Title 117 W. Va. C.S.R.

Economic Development Authority Economic Development Authority

Series 01 General Administration Of The WV Capital Company Act: Establishment Of The Application Procedures To Implement The Act

W. Va. Code R. § 117-1-1 General

1.1. Scope. -- This Legislative Rule is promulgated to provide for the general administration of the West Virginia Capital Company Act. The West Virginia Capital Company Act was created to encourage the immediate investment in West Virginia businesses by making tax credits available to the investors in Qualified West Virginia Capital Companies. The Act gives the West Virginia Economic Development Authority the authority to designate eligible Capital Companies as qualified for the tax credits and sets forth the manner by which the companies must invest their capital base in West Virginia businesses. This Rule establishes the application procedure for such designation by the Authority, the general requirements for Qualified Companies, and the process for the authorization and use of tax credits.

1.2. Authority. -- W. Va. Code §§29A-1-2(d) and 5E-1-5.

1.3. Filing Date. -- May 7, 2002.

1.4. Effective Date. -- May 8, 2002.

1.5. Citation. -- This Legislative Rule may be cited as 117 C.S.R., Series 1, §117-1- __________ (____).

W. Va. Code R. § 117-1-2 Definitions

2.1. "Act" means the West Virginia Capital Company Act, W. Va. Code §5E-1-1 et seq.

2.2. "Applicant" means (1) a profit or non-profit entity, organized and existing under the laws of West Virginia, which is created for the purpose of making capital available for qualified investments or (2) a West Virginia business development corporation created pursuant to W. Va. Code §31-14-1 et seq., that seeks to be designated by the Authority as a Qualified Company. For purposes of this definition, entity includes, but is not limited to, a corporation (including an S Corporation), a partnership, a limited liability company and a trust.

2.3. "Authority" means the West Virginia Economic Development Authority, provided for in W. Va. Code §31-15-1 et seq.

2.4. "Authorized Tax Credits" means the tax credits provided for in W. Va. Code §5E-1-8.

2.5. "Capital Base" means the equity capital or net worth upon which tax credits are authorized for a Qualified Company, and the source from which investments are to be made in accordance with this Rule.

2.6. "Capital Lease" means a lease meeting one or more of the following criteria:

2.6.a. The lease transfers ownership of the property to the lessee at the end of the lease term by the lessee's exercise of a purchase option which is de minimis in amount;

2.6.b. The lease term is equal to seventy-five percent or more of the estimated economic life of the leased property. However, if the beginning of the lease terms falls within the last twenty-five percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used;

2.6.c. Under generally accepted accounting principals, the lessee cannot treat payments to the capital company as payments under an operating lease; or

2.6.d. For federal income tax purposes, the parties are required to treat payments as amortization of principal and interest.

2.7. "Certified West Virginia Capital Company" or "Certified Company" means (1) a West Virginia business development corporation created pursuant to W. Va. Code §31-14-1 et seq.; or (2) a profit or non-profit entity organized and existing under the laws of the State of West Virginia, created for the purpose of making venture or risk capital available for qualified investments, that has been certified by the Authority.

2.8. "Code" means the Code of West Virginia of 1931, as amended.

2.9. "Complete Application" means an application that contains all of the information required by this Rule, as determined by the Director, in his or her sole discretion.

2.10. "Debt or Debt Financing" means a loan to be repaid pursuant to a loan instrument with a stated maturity date of at least five (5) years, which (i) shall be maintained by the Qualified Company for at least five (5) years pursuant to W. Va. Code §5E-1-12(b) and Subdivision 6.10.a of this Rule, (ii) is not subject to payment upon demand of the Qualified Company prior to its maturity date except upon acceleration due to default in terms and conditions ordinary and usual to loan instruments, and (iii) is originally issued by a West Virginia Business to the Qualified Company.

2.11. "Decertification" means the action of the Authority of revoking the Qualified Status from a Capital Company. Decertification may be involuntary due to a Capital Company's failure to comply with provisions of the Act or this Rule pursuant to Subsections 7.7, 7.8 and 7.9 of this Rule, or voluntary pursuant to Subsection 7.10 of this Rule.

2.12. "Designate as a Qualified Company" means the action of the Authority in designating a Certified Company as qualified for available tax credits and allocating the credits to the Certified Company relative to its capital base.

2.13. "Designate as Qualified" means the action of the Authority in authorizing (i) a separate capital base for a Qualified Company or (ii) an increase in a Qualified Company's capital base, and in allocating available tax credits relative to the separate capital base or increase in capital base.

2.14. "Development Corporation" means a West Virginia Business Development Corporation created pursuant to W. Va. §31-14-1 et seq.

2.15. "Director" means the Executive Director of the West Virginia Economic Development Authority, or his or her designated representative.

2.16. "Equity" or "Equity Financing" means common stock or preferred stock in a corporation purchased from the corporation including warrants and options purchased from the corporation which upon exercise entitle the Qualified Company to common or preferred stock. Equity also means an ownership interest in a general partnership, ownership of limited partnership units and an ownership interest in a limited liability company. An investment otherwise meeting this definition shall not be considered as equity if the investment includes an option whereby the Qualified Company can compel the repurchase of the investment by the issuing corporation or any other person prior to the expiration of five (5) years from the date of purchase by the Qualified Company.

2.17. "Fiscal Year" means July 1 through June 30, which is the fiscal year of the State.

2.18. "Insurance Company" means any person engaged in the business of making contracts of insurance.

2.19. "Managing Body" means the board of directors in the case of a corporation, voting partners in the case of a general partnership, general partners in the case of a limited partnership, members or managers in the case of a limited liability company and the management committee or similar decision making body in the case of a joint venture.

2.20. "Partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financing operation, or venture is carried on; and the term partner includes a member of the syndicate, group, pool, joint venture or organization.

2.21. “Pass-through entity” means any person, other than an individual, which is not classified for federal income tax purposes as an association taxed as a corporation.

2.22. "Qualified Investment" means a debt or equity financing of a West Virginia Business, but only if the business is engaged in one or more of the following activities: Manufacturing; agricultural production or processing; forestry production or processing; mineral production or processing, except for conventional oil and gas exploration; provision of services in a service industry; transportation; research and development of products or processes associated with any of the activities previously enumerated in this Subsection; tourism, an example of which is provided at Subdivision 6.5.b of this Rule; computer software development companies engaged in the creation of computer software; and wholesale or retail distribution activities within the state. The investment by a Qualified Company in purchases of property to be leased by it, as lessor, through a capital lease, as defined in Subsection 2.6 of this Rule, to a West Virginia Business lessee engaged in one of the activities enumerated in this Subsection is a qualified investment.

2.23. "Qualified West Virginia Capital Company" or "Qualified Company" means a Certified West Virginia Capital Company that has been designated by the Authority as a Qualified Capital Company under the provisions of W. Va. Code §5E-1-6 and which has raised a minimum capital base of One Million Dollars to a maximum of Four Million Dollars per fiscal year, upon which tax credits are allocated.

2.24. "S Corporation" or "Subchapter S Corporation" means a small business corporation as defined in Section 1361(b) of the Internal Revenue Code of 1954, 26 U.S.C. §§ 1 et seq., as amended, for which an election under Section 1362(a) of the Internal Revenue Code is in effect.

2.25. “SBIC” or “small business investment company” means only an entity which: (a) was organized on or after January 1, 1999; (b) is licensed by the U.S. Small Business Administration as a small business investment company under the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., as amended; and (c) has certified in writing on an application for designation as a Qualified Company submitted to the Authority pursuant to Subsection 3.3 of this Rule that the entity will diligently seek to obtain and thereafter diligently seek to invest leverage available to small business investment companies.

2.26. “SBIC-Designated Tax Credit Amount” means the maximum amount of tax credits, if any, set forth in the Act which shall be allocated by the Authority during the first thirty (30) days of each fiscal year to one or more SBICs. For the fiscal year beginning July 1, 2001, the SBIC-Designated Tax Credit Amount is two million dollars ($2,000,000.00).

2.27. "Service Industry" means a type of business that has ordinary characteristics of retail establishments except that services instead of goods are sold and the principal activity of which is furnishing service to the consuming public. Service industries include, by way of example and not by way of limitation, barbershops, laundries and automobile repair shops.

2.28. "State" means the State of West Virginia.

2.29. "West Virginia Business" means any business which is located in or is principally based in West Virginia, with more than fifty percent (50%) of its assets and operations located in West Virginia, and with more than fifty percent (50%) of its employees being West Virginia residents. For purposes of this definition, more than fifty percent (50%) of the "operations" of a business means more than fifty percent (50%) of the gross revenues of a business.

W. Va. Code R. § 117-1-3 Procedure to Become a Qualified West Virginia Capital Company

3.1. General Rule. -- In order to be designated a Qualified West Virginia Capital Company, the Act requires that an Applicant be a Certified Company. An Applicant is a Certified Company upon the Authority certifying that the Applicant is a profit or nonprofit entity organized and existing under the laws of the State of West Virginia and created for the purpose of making venture or risk capital available for Qualified Investments; provided that, the certification is unnecessary in the case of Development Corporations, which by that status are considered Certified Companies. For purposes of implementing the tax credit program established by the Act and to facilitate the process of qualification by the Authority, the Authority shall combine the processes of (1) certifying applicants as Certified Companies, and (2) designating Certified Companies as Qualified West Virginia Capital Companies under the Act, into a one step procedure.

3.2. Requirements for Qualified Company. -- The following requirements apply as indicated to all Qualified Companies and Applicants:

3.2.a. Certification. -- A Qualified Company shall be a Certified West Virginia Capital Company;

3.2.b. Business Office. -- An Applicant or Qualified Company shall have a reasonably accessible business office located within the State of West Virginia, which office has a listed telephone number and is open to the public during normal business hours;

3.2.c. Amount of Capital base. -- An Applicant or Qualified Company shall have a capital base of at least One Million Dollars, but not greater than Four Million Dollars, which must be raised after July 1, 1986. If the amount of the investment in an Applicant or Qualified Company in any fiscal year exceeds Four Million Dollars, the amount in excess of Four Million Dollars is not eligible for tax credits under the Act for that fiscal year. A capital base of a Qualified Company which falls below the minimum requirement of One Million Dollars due to the uncollectability and write-off of a qualified investment is not in violation of the One Million Dollar minimum requirement set forth in this Subdivision and in W. Va. Code §5E-1-7(d);

3.2.d. Maintenance of Capital Base. -- After designation as a Qualified Company, a Qualified Company which is not a SBIC shall maintain all of its capital base, as defined in this Rule, except that which has been invested in Qualified Investments, in bank accounts and financial institutions which are located in the State of West Virginia, in any other interest bearing instruments with a maturity of less than one (1) year which are obtained from and managed by a West Virginia corporation, or in a fund authorized by the Authority pursuant to W. Va. Code §5E-2-4(b) in accordance with Subsection 6.1 of this Rule. For purposes of this Rule, the phrase "interest bearing instruments with a maturity of less than one (1) year which are obtained from and managed by a West Virginia corporation" includes, by way of example and not by way of limitation, direct investment in interest bearing money management or similar accounts or certificates of deposit maturing in one (1) year or less obtained from a West Virginia branch office of a brokerage firm;

3.2.e. Limitation on Debt Investment in Capital Base. -- No more than twenty-five (25%) percent of each separate capital base of an Applicant or Qualified Company which is not a SBIC shall be in the form of full recourse, interest bearing demand notes. The notes shall be backed by an irrevocable letter of credit or bond from a reputable source, as determined by the Authority;

3.2.f. Stated Purpose. -- An Applicant or Qualified Company's stated purpose shall be to encourage and assist in the creation, development or expansion of West Virginia businesses;

3.2.g. Funds.

1. An Applicant which is not a SBIC shall establish an escrow account located in West Virginia. All funds invested in an Applicant which is not a SBIC shall be deposited and held in the escrow account for the period of time between their receipt by the Applicant and the designation of the Applicant as a Qualified Company.

2. A Qualified Company which is not a SBIC, seeking to establish a separate capital base or increase its capital base, shall establish a separate escrow account located in West Virginia for each separate capital base or each increase to capital base sought. All funds invested in a Qualified Company which is not a SBIC relative to a separate capital base or increase to capital base shall be deposited and held in the applicable escrow account for the period of time between their receipt by the Qualified Company and the designation as qualified of the respective separate capital base or increase to capital base.

3. A Qualified Company which is a SBIC seeking to establish a separate capital base or increase its capital base, shall submit to the Authority small business administration capital certificates totaling the amount of the separate capital base or increased capital base.

4. Funds may not be invested by the Applicant or the Qualified Company until the Authority designates the Applicant a Qualified Company, or designates as qualified the separate capital base or increase to capital base sought, as applicable. In the case of companies which are not SBICs, where the Authority does not designate the Applicant a Qualified Company, or designate as qualified the separate capital base or increase to capital base sought, the escrowed funds shall be returned to the investors, if requested by the investors;

3.2.h. Disclosure to Investors. -- An Applicant or Qualified Company, when soliciting funds for its capital base, shall disclose that no tax credit for the investor's investment will be available until the Authority either designates the Applicant a Qualified Company or designates as qualified a separate capital base or an increase to capital base, and issues to the Qualified Company notice of the qualification and a Certificate of tax credit; and

3.2.i. Business Registration Certificate. -- An Applicant or Qualified Company shall hold a valid West Virginia business registration certificate pursuant to W. Va. Code§11-12-1 et seq., or be exempt from registration.

3.3. Application Requirements. -- An Applicant shall make written application for designation as a Qualified West Virginia Capital Company to the Authority on application forms provided by the Director. The application form shall be signed and verified by the Applicant or by a duly authorized officer, partner, limited liability company member or manager or trustee of the Applicant and contain the following information:

3.3.a. The full legal name of the Applicant;

3.3.b. The mailing and office addresses and telephone numbers of the Applicant's principal office in this State; and if different, the mailing and office addresses and telephone numbers of the Applicant's principal place of business;

3.3.c. Information that the Applicant's purpose is to encourage and assist in the creation, development or expansion of West Virginia businesses;

3.3.d. A certified copy of the Applicant's Certificate of Incorporation, and Articles of Incorporation or Corporate Charter; a certified copy of the Applicant's certificate of formation of limited or general partnership; a certified copy of the Applicant's Articles of Organization of a limited liability company; documents that evidence the creation of a trust; or any other evidence that the Applicant is organized and existing under the laws of the State of West Virginia;

3.3.e. The titles, names, addresses and telephone numbers of the Applicant and the Applicant's directors and officers; or general, limited and managing partners; or limited liability company managers; or trustees. The addresses shall include street and number, city or town, state and zip code;

3.3.f. The names, addresses and telephone numbers of all of the Applicant's investors, including street and number, city or town, state and zip code, and the income tax return filing status of each investor, including whether each investor is a fiscal or calendar year taxpayer; and each investor's employer identification or social security number; and for investors that are partnerships, S Corporations, limited liability companies or individual joint investors, the information required under this Subdivision for all partners, shareholders, members and individuals;

3.3.g. Information that the Applicant has disclosed to all investors that a tax credit is not available for the investor's investment in an Applicant until the Authority has designated the Applicant a Qualified West Virginia Capital Company and the investor has received a certificate authorizing the tax credit approved by the Authority for each fiscal year;

3.3.h. Information that the Applicant has disclosed to all investors that the State of West Virginia is not liable in any manner for any damages which may result from or arise out of the provisions of the Act, this Rule, or the application of the Act or this rule;

3.3.i. As applicable, a statement that the Applicant will use its capital base, as defined in this Rule, to make qualified investments in accordance with the schedule set forth in W. Va. Code §5E-1-12 and Subsection 6.3 of this Rule;

3.3.j. A statement that the Applicant will comply with all requirements of the Act and this Rule, including without limitation, investment of its capital base in accordance with the provisions of the Act and this Rule.

3.3.k. If the Applicant is a corporation, information on the aggregate number of shares which it has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if any, within a class;

3.3.l. Information stating the total capital base of the Applicant and how the value has been determined;

3.3.m. Information regarding whether the Applicant has been involuntarily decertified under Subsections 7.7 through 7.9 of this Rule and whether any of the Applicant's directors, officers, general partners, managing partners, limited liability company members or managers, trustees or investors have ever served as directors, officers, general partners, managing partners, limited liability company members or managers or trustees of any decertified Qualified Company;

3.3.n. In the case of Applicants which are not SBICs, information that the Applicant has established an equity escrow account in West Virginia into which funds invested by investors have been deposited and will be held for the period of time between their investment and the designation of the Applicant by the Authority as a Qualified Company, the location of the account, that the Applicant has disclosed to the investors that no funds will be invested by the Applicant until it has been designated as a Qualified Company and that in the event the Applicant does not qualify, that the funds shall be returned to the investors, if requested by the investors. In the case of Applicants which are SBICs, the Applicant shall provide evidence of the Applicant’s small business administration capital certificates totaling the funds to be invested;

3.3.o. If any of the investors in the Applicant is a partnership, an S Corporation, a limited liability company or an individual joint investor, the apportionment plan, the employer identification or social security number of those to whom the tax credits are apportioned, and statements signed by each partner, shareholder, member or individual consenting to the apportionment plan; all of which requirements are more fully set out in Subdivision 5.7.f of this Rule;

3.3.p. The information required in Subsection 5.1 of this Rule;

3.3.q. Information that the Applicant holds a valid West Virginia business registration certificate pursuant to W. Va. Code §11-12-1 et seq., or is exempt from registration;

3.3.r. In the case of an Applicant which is a SBIC, evidence that the Applicant is licensed as a SBIC and a certification that the Applicant will diligently seek to obtain and thereafter diligently seek to invest leverage available to SBICs under the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., as amended; and

3.3.s. Any additional information requested by the Authority.

3.4. Application Form. -- The form for applying to become a Qualified West Virginia Capital Company may be obtained from the Director at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston WV 25311-1217.

3.5. Filing. -- Each Applicant shall file with the Director three (3) complete applications with original signatures.

3.6. Application Receipt and Review.

3.6.a. Acceptance in General.

1. General Rule. During regular business hours of the Authority, applications of all Applicants, whether the Applicants are SBICs or not SBICs, relative to tax credits available in a particular fiscal year shall be received by the Director on a first come, first served basis beginning on July 1 of that fiscal year and continuing thereafter in that fiscal year until all tax credits authorized for that fiscal year by the Act have been exhausted; subject, however, to the specific provisions of Subdivision 3.10 of this Rule. The Director shall record the time and date of receipt of an application. Applications submitted by mail or a courier or delivery service shall be considered to be received at 12:00 noon on the day of delivery, regardless of the time of day of actual delivery; provided that, an application submitted by mail or a courier or delivery service shall be received and accepted by the Director only if the application is delivered after the beginning of the period in which the application would be accepted if delivered in person.

2. Time Period for Acceptance of Applications Submitted by SBICs. All applications submitted by Applicants which are SBICs shall be submitted and received by the Director within the first ten (10) days of the fiscal year to allow the Authority to allocate tax credits to successful SBIC applicants within the first thirty (30) days of the fiscal year as required by the provisions of the Act and Subdivision 3.10 of this Rule.

3.6.b. Simultaneous Receipt of Applications.

1. Simultaneous Receipt of Applications Submitted by SBICs. -- In the event that, upon the opening for business of the Offices of the Authority on any day, more than one Applicant which is a SBIC is waiting for the Offices to open in order to submit an application, then the applications of all SBIC Applicants waiting shall be considered received simultaneously by the Director.

2. Simultaneous Receipt of Applications Submitted by Applicants Which Are Not SBICs. -- In the event that, upon the opening for business of the Offices of the Authority on any day, more than one Applicant which is not a SBIC is waiting for the Offices to open in order to submit an application, then the applications of all non-SBIC Applicants waiting shall be considered received simultaneously by the Director.

3.6.c. Review of Applications.

1. General Rule. -- The Director shall review all applications in the order of their receipt, subject to Paragraphs 3.6.c.2 and 3.6.c.3 of this Rule, to determine if each application is complete. The Director has sole discretion to determine whether an application is complete. The Director's determination shall be made within forty-five (45) days of the application's receipt; provided, however, that in the case of an application submitted by a SBIC, the Director’s determination shall be made within the first twenty (20) days of the fiscal year. In the event that the Director determines an application to be incomplete, the Director shall notify the Applicant, in writing, of the reasons for that determination and shall return the incomplete application to the Applicant. The Applicant may resubmit the application after correcting the deficiencies stated in the notice. If an application, though incomplete, is substantially complete as determined in the sole discretion of the Director, the time of receipt of the resubmitted application, for purposes of review by the Director, shall be considered to be the time of receipt of the initial application if tax credits remain available at the time of resubmission. If an application is not substantially complete as determined in the sole discretion of the Director, the resubmitted application shall be considered received, for purposes of review by the Director, when resubmitted.

2. Review of Simultaneously Received Applications Submitted By Applicants Which Are SBICs. -- In the event of simultaneously received applications submitted by Applicants which are SBICs, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications of SBICs. If the total tax credits sought by all the simultaneously received applications submitted by SBICs are less than the SBIC-Designated Tax Credit Amount for that fiscal year, after taking into account applications submitted by SBICs reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications for completeness and the applications shall be considered simultaneously reviewed. If the total tax credits sought by all the simultaneously received applications submitted by SBICs exceed the SBIC-Designated Tax Credit Amount for that fiscal year, after taking into account SBIC applications reviewed previously and determined to be complete or substantially complete, the Director shall, within fifteen (15) days, but not earlier than five (5) days, after the receipt of the applications, conduct a lottery to determine the order of review of the simultaneously received applications of SBICs, as follows:

A. The Director shall provide all SBIC Applicants that submitted simultaneously received applications written notice of the lottery and the opportunity for their designated representative to attend the lottery;

B. To conduct the lottery, the Director shall: (i) prepare for each SBIC Applicant that submitted a simultaneously received application, on index cards of the same fundamental character, an index card setting forth the Applicant's name and the tax credits sought by the Applicant by its application; (ii) deposit in a container one index card for each Applicant; (iii) select and draw from the container one index card in a manner that the Director may not determine the Applicant set forth on the index card; (iv) announce and record the Applicant whose index card was drawn and the amount of tax credits sought by that Applicant; and (v) repeat steps (iii) and (iv) until all Applicants' cards are drawn from the container;

C. Each simultaneously received application submitted by a SBIC shall be then reviewed for completeness by the Director in the order in which it was drawn from the container; and D. Prior to, or at any time during the lottery process, one or more SBIC Applicants, by agreement or otherwise, may voluntarily decrease the amount of tax credits sought by its application, provided the minimum capitalization requirements of the Act and this Rule continue to be satisfied.

3. Review of Simultaneously Received Applications Submitted By Applicants Which Are Not SBICs. -- In the event of simultaneously received applications submitted by Applicants which are not SBICs, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications submitted by non-SBICs. In the event that tax credits are allocable under the Act to non-SBICs in a fiscal year, if the total tax credits sought by all the simultaneously received applications submitted by non-SBICs are less than the total tax credits then available for that fiscal year reduced by the SBIC-Designated Tax Credit Amount, after taking into account applications submitted by non-SBICs reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications submitted by non-SBICs for completeness and the applications shall be considered simultaneously reviewed. If the total tax credits sought by all the simultaneously received applications submitted by non-SBICs exceed the total tax credits then available for that fiscal year reduced by the SBIC-Designated Tax Credit Amount, after taking into account applications submitted by non-SBICs reviewed previously and determined to be complete or substantially complete, the Director shall, within fifteen (15) days, but not earlier than five (5) days, after the receipt of the applications, conduct a lottery to determine the order of review of the simultaneously received applications submitted by non-SBICs, as follows:

A. The Director shall provide all non-SBIC Applicants that submitted simultaneously received applications written notice of the lottery and the opportunity for their designated representative to attend the lottery;

B. To conduct the lottery, the Director shall: (i) prepare for each non-SBIC Applicant that submitted a simultaneously received application, on index cards of the same fundamental character, an index card setting forth the Applicant's name and the tax credits sought by the Applicant by its application; (ii) deposit in a container one index card for each Applicant; (iii) select and draw from the container one index card in a manner that the Director may not determine the Applicant set forth on the index card; (iv) announce and record the Applicant whose index card was drawn and the amount of tax credits sought by that Applicant; and (v) repeat steps (iii) and (iv) until all Applicants' cards are drawn from the container;

C. Each simultaneously received application of a non-SBIC shall be then reviewed for completeness by the Director in the order in which it was drawn from the container; and D. Prior to, or at any time during the lottery process, one or more non-SBIC Applicants, by agreement or otherwise, may voluntarily decrease the amount of tax credits sought by its application, provided the minimum capitalization requirements of the Act and this Rule continue to be satisfied.

