2015-2016 Bill 3088: S.C. Small Business Tax Incentives Act - South Carolina Legislature Online

1 South Carolina General Assembly 2 121st Session, 2015-2016 3 4 H. 3088 5 6 STATUS INFORMATION 7 8 General Bill 9 Sponsors: Reps. Loftis, Burns, Henderson, G.R. Smith, Whipper and Hodges 10 Document Path: l:\council\bills\bbm\9104htc15.docx 11 12 Introduced in the House on January 13, 2015 13 Introduced in the Senate on May 27, 2015 14 Last Amended on May 26, 2015 15 Currently residing in the Senate Committee on Finance 16 17 Summary: S.C. Small Business Tax Incentives Act 18 19 20 HISTORY OF LEGISLATIVE ACTIONS 21 22 Date Body Action Description with journal page number 23 12/11/2014 House Prefiled 24 12/11/2014 House Referred to Committee on Ways and Means 25 1/13/2015 House Introduced and read first time ( House Journalpage 91) 26 1/13/2015 House Referred to Committee on Ways and Means ( House Journalpage 91) 27 2/5/2015 House Member(s) request name added as sponsor: Whipper 28 5/21/2015 House Committee report: Favorable with amendment Ways and Means (House 29 Journalpage 27) 30 5/26/2015 House Member(s) request name added as sponsor: Hodges 31 5/26/2015 House Amended ( House Journalpage 43) 32 5/26/2015 House Read second time ( House Journalpage 43) 33 5/26/2015 House Roll call Yeas96 Nays3 34 5/26/2015 Scrivener's error corrected 35 5/27/2015 House Read third time and sent to Senate ( House Journalpage 11) 36 5/27/2015 Senate Introduced and read first time ( Senate Journalpage 26) 37 5/27/2015 Senate Referred to Committee on Finance ( Senate Journalpage 26) 38 39 View the latest legislative information at the website 40 41 42 VERSIONS OF THIS BILL 43 44 12/11/2014 45 5/21/2015 46 5/26/2015 47 5/26/2015-A 48 1 AMENDED 2 May 26, 2015 3 4 H. 3088 5 6 Introduced by Reps. Loftis, Burns, Henderson, G.R. Smith, 7 Whipper and Hodges 8 9 S. Printed 5/26/15--H. 10 Read the first time January 13, 2015. 11 12

[3088-2] 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 12 1976, BY ADDING ARTICLE 10 TO CHAPTER 6, TITLE 12 13 SO AS TO ENACT THE “SOUTH CAROLINA SMALL 14 BUSINESS TAX INCENTIVES ACT”, ALLOWING VARIOUS 15 INCOME TAX DEDUCTIONS AND CREDITS FOR 16 RESIDENT TAXPAYERS FOR INVESTMENT IN QUALIFIED 17 BUSINESSES IN THIS STATE AND TO ALLOW A JOBS TAX 18 CREDIT AND AN ADDITIONAL TAX CREDIT FOR 19 QUALIFIED RESEARCH EXPENSES FOR SUCH 20 BUSINESSES; TO AMEND SECTION 351202, RELATING TO 21 TRANSACTIONS WHICH ARE EXEMPT FROM THE 22 REQUIREMENTS OF SPECIFIC PROVISIONS OF 23 SECURITIES LAW INCLUDING REGISTRATION 24 REQUIREMENTS, SO AS TO EXEMPT ANY OFFER OR 25 SALE OF A SECURITY BY AN ISSUER IF THE OFFER OR 26 SALE IS CONDUCTED IN ACCORDANCE WITH SECTION 27 351205; AND BY ADDING SECTION 351205 SO AS TO 28 AUTHORIZE CERTAIN QUALIFIED COMPANIES IN THIS 29 STATE TO SOLICIT INVESTMENTS FROM QUALIFIED 30 RESIDENT INVESTORS IN THIS STATE IN ORDER TO 31 ENABLE THEM TO RAISE MONEY ON AN INTRASTATE 32 BASIS. 33 Amend Title To Conform 34 35 Be it enacted by the General Assembly of the State of South 36 Carolina: 37 38 SECTION 1. Section 351202 of the 1976 Code, as added by Act 39 110 of 2005, is amended by adding a new item appropriately 40 numbered to read: 41

[3088] 3 1 “( ) any offer or sale of a security by an issuer if the offer or 2 sale is conducted in accordance with Section 351205.” 3 4 SECTION 2. Article 2, Chapter 1, Title 35 of the 1976 Code is 5 amended by adding: 6 7 “Section 351205. (A) Except as otherwise provided in this 8 chapter, an offer or sale of a security by an issuer is exempt from 9 the provisions of Sections 351301 through 351306, and Section 10 351504, if the offer or sale is conducted pursuant to this section. 11 (B) The securities commissioner, consistent with the provisions 12 of this section, Section 3(a)(11) of the Securities Act of 1933, 15 13 U.S.C. Section 77c(a)(11), and SEC Rule 147, 17 C.F.R. Part 14 230.147, shall exempt a security, transaction, or offer of securities 15 from registration requirements otherwise required. The exemption 16 applies in this State beginning on the effective date of the 17 implementing rule, order, or regulation of the securities 18 commissioner. 19 (C) As used in this section: 20 (1) ‘Qualified security’ means any note, stock, treasury stock 21 bond, debenture, evidence of indebtedness, certificate of interest or 22 participation in any profitsharing agreement, reorganization 23 certificate or subscription, transferable share, investment contract, 24 certificate of deposit for a security, certificate of interest or 25 participation in a patent or application therefore or in royalty or 26 other payments under such a patent or application, or, in general, 27 any interest or instrument commonly known as a security or any 28 certificate for, receipt for, guarantee of, or option, warrant, or right 29 to subscribe to or purchase any of the foregoing of a qualified 30 company. 31 (2) ‘Qualified company’ means a forprofit, private company 32 registered and domiciled in this State. 33 (3) ‘Qualified resident investor’ means an individual who 34 resides in and is domiciled in this State and files South Carolina 35 individual income tax returns. 36 (4) ‘Disclosure brochure’ means a brochure produced and 37 updated by the securities commissioner for distribution to qualified 38 investors, qualified companies, and professional business 39 intermediaries engaged in a South Carolina private intrastate 40 securities offering. 41 (D) A qualified company may raise an unlimited amount of 42 capital from qualified resident investors, and a qualified resident

