature of receipt required, or delivered by a courier service or certified mail with signature of receipt required. The application must be delivered to the Office of Economic Development located at 1625 Broadway, Suite 1700, Denver, CO 80202.
4. Once an application has been submitted to the Office, the Office shall not recognize such application and shall not certify an Applicant as a Certified Capital Company if there has been an exchange of money or other consideration for purposes of gaining an advantage in regard to the Office’s review of Applicant’s application and approval of an application for certification.
5. Whenever any material information that the Applicant supplied in its application has become inaccurate or obsolete, the Applicant shall file an amended application in a format prescribed by the Office, including originally executed signatory pages. Amended applications must be submitted within 5 business days, of the information becoming inaccurate or obsolete during the application process. Amended applications shall be filed in the same manner and using the same methods as described in this section, “ Filing of Certified Capital Company Application ” ;however, no fee shall be required. The Applicant/CAPCO shall ask the Office to review the amended application and provide approval in the same manner that the Office reviews and approves initial applications; however, the 30-day time frame for approval shall begin upon the submittal of the amended application.
6. The Applicant shall, as soon as possible or within 5 business days, notify the Office in writing when: the Applicant is unable to continue as a viable going concern, the Applicant is subject to litigation which may affect its viability as a going concern, and/or if a merger or acquisition of the Applicant or by the Applicant has occurred. In the case of a merger or acquisition, the Office shall request additional information as needed to determine if the requirements of the CAPCO Statute and this regulation continue to be met. Such notification shall be filed in the same manner and using the same methods as described in this section “ Filing of Certified Capital Company Application ” .The 30-day time frame for approval shall begin upon the submittal of the amended application.
7. The Office shall stamp applications for certification, Notices of Intent to Request Premium Tax Credit Allocation from the Pool and amended applications with the date and time of receipt.
8. The Office reserves the right to determine what information is deemed material with regards to an Applicant fully completing, executing and filing an application, an amended application, or a Notice of Intent to Request Continuing Certified Capital Company Status with the Office. Requirements of an Application The application shall contain:
1. A nonrefundable application fee in the amount of $7,500 in the form of a cashier’s check, certified check, or company check made payable to the State of Colorado.
2. Statements may be combined into one statement when several certifications are required by the same Person.
3. A statement, signed by a legally authorized representative of the Applicant, that states whether the application is applicable to tax credits associated with the Rural Pool and/or the Statewide Pool during the Pool application process.
4. Signature authorization documentation for the legally authorized representative of the Applicant, which is appropriate for the Applicant’s legal structure. For example, a fully executed board resolution (authorizing the President of the company to sign such documents and stating who the President
5. Applicant’s complete legal organizational documents which reflect evidence of appropriate filing with appropriate state agencies, if filing is required, along with a signed self certification of good standing in said state dated no earlier than 60 business days prior to submittal. For example, a complete copy of a corporation’s articles of incorporation and by-laws (which have been filed with the Colorado Secretary of State and reflect a file date/number) and a signed self-certification of good standing in Colorado, would be appropriate legal organizational documents for a corporation.
6. Any “assumed or doing business as” names that the Applicant conducts business under and any required “assumed or doing business as” filings with a state agency, if applicable.
7. If the CAPCO is to be managed by a management or operating company, signature authorizations, the legal organizational documentation, any “assumed or doing business as” name filings, if applicable, appropriate contact people, phone numbers and street address for the management or operating company shall be submitted. Refer to items required under numbers 4., 5., and 6. of this section, “ Requirements of an Application ” ,for further guidance on the type of documents.
8. If the CAPCO is to be managed by a management or operating company, the Applicant shall submit an executed contract between the Applicant and the management or operating company, which describes what actions, the management or operating company may take on behalf of the Applicant. Such contract shall be signed by a legally authorized representative of the Applicant and of the management or operating company. For example, the contract agreement may authorize the management or operating company to submit requests to the Office for a written opinion on the eligibility of a business as a Qualified Business or a Qualified Rural Business on behalf of the Applicant.
9. A list, including the name and address, of all members of the Applicant’s Board of Directors (voting or otherwise), officers, partners, trustees, managers, members, and principals. Such list shall describe the level of control over the Applicant and prospective CAPCO.
10. The address, phone number and individual contacts for the Applicant’s Principal Office or Headquarters location in Colorado.
11. A list, including the name and address, of all the Applicant’s existing office locations.
12. A list, including the name, Insurance Premium Tax Identification Number issued by the National Association of Insurance Commissioners, address and description, of all Affiliates of the Applicant and a description of the Affiliate’s relationship with the Applicant.
13. A statement, signed by a legally authorized representative of the Applicant that states the primary business activity of the CAPCO is the Investment of Cash in Qualified Businesses and/or Qualified Rural Businesses.
14. An audited Balance Sheet, in the legal name of the Applicant, which verifies that the legal Applicant has an Equity Capitalization of $500,000 or more in the form of unencumbered cash, marketable securities, or other liquid assets. The audited Balance Sheet shall be accompanied by an originally executed, unqualified opinion from an Independent Certified Public Accountant, which states that the legal Applicant meets the Equity Capitalization requirement stated herein. The unqualified opinion shall be dated no earlier than 35 days before the application is submitted to the Office. The unqualified opinion shall be on the Independent Certified Public Accountant’s letterhead and shall include a complete street address and phone number. The Independent Certified Public Accountant shall be a member in good standing with the American Institute of Certified Public Accountants and, if requested by the Office, such good standing will be documented by a letter, dated no earlier than 60 business days before the submittal to the Office, from the President/Executive Director of the AICPA. If requested by the Office, a copy of the Independent Certified Public Accountant’s license in the U.S. state where he or she practices shall be submitted along with a statement from the issuer of the license that the Independent Certified Public Accountant is in good standing in the state where he or she practices dated no earlier than 60 business days of the submittal to the Office. Such statement from the issuer of the license shall contain a street address and phone number.
15. During the Pool application process, a statement, signed by a legally authorized representative of the Applicant, that states the Applicant has a least two principals or at least two individuals (hereafter identified as key employees) employed to manage the funds who have at least two years of money management experience in the venture capital industry if the Applicant is applying to be a Certified Capital Company for only the Statewide Pool or for both the Statewide Pool and the Rural Pool. Such statement shall also be signed by the two principals or the two key employees. During the Pool application process, a statement, signed by a legally authorized representative of the Applicant, that states the Applicant has at least two principals or at least two individuals (hereafter identified as key employees) employed to manage the funds who each have at least two years of experience in either the venture capital or investment banking industry if the Applicant is applying to be a Certified Capital Company for only the Rural Pool. Such statement shall also be signed by the two principals or the two key employees.
16. The Statute requires that “The Office shall verify whether the Applicant meets the requirements of 10- 3.5-104(2)(d), C.R.S.,” pertaining to the experience of the Applicant’s principals or key employees. In order to accomplish this requirement, the following items shall accompany the statement, described in 15:
17. A statement of disclosure from the Applicant’s principals, key employees and its management/operating company, if applicable, that will be involved in the direction, management or operation of the Certified Capital Company, stating that the Person has read the Colorado CAPCO Statute and regulations; fully understands the requirements of the Colorado Statute and regulations; is not affiliated with the Colorado Office of Economic Development and/or any of its employees and will not be affiliated with the Colorado Office of Economic Development and/or any of its employees during their affiliation with the Applicant; has never been convicted of and is not currently under indictment or prosecution for securities fraud or any other criminal acts (other than minor vehicle violations); has no overdue federal, state (any state in the United States), or local (any local government in the United States) tax payments or liens, has not been ordered to pay, and/or is not currently involved in legal action with the State of Colorado or any agency thereof for the payment of funds owed to the state, any agency of the State of Colorado, or other parties that the State of Colorado represents. Such statement of disclosure shall be supplied by the Office, shall be completed by each of the Applicant’s principals, key employees and its management/operating company, if applicable; and, shall require a full and complete explanation as to the reason and circumstances for any of the requirements described herein not being met.
18. A statement, signed by a legally authorized representative of the Applicant, which states that no insurance company or Affiliate of an insurance company shall, directly or indirectly manage the Applicant’s Certified Capital Company or control the direction of investments for the Applicant’s Certified Capital Company.