3.7. False Information. -- If an Applicant submits any false or misleading information, the Director may reject the application and deny further consideration of the Applicant for qualification in that and subsequent fiscal years.

3.8. Complete Application. -- Upon a determination by the Director that an application is complete, the Director shall place the complete application on the agenda of the next regularly scheduled meeting of the Authority. Complete applications shall be placed on the agenda in the order of their review by the Director.

3.9. Action of Authority. -- The Authority shall consider all applications in the order they are placed on the agenda of any regularly scheduled meeting of the Authority. The Authority shall certify as a Certified Company and designate as a Qualified Company those Applicants which meet the requirements of the Act and this Rule.

3.10. Allocation of Tax Credits. -- Upon designating an Applicant a Qualified West Virginia Capital Company, the Authority shall allocate, in the order in which companies are designated by the Authority, available tax credits for the investors in the Qualified Company, subject to Subsection 3.12 of this Rule. Not more than the SBIC-Designated Tax Credit Amount may be allocated during the first thirty (30) days of any fiscal year to one or more SBICs and, in those years in which tax credits are allocable under the Act to non-SBICs, the remainder of the tax credits allocable during the fiscal year which have not been allocated to SBICs during the first thirty (30) days of the fiscal year shall be allocated to Applicants which are not SBICs or as otherwise directed by the Act. For the fiscal year beginning July 1, 2001, no tax credits are allocable under the Act to Applicants which are not SBICs.

3.11. Notification of Action. -- The Director shall notify the Applicant in writing of the Authority's action designating or refusing to designate the Applicant a Qualified West Virginia Capital Company. The Director shall issue to a Qualified Company the Certificate of tax credit provided for in Subsection 5.5 of this Rule. The notice to a Qualified Company shall set forth the level of capitalization that qualifies for tax credits under W. Va. Code §5E-1-8. The notice to an Applicant not designated a Qualified Company shall set forth the reasons for that determination.

3.12. Suspension of Qualification Process. -- Notwithstanding the provisions at Subsections 3.6 through 3.11 of this Rule, in any fiscal year, upon the allocation to Qualified Companies of the total tax credits authorized for that fiscal year by the Act, the Authority shall suspend the qualification process and the Director shall reject all subsequently submitted applications. When, in any fiscal year, the total tax credits authorized in that fiscal year by the Act have previously been allocated to Qualified Companies, all applications received and then pending, and all applications thereafter submitted to the Director in that fiscal year shall not be reviewed by the Director or considered by the Authority in that or any subsequent fiscal year. Rather, the Applicant that submitted an application shall submit a new application in a subsequent fiscal year in order to be eligible for tax credits in that subsequent fiscal year. Upon determining that an application will not be reviewed pursuant to this Subsection, the Director shall mail written notice of that determination to the Applicant's principal office in this State.

3.13. Additional Applications. -- A Qualified Company which does not seek additional tax credits under Section 4 of this Rule is not required to file any additional application with the Authority to retain its status as a Qualified Company, provided that the Qualified Company remains in compliance with the requirements of the Act and this Rule.

3.14. Duty to Supplement. -- Any Applicant or Qualified Company shall immediately supplement any application filed under Section 3 or 4 of this Rule or any other information submitted to the Authority pursuant to this Rule if any material fact contained in the application or information changes. The Authority shall determine if the change constitutes an amendment to an application requiring the consent of the Authority pursuant to Subsection 3.15 of this Rule.

3.15. Amendments. - - An applicant may not amend an application without the written consent of the Authority for good cause shown.

§17-1-4. Additional Tax Credits.

4.1. Separate Capital Base.

4.1.a. General Rule; Amount. -- During each fiscal year, a Qualified Company may apply to the Authority to have a separate capital base designated as qualified. A separate capital base shall be in the amount of at least One Million Dollars but may not exceed Four Million Dollars.

4.1.b. Application Requirements. -- The Qualified Company shall file an application on the form provided for in Subsection 3.3 of this Rule and shall provide the information required for Applicants under that Subsection, as it applies to the Qualified Company's separate capital base, with all references in the application to Applicants, investors, capital bases and designation as a Qualified Company being read to apply to Qualified Companies applying to have a separate capital base designated as qualified, investors in the separate capital base, the separate capital base sought and designation as qualified of the separate capital base, respectively, and shall also amend its original application to reflect any changes in the information that it initially filed with the Authority.

4.1.c. Application; Receipt; Review; Action; Tax Credit Allocation. -- The provisions of Subsections 3.4 through 3.14 of this Rule apply to the application process, receipt and acceptance of applications, review of applications by the Director, action by the Authority and allocation of tax credits, with all references in Subsections 3.4 through 3.14 to Applicants and applications being read to apply to Qualified Companies applying for designation as qualified of a separate capital base and applications therefor, respectively.

4.1.d. Separate Capital Base; Requirements. -- Designation of a separate capital base as qualified will create a separate capital base for the Qualified Company. Each separate capital base is subject to all investment and reporting requirements of the Act and Sections 6 and 7 of this Rule, independent of any other capital base of the Qualified Company.

EXAMPLE:

Qualified Company, in fiscal year 1991, has a capital base of Two Million Dollars ($2,000,000.00). In fiscal year 1992, Qualified Company may qualify a new and separate capital base (other than its original capital base of $2,000,000.00), pursuant to Subsection 4.1 of this Rule, in an amount of at least One Million Dollars ($1,000,000.00) and not to exceed Four Million Dollars ($4,000,000.00). The new and separate capital base qualified in 1992 is governed by the provisions of the Act as amended in 1991 and this Rule, including the 35-55-75 investment schedule of W. Va. Code §5E-1-12(a) and Subsection 6.3 of this Rule.

4.2. Increases to Capital Base.

4.2.a. General Rule; Amount. -- During any fiscal year in which it has not received approval for the maximum tax credit under Subsection 5.2 of this Rule of Two Million Dollars for that year, a Qualified Company may apply to the Authority to have an increase in its existing capital base designated as qualified and additional tax credits on the increase in accordance with Subsection 5.3 of this Rule; provided, however, the maximum total amount to which an existing capital base may be increased is Four Million Dollars ($4,000,000.00).

4.2.b. Application Requirements. -- The Qualified Company shall file an application on the form provided for in Subsection 3.3 of this Rule and shall provide the information required for Applicants under that Subsection, as it applies to the increase of the Qualified Company's capital base, with all references in the application to Applicants, investors, capital bases and designation as a Qualified Company being read to apply to Qualified Companies applying to have an increase to capital base designated as qualified, investors in the increase to capital base, the increase to capital base sought and designation as qualified of the increase to capital base, respectively, and shall also amend its original application to reflect any changes in the information that it initially filed with the Authority.

4.2.c. Application; Receipt; Review; Action; Tax Credit Allocation. -- The provisions of Subsections 3.4 through 3.15 of this Rule apply to the application process, receipt and acceptance of applications, review of applications by the Director, action by the Authority and allocation of tax credits, with all references in the application to Applicants and applications being read to apply to Qualified Companies applying to have an increase to capital base designated as qualified, and applications for the increase, respectively.

4.2.d. Fiscal Year. -- Designation of an increase to capital base as qualified will increase the Qualified Company's existing capital base regardless of the year in which the initial capital base was qualified, but tax credits resulting from the increase to capital base shall be allocated from tax credits authorized for the fiscal year in which application for the increase was made.

4.2.e. Single Total Capital Base; Requirements. -- The initial capital base and all increases to it shall together constitute a single total capital base. That total capital base is subject to all investment and reporting requirements of the Act and Sections 6 and 7 of this Rule, on a prospective basis, as if the total capital base was qualified in its entirety at the time of qualification of the initial capital base; provided that, where a Qualified Company was designated as a Qualified Company prior to the 1991 amendments to the Act, and its increase to capital base was designated as qualified subsequent to the amendments, the pre-amendment requirements apply to the initial portion of the total capital base and the post-amendment requirements apply to the increase.

4.2.f. Investment Schedule Limitation. -- Notwithstanding the provisions of Subsection 4.2 of this Section, an increase to capital base shall not be designated as qualified if, at the time of designation, the Qualified Company would be in violation of Subdivision 6.3.c of this Rule with regard to the total capital base.

EXAMPLE 1:

Qualified Company was qualified on February 1, 1989 with a capital base of $1,000,000.00. Qualified Company wishes to increase its capital base pursuant to Subsections 4.2 and 5.3 of this Rule. An increase of $500,000.00 is approved by the Authority on October 1, 1991. With the increase, Qualified Company has a single capital base of $1,500,000.00. However, the original $1,000,000.00 is subject to the 20-40-60 investment schedule under the Act prior to its 1991 amendment, while the $500,000.00 increase is subject to the 35-55-75 investment schedule of W. Va. Code §5E-1-12(a) and Subsection 6.3 of this Rule. The $500,000.00 increase occurs in Year 3 of the original 20-40-60 investment schedule. Therefore, as illustrated below, by the end of Year 3, Qualified Company must have invested in a qualified manner a total of $975,000.00 (60% of the original $1.0 million plus 75% of the $500,000.00 increase).

Year 1 -- 2/1/89 - 2/1/90 Cumulative Required Investment $200,000.00 (20% of $1.0 million)

Total $200,000.00 Year 2 -- 2/1/90 - 2/1/91 Cumulative Required Investment $400,000.00 (40% of $1.0 million)

Total $400,000.00 Year 3 -- 2/1/91 - 2/1/92 Cumulative Required Investment $600,000.00 (60% of $1.0 million) + $357,000.00 (75% of $500,000.00)

Total $975,000.00 EXAMPLE 2:

Qualified Company was qualified on February 1, 1987, with a capital base of $1,000,000.00. In 1991, Qualified Company wishes to increase its original capital base by $500,000.00. However, the original $1,000,000.00 was subject to the 20-40-60 investment schedule under the Act prior to its 1991 amendment, while the $500,000.00 increase, if approved, would be subject to the 35-55-75 investment schedule of W. Va. Code §5E-1-12(a) and Subsection 6.3 of this Rule. Unless Qualified Company had invested $975,000.00 (60% of the original $1.0 million plus 75% of the $500,000.00 increase) by February 1, 1990, the $500,000.00 increase in 1991 would not be approved as an increase to the original capital base. Furthermore, given that each separate capital base must be in the amount of at least $1,000,000.00, Qualified Company would need to raise an additional $500,000.00 to be able to form a separate capital base pursuant to Subsection 4.1 of this Rule.

W. Va. Code R. § 117-1-5 Tax Credits

5.1. Semi-Annual Reports. -- Each Qualified Company shall report to the Tax Commissioner and the Authority on a semi-annual basis, and shall file separate reports for each separate capital base that is designated as qualified by the Authority. In each fiscal year until the Qualified Company is decertified by the Authority, a report covering the first and second quarters of the Company's fiscal year, and a report covering the third and fourth quarters of the Company's fiscal year, shall be submitted to the Authority no later than thirty (30) days following the end of the respective two-quarter period. However, the initial report need not be submitted until thirty (30) days following the end of the first two-quarter period ending more than six (6) months after the Company's designation as a Qualified Company or the designation as qualified of the separate capital base. The initial report shall contain the following information:

5.1.a. The name of each investor in the Qualified Company who has received, or is to receive, a tax credit as the result of investment in the subject capital base;

5.1.b. The amount of each investor's investment in the subject capital base and the date on which the investment was made;

5.1.c. The amount of tax credit allowed to the investor as the result of investment in the subject capital base;

5.1.d. All Qualified Investments the Qualified Company has made;

5.1.e. In the case of a Qualified Company which is a SBIC, a statement as to the compliance by the SBIC with the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., as amended, and the federal regulations promulgated under that Act, as well as a copy of the status or results of any examinations, audits or investigations conducted by or on behalf of the U.S. Small Business Administration with regard to compliance by the SBIC; and

5.1.f. Any additional information requested by the Authority.

5.1.g. Each subsequent report shall contain only changes or additions in information from the initial report.

5.2. Maximum Authorized Credits. -- The total amount of tax credits authorized for a single Qualified Company may not exceed Two Million Dollars during any single State fiscal year.

5.3. Additional Tax Credits. -- If a Qualified Company has not received approval for the maximum tax credit of Two Million Dollars within any State fiscal year, the Qualified Company may apply, pursuant to Subsection 4.2 of this Rule, as many as three times during any State fiscal year for additional credits of at least $50,000.00 each by seeking to have increases to its capital base designated as qualified.

5.4. Total Credits; Allocation. -- The total credits which may be authorized by the Authority in each fiscal year is set forth in the Act. Subject to the provisions of Subdivision 3.10 of the Rule, the Authority shall allocate these credits to Qualified Companies in the order in which the companies are designated as Qualified West Virginia Capital Companies or their separate capital bases or increases to capital base are designated as qualified, as the case may be.

5.5. Certificate of Tax Credit. -- The Authority shall issue to the Qualified Company the Authority's Certificate approving the amount of tax credits allocated to the Qualified Company. The Authority's Certificate shall list the investors entitled to a tax credit and the amount of credit allotted to each investor. The Qualified Company shall issue to each investor entitled to a tax credit, the Qualified Company's Certificate on a form prepared by the Authority, signed and verified by the Qualified company or by a duly authorized officer, partner, limited liability company member or manager, or trustee of the Qualified Company. The Qualified Company's Certificate shall set forth the amount of the investor's credit. The investor shall submit a true copy of the Qualified Company's Certificate with the investor's tax return requesting a tax credit. If the investor entitled to a tax credit is a partnership, an S corporation, a limited liability company, any other pass-through entity or an individual joint investor, the partners, shareholders, members, owners or individual investors shall apportion the tax credit among themselves pursuant to the provisions of Subdivision 5.7.f of this Rule.

5.6. Investors Entitled to Tax Credit; Amount. -- Any investor, including an individual, partnership, limited liability company, corporation or other entity, who makes an investment in an Applicant that is designated a Qualified Company pursuant to this Rule or who makes an investment in a Qualified Company's separate capital base or increase to capital base that is designated as qualified, is entitled to a tax credit, as allocated under Subsection 3.10 of this Rule, equal to fifty percent (50%) of the investment, except as otherwise provided by the Act or this Rule. The partners of a partnership, the shareholders of an S corporation, the members of a limited liability company, the owners of any other pass-through entity and individual joint investors are entitled to the credits allocated and authorized by the Authority for investments by the partnership, the S corporation, the limited liability company, the other pass-through entity or the joint investors in accordance with the apportionment plan provided for in Subdivision 5.7.f of this Rule.

5.7. Application of Tax Credits.

5.7.a. General Rule. -- The amount of tax credit allowed for the taxable year is the portion of the tax credit authorized under W. Va. Code §5E-1-8(c) and Subsection 5.6 of this Rule that does not exceed the tax liability limitation as provided in this Subsection.

5.7.b. Tax Credit Available. -- The credit available for the taxable year is the sum of:

1. Unused tax credit carried forward from prior taxable years (carryforwards); and 2. The amount of tax credit determined under W. Va. Code §5E-1-8(c) for the taxable year and described in Subsection 5.6 of this Rule (tax credits earned).

5.7.c. Tax Liability Information. -- Tax credit available for a taxable year beginning after June 30, 1986, must be applied against the same taxes as set forth in W. Va. Code §11-13C-5(c) through (i), and in that order.

5.7.d. Excess Tax Credit. -- The excess of the tax credit available over the applicable tax liability limitation for the year is an unused credit which the Qualified Company may carry forward as provided for under Subsection 5.8 of this Rule.

5.7.e. Order of Application. -- If the tax credit available for a taxable year is not allowed in full because of the tax liability limitation, carry forwards are applied against the tax liability limitation first. To the extent the tax liability limitation exceeds carry forwards, tax credit earned for the taxable year is then applied.

5.7.f. Apportionment.

1. The partners, shareholders, members, owners or individuals shall by election divide the tax credits authorized by the Authority for investments by a partnership, an S corporation, a limited liability company, pass-through entity or individual joint investors pursuant to this Subdivision 5.7.f.

2. The partners, S corporation shareholders, limited liability company members, pass-through entity owners or individual joint investors shall apportion the tax credit authorized in any manner they may select, provided that each partner, shareholder, member, owner or individual consents in writing to an apportionment plan. The written consent to an apportionment plan shall be signed by each partner, shareholder, member, owner or individual, or their duly authorized agents. The written consent shall set forth the name, address, employer identification number or social security number and taxable year for which the credit will be claimed for each partner, shareholder, member, owner or individual and the amount of tax credit apportioned to each of them under the plan. The consent of more than one partner, shareholder, member, owner or individual may be incorporated in a single statement. Each partner, shareholder, member, owner or individual shall file the statement with the application required pursuant to Subsection 3.3 of this Rule and the statement is irrevocable and not subject to change after filing unless the tax credit authorized by the Authority is less than the tax credit applied for, in which case the Authority may request the apportionment plan to be amended. Each partner, shareholder, member, owner and individual consenting to an apportionment plan shall keep as part of his or her records a copy of the statement containing all of the required consents.

3. An apportionment plan adopted and consented to by all partners, S corporation shareholders, limited liability company members, pass-through entity owners or joint individual investors is valid only for the tax credits authorized by the Authority pursuant to the application with respect to which the plan is filed. A separate consent to an apportionment plan must be filed with respect to each application filed pursuant to Subsection 3.3 of this Rule.

5.7.g. Limitation. -- Tax credits authorized by the Authority may not be used against any liability the taxpayer may have for interest, penalties, or additions to tax.

5.8. Carryforward of Unused Tax Credit.

5.8.a. General Rule. -- The holder of a tax credit may carry forward an unused tax credit to succeeding taxable years but not beyond fifteen (15) years. Carry forwards of unused tax credit are taken into account in determining the amount of tax credit available and the tax credit allowed for the taxable years to which they may be carried.

5.8.b. Unused Credit. -- If carry forwards and tax credit earned exceed the tax liability limitation, the excess attributable to tax credit earned is an unused tax credit.

5.8.c. Limitation on Carry forwards. -- Tax credit carry forwards to a taxable year may not exceed the applicable tax liability limitation for that year. Tax credit carry forwards from an unused tax credit year (the taxable year in which an unused tax credit arises) are applied before tax credit carry forwards from a later unused tax credit year.

5.8.d. Joint Return by Husband and Wife. -- This Subdivision prescribes additional rules for computing the tax credit carry forwards of a husband and wife making a joint return for one or more of the taxable years involved in the computation of the tax credit earned.

1. From Separate to Joint Return. -- If a husband and wife, making a joint return for any taxable year, did not make a joint return for any of the taxable years involved in the computation of the tax credit earned, the separate tax credits apportioned in accordance with Subdivision 5.7.f of this Rule shall together be considered a joint tax credit carryforward to the taxable year.

2. Continuous Use of Joint Return. -- If a husband and wife making a joint return for a taxable year made a joint return for each of the taxable years involved in the computation of the tax credit earned or the tax credit carryforward to the taxable years, the joint tax credit or tax credit carryforward to the taxable year is computed in the same manner as the tax credit carryforward of an individual as provided in Subdivisions 5.8.a through 5.8.c of this Rule.

3. From Joint to Separate Return. -- If a husband and wife making separate returns for a taxable year made a joint return for any, or all, of the taxable years involved in the computation of the tax credit earned or tax credit carryforward to the taxable year, the separate tax credit carryforward of each spouse to the taxable year is computed in accordance with Subdivisions 5.8.a through 5.8.c of this Rule but with the following modification: The tax credit of each spouse for a taxable year for which a joint return was made shall be considered to be that portion of the joint tax credit apportioned to the spouse in accordance with Subdivision 5.7.f of this Rule.

4. Recurrent Use of Joint Return. -- If a husband and wife making a joint return for any taxable year made a joint return for one or more, but not all, of the taxable years involved in the computation of a tax credit carryforward to the taxable years, the taxable year is computed in the manner set forth in Paragraph 5.8.d.3. of this Rule. The tax credit carryforward is considered a joint tax credit carryforward to the taxable year.

5. Joint Tax Credit Carryforwards. -- The joint tax credit carryforwards to any taxable year for which a joint return is made are all the tax credit carryforwards of both spouses to the taxable year.

6. Divorce and Remarriage. -- It is the intent of this Rule to allow the carryforward of joint tax credits to joint returns and of separate tax credits to joint returns so long as the two individuals remain married in both the taxable year in which the tax credit is earned and the taxable year to which the tax credit is to be carried. Divorce and remarriage in joint return cases present special problems. A joint tax credit of one couple cannot be carried to another taxable year and applied to the tax liability of a different couple. The principles established under the Internal Revenue Code and Treasury Regulations, and interpretations thereof, for net operating loss carryovers and investment tax credit carryforwards may be used as a guide in applying the rules for joint returns of husband and wife and separate returns of husband and wife and in cases involving divorce and remarriage.

5.8.e. Tax Credits Not Assignable. -- No portion of the tax credit earned by any investor is subject in any manner to alienation, sale, transfer or assignment, except that tax credits authorized by the Authority for investments by a partnership, an S corporation, a limited liability company, any other pass-through entity or individual joint investors may be apportioned pursuant to Subdivision 5.7.f of this Rule.

5.9. Investment to Date. -- The tax credit provided for in W. Va. Code §5E-1-8 is available only to those investors whose investment in a Qualified West Virginia Capital Company occurs on or after July 1, 1986.

5.10. Recapture. -- If the amount invested by the investor is not used by the Qualified Company for qualified investments as required by the Act and this Rule, the investor is not subject to a recapture provision for any credit claimed by him or her to date. However, the Qualified Company is subject to the penalty imposed under W. Va. Code §5E-1-12 and Subsection 7.6 of this Rule.

W. Va. Code R. § 117-1-6 Investment Requirements, Reporting, Record Keeping, Prohibitions, Sale or Liquidation and SBIC Compliance

6.1. Investments. -- A Qualified Company shall invest each separate capital base in Qualified Investments in accordance with the schedule set forth in Subsection 6.3 of this Rule. The portion of each separate capital base of a Qualified Company not required to be invested in Qualified Investments under Subsection 6.3 of this Rule shall be maintained or invested by the Qualified Company in one or more of the following: (i) in Qualified Investments; (ii) in bank accounts and financial institutions which are located in the State of West Virginia; (iii) other interest bearing instruments with a maturity of less than one (1) year which are obtained from and managed by a West Virginia corporation, as defined in Subdivision 3.2.c of this Rule; or (iv) a fund authorized by the Authority pursuant to W. Va. Code §5E-2-4(b). After a Qualified Investment is made, the Qualified Company shall obtain and submit to the Authority with the next semi-annual report of the Company, required to be filed pursuant to Subsection 5.1 of this Rule, affidavits prepared by any authorized officer, partner, owner, limited liability company member or manager, or trustee of the business invested in, which set forth the following:

6.1.a. That it is a business located in or principally based in West Virginia;

6.1.b. That more than fifty percent (50%) of its assets and operations, as defined in Subsection 2.29 of this Rule, are located in West Virginia;

6.1.c. That more than fifty percent (50%) of its employees are West Virginia residents; and

6.1.d. A brief description of the activities in which the business is engaged.

