NY Tax L § 11 (2021)
2021 New York Laws TAX - Tax Article 1 - Short Title; Definitions; Miscellaneous 11 - Certified Capital Companies.

§ 11. Certified capital companies. (a) Definitions. For the purpose of this section the following terms shall mean:  (1)  "Certification  date"  -  the  date  on which a certified capital company is so designated by the  department  for  a  specific  certified capital company program.  (2)  "Certified  capital"  -  an  investment  of  cash  by a certified investor in a certified capital company which fully funds  the  purchase price  of  either  or  both its equity interest in the certified capital company or a qualified debt instrument issued by the  certified  capital company.  Any  such  investment  shall  be  subject to the provisions of article fourteen of the insurance law.  (3) "Certified capital company" - a partnership, corporation, trust or limited liability company, organized  on  a  for-profit  basis  that  is located, headquartered and licensed or registered to conduct business in New  York,  that  has as its primary business activity the investment of cash in qualified businesses and that is certified by the department  as meeting the criteria set forth in subdivision (b) of this section.  (4)  "Certified  investor"  -  any  insurance company that contributes certified capital.  (5) "Department" - the department  of  financial  services;  provided, however,  that  "department"  shall  mean  the  department  of  economic development with  regard  to  any  application,  certification,  report, submission,  filing or other action required or governed by this section occurring on or after August first, two thousand eleven.  (6) "Net profits on certified  investments"  -  the  amount  of  money returned  to  the  certified capital company in repayment of or exchange for the certified capital company's qualified investment or  investments in  the  qualified  business  in  excess of the amount of such qualified investment or investments.  Such  number  shall  aggregate  all  of  the certified   capital  company's  qualified  investments  where  gains  on qualified  investments  are   netted   against   losses   on   qualified investments.  (7)  "Qualified  business"  -  an  independently  owned  and  operated business that meets all of the following conditions as of  the  time  of the first investment in the business:  (A)  It is headquartered in New York state, and its principal business operations are located in New York state, and the  qualified  investment it  receives  is  used  solely to support its business operations in the state, except for advertising, promotions and sales purposes.  In  cases where  the  qualified  investment  is  made  in  a start-up company such capital must be used  solely  to  establish  and  support  its  business operations  in  New  York  state, except for advertising, promotions and sales purposes.  (B) It has either (i) no more than one  hundred  employees,  at  least eighty  percent  of whom are employed in New York state or, (ii) no more than two hundred employees, at least eighty percent of whom are employed in this state, and during the  fiscal  year  immediately  preceding  the qualified  investment  it  had,  together  with  its  affiliates,  gross revenues of no more than five million dollars, on a  consolidated  basis as   determined   in   accordance  with  generally  accepted  accounting principles, except that,  with  respect  to  certified  capital  company program  three  and certified capital company program four and certified capital company program five, in the case of a  company  located  in  an empire  zone  established  pursuant to article eighteen-B of the general municipal law  such  gross  revenues  shall  not  exceed  eight  million dollars.  (C)  It  is  involved  in  commerce  for the purpose of developing and manufacturing products and systems, including but not  limited  to  high  technology  products  and  systems such as computers, computer software, medical  equipment,  biotechnology,  telecommunications  equipment   and products,  processing  or  assembling  all types of products, conducting research and development on all types of products or providing services, but  excluding  real  estate,  real  estate  development,  insurance and businesses predominantly engaged in professional  services  provided  by accountants, lawyers or physicians.  (D)  The  business was not organized by a certified capital company or an affiliate of a certified capital company, but  this  paragraph  shall not  prohibit  a  certified  capital  company  from providing financial, technical or similar advice to a business before making an investment in such business.  (E) The business does not have a financial relationship,  such  as  an ownership interest, investment interest, or compensation agreement, with a  certified  capital  company  or  any affiliate of a certified capital company before the date on which a certified capital company  makes  its first  investment in the business, but this paragraph shall not prohibit a certified capital  company  from  providing  financial,  technical  or similar  advice  to  a  business  before  making  an  investment in such business.  (F) For purposes of this paragraph, the term "independently owned  and operated  business"  means  (i)  in the case of a corporation or limited liability company, a corporation where no more than fifty percent of the voting stock of the corporation or limited liability company is owned or controlled, directly or indirectly, by a single  corporation,  a  single partnership  or a single limited liability company, and (ii) in the case of  a  partnership,  association,  or  other  entity,   a   partnership, association  or  other  entity  where  no more than fifty percent of the capital, profits or  other  beneficial  interest  in  such  partnership, association  or  other  entity  is  owned  or  controlled,  directly  or indirectly, by a single corporation, a single partnership  or  a  single limited  liability  company;  provided,  however,  that  the  term shall include, as a single "independently owned and operated business," parent and subsidiary or affiliated corporations or limited liability companies (i) that are engaged in an integrated  for-profit  business  enterprise, and  (ii)  in  which  at  least  eighty  percent  of the voting stock or membership interests of all of the  corporations  or  limited  liability companies  is  owned  or controlled, directly or indirectly, by a common group of shareholders or members, and no more than fifty percent of  the voting  stock  or  membership  interests  of  all of the corporations or limited  liability  companies  is  owned  or  controlled,  directly   or indirectly,  by  a  single  corporation,  single  partnership, or single limited liability company that is not  part  of  such  group  or  parent company or affiliated corporations or limited liability companies.  (8)  "Qualified  debt  instrument"  -  a  debt  instrument issued by a certified capital company, at par value or a premium, with  an  original maturity  date of at least five years from date of issuance, a repayment schedule which is not faster than a level  principal  amortization,  and interest,  distribution or payment features which are not related to the profitability of the certified capital company or the performance of the certified capital company's investment portfolio.  (9) "Qualified distribution"  -  any  distribution  or  payment  by  a certified capital company in connection with the following:  (A)  Reasonable  costs and expenses of such equity holders incurred by such equity holders in connection with  forming,  syndicating,  managing and  operating  the  certified  capital company, including (i) an annual management fee in an amount  that  does  not  exceed  two  and  one-half percent  of  the certified capital of the certified capital company with  respect to a particular certified  capital  company  program;  (ii)  the reasonable  and  necessary  fees paid for professional services (such as legal and accounting services) related to the operation of the certified capital  company;  (iii) with respect to program four and any subsequent program, all payments by the certified capital company  in  satisfaction of  its  indebtedness  to its certified investors, provided that no more than thirty-five percent of such certified capital  company's  certified capital  may  be  used  to  purchase  U.S.  treasury  securities,  other investment-grade securities,  a  guaranty,  indemnity,  bond,  insurance policy  or  other  payment  undertaking, or any combination thereof; and provided further, that nothing in this provision shall be  construed  to limit  a  certified capital company from expending non-certified capital in satisfaction of such indebtedness; and (iv) with respect  to  program four  and  any  subsequent program, the reasonable costs and expenses of forming, syndicating,  or  organizing  the  certified  capital  company, separate  from the costs of insuring or defeasing the obligations of the certified capital  company,  provided,  however,  that  such  costs  and expenses  shall  not  exceed  five  percent  of  the  certified  capital company's certified capital; and  (B) Any increase or projected increase  in  federal  or  state  taxes, including  penalties  and  interest  related to state and federal income taxes, of the equity owners of a  certified  capital  company  resulting from  the  earnings  or  other  tax  liability  of the certified capital company to the extent that the increase is  related  to  the  ownership, management or operation of a certified capital company.  (10)  "Qualified  investment"  - the investment of cash by a certified capital company in a qualified business for the purchase  of  any  debt, equity  or  hybrid  security,  of  any  nature and description whatever, including a debt instrument or security which has the characteristics of debt  but  which  provides  for  conversion  into   equity   or   equity participation instruments such as options or warrants, provided however, in the case of certified capital programs three, four and five, that any such debt instrument have a maturity of at least twenty-four months from the  date  such  debt is incurred; and further provided that a certified capital company, after the investment and assuming full  conversion  and exercise  of  any  equity  participation instruments, shall not own more than fifty percent of the  voting  equity  of  the  qualified  business, except  in the case of a follow-on investment where a specific exemption is granted by the department under subparagraph (D) of paragraph one  of subdivision  (c)  of  this section. Furthermore, except in the case of a follow-on investment, if a certified  capital  company  owns  more  than fifteen percent of the equity in a company or has a seat on the board of directors  of  such  company,  then  a  certified capital company cannot invest in such company unless the following conditions are met:  (i)  at least  one  other  investor  who  is  not  an affiliate of the certified capital company participates in the same round of investment on the same terms and conditions as the certified  capital  company;  and  (ii)  the certified  capital  company and its affiliates invest no more than fifty percent of the total investment made in that round of investment.  (11) "Early stage business" - a qualified business which is  involved, at  the  time of investment, in activities related to the development of initial product or service offerings, such as prototype  development  or establishment  of  initial production or service processes, or, which is less than two years old and during the fiscal year immediately preceding the qualified  investment  had,  together  with  its  affiliates,  gross revenues of no more than two million dollars, on a consolidated basis as determined in accordance with generally accepted accounting principles.  (12)  "Superintendent"  -  the  superintendent  of financial services; provided, however, that "superintendent" shall mean the commissioner  of economic  development  with  regard  to  any application, certification, report, submission, filing or other action required or governed by  this section occurring on or after August first, two thousand eleven.  (13)  "Certified  capital  company program" - a calendar year or years for which taxpayers may be allocated and  allowed  credits  pursuant  to this  section  and  subdivision (k) of section fifteen hundred eleven of this chapter and delineated as a separate program by this section.  (14) "Starting date" - the date on which a certified  capital  company is  allocated certified capital for a specific certified capital company program pursuant to subdivision (b) of this section.  (15) "Underserved area" - a county, including a county wholly within a city, in which, as of January first, two thousand, less than twenty-five percent of the qualified investments in qualified businesses  were  made by  certified  capital companies under certified capital company program one. The superintendent shall prepare a list of such  counties  by  July first, two thousand.  (16)  "Start-up business" - a qualified business which is involved, at the time of investment, in activities  related  to  the  development  of initial  product  or service offerings, such as prototype development or establishment of initial production or service processes, or,  which  is less than two years old and during the fiscal year immediately preceding the  qualified  investment  had,  together  with  its  affiliates, gross revenues of no more than two million dollars, on a consolidated basis as determined in accordance with generally accepted  accounting  principles and  has fewer than twenty employees at the time of the investment; and, in addition, which has emerged within the year  prior  to  the  date  of investment  or  is  emerging  from, or utilizes a technology transferred from, a university or college research  facility  located  in  New  York state,  a not-for-profit research facility located in New York state, or an industrial research facility located in New York state, or  which  is conducting research in conjunction with or in the research facilities of a  university  or college located in New York state, or which is located in or has emerged within the year prior to the date of investment or  is emerging from an incubator facility located in New York state.  (b)  Certification.  (1) The superintendent shall establish by rule or regulation  the  procedures  for  making  an  application  to  become  a certified  capital  company.  The  applicant  shall pay a non-refundable application fee of five hundred  dollars  at  the  time  of  filing  the application with the department.  (2)  The superintendent may certify partnerships, corporations, trusts or limited liability companies, organized on a for profit  basis,  which submit an application to be designated as a certified capital company if such  applicant  is located, headquartered and licensed or registered to conduct business in New York, has as its primary business  activity  the investment  of cash in qualified businesses and meets the other criteria set forth in this subdivision.  (3) A certified capital company's initial capitalization, at the  time of seeking certification, must be five hundred thousand dollars or more.  (4)  The  superintendent  shall review the organizational documents of each applicant  for  certification  and  the  business  history  of  the applicant,  determine  that  the applicant's cash, marketable securities and other liquid assets are at least five hundred thousand dollars,  and determine  that  the  officers  and  the  board  of  directors,  general partners,  trustees,  managers,  or  members  are  trustworthy  and  are thoroughly acquainted with the requirements of this subdivision.  (5)  The  superintendent  shall verify that at least two principals of the certified capital company or any manager of  the  certified  capital company  each  have no less than five years of experience in the venture capital or a venture capital-related industry.  (6)  Any  offering  material  involving  the sale of securities of the certified capital company shall include the following statement:   "Authorizing the formation of a Certified  Capital  Company  does  not constitute  the  endorsement  of  the state of New York as to either the quality of management or the potential for earnings of such company  and the state of New York is not liable for damages or losses to a Certified Investor in the company. Use of the word 'certified' in an offering does not  constitute a recommendation or endorsement of the investment by the state of New York.   Investments in a prospective Certified Capital Company  prior  to  the time  such  company  is  certified  with  respect to a certified capital company program are not eligible for tax credits. In the  event  certain statutory  provisions  (as  specified  in section 11 of the Tax Law) are violated, the state of New York may require  forfeiture  of  unused  tax credits and repayment of used tax credits."  (7)  Within  sixty days of application, the superintendent shall issue the certification or shall refuse the certification and  communicate  in detail   to  the  applicant  the  grounds  for  the  refusal,  including suggestions for the removal of those grounds.  (8) The superintendent may certify any  previously  certified  capital company  which  has remained in compliance with the requirements of this section upon  the  application  of  such  company  to  be  designated  a certified  capital  company  for a certified capital company program for which  it  is  not  so  designated.  Such  new  certification  shall  be considered  a  separate  certification from any other such certification under this section and investments in  and  by  such  company  shall  be considered  separately  for purposes of subdivisions (c) and (d) of this section.  (9) The superintendent shall start accepting applications to become  a certified  capital  company  in certified capital company program two by November first, nineteen hundred ninety-nine, and shall start  accepting applications  to become a certified capital company in certified capital company program three by August first, two  thousand,  and  shall  begin accepting   applications  to  become  a  certified  capital  company  in certified capital company program four by the later of August first, two thousand four or not more than sixty days after the  effective  date  of section  one of part D of chapter fifty-nine of the laws of two thousand four and shall  begin  accepting  applications  to  become  a  certified capital  company  in certified capital company program five by the later of July first, two thousand five or not more than sixty days  after  the effective  date  of  the  chapter of the laws of two thousand five which amended this paragraph.  (10) A certified capital company may  obtain  a  guaranty,  indemnity, bond,  insurance policy and/or other payment undertaking for the benefit of its certified investors from any entity; provided, however, that,  in no case shall more than one certified investor of such certified capital company  or affiliates of such certified investor be entitled to provide such guaranty, indemnity, bond, insurance policy  and/or  other  payment undertaking in favor of the certified investors of the certified capital company and its affiliates in this state.  (c)  Requirements for continuance of certification. (1) To continue to be certified with respect to  a  particular  certified  capital  company program,  a  certified  capital  company must make qualified investments according to the following schedule:  (A) Within two years after the starting date of a  specific  certified capital  company  program  of  a  certified  capital  company,  at least twenty-five percent of its certified capital allocable to such certified capital company program must be placed in qualified investments.  (B) Within three years after the starting date of a specific certified capital  company  program of a certified capital company, at least forty percent of its certified capital allocable  to  such  certified  capital company program must be placed in qualified investments.  (C)  Within four years after the starting date of a specific certified capital company program of a certified capital company, at  least  fifty percent  of  its  certified  capital allocable to such certified capital company program must be placed in qualified investments, at least  fifty percent of which must have been placed in early stage businesses, except that  in  the  case of program four and any subsequent program, at least twenty-five percent of which  must  have  been  placed  in  early  stage businesses and an additional twenty-five percent of which must have been placed  in start-up businesses, and except that in the case of qualified investments  made  in  qualified  businesses  located  in  empire  zones established  pursuant to article eighteen-B of the general municipal law under the provisions of certified capital company program three, program four and  program  five  from  allocations  of  certified  capital  made specifically   for   such   targeted  investments  in  such  zones,  the requirement for  qualified  investments  in  early  stage  and  start-up businesses shall not apply.  (D)  A  certified capital company, at least fifteen working days prior to making a proposed investment in a specific business, shall certify in writing to the superintendent that (i) the business in which it proposes to invest meets the definition of a qualified business as set  forth  in subdivision  (a)  of  this  section  or,  in  the  case  of  a follow-on investment, that such business continues to meet  the  requirements  set forth in subparagraphs (A) and (C) of paragraph seven of subdivision (a) of this section and, in either case, an explanation of its determination that  the  business  meets  such  requirements, and (ii) with respect to certified capital company program three, program four and program  five, whether  or  not  such business is located in an empire zone established pursuant to article eighteen-B of the general municipal  law  or  in  an underserved  area  outside  an  empire  zone.  The  certification to the superintendent shall include a sworn  statement  from  the  business  in which  the certified capital company proposes to invest, which statement shall  evidence  the  intention  of  the  business   to   maintain   its headquarters  in New York and conduct its primary business operations in the state of New York  after  its  receipt  of  the  investment  by  the certified  capital  company.  If  the superintendent determines that the business does not meet the definition of a qualified  business,  or,  in the case of a follow-on investment, that such business does not meet the requirements  set  forth in subparagraphs (A) and (C) of paragraph seven of subdivision (a) of this section, then it shall,  within  the  fifteen working  day  period  prior  to  the  making of the proposed investment, notify the certified capital company of its determination and provide an explanation thereof, provided, however, that the  department  may,  upon written  request of a certified capital company and at the discretion of the department, grant,  in  writing,  an  exemption  to  the  percentage limitations of paragraph ten of subdivision (a) of this section.  (E)  All  certified capital not placed in qualified investments by the certified capital company may be held or invested in such manner as  the certified  capital  company,  in  its discretion, deems appropriate. The proceeds of all  certified  capital  returned  to  a  certified  capital company  after  being  originally placed in qualified investments may be  placed again  in  qualified  investments  and  shall  count  toward  any requirement  in  this  subdivision  with  respect  to  placing certified capital in qualified investments.  (F)  If  within ten years after the starting date of certified capital company program four or program five, and within twelve years after  the starting date of certified capital company programs one, two, and three, one  hundred  percent  of the certified capital allocable to a certified capital company participating in such program has  not  been  placed  in qualified  investments,  the specific certified capital company shall no longer be permitted to  receive  management  fees;  provided  that  such restriction  shall  not  apply  (i)  with  respect  to certified capital company programs one, two, and three, to any certified  capital  company that  has  not,  prior  to  October  thirty-first,  two  thousand  four, received, as opposed to accrued,  any  management  fees,  or  (ii)  with respect to any certified capital company program, to a certified capital company  in  which  at least fifty percent of the voting stock, capital, membership interests, or other beneficial ownership  interests,  as  the case  may  be,  are  owned  by  an  entity  that is managed, directly or indirectly, by a non-profit corporation.  (2) Any business which is classified as a qualified  business  at  the time  of  the  first  investment in said business by a certified capital company shall remain classified as a qualified business and may  receive follow-on  investments  from  any  certified  capital  company, and such follow-on investments shall be qualified investments  even  though  such business may not meet the definition of a qualified business at the time of  such  follow-on  investments,  provided, however, that such business continues to meet the requirements set forth in  subparagraphs  (A)  and (C)  of  paragraph  seven  of  subdivision (a) of this section, and such business reaffirms its intention to maintain  its  headquarters  in  New York  and  conduct  its  primary business operations in the state of New York  as  required  in  subparagraph  (D)  of  paragraph  one  of   this subdivision.  (3) No qualified investment may be made by a certified capital company to  the extent such investment would cause the company's total qualified investment outstanding with respect to the qualified business  receiving such investment to exceed fifteen percent of the total certified capital of the certified capital company at the time of such investment.  (4)  Documents  and  other  materials  submitted  by certified capital companies  or  by  businesses  for  purposes  of  the   continuance   of certification shall not be public records if such records are determined by  the  superintendent  to  be  trade  or business secrets and shall be maintained in a confidential manner by the superintendent.  (5) The aggregate cumulative amount of all qualified investments  made by the certified capital company for a certified capital company program from  its  starting  date  for  such  program  will be considered in the calculation of the percentage requirements under subparagraphs (A),  (B) and  (C)  of  paragraph one of this subdivision, provided, however, that any amounts received by a certified capital  company  from  a  qualified business  as  (i)  commitment  fees, closing fees, or other similar fees (excluding reimbursement of out-of-pocket expenses, including legal fees and accounting fees) in excess of one percent of the  certified  capital company's  investment  in  the  qualified business or (ii) license fees, royalties, or similar charges shall not be  considered  in  any  of  the percentage calculations under this section.  (6)  Each  certified capital company shall report the following to the superintendent:  (A) As soon as practicable after the receipt of certified  capital  or an  irrevocable  funding  commitment  subject  only to the receipt of an  allocation pursuant to subdivision (h) of this section, (i) the name  of each  certified  investor from which the certified capital was received, including such certified investor's insurance tax identification number; (ii)  the  amount  of  each certified investor's investment of certified capital; and (iii) the date on which the certified capital was received. Provided, however, that requests for  allocation  of  tax  credits  with respect  to  certified  capital company program two by certified capital companies on behalf of their certified investors which are  received  by the  superintendent  on  or  before  March  first, two thousand shall be treated as having been received on March first,  two  thousand  for  tax credits  to  be utilized in two thousand one, and if satisfactory, shall be given equal priority for  allocation,  and  provided,  however,  that requests for allocation of tax credits with respect to certified capital company  program three by certified capital companies on behalf of their certified investors which are  received  by  the  superintendent  on  or before  December  first,  two  thousand  shall be treated as having been received on December first, two thousand for tax credits to be  utilized in  two thousand two, and if satisfactory, shall be given equal priority for allocation, and provided, however, that requests for  allocation  of tax  credits  with  respect to certified capital company program four by certified capital companies on behalf of their certified investors which are received by the superintendent on  or  before  December  first,  two thousand  four  shall  be  treated  as  having been received on December first, two thousand four for tax credits to be utilized in two  thousand six,  and if satisfactory, shall be given equal priority for allocation, and provided, however, that requests for allocation of tax credits  with respect  to  certified capital company program five by certified capital companies on behalf of their certified investors which are  received  by the  superintendent  on  or  before the later of (i) November first, two thousand five and (ii) the one hundred twentieth day after the  date  on which  the superintendent began accepting applications for certification in connection with certified capital company program  five  pursuant  to paragraph  nine  of  subdivision (b) of this section shall be treated as having been received on such later date for tax credits to  be  utilized in  two  thousand  seven,  and  if  satisfactory,  shall  be given equal priority for allocation.  (B) On an annual basis, on or  before  January  thirty-first  of  each year,  (i)  the  amount  of  the  certified  capital company's certified capital at the end of the immediately preceding year;  (ii)  whether  or not the certified capital company has invested more than fifteen percent of  its total certified capital in any one business; (iii) all qualified investments that the certified capital company made during the  previous calendar  year,  including  the  number  of  employees of each qualified business in which it has made investments at the time of such investment and as of December  first  of  the  preceding  calendar  year.  