19. A separate listing of all Persons that have voting securities or other voting ownership interests in the legal Applicant along with the Person’s respective ownership percentage of such securities or ownership. The sum of all percentages on such list shall total one hundred percent (100%). No insurance company or Affiliate of an insurance company shall, directly, or indirectly, beneficially own, whether through rights, options, convertible interests, or otherwise, fifteen percent (15%) or more of the voting securities or other voting ownership interests of a Certified Capital Company.
20. A statement, signed by a legally authorized representative of the Applicant, stating that the information submitted in the application is complete and accurate.
21. A sample of offering materials used or to be used in investor solicitations. Any offering material involving the sale of securities of the Certified Capital Company shall include the following statement:
22. A statement, from a legally authorized representative of the Applicant that states that all information submitted during the application phase will endure and continue to be legally binding if an Applicant is certified by the Office.
23. The Office reserves the right to request additional information after the application and the application fee have been submitted which is reasonable and necessary to complete the evaluation of the application.
24. The Office reserves the right to determine what information is deemed material with regards to an Applicant fully completing, executing and filing an application, an amended application, or a Notice of Intent to Request Continuing Certified Capital Company Status with the Office. Approval of Application and Issuance of Certification Within thirty (30) days after receipt of an application (unless amendments to the application have been submitted), the Office shall issue the certification or deny the certification. The Office shall review and approve or reject applications in the order submitted, treating all applications received on the same day as being received simultaneously unless the application is incomplete (refer to “ Incomplete Applications ” ).The Office shall consider the requirements stated in the Statute, along with the information requested in this regulation, to determine if an Applicant shall be certified to be a Certified Capital Company. The certification issued by the Office shall indicate whether the certification is applicable to credits allocated pursuant only to the Rural Pool, only the Statewide Pool, or both the Rural Pool and the Statewide Pool during the Pool application process. The certification issued by the Office shall state that the certification is contingent upon all information submitted, except for maintaining Equity Capitalization, during the application phase continuing to be accurate and in force unless written approval for variances have been requested by the Applicant and approved by the Office. The certification issued by the Office shall be effective from the date of issuance and shall continue until such time as the CAPCO has been decertified pursuant to 10-3.5-109 C.R.S., whether such decertification is a result of the CAPCO’s annual review or otherwise.
Incomplete Application In the event of an incomplete application or if additional information has been requested by the Office, the application shall be treated as having been received on the date originally submitted only if the Applicant submits the additional information within fifteen (15) days after the date of the Office’s written request. Upon receiving all requested information, the Office shall have ten (10) days from the day that the completed information was submitted to approve or reject the application and certification request. If all application requirements are not met within the time frame stated herein, the application shall be deemed withdrawn and the Office shall have no obligation to provide additional notices to the Applicant. Denial of Application If an application is denied, the Office shall communicate in detail to the Applicant the grounds for the denial, including suggestions for the removal of such grounds. A denied Applicant must refile its revised application after taking into account the Office’s communication on the grounds for the denial and suggestions for the removal of such grounds. The application will then be treated as a new application in respect to the application process and time frames for reviewing it. Based on the extent of the revisions that need to be made by the Applicant and then reviewed by the Office, the Office shall determine if a new application fee shall be charged. False, inaccurate, or misleading information provided in the application shall be grounds for rejection of the application and denial of further consideration. PREMIUM TAX CREDIT ALLOCATION PROCESS 10-3.5-106, C.R.S. Premium Tax Credit Allocation Pools The Premium Tax Credit Allocation Pool of $100 million has been authorized by the CAPCO Statute. Additionally, the Pool is further divided into a $25 million Rural Pool and a $75 million Statewide Pool, which may generally be referred to as Specific Pools.
Premium Tax Credit Allocation Claims 1. The Office of Economic Development shall accept Premium Tax Credit Allocation Claims filed by CAPCOs (on behalf of their investors), pertaining to the Pool, beginning no earlier than 8:30AM Mountain Standard Time or Mountain Daylight Time, as applicable, on April 8, 2002. All of the Rural Pool ($25,000,000) shall be fully allocated before the Office shall begin allocating the Statewide Pool ($75,000,000). The CAPCO shall previously have been certified by the Office to be a CAPCO in Colorado in order to be eligible to submit Premium Tax Credit Allocation Claims and such claims shall only be accepted for the Specific Pools for which the CAPCO has received certification. All Premium Tax Credit Allocation Claim forms submitted prior to the stated time and date (whether by hand delivery or otherwise) shall be considered as received on the stated time and date.
2. The CAPCO shall file original paper copies of the Premium Tax Credit Allocation Claim forms with the Office. No other form (such as e-mail, facsimile, etc.) of the forms shall be accepted.
3. The Premium Tax Credit Allocation Claim forms shall be deemed filed with the Office when the Office receives one original form from each Investor, including originally executed pages where signatures are required and a Master Claims Report from the CAPCO. The Premium Tax Credit Allocation Claim form and the Master Claims Report format shall be obtained directly from the Office. The forms shall either be hand delivered with signature of receipt required, or delivered by a courier service or certified mail with signature of receipt required. The forms must be delivered to the Office of Economic Development located at 1625 Broadway, Suite 1700, Denver, CO 80202.
4. The Office shall stamp Premium Tax Credit Allocation Claim forms with the date and time of receipt.
5. If a CAPCO’s certification for the Pool is applicable to the Rural Pool and the Statewide Pool, the CAPCO on an aggregate basis with its Affiliates, shall not file Premium Tax Credit Allocation Claims in excess of $100,000,000. However, the CAPCO shall not file Premium Tax Credit Allocation Claims in excess of the maximum available under the Rural Pool ($25,000,000) and the Statewide Pool ($75,000,000). The CAPCO’s Premium Tax Credit Allocation Claim form shall specify that the Premium Tax Credit Allocation Claim is for an allocation of premium tax credits from the Rural Pool only, the Statewide Pool only, or both the Rural Pool and the Statewide Pool and shall state the amount requested from each of the Specific Pool(s). The CAPCO shall previously have been certified by the Office to be a CAPCO in Colorado in order to be eligible to submit Premium Tax Credit Allocation Claims and such claims shall only be accepted for the Specific Pools for which the CAPCO has received certification. With respect to claims being filed for both the Rural Pool and the Statewide Pool, the maximum amount of Premium Tax Allocation Claims that any one Certified Investor and Affiliates may file, in the aggregate, in one or more Certified Capital Companies shall not exceed Fifteen Million dollars ($15,000,000).
6. If a CAPCO’s certification for the Pool is applicable only to the Statewide Pool, the CAPCO on an aggregate basis with its Affiliates, shall not file Premium Tax Credit Allocation Claims in excess of Seventy-Five Million Dollars ($75,000,000). The CAPCO’s Premium Tax Credit Allocation Claim form shall specify that the Premium Tax Credit Allocation Claim is for an allocation of premium tax credits from only the Statewide Pool and shall specify the dollar amount being requested. The CAPCO shall previously have been certified by the Office to be a CAPCO in Colorado in order to be eligible to submit Premium Tax Credit Allocation Claims and such claims shall only be accepted if the CAPCO has received certification for the Statewide Pool. With respect to claims being filed for only the Statewide Pool, the maximum amount of Premium Tax Allocation Claims that any one Certified Investor and Affiliates may file, in the aggregate, in one or more Certified Capital Companies shall not exceed Fifteen Million dollars ($15,000,000). If a Certified Company, on an aggregate basis with its Affiliates, files Premium Tax Credit Allocation Claims in excess of the limits described herein, the Office shall consider the Premium Tax Credit Allocation Claim as not filed and shall mail it back to the CAPCO by regular mail.
7. If a CAPCO’s certification for the Pool is applicable only to the Rural Pool, the CAPCO on an aggregate basis with its Affiliates, shall not file Premium Tax Credit Allocation Claims in excess of Twenty-Five Million Dollars ($25,000,000). The CAPCO’s Premium Tax Credit Allocation Claim form shall specify that the Premium Tax Credit Allocation Claim is for an allocation of premium tax credits from only the Rural Pool and shall specify the dollar amount being requested. The CAPCO shall previously have been certified by the Office to be a CAPCO in Colorado in order to be eligible to submit Premium Tax Credit Allocation Claims and such claims shall only be accepted if the CAPCO has received certification for the Rural Pool. With respect to claims being filed for only the Rural Pool, the maximum amount of Premium Tax Credit Allocation Claims that any one Certified Investor and Affiliates may file in one or more Certified Capital Companies, in the aggregate, shall not exceed Twenty-Five Million Dollars ($25,000,000).