6.2. Affidavit from Qualified Company. -- A Qualified Company shall submit to the Authority, contemporaneous with the filings required under Subsection 6.1 of this Rule, affidavits prepared by an authorized officer, partner, owner, limited liability company member or manager, or trustee of the Qualified Company which demonstrate:

6.2.a. That the business invested in is not a business engaged in an activity prohibited by Subsection 6.5 of this Rule;

6.2.b. That the business invested in is a West Virginia Business as defined in Subsection 2.29 of this Rule; and

6.2.c. That the West Virginia Business invested in is engaged in activities that meet the requirements of a Qualified Investment, as specified in Subsection 2.22 of this Rule.

6.3. Schedule of Qualified Investments. -- A Qualified Company shall invest each capital base in Qualified Investments according to the following schedule:

6.3.a. At least thirty-five percent (35%) of its capital base within one (1) year of the date on which the Qualified Company was designated as a Qualified West Virginia Capital Company by the Authority or, relative to a separate capital base designated as qualified pursuant to Subsection 4.1 of this Rule, within one (1) year of the date on which that separate capital base was designated as qualified by the Authority;

6.3.b. At least fifty-five percent (55%) of its capital base within two (2) years of the date on which the Qualified Company was designated as a Qualified West Virginia Capital Company by the Authority or, relative to a separate capital base designated as qualified pursuant to Subsection 4.1 of this Rule, within two (2) years of the date on which that separate capital base was designated as qualified by the Authority; and

6.3.c. At least seventy-five percent (75%) of its capital base within three (3) years of the date on which the Qualified Company was designated as a Qualified West Virginia Capital Company by the Authority or, relative to a separate capital base designated as qualified pursuant to Subsection 4.1 of this Rule, within three (3) years of the date on which that separate capital base was designated as qualified by the Authority.

6.3.d. The provisions of this Subsection 6.3 do not apply to the capital base of a Qualified Company which is a SBIC provided that the capital base was qualified on a date on or after June 13, 2001.

6.4. Limitation of Qualified Investment. -- No more than thirty percent (30%) of the total equity raised by a Qualified Company may be invested in any one West Virginia Business. For purposes of this Subsection, "equity" means the total of all the capital bases designated as qualified by the Authority.

6.5. Investment in Certain Businesses Prohibited.

6.5.a. A Qualified Company shall not invest any of its capital base in any of the following businesses:

1. Banks;

2. Savings & Loan Associations;

3. Credit Companies;

4. Financial or Investment Advisors;

5. Brokerage or Financial Firms;

6. Other Capital Companies;

7. Charitable and religious institutions;

8. Businesses engaged in conventional oil and gas exploration;

9. Insurance Companies;

10. Businesses engaged in Residential Housing or Development; or 11. Any other business which the Authority determines to be against the public interest, the purposes of the Act or in violation of any law.

6.5.b. For the purposes of Paragraph 6.5.a.10 of this Rule, "residential housing or development" shall not include "tourism." "Tourism", as referred to in Subsection 2.22 of this Rule, includes, by way of example and not by way of limitation, housing which is to be sold as second residences or which is rented or leased to the public for overnight stay and which in either event is located near an established tourism resort. A Qualified Company desiring to make a "tourism" investment pursuant to this Subdivision or Subsection 2.22 shall obtain certification from the Authority that the investment is eligible for qualification as a "tourism" investment prior to making the investment.

6.6. Alter Ego Investments Prohibited. -- W. Va. Code §5E-1-13(b) prohibits a Qualified Company which is not a SBIC from investing any portion of its capital base, or making other investments, in a business that is the "alter ego" of the Qualified Company.

6.6.a. Relative. -- For purposes of Subsection 6.6 of this Rule, the term "Relative" means a blood relative, a spouse, a spouse of a Blood Relative, or a person who is a Relative of a spouse, including persons related by a step or adoptive relationship, or a member of a common household. The term "Blood Relative" includes lineal descendants, ancestors, brothers and sisters, nephews and nieces, uncles and aunts, and first cousins.

6.6.b. Substantially Related. -- A business is an alter ego of a Qualified Company if ownership of the business and ownership of the Qualified Company are "substantially related". Ownership of a business and ownership of a Qualified Company are "substantially related" if one or more of the following conditions are present at the time the investment is made or while the investment is outstanding:

1. Any investor in the Qualified Company is, or is a Relative (as defined in Subdivision 6.6.a of this Rule) of, an investor in or owner of the business. An investor in any parent business is considered an investor in all subsidiaries of the parent business for the purposes of this Paragraph.

EXAMPLE:

A Qualified Company is formed with A, B and C as investors. Qualified Company makes an investment in a West Virginia Business. For the purposes of Paragraph 6.6.b.1 of this Rule, the West Virginia Business would not be an "alter ego" of the Qualified Company as long as: (i) neither A, B nor C is an investor or owner of the West Virginia Business, and; (ii) no blood relative, spouse, spouse of a blood relative, relative of a spouse, or member of the household of either A, B or C is an investor or owner of the West Virginia Business.

2. There is an agreement, written or oral, between the Qualified Company and the business that the investment by the Qualified Company in the business is conditioned upon the business (1) entering into any contract, agreement or other arrangement with an investor in the Qualified Company or a Relative (as defined in Subdivision 6.6.a of this Rule) of an investor, or with any business owned or controlled by an investor in the Qualified Company or a Relative of an investor, or (2) applying the invested funds to a purpose that will, clearly and naturally, substantially benefit an investor in the Qualified Company, a Relative of an investor, or any business owned or controlled by an investor in the Qualified Company or a Relative of an investor;

EXAMPLE 1:

A Qualified Company is formed with A, B and C as investors. Qualified Company's investment in XYZ, a West Virginia Business, is conditioned upon XYZ entering into a contract with Company Q, a business owned or controlled by investor B. Qualified Company would be prohibited from investing in XYZ on these conditions.

EXAMPLE 2:

Qualified Company is formed with A, B and C as investors. Qualified Company's investment in XYZ, a West Virginia Business, is conditioned upon XYZ using the investment to install certain equipment that will necessitate the use of supplies sold exclusively by Company Q, a business owned or controlled by Investor B. Qualified Company would be prohibited from investing in XYZ on these conditions.

3. The investment by the Qualified Company is conditioned upon a reciprocal investment by another West Virginia Qualified Company in a business owned or controlled by an investor in the Qualified Company; or 4. The investment by the Qualified Company results in there being either (i) no equity ownership in the business other than the Qualified Company or (ii) the non-Qualified Company ownership in the business lacks economic substance.

EXAMPLE 1:

Qualified Company owns ninety percent (90%) of XYZ, a West Virginia Business. The remaining ten percent (10%) ownership in XYZ is owned by an individual, M, who received his shares at no cost to him or her, and an individual, N, to whom Qualified Company loaned the money needed to purchase N's shares. The loan to N is on a non-recourse basis, meaning that N has no personal liability to repay the loan. The non-Qualified Company ownership by M and N in XYZ "lacks economic substance" and, pursuant to Paragraph 6.6.b.4 of this Rule, ownership of XYZ and Qualified Company are "substantially related." Therefore, XYZ would be an "alter ego" of Qualified Company and Qualified Company's investment in XYZ would be prohibited.

EXAMPLE 2:

Qualified Company owns eighty-five percent (85%) of the stock of XYZ, a West Virginia Business which manufactures widgets. Qualified Company paid $85,000.00 for its stock. The remaining fifteen percent (15%) of the stock is owned by an individual, K, who received his or her share by contributing to XYZ machinery used to manufacture widgets, which machinery has been appraised at $15,000.00. The non-Qualified Company ownership by K does not "lack economic substance" and, pursuant to Paragraph 6.6.b.4 of this Rule, XYZ would not be an "alter ego" of Qualified Company.

EXAMPLE 3:

Qualified Company owns ninety shares (equaling ninety percent (90%)) of the stock of XYZ, a West Virginia Business. Qualified Company paid $90,000.00 or $1,000.00 per share for its stock. The remaining ten shares (or ten percent (10%)) of the stock of XYZ are owned by an individual, D, who bought such stock for $10.00 or $1.00 per share. Furthermore, Qualified Company and D have an agreement by which Qualified Company has the right to buy D's shares in XYZ at any time for $1.00 per share. The non-Qualified Company ownership by D "lacks economic substance" under Paragraph 6.6.b.4 of this Rule for two reasons: (i) D's investment of $10.00 in XYZ is so minimal that D's investment is risk-free, and (ii) D's agreement with Qualified Company may result in D not receiving the benefits of ownership in XYZ.

6.6.c. Control of Board of Directors. -- A business is an alter ego of a Qualified Company if the board of directors of the business is controlled by the Qualified Company, unless control consists of no more than a simple majority of the board. In order to determine control, directors of the business that exercise control on behalf of the Qualified Company include directors of the business that are (i) employees, officers, directors, limited liability company managers or other management personnel of the Qualified Company; (ii) persons who are investors in the Qualified Company; or (iii) persons who are Relatives (as defined in Subdivision 6.6.a of this Rule) of an investor in, or employee, officer, director, limited liability company manager or other management official of, the Qualified Company. Non-Qualified Company directors include individuals who do not meet the preceding conditions of this Subdivision. If the business is not a corporation then the same rules concerning control apply to the managing body for the business.

6.7. Management Interlock Prohibited.

6.7.a. General Rule. -- Except when required in order to remedy problems arising from a lack of profitability in the business or from dishonesty of the persons managing the business or from the death or unanticipated departure of a person occupying a key management position in the business, a Qualified Company which is not a SBIC may not manage any business in which the Qualified Company has invested. Therefore, unless otherwise provided, no investor, director, officer or employee of the Qualified Company can occupy a management position in the business. A "management position" includes any position or office, other than membership on the board of directors, however described by title or office, where the individual has responsibility for and authority over all or any portion of the day-to-day operations of the business. In the case of a general partnership or a limited liability company, a general partner or member is not considered to occupy a management position in the business merely because the general partner or member regularly exercises his or her voting rights as long as the general partner or member is not responsible for and does not have authority over all or any portion of the day-to-day operations of the business.

EXAMPLE:

Qualified Company is one of five general partners in a general partnership which is a West Virginia Business. By written agreement within the partnership or by written contract, a general partner other than Qualified Company is designated the "Managing Partner" and is given authority over the day-to-day operations of the partnership. In this case, Qualified Company does not occupy a management position in the West Virginia Business even though Qualified Company would exercise its right to vote on the person who would occupy the position of Managing Partner.

6.7.b. Lack of Profitability Exception. -- In order to establish that occupation of management positions is required in order to cure a lack of profitability in the business, the Qualified Company shall demonstrate that the expenses of the business have exceeded the revenues of the business for two consecutive fiscal quarters. If the Qualified Company takes control of management of the business, it shall relinquish control within a reasonable time after the revenues of the business have exceeded the expenses of the business for two consecutive fiscal quarters. In no event shall the Qualified Company have control of management of the business for a period exceeding twenty-four (24) months, even if profitability is not restored at the end of the twenty-four (24) month period.

6.7.c. Cure of Dishonesty Exception. -- In order to establish that occupation of management positions is required in order to cure dishonesty within management, the Qualified Company shall demonstrate that there is substantial reason to believe that existing members of management have violated state or federal law in connection with the performance of their duties for the business, that the suspected violations pose a significant risk of detriment to the business, and that an independent investigation of the suspected wrongdoing was undertaken, the results of which indicate the occurrence of a violation of law. Breach of fiduciary duty and negligence without more do not constitute "dishonesty." Where dishonesty in management is established, an investor, director, officer or employee of the Qualified Company may serve as an interim replacement of existing management for a maximum period of six (6) months.

6.7.d. Death or Departure Exception. -- In situations involving the death or unanticipated departure of a person occupying a key management position in the business, an investor, director, officer or employee of the Qualified Company may serve as an interim replacement of that person for a maximum period of six (6) months.

6.8. Conflict of Interest. -- No officer, member, or employee of the Authority shall be financially interested, directly or indirectly, in any Qualified Company.

6.9. Limitation on Financial Institutions.

6.9.a. No more than forty-nine percent (49%) of the total capital base of any Qualified Company which is not a SBIC may be owned by banks, savings and loan associations, savings banks, or other financial institutions, or any affiliate thereof, as investors. For the purposes of Subsection 6.9 of this Rule, "total capital base" means the total of all the capital bases designated as qualified by the Authority.

6.9.b. The following are "affiliates" of a bank, savings and loan association, savings bank, or other financial institution for purposes of Subsection 6.9 of this Rule and W. Va. Code §5E-1-20:

1. A holding company of the financial institution;

2. A wholly owned subsidiary of the financial institution;

3. A corporation, partnership or other entity of which the financial institution has majority ownership; or 4. A member of the same controlled group (as defined for federal income tax purposes) as the bank, savings and loan association, savings bank, or other financial institution.

6.9.c. No officer, employee, or director of a financial institution, or any affiliate thereof, may vote as a member of the board of any Qualified Company which is not a SBIC, if the matter being voted on affects the financial institution for which the board member served as an officer, employee or director. If the Qualified Company is not a corporation, then the restriction also applies to the managing body of the Qualified Company.

6.10. Sale or Liquidation of Qualified Investments.

6.10.a. Maintenance of Investment. -- A Qualified Company shall maintain its Qualified Investments for a period of at least five (5) years, except that a Qualified Company receiving repayment or return of a Qualified Investment (exclusive of interest, dividends or other earnings on the investment) shall reinvest the company's repaid or returned cost basis in the investment in a Qualified Investment which remains outstanding for a period of time at least equal to the remainder of the initial five-year term, with reinvestment to be made within twenty-four (24) months from the date of repayment or return, unless a waiver is obtained from the Authority prior to the end of the twenty-four (24) month period; provided that, the returned amounts may be accumulated for six (6) months before the aforesaid twenty-four (24) month period commences; and, provided further, however, that this Subsection does not apply to Qualified Investments made by a Qualified Company which is a SBIC on a date on or after June 13, 2001.

1. Debt Investment. -- For purposes of Subdivision 6.10.a of this Rule and W. Va. Code §5E-1-12(b), a debt investment, as defined at Subsection 2.10 of this Rule, is considered to be "maintained" for the required five-year period (i) to the extent of the amount written off, when the debt investment becomes uncollectible and is written-off by the Qualified Company; (ii) to the extent of amounts repaid, when the unpaid balance is subsequently written-off and installment payments received by the Qualified Company each year did not exceed thirty percent (30%) of the original principal balance or, if the payments did exceed the thirty (30%) limit, they were determined by a normal amortization schedule based upon at least a five (5) year term; or (iii) to the extent of the entire investment, when the debt investment is not repaid in full for at least five (5) years and installment payments received by the Qualified Company each year during the required five-year period do not exceed thirty percent (30%) of the original principal balance, except that installment payments received by the Qualified Company each year during the required five-year period may exceed thirty percent (30%) of the original principal balance if the installment payments are determined by a normal amortization schedule. If a Qualified Company receives installment payments during any one year of the required five-year period, not determined by a normal amortization schedule, which exceed thirty percent (30%) of the original principal balance of the debt investment, or if a Qualified Company receives repayment in full of a debt investment prior to the end of the five (5) year period, the Qualified Company shall reinvest all repaid principal pursuant to Subdivision 6.10.a of this Rule and W. Va. Code §5E-1-12(b), but the amount of any remaining unpaid principal balance remain a Qualified Investment and need not be reinvested if thereafter maintained in compliance with this Rule and the Act. For purposes of Subdivision 6.10.a of this Rule, "normal amortization" represents the regular and equal payment necessary to be made at the end of each period that will repay both the interest on the loan and the original loan amount.

EXAMPLE 1:

A. Qualified Company makes a $100,000.00 qualified debt investment with a stated maturity date of five (5) years in XYZ, a West Virginia Business. XYZ makes payments to Qualified Company so that the following amounts of the principal balance are repaid in the first two (2) years:

Year 1: $10,000.00 principal repaid Year 2: $31,000.00 principal repaid B. The repayment of $31,000.00 of principal in Year 2 violates the thirty percent (30%) limitation in Paragraph 6.10.a.1 of this Rule if the payment would exceed payments under a normal amortization schedule.

C. Given that the Year 2 payments exceed payments under a normal amortization schedule, Qualified Company would be required to reinvest $41,000.00 (principal payments received in Years 1 and 2) pursuant to Subdivision 6.10.a of this Rule and W. Va. Code §5E-1-12(b). The remaining $59,000.00 in principal owed would remain a Qualified Investment as long as the provisions of this Rule and the Act are followed.

EXAMPLE 2:

A. Qualified Company makes a $100,000.00 qualified debt investment with a stated maturity date of five (5) years in XYZ, a West Virginia Business. XYZ makes payments to Qualified Company so that the following amounts of the principal balance are repaid in the first four (4) years:

Year 1: $25,000.00 of principal repaid Year 2: $25,000.00 of principal repaid Year 3: $25,000.00 of principal repaid Year 4: $25,000.00 of principal repaid B. The repayment of principal in Years 1 - 4 does not violate the thirty percent (30%) limitation of Paragraph 6.10.a.1 of this Rule. However, since the entire principal balance has been repaid by the end of Year 4, the investment has not been maintained for at least five (5) years and, therefore, must be reinvested pursuant to Subdivision 6.10.a of this Rule and W. Va. Code §5E-1-12(b).

EXAMPLE 3:

A. Qualified Company makes a $100,000.00 qualified debt investment with a stated maturity date of five (5) years in XYZ, a West Virginia Business. XYZ makes payments to Qualified Company so that the following amounts of the principal balance are repaid in the first two (2) years:

Year 1: $10,000.00 principal repaid Year 2: $15,000.00 principal repaid B. In Year 3, the remaining $75,000.00 of principal due on this debt investment becomes uncollectible and is written-off by Qualified Company as a bad loan. The entire debt investment is considered maintained for the required five-year period and no reinvestment of any portion of this investment is required.

2. Early Repayment. -- A Qualified Company which is unable to maintain a Qualified Investment for the required five-year period due to voluntary repayment of the investment in full by the West Virginia business in advance of the required five-year period, repayment in advance of the required five-year period due to default by the West Virginia business and acceleration of the loan, or otherwise, shall reinvest its repaid or returned cost basis in the investment as is required by W. Va. Code §5E-1-12(b) and Subdivision 6.10.a of this Rule.

3. Equity Investment. -- For purposes of Subdivision 6.10.a of this Rule and W. Va. Code §5E-1-12(b), an equity investment, as defined at Subsection 2.16 of this Rule, is considered to be "maintained" for the required five-year period, to the extent of the amount not recovered and written-off, upon the dissolution, liquidation or other termination of operations of the West Virginia business.

4. Waiver. -- A Qualified Company desiring a waiver from the Authority of its obligation to reinvest its repaid or returned cost basis from a Qualified Investment which has not been maintained for the required five-year period pursuant to W. Va. Code §5E-1-12(b) and Subdivision 6.10.a of this Rule shall request a waiver in writing and send the request by certified mail to the Authority at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston WV 25311-1217. The request shall contain the name, mailing address, and telephone number of a person that can be contacted by the Authority for further information concerning the request. The Qualified Company shall provide any additional information requested by the Authority regarding a waiver request.

6.10.b. Sale or Liquidation. -- A Qualified Company may sell or liquidate a Qualified Investment which has been maintained for the required five-year period; however, the initial cost basis of the Qualified Investment shall be maintained or invested by the Qualified Company in one or more of the following:

1. Qualified Investments;

2. Bank accounts and financial institutions which are located in the State of West Virginia; and 3. Other interest bearing instruments with a maturity of less than one (1) year which are obtained from and managed by a West Virginia corporation, as defined in Subdivision 3.2.c of this Rule.

6.11. Equity Capitalization Over Four Million Dollars. -- If a Qualified Company raises capital in excess of Four Million Dollars in a fiscal year, the capital in excess of Four Million Dollars does not constitute a part of the capital base of the company and is not subject to the restrictions and requirements of Section 6 of this Rule.

6.12. Compliance of SBICs with Qualified Company Status.

A Qualified Company with SBIC status shall at all times remain in full compliance with the provisions of the Act and this Rule applicable to Qualified Companies which are SBICs, as well as with the provisions of the Small Business Investment Act, 15 U.S.C. §§ 661 et seq., as amended, and the federal regulations promulgated under that Act.

W. Va. Code R. § 117-1-7 Audits, Reports, Confidentiality, Examination, Failure to Comply, Penalties, Decertification

7.1. Annual Audit and Report. -- For each Qualified Company, an audit of each of its capital bases designated as qualified shall be conducted annually by a certified public accountant, beginning at the end of the first fiscal year of the Company, and each year thereafter until the Qualified Company is decertified by the Authority. An audit of any of a Qualified Company's capital bases may be consolidated and submitted with audits of any other of its capital bases required under this Subsection, so long as information required under the Act and this Rule with respect to each capital base is separate and distinct. Provided that, in the case of the capital base of a designated Qualified Company or a separate capital base or increase to capital base designated as qualified, prior to the 1991 amendments to the Act, audits with respect to the qualified capital bases need not be conducted after the expiration of a five year period beginning from the date of the last of the designations if the Qualified Company is not then actively investing but is instead merely maintaining existing investments pursuant to the requirements of the Act and this Rule. In those cases, in lieu of audits, the Qualified Company shall annually file internally prepared unaudited financial statements accompanied by an affidavit setting forth (1) the name of the Qualified Company; (2) the name and title of the affiant; (3) that the affidavit is submitted in connection with the internally prepared financial statements of the Qualified Company; (4) the time period covered by the financial statements; (5) that there have been no material or significant changes in the Qualified Company's Qualified Investments for the time period specified, or what, if any, changes have occurred; and (6) that the financial statements are true, complete and accurate.

7.2. General Requirements for Audits. -- The following requirements apply to Audits of the Qualified Company:

7.2.a. Independent CPA. -- The certified public accountant shall be independent of the Qualified Company being examined to ensure that the audit report will be impartial, in fact and in appearance.

7.2.b. Working Papers; Standards. -- In performing the audit, the accountant shall prepare working papers in accordance with the generally accepted accounting standards of field work. Working papers for an audit shall be retained by the accountant for a minimum of three (3) years from the date of the audit report, or longer if notified in writing by the Authority before the end of the three (3) year period. The Qualified Company shall make its audit working papers available upon written request of the Authority or the Director. The audit shall be conducted in accordance with generally accepted auditing and accounting principles and any other guidelines the Authority may prescribe.

7.2.c. Report Contents. -- The audit report shall address the methods of operation and conduct of the business of the Qualified Company and report on the Qualified Company's compliance with the requirements of the Act and this Rule and, in the case of SBICs, with the provisions of the Small Business Investment Act, 15 U.S.C. §§ 661 et seq., as amended, and the federal regulations promulgated under that Act. In particular the report shall address whether the company has made proper and timely investments. Any instances of noncompliance shall be specifically cited. If the accountant finds that the Company has been in compliance, the accountant shall make a positive statement to that effect.

7.2.d. Submission of Report. -- The Qualified Company shall submit three certified copies of the audit report no later than ninety (90) days from the end of each fiscal year, together with three copies of a descriptive narrative of the Qualified Company's activities, its methods of operation and the general conduct of the Company, and three copies of its financial statements.

7.2.e. Bound Report. -- Each copy of the audit report and narrative statement shall be bound in a durable cover. The name of the Qualified Company and the time period covered by the report shall be visibly printed on the front cover of the report.

7.2.f. Other Requirements. -- The Authority may dictate other audit requirements from time to time.

7.3. Confidentiality.

7.3.a. General Rule. -- All information submitted to the Authority is confidential and not subject to public disclosure when filed with the Authority, except as otherwise provided in Subsection 7.3 of this Rule and in W. Va. Code §§5E-1-8 and 5E-1-21.

7.3.b. Application Information. -- All information submitted to the Authority pursuant to (i) application for designation as a Qualified Company (ii) application for designation as qualified of a separate capital base pursuant to Subsection 4.1 of this Rule, and (iii) application for designation as qualified of an increase to capital base pursuant to Subsection 4.2 of this Rule, and documents related to the applications, are confidential and not subject to public disclosure when filed with the Authority, except the following:

1. The full legal name of the entity making the application;

2. The mailing and office addresses and telephone number of the applicant;

3. The name of a person to contact for the applicant;

4. The names of all directors, officers, managers or managing partners of the applicant;

5. Whether the applicant has the policy of restricting its investment to particular areas of the state, and if so, a description of the particular areas, or whether the applicant has no restriction and may invest statewide;

6. Whether the applicant has the policy of restricting the type of its investments to debt investments, equity investments, capital leases or any combination of those investments; and 7. The amount of the capital base of the applicant designated as qualified by the Authority.

