GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 475

Short Title:  Small Business Capital & Growth Act.	(Public)

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Sponsors: Representatives Shaw, Linney; Adams, Alexander, Beall, Berry, Black, Blue, Bowen, Boyd-McIntyre, Braswell, W. Brown, Buchanan, Church, Cunningham, Earle, Easterling, Fitch, Fox, Gamble, Hensley, Hiatt, Hightower, Hill, H. Hunter, R. Hunter, Hurley, Locke, McAllister, McLaughlin, Mercer, G. Miller, Oldham, Ramsey, Rayfield, Redwine, Robinson, Sexton, Snowden, Sutton, Thompson, Tolson, Wainwright, Warner, Wilkins, G. Wilson, Womble, Wright, and Yongue.

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Referred to:  Business and Labor, if favorable, Finance.

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March 15, 1995

A BILL TO BE ENTITLED
AN ACT TO CREATE THE NORTH CAROLINA CAPITAL ACCESS AUTHORITY TO PROVIDE EQUITY AND CREDIT FINANCING TO SMALL AND MEDIUM-SIZED BUSINESSES TO CREATE JOBS FOR NORTH CAROLINA.
The General Assembly of North Carolina enacts:
TABLE OF CONTENTS
I.  CAPITAL ACCESS AUTHORITY AND FUND
II.  REVENUES EARMARKED FOR CAPITAL ACCESS FUND
III.  INVESTMENTS BY STATE TREASURER
IV.  INSURANCE TAX CREDIT FOR INVESTMENTS
V.  BONDS FOR INDUSTRIAL FACILITIES
VI.  BANK TAX DEDUCTION FOR INVESTMENTS
VII.  CONFORMING CHANGES
VIII.  EFFECTIVE DATES
PART I.
CAPITAL ACCESS AUTHORITY AND FUND
Section 1.  This act is the Small Business Capital and Growth Act of 1995.
Sec. 2.  G.S. 53A-35 through G.S. 53A-37 are designated Part 1 of Article 3 of Chapter 53A of the General Statutes, entitled "General Provisions" and the remainder of Article 3 of Chapter 53A of the General Statutes is designated Part 2, entitled "North Carolina Enterprise Corporations".
Sec. 3.  Article 3 of Chapter 53A of the General Statutes, as amended by this act, is further amended by adding a new Part to read:
"Part 3. The North Carolina Capital Access Authority.
"§ 53A-50.  Creation of Authority; purpose.
(a)	Creation. – The North Carolina Capital Access Authority is created as a body corporate and politic having the powers and jurisdiction as provided under this Part or any other law.  The Authority is a State agency created to perform essential governmental and public functions.  The Authority shall be located within the Department of Commerce, but shall exercise all of its powers, including the power to employ, direct, and supervise all personnel, independently of the Secretary of Commerce and, notwithstanding any other provision of law, shall be subject to the direction and supervision of the Secretary only with respect to the management functions of coordinating and reporting.
(b)	Purpose. – The purpose of The North Carolina Capital Access Authority is to promote, stimulate, develop, and advance economic prosperity and stimulate job creation in rural areas, underdeveloped communities, depressed urban commercial areas, and economically distressed areas of North Carolina through mezzanine finance investments and loans to Qualified North Carolina Businesses and through facilitation of development projects in connection with private economic development. To stimulate development broadly across the State, the Authority shall, to the maximum extent feasible consistent with sound business practices, provide financing and credit available to businesses located throughout the State.  The Authority shall support nonspeculative, mainstream businesses as provided in this Part.
"§ 53A-51.  Governing body of Authority.
(a)	Board of Directors. – The Authority shall be governed by a Board of Directors.  The Board shall consist of 12 appointed members and 10 ex officio members.  As the holder of an office, each member of the Board shall take the oath required by Article VI, § 7 of the North Carolina Constitution before assuming the duties of a Board member.  The Governor shall designate a chair and a vice-chair of the Board.  The chair shall convene the first meeting of the Board.
(b)	Appointed Members. – Four members shall be appointed by the Governor, one who represents the banking industry, one who represents a North Carolina Enterprise Corporation created pursuant to Part 2 of this Article, one who represents small business interests, and one who represents public interests.  Four members shall be appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120-121, one who represents community development corporations, one who represents environmental interests, one who represents medium-sized business interests, and one who represents public interests.  Four members shall be appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate in accordance with G.S. 120-121, one who owns a minority business as defined in G.S. 143-128, one who represents a public utility, one who represents a nonprofit organization active in infrastructure development under the Community Reinvestment Act, and one who represents public interests.
In making appointments to the Board, the Governor and the General Assembly shall give consideration to the geographical representation of the Western region, the Piedmont region, and the Eastern region of the State.  In addition, the appointments should reflect the ethnic and gender diversity of the State as nearly as practical.  The appointing authority shall make a replacement appointment to serve for the unexpired term in the case of a vacancy.  A vacancy in an appointment made by the General Assembly shall be filled in accordance with G.S. 120-122.
The initial appointments to the Board shall be for terms beginning on July 1, 1995.  Of the initial appointments made by the Governor, by the General Assembly upon the recommendation of the Speaker of the House of Representatives, and by the General Assembly upon the recommendation of the President Pro Tempore of the Senate, two appointments from each group shall be designated to expire on July 1, 1997; the remaining terms shall expire July 1, 1999.  Thereafter, all appointments shall be for a term of four years.
The Governor may remove any appointed member of the Board for misfeasance, malfeasance, or nonfeasance in accordance with G.S. 143B-13(d). The authority who appointed a member of the Board may remove the member for using improper influence in accordance with G.S. 143B-13(c).
(c)	Ex Officio Members. – The following members shall be ex officio, voting members of the Board:
(1)	The State Treasurer, or the Treasurer's designee.
(2)	The Secretary of State, or the Secretary's designee.
(3)	The Commissioner of Agriculture, or the Commissioner's designee.
(4)	The State Auditor, or the Auditor's designee.
(5)	The State Superintendent of Public Instruction, or the Superintendent's designee.
(6)	The Attorney General, or the Attorney General's designee.
(7)	The Commissioner of Labor, or the Commissioner's designee.
