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2017 SESSION
17101272DBe it enacted by the General Assembly of Virginia:
1. That § 2.2-1616 of the Code of Virginia is amended and reenacted as follows:
§ 2.2-1616. Creation, administration, and management of the Small Business Investment Grant Fund.
A. As used in this section:
"Authority" means the Virginia Small Business Financing Authority.
"Eligible investor" means an individual subject to
the tax imposed by § 58.1-320 or a special purpose entity
established for the purpose of making investments for an individual. The term shall "Eligible investor" does
not include an individual who engages in the business of making debt or equity
investments in private businesses, or to any
person that would be allocated a portion of the grant under this section as a
partner, shareholder, member, or owner of an entity that engages in such
business.
"Fund" means the Small Business Investment Grant Fund.
"Pass-through entity" means the same as that term is defined in § 58.1-390.1.
"Qualified investment" means a cash investment in a
qualified business in the form of equity or subordinated debt. However, an investment shall
not be qualified if the taxpayer who holds such investment, or any of the
taxpayer's family members, or any entity affiliated with such taxpayer,
receives or has received compensation from the qualified business in exchange
for services provided to such business as an employee, officer, director,
manager, independent contractor, or otherwise in connection with or within one
year before or after the date of such investment. For the purposes hereof,
reimbursement of reasonable expenses incurred shall not be deemed to be
compensation.
"Small business" means a corporation, pass-through
entity, or other entity that (i) has annual gross revenues of no more than $5
million in its most recent fiscal year; (ii) has its principal office or
facility in the Commonwealth; (iii) is engaged in business primarily in or does
substantially all of its production in the Commonwealth; (iv) has not obtained
during its existence more than $3 $5 million in aggregate gross
cash proceeds from the issuance of its equity or debt investments, not
including commercial loans from national or state-chartered banking or savings
and loan institutions; (v) has no more than 50 employees who are employed
within the Commonwealth; and (vi) has been designated as such by the Authority
pursuant to the provisions of this section.
"Subordinated debt" means indebtedness of a corporation, general or limited partnership, or limited liability company that (i) by its terms required no repayment of principal for the first three years after issuance, (ii) is not guaranteed by any other person or secured by any assets of the issuer or any other person, and (iii) is subordinated to all indebtedness and obligations of the issuer to national or state-chartered banking or savings and loan institutions.
B. From such funds as may be appropriated by the General Assembly and any gifts, grants, or donations from public or private sources, there is hereby created in the state treasury a special nonreverting, permanent fund to be known as the Small Business Investment Grant Fund, to be administered by the Department. The Fund shall be established on the books of the Comptroller. Interest earned on moneys in the Fund shall remain in the Fund and be credited to it. Any moneys remaining in the Fund at the end of each fiscal year, including interest thereon, shall not revert to the general fund but shall remain in the Fund. Expenditures and disbursements from the Fund, which shall be in the form of grants pursuant to this section, shall be made by the State Treasurer on warrants issued by the Comptroller upon written request bearing the signature of the Director. Grants from the Fund shall only be made to applications pursuant to this section.
C. An eligible investor that makes a qualified investment in a
small business on or after July 1,
D. A small business shall apply with the Authority to receive
qualified investments eligible for the grant pursuant to this section and shall
provide to the Authority such information as the Authority deems necessary to
demonstrate that it meets the qualifications set forth in subsection A. E. Any eligible investor applying for a grant pursuant to this
section shall submit an application to the Authority. F. Unless the eligible investor transfers the equity received
in connection with a qualified investment as a result of (i) the liquidation of
the small business issuing such equity; (ii) the merger, consolidation, or
other acquisition of such business with or by a party not affiliated with such
business; or (iii) the death of the eligible investor, any eligible investor
that fails to hold such equity for at least two years shall forfeit the grant
and shall pay the Authority interest on the total allowed grant at the rate of
one percent per month, compounded monthly, from the date the grant was awarded
to the taxpayer. The Authority shall deposit any amounts received under this
subsection into the general fund of the Commonwealth. G. Grants shall be issued in the order that each completed
eligible application is received by the Authority. In the event that the amount
of eligible grants requested in a fiscal year exceeds the funds available in
the Fund, such grants shall be paid in the next fiscal year in which funds are
available. H. An eligible investor shall not be awarded a grant pursuant
to this section for any investment in a small business for which the eligible
investor has been allowed a tax credit pursuant to § 58.1-339.4. I. The Authority shall establish policies and procedures
relating to (i) the certification of small businesses, (ii) the application for
grants, and (iii) the recapture of grant awards claimed with interest in the
event that the qualified investment is not held for the requisite period set
forth in subsection F. Such policies and procedures shall be exempt from the
Administrative Process Act (§ 2.2-4000 et seq.). 2012 2016, but prior to January 1,
2019, that has been certified by the Authority pursuant to subsection D shall
be eligible for a grant in an amount equal to 10 the lesser of 50
Alternatively,
a small business may apply to the Authority on behalf of an eligible investor. The
Authority shall determine the amount of the grant allowable to the eligible
investor for the year.