Emerging Markets Law

Georgia Legislature Approves Sale of $55 Million in Tax Credits to Fund Venture Capital

My tax partner, Julian Fortuna wrote this:

The Georgia General Assembly recently passed H.B. 439 which contains a provision authorizing the Invest Georgia Fund to raise capital by selling premium tax credits to insurance companies doing business in Georgia.

The Invest Georgia Fund (“the Fund”) is a state-owned venture capital fund established in 2013 to invest in Georgia-based technology, bioscience, manufacturing, marketing, agriculture, and information related companies. The Fund is authorized to invest in early or growth stage companies which are headquartered Georgia and maintain their principal business here for at least three years after receiving funding. Companies receiving funding must also meet certain headcount and revenue criteria. A three member board was appointed in August 2014 to oversee the Fund and select an administrator through an open bidding process.

Under the 2013 legislation, the Fund was dependent upon the annual state budget process to raise capital. The 2014 budget apportioned only $10 million for the Fund. Now, if the Governor signs H.B. 439 into law, the Fund will be able to raise up to $55 million of capital by selling premium tax credits to insurance companies doing business in Georgia.

Beginning January 1, 2016, the credits will become available for sale at a price of no less than 75 cents on the dollar, so that if all of the credits are sold the Fund will raise at least $41 million. Insurance companies that purchase the credits will be able to use them to offset premium tax liabilities at a rate of 20 percent per year over five years starting with the third year after purchase. Alternatively, the purchasers will be permitted to resell the credits to other qualified purchasers. The Fund will be authorized to receive proceeds from the tax credit sales in installment payments. The tax credits will not be eligible for carryback but may be carried forward to any tax year beginning on or before December 31, 2028.

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