For  any qualified  business where the certified capital company no longer has an investment, the  certified  capital  company  shall  provide  employment figures  for  such  company as of the last day before the investment was terminated. Such report shall provide  a  separate  accounting  by  each certified  capital  company  program; and (iv) all qualified investments made in empire zones and underserved areas outside such empire zones  as required  under  certified  capital  company  program  three,  certified capital company program four and certified capital company program five.  (C) Each certified capital company shall provide to the superintendent annual audited financial statements, which shall include the opinion  of an  independent  certified  public accountant, within ninety days of the close of its fiscal year. The audit  shall  address  whether  the  funds received by the certified capital company have been invested as required  under   subparagraphs  (A),  (B)  and  (C)  of  paragraph  one  of  this subdivision.  Upon  receiving  notification  and  documentation   by   a certified  capital  company  that  it  has satisfied the requirements of subparagraph  (C)  of  paragraph  one  of  this  subdivision that it has invested fifty percent of its certified capital,  the  department  shall have  sixty days to notify such certified capital company that it has or has not met such requirement, with a reason for such determination if it has not, in the judgment of the department, met such requirement. If the department does not provide such notification  within  sixty  days,  the certified  capital  company  shall  then  be  deemed  to  have  met such requirement.  (D) On or before April first of  each  year,  each  certified  capital company  shall  pay  an annual, non-refundable certification fee of five hundred dollars to the superintendent; provided that no such  fee  shall be  required  within  six  months of the initial certification date of a certified capital company.  (E)(1) Within thirty days  of  the  decision  on  an  application  for certification   pursuant   to  subdivision  (b)  of  this  section,  the superintendent shall submit a copy of such application and  the  related decision  to  the department of taxation and finance. The superintendent shall submit a  copy  of  all  filings  of  certifications  pursuant  to subparagraph   (D)   of  paragraph  one  of  this  subdivision  and  any determination made thereon within fifteen days of such filing.  (2) The superintendent shall annually, by March first, submit  to  the department  of  taxation and finance a list of persons who may claim the tax credit for the previous  taxable  year  and  any  other  information necessary  to assist the department of taxation and finance to determine eligibility for such tax credit.  (d) Distributions. (1) A certified capital company may make  qualified distributions  at  any time. In order for a certified capital company to make a distribution other than a qualified distribution from a certified capital company program, to its equity holders, either (A) the aggregate cumulative amount of all qualified investments  for  such  program  must equal  or  exceed one hundred percent of its certified capital allocable to such certified capital company program, or (B) it must have  received written authorization to make such distribution from the superintendent. In no event, however, shall any such distribution to its equity holders, other  than  a  qualified  distribution,  be made by a certified capital company from a certified capital company program unless an amount  equal cumulatively to at least ninety percent of its certified capital of such program  is  invested in companies that conduct their principal business operations in New York state.  (2) In the event that a business in which a  qualified  investment  is made relocates its principal business operations to another state during such  investment,  or  within three months after the termination of such investment, the cumulative  amount  of  qualified  investment  shall  be reduced  by the amount of such qualified investment, for the purposes of this subdivision only, unless (A) the certified capital company  invests an  amount  at least equal to the investment of certified capital in the relocated business in a qualified business located  in  New  York  state within  six  months  of  the  relocation  or  (B)  unless  the  business demonstrates that it has returned its principal business  operations  to New  York state within three months of such relocation. A business shall be deemed to have relocated its principal  business  operations  outside New  York  state  if the primary workplace of more than fifty percent of the employees of such business within the state is relocated to  another state.  (3)  In  the  event that a business in which a qualified investment is made under certified capital company program  three,  certified  capital company   program  four  or  certified  capital  company  program  five, relocates its principal business operation within the  earlier  of  four years  after the date of such qualified investment or three months after the  termination  of  such  investment,  whereby  the  requirements   of paragraph  three  of  subdivision  (h) of this section to make qualified investments in qualified businesses located in empire zones  established pursuant  to  article  eighteen-B  of  the  general  municipal law or in underserved areas outside such empire zones no longer are satisfied, the cumulative amount of qualified investment shall be reduced by the amount of such qualified investment, for the purposes of this subdivision only, unless (A) the certified capital company  invests  an  amount  at  least equal  to  the investment of certified capital in the relocated business in a qualified business located in  either  an  empire  zone  or  in  an underserved  area  outside  an  empire  zone so that the requirements of paragraph three of subdivision (h) of this section are  again  satisfied within  six  months  of  such  relocation,  unless the certified capital company certifies to the superintendent that a  good  faith  effort  was made to make additional qualifying investments under the requirements of paragraph  three of subdivision (h) of this section, or (B) the business demonstrates that it has returned its principal  business  operation  to New  York  state  in  either  an  empire  zone or in an underserved area outside an empire zone within three months of such  relocation,  or  (C) the  business  demonstrates  that  it  had  a valid business purpose for relocating its principal business operation. A business shall be  deemed to have relocated its principal business operations outside of an empire zone  or  an  underserved  area  outside  an  empire zone if the primary workplace of more than fifty percent of the employees of  such  business within  an  empire zone or an underserved area outside an empire zone is relocated to an area outside the state or outside an empire zone  or  an underserved area outside an empire zone.  (4)  Payments  to  debt  holders of a certified capital company may be made without restriction with respect to  repayments  of  principal  and interest  on  indebtedness  owed to them by a certified capital company, including  indebtedness  of  the  certified  capital  company  on  which certified  investors  earned  tax  credits. A debt holder that is also a certified investor or equity holder of a certified capital  company  may receive  payments  with  respect  to  such  debt without any restriction whatsoever.  (5) A  certified  capital  company  that  receives  certified  capital investments  under  program four and any subsequent program shall pay to the department for deposit in the general fund an amount equal to thirty percent of the net profits on qualified investments. A certified capital company  shall  make  all  payments  required   under   this   paragraph concurrently  with and pro rata to distributions of profits and gains to its equity owners; however, nothing contained in this paragraph shall be construed to affect qualified distributions.  (6) The amount of any payment required under paragraph  five  of  this subdivision  shall  be reduced to fifteen percent of such net profits on qualified investments if, at the time of such net profits  distribution, such   certified  capital  company  irrevocably  commits  to  both:  (A) re-invest the remaining fifteen percent of such net  profits  not  being paid  to  the general fund under paragraph five of this subdivision into qualified businesses, and (B) invest an additional amount  equal  to  at least  fifteen  percent  of such net profits distribution into qualified businesses which additional amount shall come from a  separate  pool  of venture  capital that is controlled by the certified capital company but  that does not contain certified  capital.  In  making  investments  from funds  established  under  this paragraph, the certified capital company shall follow the requirements set forth in subparagraph (D) of paragraph one  of subdivision (c) of this section pertaining to obtaining approval of  the  investment  being  in  a  qualified   business,   except   that requirements   pertaining   to   empire   zones  and  underserved  areas requirements shall not apply. Once qualified  investments  in  qualified businesses  have  been  made  pursuant to this paragraph equal to thirty percent  of  the  net  profits  on  qualified  investments,   then   the requirements  under  this  subdivision shall have been satisfied and the proceeds from such  qualified  businesses  may  be  distributed  without restriction.  (e)  Decertification.  (1)  The superintendent shall conduct an annual review of each certified capital company to determine if  the  certified capital  company  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 this subdivision. The cost of the annual  review  shall  be paid  by  each  certified  capital company according to a reasonable fee schedule adopted by the superintendent.  (2) Any material violation of subdivision (c)  of  this  section  with respect  to  a  particular  certified  capital  company program shall be grounds for  decertification  of  the  certified  capital  company  with respect  to  such  program.  If  the  superintendent  determines  that a certified capital company is not in compliance with the requirements  of subdivision  (c)  of this section with respect to a particular certified capital company  program,  it  shall,  by  written  notice,  inform  the officers  of  the  certified  capital company that the certified capital company will be subject to decertification with respect to such  program in  one  hundred  twenty  days  from  the date of mailing of the notice, unless the deficiencies are corrected and the certified capital  company is again in compliance with all requirements for certification.  (3)  At  the  end  of  the one hundred twenty day grace period, if the certified capital company is still not in  compliance  with  subdivision (c)  of  this  section  with  respect  to a particular certified capital company  program,  the   superintendent   shall   send   a   notice   of decertification  to  the  certified capital company with respect to such program and to all other appropriate state agencies.  (4) Notwithstanding the provisions of paragraphs two and three of this subdivision, if a certified capital company in certified capital company programs three, four and  five  fails  to  satisfy  the  requirement  in subparagraph  (B)  of  paragraph  one of subdivision (c) of this section because it has been unable to make  a  sufficient  amount  of  qualified investments  in  qualified  businesses  located  either  in empire zones established pursuant to article eighteen-B of the general municipal  law or  in  underserved  areas  outside  such  empire  zones, such certified capital company shall not be subject to decertification  at  that  time. However,  if  such  certified  capital  company  fails  to  satisfy  the requirement in subparagraph (C) of paragraph one of subdivision  (c)  of this  section  because it has been unable to make a sufficient amount of qualified investments in qualified businesses  located  either  in  such empire  zones  or  in  underserved  areas outside such empire zones, but certifies to the superintendent that it had made a good faith effort  to make  such  investments, such certified capital company shall be allowed two additional years to satisfy the  requirement  in  such  subparagraph (C).  If,  after  the  conclusion of such two year period, the certified capital company still has not been able to satisfy  the  requirement  to make  such  investments, and such certified capital company certifies to  the superintendent that it had made a good faith  effort  to  make  such investments,  the  requirement  in  paragraphs  three,  four and five of subdivision (h)  of  this  section  to  make  qualified  investments  in qualified  businesses  located  in  empire zones or in underserved areas shall be waived. Such certified capital company shall  then  be  allowed one additional year to satisfy the requirement in such subparagraph (C), and  if,  at  the  conclusion  of  that additional one year period, such requirement is still not satisfied, such certified capital company shall be subject to decertification and the provisions of paragraphs  two  and three of this subdivision shall apply.  (5)   Once   a  certified  capital  company  has  invested  an  amount cumulatively equal to one hundred percent of its certified capital  with respect  to  a particular certified capital company program in qualified investments and has met all other requirements under  this  subdivision, the  certified  capital company shall no longer be subject to regulation by the superintendent and shall no longer be subject to the requirements of subdivision (c) of this section with respect to  such  program.  Upon receiving  documented  certification by a certified capital company that it has invested an amount equal to one hundred percent of its  certified capital,  the  department shall have sixty days to notify such certified capital company that it has or has  not  met  such  requirement  with  a reason  for  such  determination  if  it has not, in the judgment of the department, met such requirement. If the  department  does  not  provide such notification within sixty days, the certified capital company shall then be deemed to have met such requirement.  (6)   The   superintendent   shall   send   written   notice  of  such decertification to the address of  each  certified  investor  whose  tax credit  has  been  subject to recapture or forfeiture, using the address shown on the last filing submitted to the superintendent.  (f) Revocation of certification. The  superintendent  may  revoke  the certification  of  a certified capital company, or, at the discretion of the superintendent, the certification of  a  certified  capital  company with  respect to a particular certified capital company program only, if any material representation to the superintendent in connection with the application  process  proves  to  have  been  falsely  made  or  if  the application  materially  violates  any  requirement  established  by the superintendent  pursuant  to  this   subdivision.   