[3088] 4 1 investor who is an accredited investor as defined pursuant to this 2 chapter may invest an unlimited amount in qualified companies. 3 (E) A qualified investor, who is not an accredited investor as 4 defined in Rule 501(a) of Regulation D, may not purchase more 5 than a total annual investment in qualified companies of: 6 (1) ten percent of the greater of annual income or net worth 7 for natural persons; or 8 (2) ten percent of the greater of annual revenue or net assets 9 at the end of the fiscal year for nonnatural persons. 10 (F) A commission, fee, or other remuneration, may not be paid 11 or given, directly or indirectly, for any person’s participation in the 12 offer or sale of qualified intrastate securities for the issuer unless 13 the person is registered either as a brokerdealer, an investment 14 advisor, or private placement agent pursuant to this section. 15 (G) All investment funds and capital received from qualified 16 investors by a qualified company must be deposited into a bank or 17 depository institution authorized to do business in this State, and 18 all funds must be used in accordance with representations made to 19 investors. 20 (H) Fifteen days before the issue of any public general 21 solicitation or advertising, the issuer shall provide the Form D 22 notice to the securities commissioner in writing or in electronic 23 form. The notice must specify that the issuer is conducting an 24 offering in reliance upon this exemption allowed by this section 25 and must contain the names and addresses of the following persons 26 and information related to the offering: 27 (1) the issuer; 28 (2) all persons involved in the offer or sale of securities on 29 behalf of the issuer; 30 (3) the bank or other depository institution in which investor 31 funds are deposited; and 32 (4) the term sheet provided to investors regarding the terms 33 and conditions of the offering. 34 (I) The issuer may not be, either before or as a result of the 35 offering, an SEC registered investment company as defined in 36 Section 3 of the Investment Company Act of 1940, 15 U.S.C. 37 Section 80a3, or a company subject to the reporting requirements 38 of Section 13 or 15(d) of the Securities Exchange Act of 1934, 15 39 U.S.C. Sections 78m and 78o(d), as adopted by reference in this 40 chapter. 41 (J) The issuer shall inform all purchasers that the securities 42 have not been registered and, as a result, may not be resold, within 43 twelve months of purchase, unless the securities are registered or

[3088] 5 1 qualify for an exemption from registration pursuant to this chapter. 2 In addition, the issuer shall provide each investor a copy of the 3 investment disclosure brochure, and obtain a signed copy of that 4 brochure from the investor, before providing the investor a copy of 5 the term sheet, related to the offering. 6 (K) Before accepting or depositing investor funds or capital, the 7 issuer shall provide each investor a copy of the term sheet, and the 8 private placement memo related to the terms and conditions of the 9 offering. 10 (L) The securities commissioner may adopt rules, issue orders, 11 or promulgate regulations as applicable, pursuant to this chapter to 12 register and regulate intrastate private investment companies, 13 pursuant to rules contained in Title II of the JOBS Act of 2012, 14 and Regulation D Rule 506(c). Private equity fund companies are 15 statechartered economic, business, and industrial development 16 companies that provide financial or managerial assistance to 17 qualified business enterprises engaged in the activities described in 18 Section 1261520(1). Securities of the private equity fund 19 companies only may be sold to accredited qualified resident 20 investors or to resident or nonresident qualified institutional buyers 21 (QIBs) defined pursuant to Rule 144A of the Securities Act of 22 1933. 23 Any such private equity fund company must engage in the 24 transaction of business pursuant to the exemption from registration 25 pursuant to the Investment Company Act of 1940 afforded to 26 economic, business, and industrial development companies as 27 provided for by Section 6(a)(5) of the Investment Company Act of 28 1940, as amended pursuant to 15 U.S.C. Section 80a6(a). 29 Federal or state registered investment advisors who provide 30 advice and fund management for private investment companies 31 must be licensed in this State and shall file Form ADV Part I and 32 Part II with the securities commissioner. Advisers to private 33 equity funds are not subject to statutory disqualifications contained 34 pursuant to the JOBS Act of 2012. Investment advisers to private 35 equity funds are subject to the general antifraud requirements of 36 Rule 206(4)8 pursuant to the Investment Advisers Act of 1940, 37 Advisers Act, and to the antifraud provisions of this chapter. 38 (M) The provisions of Article 5 of this chapter apply to 39 securities issued pursuant to this section, mutatis mutandis.” 40 41 SECTION 3. This act takes effect upon approval by the 42 Governor. 43 XX

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