(8)	The Commissioner of Insurance, or the Commissioner's designee.
(9)	The Secretary of Commerce, or the Secretary's designee.
(10)	The President of the North Carolina Community College System, or the President's designee.
(d)	Organization of the Board. – The Board shall adopt bylaws with respect to the calling of meetings, quorums, voting procedures, the keeping of records, and other organizational and administrative matters as the Board may determine.  A quorum shall consist of a majority of the members of the Board.  No vacancy in the membership of the Board shall impair the right of a quorum to exercise all rights and to perform all the duties of the Board and the Authority.
(e)	Compensation of the Board. – No part of the revenues or assets of the Authority shall inure to the benefit of or be distributable to the members of the Board or officers or other private persons. The members of the Board shall receive no salary for their services but shall be entitled to receive per diem and necessary travel and subsistence expenses payable to members of State boards and agencies generally pursuant to G.S. 138-5 and G.S. 138-6, as the case may be.
(f)	Treasurer. – The Board shall select the Authority's treasurer.  The Board shall require a surety bond of the appointee in an amount fixed by the Board, and the premium shall be paid by the Authority as a necessary expense of the Authority.
(g)	Executive Director and Other Employees. – The Board shall appoint an executive director, whose salary shall be fixed by the Board, to serve at its pleasure.  The executive director or a person designated by the executive director shall appoint, employ, dismiss, and, within the limits of available funding, fix the compensation of other employees as considered necessary.
(h)	Office. – The Board shall establish an office for the transaction of the Authority's business at the place the Board finds advisable or necessary to implement the provisions of this Part.
"§ 53A-52.  Capital Access Financing Fund.
The Authority shall establish the Capital Access Financing Fund, as a trust fund.  The Fund shall consist of loans, gifts, grants, appropriations, investments, and any other funds made available for the Fund.  The Authority shall use monies in the Fund to provide mezzanine finance capital, credit, and other types of financing as appropriate for Qualified North Carolina Businesses and to facilitate development projects in connection with private economic development.
"§ 53A-53.  Capital Access Financing Program.
(a)	Program Established. – The Authority shall establish and implement a Capital Access Financing Program in accordance with this section to create at least 40,000 jobs during its first five years.  The purpose of the program is to provide mezzanine finance capital, credit, and other financing to Qualified North Carolina Businesses in rural areas, underdeveloped communities, depressed urban commercial areas, and economically distressed areas of the State.  Financing shall be targeted to businesses that will create well-paying jobs for North Carolina citizens.
(b)	Procedures. – The Authority shall establish a procedure for businesses to apply for financing from the Fund.  The application must include information regarding the applicant's experience, credit rating, track record in previous businesses, and any other information required by the Authority.  Each application shall also include documentation of the number of jobs to be created as a result of the financing and the expected average wage the jobs will pay.  In the case of a loan, the Authority shall require the applicant to provide a certified appraisal of the collateral that will secure the loan.  The Authority may require an applicant to sign a letter of intent and make other commitments or contracts before receiving financing from the Fund.
(c)	Sound Business Practices. – The Authority shall adopt rules and standards to assure that all financing provided from the Fund is consistent with sound business practices, including requirements that all loans be collateralized, that applicants have sound credit ratings and meet experience standards set by the Authority, and that mezzanine finance investments not be speculative.  The Authority shall assure that all financing agreements include strong remedies for defaults, including foreclosure on collateral.  The Authority shall assure that financing agreements meet standards such that the loans can be sold on the secondary market.
(d)	Matching. – The Authority shall establish matching requirements for receipt of financing from the Fund.  These requirements shall be flexible, tailored to the type, size, and circumstances of the business seeking financing.
(e)	Minimum Wage Standards. – The Authority shall establish a minimum wage standard that jobs to be created by a business must meet as a condition of receiving financing from the Fund.  The standard for the average weekly wage to be paid for the jobs shall include minimum dollar amounts for different types of industries and a requirement that the wage is at least twenty-five percent (25%) above the median weekly wage paid in the county in which the jobs will be located.  For the purpose of this subsection, the median wage in a county is the median average wage for all insured industries in the county as computed by the Employment Security Commission for the most recent period for which data are available.  The Authority may waive or alter the minimum wage requirement if the area in which the jobs are to be created has an especially severe rate of unemployment or in similar cases involving extreme circumstances.
(f)	Minimum and Maximum Financing Amount. – The Authority shall provide financing in amounts no less than five hundred thousand dollars ($500,000) per business.  The Authority shall establish maximum financing amounts for different types and sizes of businesses, not to exceed ten million dollars ($10,000,000) per business.  In no case shall the amount of financing for a business exceed twenty-five thousand dollars ($25,000) per job to be created as a result of the financing.
(g)	Priority of Investments. –  In choosing businesses to finance, the Authority shall give priority to start-up businesses; businesses that engage primarily in manufacturing, processing, warehousing, wholesaling, research and development, or a service-related industry; businesses that will create high-quality jobs; and businesses that cannot obtain sufficient financing through traditional financial institutions.  The Authority shall assign a lower priority to real-estate related businesses as defined in G.S. 105-163.010 and to businesses that engage primarily in providing a professional service as defined in Chapter 55B of the General Statutes, construction or contracting, selling or leasing at retail, providing personal grooming or cosmetics services, or offering any form of entertainment, amusement, recreation, or athletic or fitness activity for which an admission or a membership is charged.  The Authority shall not invest in a business engaged as a substantial part of its business in the purchase, sale, or development, or purchasing, selling, or holding for investment of commercial paper, notes, other indebtedness, financial instruments, securities, or real property, or otherwise in making investments.  The Authority shall not invest in a business formed for the primary purpose of acquiring all or part of the stock or assets of one or more existing businesses.
(h)	Technical Assistance. – The Authority shall provide technical assistance and support to businesses to enable them to obtain loan guarantees and other support from federal agencies and other sources.
"§ 53A-54.  Powers of the Authority.
(a)	The Authority shall have all of the powers necessary to execute the provisions of this Part, which shall include at least the following powers:
(1)	The powers of a corporate body, including the power to sue and be sued and to adopt and use a common seal.