In   addition,   the superintendent  may  revoke  the  certification  of  a certified capital company  if  such  certified  capital  company  (i)  falsely  certified, pursuant  to  paragraph  three of subdivision (d) of this section that a good faith effort was made to  make  additional  qualifying  investments under  the  requirements  of  paragraph three of subdivision (h) of this section, or (ii)  falsely  certified,  pursuant  to  paragraph  four  of subdivision (e) of this section, that it had made a good faith effort to make  a  sufficient  amount  of  qualifying  investments  in  qualifying businesses located in  empire  zones  established  pursuant  to  article eighteen-B  of the general municipal law or in underserved areas outside such empire zones.  (g) Registration requirements. All investments for which  tax  credits are allowable under the provisions of subdivision (k) of section fifteen hundred  eleven  of  this  chapter shall satisfy the conditions of being registered or specifically exempt from  registration  by  provisions  or regulations  under  sections  three  hundred  fifty-nine-e through three hundred fifty-nine-ff of the general business law.  (h) Maximum permitted credits. (1) Certified capital  company  program one.  The  aggregate amount of certified capital for which taxpayers may be allocated and allowed tax credits  pursuant  to  this  paragraph  and subdivision  (k)  of  section fifteen hundred eleven of this chapter may  not exceed fifty million dollars  for  calendar  year  nineteen  hundred ninety-nine,  which  certified  capital  may  be  invested  in certified capital  companies  beginning  in   calendar   year   nineteen   hundred ninety-eight.  In  calendar year two thousand or thereafter, tax credits may be allowed pursuant to this paragraph and such subdivision  (k)  for an   additional  fifty  million  dollars  of  certified  capital,  which certified  capital  may  be  invested  in  certified  capital  companies beginning   in  calendar  year  nineteen  hundred  ninety-nine,  if  not allocated to calendar year nineteen hundred ninety-eight  in  accordance with  this  paragraph.  Therefore, the total amount of certified capital for which tax credits may be allowed pursuant to this paragraph and such subdivision (k) shall be one hundred million dollars.   During any calendar year in which the  limitation  described  in  this paragraph  will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing  of information   described   in   subparagraph  (A)  of  paragraph  six  of subdivision (c) of  this  section.  Certified  capital  limited  in  any calendar  year  by  the  application of the provisions of this paragraph shall be allowed and allocated in the  immediately  succeeding  calendar year   in   order   of   priority  set  forth  in  this  paragraph.  The superintendent shall advise any certified  capital  company  in  writing within fifteen days after receiving such filing, whether the limitations of  this paragraph then in effect will be applicable with respect to the investments  and   credits   described   in   such   filing   with   the superintendent.   Certified capital may be raised by each certified capital company with respect  to certified capital company program one at any time subsequent to its certification date, and credits shall be allocated to and  vested in  certified  investors at the time of each such investment as provided in this paragraph, although such credits shall not be first  allowed  or incurred  for  state  tax  purposes,  until,  at the earliest, tax years beginning in nineteen hundred ninety-nine  with  respect  to  the  first fifty million dollars of credits and tax years beginning in two thousand with respect to the next such fifty million dollars of credits.  (2)  Certified  capital  company  program two. The aggregate amount of certified capital for which taxpayers may be allocated and  allowed  tax credits  pursuant  to  this  paragraph  and  subdivision  (k) of section fifteen hundred eleven of this chapter may  not  exceed  thirty  million dollars  for calendar year two thousand one, which certified capital may be invested in certified capital companies beginning  in  calendar  year nineteen hundred ninety-nine.   During  any  calendar  year  in which the limitation described in this paragraph will limit the amount of certified capital, certified  capital will  be allocated in order of priority based upon the date of filing of information  described  in  subparagraph  (A)  of   paragraph   six   of subdivision  (c)  of  this  section. The superintendent shall advise any certified  capital  company  in  writing,  within  fifteen  days   after receiving such filing, whether the limitations of this paragraph then in effect  will  be  applicable with respect to the investments and credits described in such filing with the superintendent.   Certified capital may be raised by each certified capital company with respect to certified capital company program two at any time  subsequent to  its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment  as  provided in  this  paragraph, although such credits shall not be first allowed or incurred for state tax purposes,  until,  at  the  earliest,  tax  years beginning in two thousand one.  (3)  Certified  capital company program three. The aggregate amount of certified capital for which taxpayers may be allocated and  allowed  tax credits  pursuant  to  this  paragraph  and  subdivision  (k) of section fifteen hundred eleven of this chapter may not exceed one hundred  fifty million  dollars  for  calendar  year  two thousand two, which certified capital may be invested in  certified  capital  companies  beginning  in calendar year two thousand.   During  any  calendar  year  in which the limitation described in this paragraph will limit the amount of certified capital, certified  capital will  be allocated in order of priority based upon the date of filing of information  described  in  subparagraph  (A)  of   paragraph   six   of subdivision  (c)  of  this  section. The superintendent shall advise any certified  capital  company  in  writing,  within  fifteen  days   after receiving such filing, whether the limitations of this paragraph then in effect  will  be  applicable with respect to the investments and credits described in such filing with the superintendent.   Certified capital may be raised by each certified capital company with respect  to  certified  capital  company  program  three  at  any   time subsequent  to its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment as provided in this paragraph, although such credits  shall  not  be  first allowed  or incurred for state tax purposes, until, at the earliest, tax years beginning in two thousand two. One-third of the certified  capital raised  by  each  certified  capital  company  with respect to certified capital  company  program  three  shall  be  used  to   make   qualified investments  in qualified businesses located in empire zones established pursuant to  article  eighteen-B  of  the  general  municipal  law,  and one-third  of  such  certified  capital  shall be used to make qualified investments in qualified businesses located in underserved areas outside such empire zones.  (4) Certified capital company program four. The  aggregate  amount  of certified  capital  for which taxpayers may be allocated and allowed tax credits pursuant to  this  paragraph  and  subdivision  (k)  of  section fifteen  hundred  eleven  of  this  chapter may not exceed sixty million dollars for calendar year two thousand six, which certified capital  may be  invested  in  certified capital companies beginning in calendar year two thousand four.   