7.3.c. Report Information. -- All information submitted to the Authority in regard to the semi-annual reports required by Subsection 5.1 of this Rule, including the affidavits required under Subsections 6.1 and 6.2 of this Rule, is confidential and not subject to public disclosure when filed with the Authority, except the following:

1. The name of any Qualified Company that made a Qualified Investment;

2. The name, address and phone number of each West Virginia Business receiving a Qualified Investment, specified as to the investing Qualified Company;

3. Whether each Qualified Investment from the Qualified Company was a debt investment, equity investment, capital lease or combination of those investments, specified as to the West Virginia Business;

4. The qualified activity under Subsection 2.22 of this Rule in which each West Virginia Business receiving a Qualified Investment from the Qualified Company is engaged, specified as to the West Virginia Business; and 5. Whether the amount of each Qualified Investment in a West Virginia Business is: (i) not more than $50,000.00; (ii) more than $50,000.00, but not more than $100,000.00; (iii) more than $100,000.00, but not more than $250,000.00; (iv) more than $250,000.00, but not more than $500,000.00; (v) more than $500,000.00, but not more than $1,000,000.00; or (vi) more than $1,000,000.00, specified as to the West Virginia Business.

7.3.d. Ruling Request Information. -- All information submitted to the Authority regarding a ruling request pursuant to Section 9 of this Rule is confidential and not subject to public disclosure when filed with the Authority, except that the Authority may, if it so desires, publish or make available to the public a summary of the ruling request provided that all names and other identifying facts are omitted.

7.3.e. General Correspondence. -- All general correspondence of or to the Authority is confidential and not subject to public disclosure.

7.3.f. Examination & Audit Information. -- All information obtained by or submitted to the Authority in regard to the examination or audit (including audits performed by independent certified public accountants) of a Qualified Company pursuant to W. Va. Code §5E-1-16 and Subsections 7.1, 7.5 and 7.11 of this Rule is confidential and not subject to public disclosure, except where the public disclosure results from enforcement proceedings contemplated by W. Va. Code §5E-1-21(b) and (c).

7.3.g. Internal Information. -- Unless otherwise provided, all information generated internally by the Authority including, by way of example and not by way of limitation, internal memoranda and reports is confidential and not subject to public disclosure.

7.3.h. Tax Information. -- All tax returns and tax return information subject to the nondisclosure restrictions of W. Va. Code §11-10-5d is confidential, except for the information subject to disclosures authorized, mandated or permitted pursuant to W. Va. Code §§5E-1-8, 5E-1-21 or 11-10-5s.

7.3.i. Authority Determination. -- In addition to the information described in this Subsection and classified as non-confidential, the Authority may from time to time consider as non-confidential and disclose to the public any information by the execution of a resolution or policy statement that the information is non-confidential.

7.3.j. Request for Confidentiality. -- Any person or entity submitting information to the Authority which is classified as non-confidential by this Rule or the Act shall be treated as non-confidential and subject to disclosure unless the person submitting the information makes a showing, satisfactory to the Authority, at the time the information is submitted that the information should be treated as confidential under W. Va. Code §5E-1-21(b). Any person desiring to make a submission shall indicate in writing what information is requested to be treated in a confidential manner and the basis upon which the treatment is justified. A person making a request may submit the information desired to be treated as confidential separately from other information submitted. If the Authority concurs with the request then the information shall be treated as confidential. If the Authority disagrees with the requested treatment then the person submitting such information shall be notified and given a reasonable opportunity to withdraw the information.

7.3.k. Disclosure to State Personnel. -- Notwithstanding any provisions of the Act or this Rule, any record, report, document or information may be disclosed to any officers, employees or authorized representatives of the State of West Virginia charged with administering the provisions of the Act and this Rule and may be disclosed pursuant to proceedings under W. Va. Code §5E-1-16(b) and Subsection 7.5 of this Rule; provided that, the provisions of the West Virginia Code regarding confidentiality and the disclosure of tax returns and tax information, including without limitation W. Va. Code §11-10-5d, apply to the Authority, its agents and employees and to information submitted to the Authority under the Act and this Rule.

7.4. Annual Authority Review. -- The Authority shall conduct an annual review of the accountant's report and audit required by W. Va. Code §5E-1-16(a) and Subsection 7.1 of this Rule and any other information filed by a Qualified Company to determine if the company is in compliance with the requirements of the Act and this Rule, to advise the company as to the qualified status of its investments, and to ensure that no investment has been made in violation of W. Va. Code §§5E-1-12 and 5E-1-13, and Section 6 of this Rule. Based on the results of the annual review, the Authority shall notify the Tax Commissioner of any Qualified Companies that are not in compliance with the Act or this Rule.

7.5. Investigation by Authority. -- The Authority may examine, under oath, any of the officers, directors, partners, owners, limited liability company members or managers, trustees, agents, employees or investors of a Qualified Company regarding the methods of operation and business of the company, and any other matters which the Authority may consider necessary to ensure compliance with the Act and this Rule. The Authority may issue subpoenas and subpoenas duces tecum, and administer oaths relative to any the examination.

7.6. Non-Compliance Penalty. -- Any Qualified Company that fails to make or maintain Qualified Investments pursuant to this Rule and the Act shall pay to the Tax Commissioner a penalty equal to all of the tax credits authorized on the capital base which the Qualified Company failed to properly invest or maintain with interest at the rate of 1-1/2% per month, compounded monthly, from the date the tax credits were certified as allocated to the West Virginia Qualified Company. The Tax Commissioner shall give notice to the Qualified Company of any penalties assessed under this Subsection. The Tax Commissioner may abate the penalties upon written request of the Qualified Company if the Qualified Company establishes reasonable cause for the failure to make or maintain Qualified Investments. The Tax Commissioner shall deposit any amounts received as penalties under this Subsection to the State general revenue fund. To carry out the provisions of this Section, the Tax Commissioner has all powers and authority granted to him or her under the West Virginia Tax Procedures and Administration Act and the rules promulgated thereunder and the penalty may be assessed and collected in the same manner as other penalties are assessed and collected under that Act.

7.7. Involuntary Decertification. -- Failure of a Qualified Company to comply with the provisions of the Act or this Rule is grounds for decertification of the Company by the Authority pursuant to §5E-1-17 of the Act and this Subsection.

7.7.a. Notice. -- If at any time the Authority determines that a Qualified Company is not in compliance with the requirements of the Act or this Rule, the Authority shall give the Qualified Company written notice of the noncompliance and that the Qualified Company shall be decertified in ninety (90) days from the date of mailing of the notice unless the company satisfactorily corrects the actions of noncompliance or files a petition with the Authority for reconsideration and demands an administrative hearing. The hearing shall be conducted as provided in W. Va. Code §29A-5-1.

7.7.b. Notice of Decertification. -- If a Qualified Company is not in compliance with the Act and this Rule following the ninety (90) day period provided by Subdivision 7.7.a of this Rule and no administrative hearing is demanded by the Qualified Company, the Authority shall send a notice of decertification to the Qualified Company and to the State Tax Commissioner. If an administrative hearing is demanded by the Qualified Company and results in a decision supporting the Authority’s decertification actions, the Qualified Company shall be provided a period to cure its noncompliance. The period of noncompliance shall begin on the date of issuance of the decision and extend for ninety (90) days less the number of days from issuance of the notice required by Subdivision 7.7.a to the Qualified Company’s filing of its petition and demand for hearing. Involuntary decertification of a Qualified Company causes the forfeiture of any right or interest to qualification for further tax credits under the Act or this Rule for: (i) the decertified company; and (ii) any Applicant, or any Qualified Company seeking designation as qualified of a separate capital base or an increase in its capital base, in which any director, officer, general partner, managing partner, limited liability company member or manager or trustee of the decertified company is a director, officer, general partner, managing partner, limited liability company member or manager, trustee or investor.

7.8. Voluntary Decertification Requested by Qualified Company. -- A Qualified Company, which has complied with the provisions of the Act and this Rule including the provisions of W. Va. Code §5E-1-12(b) and Subsection 6.10 of this Rule, desiring to terminate its status as a Qualified Company under the Act but to remain in existence and not to dissolve or liquidate pursuant to W. Va. Code §5E-1-12(c) or Section 8 of this Rule shall make written application to the Authority requesting decertification and the revocation of its status as a Qualified Company under the Act. The written application for decertification shall provide information certifying that the Qualified Company has complied with the provisions of the Act and this Rule. A Qualified Company requesting decertification shall provide all information requested by the Authority. The Authority may perform an audit or examination of any Qualified Company requesting decertification in order to ascertain or verify the Qualified Company's compliance with the Act and this Rule. The standard to be used by the Authority to determine compliance with W. Va. Code §5E-1-12(b) and Subsection 6.10 of this Rule, shall be whether the Qualified Company has maintained for at least five years individual Qualified Investments totaling (1) at least sixty percent (60%) of the capital base from which the investments were made, with regard to the initial capital base of a designated Qualified Company or any separate capital base or increase to capital base designated as qualified, prior to the 1991 amendments to the Act; or (2) at least seventy-five (75%) of the capital base from which the investments were made, with regard to the initial capital base of a designated Qualified Company, or any separate capital base or increase to capital base designated as qualified, subsequent to the 1991 amendments to the Act.

7.9. Audits. -- In addition to the annual audit required under W. Va. Code §5E-1-16(a) and Subsection 7.1 of this Rule, the Authority and the Tax Commissioner may jointly audit any one or more Qualified Companies in any year on a random basis, or for cause, or for any other basis the Authority and Tax Commissioner may select. In addition to any other right or power the Tax Commissioner may have to audit any business in which a Qualified Company has invested or proposes to invest, the Tax Commissioner may audit the business on a random audit selection basis, or for cause, or on any other basis the Tax Commissioner may select.

W. Va. Code R. § 117-1-8 Dissolution or Liquidation of Qualified Company

8.1. General Rule. -- A Qualified Company which is not a SBIC may be dissolved or liquidated only after notice and approval of the dissolution or liquidation by the Authority. The approval shall not be unreasonably withheld by the Authority. Unless waived by the Authority, no dissolution or liquidation of any Qualified Company which is not a SBIC may be made if the dissolution or liquidation would cause the provisions of Subsection 6.10 of this Rule or W. Va. Code §5E-1-12(b) to be violated. The standard to be applied by the Authority in determining whether dissolution or liquidation would cause the provisions to be violated is that set forth in Subsection 7.10 of this Rule.

8.2. Application Requirements. -- A Qualified Company which is not a SBIC desiring to dissolve or liquidate shall make written application to the Authority requesting the Authority's approval for the dissolution or liquidation. The written application shall include the following:

8.2.a. A description of all Qualified Investments of the Qualified Company currently outstanding;

8.2.b. Information certifying that all Qualified Investments currently outstanding have been maintained or reinvested, pursuant to W. Va. Code §5E-1-12(b) and Subsection 6.10 of this Rule, for a period of at least five (5) years; or, if all Qualified Investments currently outstanding have not been maintained or reinvested, those investments shall be identified; and

8.2.c. Any additional information specified by the Authority.

8.3. Requests for Information. -- A Qualified Company which is not a SBIC applying for approval to dissolve or liquidate shall provide all information requested by the Authority.

8.4. Compliance Audits. -- The Authority may perform an audit or examination of any Qualified Company requesting approval for dissolution or liquidation to ascertain or verify the Qualified Company's compliance with the Act and this Rule.

W. Va. Code R. § 117-1-9 Ruling Procedure

9.1. General Rule. -- A Qualified Company or the organizers of a Qualified Company may request an informal ruling from the Authority concerning the application of the Act and this Rule to a specific set of facts and circumstances. The Authority will not issue rulings concerning the tax ramifications of investment in a Qualified Company. A qualified Company shall direct any tax ruling requests to the West Virginia Department of Tax and Revenue.

9.2. Request Requirements. -- A ruling request shall meet the following requirements in order to be considered by the Authority:

9.2.a. The ruling request shall be in writing and sent by certified mail to the Authority at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston WV 25311-1217;

9.2.b. Any factual representations upon which the ruling will be based shall be verified under oath;

9.2.c. The request shall state the ruling that is requested and shall contain legal analysis in support of the requested ruling;

9.2.d. The ruling shall be accompanied by a non-refundable filing fee of three hundred dollars ($300.00) per ruling requested;

9.2.e. The request shall contain the name, mailing address and telephone number of a person that can be contacted by the Authority for further information concerning the request; and

9.2.f. Any additional information requested by the Authority shall be submitted in writing. Additional information shall be verified under oath if it involves factual representations.

9.3. Publication of Rulings; Reliance; Modification. -- The Authority may publish or release summaries of previous rulings with facts or characteristics identifying the person or persons requesting the ruling omitted; however, the only persons who may rely upon a ruling by the Authority are those persons who requested and received the ruling. As to those persons, the Authority reserves the right to notify the recipient of the ruling at the recipient's last address known to the Authority that the subject ruling may no longer be relied upon as of the date of the notice. A ruling may be prospectively modified if the Authority determines that the ruling was incorrect or is in conflict with the Act, this Rule or any other substantive legal precedent.

9.4. Denial of Requests. -- The Authority may decline to issue a ruling and return the filing fee to the person requesting the ruling. From time to time, the Authority may announce those areas in which it will not issue rulings.

W. Va. Code R. § 117-1-10 Transition Rules

10.1. 1991 Amendments to the Act. - - Because the Act was substantially amended during the regular session of the Legislature in 1991, the following provisions, along with W. Va. Code §5E-1-19, shall provide transition guidelines for Qualified Investments.

10.1.a. Until repaid, all Qualified Investments made prior to the effective date of the 1991 amendments to the Act remain unaffected by such 1991 amendments and shall be governed by the Act as it appeared at the time the Qualified Investment was made, and the Rules promulgated under the Act. Funds repaid or returned to a Qualified Company and reinvested pursuant to W. Va. Code §5E-1-12(b) and Subsection 6.10 of this Rule subsequent to the 1991 amendments shall be governed by the 1991 amendments.

10.1.b. A Qualified Investment made pursuant to any contract or agreement entered into prior to the effective date of the 1991 amendments to the Act by a Qualified Company whereby the Qualified Company agreed to make an investment or increase its investment in a West Virginia Business, with the investment or increase in investment to take place subsequent to the effective date of the 1991 amendments to the Act, shall remain unaffected by the 1991 amendments and shall be governed by the Act as it appeared at the time the contract or agreement was entered into, and the Rules promulgated under the Act.

10.1.c. Any refinancing or restructuring by a Qualified Company of a Qualified Investment which was made prior to the 1991 amendments to the Act shall remain unaffected by the 1991 amendments and shall be governed by the Act as it appeared at the time the Qualified Investment was initially made, and Rules promulgated under the Act; provided that, the refinancing or restructuring does not include any new investment by the Qualified Company.

10.1.d. Any Qualified Investment made by a Qualified Company on or after the effective date of the 1991 amendments to the Act shall be governed by the provisions of the Act as amended in 1991.

10.2. 2001 Amendments to the Act. - - Because certain provisions of the Act related to SBICs were substantially amended during the regular session of the Legislature in 2001, the following provisions shall provide transition guidelines for Qualified Companies which are SBICs:

10.2.a. Until repaid, all Qualified Investments made by SBICs prior to the effective date of the 2001 amendments to the Act shall remain unaffected by the 2001 amendments and shall be governed by the Act and the Rules promulgated under the Act as they appeared at the time the Qualified Investments were made; and

10.2.b. Qualified Investments made by SBICs on or after the effective date of the 2001 amendments to the Act shall be governed by the provisions of the Act as amended in 2001.

W. Va. Code R. § 117-1-11 Examples

11.1. Any example provided in this Rule is provided merely to demonstrate a certain specific application of the rule it exemplifies. These examples do not, therefore, represent the exclusive application of any rule and in no way restrict the meaning or application of this Rule as it is interpreted by the Authority and any court or governmental agency of competent jurisdiction.

117CSR1

117CSR1

Series 02 Meetings and Meeting Notices

W. Va. Code R. § 117-2-1 General

1.1. Scope. -- This procedural rule governs the notice given of all regularly scheduled, special and emergency meetings of the Board of the West Virginia Economic Development Authority. This procedural rule also governs the public's attendance at such meetings as well as appearances before the Board by members of the public at such meetings.

1.2. Authority. -- W. Va. Code §6-9A-1 et seq.

1.3. Filing Date. -- April 28, 2022.

1.4. Effective Date. -- June 1, 2022.

W. Va. Code R. § 117-2-2 Definitions

2.1. “Authority” means the West Virginia Economic Development Authority.

2.2. "Board" means the governing body of the West Virginia Economic Development Authority.

2.3. "Person" means any individual, trust, estate, partnership, corporation, association, or any other legal entity recognized by the State of West Virginia.

W. Va. Code R. § 117-2-3 Regular Meetings

3.1. The Board shall hold regular meetings on the third Thursday of each month; provided, that when such date falls upon a legal holiday, the Board may designate another date for the regular meeting.

3.2. The Board shall commence all regular meetings at 11:00 a.m. unless otherwise specified in the notice of any such meeting.

3.3. All regular meetings shall be conducted at 180 Association Drive, Charleston, West Virginia unless otherwise specified in the notice of any such meeting.

3.4. All regular meetings shall be general meetings for the consideration of any and all matters which may properly come before the Board.

3.5. Except in the event of an emergency requiring immediate official action by the Board, notice of all regular meetings of the Board shall be electronically filed with the office of the West Virginia Secretary of State for posting on the Secretary of State’s open meetings website in a manner to allow each notice to appear on said website at least five (5) business days prior to the date of the meeting. Each such regular meeting notice shall state the time, place and purpose of the meeting.

W. Va. Code R. § 117-2-4 Special Meetings

4.1. Special meetings of the Board shall be for the consideration of only those matters designated by the Board members requesting the meeting unless otherwise changed by the Board.

4.2. Except in the event of an emergency requiring immediate official action by the Board, notice of all special meetings of the Board shall be electronically filed with the office of the West Virginia Secretary of State for posting on the Secretary of State’s open meetings website in a manner to allow each notice to appear on said website at least five (5) business days prior to the date of the meeting. Each such special meeting notice shall state the time, place and purpose of the meeting.

W. Va. Code R. § 117-2-5 Emergency Meetings

5.1. In the event of an emergency requiring immediate official action by the Board, notice of the emergency meeting of the Board shall be electronically filed with the office of the West Virginia Secretary of State for posting on the Secretary of State’s open meetings website and posted on the Authority’s website as soon as practicable prior to the meeting. Each such emergency meeting notice shall state the time, place and purpose of the meeting and the facts and circumstances of the emergency.

W. Va. Code R. § 117-2-6 Open Proceedings

6.1. All meetings of the Board shall be open to the public, except as when the Board holds an executive session pursuant to W. Va. Code §6-9A-4.

6.2. Any person desiring to address the Board at any meeting may do so provided that such person registers to address the Board no less than fifteen (15) minutes prior to the time the meeting is scheduled to commence.

6.3. The Board may cause the removal from any meeting of any member of the public who, as determined by the Board, is disrupting the meeting to the extent that orderly conduct of the meeting is compromised.

6.4. At any meeting where there is not room enough for all members of the public who wish to attend, the Board shall create and enforce reasonable guidelines for public attendance.

117CSR2

Series 03 General Administration Of The WV Venture Capital Act

W. Va. Code R. § 117-3-1 General

1.1. Scope. -- This Legislative Rule is promulgated to provide for the general administration of the West Virginia Venture Capital Act. This Rule provides necessary clarification of the provisions of the Act and provides for the general administration of the Act.

1.2. Authority. -- W. Va. Code §5E-2-3.

1.3. Filing Date. -- April 15, 2004.

1.4. Effective Date. -- April 15, 2004.

1.5. Citation. -- This Legislative Rule may be cited as 117 C.S.R., Series 3, §117-3-1, et seq.

W. Va. Code R. § 117-3-2 Definitions

2.1. "Act" means the West Virginia Venture Capital Act, W. Va. Code §§5E-2-1 et seq.

2.2. "Authority" means the West Virginia Economic Development Authority, provided for in W. Va. Code §§31-15-1 et seq.

2.3. "Authorized Tax Credits" means the tax credits provided for in W. Va. Code §5E-2-4.

2.4. "Debt" means a loan to be repaid pursuant to a loan instrument, and includes debt convertible into equity.

2.5. "Director" means the Executive Director of the West Virginia Economic Development Authority, or his or her designated representative.

2.6. “Entity” means a corporation, Partnership, limited liability company, trust or other business organization.

2.7. "Equity" means common stock or preferred stock in a corporation including warrants and options which upon exercise entitle the purchaser to common or preferred stock. Equity also means an ownership interest in other Entities.

2.8. “Federal Program Participant” means (a) An SBIC; (b) a New Markets Venture Capital Company; or (c) an Entity which is not an SBIC or a New Markets Venture Capital Company but which is designated by the Authority as a Federal Program Participant due to the Entity’s participation in a venture capital program administered by the United States Small Business Administration or other federal agency.

2.9. "Fiscal Year" means July 1 through June 30, which is the fiscal year of the State.

2.10. “Fund” means one (1) or more Entities authorized by the Authority pursuant to the Act for the investment of capital in the West Virginia economy. A Federal Program Participant, as defined in Subsection 2.8 of this Rule, may serve as a Fund, Fund Manager or in a dual capacity. A Federal Program Participant that serves as a Fund, Fund Manager, or in a dual capacity, is subject to all the requirements set forth in this Rule applicable to Funds and Fund Managers.

2.11. “Fund Manager” means an individual, Federal Program Participant or Entity selected pursuant to Section 4 of this Rule to manage the assets of a Fund or a Fund Share.

2.12. “Fund Share” means a segregated portion of the assets of a Fund.

2.13. “Governance Agreement” means the agreement entered into by a Governing Entity and the investors for the management of the affairs of a Fund.

2.14. “Governing Entity” means the Entity or Entities which have the authority to control the business and affairs of a Fund.

2.15. “Investor” means an individual or Entity which has invested in a Fund or a Fund Share.

2.16. "Managing Body" means the board of directors in the case of a corporation, voting partners in the case of a general partnership, general partners in the case of a limited partnership, members or managers in the case of a limited liability company and the management committee or similar decision making body in the case of a joint venture.

2.17. “New Markets Venture Capital Company” means an Entity which has been designated by the United States Small Business Administration as a New Markets Venture Capital Company pursuant to 13 C.F.R. §108 et seq.

2.18. "Partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financing operation, or venture is carried on; and the term partner includes a member of the syndicate, group, pool, joint venture or organization. The term “Partnership” includes a general or limited partnership.

2.19. “Participation Agreement” means a written agreement executed by a Fund Manager and the applicable Fund or Governing Entity, as the case may require, setting forth the terms and conditions of the Fund Manager’s service to the Fund or Fund Share. In instances where the Fund or Fund Share purchases an ownership interest in its Fund Manager, “participation agreement” may, as applicable, include the limited partnership agreement, limited liability company operating agreement or other applicable written agreement entered into by the Fund and other owners of the Fund Manager.

2.20. “Pass-Through Entity” means any person, other than an individual, which is not classified for federal income tax purposes as an association taxed as a corporation.

2.21. “Person” includes an individual or Entity.

2.22. “SBIC” or “Small Business Investment Company” means only an Entity which is licensed by the United States Small Business Administration as a Small Business Investment Company under the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., as amended.

2.23. "S Corporation" or "Subchapter S Corporation" means a small business corporation as defined in Section 1361(b) of the Internal Revenue Code of 1954, 26 U.S.C. §§ 1 et seq., as amended, for which an election under Section 1362(a) of the Code is in effect.