(2)	To own, acquire, finance, rent, lease, dispose of, encumber, mortgage, or manage real or personal property, but not to acquire property by eminent domain.
(3)	To pay all necessary costs and expenses in the formation, organization, administration, and operation of the Authority.
(4)	To apply for, accept, and administer loans and grants of money from any federal agency, from the State or its political subdivisions, or from any other public or private sources available, to expend the money in accordance with the requirements imposed by the lender or donor, and to give any evidences of indebtedness that are required.  No indebtedness of any kind incurred or created by the Authority shall constitute an indebtedness of the State or its political subdivisions, and no indebtedness of the Authority shall involve or be secured by the faith, credit, or taxing power of the State or its political subdivisions.
(5)	To form and contract with a licensed small business investment company as defined in the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., to obtain funding and administer loans to Qualified North Carolina Businesses.
(6)	To adopt bylaws or rules implementing the provisions of this Part.
(7)	To indemnify the Authority and its officers, directors, agents, employees, and adjoining property owners, or the general public against loss or liability resulting from any act or omission by or on behalf of the Authority.
(8)	To purchase or finance real or personal property in the manner provided for cities and counties under G.S. 160A-20.
(9)	To recommend that the North Carolina Industrial and Pollution Control Facilities Financing Authority created under Chapter 159D of the General Statutes issue bonds to finance development projects identified by the Authority, as provided in G.S. 53A-55.
(10)	To arrange for the State Treasurer to invest in the equity securities of Qualified North Carolina Businesses pursuant to G.S. 147-69.2(b)(10a).
(11)	With the approval of any unit of local government, to use officers, employees, agents, and facilities of the unit of local government for the purposes and upon the terms as may be mutually agreeable.
(12)	To receive and use appropriations from the State, including an appropriation from the proceeds of State general obligation bonds or notes.
(b)	To execute the powers provided in subsection (a) of this section, the Board shall determine the policies of the Authority by majority vote of the members of the Board present and voting, a quorum having been established.  Once a policy is determined, the Board shall communicate it to the executive director, who shall have the sole and exclusive authority to execute the policy of the Authority.  No member of the Board shall have the responsibility or authority to give operational directives to any employee of the Authority other than the executive director.
"§ 53A-55.  Facilitating financing of development projects.
(a)	Recommendation. – If the Authority determines that a proposed development project is one that would be eligible for financing by the North Carolina Industrial and Pollution Control Facilities Financing Authority created in Chapter 159D of the General Statutes and makes the findings required in this section, the Authority may recommend that the Industrial and Pollution Control Facilities Financing Authority issue bonds to finance the project pursuant to G.S. 159D-6.  The Authority shall transmit its recommendation in writing to the chair of the board of commissioners of the Industrial and Pollution Control Facilities Financing Authority.  The recommendation shall be accompanied by a request that bonds be issued, a certification of the Authority's findings under this section, and any other information required by the Industrial and Pollution Control Facilities Financing Authority.
(b)	Findings. – Before recommending that the Industrial and Pollution Control Facilities Financing Authority issue bonds to finance a proposed development project, the Authority shall find that all of the following conditions have been met:
(1)	The financing of the development project is necessary to enable one or more Qualified North Carolina Businesses to create or save, directly or indirectly, jobs in a rural area, an underdeveloped community, a depressed urban commercial area, or an economically distressed area of the State.
(2)	The jobs to be created or saved meet the minimum wage standard established by the Authority under G.S. 53A-53(e).
(3)	The affected business is a type of business to which the Authority has assigned a priority pursuant to G.S. 53A-53(g).
(4)	The number of jobs to be created or saved will be large enough to have a measurable impact on the area immediately surrounding the proposed project and will be commensurate with the size and cost of the proposed project.
(5)	The proposed operator of the proposed development project has demonstrated or can demonstrate the capability to operate the project.
(6)	The financing of the project will not cause or result in the abandonment of an existing industrial or manufacturing facility of the proposed operator or an affiliate elsewhere within the State unless the facility is to be abandoned because of obsolescence, lack of available labor in the area, or site limitations.
(c)	Local Government Commission Fee. – In reviewing a proposed bond issue under G.S. 159D-8 that has been recommended and requested by the Authority under this section, the Local Government Commission shall waive any fees it would otherwise impose for the review.
"§ 53A-56.  Taxation of property of Authority.
Property owned by the Authority is exempt from taxation in accordance with Article V, § 2 of the North Carolina Constitution.
"§ 53A-57.  Authority funds.
All Authority funds shall be deposited in one or more banks to be designated by the Board.  Funds of the Authority shall be paid out only upon warrants signed by the treasurer or assistant treasurer of the Authority and countersigned by the chair, the acting chair, or the executive director.  No warrants shall be drawn or issued disbursing any of the funds of the Authority except for a purpose authorized by this Part and only when the account or expenditure has been audited and approved by the Authority or its executive director.
"§ 53A-58.  Cooperation by other State agencies.
All State officers and agencies shall render the services to the Authority within their respective functions as may be requested by the Authority.
"§ 53A-59.  Annual and quarterly reports.
The Authority shall, promptly following the close of each fiscal year, submit an annual report of its activities for the preceding year to the Governor, the General Assembly, and the Local Government Commission.  Each report shall be accompanied by an audit of its books and accounts.  The costs of all audits, whether conducted by the State Auditor's staff or contracted with a private auditing firm, shall be paid from funds of the Authority.
The Authority shall submit quarterly reports to the Joint Legislative Commission on Governmental Operations.  The reports shall summarize the Authority's activities during the quarter and contain any information about the Authority's activities that is requested by the Commission.
"§ 53A-60.  Dissolution.
Whenever the Board determines by resolution that the purposes for which the Authority was formed have been substantially fulfilled and that all obligations incurred by the Authority have been fully paid or satisfied, the Board may declare the Authority to be dissolved.  On the effective date of the resolution, the title to all funds and other property owned by the Authority at the time of the dissolution shall vest in the State and possession of the funds and other property shall be delivered to the State.
"§ 53A-61.  Tax credit.
A person who invests in the Capital Access Financing Fund or the North Carolina Capital Access Authority is entitled to a tax credit as provided in Article 8C of Chapter 105 of the General Statutes."