8. For the Pool of One Hundred Million Dollars ($100,000,000), the aggregate amount of Certified Capital for which premium tax credits are allowed for all Certified Investors shall not exceed Ten Million Dollars ($10,000,000) per year for ten years beginning in tax year 2003 for the Pool in accordance with 10-3.5-105, C.R.S.
9. For the Pool, Investors shall not invest Certified Capital in CAPCOs prior to April 1, 2002 in order to be eligible to make a Premium Tax Credit Allocation Claim from the Pool.
10. In conjunction with this section, Premium Tax Credit Allocation Claims , each Premium Tax Credit Allocation Claim form shall be accompanied by an original statement executed by the prospective Certified Investor, which states:
11. In conjunction with this section, Premium Tax Credit Allocation Claims , each Investor shall submit either a Resolution from the Investor’s Board which states that the Board of Directors has authorized the individual(s) who signed such documents to enter into such contracts/agreements on behalf of the Investor or an incumbency certificate executed by the Secretary of the Investor attesting to the position with the Investor that is held by the individual(s) who signed such documents. Such position, which the individual(s) holds with the Investor, must be one that is given authority to sign such documents in the company’s By-Laws or other such document.
12. In conjunction with the requirements of this section, Premium Tax Credit Allocation Claims , each Investor shall submit: its address and Insurance Premium Tax Identification Number; a list of all insurance company Affiliates of the Investor (including the Affiliate’s name, the Affiliate’s Insurance Premium Tax Identification Number, the Affiliate’s address and a description of the Affiliate); a list of all Certified Capital Company Affiliates of the Investor (including the Affiliates' name, the Affiliates' address and a description of the Affiliate); and a description of the Investor’s relationship with the Affiliate.
The following definition of control shall be used by the Office. Control means a person (e.g., firm, company, entity, natural person), who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specific person. "Control” , including the terms “controlling” , “controlled by” , and “under common control with” , means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than commercial contract for goods or non-management services, or otherwise. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing fifteen percent or more of the voting securities of any other person. Each of a company’s officers, directors, or partners exercising executive responsibility (or persons having similar status or functions) is presumed to “control” the company. A person is presumed to control a corporation if the person: (1) directly or indirectly has the right to vote 15% or more of a class of the corporation’s voting securities, or (2) has the power to sell or direct the sale of 15% or more of a class of the corporation’ voting securities. A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 15% or more of the capital of the partnership. A person is presumed to control a limited liability company (LLC) if the person: (1) directly or indirectly has the right to vote 15% or more of a class of the interests of the LLC; (2) has the right to receive upon dissolution, or has contributed, 15% or more of the capital of the LLC; or (3) is an elected manager of the LLC.
If the CAPCOs, insurance companies, and/or other persons, as applicable, are not able to certify that they meet the above definition of control, then it shall be the responsibility of the CAPCOs, insurance companies, and/or other persons, as applicable, to submit an executed "Confirmation of Compliance with Affiliate and Control Definitions Form" (as issued by the Office), but specify on the Form the areas of non- compliance. Additionally, it shall be the responsibility of the CAPCOs, insurance companies, and/or other persons, as applicable, to provide documentation to the Office which substantiates that such control does not exist.
13. In conjunction with the requirements of this section, Premium Tax Credit Allocation Claims , the Premium Tax Credit Allocation Claim forms shall be accompanied by a descriptive list of guaranties, indemnities, bonds, insurance policies, or other payment undertakings that the CAPCO undertook or will undertake for the benefit of its Certified Investors. In no case shall more than one Certified Investor of the CAPCO or Affiliate of the Certified Investor be entitled to provide such payment undertakings in favor of the Certified Investors of the Certified Capital Company and its Affiliates in the State of Colorado. Such list shall include the amount of each payment undertaking, the provider of each payment undertaking in favor of the Certified Investors and a description of the payment undertaking. Such list shall be in the form of a statement by the CAPCO.
Calculation Method Utilized For Certified Capital For Which Premium Tax Credits Are Allowed The earliest date that Premium Tax Credit Allocation Claims for the Pool can be filed with the Office is April 8, 2002. The Certified Capital and Premium Tax Credits shall be allocated to Certified Investors, in Certified Capital Companies, in the order in which Premium Tax Credit Allocation Claims requesting an allocation of Premium Tax Credits under each Specific Pool are filed with the Office by Certified Capital Companies on behalf of their Certified Investors. The two Specific Pools, for which Premium Tax Credit Allocations shall be calculated, are the Rural Pool and the Statewide Pool. The Office shall begin the process by ensuring that all requirements stated under “ Premium Tax Credit Allocation Claims ” have been met. The Office shall then begin allocating the Rural Pool ($25,000,000) based on the Premium Tax Credit Allocation Claims filed with the Office. All of the Rural Pool must be fully allocated before the Office can begin allocating the Statewide Pool ($75,000,000). If two or more CAPCOs (and their Affiliates) file Premium Tax Credit Allocation Claims related to a Specific Pool with the Office on behalf of their Certified Investors on the same day and the sum of such Premium Tax Credit Allocation Claims exceeds, in the aggregate, the maximum aggregate amount available under such Specific Pool at the time of filing, the Certified Capital for which Premium Tax Credits are allocated shall be allocated among all Certified Investors filing on the same day utilizing a pro-rated basis for calculation purposes and as described herein. The process herein determines the amount of Certified Capital for which Premium Tax Credits are allowed.
Calculation Example A After the Office verified compliance with all requirements stated under “ Premium Tax Credit Allocation Claims ,” assume that three Certified Capital Companies certified only for the Rural Pool were the only CAPCOs that submit a Premium Tax Credit Allocation Claim for the Rural Pool. On April 8, 2002, if CAPCO A's (and its Affiliates) Investors request $10 million dollars (over ten years) in premium tax credits; CAPCO B’s (and its Affiliates) Investors request $10 million dollars (over ten years) in premium tax credits; and CAPCO C’s (and its Affiliates) Investors request $25 million dollars (over ten years) in premium tax credits, then the total premium tax credits’ requests of $45 million dollars exceed the $25 million dollars in premium tax credits available under the Rural Pool. Therefore, CAPCO A's (and its Affiliates) Investors would be allocated ($10,000,000/$45,000,000) x $25,000,000 = .22 x $25,000,000 = $5,555,556 in tax credits (over ten years); CAPCO B's (and its Affiliates) Investors would be allocated the same amount of tax credits as CAPCO A’s investors which is $5,555,556 (over ten years) and CAPCO C’s (and Affiliates) Investors would be allocated ($25,000,000/$45,000,000) x $25,000,000 = .56 x $25,000,000 = $13,888,888 in tax credits (over ten years). The Office reserves the right to round up or down within $1.00 at its discretion in allocating Premium Tax Credits. Calculation Example B If not fully allocated on the first day that a request(s) were received by the Office, then Premium Tax Credit Allocations shall be made in the amount requested. The premium tax credit allocations for claims filed on the first day shall be subtracted from the maximum available under the Specific Pool. The remaining balance shall become the new maximum available under the Specific Pool; however, the new maximum available will not impact the CAPCO’s Premium Tax Credit Allocation Claims’ limits as described in all requirements stated under “ Premium Tax Credit Allocation Claims ” .This process will continue to be utilized if Premium Tax Credit Allocation Claims for each specific date do not exceed the remaining, unallocated tax credit balance. In the event that Premium Tax Credit Allocation Claims exceed the remaining, unallocated tax credit balance on a specific date, the pro-rated calculation method shall then be utilized.