During any calendar year in which the  limitation  described  in  this paragraph  will limit the amount of certified capital, certified capital will be allocated in order of priority based upon the date of filing  of information   described   in   subparagraph  (A)  of  paragraph  six  of subdivision (c) of this section. The  superintendent  shall  advise  any certified   capital  company  in  writing,  within  fifteen  days  after receiving such filing, whether the limitations of this paragraph then in effect will be applicable with respect to the  investments  and  credits described in such filing with the superintendent.   Certified capital may be raised by each certified capital company with respect to certified capital company program four at any time subsequent to  its certification date, and credits shall be allocated to and vested in certified investors at the time of each such investment  as  provided in  this  paragraph, although such credits shall not be first allowed or incurred for state tax purposes,  until,  at  the  earliest,  tax  years beginning in two thousand six. One-third of the certified capital raised by  each  certified  capital  company  with respect to certified capital company program four shall be used  to  make  qualified  investments  in qualified  businesses  located  in  empire zones established pursuant to article eighteen-B of the general municipal law, and one-third  of  such certified  capital  shall  be  used  to  make  qualified  investments in  qualified businesses located in underserved areas  outside  such  empire zones,  provided,  however,  that in the case of an investment made by a certified capital company in an empire zone located  in  an  underserved area, the certified capital company making such an investment may choose to designate such investment as an investment in an underserved area but not  as  an  investment in an empire zone for the purpose of meeting the requirements of this paragraph. Fifty percent of  the  total  amount  of capital  invested  by  a  certified  capital  company at the time of one hundred percent investment of  funds  shall  be  invested  in  qualified businesses  that  are  involved  in  commerce for the primary purpose of developing  and  manufacturing  products  and  systems  covered  by  the activities  set  forth  in  paragraph  (b) of subdivision one of section thirty-one hundred two-e of the public authorities law and have a  ratio of  research  and  development expenditures to net sales which equals or exceeds six percent during the fiscal  year  immediately  preceding  the qualified investment.  (5)  Certified  capital  company program five. The aggregate amount of certified capital for which taxpayers may be allocated and  allowed  tax credits  pursuant  to  this  paragraph  and  subdivision  (k) of section fifteen hundred eleven of this chapter  may  not  exceed  sixty  million dollars  for  calendar  year two thousand seven, which certified capital may be invested in certified capital  companies  beginning  in  calendar year two thousand five.   During  any  calendar  year  in which the limitation described in this paragraph will limit the amount of certified capital, certified  capital will  be allocated in order of priority based upon the date of filing of information  described  in  subparagraph  (A)  of   paragraph   six   of subdivision  (c)  of  this  section. The superintendent shall advise any certified  capital  company  in  writing,  within  fifteen  days   after receiving such filing, whether the limitations of this paragraph then in effect  will  be  applicable with respect to the investments and credits described in such filing with the superintendent.   Certified capital may be raised by each certified capital company with respect to certified capital company program five at any time subsequent to its certification date, and credits shall be allocated to and  vested in  certified  investors at the time of each such investment as provided in this paragraph, although such credits shall not be first  allowed  or incurred  for  state  tax  purposes,  until,  at the earliest, tax years beginning in two thousand seven.  One-third  of  the  certified  capital raised  by  each  certified  capital  company  with respect to certified capital company program five shall be used to make qualified investments in qualified businesses located in empire zones established pursuant  to article  eighteen-B  of the general municipal law, and one-third of such certified capital  shall  be  used  to  make  qualified  investments  in qualified  businesses  located  in underserved areas outside such empire zones, provided, however, that in the case of an investment  made  by  a certified  capital  company  in an empire zone located in an underserved area, the certified capital company making such an investment may  chose to designate such investment as an investment in an underserved area but not  as  an  investment in an empire zone for the purpose of meeting the requirements of this paragraph. Fifty percent of  the  total  amount  of capital  invested  by  a  certified  capital  company at the time of one hundred percent investment of  funds  shall  be  invested  in  qualified businesses  that  are  involved  in  commerce for the primary purpose of developing  and  manufacturing  products  and  systems  covered  by  the activities  set  forth  in  paragraph  (b) of subdivision one of section thirty-one hundred two-e of the public authorities law and have a  ratio of  research  and  development expenditures to net sales which equals or  exceeds six percent during the fiscal  year  immediately  preceding  the qualified investment.  (i) Maximum certified capital. The maximum amount of certified capital per  certified capital company program invested in one or more certified capital companies allowed in any one year to any one certified  investor shall  not  exceed  ten  million  dollars  for certified capital company programs one and three, and eight million dollars for certified  capital company  programs  two,  four and five for such year, provided, however, that if the aggregate amount of certified capital for such year, as  set forth  in  subdivision  (h)  of this section, has not been reached sixty days prior to the end  of  the  year  to  which  such  aggregate  amount applies, the provisions of this subdivision shall cease to apply for the remainder of such year. In addition, the aggregate amount of tax credits allowed  in  any  taxable  year  to any affiliated group of taxpayers in relation to certified  capital  may  not  exceed  such  maximum  amount, whether  or  not  such  taxpayers  file  a  combined  return pursuant to subdivision (f) of section fifteen hundred fifteen of this chapter.  For purposes  of  the  preceding sentence, the term "affiliated group" shall have the same meaning as described  in  section  1504  of  the  internal revenue code, except that the references to "at least eighty percent" in such section 1504 shall be read as "more than fifty percent".  (k)  Rules  and  regulations. The superintendent, in consultation with the department of taxation and finance, shall prescribe such  rules  and regulations  as he or she shall deem necessary in order to implement the provisions of this  section  within  one  hundred  twenty  days  of  the effective date of this section.  (l)  For  the  purposes  of this section, the term "empire zone" shall also include, in relation to investments made  by  a  certified  capital company  in  which  at least fifty percent of the voting stock, capital, and membership interests, as the case may be, are  owned  by  an  entity that is managed directly or indirectly, by a non-profit corporation, the liberty  zone  as  defined  in  section  one of part AA of chapter three hundred eighty-three of the laws of two  thousand  one,  the  resurgence zone  as  defined  in  section  one  of  part A of chapter three hundred eighty-three of the laws of two thousand one and a  federal  empowerment zone designated pursuant to section 1391 of the internal revenue code.