PART II.
REVENUES EARMARKED FOR CAPITAL ACCESS FUND
Sec. 4.  G.S. 147-69.1(d) reads as rewritten:
"(d)	Unless otherwise provided by law, the interest or income received and accruing from all deposits or investments of such cash balances shall be paid into the State's General Fund, except that all interest or income received and accruing on the monthly balance of the Highway Fund shall be paid into the State Highway Fund. The cash balances of the several funds may be combined for deposit or investment purposes; and when such combined deposits or investments are made, the interest or income received and accruing from all deposits or investments shall be prorated among the funds in conformity with applicable law and the rules and regulations adopted by the Governor and Council of State.
The State Treasurer shall, on a monthly basis beginning July 1, 1995, and ending July 1, 2000, credit to the Capital Access Financing Fund created in G.S. 53A-52 fifteen percent (15%) of the interest or income received and accruing during the previous month from the State's General Fund."
Sec. 5.  Article 2 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-33.2.  Transfer to Capital Access Financing Fund.
The Secretary shall, on a monthly basis beginning July 1, 1995, and ending July 1, 1998, credit to the Capital Access Financing Fund created in G.S. 53A-52 the net proceeds of the taxes collected under this Article during the previous month."
PART III.
INVESTMENTS BY STATE TREASURER
Sec. 6.  G.S. 147-69.2(b) reads as rewritten:
"(b)	It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (a) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:
(1)	Any of the investments authorized by G.S. 147-69.1(c);
(2)	General obligations of other states of the United States;
(3)	General obligations of cities, counties and special districts in North Carolina;
(4)	Obligations of any company, other organization or legal entity incorporated or otherwise created or located within or without the United States if such obligations bear one of the three highest ratings of at least one nationally recognized rating service and do not bear a rating below the three highest by any nationally recognized rating service which rates the particular security;
(5)	Notes secured by mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration on real estate located within the State of North Carolina;
(6)	Asset-backed securities (whether considered debt or equity) provided they bear ratings by nationally recognized rating services as provided in G.S. 147-69.2(b)(4) and that they do not bear a rating below the three highest by any nationally recognized rating service which rates the particular securities;
(7)	With respect to Retirement Systems' assets referred to in G.S. 147-69.2(b)(8), (i) insurance contracts which provide for participation in individual or pooled separate accounts of insurance companies, (ii) group trusts, (iii) individual, common or collective trust funds of banks and trust companies and (iv) real estate investment trusts; provided the investment manager has assets under management of at least one hundred million dollars ($100,000,000); provided such investment assets are managed primarily for the purpose of investing in or owning real estate or related debt financing located in the United States; and provided that the investment authorized by this subsection shall not exceed ten percent (10%) of the book value of all invested assets of the Retirement Systems;
(8)	With respect to assets of the Teachers' and State Employees' Retirement System, the Consolidated Judicial Retirement System, the Firemen's and Rescue Workers' Pension Fund, the Local Governmental Employees' Retirement System, and the Legislative Retirement System (hereinafter referred to collectively as the Retirement Systems), preferred or common stocks issued by any company incorporated or otherwise created or located within or without the United States, provided:
a.	That common stock or preferred stock of such corporation is registered on a national securities exchange as provided in the Federal Securities Exchange Act or quoted through the National Association of Securities Dealers' Automated Quotations (NASDAQ) system;
b.	That such corporation shall have paid a cash dividend on its common stock in each year of the 5-year period next preceding the date of investment and the aggregate net earnings available for dividends on the common stock of such corporation for the whole of such period shall have been at least equal to the amount of such dividends paid;
c.	That in applying the dividend and earnings test under this section to any issuing, assuming, or guaranteeing corporation, where such corporation shall have acquired its property or any substantial part thereof within a five-year period immediately preceding the date of investment by consolidation, merger, or by the purchase of all or a substantial portion of the property of any other corporation or corporations, or shall have acquired the assets of any unincorporated business enterprise by purchase or otherwise, the dividends and net earnings of the several predecessor or constituent corporations or enterprises shall be consolidated and adjusted so as to ascertain whether or not the applicable requirements of this section have been complied with;
d.	That the book value of common and preferred stocks including securities convertible into common stocks shall not exceed fifty percent (50%) of the book value of all invested assets of the Retirement Systems; provided, further:
1.	Not more than one and one-half percent (1 1/2%) of the book value of such assets shall be invested in the stock of a single corporation, and provided further;
2.	The total number of shares in a single corporation shall not exceed eight percent (8%) of the issued and outstanding stock of such corporation, and provided further;
3.	As used in this subdivision d. and elsewhere in this section, book value shall mean adjusted cost basis as shown on the records of the State Treasurer.
e.	Up to five percent (5%) of the limits authorized in subdivision d. may be invested in the stocks or shares of a diversified investment company registered under the 'Investment Company Act of 1940' which has total assets of at least fifty million dollars ($50,000,000).
f.	Individual, common or collective trust funds of banks or trust companies provided that the investment manager has assets under management of at least one hundred million dollars ($100,000,000).
g.	That investments may be made in securities convertible into common stocks issued by any such company, if such securities bear one of the four highest ratings of at least one nationally recognized rating service and do not bear a rating below the four highest by any nationally recognized rating service which may then rate the particular security.
(9)	Obligations and securities of the North Carolina Enterprise Corporation, or of a limited partnership in which the North Carolina Enterprise Corporation is the only general partner, not to exceed twenty million dollars ($20,000,000) from all funds.
(10)	A limited partnership interest in a partnership whose primary purpose is to invest in venture capital or corporate buyout transactions, not to exceed thirty million dollars ($30,000,000) from all funds.
(10a)	Obligations of the North Carolina Capital Access Authority created in Article 3 of Chapter 53A of the General Statutes, obligations of the North Carolina Industrial and Pollution Control Facilities Financing Authority created under Chapter 159D of the General Statutes issued at the request of the North Carolina Capital Access Authority pursuant to G.S. 53A-55 and G.S. 159D-6, or equity securities issued by a Qualified North Carolina Business as defined in G.S. 53A-37.  To the extent possible consistent with the State Treasurer's duties, the State Treasurer shall invest at least twenty-five million dollars ($25,000,000) pursuant to this subdivision each fiscal year until July 1, 2000.