2.24. "State" means the State of West Virginia.

2.25. "West Virginia Business" means an Entity which, at all times in which monies from the Fund are invested in the Entity unless otherwise agreed to by the Governing Entity, is located in or is principally based in West Virginia, with more than fifty percent (50%) of its assets and operations located in West Virginia, and with more than fifty percent (50%) of its employees being West Virginia residents. For purposes of this definition, more than fifty percent (50%) of the "operations" of a business means more than fifty percent (50%) of the gross revenues of a business.

W. Va. Code R. § 117-3-3 Purpose and Structure

3.1. Purpose. -- The Act creates a tax credit program whereby investors receive a tax credit by making an investment in a fund authorized by the Authority for the investment of capital in the West Virginia economy. Each fund shall be independently operated by qualified managers and shall not be directly or indirectly operated or managed by the investors. Each Fund shall be an Entity authorized by the Authority for the purpose of receiving investments from investors desiring a tax credit and thereafter, through the use of Fund Managers, making investments in West Virginia Businesses.

3.2. Funds; Fund Shares. -- During each State fiscal year in which tax credits are authorized for allocation under the Act, the Authority shall create one or more Funds for the receipt of investments from individuals and entities meeting certain requirements (as set forth in Section 5 of this Rule) and which desire to invest and to receive a tax credit allocated by the Authority. The creation of each Fund and the characteristics of the Fund, including for example its structure, the type of Fund Shares if any within the Fund, the Fund Managers and the type of investments anticipated to be made, shall be communicated by the Governing Entity or the Authority to those individuals and entities which, in accordance with Subdivision 5.1.b of this Rule, have evidenced to the Authority that he, she or it meets the minimum requirements for investors set forth in Subdivision 5.1.a of this Rule and desire to consider investment in the Fund.

W. Va. Code R. § 117-3-4 Fund Managers

4.1. Application. -- Any individual or Entity, including, without limitation, a Federal Program Participant, desiring to apply for designation by the Authority as a Fund Manager shall submit a written application on forms provided by the Authority or, in the discretion of the Authority, shall submit a written proposal to the Authority in response to a request for proposal issued by the Authority.

4.1.1. Contents of Application or Proposal. -- The application or proposal shall be signed and verified by the applicant or by a duly authorized representative of the applicant, and shall contain the following information:

4.1.1.a. The full legal name and tax identification number of the applicant;

4.1.1.b. The mailing and office addresses and telephone numbers of the applicant's principal office in this State; and if different, the mailing and office addresses and telephone numbers of the applicant's principal place of business;

4.1.1.c. A certified copy, as applicable, of the applicant's: Articles of Incorporation; certificate of formation of a limited partnership; Articles of Organization of a limited liability company; documents that evidence the creation of a trust; or any other evidence that the Applicant is organized and existing as an Entity;

4.1.1.d. Unless otherwise directed by the Authority, the titles, names, home and business addresses, telephone numbers and tax identification numbers of, as applicable, the applicant's directors, officers, shareholders, partners, members, managers, trustees or other persons or Entities serving on the Managing Body of, or having an ownership interest in, the applicant. The addresses shall include street and number, city or town, state and zip code;

4.1.1.e. Information evidencing that the applicant has met all minimum requirements for Fund Managers as set forth in Subsection 4.2 of this Rule;

4.1.1.f. A statement that the Applicant, if designated as a Fund Manager, will comply with all requirements of the Act and this Rule;

4.1.1.g. The procedure by which the Applicant, if designated as a Fund Manager, would insure compliance with Subsection 7.4 of this Rule; and

4.1.1.h. Any and all additional information requested by the Authority.

4.1.2. Application Forms and Requests for Proposals. -- The form for applying to become a Fund Manager or a request for proposal may be obtained from the Director at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston, WV 25311-1217.

4.1.3. Filing. -- Each Applicant shall file with the Director three (3) complete applications or proposals with original signatures.

4.1.4. Receipt. -- The Director shall only receive applications or proposals at the times set forth by the Director in notices published in the State Register.

4.2. Minimum Requirements of Fund Managers. -- The following requirements apply as indicated to all Fund Managers and applicants for Fund Manager:

4.2.a. Business Office. -- A Fund Manager or applicant for Fund Manager, prior to the execution of a participation or other agreement with the Fund or Governing Entity of the Fund in accordance with Subsection 4.4 of this Rule, shall have a business office located within the State of West Virginia. The office shall have a listed telephone number and shall be open to the public during normal business hours;

4.2.b. Net Worth. -- A Fund Manager or applicant for Fund Manager shall have a minimum net worth, as evidenced by financial statements submitted to the Authority, in such an amount as is acceptable to the Authority;

4.2.c. Experience. -- A Fund Manager or applicant for Fund Manager shall have investment experience acceptable to the Authority;

4.2.d. Business Registration Certificate. -- A Fund Manager or applicant for Fund Manager shall hold a valid West Virginia business registration certificate pursuant to W. Va. Code §§11-12-1 et seq., or be exempt from registration.

4.3. Review of Applications and Proposals. -- The Authority shall review all applications and proposals properly and timely submitted to the Director.

4.4. Designation of Fund Managers; Execution of Participation Agreements. The Authority, in its discretion, shall select from the applications or proposals properly and timely submitted to the Director one (1) Fund Manager for each Fund or Fund Share. The Authority shall not designate any individual or Entity as a Fund Manager until a participation or other agreement has been executed between the applicant and the Fund or Governing Entity of the applicable Fund evidencing the designation of the applicant as a Fund Manager and setting forth terms and conditions that are acceptable to the Authority and the applicant including, without limitation, provisions setting forth:

4.4.1. The Fund Manager’s compensation; and

4.4.2. All other terms that are agreed to by the Governing Entity and the Fund Manager.

W. Va. Code R. § 117-3-5 Investors

5.1. Minimum Requirements of Investors; Confirmation.

5.1.a. Minimum Requirements. -- All investors in any Fund or Fund Share, and any individual or Entity applying for a tax credit under this Rule, shall meet the following requirements:

5.1.a.1. Accredited Investor. Each investor shall meet the requirements to be an accredited investor as set forth, from time to time, in Regulation D promulgated by the U.S. Securities and Exchange Commission under the Securities Act of 1933 or shall meet any other more stringent requirements as may be designated, from time to time, by the Authority; and

5.1.a.2. Minimum Investment. Each investor shall invest in a Fund, or as an allocation amongst Fund Shares of a Fund, a minimum of Two Hundred Thousand Dollars ($200,000.00) or other amount set by the Authority.

5.1.b. Confirmation. -- During the times specified by the Authority, individuals and entities meeting the minimum requirements of investors as set forth in Subdivision 5.1.a of this Rule and desiring to consider investment in a Fund or Fund Share shall submit evidence to the Authority, in a form acceptable to the Authority, so that the Authority can confirm that the individual or Entity does meet the minimum requirements for investors set forth in Subdivision 5.1.a of this Rule. Only after confirmation has been made by the Authority may the individual or Entity apply for investment in any Fund or Fund Share and for receipt of any tax credits authorized under the Act.

5.2. Investor Applications.

5.2.a. -- Announcement. The Authority shall announce, to all individuals and entities which in accordance with Subdivision 5.1.b of this Rule have been confirmed by the Authority to meet the minimum requirements of investors as set forth in Subdivision 5.1.a of this Rule, the acceptance of applications for investment in a Fund or Fund Share. The announcement shall occur at least thirty (30) calendar days before the date set for acceptance of applications. The notice shall set forth:

5.2.a.1. The first day upon which applications may be submitted to the Director;

5.2.a.2. The name of the Fund or Fund Share for which applications will be taken;

5.2.a.3. Information disclosing the Fund Managers for the Fund or Fund Share and other information pertaining to the Fund or Fund Share as desired by the Authority; and

5.2.a.4. Any other information desired by the Authority.

5.2.b. -- Application. Individuals and entities desiring to invest in a Fund or Fund Share shall submit to the Director a written application on forms provided by the Authority.

5.2.c. -- Contents of Application. The application shall be signed and verified by the applicant or by a duly authorized representative of the applicant, and shall contain the following:

5.2.c.1. The full legal name and tax identification number of the applicant;

5.2.c.2. The applicant’s physical address, mailing address and telephone number;

5.2.c.3. If the applicant is a business Entity, the titles, names, home and business addresses and telephone numbers of, as applicable, the individuals and entities serving on the Managing Body of, or having an ownership interest in, the applicant. The addresses shall include street and number, city or town, state and zip code;

5.2.c.4. Information evidencing that the applicant continues to satisfy all minimum requirements for investors as set forth in Subdivision 5.1.a of this Rule;

5.2.c.5. A statement that the Applicant, if accepted as an investor, will comply with all requirements of the Act, this Rule and the applicable Governance Agreement;

5.2.c.6. A statement that the Applicant understands the risks and restrictions of investing in the applicable Fund and the applicable Fund Share;

5.2.c.7. A statement as to the percentage, which shall not exceed fifty percent of the amount of the applicant’s investment, which the applicant agrees to receive as a tax credit under the Act if the applicant is accepted as an investor; provided, that the percentage shall not exceed ten percent in the case of qualified capital companies under the West Virginia Capital Company Act, W. Va. Code §§5E-1-1 et seq., which have received the consent of the Authority to submit an application for investment in a Fund or Fund Share of monies from their capital bases which are not required to be invested in qualified investments;

5.2.c.8. A statement that, to the best knowledge of the investor, investment in the Fund or Fund Share applied for will not violate the provisions of Subsection 5.11 of this Rule;

5.2.c.9. An irrevocable letter of credit representing the proposed investment in an amount equal to or exceeding the minimum investment amount as determined in accordance with Paragraph 5.1.a.2 of this Rule and a certified check for any initial capital call: Provided, that the economic development authority may authorize a reduction in the amount of the irrevocable letter of credit to correspond to a payment made towards the proposed investment; and

5.2.c.10. Any and all additional information or statements as requested by the Authority.

5.2.d. Application Forms. -- The form for applying to become an investor in a Fund or Fund Share may be obtained from the Director at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston, WV 25311-1217.

5.2.e. Filing. -- Each Applicant shall file with the Director three (3) complete applications with original signatures.

5.2.f. Applications of Qualified Capital Companies. -- Qualified capital companies under the West Virginia Capital Company Act, W. Va. Code §§5E-1-1 et seq. must receive the prior written consent of the Authority in order to submit an application for investment in a Fund or Fund Share. Any investment, if made, may only constitute in whole or in part monies from their capital bases which are not required to be invested in qualified investments. The application process and the requirements of investors set forth in this Rule also apply to qualified capital companies.

5.3. Application Receipt and Review.

5.3.a. Acceptance in General. -- During regular business hours of the Authority, applications shall be received by the Director (which shall for purposes of receipt of applications include other representatives of the Authority) on a first come, first served basis beginning on the day set forth in the announcement for acceptance of applications; provided, however, that all applications received by the Director on the same calendar day shall be considered simultaneously received regardless of the time of day of actual delivery. The Director shall record the time and date of receipt of an application. The Director shall not receive applications prior to the day set forth in the announcement for acceptance of applications.

5.3.b. Delivery. -- Applications shall be considered received by the Director and submitted by the applicant on the day of actual delivery to the Director, whether the delivery is performed in person, by mail, by courier or delivery service, or otherwise.

5.3.c. Review of Applications.

1. General Rule. -- The Director shall review all applications in the order of their receipt to determine if each application is complete. The Director has sole discretion to determine whether an application is complete. The Director's determination shall be made within forty-five (45) days of the application's receipt. In the event that the Director determines an application to be incomplete, the Director shall notify the applicant, in writing, of the reasons for that determination and shall return the incomplete application to the applicant. The applicant may resubmit the application after correcting the deficiencies stated in the notice. If an application, though incomplete, is substantially complete as determined in the sole discretion of the Director, the time of receipt of the resubmitted application, for purposes of review by the Director, shall be considered to be the time of receipt of the initial application. If an application is not substantially complete as determined in the sole discretion of the Director, the resubmitted application shall be considered received, for purposes of review by the Director, when resubmitted.

2. Review of Simultaneously Received Applications.

a. In the event of simultaneously received applications submitted by applicants, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications. If the total tax credits sought by all the simultaneously received applications are less than the tax credits authorized for the Fund or Fund Share, after taking into account applications reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications for completeness and the applications shall be considered simultaneously reviewed.

b. If the total tax credits sought by all the simultaneously received applications exceed the tax credits authorized for the Fund or Fund Share, after taking into account applications reviewed previously and determined to be complete or substantially complete, the Director shall issue tax credits by giving preference to those applicants which have agreed in their application to accept a tax credit based on a lower percentage of their investment than that requested by the other applicants.

c. If authorized tax credits still remain after giving that preference, then the Director shall, within thirty (30) days, but not earlier than five (5) days, after the receipt of the applications, conduct a lottery to determine the order of review of the simultaneously received applications which have not been awarded tax credits based upon the preference of Paragraph b of this Subdivision, as follows:

i. The Director shall provide all applicants that submitted simultaneously received applications and which have not been awarded tax credits based upon the preference of Paragraph b of this Subdivision written notice of the lottery and the opportunity for their designated representative to attend the lottery.

ii. To conduct the lottery, the Director shall: (a) prepare for each applicant, on index cards of the same fundamental character, an index card setting forth the applicant's name and the tax credits sought by the applicant by its application; (b) deposit in a container one index card for each applicant; (c) select and draw from the container one index card in a manner that the Director may not determine the applicant set forth on the index card; (d) announce and record the applicant whose index card was drawn and the amount of tax credits sought by that applicant; and (e) repeat steps (c) and (d) until all applicants' cards are drawn from the container.

iii. Each application shall be then reviewed for completeness by the Director in the order in which it was drawn from the container.

iv. Prior to commencement of the lottery process, all applicants participating in the lottery may, by written agreement in a form acceptable to the Authority, agree as to how the remaining tax credits are to be divided amongst the applicants; provided, however, that the minimum investment requirements set forth in Paragraph 5.1.a.2 of this Rule shall be satisfied.

v. If for any reason an applicant selected for a tax credit allocation does not become an investor, the Authority shall award the unused credit to the next qualified applicant.

5.4. False Information. -- Upon the submittal of any false or misleading information by an applicant, the Director may reject the application and deny further consideration of the applicant for qualification in that and subsequent fiscal years.

5.5. Complete Application. -- Upon a determination by the Director that an application is complete, the Director shall place the complete application on the agenda of the next duly or regularly scheduled meeting of the Authority. Complete applications shall be placed on the agenda in the order of their review by the Director.

5.6. Action of Authority. -- The Authority shall consider all applications in the order they are placed on the agenda of any duly or regularly scheduled meeting of the Authority.

5.7. Allocation of Tax Credits. -- In the order set forth in this Section, the Authority shall issue certificates of tax credit to the applicants for each Fund or Fund Share after each applicant has executed the applicable Governance Agreement and any other documentation requested by the Authority and the applicable Governing Entity. Upon issuance of tax credits to an applicant, the applicant becomes an investor in the Fund or Fund Share.

5.8. Notification of Action. -- The Director shall notify each applicant in writing of the Authority's action with regard to the application.

5.9. Suspension of Qualification Process. -- In any fiscal year, upon the allocation to applicants of the total tax credits authorized for that Fund or Fund Share, the Authority shall suspend the qualification process and the Director shall reject all subsequently submitted applications.

5.10. Obligation to Update Application. -- Any applicant shall immediately notify the Director in writing of any changes in any of the information filed with the Authority as part of an application filed under this Rule or any other information submitted to the Authority pursuant to this Rule.

5.11. Relationship with Fund Manager Prohibited.

5.11.1. General Rule. -- W. Va. Code §5E-2-4(b) provides for the issuance of tax credits to investors which invest in a fund authorized by the Authority which is independently operated by qualified managers and is not directly or indirectly operated by the investors.

5.11.2. Ownership. -- At all times during investment in a Fund or Fund Share, an investor in a Fund or Fund Share shall not have a substantial ownership interest, which for purposes of this Rule shall be considered a five percent or more ownership interest, in the Fund Manager managing the Fund or Fund Share invested in. Likewise, a Fund Manager shall not have a substantial ownership interest, which for purposes of this Rule shall be considered a five percent or more ownership interest, in any investor of the Fund or Fund Share which the Fund Manager is managing.

5.11.3. Compensation. -- Unless the prior written consent of the applicable Governing Entity is obtained, an investor in a Fund or Fund Share and the Manager of a Fund or Fund Share shall not have a direct or indirect compensation arrangement of any kind for services to be provided by the investor to the Fund Manager or by the Fund Manager to the investor, or any kind of debtor-creditor relationship.

5.12. Rights and Obligations of Investors. -- The rights and responsibilities of the investors in a Fund or Fund Share are those set forth in the Act, this Rule and the applicable Governance Agreement.

W. Va. Code R. § 117-3-6 Tax Credits

6.1. Maximum Authorized Credits.

6.1.1. Generally. -- Each investor in a Fund or Fund Share shall be allowed a tax credit equal to no more than fifty percent of the investor’s investment in a Fund or Fund Share; provided, that investors in a Fund or Fund Share which are qualified capital companies under the West Virginia Capital Company Act, W. Va. Code §§5E-1-1 et seq., and which have, pursuant to the consent of the Authority, invested in a Fund or Fund Share monies from their capital bases which are not required to be invested in qualified investments shall be allowed a tax credit equal to no more than ten percent of the investor’s investment in the Fund.

6.1.2. Maximum Per Investor. -- Unless waived by the Authority, the total amount of tax credits authorized for a single investor may not exceed Two Million Dollars during any single State fiscal year.

6.2. Total Credits. -- The total credits which may be authorized by the Authority in each fiscal year is set forth in the Act.

6.3. Certificate of Tax Credit. -- The Authority shall issue to each investor the Authority's Certificate approving the amount of tax credits allocated to the investor. The Authority's Certificate shall list the name of the investor and the amount of credit allotted to the investor. An investor shall submit a true copy of the Certificate with the investor's tax return requesting a tax credit. If the investor entitled to a tax credit is a Partnership, an S corporation, a limited liability company or any other pass-through entity, the partners, shareholders, members or owners shall apportion the tax credit among themselves pursuant to the provisions of Subdivision 6.4.f of this Rule.

6.4. Application of Tax Credits.

6.4.a. General Rule. -- The amount of tax credit allowed for the taxable year is the portion of the tax credit authorized that does not exceed the tax liability limitation provided in this Subsection.

6.4.b. Tax Credit Available. -- The credit available for the taxable year is the sum of:

1. Unused tax credit carried forward from prior taxable years (carryforwards); and 2. The amount of tax credits allocated to the investor by the Authority pursuant to the Act and this Rule (tax credits earned).

6.4.c. Tax Liability Limitation. -- Tax credit available for a taxable year beginning after June 30, 2001, shall be applied against the same taxes as set forth in W. Va. Code §11-13C-5(c) through (i), and in that order.

6.4.d. Excess Tax Credit. -- The excess of the tax credit available over the applicable tax liability limitation for the year is an unused credit which the investor may carry forward as provided for under Subsection 6.5 of this Rule.

6.4.e. Order of Application. -- If the tax credit available for a taxable year is not allowed in full because of the tax liability limitation, carryforwards are applied against the tax liability limitation first. To the extent the tax liability limitation exceeds carryforwards, tax credit earned for the taxable year is then applied.

6.4.f. Apportionment.

1. The partners, shareholders, members or owners shall by election and pursuant to this Subdivision 6.4.f. divide the tax credits authorized by the Authority for investments by a Partnership, an S corporation, a limited liability company or other entity which is treated as a pass-through entity under federal and state income tax laws.

2. The partners, S corporation shareholders, limited liability company members or other pass-through entity owners shall apportion the tax credit authorized in any manner they may select, provided that each partner, shareholder, member or owner consents in writing to an apportionment plan. The written consent to an apportionment plan shall be signed by each partner, shareholder, member or owner, or their duly authorized agents. The written consent shall set forth the name, address, employer identification number or social security number and taxable year for which the credit will be claimed for each partner, shareholder, member or owner and the amount of tax credit apportioned to each of them under the plan. The consent of more than one partner, shareholder, member or owner may be incorporated in a single statement. Each partner, shareholder, member or owner shall file the statement with the application required pursuant to Section 5 of this Rule. The statement is irrevocable and not subject to change after filing of the application unless the tax credit authorized by the Authority is less than the tax credit applied for, in which case the Authority may request the apportionment plan to be amended. Each partner, shareholder, member or owner consenting to an apportionment plan shall keep as part of his or her records a copy of the statement containing all of the required consents.

3. An apportionment plan adopted and consented to by all partners, S corporation shareholders, limited liability company members or other pass-through entity owners is valid only for the tax credits authorized by the Authority pursuant to the application with respect to which the plan is filed. A separate consent to an apportionment plan shall be filed with respect to each application filed pursuant to Section 5 of this Rule.

6.4.g. Limitation. -- Tax credits authorized by the Authority may not be used against any liability the taxpayer may have for interest, penalties, or additions to tax.

6.5. Carryforward of Unused Tax Credit.

6.5.a. General Rule. -- The holder of a tax credit may carry forward an unused tax credit as defined in Subdivision 6.5.b of this Rule to succeeding taxable years but not beyond fifteen (15) years. Carryforwards of unused tax credits shall be taken into account in determining the amount of tax credit available and the tax credit allowed for the taxable years to which they may be carried forward.

6.5.b. Unused Credit. -- If carry forwards and tax credits earned exceed the tax liability limitation, the excess attributable to tax credits earned is an unused tax credit. The taxable year in which an unused tax credit arises is referred to as the "unused credit year".

6.5.c. Limitation on Carryforwards. -- Tax credit carryforwards to a taxable year may not exceed the applicable tax liability limitation for that year. Tax credit carryforwards from an unused tax credit year are applied before tax credit carryforwards from a later unused tax credit year.

6.5.d. Joint Return by Husband and Wife. -- This Subdivision prescribes additional rules for computing the tax credit carryforwards of a husband and wife making a joint return for one or more of the taxable years involved in the computation of the tax credits earned.

1. From Separate to Joint Return. -- If a husband and wife, making a joint return for any taxable year, did not make a joint return for any of the taxable years involved in the computation of the tax credit earned, the separate tax credits apportioned in accordance with Subdivision 6.4.f of this Rule shall together be considered a joint tax credit carryforward to the taxable year.

2. Continuous Use of Joint Return. -- If a husband and wife making a joint return for a taxable year made a joint return for each of the taxable years involved in the computation of the tax credit earned or the tax credit carryforward to the taxable years, the joint tax credit or tax credit carryforward to the taxable year is computed in the same manner as the tax credit carryforward of an individual as provided in Subdivisions 6.5.a through 6.5.c of this Rule.

3. From Joint to Separate Return. -- If a husband and wife making separate returns for a taxable year made a joint return for any, or all, of the taxable years involved in the computation of the tax credit earned or tax credit carryforward to the taxable year, the separate tax credit carryforward of each spouse to the taxable year is computed in accordance with Subdivisions 6.5.a through 6.5.c of this Rule but with the following modification: The tax credit of each spouse for a taxable year for which a joint return was made shall be considered to be that portion of the joint tax credit apportioned to the spouse in accordance with Subdivision 6.4.f of this Rule.

4. Recurrent Use of Joint Return. -- If a husband and wife making a joint return for any taxable year made a joint return for one or more, but not all, of the taxable years involved in the computation of a tax credit carryforward to the taxable years, the taxable year is computed in the manner set forth in Paragraph 6.5.d.3. of this Rule. The tax credit carryforward is considered a joint tax credit carryforward to the taxable year.

5. Joint Tax Credit Carryforwards. -- The joint tax credit carryforwards to any taxable year for which a joint return is made are all the tax credit carryforwards of both spouses to the taxable year.