After the Office verified compliance with all requirements stated under “ Premium Tax Credit Allocation Claims ” ,assume that two Certified Capital Companies certified only for the Rural Pool and one Certified Capital Company certified for both the Rural Pool and the Statewide Pool were the only CAPCOs that submit a Premium Tax Credit Allocation Claim for the Rural Pool. On April 8, 2002, if CAPCO A's (and Affiliates) Investors request $5 million dollars (over ten years) in premium tax credits; CAPCO B’s (and Affiliates) Investors request $5 million dollars (over ten years) in premium tax credits; and CAPCO C’s (and Affiliates) Investors request $10 million dollars (over ten years) in premium tax credits, then the total requests of $20 million dollars do not exceed the $25 million dollars in premium tax credits available under the Rural Pool. Therefore, CAPCO A's Investors would be allocated $5,000,000 in premium tax credits (over ten years); CAPCO B's Investors would be allocated the same amount of premium tax credits as CAPCO A’s Investors which is $5,000,000 (over ten years) and CAPCO C’s Investors would be allocated $10,000,000 in premium tax credits (over ten years). After the $20 million dollars are allocated, $5 million dollars in premium tax credits will still be available. On April 11, 2002, CAPCO D’s (and Affiliates) Investors request $5 million dollars (over ten years) in premium tax credits and CAPCO E’s (and Affiliates) Investors request $10 million dollars (over ten years) in premium tax credits, then the total new requests of $15 million dollars exceed the remaining $5 million dollars in premium tax credits available after the initial allocation. Therefore, CAPCO D’s Investors would be allocated ($5,000,000/$15,000,000) x $5,000,000 = .33 x $5,000,000 = $1,666,667; and CAPCO E’s Investors would be allocated ($10,000,000/$15,000,000) x $5,000,000 = .67 x $5,000,000 = $3,333,333. The Office reserves the right to round up or down within a $1.00 at its discretion in allocating Premium Tax Credits.
Calculation Example C Assume that either Calculation A or Calculation B has occurred. The Rural Pool would be fully allocated. The Office shall allocate Premium Tax Credits from the Statewide Pool using the same method described in Calculation Example A and Calculation B.
Calculation Method Utilized For Premium Tax Credit Allocations to Individual Investors After calculating the Capital for which “Premium Tax Credits Are Allowed” for each CAPCO that submitted Premium Tax Credit Allocation Claims on behalf of its Certified Investors, the Office shall calculate the Premium Tax Credit Allocations to each Certified Investor of a Certified Capital Company. The amount of Capital for which “Premium Tax Credits Are Allowed” under a Specific Pool shall be allocated among the Certified Investors on a pro-rata basis. The pro-rata allocation for any one Certified Investor shall bear the same relation to the maximum aggregate amount available under each Specific Pool, as that Certified Investor’s Premium Tax Credit Allocation under such Specific Pool bears to the total of all Premium Tax Credit Allocation Claims seeking an Allocation of Premium Tax Credits pursuant to the same Specific Pool filed on behalf of all Certified Investors on the same day. Upon the receipt of the Investor’s Certified Capital in the amounts calculated herein, the amount determined by these calculations shall be the amount of Certified Capital provided to the CAPCO.
Calculation Example D Based on the calculation previously made under “ Calculation Method Utilized For Certified Capital For Which Premium Tax Credits Are Allowed, Calculation Example A ” ,the amount of the Certified Capital for which “Premium Tax Credits Are Allowed” was determined. The Office shall now complete the pro-rata calculation to determine each Investor’s Allocation of Premium Tax Credits. For simplicity, assume that none of the Investors (and Affiliates) are the same Investors (and Affiliates)— thus eliminating the need to verify that individual Investors (and Affiliates) have not exceeded certain maximum limitations. Assume that CAPCO’s (and Affiliates) submitted the following Premium Tax Credit Allocation Claims on behalf of their respective Investors (and Affiliates): . Investor’s Initial Claim Investor’s Allocation CAPCO A: Investor 1 @ $1,000,000 ($1,000,000/$45,000,000) X$25,000,000 = $555,556 . Investor 2 @ $1,000,000 ($1,000,000/$45,000,000)
X $25,000,000 = $277,778 . Investor 7 @ $ 500,000 ($ 500,000/$45,000,000)
X $25,000,000 = $277,778 . Investor 8 @ $ 500,000 ($ 500,000/$45,000,000)
X $25,000,000 = $277,778 . Investor 9 @ $1,000,000 ($1,000,000/$45,000,000)
X$25,000,000 = $555,555 . Investor 10 @ $1,500,000 ($1,000,000/$45,000,000)
X$25,000,000 = 833,333 . Total $10,000,000 Total $5,555,556 . . .
CAPCO B: Investor 1 @ $1,200,000 ($1,200,000/$45,000,000) X$25,000,000 = $666,667 . Investor 2 @ $1,200,000 ($1,200,000/$45,000,000)
X$25,000,000 = $666,667 . Investor 6 @ $500,000 ($ 500,000/$45,000,000)
X $25,000,000 = $277,778 . Investor 7 @ $500,000 ($ 500,000/$45,000,000)
X $25,000,000 = $277,778 . Investor 8 @ $500,000 ($ 500,000/$45,000,000)
X $25,000,000 = $277,778 . Investor 9 @ $1,000,000 ($1,000,000/$45,000,000)
X$25,000,000 = $555,555 . Investor 10 @ $1,500,000 ($1,500,000/45,000,000)
X $25,000,000 = $833,332 . Total $10,000,000 Total $5,555,556 . . .
CAPCO C: Investor 1 @ $3,750,000 ($3,750,000/$45,000,000) X$25,000,000=$2,083,33 . Investor 2 @ $3,750,000 ($3,750,000/$45,000,000)
X$25,000,000= $2,083,333 . Investor 6 @ $3,750,000 ($3,750,000/$45,000,000)
X$25,000,000= $2,083,333 . Investor 7 @ $500,000 ($500,000/$45,000,000)X $25,000,000 = $277,778 . Investor 8 @ $2,000,000 ($2,000,000/$45,000,000)
X$25,000,000= $1,111,112 . Total $25,000,000 Total $13,888,888 TOTAL SPECIFIC POOL ALLOCATION = $25,000,000 ($5,555,556 + $5,555,556 + $13,888,888)
Calculation Example E Based on the calculation previously made under “ Calculation Method Utilized For Certified Capital For Which Premium Tax Credits Are Allowed, Calculation Example B ” ,the amount of the Certified Capital for which “Premium Tax Credits Are Allowed” was determined. The Office shall now complete the pro-rata calculation to determine each Investor’s Allocation of Premium Tax Credits. For simplicity, assume that none of the Investors (and Affiliates) are the same Investors (and Affiliates)— thus eliminating the need to verify that individual Investors (and Affiliates) have not exceeded certain maximum limitations. No calculations are needed for CAPCO A, CAPCO B, and CAPCO C since the Individual Investors shall receive the amount requested. Calculations are needed for CAPCO D and CAPCO E. Assume that CAPCO’s (and Affiliates) submitted the following Premium Tax Credit Allocation Claims on behalf of their respective Investors:
. Investor 2 @ $750,000 $750,000 .
. Investor 3 @ $750,000 $750,000 .
. Investor 4 @ $750,000 $750,000 .
. Investor 5 @ $750,000 $750,000 .
. Investor 6 @ $750,000 $750,000 .
. Investor 7 @ $500,000 $500,000 .
. Total $5,000,000 Total $5,000,000 .
. . . .
CAPCO B: Investor 1 @ $750,000 $750,000 .
. Investor 2 @ $750,000 $750,000 .
. Investor 3 @ $750,000 $750,000 .
. Investor 4 @ $750,000 $750,000 .
. Investor 5 @ $750,000 $750,000 .
. Investor 6 @ $750,000 $750,000 .
. Investor 7 @ $500,000 $500,000 .
. Total $5,000,000 Total $5,000,000 .
. . . .
CAPCO C: Investor 1 @ $1,500,000 $1,500,000 .
. Investor 2 @ $1,500,000 $1,500,000 .
. Investor 3 @ $1,500,000 $1,500,000 .
. Investor 4 @ $1,500,000 $1,500,000 .
. Investor 5 @ $1,500,000 $1,500,000 .
. Investor 6 @ $1,500,000 $1,500,000 .
. Investor 7 @ $1,000,000 $1,000,000 .
. Total $10,000,000 $10,000,000 .