(11)	With respect to assets of the Escheat Fund, obligations of the North Carolina Global TransPark Authority authorized by G.S. 63A-4(a)(22), not to exceed twenty-five million dollars ($25,000,000), that have a final maturity not later than September 1, 1999. The obligations shall bear interest at the rate set by the State Treasurer. No commitment to purchase obligations may be made pursuant to this subdivision after September 1, 1993, and no obligations may be purchased after September 1, 1994. In the event of a loss to the Escheat Fund by reason of an investment made pursuant to this subdivision, it is the intention of the General Assembly to hold the Escheat Fund harmless from any such loss by appropriating to the Escheat Fund funds equivalent to the loss.
(12)	With respect to assets of the Escheat Fund, obligations of the North Carolina Industrial and Pollution Control Facilities Financing Authority created under Chapter 159D of the General Statutes issued at the request of the North Carolina Capital Access Authority pursuant to G.S. 53A-55 and G.S. 159D-6.  The obligations shall bear interest at the rate set by the State Treasurer and may be subordinated in right of payment to other obligations of the North Carolina Industrial and Pollution Control Facilities Financing Authority.  In the event of a loss to the Escheat Fund by reason of an investment made pursuant to this subdivision, it is the intention of the General Assembly to hold the Escheat Fund harmless from any such loss by appropriating to the Escheat Fund funds equivalent to the loss."
PART IV.
INSURANCE TAX CREDIT FOR INVESTMENTS
Sec. 7.  Article 3 of Chapter 53A of the General Statutes, as amended by this act, is further amended by adding a new Part to read:
"Part 4. Certified North Carolina Capital Companies.
"§ 53A-70.  Requirements for certification of a certified North Carolina capital company.
(a)	Initial Certification. – In order to be initially certified as a certified North Carolina capital company, a company must satisfy the following requirements.
(1)	It is a partnership, corporation, trust, or limited liability company, whether for-profit or nonprofit, whose primary business activity is the investment of cash in qualified business ventures.
(2)	Its cash, marketable securities, and other liquid assets equal at least two hundred thousand dollars ($200,000).
(3)	Its officers and its board of directors, partners, trustees, or managers are thoroughly acquainted with the requirements of this Part.
(b)	Annual Recertification. – In order to be recertified, a certified North Carolina capital company must satisfy the following requirements:
(1)	Within three years after the date it was initially certified, at least thirty percent (30%) of the total cash invested in the company must be placed in approved investments.
(2)	Within five years after the date it was initially certified, at least fifty percent (50%) of the total cash invested in the company must be placed in approved investments.
(3)	It shall not invest in a single qualified business venture an amount that is more than fifteen percent (15%) of the total cash under the company's management at the time of the investment.
"§ 53A-71.  Procedure for certification and recertification; reports.
(a)	Initial Certification.  – In order to be initially certified as a certified North Carolina capital company, a company must file an application with the Division and pay the initial certification fee set by the Secretary of State.  The application shall include any information and supporting documents required by the Secretary of State to determine whether the company qualifies for initial certification.  Within 60 days after an application is filed, the Division shall determine whether the applicant qualifies for initial certification and shall either issue the certification or shall refuse the certification and notify the applicant in detail of the grounds for the refusal, including suggestions for the removal of those grounds.
(b)	Annual Recertification. – To remain certified as a certified North Carolina capital company, a company must apply annually for recertification and pay the annual recertification fee set by the Secretary of State.  The application shall include any information and supporting documents required by the Secretary of State to determine whether the company qualifies for recertification.
The Division shall conduct an annual review of each certified North Carolina capital company to determine if the company is in compliance with the requirements for certification and recertification, to advise the company as to the certification status of its approved investments, and to ensure that the company's investments are in compliance with this Part.
(c)	Application Forms; Fees. – Applications for initial certification and annual recertification under this section shall be in the form required by the Secretary of State.  The Secretary of State shall prepare blank forms for the applications.  Each application shall be signed by the owners of the company or, in the case of a corporation, by its president, vice-president, treasurer, or secretary.  There shall be annexed to the application the affirmation of the person making the application in the following form:  'Under penalties prescribed by law, I certify and affirm that to the best of my knowledge and belief this application is true and complete.'  A person who submits a false application is guilty of a Class 1 misdemeanor.
The Secretary of State may charge an applicant a fee for initial certification as a certified North Carolina capital company and a fee for annual recertification as a certified North Carolina capital company.  The fees set by the Secretary of State may not exceed the estimated cost to the Division of initial certification or annual recertification, as appropriate, as determined by the Secretary of State.
(d)	Quarterly Reports. – Each certified North Carolina capital company shall report the following to the Division on a quarterly basis:
(1)	The name of each person who has invested cash in the certified North Carolina capital company.
(2)	The amount of each investor's cash investment and the date on which the certified North Carolina capital company received the investment.
(3)	The amount of cash invested in the certified North Carolina capital company as of the end of the quarter.
(4)	All approved investments that the certified North Carolina capital company has made.
(5)	Any other information required by the Secretary of State.
(e)	Annual Financial Statements. – Each certified North Carolina capital company shall provide the Division within 90 days after the end of its fiscal year an annual audited financial statement that includes an opinion of an independent certified public accountant.  The audit shall address the methods of operation and conduct of the business of the company to determine whether the company has complied with this Part and whether the cash invested in the company has been invested as required by this Part.
"§ 53A-72.  Tax credit.
A person who invests cash in a certified North Carolina capital company is entitled to a tax credit as provided in Article 8C of Chapter 105 of the General Statutes.
"§ 53A-73.  Decertification of certified North Carolina Capital company.
(a)	Grounds for Decertification. –  Any material violation of this Part shall be grounds for decertification under this section.
