2023 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.