CAPCO D: Investor 1 @ $750,000 ($750,000/$15,000,000)
X $5,000,000* = $250,000 . Investor 5 @ $750,000 ($750,000/$15,000,000)
X $5,000,000* = $250,000 . Investor 6 @ $750,000 ($750,000/$15,000,000)
X $5,000,000* = $250,000 . Investor 7 @ $500,000 ($500,000/$15,000,000)
X $5,000,000* = $166,667 . Total $5,000,000 Total $1,666,667 *$5,000,000 is the denominator since this is the amount of the Specific Pool that was available on the day that CAPCO D and CAPCO E made their Premium Tax Credit Allocation Claims. CAPCO E: Investor 1 @ $1,500,000 ($1,500,000/$15,000,000) X$5,000,000* = $500,000 . Investor 2 @ $1,500,000 ($1,500,000/$15,000,000)
X$5,000,000* = $500,000 . Investor 3 @ $1,500,000 ($1,500,000/$15,000,000)
X$5,000,000* = $500,000 . Investor 4 @ $1,500,000 ($1,500,000/$15,000,000)
X$5,000,000* = $500,000 . Investor 5 @ $1,500,000 ($1,500,000/$15,000,000)
X$5,000,000* = $500,000 . Investor 6 @ $1,500,000 ($1,500,000/$15,000,000)
X$5,000,000* = $500,000 . Investor 7 @ $1,000,000 ($1,000,000/$15,000,000)
X$5,000,000* = $333,333 . Total $10,000,000 Total $3,333,333 *$5,000,000 is the denominator since this is the amount of the Specific Pool that was available on the day that CAPCO D and CAPCO E made their Premium Tax Credit Allocation Claims. TOTAL SPECIFIC POOL ALLOCATION = $25,000,000 ($5,000,000 + $5,000,000 + $10,000,000 + 1,666,667 + $3,333,333) Allocation Date and Written Notification of Premium Tax Credit Allocation Within 5 business days (except as noted below) after the Office receives a Premium Tax Credit Allocation Claim filed by a Certified Capital Company on behalf of one or more of its Certified Investors, the Office shall notify (by overnight courier with signature of receipt required) the Certified Capital Company of the amount of tax credits allocated to each of the Certified Investors in such Capital Company. Such date shall be the Allocation Date. An alternative Certified Investor or other investor may not contribute Certified Capital to the CAPCO in lieu of the Certified Investor listed on the Office’s notification. However, Premium Tax Credit Allocation Claims filed for the Statewide Pool shall not be allocated until the Rural Pool has been fully allocated. The Office shall begin allocating the Statewide Pool the next business day after the Rural Pool has been fully allocated. Within 5 business days after the Office begins allocating the Statewide Pool, as applicable, the Office shall notify the Certified Capital Company of the amount of tax credits allocated to each of the Certified Investors in such Certified Capital Company. Such date shall be the Allocation Date. An alternative Certified Investor may not contribute Certified Capital to the CAPCO in lieu of the Certified Investor listed on the Office’s notification. The Written Notification of Premium Tax Credit Allocation shall require that the CAPCO submit to the Office, within 30 business days of the date of the Written Notification of Premium Tax Credit Allocation, a copy of all material documents relating to each Certified Investor’s investment of Certified Capital and a report containing the following information:
1. The name of each Certified Investor from which the Certified Capital was received (delineated by Specific Pool), including such Certified Investor’s Insurance Premium Tax Identification Number;
2. The date on which the Certified Capital was received by the CAPCO delineated by Specific Pool;
3. The amount of each Certified Investor’s investment of Certified Capital and Premium Tax Credits (the same amount), delineated by Specific Pool; and 4. Supporting documentation, such as a statement from the CAPCO’s financial institution receiving the deposit on behalf of the CAPCO, stating: that the deposit or wire transfer has been completed; the specific amount of the deposit or wire transfer, the date of the deposit or wire transfer, and that the funds are “collected funds” at the financial institution. With respect to a CAPCO that participated in both the Rural Pool and the Statewide Pool, the 5-business day and 30-business daytime periods set forth in this section will begin on the Allocation Date for the Statewide Pool.
Forfeiture of Allocation and Reallocation of Premium Tax Credits In the event that a CAPCO does not receive an investment of Certified Capital equaling the amount of Premium Tax Credits Allocated to the CAPCO’s investors within 5 business days of the receipt of the Office’s notification (by overnight courier with signature of receipt required) of the Premium Tax Credit Allocated to the CAPCO’s investors, the CAPCO shall notify the Office immediately, within 24 hours, by overnight courier with signature of receipt required. As a result of such notification from the CAPCO, the Premium Tax Credit Allocation for the specific investor(s) shall be forfeited. If the Office has not received a copy of all documents relating to each Certified Investor’s investment of Certified Capital and the required report within 30 business days, the Premium Tax Credit Allocation for the specific investor(s) shall be forfeited.
If forfeiture of Premium Tax Credit Allocations occurs, the Office shall recalculate the Premium Tax Credit Allocations for each Specific Pool, if affected by such forfeiture, and shall redistribute the forfeited Premium Tax Credit Allocations based on other investor’s initial commitment of Certified Capital. Such recalculation shall utilize the same methods described in the Premium Tax Credit Allocation Process but the now ineligible investors shall not be included in the calculations. If such a pro rata redistribution occurs, the Office shall notify (by overnight courier with signature of receipt required) the Certified Capital Company of the new amount of tax credits allocated to each of the eligible Certified Investors in such Capital Company. Such date of notification shall be the new Allocation Date and the requirements described in this section for receiving investments and notifying the Office shall begin as of such new Allocation Date.
CONTINUING CERTIFICATION REQUIREMENTS 10-3.5-107, 10-3.5-108, 10-3.5-109 and 10-3.5- 110, C.R.S.
A Certified Capital Company must fully comply with all of the requirements described under the following sections of “ CONTINUING CERTIFICATION REQUIREMENTS ” . Continued Accuracy of Information Submitted in the Application Whenever any material information that the CAPCO supplied in its initial application becomes inaccurate or obsolete (including, but not limited to, retention of the two experienced principals or key employees reflected in the application), the CAPCO shall file an amended application in a format prescribed by the Office, including originally executed signatory pages. Amended applications shall be submitted within 10 business days of the information becoming inaccurate or obsolete; however, amended applications shall be filed within 5 business days in the event any of the experienced principals or key employees required in the Statute leaves the CAPCO. Amended applications shall be filed in the same manner and using the same methods as described in the section, “ Filing of Certified Capital Company Application ” ;however, no fee shall be required. The CAPCO shall notify its Certified Investors of the amended application and a copy of such notification shall be provided to the Office. Amended applications shall demonstrate the CAPCO’s continued ability to be in compliance with initial application requirements. Continuation as a Viable Going Concern The CAPCO shall, as soon as possible, but in any event within 5 business days, notify the Office and its Certified Investors in writing when the CAPCO may be unable to continue as a viable going concern or when the CAPCO is subject to litigation which may affect its viability as a going concern. Examples of when a CAPCO may be unable to continue as a viable going concern include, but are not limited to, the inability of a CAPCO to make scheduled debt payments (including principal, interest, and any applicable fees) and/or other obligations of the CAPCO, either in the ordinary course of business or otherwise, within the terms of when such payments are due. Notifications shall either be hand delivered with signature of receipt required, or delivered by a courier service or certified mail with signature of receipt required. Such notifications must be delivered to the Office of Economic Development located at 1625 Broadway, Suite 1700, Denver, CO 80202.
Upon the CAPCO notifying the Office by the procedure outlined in this section or if a viable going concern issue is noted in any audits, procedural reviews, or compliance reviews received by the Office, the CAPCO shall immediately discontinue any further investment of Certified Capital in Qualified Businesses or Qualified Rural Businesses unless interim management by an entity authorized in the Statute has occurred.
Interim Management Notification In the event interim management is assumed as authorized in the Statute, the assuming entity shall immediately notify the Office in writing and provide a plan and timetable for selecting replacement CAPCO management. Such notification shall be hand delivered with signature of receipt required, or delivered by a courier service or certified mail with signature of receipt required. The notification must be delivered to the Office of Economic Development located at 1625 Broadway, Suite 1700, Denver, CO 80202. By the 10th of the following month in which the interim management was assumed and continuing monthly thereafter, the assuming entity shall provide a written status update on the hiring of replacement management.
Submittal of Documentation for Certified Investor’s Investment of Certified Capital The Written Notification of Premium Tax Credit Allocation shall require that the CAPCO submit to the Office, within 30 business days of the date of the Written Notification of Premium Tax Credit Allocation, a copy of all material documents relating to each Certified Investor’s investment of Certified Capital and a report containing the information described in the “ Allocation Date and Written Notification of Premium Tax Credit Allocation ” section of “ PREMIUM TAX CREDIT ALLOCATION PROCESS ” in this regulation. All documents relating to the Certified Investors’ investment of Certified Capital in the CAPCO shall be made available at the time of Audit or Office Annual Review. Eligibility Determination For CAPCO Qualified Investments A CAPCO shall use its Certified Capital to make Qualified Investments in Qualified Businesses and/or Qualified Rural Businesses. Such Qualified Investments shall occur after the Allocation Date pertaining to such Certified Capital. If a CAPCO substitutes Certified Capital for any investment made prior to the Allocation Date and/or the CAPCO uses Certified Capital to purchase all or part of an investment made prior to the Allocation Date, then such use of Certified Capital shall not be considered a Qualified Investment under this program.