(b)	Procedure for Decertification. – If the Division determines that a certified North Carolina capital company is not in compliance with any requirement for continuing in certification, it shall, by written notice, inform the officers of the company and the board of directors, manager, trustees, or general partners that the company will be decertified in 120 days after the date the notice is mailed unless the company corrects the deficiencies to bring itself in compliance with the requirements for certification.  At the end of the 120-day grace period, if the certified North Carolina capital company is still not in compliance, the Division shall decertify the company and send a notice of decertification to the company and to the Department of Revenue and the Department of Insurance.
(c)	Effect of Decertification. – If a certified North Carolina capital company is decertified, no further tax credits for an investment in the company are allowed pursuant to G.S. 105-228.10D.
"§ 53A-74.  Certification revoked for false application.
If the Division finds that any of the information contained in an application for initial certification was false at the time the application was filed, the Division shall revoke the certification of the certified North Carolina capital company.  A taxpayer who has received a credit under Article 8C of Chapter 105 of the General Statutes for an investment in a certified North Carolina capital company forfeits the credit pursuant to G.S. 105-228.10D if the certification of the company is revoked because information in the company's application for initial certification was false.
"§ 53A-75.  Rules.
The Secretary of State may adopt rules to implement this Part."
Sec. 8.  Chapter 105 of the General Statutes is amended by adding a new Article to read:
"ARTICLE 8C.
"Premiums Tax Credit for Investments in
North Carolina Businesses.
"§ 105-228.10A.  Purpose.
The purpose of this Article is to provide an incentive for insurance companies to invest in certified North Carolina capital companies, in the North Carolina Capital Access Authority, and in obligations of the North Carolina Industrial and Pollution Control Facilities Financing Authority.
"§ 105-228.10B.  Definitions.
The following definitions apply in this Article.
(1)	Capital Access Financing Fund. – The Capital Access Financing Fund established under Article 3 of Chapter 53A of the General Statutes.
(2)	Certified North Carolina capital company. – A certified North Carolina capital company created under Article 3 of Chapter 53A of the General Statutes.
(3)	North Carolina Capital Access Authority. – The North Carolina Capital Access Authority created in Article 3 of Chapter 53A of the General Statutes.
"§ 105-228.10C.  Premiums tax credit for investments.
(a)	Credit. – A person who invests cash in a certified North Carolina capital company, who invests in the Capital Access Financing Fund or the North Carolina Capital Access Authority, or who invests in obligations of the North Carolina Industrial and Pollution Control Facilities Financing Authority created under Chapter 159D of the General Statutes issued at the request of the North Carolina Capital Access Authority pursuant to G.S. 53A-55 and G.S. 159D-6, is allowed against the gross premiums tax imposed by G.S. 105-228.5 and G.S. 105-228.8 a credit equal to the amount invested by the taxpayer during the taxable year.  The credit for investments made in a certified North Carolina capital company is allowed only for investments made within 365 days after the date the company is initially certified by the Secretary of State under Article 3 of Chapter 53A of the General Statutes.  To claim the credit allowed by this section, the taxpayer must provide the Commissioner of Insurance any supporting documentation the Commissioner requires.
(b)	Limitations. – The taxpayer may not take the entire credit for the taxable year the investment is made, but may take up to ten percent (10%) of the aggregate credit allowed under this section for that taxable year and for each succeeding taxable year until the entire credit has been used.  The credit allowed by this section may not exceed the taxpayer's gross premiums tax liability for a taxable year reduced by the sum of all credits allowable except payments of tax by or on behalf of the taxpayer.  Subject to the ten percent (10%) limitation, any unused portion of the credit may be carried forward to succeeding taxable years.
"§ 105-228.10D.  Effect of decertification or revocation of certification.
(a)	Decertification. – If a certified North Carolina capital company is decertified under G.S. 53A-73, no tax credit for an investment in the company is allowed under this Article for a taxpayer's taxable year beginning in the calendar year the decertification occurred or for subsequent taxable years.  Decertification of a certified North Carolina capital company does not affect a tax credit allowed under this Article for a taxpayer's taxable year that began before the calendar year in which the decertification occurred.
(b)	Revocation of Certification. – A taxpayer who has received a credit under this Article for an investment in a certified North Carolina capital company forfeits the credit if the certification of the company is revoked under G.S. 53A-74 because information in the company's application for initial certification was false.  A taxpayer who forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105-241.1(i), computed from the date the taxes would have been due if the credit had not been allowed.  The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer who fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105-236.
"§ 105-228.10E.  Transfer or redemption of investment.
A taxpayer who has received a credit under this Article for an investment forfeits the credit in the following cases:
(1)	Within one year after the investment was made, the taxpayer transfers any of the securities received in the investment that qualified for the tax credit to another person or entity, other than in a transfer resulting from one of the following:
a.	The death of the taxpayer.
b.	A final distribution in liquidation to the owners of a taxpayer that is a corporation or other entity.
c.	A merger, consolidation, or similar transaction requiring approval by the shareholders of the certified North Carolina capital corporation under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.
(2)	Within five years after the investment was made, the Capital Access Financing Fund, North Carolina Capital Access Authority, North Carolina Industrial and Pollution Control Facilities Financing Authority, or North Carolina capital corporation in which the investment was made makes a redemption with respect to the securities received in the investment.
In the event the taxpayer transfers fewer than all the securities in a manner that would result in a forfeiture, the amount of the credit that is forfeited is the product obtained by multiplying the aggregate credit attributable to the investment by a fraction whose numerator equals the number of securities transferred and whose denominator equals the number of securities received on account of the investment to which the credit was attributable.  In addition, if the redemption amount is less than the amount invested by the taxpayer in the securities to which the redemption is attributable, the amount of the credit that is forfeited is further reduced by multiplying it by a fraction whose numerator equals the redemption amount and whose denominator equals the aggregate amount invested by the taxpayer in the securities involved in the redemption.  The term 'redemption amount' means all amounts paid that are treated as a distribution in part or full payment in exchange for securities under section 302(a)	of the Code."
PART V.
BONDS FOR INDUSTRIAL FACILITIES
Sec. 9.  G.S. 159D-6 reads as rewritten:
"§ 159D-6.  Bonds.
