CHAPTER 177 SENATE BILL No. 554 (Amends Chapter 108)
      An Act concerning the Kansas venture capital company act; reauthorizing tax credits for
      cash investments in venture capital funds in which the Kansas technology enterprise
      corporation or its subsidiaries is an investor; amending K.S.A. 1997 Supp. 74-8401, as
      amended by section 7 of 1998 Senate Bill 487, and repealing the existing section.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 1997 Supp. 74-8401, as amended by section 7 of
1998 Senate Bill No. 487, is hereby amended to read as follows: 74-8401.
(a) There shall be allowed as a credit against the tax imposed by the
Kansas income tax act on the Kansas taxable income of a taxpayer and
against the tax imposed by K.S.A. 40-252 and amendments thereto on
insurance companies for cash investment in a certified local seed capital
pool an amount equal to 25% of such taxpayer's cash investment in any
such pool in the taxable year in which such investment is made and the
taxable years following such taxable year until the total amount of the
credit is used. The amount by which that portion of the credit allowed
by this section exceeds the taxpayer's liability in any one taxable year may
be carried forward until the total amount of the credit is used. If the
taxpayer is a corporation having an election in effect under subchapter S
of the federal internal revenue code or a partnership, the credit provided
by this section shall be claimed by the shareholders of such corporation
or the partners of such partnership in the same manner as such share-
holders or partners account for their proportionate shares of the income
or loss of the corporation or partnership.

(b) The total amount of credits allowable pursuant to this section and
credits allowable pursuant to K.S.A. 74-8205, 74-8206 and 74-8304, and
amendments thereto, shall be attributable to not more than $50,000,000
of cash investments in Kansas venture capital companies, Kansas Venture
Capital, Inc. and local seed capital pools. With respect to the additional
amount of cash investments made eligible for tax credits by this act,
$10,000,000 of such amount shall be dedicated and reserved until De-
cember 31, 1990, for cash investments in a seed capital fund or funds in
which the Kansas technology enterprise corporation, or its subsidiaries,
is an investor. The $50,000,000 amount of cash investments now eligible
for the tax credits allowed pursuant to this section and K.S.A. 74-8205,
74-8206 and 74-8304 and amendments thereto shall be reduced to the
extent that the total amount of cash investments received by such seed
capital fund or funds before January 1, 1991, is less than $10,000,000.
However, any such credits which were not claimed for investments made
prior to January 1, 1991, may be allowed to a taxpayer for cash investment
made in Kansas Venture Capital, Inc. pursuant to K.S.A. 74-8205 and 74-
8206, and amendments thereto, not to exceed $2,595,236 of the
$10,000,000 reserved under this subsection for investment in seed capital
funds in which the Kansas technology enterprise corporation or its sub-
sidiaries was an investor. A taxpayer may also be allowed a credit for cash
investment made pursuant to K.S.A. 74-8304, and amendments thereto
not to exceed $6,012,345 of the $10,000,000 reserved under this subsection
if such taxpayer first purchases the entire interest of the Kansas technol-
ogy enterprise corporation or its subsidiaries in Kansas venture capital
companies established prior to January 1, 1991. However, no credit shall
be allowed for cash investment which results in the purchase of the in-
terest of the Kansas technology enterprise corporation or its subsidiaries
in Kansas venture capital companies established prior to January 1, 1991.

(c) As used in this section, (1) ``local seed capital pool'' means money
invested in a fund established to provide funding for use by small busi-
nesses for any one or more of the following purposes: (A) Development
of a prototype product or process; (B) a marketing study to determine
the feasibility of a new product or process; or (C) a business plan for the
development and production of a new product or process;

(2) ``Kansas business'' means any small business owned by an individ-
ual, any partnership, association or corporation domiciled in Kansas, or
any corporation, even if a wholly owned subsidiary of a foreign corpora-
tion, that does business primarily in Kansas or does substantially all of its
production in Kansas.

(d) No credit from income tax liability shall be allowed for cash in-
vestment in a local seed capital pool unless: (1) The amount of private
cash investment therein is $200,000 or more; (2) the moneys necessary
to administer and operate the pool are funded from sources other than
the private and public cash investments; and (3) funds invested by the
local seed capital pool shall be invested at 100% in Kansas businesses.

(e) Public funds may be invested in a local seed capital pool except
that each dollar of public funds, other than that which may be used to
administer and operate a pool, shall be matched by not less than $2 of
private cash investment. Public funds shall have a senior position to any
private cash investment and may receive a lower rate of return than that
allowable for a private cash investment.

(f) The provisions of this section, and amendments thereto, shall be
applicable to all taxable years commencing after December 31, 1986.

Sec. 2. K.S.A. 1997 Supp. 74-8401, as amended by section 7 of 1998
Senate Bill No. 487, is hereby repealed.

Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved May 13, 1998

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