6. Divorce and Remarriage. -- It is the intent of this Rule to allow the carryforward of joint tax credits to joint returns and of separate tax credits to joint returns so long as the two individuals remain married in both the taxable year in which the tax credit is earned and the taxable year to which the tax credit is to be carried forward. Divorce and remarriage in joint return cases present special problems. A joint tax credit of one couple cannot be carried forward to another taxable year and applied to the tax liability of a different couple. In applying the rules for joint returns of husband and wife and separate returns of husband and wife and in cases involving divorce and remarriage, the principles established under the Internal Revenue Code and Treasury Regulations, and interpretations thereof, for net operating loss carryovers and investment tax credit carryforwards may be used by the West Virginia Department of Tax and Revenue as a guide.

6.5.e. Tax Credits Not Assignable. -- No portion of the tax credit earned by any investor is subject in any manner to alienation, sale, transfer or assignment, except that tax credits authorized by the Authority for investments by a Partnership, an S corporation or a limited liability company may be apportioned pursuant to Subdivision 6.4.f of this Rule.

W. Va. Code R. § 117-3-7 Investment Requirements

7.1. Investments. -- Each Fund Manager shall invest the assets of the Fund or Fund Share to which the Fund Manager is assigned or which it receives by making debt or equity investments in West Virginia Businesses in accordance with this Section.

7.2. Investments Pursuant to Investment Guidelines. -- The Fund Manager shall invest the assets of each Fund or Fund Share according to the investment guidelines agreed upon between the Fund Manager and the Fund or Governing Entity and set forth in a participation or other agreement entered into by the Fund Manager and the applicable Fund or Governing Entity in accordance with Subdivision 7.6.4 of this Rule.

7.3. Limitation of Qualified Investment. -- No more than thirty percent (30%) of the equity of a Fund or Fund Share raised in accordance with the Act and this Rule may be invested in any one West Virginia Business without the consent of the applicable Fund or Governing Entity.

7.4. Investment Restrictions

7.4.1. Unless the prior written consent of the applicable Fund or Governing Entity is obtained, a Fund Manager may not invest any portion of a Fund or Fund Share in any West Virginia Business where there is a direct or indirect economic relationship, in the form of ownership, compensation or otherwise, between the Fund Manager, inclusive of the Fund Manager’s relatives, affiliates or members of its Managing Body, and the West Virginia Business, inclusive of relatives, affiliates and members of the Managing Body. The investment restrictions in this Subdivision are not applicable where the Fund Manager’s economic relationship is solely the result of the fact that the Fund Manager has made a previous investment in the West Virginia Business pursuant to the Act or this Rule.

7.4.2. Unless the prior written consent of the applicable Fund or Governing Entity is obtained, a Fund Manager may not invest any portion of or contribution from a Fund or Fund Share in any West Virginia Business where there is a direct or indirect economic relationship, in the form of ownership, compensation or otherwise, between the West Virginia Business, including the relatives, affiliates and members of the Managing Body of the West Virginia Business, and an investor in the Fund or Fund Share, including relatives, affiliates and members of the Managing Body of the investor. The investment restrictions in this Subdivision are not applicable where the investor’s economic relationship is solely the result of the fact that the Fund Manager has made a previous investment in the West Virginia Business pursuant to the Act or this Rule.

7.5. Conflict of Interest. -- No officer, member, or employee of the Authority may be financially interested, directly or indirectly, in any Fund Manager or West Virginia Business invested in by a Fund Manager.

7.6. Purchase of Ownership Interest in a Fund Manager.

7.6.1. Structure. -- At the discretion of the Authority or applicable Governing Entity, a Fund or Fund Share may invest its assets by purchasing an ownership interest in a Federal Program Participant or other Entity serving as the Fund Manager. Such purchase of an ownership interest in the Fund Manager may be by original issue from the Fund Manager or purchased on the secondary market from an owner of the Fund Manager.

7.6.2. Pooling of Assets. -- The assets of the Fund or Fund Share used to purchase an ownership interest in its Fund Manager may be pooled with that of other private or public investors holding ownership interests in the Fund Manager so that the assets of the Fund or Fund Share contributed to the Fund Manager may become indistinguishable from those of the other owners of the Fund Manager.

7.6.3. Investments. -- In situations where the Fund or Fund Share purchases an ownership interest in its Fund Manager, the Fund Manager may invest its assets, including those of the Fund or Fund Share, in businesses located in various states: Provided, That the Fund Manager must invest an amount equal to or exceeding the amount contributed by the Fund or Fund Share, net of reasonable management fees and operational expenses allocable to the Fund under the applicable Participation Agreement, in the form of debt or equity investments in West Virginia Businesses in accordance with this section.

7.6.4. Investment Guidelines. -- In the Participation Agreement or other agreement executed by the applicable Fund or Governing Entity and the Fund Manager, the Fund or Governing Entity and the Fund Manager shall contractually agree on the investment guidelines to be followed by the Fund Manager when investing in West Virginia Businesses.

7.7. Where the Fund or Fund Share Does Not Purchase an Ownership Interest In Its Fund Manager. -- In situations where the Fund or Fund Share does not purchase an ownership interest in its Fund Manager:

7.7.1. Unless the prior written consent of the Governing Entity is obtained, the Fund Manager shall not obtain ownership of assets of the Fund or Fund Share. Rather, the Fund Manager, at least fifteen (15) days before the closing of an investment in a West Virginia Business, shall advise the applicable Governing Entity in writing of the funds to be invested to allow the applicable Governing Entity to make the funds available for investment by the Fund Manager at closing;

7.7.2. Unless the prior written consent of the Governing Entity is obtained, the Fund Manager shall make, and at all times maintain, all investments on the name of the applicable Fund; and

7.7.3. The Fund Manager shall have discretion as to the selection of West Virginia Businesses for investment and the terms upon which such investments are made; however, the applicable Fund or Governing Entity may at all times revoke or restrict such discretion of the Fund Manager and submit investment guidelines to be followed by the Fund Manager.

W. Va. Code R. § 117-3-8 Liquidation of a Fund or Fund Share; Repurchase of Investor Ownership Interests

8.1. Liquidation of Entire Fund or Fund Share. Unless otherwise set forth in the applicable Governance Agreement, the subscription agreement or any other document agreed to by the investors, at any time after the 5th anniversary of the first investment made by the Fund Manager of a Fund or Fund Share in a West Virginia Business, the Fund or Fund Share may be liquidated at the unanimous written consent of all investors of such Fund or Fund Share or at the discretion of the applicable Governing Entity. Upon liquidation, the assets of the Fund or Fund Share shall be distributed in cash or in kind to the investors of the Fund or Fund Share on a pro rata basis.

8.2. Repurchase of Investor Ownership Interests. Unless otherwise set forth in the applicable Governance Agreement, the subscription agreement or such other document agreed to by the investors, at any time after the 5th anniversary of the first investment made by the Fund Manager of the Fund or Fund Share in a West Virginia Business, an investor in such Fund or Fund Share may, upon written request to the applicable Governing Entity, have all or any portion of such investor’s ownership interest repurchased at a value agreed to by the Governing Entity and the investor. Upon such repurchase of the investor’s ownership interest, the investor shall receive, in the discretion of the applicable Governing Entity, cash and/or a distribution in kind of assets of the Fund or Fund Share which collectively equals the value agreed to by the Governing Entity and the investor.

W. Va. Code R. § 117-3-9 Audits and Reports

9.1. Reporting. -- Each Fund Manager shall, at least quarterly, submit to the applicable Governing Entity, the Authority and to each investor reports which set forth the following:

9.1.a. With regard to each West Virginia Business invested in during that quarter, the name and address of the business, a description of the activities of the business and a description of the investment made in the business and the terms of the investment;

9.1.b. The percentage of the Fund or Fund Share which has been invested to date;

9.1.c. The status and performance of each outstanding investment;

9.1.d. The effect investments by the Fund have had on the ability of West Virginia Businesses invested in to increase or retain employment of domiciled West Virginians; and

9.1.e. Any other information requested by the applicable Governing Entity or the Authority.

9.2. Affidavit from Businesses Invested In. -- Prior to closing of a Fund’s investment in a West Virginia Business, the Fund Manager shall secure from each West Virginia Business invested in affidavits prepared by an authorized officer, partner, limited liability company member or manager, or trustee of the West Virginia Business invested in which demonstrate:

9.2.a. That the business invested in is a West Virginia Business as defined in Subsection 2.25 of this Rule;

9.2.b. That the investment does not violate the investment restrictions set forth in Subsection 7.4 of this Rule; and

9.2.c. The effect the investment by the Fund is expected to have on the ability of the business invested in to increase or retain employment of domiciled West Virginians.

9.2.d. The affidavits shall be delivered by the Fund Managers to the applicable Governing Entity and the Authority no later than fifteen (15) days prior to closing.

9.3. Annual Audit and Report. -- For each Fund or Fund Share, an audit shall be conducted annually by a certified public accountant, beginning at the end of the first State fiscal year in which the Fund or Fund Share was created and each year thereafter until the Fund or Fund Share is liquidated by the applicable Governing Entity. The cost of the audit shall be paid by the Fund or Fund Share.

9.4. General Requirements for Audits. -- The following requirements apply to audits of a Fund or Fund Share:

9.4.a. Independent CPA. -- The certified public accountant shall be independent of the Fund or Fund Share being examined to ensure that the audit report is impartial, in fact and in appearance.

9.4.b. Working Papers; Standards. -- In performing the audit, the accountant shall prepare working papers in accordance with the generally accepted accounting and auditing standards of field work. The accountant shall retain working papers for an audit for a minimum of three (3) years from the date of the audit report, or longer if notified in writing by the Authority before the end of the three (3) year period. The audit working papers shall be made available upon written request of the Authority or the Director. The audit shall be conducted in accordance with generally accepted auditing and accounting principles and standards, and any other guidelines the Authority may prescribe.

9.4.c. Report Contents. -- The audit report shall address the methods of operation and conduct of the business of the Fund or Fund Share and report on the Fund Manager’s compliance with the requirements of the Act and this Rule. In particular the report shall address whether the Fund Manager has made proper and timely investments. Any instances of noncompliance shall be specifically cited. If the accountant finds that the Fund Manager has been in compliance, the accountant shall make a positive statement to that effect.

9.4.d. Submission of Report. -- The Fund Manager shall submit to the applicable Governing Entity and the Authority three certified copies of the audit report no later than ninety (90) days from the end of each State fiscal year, together with three copies of a descriptive narrative of the Fund Manager’s activities, its methods of operation of the Fund or Fund Share and three copies of the Fund or Fund Share’s financial statements.

9.4.e. Other Requirements. -- The Governing Entity or the Authority may dictate other audit requirements from time to time.

W. Va. Code R. § 117-3-10 Confidentiality

10.1. General Rule. -- All information submitted to the Authority is confidential and not subject to public disclosure when filed with the Authority, except as otherwise provided in this Section and in the Act.

10.2. Application Information. -- All information submitted to the Authority or the applicable Governing Entity pursuant to (i) an application for designation as a Fund Manager and (ii) an application for designation as an investor, and documents related to the applications, are confidential and not subject to public disclosure when filed with the Authority, except the following:

1. The full legal name of the Entity making the application;

2. The mailing and office addresses and telephone number of the applicant; and 3. The name of a person to contact for the applicant.

10.3. Investment Information. -- All information regarding the investments made by Fund Managers in West Virginia Businesses is confidential and not subject to public disclosure, except the following:

1. The name of the Fund or Fund Share from which the investment was made;

2. The name, address and telephone number of each West Virginia Business receiving an investment, specified as to the investing Fund or Fund Share;

3. Whether the investment was a debt investment, equity investment, or combination of those investments, specified as to the West Virginia Business invested in; and 4. Whether the amount of each investment in a West Virginia Business is: (i) not more than $50,000.00; (ii) more than $50,000.00, but not more than $100,000.00; (iii) more than $100,000.00, but not more than $250,000.00; (iv) more than $250,000.00, but not more than $500,000.00; (v) more than $500,000.00, but not more than $1,000,000.00; or (vi) more than $1,000,000.00, specified as to the West Virginia Business invested in.

10.4. Performance of Fund or Fund Share. -- All information pertaining to the performance of the Fund or a Fund Share is confidential and not subject to public disclosure unless permitted by the applicable Governing Entity.

10.5. Ruling Request Information. -- All information submitted to the Authority regarding a ruling request pursuant to Section 12 of this Rule is confidential and not subject to public disclosure when filed with the Authority, except that the Authority may publish or make available to the public a summary of the ruling request provided that all names and other identifying facts are omitted.

10.6. General Correspondence. -- All general correspondence of or to the Authority is confidential and not subject to public disclosure.

10.7. Examination & Audit Information. -- All information obtained by or submitted to the Authority in regard to the examination or audit including audits performed by independent certified public accountants of a Fund or Fund Share is confidential and not subject to public disclosure, except where the public disclosure results from proceedings contemplated by Section 11 of this Rule.

10.8. Internal Information. -- Unless otherwise provided, all information generated internally by the Authority including but not limited to internal memoranda and reports is confidential and not subject to public disclosure.

10.9. Tax Information. -- All tax returns and tax return information subject to the non-disclosure restrictions of W. Va. Code §11-10-5d is confidential, except for the information subject to disclosures authorized, mandated or permitted pursuant to W. Va. Code §§5E-2-4(g) or 11-10-5s.

10.10. Authority Determination. -- In addition to the information described in this section and classified as non-confidential, the Authority may from time to time consider as non-confidential and disclose to the public any information by the execution of a resolution or policy statement that the information is non-confidential.

10.11. Request for Confidentiality. -- Any person submitting information to the Authority which is classified as non-confidential by this Rule or the Act shall be treated as non-confidential and subject to disclosure unless the person submitting the information makes a showing, satisfactory to the Authority at the time the information is submitted, that the information should be treated as confidential. Any person desiring to make a submission shall indicate in writing what information is requested to be treated in a confidential manner and the basis upon which the treatment is justified. A person making a request may submit the information desired to be treated as confidential separately from other information submitted. If the Authority concurs with the request then the information shall be treated as confidential. If the Authority disagrees with the requested treatment then the Authority shall notify the person submitting the information and give the person a reasonable opportunity to withdraw the information.

10.12. Disclosure to State Personnel. -- Notwithstanding any provisions of the Act or this Rule, any record, report, document or information may be disclosed to any officers, employees or authorized representatives of the State of West Virginia charged with administering the provisions of the Act and this Rule and may be disclosed pursuant to proceedings under Section 11 of this Rule. The provisions of the West Virginia Code regarding confidentiality and the disclosure of tax returns and tax information, including without limitation W. Va. Code §11-10-5d, apply to the Authority, its agents and employees and to information submitted to the Authority under the Act and this Rule.

W. Va. Code R. § 117-3-11 Investigation; Remedies

11.1. Investigation by Authority. -- The Authority may examine, under oath, any of the Fund Managers, investors, or West Virginia Businesses invested in, and any owners, members of the Managing Body, employees or agents thereof, with regard to any matters which the Authority may consider necessary to ensure compliance with the Act and this Rule. The Authority may issue subpoenas and subpoenas duces tecum, and administer oaths relative to any examination.

11.2. Remedies. -- In the event of the failure of any individual or Entity to comply with the Act or this Rule, the remedies set forth in the applicable Governance Agreement, participation agreement or other applicable agreements or documents govern in addition to all remedies or relief available at law to the Authority, the Fund or the State.

W. Va. Code R. § 117-3-12 Ruling Procedure

12.1. General Rule. -- Any person may request an informal ruling from the Authority concerning the application of the Act and this Rule to a specific set of facts and circumstances. The Authority shall not issue rulings concerning the tax ramifications of investment in a Fund or Fund Share. Any tax ruling requests shall be directed to the West Virginia Department of Tax and Revenue.

12.2. Request Requirements. -- A ruling request shall meet the following requirements in order to be considered by the Authority:

12.2.a. The ruling request shall be in writing and sent by certified mail to the Authority at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston, WV 25311-1217;

12.2.b. Any factual representations upon which the ruling will be based shall be verified under oath;

12.2.c. The request shall state the ruling that is requested and shall contain legal analysis in support of the requested ruling;

12.2.d. The request shall be accompanied by a non-refundable filing fee of five hundred dollars ($500.00) per issue addressed in the ruling requested;

12.2.e. The request shall contain the name, mailing address and telephone number of a person that can be contacted by the Authority for further information concerning the request; and

12.2.f. Any additional information requested by the Authority shall be submitted in writing. Additional information shall be verified under oath if it involves factual representations.

12.3. Publication of Rulings; Reliance; Modification. -- The Authority may publish or release summaries of previous rulings with facts or characteristics identifying the person or persons requesting the ruling omitted. However, the only persons who may rely upon a ruling by the Authority are those persons who requested and received the ruling. As to those persons, the Authority reserves the right to notify the recipient of the ruling at the recipient's last address known to the Authority that the subject ruling may no longer be relied upon as of the date of the notice. A ruling may be prospectively modified if the Authority determines that the ruling was incorrect or is in conflict with the Act, this Rule or any other substantive legal precedent.

12.4. Denial of Requests. -- The Authority may decline to issue a ruling and return the filing fee to the person requesting the ruling. From time to time, the Authority may announce those areas in which it will not issue rulings.

117CSR3

117CSR3

Series 04 Economic Development And Technology

W. Va. Code R. § 117-4-1 General

1.1. Scope. -- This Legislative Rule is promulgated to provide for the efficient administration of the credits allowed for investments in economic development and technology advancement centers.

1.2. Authority. -- W. Va. Code §5E-1-5.

1.3. Filing Date. -- April 15, 2004.

1.4. Effective Date. -- April 15, 2004.

1.5. Citation. -- This Legislative Rule may be cited as 117CSR., Series 4, §117-4- ______ (____).

W. Va. Code R. § 117-4-2 Definitions

2.1. “Act” means the West Virginia Venture Capital Act, W. Va. Code §5E-2-1 et seq.

2.2. “Agreement” means any agreement or contractual relationship entered into between a Doctoral Institution and a Center pursuant to the provisions of W. Va. Code §18B-12A-1 et seq.

2.3. “Approved Institution of Higher Education” means:

(a) A State institution of higher education as defined in W. Va. Code §18B-1-2: Alderson-Broaddus College, Appalachian Bible College, Bethany College, the College of West Virginia, Davis and Elkins College, Ohio Valley College, Salem-Teikyo College, the University of Charleston, West Virginia Wesleyan College and Wheeling Jesuit College, all in West Virginia; and (b) Any other regionally or nationally accredited institution of higher education in this State, public or private, approved by the Vice Chancellor for Administration if the institution has been licensed for a minimum of fifteen years subject to the provisions of W. Va. Code §§18C-3-5 and 18C-1B-4.

2.4. “Authority” means the West Virginia Economic Development Authority, provided for in W. Va. Code §§31-15-1 et seq.

2.5. “Authorized Tax Credits” means the tax credits provided for in W. Va. Code §5E-2-4.

2.6. “Capital Base” means equity capital or net worth.

2.7. “Capital Lease” means a lease meeting one or more of the following criteria:

1. The lease transfers ownership of the property to the lessee at the end of the lease term by the lessee’s exercise of a purchase option which is de minimis in amount;

2. The lease term is equal to seventy-five percent or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last twenty-five percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used;

3. Under generally accepted accounting principles, the lessee cannot treat payments to the capital company as payments under an operating lease; or 4. For federal income tax purposes, the parties are required to real payments as amortization of principal and interest.

2.8. “Center” means a center for economic development and technology advancement created pursuant to W. Va. Code §18B-12A-3.

2.9. “Certified West Virginia Capital Company” means:

1. A West Virginia business development corporation created pursuant to W. Va. Code §31-14-1 et seq.

2. A profit or nonprofit entity organized and existing under the laws of this State, created for the purpose of making venture or risk capital available to qualified investments that has been certified by the Authority.

2.10. “Director” means the Executive Director of the West Virginia Economic Development Authority, or his or her designated representative.

2.11. “Doctoral Institution” means a State institution of higher education as defined in W. Va. Code §18B-8-1(d).

2.12. “Entity” means a non-profit, non-stock corporation organized exclusively for charitable, educational or scientific purposes within the meaning of §501(c) of the Internal Revenue Code of 1986, as amended, or a corporation, a partnership, limited partnership, limited liability company, trust or other business organization authorized under the West Virginia Code.

2.13. “Equity” means common stock or preferred stock in a corporation including warrants and options which upon exercise entitle the holder to common or preferred stock. Equity also means a membership interest in a partnership or limited partnership or an ownership interest in any other type of entity, including warrants or options to purchase the ownership interest.

2.14. “Fiscal Year” means July 1 through June 30, which is the fiscal year of the State.

2.15. “Governing Body” means the Governing Body of a Center.

2.16. “Investor” means an individual or Entity which has made a Qualified Investment in a Center.

2.17. “Grant” or “Grant Program” means a Grant or the Grant Program authorized and established by the provisions of Chapter §18C, Article 5 of the West Virginia Code.

2.18. “Partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financing operation, or venture is carried on; and the term partner includes a member of the syndicate, group, pool, joint venture or organization. The term “Partnership” includes a general or limited partnership.

2.19. “Pass-Through Entity” means any person, other than an individual, which is not classified for federal income tax purposes as an association taxed as a corporation.

2.20. “Person” includes an individual or Entity.

2.21. “President” means the chief executive officer of a Center employed pursuant to W. Va. Code §18A-12A-5.

2.22. “SBIC” or “Small Business Investment Company” means only an Entity which is licensed by the United States Small Business Administration as a Small Business Investment Company under the Small Business Investment Act of 1958, 15 U.S.C. §661 et seq., as amended.

2.23. “Qualified Investment” means a debt or equity financing of or a gift, grant, or contributions in a Center, which has executed an agreement with a Doctoral Institution pursuant to West Virginia Code §18B-12A-6.

2.24. “Qualified West Virginia Capital Company” means a small business investment company licensed by the United States Small Business Investment Administration under the federal Small Business Investment Act of 1958, 15 U.S.C. §661, et seq., as amended.

2.25. “S Corporation” or “Subchapter S Corporation” means a small business corporation as defined in Section 1361(b) of the Internal Revenue Code of 1954, 26 U.S.C. §1 et seq., as amended, for which an election under Section 1362(a) of the Code is in effect.

2.26. “Senior Administrator” means the Vice Chancellor for Administration, as provided in W. Va. Code §18B-1-2.

2.27. “State” means the State of West Virginia.

W. Va. Code R. § 117-4-3 Qualification of Economic Development and Technology Advancement Center

3.1. Applications. -- Qualified economic development and technology advancement centers under the West Virginia Capital Company Act, W. Va. Code §5E-1-1 et seq., must receive the prior written approval of the Authority in order to be designated as a qualified economic development and technology advancement center. The application process and the requirements for designation are set forth in this Rule.

3.2. Application Receipt and Review.

3.2.a. Acceptance in General. -- During regular business hours of the Authority, the Director (which shall for purposes of receipt of applications include other representatives of the Authority) shall receive applications on a first come, first served basis beginning on the day set forth in the announcement for acceptance of applications; provided, that all applications received by the Director on the same calendar day shall be considered simultaneously received regardless of the time of day of actual delivery. The Director shall record the time and date of receipt of an application. The Director shall not receive applications prior to the day set forth in the announcement for acceptance of applications.

3.2.b. Delivery. -- Applications shall be considered received by the Director and submitted by the applicant on the day of actual delivery to the Director, whether the delivery is performed in person, by mail, by courier or delivery service, or otherwise.

3.2.c. Review of Applications.

1. General Rule. -- The Director shall review all applications in the order of their receipt to determine if each application is complete. The Director has sole discretion to determine whether an application is complete. The Director’s determination shall be made within forty-five (45) days of the application’s receipt. In the event that the Director determines an application to be incomplete, the Director shall notify the applicant, in writing, of the reasons for that determination and shall return the incomplete application to the applicant. The applicant may resubmit the application after correcting the deficiencies stated in the notice. If an application, though incomplete, is substantially complete as determined in the sole discretion of the Director, the time of receipt of the resubmitted application, for purposes of review by the Director, shall be considered to be the time of receipt of the initial application. If an application is not substantially complete as determined in the sole discretion of the Director, the resubmitted application shall be considered received, for purposes of review by the Director, when resubmitted.