The authority is hereby authorized to provide for the issuance, at one time or from time to time, of bonds of the authority for the purpose of paying all or any part of the cost of any project.  The authority may issue bonds upon its own initiative or upon the recommendation of the Capital Access Authority created in Article 3 of Chapter 53A of the General Statutes. The principal of, the interest on and any premium payable under the redemption of such bonds shall be payable solely from the funds herein authorized for such payment. The bonds of each issue shall bear interest as may be determined by the Local Government Commission of North Carolina with the approval of the authority and the obligor irrespective of the limitations of G.S. 24-1.1, as amended, and successor provisions. The bonds of each issue shall be dated, shall mature at such time or times not exceeding 30 years from the date of their issuance, and may be made redeemable before maturity at such price or prices and under such terms and conditions, as may be fixed by the authority prior to the issuance of the bonds. The authority shall determine the form and the manner of execution of the bonds, including any interest coupons to be attached thereto, and shall fix the denomination or denominations of the bonds and the place or places of payment of principal and interest. In case any officer whose signature or a facsimile of whose signature shall appear on any bonds or coupons shall cease to be such officer before the delivery of such bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes the same as if he had remained in office until such delivery. The authority may also provide for the authentication of the bonds by a trustee or fiscal agent. The bonds may be issued in coupon or in fully registered form, or both, as the authority may determine, and provision may be made for the registration of any coupon bonds as to principal alone and also as to both principal and interest, and for the reconversion into coupon bonds of any bonds registered as to both principal and interest, and for the interchange of registered and coupon bonds.
The proceeds of the bonds of each issue shall be used solely for the payment of the cost of the project or projects, or a portion thereof, for which such bonds shall have been issued, and shall be disbursed in such manner and under such restrictions, if any, as the authority may provide in the financing agreement and the security document. If the proceeds of the bonds of any issue, by reason of increased construction costs or error in estimates or otherwise, shall be less than such cost, additional bonds may in like manner be issued to provide the amount of such deficiency. The authority may issue interim receipts or temporary bonds, with or without coupons, exchangeable for definitive bonds when such bonds have been executed and are available for delivery. The authority may also provide for the replacement of any bonds which shall become mutilated or shall be destroyed or lost.
Bonds may be issued under the provisions of this Chapter without obtaining, except as otherwise expressly provided in this Chapter, the consent of the State or of any political subdivision or of any agency of either thereof, and without any other proceedings or the happening of any conditions or things other than those proceedings, conditions or things which are specifically required by this Chapter and the provisions of the financing agreement and security document authorizing the issuance of such bonds and securing the same."
Sec. 10.  The first paragraph of G.S. 159D-7 reads as rewritten:
"The authority may issue bonds for a proposed industrial project recommended by the Capital Access Authority pursuant to G.S. 53A-55 without first obtaining the approval of the Secretary of Commerce.  Except for industrial projects recommended by the Capital Access Authority, no bonds may be issued by the authority for any other project unless the project for which the issuance thereof is proposed is first approved by the Secretary of Commerce. The authority shall file an application for approval of its proposed project with the Secretary of Commerce, and shall notify the Local Government Commission of such filing."
PART VI.
BANK TAX DEDUCTION FOR INVESTMENTS
Sec. 11.  G.S. 105-130.5(a) is amended by adding a new subdivision to read:
"(2a)	That portion of a financial institution's interest expense that is allocable to interest exempt from taxation under this Division.  The allocable portion of the interest expense is the portion for which deduction would be disallowed pursuant to section 265(b) of the Code if the interest were earned on a tax-exempt obligation as defined in section 265(b) of the Code.  The addition required by this subdivision shall be reduced, however, by 20 times the amount the financial institution has, during the taxable year, invested in or loaned to the North Carolina Capital Access Authority or the Capital Access Financing Fund created in Article 3 of Chapter 53A of the General Statutes or has invested in obligations of the North Carolina Industrial and Pollution Control Facilities Financing Authority created under Chapter 159D of the General Statutes issued at the request of the North Carolina Capital Access Authority pursuant to G.S. 53A-55 and G.S. 159D-6."
Sec. 12.  Notwithstanding G.S. 105-163.41, no addition to tax may be made under that statute for a taxable year beginning on or after January 1, 1995, and before January 1, 1996, with respect to an underpayment of corporation income tax to the extent the underpayment was created or increased by this act.
PART VII.
CONFORMING CHANGES
Sec. 13.  Article 1 of Chapter 53A of the General Statutes is repealed.
Sec. 14.  The title of Chapter 53A of the General Statutes reads as rewritten:
"Chapter 53A.
"Business Development 
and Access to Capital."
Sec. 15.  The title of Article 3 of Chapter 53A of the General Statutes reads as rewritten:
"ARTICLE 3.
"North Carolina Enterprise Corporations, the
North Carolina Capital Access Authority, and
Certified North Carolina Capital Companies."
Sec. 16.  G.S. 53A-35 and G.S. 53A-47 are repealed.
Sec. 17.  G.S. 53A-36 reads as rewritten:
"§ 53A-36.  Legislative findings and purpose.
(a)	The General Assembly finds that there exists in North Carolina a serious shortage of mezzanine finance capital and credit available for investment in rural areas, underdeveloped communities, depressed urban commercial areas, and economically distressed areas in the State.  This shortage of mezzanine finance capital and credit is severe throughout these areas of the State, has persisted for a number of years, and constitutes a grave threat to the welfare and prosperity of all residents of the State.  The lack of access to capital prevents North Carolina businesses from creating jobs that would otherwise enhance the economy of the State and provide livelihoods for North Carolina citizens.
(b)	The General Assembly finds that private enterprise and existing federal and State governmental programs have not adequately alleviated the severe shortage of mezzanine finance capital and credit available for investments in these areas in the State.
(c)	The General Assembly finds that it is a matter of grave public necessity that North Carolina Enterprise Corporations be authorized to be created and empowered to alleviate these severe shortages of mezzanine finance capital and credit for investment in rural areas of the State.  North Carolina Enterprise Corporations shall help eliminate barriers to rural economic development by providing mezzanine finance capital and credit, and other types of financing as appropriate, to businesses in rural areas that have been unable to obtain sufficient financing through traditional financial institutions.
