Bill Summary for S 35 (2015-2016)

Printer-friendly: Click to view

Summary date: 

Feb 4 2015

Bill Information:

View NCGA Bill Details2015-2016 Session
Senate Bill 35 (Public) Filed Wednesday, February 4, 2015
Intro. by Gunn, Hise.

View: All Summaries for BillTracking:

Bill summary

Includes introductory "whereas clauses" providing public policy reasons for enacting this legislation.

Part I.

Amends GS 78-17 to add a new exemption to the list of transactions that are exempt from the registration and filing requirements to include the offer or sale of securities conducted in accordance with proposed GS 78A-17.1, the Invest NC exemption. Effective when bill becomes law, expiring on July 1, 2017.

Enacts new GS 78A-17.1, Invest NC Exemption, to Article 3 of GS Chapter 78A. Provides that an offer or sale of a security by an issuer is exempt from registration requirements under GS 78-24 and filing requirements under GS 78A-49(d) if the offer or sale is conducted in accordance with the 13 specified requirements. Provides that the caps set for cash and other consideration for all sales of the security in reliance upon the exemption in GS 78A-17.1 must be cumulatively adjusted every fifth year by the Secretary of State (Administrator) to reflect the change in the Consumer Price Index for all Urban Consumers published by the Bureau of Labor Statistics. Requires an issuer of security for which the offer of sale is exempt under this section to submit a free-of-charge quarterly report to the issuer's shareholders until there are no outstanding securities issued under this section. Specifies how an issuer can satisfy the reporting requirement via an internet website if made available in accordance with specified requirements. Requires that an issuer must file each quarterly report with the Administrator. Specifies content required to be in the report. Provides criteria for offers and sales to controlling persons, defined as an officer, director, partner, trustee, or individuals having similar status or performing similar functions as the issuer, or a person owning 10% or more of the outstanding shares of any class or classes of securities of the issuer. Provides for disqualification for the exemption if an issuer or person affiliated with the issuer or offering is subject to any qualifications contained in 18 NCAC 06A. 1207(a)(1) through (a)(6) or contained in Rule 262 as promulgated under the Securities Act of 1933 (17 CFR 230.262).  Authorizes the Administrator to adopt rules to protect investors who purchase securities under this section. Directs the Administrator to charge a nonrefundable filing fee of $150 for filing the exemption notice. Effective when bill becomes law, expiring on July 1, 2017.

Makes a conforming change to GS 78A-49(d) regarding the informational filing requirement. Effective when bill becomes law, expiring on July 1, 2017.

Requires the Administrator to adopt rules to implement this act within 12 months. Provides for a 15-day notice and comment period and requires the Administrator to hold at least one public hearing on the rules. Provides that the rules become effective on the first day of the month following the date the rules are adopted and sent to the Codifier of Rules for entry into the Administrative Code. Requires any rule adopted more than 12 months after the effective date of the act comply with the requirements of GS Chapter 150B, Article 2A (effective 12 months after the date the act becomes effective and expires on July 1, 2017). 

Provides that this provision expires 12 months after the effective date of this act. Effective when bill becomes law, expiring on July 1, 2017.

Part II.

Adds new Article 3L, “NC New Markets Jobs Act of 2015,” to GS Chapter 105 to provide that an entity that makes a qualified equity investment earns a below-the-line tax reduction that may be applied to the entity’s state premium tax liability on future premium tax reports filed under Article 8B of GS Chapter 105.

Enacts new GS 105-129.101 (definitions). Defines qualified equity investment as an equity investment in, or long-term debt security issued by, a qualified community development entity that meets each of the following requirements: (1) is acquired after the act's effective date at its original issuance solely in exchange for cash, (2) has at least 85% of its cash purchase price used by the qualified community development entity to make qualified low-income community investments in qualified active low-income community businesses located in this state by the first anniversary of the initial reduction allowance date, and (3) is designated as a qualified equity investment under this subdivision and certified by the Department of Commerce (Department) as not exceeding the limitation in proposed GS 105-129.102(d)(5). Additionally defines qualified active low-income community business, qualified community development entity, and additional terms as they apply in this act.

Provides details on the tax reduction and directs the Department to certify $208,333,333  in qualified equity investment authority in accordance with two allocations, one for the Rural Reserve and one for the Statewide Reserve, as described in GS 105-129.109(a). Sets out the procedure for a qualified community development entity to apply to the Department, which is to begin accepting applications on July 1, 2015, for an equity investment or long-term debt security to be designated as a qualified equity investment. Allows for disallowing a reduction claimed or to be claimed by a taxpayer under new Article 3L under specified circumstances. Requires that notice of a disallowed tax reduction must be sent in writing to the taxpayer and the Department of Revenue. Prohibits enforcement of the disallowance under this Article until the qualified community development entity has been provided with notice of the noncompliance and allowed six months to cure the noncompliance. Provides that a recaptured reduction and the related qualified equity investment authority reverts to the Department and is to be issued pro rata to other applicants whose allocations were reduced under the provisions of this section and in accordance with the application process. Requires that applicants pay a refundable performance deposit for each application submitted. Sets out conditions under which the deposit is forfeited.

Requires the Secretary of Commerce (Secretary) to issue binding letter rulings in response to applicants requesting an interpretation of the law to a specific set of facts. Sets out requirements for the rulings.

Provides that an entity claiming a reduction for qualified equity investment is not required to pay any additional retaliatory tax as a result of claiming the reduction.

Prohibits a certified qualified equity investment from being decertified unless the requirements of GS 105-129.107 have been met. Sets out conditions for decertification.

Provides that no qualified community development entity is entitled to pay any affiliate of such entity any fees in connection with any activity under this Article prior to decertification of all qualified equity investment issued by the entity. Does not prohibit a qualified community development entity from allocating or distributing income earned by it to the affiliates or paying reasonable interest on amounts lent to the entity by such affiliates.

Allows qualified community development entities to apply for both the Rural Reserve (consisting of $156,250,000) and the Statewide Reserve (consisting of $52,083,333). Sets out requirements for investments made under the Rural Reserve and the Statewide Reserve.

Directs a qualified community development entity issuing qualified equity investments to submit a report to the Department within the first five business days after the first anniversary of the initial reduction allowance that documents the investment of 85 percent of the purchase price in qualified low-income community investments in qualified active low-income community businesses in North Carolina. Specifies the required content of the report. Requires a qualified community development entity to continue to submit annual reports to the Department on or before April 1 of the calendar year during the compliance period.

Provides that this section, proposed Article 3L, applies to qualified equity investments made on or after July 1, 2015.