2. Review of Simultaneously Received Applications. -- In the event of simultaneously received applications submitted by applicants, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications. If the total tax credits sought by all the simultaneously received applications are less than the tax credits authorized for a Center, after taking into account applications reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications for completeness and the applications shall be considered simultaneously reviewed.

3.3. False Information. -- Upon the submittal of any false or misleading information by an applicant, the Director may reject the application and deny further consideration of the applicant for qualification in that and subsequent fiscal years.

3.4. Complete Application. -- Upon a determination by the Director that an application is complete, the Director shall place the complete application on the agenda of the next duly or regularly scheduled meeting of the Authority. Complete applications shall be placed on the agenda in the order of their review by the Director.

3.5. Action of Authority. -- The Authority shall consider all applications in the order they are placed on the agenda of any duly or regularly scheduled meeting of the Authority.

3.6. Allocation of Tax Credits. -- In the order set forth in this Section, the Authority shall issue certificates of tax credit to the applicants for each Center.

3.7. Notification of Action. -- The Director shall notify each applicant in writing of the Authority's action with regard to the application.

3.8. Suspension of Qualification Process. -- In any fiscal year, upon the allocation to applicants of the total tax credits authorized for that Center, the Authority shall suspend the qualification process and the Director shall reject all subsequently submitted applications.

3.9. Obligation to Update Application. -- Any applicant shall immediately notify the Director in writing of any changes in any of the information filed with the Authority as part of an application filed under this Rule or any other information submitted to the Authority pursuant to this Rule.

W. Va. Code R. § 117-4-4 Tax Credits

4.1. Maximum Authorized Credits.

4.1.1. Generally. -- Each Investor in a Center shall be allowed a tax credit equal to one hundred percent of the Investor’s investment in a Center.

4.1.2. Maximum Per Center. -- The total amount of tax credits authorized for a single Center may not exceed One Million Dollars ($1,000,000) during any single State fiscal year.

4.2. Total Credits. -- The total credits which may be authorized by the Authority in each fiscal year is set forth in the Act.

4.3. Certificate of Tax Credit. -- The Authority shall issue to each Investor the Authority’s Certificate approving the amount of tax credits allocated to the Investor. The Authority’s Certificate shall list the name of the Investor and the amount of credit allotted to the Investor. An Investor shall submit a true copy of the Certificate with the Investor’s tax return requesting a tax credit. If the Investor entitled to a tax credit is a Partnership, an S corporation, a limited liability company or any other pass-through entity, the partners, shareholders, members or owners shall apportion the tax credit among themselves pursuant to the provisions of subdivision 4.4.f of this Rule.

4.4. Application of Tax Credits.

4.4.a. General Rule. -- The amount of tax credit allowed for the taxable year is the portion of the tax credit authorized that does not exceed the tax liability limitation provided in this subsection.

4.4.b. Tax Credit Available. -- The credit available for the taxable year is the sum of:

1. Unused tax credit carried forward from prior taxable years (carryforwards); and 2. The amount of tax credits allocated to the Investor by the Authority pursuant to the Act and this Rule (tax credits earned).

4.4.c. Tax Liability Limitation. -- Tax credit available for a taxable year beginning after June 30, 2001, shall be applied against the same taxes as set forth in W. Va. Code §11-13C-5(c) through (i), and in that order.

4.4.d. Excess Tax Credit. -- The excess of the tax credit available over the applicable tax liability limitation for the year is an unused credit which the Investor may carry forward as provided for under subsection 4.5 of this Rule.

4.4.e. Order of Application. -- If the tax credit available for a taxable year is not allowed in full because of the tax liability limitation, carryforwards are applied against the tax liability limitation first. To the extent the tax liability limitation exceeds carryforwards, tax credit earned for the taxable year is then applied.

4.4.f. Apportionment.

1. The partners, shareholders, members or owners shall by election and pursuant to this subdivision divide the tax credits authorized by the Authority for investments by a Partnership, an S corporation, a limited liability company or other entity which is treated as a pass-through entity under federal and state income tax laws.

2. Any Center formed as a non-profit, non-stock corporation which has been allocated tax credits shall apportion the tax credits to contributors to the Center as agreed to by the contributors to the Center.

3. The partners, S corporation shareholders, limited liability company members or other pass-through entity owners shall apportion the tax credit authorized in any manner they select, provided that each partner, shareholder, member or owner consents in writing to an apportionment plan. The written consent to an apportionment plan shall be signed by each partner, shareholder, member or owner, or their duly authorized agents. The written consent shall set forth the name, address, employer identification number or social security number and taxable year for which the credit will be claimed for each partner, shareholder, member or owner and the amount of tax credit apportioned to each of them under the plan. The consent of more than one partner, shareholder, member or owner may be incorporated in a single statement. Each partner, shareholder, member or owner shall file the statement with the application required pursuant to Section 3 of this Rule. The statement is irrevocable and not subject to change after filing of the application unless the tax credit authorized by the Authority is less than the tax credit applied for, in which case the Authority may request the apportionment plan to be amended. Each partner, shareholder, member or owner consenting to an apportionment plan shall keep as part of his or her records a copy of the statement containing all of the required consents.

4. An apportionment plan adopted and consented to by all partners, S corporation shareholders, limited liability company members or other pass-through entity owners is valid only for the tax credits authorized by the Authority pursuant to the application with respect to which the plan is filed. A separate consent to an apportionment plan shall be filed with respect to each application filed pursuant to Section 3 of this Rule.

4.4.g. Limitation. -- Tax credits authorized by the Authority may not be used against any liability the taxpayer may have for interest, penalties, or additions to tax.

4.5. Carryforward of Unused Tax Credit.

4.5.a. General Rule. -- The holder of a tax credit may carry forward an unused tax credit as defined in subdivision 4.5.b of this Rule to succeeding taxable years but not beyond fifteen (15) years. Carryforwards of unused tax credits shall be taken into account in determining the amount of tax credit available and the tax credit allowed for the taxable years to which they may be carried forward.

4.5.b. Unused Credit. -- If carryforwards and tax credits earned exceed the tax liability limitation, the excess attributable to tax credits earned is an unused tax credit. The taxable year in which an unused tax credit arises is referred to as the “unused credit year”.

4.5.c. Limitation on Carryforwards. -- Tax credit carryforwards to a taxable year may not exceed the applicable tax liability limitation for that year. Tax credit carryforwards from an unused tax credit year are applied before tax credit carryforwards from a later unused tax credit year.

4.5.d. Joint Return by Husband and Wife. -- This Subdivision 4.5.d. prescribes additional rules for computing the tax credit carryforwards of a husband and wife making a joint return for one or more of the taxable years involved in the computation of the tax credits earned.

1. From Separate to Joint Return. -- If a husband and wife, making a joint return for any taxable year, did not make a joint return for any of the taxable years involved in the computation of the tax credit earned, the separate tax credits apportioned in accordance with subdivision 4.4.f of this Rule shall together be considered a joint tax credit carryforward to the taxable year.

2. Continuous Use of Joint Return. B If a husband and wife making a joint return for a taxable year made a joint return for each of the taxable years involved in the computation of the tax credit earned or the tax credit carryforward to the taxable years, the joint tax credit or tax credit carryforward to the taxable year is computed in the same manner as the tax credit carryforward of an individual as provided in subdivisions 4.5.a through 4.5.c of this Rule.

3. From Joint to Separate Return. -- If a husband and wife making separate returns for a taxable year made a joint return for any, or all, of the taxable years involved in the computation of the tax credit earned or tax credit carryforward to the taxable year, the separate tax credit carryforward of each spouse to the taxable year is computed in accordance with subdivisions 4.5.a through 4.5.c of this Rule but with the following modification: the tax credit of each spouse for a taxable year for which a joint return was made shall be considered to be that portion of the joint tax credit apportioned to the spouse in accordance with subdivision 4.4.f of this Rule.

4. Recurrent Use of Joint Return. -- If a husband and wife making a joint return for any taxable year made a joint return for one or more, but not all, of the taxable years involved in the computation of a tax credit carryforward to the taxable years, the taxable year is computed in the manner set forth in paragraph 4.5.d.3 of this Rule. The tax credit carryforward is considered a joint tax credit carryforward to the taxable year.

5. Joint Tax Credit Carryforwards. -- The joint tax credit carryforwards to any taxable year for which a joint return is made are all the tax credit carryforwards of both spouses to the taxable year.

6. Divorce and Remarriage. -- It is the intent of this Rule to allow the carryforward of joint tax credits to joint returns and of separate tax credits to joint returns so long as the two individuals remain married in both the taxable year in which the tax credit is earned and the taxable year to which the tax credit is to be carried forward. Divorce and remarriage in joint return cases present special problems. A joint tax credit of one couple cannot be carried forward to another taxable year and applied to the tax liability of a different couple. In applying the rules for joint returns of husband and wife and separate returns of husband and wife and in cases involving divorce and remarriage, the principles established under the Internal Revenue Code and Treasury Regulations, and interpretations thereof, for net operating loss carryovers and investment tax credit carryforwards may be used by the West Virginia Department of Tax and Revenue as a guide.

4.5.e. Tax Credits Not Assignable. -- No portion of the tax credit earned by any Investor is subject in any manner to alienation, sale, transfer or assignment, except that tax credits authorized by the Authority for investments by a partnership, an S corporation or a limited liability company may be apportioned pursuant to subdivision 4.4.f of this Rule.

§17-4-5. Reports and Audits. 5.1 Conflicts of Interest. -- Notwithstanding any other provision of this Rule to the contrary, officers and employees of a governing board and the affected Doctoral Institution may hold appointments to offices of the Center and be members of its Governing Body or officers or employees of other entities contracting with either the Center or a governing board of a Doctoral Institution. The Governing Body shall make an annual report of these appointments to the Doctoral Institution.

5.2. General Requirements for Audits. -- The following requirements apply to audits of a Center:

5.2.a. Independent CPA. -- The certified public accountant shall be independent of the Center being examined to ensure that the audit report is impartial, in fact and in appearance.

5.2.b. Working Papers; Standards. -- In performing the audit, the accountant shall prepare working papers in accordance with the generally accepted accounting and auditing standards of field work. The accountant shall retain working papers for an audit for a minimum of three (3) years from the date of the audit report, or longer if notified in writing by the Authority before the end of the three (3) year period. The audit working papers shall be made available upon written request of the Authority or the Director. The audit shall be conducted in accordance with generally accepted auditing and accounting principles and standards, and any other guidelines the Authority may prescribe.

5.2.c. Report Contents. -- The audit report shall address the methods of operation and conduct of the business of the Center and report on the Center’s compliance with the requirements of the Act and this Rule. Any instances of noncompliance shall be specifically cited. If the accountant finds that the Center has been in compliance, the accountant shall make a positive statement to that effect.

5.2.d. Submission of Report. -- The Center shall submit to the applicable Governing Entity and the Authority three (3) certified copies of the audit report no later than ninety (90) days from the end of each State fiscal year, together with three copies of a descriptive narrative of the Center’s activities, its methods of operation of the Center and three (3) copies of the Center’s financial statements.

5.2.e. Other Requirements. -- The Authority may dictate other audit requirements from time to time.

W. Va. Code R. § 117-4-6 Confidentiality

6.1. General Rule. -- All information submitted to the Authority is confidential and not subject to public disclosure when filed with the Authority, except as otherwise provided in this Section and in the Act.

6.2. Application Information. -- All information submitted to the Authority or the applicable Governing Entity pursuant to an application for designation as a Center, and documents related to the application are confidential and not subject to public disclosure when filed with the Authority, except the following:

1. The full legal name of the Center making the application;

2. The mailing and office addresses and telephone number of the applicant; and 3. The name of a person to contact for the applicant.

6.3. Ruling Request Information. -- All information submitted to the Authority regarding a ruling request pursuant to Section 8 of this Rule is confidential and not subject to public disclosure when filed with the Authority, except that the Authority may publish or make available to the public a summary of the ruling request provided that all names and other identifying facts are omitted.

6.4. General Correspondence. -- All general correspondence of or to the Authority is confidential and not subject to public disclosure.

6.5. Examination & Audit Information. -- All information obtained by or submitted to the Authority in regard to the examination or audit including audits performed by independent certified public accountants of a Center is confidential and not subject to public disclosure, except where the public disclosure results from proceedings contemplated by Section 7 of this Rule.

6.6. Internal Information. -- Unless otherwise provided, all information generated internally by the Authority including, but not limited to, internal memoranda and reports is confidential and not subject to public disclosure.

6.7. Tax Information. -- All tax returns and tax return information subject to the non-disclosure restrictions of W. Va. Code §11-10-5d is confidential, except for the information subject to disclosures authorized, mandated or permitted pursuant to W. Va. Code §§5E-2-4(g) or 11-10-5s.

6.8. Authority Determination. -- In addition to the information described in Subsections 6.1-6.7 of this Rule and classified as non-confidential, the Authority may from time to time consider as non-confidential and disclose to the public any information by the execution of a resolution or policy statement that the information is non-confidential.

6.9. Request for Confidentiality. -- Any person submitting information to the Authority which is classified as non-confidential by this Rule or the Act shall be treated as non-confidential and subject to disclosure unless the person submitting the information makes a showing, satisfactory to the Authority at the time the information is submitted, that the information should be treated as confidential. Any person desiring to make a submission shall indicate in writing what information is requested to be treated in a confidential manner and the basis upon which the treatment is justified. A person making a request may submit the information desired to be treated as confidential separately from other information submitted. If the Authority concurs with the request then the information shall be treated as confidential. If the Authority disagrees with the requested treatment then the Authority shall notify the person submitting the information and give the person a reasonable opportunity to withdraw the information.

6.10. Disclosure to State Personnel. -- Notwithstanding any provisions of the Act or this Rule, any record, report, document or information may be disclosed to any officers, employees or authorized representatives of the State of West Virginia charged with administering the provisions of the Act and this Rule and may be disclosed pursuant to proceedings under Section 7 of this Rule. The provisions of the West Virginia Code regarding confidentiality and the disclosure of tax returns and tax information, including without limitation, W. Va. Code §11-10-5d, apply to the Authority, its agents and employees and to information submitted to the Authority under the Act and this Rule.

W. Va. Code R. § 117-4-7 Investigation; Remedies

7.1. Investigation by Authority. -- The Authority may examine, under oath, any of members of the Center’s Governing Body, employees or agents thereof, with regard to any matters which the Authority may consider necessary to ensure compliance with the Act and this Rule. The Authority may issue subpoenas and subpoenas duces tecum, and administer oaths relative to any examination.

7.2. Remedies. -- In the event of the failure of any individual or Entity to comply with the Act or this Rule, the Authority may pursue all remedies or relief available at law to the Authority or the State.

W. Va. Code R. § 117-4-8 Ruling Procedure

8.1. General Rule. -- Any person may request an informal ruling from the Authority concerning the application of the Act and this Rule to a specific set of facts and circumstances. Any tax ruling requests shall be directed to the West Virginia Department of Tax and Revenue.

8.2. Request Requirements. -- A ruling request shall meet the following requirements in order to be considered by the Authority:

8.2.a. The ruling request shall be in writing and sent by certified mail to the Authority at the following address: West Virginia Economic Development Authority, 1018 Kanawha Blvd., Suite 501, Charleston, WV 25301-2828;

8.2.b. Any factual representations upon which the ruling will be based shall be verified under oath;

8.2.c. The request shall state the ruling that is requested and shall contain legal analysis in support of the requested ruling;

8.2.d. The request shall be accompanied by a non-refundable filing fee of five hundred dollars ($500.00) per issue addressed in the ruling requested;

8.2.e. The request shall contain the name, mailing address and telephone number of a person that can be contacted by the Authority for further information concerning the request; and

8.2.f. Any additional information requested by the Authority shall be submitted in writing. Additional information shall be verified under oath if it involves factual representations.

8.3. Publication of Rulings; Reliance; Modification. -- The Authority may publish or release summaries of previous rulings with facts or characteristics identifying the person or persons requesting the ruling omitted. However, the only persons who may rely upon a ruling by the Authority are those persons who requested and received the ruling. As to those persons, the Authority reserves the right to notify the recipient of the ruling at the recipient’s last address known to the Authority that the subject ruling may no longer be relied upon as of the date of the notice. A ruling may be prospectively modified if the Authority determines that the ruling was incorrect or is in conflict with the Act, this Rule or any other substantive legal precedent.

8.4. Denial of Requests. -- The Authority may decline to issue a ruling and return the filing fee to the person requesting the ruling. From time to time, the Authority may announce those areas in which it will not issue rulings.

117CSR4

117CSR4

Series 05 High-Growth Business Investment Tax Credit

W. Va. Code R. § 117-5-1 General

1.1. Scope. -- This Legislative Rule is promulgated to provide for the general administration of the High-Growth Business Investment Tax Credit, W. Va. Code §11-13U-1 et seq. This Rule carries out the policy and purposes of the Statute, provides necessary clarification of the provisions of the Statute, and provides for the general administration of the Statute.

1.2. Authority. -- W. Va. Code §11-13U-9.

1.3. Filing Date. -- June 1, 2005.

1.4. Effective Date. -- July 1, 2005.

1.5. Citation. -- This Legislative Rule may be cited as §117 C.S.R., Series 5, 117-5-1, et seq., (2005).

W. Va. Code R. § 117-5-2 Definitions

2.1. "Alter ego" means a qualified research and development company where one or more of the following criteria are satisfied in relation to the eligible taxpayer:

2.1.a. The ownership of the qualified research and development company is "substantially related" to the ownership of the eligible taxpayer stated on the application. "Substantially related" means a five percent or more common ownership interest in the qualified research and development company before the qualified investment is made that is eligible for the credit; or

2.1.b. The board of directors, managers or general partners of the qualified research and development company are controlled by the eligible taxpayer stated on the application: Provided, That an eligible taxpayer is considered to have control of the board of directors of a qualified research and development company if it controls a simple majority of the board of directors, managers or general partners.

2.1.c. For the purposes of the Statute, common ownership interest shall be determined in accordance with the beneficial ownership rules under Rule 13d-3 under the Securities Exchange Act of 1934 (17 C.F.R. §240-13d-3).

2.2. "Authority" means the West Virginia Economic Development Authority, provided for in W. Va. Code §31-15-1 et seq.

2.3. “Control”, for purposes of subdivision 2.1.b of this Rule, means the right or power to appoint, elect, or select, directly or indirectly, fifty percent or more of the directors, managers or general partners of a qualified research and development company.

2.4. "Corporate headquarters" means the place at which the corporation has its commercial domicile and from which the business of the corporation is primarily conducted.

2.5. “Director” means the Executive Director of the West Virginia Economic Development Authority, or his or her designated representative.

2.6. "Eligible taxpayer" means a person that has received certification from the Authority that a portion of the annual available high-growth business investment tax credit has been allocated to it, that is subject to the tax imposed by either W. Va. Code §§11-23-1 et seq., 11-24-1 et seq., or 11-21-1 et seq., and that has made a qualified investment in a qualified research and development company.

2.7. “Equity financing” means financing by selling common or preferred stock or ownership or partnership units or interests to investors.

2.8. "Person" includes any natural person, corporation, limited liability company, or partnership.

2.9. "Qualified investment" means an equity financing of a West Virginia qualified research and development company. The investment must be in cash or cash equivalents and may not be a contribution of services or in-kind property.

2.10. "Qualified research and development company" for purposes of the high-growth business investment tax credit means an entity that has been certified by the Tax Commissioner as eligible for the West Virginia research and development tax credit set forth in W. Va. Code §11-13R-1 et seq., that has annual gross receipts of less than twenty million dollars and has annual payroll of less then two million five hundred thousand dollars.

2.11. “Statute” means the “High-Growth Business Investment Tax Credit” (W. Va. Code §11-13U-1et seq.)

2.12. “Tax Commissioner” means the West Virginia Tax Commissioner or his or her designated representative.

2.13. "Tax credit" means the high-growth business development tax credit authorized by the Statute.

2.14. "Taxable year" means the tax year of the eligible taxpayer.

W. Va. Code R. § 117-5-3 Overview of the Tax Credits

3.1. Purpose. -- The Statute creates a tax credit program through which investors receive a tax credit by making equity investments in start-up, growth-oriented, research and development businesses in West Virginia.

3.2. Tax Credit Allowed. -- The tax credits are available to eligible taxpayers who invest in a qualified research and development company that maintains its corporate headquarters in West Virginia for the taxable year in which the investment was made. Eligible taxpayers may claim the tax credit against that portion of their Business Franchise Tax, Corporation Net Income Tax and Personal Income Tax for tax years beginning on or after July 1, 2005.

3.2.a. No more than one million dollars of the tax credits allowed under W. Va. Code §11-13U-4(a) may be allocated by the Authority during any fiscal year. The Authority shall allocate the tax credits in the order the applications are received, as discussed in subsection 4.5 of this Rule.

3.2.b. The Authority may not allocate more than fifty thousand dollars of this tax credit to an eligible taxpayer in a fiscal year.

3.2.c. Any unused portion of the tax credit may be carried forward to succeeding taxable years until the expiration of the fourth taxable year after the taxable year in which the investment was made. The tax credit remaining thereafter is forfeited.

3.3. Termination of the Tax Credit.

3.3.a. The tax credit terminates July 1, 2008, unless sooner terminated by law.

3.3.b. Absent statutory directive to the contrary, taxpayers who have gained entitlement to the tax credit pursuant to a qualified investment made prior to the termination date shall retain that entitlement and apply the tax credit in due course pursuant to the requirements and limitations of the Statute.

3.4. Amount of Tax Credit.

3.4.a. The total tax credit that may be allocated to an eligible taxpayer under the Statute shall be equal to fifty percent of the total value of the qualified investment in the taxable year the qualified investment was actually made.

3.4.b. The total amount of tax credit that may be used in any taxable year by any eligible taxpayer in combination with the owners of the eligible taxpayer may not exceed fifty thousand dollars.

3.4.c. The total amount of qualified investment that a qualified research and development company may accept from all eligible taxpayers in any taxable year is one million dollars.

W. Va. Code R. § 117-5-4 Application for the Tax Credit

4.1. Prerequisites to Claiming the Tax Credit -- No tax credit is allowed or may be applied under the Statute until the taxpayer seeking to claim the credit has:

4.1.a. Filed with the Authority a written application for the tax credit on forms provided by the Authority;

4.1.b. Filed with the Authority the research and development program or project certification issued pursuant to W. Va. Code §11-13R-6 for the qualified research and development company that will benefit from the investment;

4.1.c. Filed with the Authority a certified copy of its certificate of incorporation, articles of organization, certificate of formation of limited partnership or statement of limited liability partnership, as appropriate; and

4.1.d. Received from the Authority certification of the amount of tax credit to be allocated to the eligible taxpayer, as described in subsection 4.9 of this Rule.

4.2. Contents of the Application. -- The application shall be signed and verified by the applicant or by a duly authorized representative of the applicant, and shall, in addition to the items required by the Statute, contain the following:

4.2.a. The full legal name and tax identification number of the applicant;

4.2.b. The applicant’s physical address, mailing address and telephone number;

4.2.c. If the applicant is a business entity, a copy of the applicant’s bylaws, operating agreement or partnership agreement certified as a true and correct copy thereof by an officer, manager, member or partner of the entity;

4.2.d. If the applicant is a corporation, a copy of any agreements effective among the shareholders, including shareholder agreements as described in W. Va. Code §31D-7-732 or a statute of similar import;

4.2.e. If the applicant is a business entity, the names and addresses of, as applicable, the individuals and entities serving on the board of directors or other managing body of the applicant or as the managers or general partners of the applicant. The addresses shall include street and number, city or town, state and zip code;

4.2.f. If the applicant is a business entity, the names and addresses of, as applicable, the individuals and entities having an ownership interest in the applicant and the percentage of the entity owned by each owner. The addresses shall include street and number, city or town, state and zip code;

4.2.g. An agreement that the applicant, if accepted as an eligible taxpayer, does, and will, comply with all requirements of the Statute and this Rule;

4.2.h. A statement as to the amount of proposed qualified investment in a qualified research and development company;

4.2.i. A completed Form WV-ARI-001, Authorization to Release Information, or any subsequent applicable document of similar import, required for the applicant to waive tax confidentiality provisions found in the West Virginia Code; and

4.2.j. Any and all additional information or statements requested by the Authority.