(d)	The General Assembly finds that it is a matter of grave public necessity that the North Carolina Capital Access Authority be created and empowered to alleviate these severe shortages of mezzanine finance capital and credit for investment in rural areas, underdeveloped communities, depressed urban commercial areas, and economically distressed areas of the State.  The Authority shall help eliminate barriers to economic development by providing mezzanine finance capital and credit, and other types of financing as appropriate, to small and medium-sized businesses that may have been unable to obtain sufficient financing through traditional financial institutions.  The Authority shall also eliminate barriers to economic development by facilitating the funding of development projects in connection with private economic development.
(e)	The General Assembly finds that it is a matter of grave public necessity that certified North Carolina capital companies be authorized to be created as venture capital companies whose primary business activity is the investment of cash in small North Carolina business ventures that are in need of capital for survival, expansion, new product development, or similar purposes."
Sec. 18.  G.S. 53A-37 reads as rewritten:
"§ 53A-37.  Definitions.
The following definitions apply in this Article:
(1)	Approved investment. – The investment of cash by a certified North Carolina capital company in such a manner as to acquire capital in a business that, at the time of the company's first investment in the business, was a qualified business venture and was not a subsidiary of another corporation.  The capital acquired may be any debt, equity, or hybrid security, whether secured or unsecured, of any nature, including a debt instrument or security that has the characteristics of debt but provides for conversion into equity or equity participation instruments such as options or warrants.
(2)	Authority. – The North Carolina Capital Access Authority created in Part 3 of this Article.
(3)	Business. – A corporation, partnership, association, or sole proprietorship operated for profit.
(4)	Certified North Carolina capital company. – A partnership, corporation, trust, or limited liability company whose primary business activity is the investment of cash in qualified business ventures and that is certified by the Secretary of State as provided in Part 4 of this Article.
(5)	Depressed urban commercial area. – A commercial or industrial area of a city in which blight exists in the form of dilapidated, deteriorated, poorly ventilated, obsolete, overcrowded, unsanitary, or unsafe buildings; inadequate and unsafe streets; inadequate lots; or other conditions detrimental to the sound growth of the community, which tend to depress the value of neighboring properties, impair the tax base of the community, and inhibit private efforts to rehabilitate or improve other structures in the area.
(6)	Development project. – A project as defined in G.S. 159D-3.
(7)	Distressed area. – A county that is designated one of the most economically distressed counties of the State under G.S. 143B-437A or a census tract that  has more than fifteen percent (15%) of its population below the poverty line according to the latest federal decennial census.
(8)	Division. – The Securities Division of the Department of the Secretary of State.
(9)	Equity security. – Common stock, preferred stock, an interest in a partnership, subordinated debt, or a warrant that is convertible into, or entitles the holder to receive upon its exercise, common stock, preferred stock, or an interest in a partnership.
(10)	Reserved.
(11)	Mezzanine finance. – An investment in the equity securities or subordinated debt of a Qualified North Carolina Business.
(12)	Person. – An individual, a corporation, a partnership, an association, a trust, or another legal entity.
(13)	Qualified business venture. – Defined in G.S. 105-163.010.
(14)	Qualified North Carolina Business. – A business whose headquarters and principal business operations are located in North Carolina and which, together with its affiliates on a consolidated basis, had gross income during the immediately preceding fiscal year, determined in accordance with generally accepted accounting principles without taking into account extraordinary items, of less than forty million dollars ($40,000,000).
(15)	Rural areas. – Any county in North Carolina which does not include within its boundaries a city, as defined by G.S. 160A-1(2), with a population greater than one percent (1%) of the population of North Carolina.
(16)	Security. – A security as defined in G.S. 78A-2(11).
	(17)	Subordinated debt. – Indebtedness that is or will be subordinated to other indebtedness of the issuer. Subordinated debt may be convertible into common stock, preferred stock, or an interest in a partnership.
(18)	Traditional financial institutions. – Corporations or associations chartered under Chapter 53 or 54B of the General Statutes."
Sec. 19.  G.S. 53A-38(a) reads as rewritten:
"(a)	One or more persons, a majority of whom are residents of this State, may, by filing a certificate of incorporation as provided in subsection (b), incorporate a North Carolina Enterprise Corporation under the provisions of this Part."
Sec. 20.  G.S. 53A-41 reads as rewritten:
"§ 53A-41.  Governing law.
	Except as otherwise provided in this Part, a North Carolina Enterprise Corporation shall be governed by Chapter 55 of the General Statutes."
Sec. 21.  G.S. 53A-42 reads as rewritten:
"§ 53A-42.  Powers.
A North Carolina Enterprise Corporation created under this Part shall have all the powers conferred on business corporations by Chapter 55 of the General Statutes."
Sec. 22.  G.S. 105-259(a) reads as rewritten:
"(a)	Definitions. – The following definitions apply in this section:
(1)	Employee or officer. – The term includes a former employee, a former officer, and a current or former member of a State board or commission.
(2)	Tax information. – Any information from any source concerning the liability of a taxpayer for a tax, as defined in G.S. 105-228.90.  The term includes the following:
a.	Information contained on a tax return, a tax report, or an application for a license for which a tax is imposed.
b.	Information obtained through an audit of a taxpayer or by correspondence with a taxpayer.
c.	Information on whether a taxpayer has filed a tax return or a tax report.
d.	A list or other compilation of the names, addresses, social security numbers, or similar information concerning taxpayers.
e.	Information supplied on or with an application for registration or renewal of registration as a qualified business venture or a qualified grantee business under Division V of Article 4 of this Chapter.
f.	Information supplied on or with an application for initial certification or recertification as a certified North Carolina capital company under Article 3 of Chapter 53A of the General Statutes.
	The term does not include (i) statistics classified so that information about specific taxpayers cannot be identified or (ii) information submitted to the Business License Information Office of the Department of Secretary of State on a master application form for various business licenses."
PART VIII.
EFFECTIVE DATES
Sec. 23.  Sections 8, 11, 12, and 22 of this act are effective for taxable years beginning on or after January 1, 1995.  Section 11 of this act expires effective for taxable years beginning on or after January 1, 2000.  The remainder of this act becomes effective July 1, 1995.  Section 4 of this act expires July 1, 2000.  Section 5 of this act expires July 1, 1998.