In order to meet Qualification requirements, the CAPCO’s investment: 1) must be a Qualified Investment of Cash, and 2) must be in a Qualified Business or Qualified Rural Business. In order to be a Qualified Investment of Cash, the investment must meet the Investment of Cash definition found in the DEFINITION section of these regulations and must meet the Investment of Cash eligibility determination as set forth below. In order to be a Qualified Business or Qualified Rural Business, the business must meet the definition of a Qualified Business or a Qualified Rural Business as defined in 10-3.5-103(11) and 10-3.5-103(15), C.R.S. respectively and must meet the Qualified Business/Qualified Rural Business eligibility determination set forth below. Both eligibility determinations must be met in order for any CAPCO investment to be deemed a Qualified Investment.
1. In order to make an eligibility determination with regard to the investment meeting the Investment of Cash criteria, prior to making any Qualified Investment in the form of debt or a convertible instrument which could result in debt or debt characteristics, then the CAPCO shall submit or maintain, as applicable, the following information for the Office’s review:
2. In order to make an eligibility determination with regard to Qualified Business or Qualified Rural Business, the CAPCO shall submit or maintain, as applicable, the following information for the Office’s review:
3. At its option, a CAPCO, making a proposed investment in a business, may request from the Office a written opinion that the Investment of Cash either before or after the investment, which it proposes should be considered a Qualified Investment. And, at its option, a CAPCO, making a proposed investment in a business, may request from the Office a written opinion that the business in which it proposes to invest either before or after the investment, should be considered a Qualified Business or a Qualified Rural Business, as applicable.
4. If a CAPCO has not requested a written opinion regarding the Qualified Investment eligibility determination described in this section, the Office shall make such determination during its Annual Review.
5. If the Office determines that a business in which a Certified Capital Company proposes to invest before May 27, 2004, is not a Qualified Business or a Qualified Rural Business because it does not meet all of the criteria set forth in section 10(11)(a) or (15), C.R.S., as applicable, the Office may nevertheless consider the business a Qualified Business or Qualified Rural Business, as applicable, if the Colorado Economic Development Commission determines that investment in the proposed business will further the economic development of the state. The following criteria must be met:
6. A business that is classified as a Qualified Business or a Qualified Rural Business at the time of the first investment in said business by a CAPCO, when such investment occurs before May 27, 2004 shall remain classified as a Qualified Business or a Qualified Rural Business, as applicable, and may receive continuing investments from any CAPCO or any of its Affiliates. Such continuing investments, as long as they meet the Investment of Cash eligibility determination, shall be Qualified Investments even though such business may not meet the definition of a Qualified Business or a Qualified Rural Business, as applicable, at the time of such continuing investments.
7. A business that is classified as a Qualified Business or a Qualified Rural Business at the time of the first investment in said business by a CAPCO, when such investment occurs on or after May 27, 2004 shall remain classified as a Qualified Business or a Qualified Rural Business, as applicable, and may receive continuing investments from any CAPCO or any of its Affiliates. Such continuing investments, as long as they meet the Investment of Cash eligibility determination, shall be Qualified Investments even though such business may not meet the definition of a Qualified Business or a Qualified Rural Business, as applicable, at the time of such continuing investments except that:
1. The amount of the CAPCO’s Certified Capital at the end of its immediately preceding fiscal year;
2. Whether or not the CAPCO has invested more than 15% of its Total Certified Capital in any one business; and 3. All Qualified Investments that the CAPCO made during the previous calendar year;
4. A nonrefundable certification fee of $5,000 except that no such fee shall be required within 6 months of the initial allocation date of a Specific Pool(s) of a CAPCO. Only one such certification fee shall be required annually regardless of the number of Specific Pools for which the CAPCO received certification or if additional Specific Pools are authorized for such CAPCO. If a CAPCO fails to pay the certification fee within 60 business days after January 31st, the CAPCO may be subject to decertification.
5. The location and number of new jobs that have been created due to the CAPCO’s Qualified Investments during the previous twelve months and since the CAPCO’s initial Qualified Investment. Such new jobs shall be reported on a full-time equivalent basis. The report shall quantify the number of jobs created by each of the Qualified Businesses or Qualified Rural Businesses (delineated by Colorado county and non-Colorado), the name of the business, the location of the business and the type of business (such as service, manufacturing and so on). Such job creation report shall record jobs created after the investment of Certified Capital through the date that the CAPCO is no longer subject to regulation by the Office or the date that the investment has been fully repaid, whichever occurs first. Such job creation report should reflect net new jobs and should generally reflect more jobs than previously reported when making the SBA eligibility determination of Qualified Business or Qualified Rural Business, as applicable. Annual Business Plan Review Meetings During each calendar year from 2003 to 2010, the Office shall hold a meeting in each of 5 counties that have populations of no more than 150,000 individuals at which a representative from each CAPCO shall be present to review business plans from Qualified Businesses Headquartered in those counties. Schedule of Qualified Investments The aggregate cumulative amount of all Qualified Investments made by the CAPCO from an Allocation Date from each Specific Pool shall be considered in the calculation of the percentage requirements under the following “ Schedule of Investments ” section of “ CONTINUING CERTIFICATION REQUIREMENTS ” unless otherwise noted. Any proceeds, defined as cash for the purposes of the following “ Schedule of Investments ” section of “ CONTINUING CERTIFICATION REQUIREMENTS ” ,received by the CAPCO from a Qualified Investment or from other uses may be invested in another Qualified Investment and shall be utilized to calculate the “ Schedule of Investments ” with respect to investments of Certified Capital unless otherwise noted. The date cash is placed in the business, as evidenced by the date of a check or other means of funds transfer, shall be the date utilized for determining if the Schedule of Qualified Investments has been met. The CAPCO must meet specific time frames, percentages and requirements pertaining to Qualified Investments as follows:
1. Within the period ending 3 years after an allocation date for a Specific Pool, a CAPCO shall have made Qualified Investments cumulatively equal to at least 30% of the Certified Capital allocated to its Certified Investors for the Specific Pool on such allocation date. Although Qualified Distributions are allowed by the Statute in general, the 30% calculation herein shall not take into account any Qualified Distributions. A CAPCO, that received Certified Capital from the Statewide Pool allocation, shall be deemed to have invested $2 for every $1 invested in a Qualified Rural Business or a Qualified Business that has its Principal Business Operations located in a Distressed Urban Community and such $2 for $1 calculation shall be applied to the Specific Statewide Pool from which the Certified Capital was raised for investment in such businesses.
2. Within the period ending 5 years after an allocation date for a Specific Pool, a CAPCO shall have made Qualified Investments cumulatively equal to at least 50% of the Certified Capital allocated to its Certified Investors for the Specific Pool on such allocation date. Although Qualified Distributions are allowed by the Statute in general, the 50% calculation herein shall not take into account any Qualified Distributions. A CAPCO, that received Certified Capital from the Statewide Pool allocation, shall be deemed to have invested $2 for every $1 invested in a Qualified Rural Business or a Qualified Business that has its Principal Business Operations located in a Distressed Urban Community and such $2 for $1 calculation shall be applied to the Specific Statewide Pool from which the Certified Capital was raised for investment in such businesses.
3. A business that is classified as a Qualified Business or a Qualified Rural Business at the time of the first investment in said business by a CAPCO, when such investment occurs on or after May 27, 2004 shall remain classified as a Qualified Business or a Qualified Rural Business, as applicable, and may receive continuing investments from any CAPCO or any of its Affiliates. Such continuing investments, as long as they meet the Investment of Cash eligibility determination, shall be Qualified Investments even though such business may not meet the definition of a Qualified Business or a Qualified Rural Business, as applicable, at the time of such continuing investments with one exception. The one exception is that a business that is classified as a Qualified Business or Qualified Rural Business at the time of the first investment in said business by a CAPCO, when such investment occurs on or after May 27, 2004, but subsequently violates the requirement of section 10-3.5-103(11)(b)(I) or 11(c) within the first six months after such Qualified Investment, shall not be deemed to be a Qualified Business or a Qualified Rural Business, as applicable, and may not receive continuing investments from any Certified Capital Company or any of its affiliates. Additionally if this one exception occurs, the Qualified Investment shall not be used in the 30% and 50% calculations described within this Schedule of Qualified Investments.
