HCS HB 1547 -- CERTIFIED CAPITAL COMPANIES

SPONSOR:  Rizzo (Scheve)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Commerce
by a vote of 18 to 2.

This substitute makes numerous changes to the Missouri Certified
Capital Company (CAPCO) Law."  In its main provisions it:

(1)  Authorizes agricultural businesses to receive qualified
CAPCO investments, including investments which may include
secured debt, and defines "qualified Missouri agricultural
businesses";

(2)  Changes the definition of "affiliate of a certified
company" from any person owning or controlling 10% of voting
securities to persons owning or controlling 15% of such
securities.

(3)  Specifies that for certified capital raised by a CAPCO
after August 28, 2000, no more than 10% may be considered as a
"reasonable cost" for the purpose of forming and syndicating the
CAPCO, and no more than 2 1/2% may be considered as a
"reasonable cost" for the purpose of managing and operating the
CAPCO.  Companies designated as CAPCOs after this date are also
prohibited from investing more than 5% of their certified
capital in a security or policy issued or an account maintained
by an insurance company or insurance company affiliate;

(4)  Limits the maximum amount of certified capital any one
investor may invest in one or more CAPCOs in a given calendar
year to $10 million.  Current law allows the Director of the
Department of Economic Development (DED), with the approval of
the Commissioner of Administration, to reduce from 100% the
proportion of the investment for which tax credits will be
awarded, beginning anytime after August 28, 1999.  This
substitute changes this date to anytime after August 28, 2003,
so that 100% of the investment can qualify for tax credits
between 1999 and 2003.  This substitute changes the total amount
of certified capital for which tax credits are allowed after
1997, from a cap of $10 million in aggregate credits to an
additional $5 million in aggregate credits for calendar year
1998, and an additional $10 million in aggregate credits for
calendar year 2000;

(5)  Changes the criteria for continuing to be certified as a
CAPCO, requiring certain investment amounts from the date the
company has raised certified capital rather than from the date
of certification as a CAPCO;

(6)  Requires CAPCOs to invest at least 25% of their required
investments of certified capital raised after August 28, 2000,
in qualified agricultural businesses;

(7)  Defines a "qualified Missouri development stage business"
as certain businesses within an "emerging industry" as defined
by DED or with gross sales in the most recently completed fiscal
year of less than $2 million; and clarifies that allowable
distributions, other than qualified distributions, are
distributions made from certified capital;

(8)  Authorizes CAPCOs to organize wholly-owned subsidiaries; and

(9)  Allows companies with gross sales of up to $7.5 million to
be qualified businesses, provided they receive an investment
from a CAPCO that, within 4 years of its designation as a CAPCO,
invests at least one-half of its certified capital in qualified
investments in a development stage business.

FISCAL NOTE:  Estimated Loss to General Revenue Fund of $0 to
$10,000,000 in FY 2001, and $0 in FY 2002 and FY 2003.

PROPONENTS:  Supporters say that the CAPCO program has been very
effective in promoting economic development, investment in
emerging businesses, and job growth.

Testifying for the bill were Representative Scheve; Advantage
Capital Partners; Advantage Capital Company; St. Louis Regional
Chamber and Growth Association; Bank One Equity Investors, Inc.,
and Stifel, Nicolaus & Company.

OPPONENTS:  Those who oppose the bill say that CAPCO funds need
to be distributed throughout the state and not only in St. Louis
and Kansas City.

Testifying against the bill was John Davidson.

Debra Cheshier, Senior Legislative Analyst

HB 1547 -- Certified Capital Companies

Sponsor:  Scheve

This bill makes several changes to the Missouri Certified
Capital Company Law.  For companies designated as certified
capital companies (CAPCO's) after August 28, 2000, no more than
10% of their certified capital may be considered as a reasonable
cost for the purpose of forming, syndicating, managing, or
operating the CAPCO.  Companies designated as CAPCO's after this
date are also prohibited from investing more than 5% of their
certified capital in a security or policy issued or an account
maintained by an insurance company or insurance company
affiliate.  Current law allows the Director of the Department of
Economic Development (DED), with the approval of the
Commissioner of Administration, to reduce from 100% the
proportion of the investment for which tax credits will be
awarded, beginning any time after August 28, 1999.  The bill
changes this date to any time after August 28, 2005, so that
100% of the investment can qualify for tax credits between 1999
and 2005.  The bill changes the total amount of certified
capital for which credits are allowed, from a cap of $10 million
in aggregate credits to $5 million for calendar year 1998, $10
million for calendar year 2000, and to no more than 10% of the
cumulative credits earned in previous years for each year after
2000.  The bill defines a "qualified Missouri development stage
business" as certain businesses within an "emerging industry" as
defined by DED, or with gross sales in the most recently
completed fiscal year of less than $2 million; and clarifies
that allowable distributions, other than qualified
distributions, are distributions made from certified capital.
Finally, the bill allows companies with gross sales of up to
$7.5 million to be qualified businesses, if they receive an
investment from a CAPCO that, within 4 years of its designation
as a CAPCO, invests at least one-half of its certified capital
in qualified investments in a development stage business.