4.3. Application Forms. -- A person applying to become an eligible taxpayer may obtain the form from the Director at the following address: West Virginia Economic Development Authority, NorthGate Business Park, 160 Association Drive, Charleston, WV 25311-1217.

4.4. Filing. -- Each applicant shall file with the Director three (3) complete applications with original signatures.

4.5. Application Receipt and Review.

4.5.a. During regular business hours of the Authority, the Authority shall receive applications on a first come, first served basis beginning on July 1, 2005; provided, that all applications received by the Authority on the same calendar day shall be considered simultaneously received regardless of the time of day of actual delivery. The Authority shall record the time and date of receipt of an application. The Authority may not receive applications prior to July 1, 2005.

4.5.b. Applications shall be considered received by the Authority and submitted by the applicant on the day of actual delivery to the Authority, whether the delivery is performed in person, by mail, by courier or delivery service, or otherwise.

4.5.c. The Director shall review all applications in the order of their receipt to determine if each application is complete. The Director has sole discretion to determine whether an application is complete. The Director’s determination shall be made within thirty (30) days of the application’s receipt. In the event that the Director determines an application to be incomplete, the Director shall notify the applicant, in writing, of the reasons for that determination and shall return the incomplete application to the applicant. The applicant may resubmit the application after correcting the deficiencies stated in the notice, but resubmission of the application must be made within twenty (20) days after the Authority sends the notice. If an application, though incomplete, is substantially complete as determined in the sole discretion of the Director, the time of receipt of the resubmitted application, for purposes of review by the Director, shall be considered to be the time of receipt of the initial application. If an application is not substantially complete as determined in the sole discretion of the Director, the resubmitted application shall be considered received, for purposes of review by the Director, when resubmitted.

4.5.c.1. In the event of simultaneously received applications submitted by applicants, the Director shall first review the applications to determine the tax credits sought by each application, and the total of the tax credits sought by all the simultaneously received applications. If the total tax credits sought by all the simultaneously received applications are less than the tax credits authorized for allocation by the Authority, after taking into account applications reviewed previously and determined to be complete or substantially complete, the Director shall proceed to review the simultaneously received applications for completeness and the applications shall be considered simultaneously reviewed.

4.5.c.2. If the total tax credits sought by all the simultaneously received applications exceed the tax credits authorized for allocation by the Authority, after taking into account applications reviewed previously and determined to be complete or substantially complete, and if tax credits still remain, the Director shall, within thirty (30) days, but not earlier than five (5) days, after receipt of the applications, conduct a lottery to determine the order of review of the simultaneously received applications as follows:

4.5.c.2.A. The Director shall provide all applicants that submitted simultaneously received applications with written notice of the lottery and the opportunity for their designated representative to attend the lottery;

4.5.c.2.B. To conduct the lottery, the Director shall: (1) prepare for each applicant, on index cards of the same fundamental character, an index card setting forth the applicant’s name and the amount of tax credits sought by the applicant in its application; (2) deposit one index card for each applicant in a container; (3) select and draw from the container one index card in a manner that the Director may not determine the identity of the applicant until after the card is drawn from the container; (4) announce and record the applicant whose index card was drawn and the amount of tax credits sought by that applicant; and (5) repeat steps (3) and (4) until all applicants’ cards are drawn from the container;

4.5.c.2.C. Each application shall be then reviewed for completeness by the Director in the order in which it was drawn from the container;

4.5.c.2.D. Prior to commencement of the lottery process, all applicants participating in the lottery may, by written agreement in a form acceptable to the Authority, agree as to how the remaining tax credits are to be divided amongst the applicants; and

4.5.c.2.E. If for any reason an applicant selected for a tax credit allocation does not make its qualified investment, the Authority shall award the unused credit to the next qualified applicant.

4.6. False Information. -- Upon the submittal of any false or misleading information by an applicant, the Director may reject the application and deny further consideration of the applicant for qualification in that and subsequent fiscal years.

4.7. Complete Application -- Upon a determination by the Director that an application is complete, the Director shall place the complete application on the agenda of the next duly or regularly scheduled meeting of the Authority. Complete applications shall be placed on the agenda in the order of their review by the Director.

4.8. Action of Authority. -- The allocation of all tax credits under this Rule must be approved by the Authority. The Authority shall consider all completed applications in the order they are placed on the agenda and allocate tax credits under this Rule by approving those meeting the requirements of the Statute and this Rule.

4.9. Allocation of Tax Credits. -- In the order set forth in this section, the Authority shall issue certificates of the amount of tax credit to be allocated to each eligible taxpayer.

W. Va. Code R. § 117-5-5 Application of the Tax Credit

5.1. Business Franchise Tax. -- The tax credit is first applied to reduce taxes imposed upon the eligible taxpayer by W. Va. Code §11-23-1 et seq. for the taxable year (determined after application of the credits against tax provided in W. Va. Code §11-23-17, but before application of any other allowable credits against tax).

5.2. Corporation Net Income Taxes. -- After application of subsection 5.1 of this Rule, any unused tax credit is next applied to reduce the taxes imposed upon the eligible taxpayer by W. Va. Code §11-24-1 et seq. for the taxable year (determined before application of allowable credits against tax).

5.2.a. If the eligible taxpayer is a limited liability company, an electing small business corporation (as defined in section 1361 of the United States Internal Revenue Code of 1986, as amended), or a partnership, any unused tax credit remaining after application of subsections 5.1 and 5.2 of this Rule is allowed as a tax credit against the taxes imposed by W. Va. Code §11-24-1 et seq. on owners of the eligible taxpayer.

5.2.a.1. Electing small business corporations, limited liability companies, and partnerships shall allocate the tax credit allowed by the Statute among their owners in the same manner as profits and losses are allocated for the taxable year.

5.3. Personal Income Taxes. -- After application of subsections 5.1 and 5.2 of this Rule and subdivision 5.2.a of this Rule any unused tax credit is next applied to reduce the taxes imposed by W. Va. Code §11-21-1 et seq. for the taxable year (determined before application of allowable credits against tax) of the eligible taxpayer.

5.3.a. If the eligible taxpayer is a limited liability company, an electing small business corporation (as defined in section 1361 of the United States Internal Revenue Code of 1986, as amended), or a partnership, any unused tax credit remaining after application of subsections 5.1, 5.2 and 5.3 of this Rule and subdivision 5.2.a of this Rule is allowed as a tax credit against the taxes imposed by W. Va. Code §11-21-1 et seq. on owners of the eligible taxpayer.

5.3.a.1. Electing small business corporations, limited liability companies, and partnerships shall allocate the tax credit allowed by the Statute among their owners in the same manner as profits and losses are allocated for the taxable year.

5.4. Withholding tax -- No tax credit is allowed under the Statute against any withholding tax imposed by, or payable under, W. Va. Code §11-21-1 et seq.

5.5. Unused Credit Carry Forward. -- If the tax credit allowed under the Statute in any taxable year exceeds the sum of taxes enumerated in subsections 5.1, 5.2 and 5.3 of this Rule and subdivisions 5.2.a and 5.3.a of this Rule for that taxable year, the eligible taxpayer and owners of eligible taxpayers described in subdivisions 5.2.a and 5.3.a of this Rule may apply the excess as a tax credit against those taxes, in the order and manner stated in this section, for succeeding taxable years until the earlier of the following:

5.5.a. The full amount of the excess tax credit is used; or

5.5.b. The expiration of the fourth taxable year after the taxable year in which the investment was made. The tax credit remaining thereafter is forfeited.

W. Va. Code R. § 117-5-6 Restrictions on Investment

6.1. Alter Ego. -- No qualified investment may be made in a qualified research and development company that is the alter ego of the eligible taxpayer.

6.2. Time Requirement for Investment.

6.2.a. The eligible taxpayer shall maintain its qualified investment for a minimum period of five years.

6.2.b. An eligible taxpayer that receives repayment or return of a qualified investment (exclusive of interest, dividends, or other earnings on the investment) shall within three calendar months from the date of repayment or return of its investment, reinvest the repaid or returned amount of the initial investment in another qualified research and development company for a period of time at least equal to the remainder of the initial five-year term.

6.2.c. An eligible taxpayer that fails to maintain a qualified investment for the required five-year minimum period shall pay to the Tax Commissioner a penalty equal to all of the tax credits asserted under the Statute by the eligible taxpayer with interest, calculated at the rate set forth in W. Va. Code §11-10-17a, from the date the tax credits were certified as allocated to the eligible taxpayer. The Tax Commissioner shall give notice to the eligible taxpayer of any imposed penalties. The penalty shall be assessed and collected in the same manner as tax. The Tax Commissioner shall deposit any amounts received as a result of a penalty in the general revenue fund.

6.3. Amount that Qualified Research and Development Company May Accept. -- The total amount of qualified investment that a qualified research and development company may accept from all eligible taxpayers in any taxable year is one million dollars.

W. Va. Code R. § 117-5-7 Tax Credit Review and Accountability

7.1. Generally. -- Beginning February 1, 2006, and on the first day of February every third year thereafter, the Tax Commissioner shall submit to the governor, the president of the Senate, and the speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of the tax credit allowed under the Statute during the most recent three-year period for which information is available.

7.2. Termination. -- The requirement to file the tax credit review and accountability report terminates on June 30, 2011, unless the credit program terminates sooner.

7.3. Criteria for Evaluation. -- The criteria to be evaluated includes, but is not limited to, for each year of the three-year period:

7.3.a. The number of eligible taxpayers claiming the tax credit;

7.3.b. The net number, type, and duration of new jobs created in West Virginia by all qualified research and development companies in which taxpayers claiming the tax credit made investments and the wages and benefits paid by the qualified research and development companies to persons filling the new jobs;

7.3.c. The cost of the tax credit;

7.3.d. The cost of the tax credit per new job created; and

7.3.e. Comparison of employment trends for the industry and for taxpayers within the industry that claim the tax credit.

7.4. Requirement of Taxpayers Claiming the Tax Credit. -- Eligible taxpayers claiming the tax credit shall provide information required by the Tax Commissioner for the purpose of preparing the report. Information that eligible taxpayers are required to provide shall be subject to the confidentiality and disclosure provisions of W. Va. Code §§11-10-5d and 11-10-5s.

W. Va. Code R. § 117-5-8 Confidentiality

8.1. General Rule. -- All information submitted to the Authority is confidential and not subject to public disclosure when filed with the Authority, except as otherwise provided in this section and in the Statute.

8.2. Application Information. -- All information submitted to the Authority pursuant to an application for designation as an eligible taxpayer and documents related to the application, are confidential and not subject to public disclosure when filed with the Authority, except the following:

8.2.a. The full legal name of the applicant;

8.2.b. The mailing and office addresses and telephone number of the applicant; and

8.2.c. The name of a person to contact for the applicant.

8.3. General Correspondence. -- All general correspondence of or to the Authority is confidential and not subject to public disclosure.

8.4. Internal Information. -- Unless otherwise provided, all information generated internally by the Authority including but not limited to internal memoranda and reports is confidential and not subject to public disclosure.

8.5. Disclosure of Tax Credits. -- Notwithstanding any provision in the West Virginia Code to the contrary, the Tax Commissioner shall annually publish in the state register the name and address of every eligible taxpayer asserting the credit on one or more tax returns filed during the period of time covered by the report and the amount of any tax credit asserted by the taxpayer under the Statute.

8.6. Tax Information. -- All tax returns and tax return information subject to the non-disclosure restrictions of W. Va. Code §11-10-5d are confidential, except for the information subject to disclosures authorized, mandated or permitted pursuant to W. Va. Code §11-10-5s.

W. Va. Code R. § 117-5-9 General Procedure and Administration

9.1. Requirements to Claim the Tax Credit. -- To claim this tax credit, a taxpayer shall comply with the Statute and this Rule, and shall timely provide complete and accurate forms, schedules and other information required by the Tax Commissioner.

9.1.a. The taxpayer shall file required forms, schedules and information requested by the Tax Commissioner by the due date of the return for the taxes against which the tax credit is to be applied, with regard to any extension of time for filing but without regard to any extension of time for payment.

9.2. Applicability of Various Tax Laws. -- Application of this credit and eligibility for this credit shall not abrogate application of the provisions of W. Va. Code §11-23-1 et seq. (Business Franchise Tax), W. Va. Code §11-24-1 et seq. (Corporation Net Income Tax) and W. Va. Code §11-21-1 et seq. (Personal Income Tax), and rules issued pursuant to those statutes, with respect to any eligible taxpayer or owner of any eligible taxpayer to the extent that they may be subject to the provisions of those laws, and shall not abrogate application of the provisions of W. Va. Code §11-10-1 et seq. (Procedure and Administration) which provide for administration of those taxes.

9.3. Maintenance of Records. -- A taxpayer that does not maintain the records required to verify the validity of its eligibility for the tax credit and the accuracy of the amount of the tax credit claimed may be denied the tax credit or be subject to recapture to the extent the eligibility and accuracy are not substantiated by its records.

117CSR5

117CSR5

Series 06 Purchasing Procedures

W. Va. Code R. § 117-6-1 General

1.1. Scope. -- This rule is to ensure appropriate procedures will be followed and to ensure controls are in place for the purchase of goods and services.

1.2. Authority. -- W. Va. Code §31-15-6.

1.3. Filing Date. -- July 31, 2020.

1.4. Effective Date. -- August 31, 2020.

W. Va. Code R. § 117-6-2 Definitions

2.1. “Accountant” means any member of the Authority staff with a job title of Accountant and a Division of Personnel Class Specification title of Financial Reporting Specialist III.

2.2. “Associate Director” means the Associate Director of the Authority.

2.3. “Authority” means the West Virginia Economic Development Authority, a public corporation and governmental instrumentality, created and established under W. Va. Code §§31-15-1 et seq.

2.4. “Best value procurement method” means a request for proposal.

2.5. “Bid” or “bids” means anything that a vendor submits in response to a solicitation that constitutes an offer to the agency and includes, but is not limited to, documents submitted in response to a request for quotation, proposals submitted in response to a request for proposal, or proposals submitted in response to an expression of interest.

2.6. “Bid Evaluator” means the Executive Director, the Associate Director, the Director of Financial Services or any Accountant.

2.7. “Board” means the governing body of the Authority.

2.8. “Director of Financial Services” means the Director of Financial Services of the Authority.

2.9. “Executive Director” means the Executive Director of the Authority, or his or her designated representative.

2.10. “RFP” means Request for Proposal.

2.11. “State” means the State of West Virginia.

W. Va. Code R. § 117-6-3 Overview

3.1. The Authority is charged with the responsibility to develop and advance the business prosperity and economic welfare of the State by providing financial assistance in the form of loans, direct financing and operating leases to industrial development agencies and enterprises for the promotion and retention of new and existing commercial and industrial development.

The Authority receives no appropriations from the State’s General Revenue Fund. Further, the Authority is exempt from the State’s procurement policy. On a monthly basis management presents an overview of the previous months financial performance compared to budget and provides the Board a detailed list of purchasing card (PCARD) purchases.

W. Va. Code R. § 117-6-4 Purchasing Requirements

4.1. Each payment will be evaluated based on the total amount that will be paid to a vendor during the fiscal year. The Authority will document the evaluation of each payment with a copy of the invoice or the executed contract, if applicable. If any purchase or expenditure does not involve a contract, documentation should be included as backup to the request for payment and copied with the payable/voucher. Each purchase or expenditure will be evaluated and approved as non-recurring unless it is a known recurring payment. If the purchase or expenditure is a known recurring payment it will be evaluated based on the total recurring amount of all payments and approved accordingly based on the total recurring payment amount. In the event a one-time expenditure becomes a recurring payment, the expenditure will be re-evaluated and documented at the point the expenditure became a recurring payment and approved based on the total recurring payment amount.

4.2. Requirements for purchases up to $5,000:

4.2.1. No formal bid process is required.

4.2.2. Approval(s) on the request for payment will serve as documentation of the decision of reasonableness and will be copied with the payable.

4.2.3. The purchase must receive the approval of the Executive Director, Associate Director or the Director of Financial Services.

4.3. Requirements for purchases greater than $5,000 but not more than $10,000:

4.3.1. No formal bid process required if prices obtained through research and inquiry are considered to be reasonable.

4.3.2. Reasonableness will be determined by comparing prices to previous purchases, other published prices or prices from more than one vendor.

4.3.3. The proposed purchase must receive the approval of the Executive Director, Associate Director or Director of Financial Services.

4.4. Requirements for purchases greater than $10,000 but not more than $25,000:

4.4.1. Prices or quotes will be obtained from a minimum of two (2) separate sources.

4.4.2. Price will not be the final deciding factor.

4.4.3. The proposed purchase must receive the approval of the Board.

4.5. Requirements for purchases greater than $25,000:

4.5.1. Bids must be solicited from Class II Legal Ad as defined in W. Va. Code §59-3-2 and solicited from an adequate number of known qualified suppliers with reasonable response time permitted. This may be done in the form of an RFP, if applicable.

4.5.2. The RFP invitation must define the items or services to allow consistency and comparability of bids submitted, if applicable.

4.5.3. Each vendor is solely responsible for delivering its bid to the Authority.

4.5.4. Bids will remain sealed until the appointed date and time for opening.

4.5.5. Bids will be opened at a time and place prescribed in the RFP.

4.5.6. Bids will be reviewed and awarded by the Bid Evaluators, who will sign a form certifying they have no conflicts of interest. Each bid shall be reviewed by two (2) Bid Evaluators.

4.5.7. Any bid may be accepted or rejected, in whole or in part, as the Authority feels it to be in the best interest of the Authority. If any bid is rejected, the Authority will provide a written explanation to the bidder.

4.5.8. A bidder may make a change to a sealed bid before the bid opening. A bidder must submit changes in writing. To be effective, any change must be received prior to the date and time of the bid opening.

4.5.9. Bids will be open for public inspection at any time after the completion of the public bid opening.

4.5.10. When tie bids are received, the Authority shall break the tie by any of the following means: allowing the tied vendors to make a final offer, flip a coin, draw of the cards, or any other impartial method considered prudent by the Authority.

4.5.11. The proposed purchase must receive the approval of the Board.

4.5.12. The Authority may reject a bid that a vendor declares to be erroneous after the bid opening, but otherwise appears to be responsive, if all of the following conditions exist: (1) an error was made; (2) the error materially affected the bid; (3) rejection of the bid would not cause a hardship on the Authority, other than losing an opportunity to receive commodities, services or printing at a reduced cost; and (4) enforcement of the part of the bid in error would be unconscionable.

4.5.13. After award of any bids, the entire contract file will be made available to the public.

4.6. Protests. Protests apply only to bids, price quotes and awards made under Section 4.5.

4.6.1. The Authority will provide timely written notice to the vendors that were unsuccessful in their bid not being awarded.

4.6.2. Submission of Protest.

4.6.2.a. Protests based on bid specifications must be submitted no later than five (5) working days prior to the bid opening. The vendor is responsible for knowing the bid opening and award dates. Protests received after these dates may be rejected at the option of the Authority.

4.6.2.b. All protests must be submitted in writing to the Authority and contain the following information:

4.6.2.b.1. The name and address of the protestor;

4.6.2.b.2. The requisition, solicitation, purchase order or contract numbers;

4.6.2.b.3. A statement of the grounds of protest;

4.6.2.b.4. Supporting documentation, if necessary; and

4.6.2.b.5. The resolution or relief sought.

4.6.2.c. Failure to submit the information required by Subdivision 4.6.2.b. shall be grounds for rejection of the protest by the Authority.

4.6.3. Protest Review.

4.6.3.a. The Executive Director or the Associate Director or his or her designee shall review the matter of protest and issue a written decision. A hearing may be conducted at the option of the Executive Director or Associate Director or his or her designee. Continuation or delay of a purchase order or contract award is at the discretion of the Executive Director or Associate Director, or his or her designee.

4.6.3.b. The Authority may refuse to review any protests when the matter involved has been decided in a previous protest by the Authority.

W. Va. Code R. § 117-6-5 Bid Evaluation

5.1. Each Bid Evaluator must certify that no financial, personal, or other conflict of interest exists relating to any vendor or vendor representative that has submitted a bid. The Authority may develop a form that Bid Evaluators can sign for certification purposes.

5.2. From the time a requisition is submitted to the Authority for public advertisement until an award is made, Bid Evaluators are not permitted to communicate with vendors about the solicitation or any component thereof.

W. Va. Code R. § 117-6-6 Best Value Procurement

6.1. Requests for quotation are the preferred method of procurement, but the Authority may utilize a best value procurement method to procure goods, services, or printing. To utilize an RFP, there must be adequate justification explaining why an evaluation based on price and compliance with specifications alone would not be adequate. Each RFP shall be reviewed and approved in writing that it is in the best interest of the Authority.

W. Va. Code R. § 117-6-7 Open End Contracts

7.1. The Authority may secure open end contracts to obtain commodities, services, or printing to supply the repetitive needs of the Authority.

W. Va. Code R. § 117-6-8 Permitted Exceptions

8.1. Sole-Source Provider. Exceptions may be made to the provisions of this rule in instances where there is a “sole-source” provider.

8.2. Board Approved Emergency Exceptions. The Board may grant management of the Authority the ability to approve purchases or expenditures exceeding $10,001 through a motion for emergency matter. The motion must identify the project and the types of purchases or expenditures. Management must present to the Board on an after the fact basis all payments approved through the emergency matter exception.

W. Va. Code R. § 117-6-9 Remedies

9.1. Contract Cancellation.

9.1.1. The Executive Director or Associate Director may cancel a purchase a purchase or contract immediately under any one of the following conditions including, but not limited to:

9.1.1.a. The vendor agrees to the cancellation;

9.1.1.b. The vendor has obtained the contract by fraud, collusion, conspiracy, or is in conflict with any statutory or constitutional provision of the State;

9.1.1.c. Failure to honor any contractual term or condition or to honor standard commercial practices;

9.1.1.d. The existence of an organizational conflict of interest is identified;

9.1.1.e. Violation of any federal, state, or local law, regulation, or ordinance, and

9.1.1.f. The contract was awarded in error.

9.1.2. The Executive Director or Associate Director may cancel a purchase or contract for any reason or no reason, upon providing the vendor with 30 days' notice of the cancellation.

9.2. Opportunity to Cure. In the event that a vendor fails to honor any contractual term or condition, or violates any provision of federal, state, or local law, regulation, or ordinance, the Executive Director or Associate Director may request that the vendor remedy the contract breach or legal violation within a time frame the Executive Director or Associate Director determines to be appropriate. If the vendor fails to remedy the contract breach or legal violation or the Executive Director or Associate Director determines, at his or her sole discretion, that such a request is unlikely to yield a satisfactory result, then he or she may cancel immediately without providing the vendor an opportunity to perform a remedy.

9.3. Re-Award. The Executive Director or Associate Director may award the cancelled contract to the next lowest responsible bidder without a subsequent solicitation if the following conditions are met:

9.3.1. The next lowest responsible bidder (or next highest scoring bidder if best value procurement) is able to perform at the price contained in its original bid submission, and

9.3.2. The contract is an open-end contract, a one-time purchase contract, or a contract for work which has not yet commenced.

W. Va. Code R. § 117-6-10 Violations

10.1. The Authority shall suspend from bidding on Authority purchases up to one (1) year, any vendor violating this procedural rule.

10.2. Any person receiving anything of value from a known interested party in awarding a purchase order or contract is subject to the provisions of W. Va Code §5A-3-28, 29, 30 and 31 unless otherwise determined by the State Ethics Commission.

W. Va. Code R. § 117-6-11 Severability

11.1. If any word, phrase, or provision of this rule is held to be invalid, the remainder of the rule shall, to the fullest extent possible, not affected by that holding.