4. In order to calculate such percentages, CAPCOs shall maintain separate records and separate tracking for each specific allocation of Certified Capital (for example, the Rural Pool, Statewide Pool, as applicable to each CAPCO).
Eligibility of Qualified Distributions 1. Before May 27, 2004 a CAPCO shall make reasonable Qualified Distributions at any time. In order to make a Distribution occurring before May 27, 2004, out of Certified Capital to its Certified Investors on a particular Allocation Date other than a Qualified Distribution, a CAPCO shall have made Qualified Investments in an amount to cumulatively equal to 100% of the Certified Capital allocated to its Certified Investors on such allocation date, except that a CAPCO may make repayments of principal and interest on its indebtedness without any restriction whatsoever, including repayments of indebtedness of the CAPCO on which Certified Investors earned Premium Tax Credits.
2. On or after May 27, 2004, and before the beginning of the tenth anniversary of an allocation date, a CAPCO may make a qualified Distribution at any time.
3. On or after May 27, 2004, and before the beginning of the tenth anniversary of an allocation date, in order to make a Distribution out of proceeds or gains from Qualified Investments, proceeds or gains from any other use of Certified Capital, Equity Capitalization contributions paid into the CAPCO on or after May 27, 2004, or Certified Capital allocated to its Certified Investors on a particular Allocation Date, other than a Qualified Distribution, or a Distribution to make repayments of principal and interest on its indebtedness without any restriction whatsoever, including repayments of indebtedness of the CAPCO on which Certified Investors earned Premium Tax Credits; or a Distribution to pay any projected increase in federal or state taxes, including penalties and interest related to federal and state income taxes, of the equity owners of a CAPCO resulting from operations or ownership of the CAPCO without any restriction whatsoever; or a Distribution to return any equity capitalization paid into the CAPCO before May 27, 2004, from any equity capitalization contributions paid into the CAPCO before May 27, 2004, proceeds or gains from qualified investments, or proceeds or gains from any other use of Certified Capital, a CAPCO shall:
4. On or after May 27, 2004, and beginning on the tenth anniversary of an allocation date, a CAPCO shall make no further Distributions of any kind, including Qualified Distributions, from Certified Capital or proceeds or gains from any type of investment of Certified Capital, unless and until the CAPCO has made Qualified Investments cumulatively equal to 100% of the Certified Capital allocated to its Certified Investors on such allocation date; except that this restriction on further Distributions shall not prohibit payments on indebtedness of the CAPCO, including indebtedness to Certified Investors, on qualified debt instruments or Distributions permitted by 10-3.5-108(2)(b). Use, Transfer and/or Sale of Premium Tax Credits Due to the “estimated” nature of quarterly tax payments, Premium Tax Credits may only be used on an annual basis against actual Premium Tax Liabilities. Premium Tax Credits may first be used for the March payment that is due in 2004, with regard to the actual tax liability for the calendar year 2003. The Premium Tax Credits, established pursuant to the Statute for this program, may be transferred or sold. A transfer or sale shall not affect the time schedule for taking the Premium Tax Credit as provided in the Statute in 10-3-5.105, C.R.S.
1. Premium Tax Credits earned by a Certified Investor pursuant to 10-3.5-106, C.R.S. (the “Certified Investor” or “Transferor” ) may be transferred or sold in whole or part to one or more insurance companies (the “Transferee” ) that are subject to the State of Colorado’s PremiumTax.
2. Transfer or sale of Premium Tax Credits, whether by the original investor or a re-sale by a Transferee, shall only be made once per calendar year and shall occur no later than December 31st of each calendar/tax year in order to be valid for Premium Taxes related to such calendar/tax year ending December 31st which are subsequently due on March 1st of the following calendar/tax year. In the event of a change in ownership or control of the holder of Premium Tax Credits, transfers of such Premium Tax credits to a new owner may occur without being subject to the once per calendar year limitation except that such transfers shall occur no later than December 31st of each calendar/tax year in order to be valid for Premium Taxes related to such calendar/tax year ending December 31st which are due on March 1st of the following calendar/tax year.
3. The format of all transfer or sale documents shall be approved by the Office. Any Premium Tax Credits recaptured pursuant to section 10-3.5-109 , C.R.S. shall be the liability of the taxpayer who actually claimed the Premium Tax Credits. The “taxpayer who actually claimed the Premium Tax Credits” shall refer to each taxpayer, whether a Certified Investor or a subsequent Transferee, who has used a Premium Tax Credit to reduce its state premium tax liability in any tax year. Since any Premium Tax Credits recaptured pursuant to 10-3.5-109 , C.R.S. shall be the liability of the taxpayer who actually claimed the Premium Tax Credits, the Office shall require that the Transferee be actively licensed and in compliance with all licensing requirements, including minimum net worth requirements, as set forth by the State of Colorado to conduct such insurance business.
4. All owners of Premium Tax Credits (Certified Investor or Transferees) shall submit an Annual Report to the Office in a format provided by the Office, with a copy to the Colorado Division of Insurance, no later than January 31st of each year (for the previous calendar/tax year) which provides details on the following information broken out by each Specific Pool:
Annual Review by Office The Office shall conduct an annual review of each CAPCO to determine whether the CAPCO is abiding by the requirements of certification, to advise the Certified Capital Company as to the eligibility status of its Qualified Investments, and to ensure that no investment has been made in violation of the Statute and this regulation.
In accordance with the legislative declaration in 10-3.5-102, C.R.S. such review shall include a report, to be submitted to the Office dated no earlier than 30 business days before the annual review date, which shall state the location and number of new jobs that have been created due to the CAPCO’s Qualified Investments during the previous twelve months and since the CAPCO’s initial Qualified Investment. Such new jobs shall be reported on a full-time equivalent basis. The report shall quantify the number of jobs created by each of the Qualified Businesses or Qualified Rural Businesses (delineated by Colorado county and non-Colorado), the name of the business, the location of the business and the type of business (such as service, manufacturing and so on). Such job creation report shall record jobs created after the investment of Certified Capital through the date that the CAPCO is no longer subject to regulation by the Office or the date that the investment has been fully repaid, whichever occurs first. Such job creation report should reflect net new jobs and should generally reflect more jobs than previously reported when making the SBA eligibility determination of Qualified Business or Qualified Rural Business, as applicable.
Additional program information will be reviewed as needed. The cost of the annual review shall be paid by each CAPCO according to a reasonable fee schedule adopted by the Office. Upon completion of its review, the Office shall send an invoice for the annual review to the CAPCO. The total invoiced amount shall include the number of billable hours associated with the annual review and the annual review report. The billable hourly rate shall be $50 per hour. Payment shall be due within 30 business days from the date of the invoice. Payment shall be made by certified, cashier’s check, or company check. If a CAPCO fails to pay such invoice within 60 business days from the date of invoice, the CAPCO may be subject to decertification.
DECERTIFICATION AND RECAPTURE OF PREMIUM TAX CREDITS 1. Any material violation before May 27, 2004, of the Statute and CONTINUING CERTIFICATION REQUIREMENTS contained in this regulation shall be grounds for decertification of a CAPCO. The Office shall decertify CAPCOs in accordance with 10-3.5-109(1)-(4), C.R.S. and 10-3.5- 109(6)-(7).
2. On or after May 27, 2004, the Office shall review the CAPCOs in accordance, but not limited to, with 10-3.5-109(1-7) and 10-3.5-107, C.R.S. as amended with additional emphasis on 10-3.5-106 (3) and (6), C.R.S.
3. On or after May 27, 2004, any material violation of 10-3.5-107, C.R.S. shall be grounds for decertification of the CAPCO as specifically described in 10-3.5-107, C.R.S. and/or assessment of an administrative fine(s) to be determined by the Office as described in 10-3.5-109, C.R.S. and utilizing the schedule describe in this paragraph 3.
Annual Audit by an Independent Certified Public Accountant Annually, and within 90 days after the close of its fiscal year, each CAPCO shall provide to the Office an audited financial statement that includes an originally executed, unqualified opinion of an Independent Certified Public Accountant. The unqualified opinion shall be on the Independent Certified Public Accountant’s letterhead and shall include a complete street address and phone number. The Independent Certified Public Accountant shall be a member in good standing with the American Institute of Certified Public Accountants and, if requested by the Office, such good standing will be documented by a letter, dated no earlier than 60 business days before the submittal to the Office, from the President/Executive Director of the AICPA. If requested by the Office, a copy of the Independent Certified Public Accountant’s license in the U.S. state where he or she practices shall be submitted along with a statement from the issuer of the license that the Independent Certified Public Accountant is in good standing in the state where he or she practices, dated no earlier than 60 business days of the submittal to the Office. Such statement from the issuer of the license shall contain a street address and phone number. The audit shall include agreed upon procedures including addressing the methods of operation and conduct of the business of the CAPCO to determine if the CAPCO is complying with 10-3.5-101 through 10-3.5-110, 24-48.5-106 and 10-1-103, C.R.S. and this regulation, which includes that Certified Capital has been invested as required by the time limits provided for in the Statute and this regulation and which includes the specific definitions provided within the Statute and this regulation. CAPCO NO LONGER SUBJECT TO REGULATION BY OFFICE 1. A CAPCO shall no longer be subject to regulation by the Office except insofar as is necessary to oversee the Distributions made pursuant to section 10 - 3.5 - 108 (3) (b), C.R.S. if the following requirements have been met:
DISTRIBUTIONS REVIEW-REMITTANCE OF PORTION OF PROCEEDS Before May 28, 2004, the information needed by the Office to perform the Distributions Review includes, but is not limited to, the following: Schedule of Distributions itemized by type of Distribution (other than Qualified Distributions, but including and not limited to, principal, interest and fee payments with respect to Qualified Debt Instruments); Schedule of Qualified Investments; Schedule of Outflows of Certified Capital; Schedule of Additional Capital. Such Schedules shall be submitted to the Office within 90 business days of the CAPCO’s fiscal year end and dated as of the CAPCO’s fiscal year end. Each Schedule shall provide a cumulative record of the required information including specific dates on which transactions occurred beginning with the Allocation Date for the Specific Pool of Certified Capital and continuing through the most current fiscal year end. In addition, on or after May 28, 2004, Distributions out of proceeds or gains from Qualified Investments, proceeds or gains from any other use of Certified Capital, proceeds or gains from equity capitalization contributions, equity capitalization contributions and certified Capital allocated to Certified Investors on a particular allocation date, shall be specifically examined as a part of the annual review. The Distributions Review shall be completed annually beginning in the first fiscal year of the Allocation Date.
Distributions Review 1. The Office shall review if the CAPCO has followed the requirements of the Statute with regard to when Distributions other than Qualified Distributions can be made. The Office shall verify that Qualified Investments in an amount cumulatively equal to 100% of Certified Capital allocated to Certified Investors on the Allocation Date and in an amount equal to at least one-third of the Certified Capital allocated to its Certified Investors from the Statewide Pool are in the seed or early stage from either the Statewide or Rural Pool, were made prior to any Distribution other than a Qualified Distribution or other than debt repayment including principal, interest, and fees relating to a Qualified Debt Instrument or a Distribution to pay any projected increase in federal or state states including penalties and interest related to federal or state income taxes of the owners of a CAPCO resulting from the ownership or operations of the CAPCO. Also reviewed will be that the Qualified Business has maintained its headquarters and principal place of business in Colorado for at least six-months after the qualified investment or after it has relocated from another state;
2. The Office shall annually calculate the CAPCO’s Internal Rate of Return to determine if it exceeds ten percent on the Certified Capital allocated to the Certified Investors of the CAPCO on such allocation date plus additional equity capitalization of the CAPCO.
3. The Office shall calculate the internal rate of return (IRR) also known as the discount rate, for which the present value of the aggregate total of Distributions (other than Qualified Distributions and including but not limited to principal, interest and fee payments with respect to Qualified Debt Instruments and all other Distributions) combined with 10% of the Premium Tax Credits allocated on the Allocation Date to the Certified Investors and/or any additional value exceeding 10% of tax credits sold during the current fiscal year (for use in the current year or future years), equals the present value of the Certified Capital allocated to the Certified Investors of the CAPCO on the Allocation Date plus any additional equity capitalization of the CAPCO.
4. The IRR calculation shall apply all Distributions and additional capital contributions as they are made and shall apply 10% of the Premium Tax Credits allocated on the Allocation Date to the Certified Investors and/or any additional value exceeding 10% of tax credits sold during the current fiscal year (for use in the current year or future years) as of January of the year for which the internal rate of return is being calculated.
5. The Office shall notify the CAPCO as to the amount to be reported to the Division of Housing in the Department of Local Affairs within 60 business days of the Distributions Review. The CAPCO shall annually submit a report to the Office of any and all payments made as directed by the Division of Housing in the Department of Local Affairs and the Executive Director of the Department of Human Services within 90 business days of the CAPCO’s fiscal year end.
Example — Distributions Review, IRR and Remittance of Funds XYZ, a venture capital firm, applies to the Office to become a CAPCO. XYZ has $500,000 in equity capitalization and meets all other application requirements. The Office notifies XYZ that its application for certification has been approved.
XYZ submits Premium Tax Credit Allocation Claim forms totaling $10,000,000 out of the 2002 Statewide Pool. The Office is able to allocate all $10,000,000 in Premium Tax Credits to XYZ’s Certified Investors. Ten percent (10%) of the Premium Tax Credit Allocations are available to use in Years 2 through 11 (ten years). Within the required 5 business days, XYZ receives all $10,000,000 of Certified Capital from its Certified Investors. The Certified Capital received from Certified Investors is comprised of $2,000,000 in equity capitalization and $8,000,000 in Qualified Debt. The terms of the Qualified Debt are a level principal amortization over 8 years beginning in year 2 and quarterly interest payments at an interest rate of 8%. XYZ makes tax Distributions annually beginning in year 2 of ten thousand a year. XYZ invests the $10,000,000 of Certified Capital in Qualified Businesses in the form of equity to 10 companies at an investment amount of $1,000,000 each. By the end of year 6 XYZ has made Qualified Investments cumulatively equal to: 100% of the Certified Capital allocated to its Certified Investors and met the 6-month requirement, and at least one-third of the Certified Capital allocated to its Certified Investors under the Statewide Pool in Qualified Businesses that are in seed or early stage. The Schedules required in this section are received within 90 business days of the CAPCOs fiscal year end and report the following annual results:
Qual Debt Interest $640 $600 $520 Distribution Qual Debt Principal 0 $1,000 $1,000 Distribution Equity Holders Tax 0 $10 $10 Distribution Cert Investor Distribution 0 0 0 Annual Distributions $640 $1,610 $1,530 Cumulative Distributions $640 $2,250 $3,780 . . . .
IRR -97.44% -59.05% -26.85% Distribution to reduce - - - IRR to 10% Amount to be Reported - - - Internal rate of return (IRR) is calculated annually. On 12/31 in Year 6, the XYZ makes a Distribution to Certified Investors totaling $400,000 when the internal rate of return is calculated for that year it equals 8.76%. Since the IRR does not exceed 10% the Office calculates the amount to be reported to the Division of Housing in the Department of Local Affairs, which equals $60,000 computed as 15% of $400,000. The Office notifies XYZ that $60,000 shall be reported to the Division of Housing in the Department of Local Affairs. In Year 7 the IRR equals 13.61%. The Office calculates the total amount of Distributions required to reduce the IRR from 13.61% to 10%. This amount of further Distributions to produce a 10% IRR equals $2,175,000. Thus, the amount to be reported to the Division of Housing in the Department of Local Affairs equals $375,000 computed as 20% of $2,175,000 minus $60,000 reported in Year 6. The Office notifies XYZ that $375,000 shall be reported to the Division of Housing in the Department of Local Affairs.
Such Distributions Review continues annually.
NOTE: Internal Rate of Return calculations are computed using a Microsoft Excel spreadsheet with the Analysis Tool Pak - VBA and the XIRR formula.
APPEALS, DUE PROCESS AND RIGHT TO A HEARING Any person adversely affected by a decision of the Office in regard to this program is entitled to a hearing pursuant to the Administrative Procedure Act 24-4-105(2). MATERIAL DETERMINATION In all cases, the Office reserves the right to determine the materiality of a requested item.