<p> IACA List Serve Discussion Initiated on August 7, 2015</p><p>Robert Lindsey VA 8/07/15</p><p>Subject: Special benefit for certain persons who form Business Entities</p><p>Good afternoon! We have an interesting question(s) to pose to the BOS list serve for this Friday afternoon and we are anxious to see what other jurisdictions are seeing in their States regarding providing special benefits for certain defined class of persons.</p><p>A. Does any jurisdiction provide a special benefit to a defined class of persons (such as military veterans, college students or small business owners) who seek to form corporations, limited liability companies, limited partnerships, business trusts, etc.? A special benefit might be an exemption from paying the fees associated with forming a business entity, reimbursement/refund of all or a portion of these fees, or a state tax credit for these fees.</p><p>B. If a jurisdiction provides a special benefit, how was it created – statute, filing office rule or other means (please include the citation to the statute/rule or explain the “other means”)?</p><p>C. If a jurisdiction provides such a benefit: </p><p>1. How does it validate/verify that the filer qualifies for the benefit? </p><p>2. How many times or how often can the same person make use of the benefit?</p><p>3. How many times has the benefit been used in a given period of time (e.g., a month, quarter, year)?</p><p>4. Has the benefit been misused and, if so, to what extent?</p><p>5. What are the consequences if a person is found to have misused the benefit?</p><p>Any other information or comments regarding this subject will be appreciated.</p><p>As always, thanks in advance for your valuable input regarding this and other list serve questions.</p><p>Robert Lindsey</p><p>Jurisdiction’s that currently do not provide special benefits for defined classes</p><p>Arizona, District of Columbia, Florida, Hawaii, Indiana, Montana, Nevada, North Carolina, Ohio, Pennsylvania, Rhode Island, Utah, Oregon, Washington Carmen Flores Texas August 7, 2015</p><p>The Texas Legislature recently enacted Senate Bill 1049, which amends the Tax Code and our Business Organizations Code (BOC) to exempt a taxable entity (i.e., a corporation, limited liability company, and certain limited partnerships) that meets the definition of a new veteran- owned business from franchise tax and the filing fees imposed under the BOC for filings made with the secretary of state.</p><p>An entity qualifies as a new veteran-owned business only if each owner is a natural person who served in and was honorably discharged from a branch of the United States armed forces and provides verification of the person’s service and discharge to the Comptroller of Public Accounts.</p><p>The exemption from franchise tax and waiver of filing fees continues until the earlier of: 1) the fifth anniversary of the date on which the business entity was formed, or 2) until the entity ceases to qualify as a new veteran-owned business. The changes to the Tax Code and BOC are effective on January 1, 2016 and are repealed effective January 1, 2020. A business entity that first qualifies as a new veteran-owned business before January 1, 2020, is governed by the law in effect immediately before that date, and the repealed law is continued in effect for that purpose. </p><p>We (Comptroller of Public Accounts and SOS) are currently trying to figure out how this is going to work. </p><p>Bert Black Minnesota August 7, 2015</p><p>Minnesota provides for reinstatement at no charge if an entity has been administratively dissolved, under Minnesota Statutes, section 5.33:</p><p>5.33 RETURNING COMBAT VETERANS.</p><p>If any Minnesota business or nonprofit corporation, limited liability company, cooperative, limited partnership, or limited liability partnership has been administratively or statutorily dissolved, revoked, or terminated after December 31, 2006, for failure to file an annual or periodic report with the Office of the Secretary of State during a calendar year when an individual with substantial responsibility for the operation of the dissolved, revoked, or terminated business or nonprofit corporation, limited liability company, cooperative, limited partnership, or limited liability partnership was serving in active military service in the armed forces of the United States, including the reserves or National Guard, as defined in section 190.05, subdivision 5b or 5c, or was engaged in employment outside of the United States essential to the prosecution of a war or to the national defense, as designated by the United States Congress or the United States Department of Defense, the secretary of state shall waive any reinstatement fee otherwise required by law.</p><p>I do not believe anyone has ever taken advantage of this section, so I cannot answer your question C as there is no data. Alexis Chadderdon Michigan August 11, 2015</p><p>Below are the responses from Michigan in bold:</p><p>A. Does any jurisdiction provide a special benefit to a defined class of persons (such as military veterans, college students or small business owners) who seek to form corporations, limited liability companies, limited partnerships, business trusts, etc.? A special benefit might be an exemption from paying the fees associated with forming a business entity, reimbursement/refund of all or a portion of these fees, or a state tax credit for these fees.</p><p>In Michigan, certain filing fees, certificate fees, and certified copy fees may be waived for honorably discharged veterans based on entity type.</p><p>Section 1101(7) of the Michigan Limited Liability Company Act provides for the waiver of fees if a majority of the membership interests in the limited liability company responsible for paying the fee are held by one or more honorably discharged veterans. However, since a limited liability company does not exist until the Articles of Organization have been filed, no membership interest can be held; therefore, the filing fee for the Articles of Organization cannot be waived. After the Articles of Organization are filed, then the fees can be waived for subsequent documents and the company’s Annual Statement.</p><p>Section 1060(10) of the Business Corporation Act provides for the waiver of fees if a majority of shares are held by one or more honorably discharged veterans. Since a corporation does not exist until the Articles of Incorporation have been filed, there are no shareholders; therefore, the filing fee for the Articles of Incorporation cannot be waived. After the Articles of Incorporation are filed, then the fees can be waived for subsequent documents and the company’s Annual Report.</p><p>Section 1060(5) of the Michigan Nonprofit Corporation Act, 1972 PA 284 states:</p><p>The administrator shall waive the fee for filing initial articles of incorporation, otherwise required under subsection (1), if a majority of the initial members of a membership corporation, initial directors of a directorship corporation, or initial shareholders of a stock corporation, as applicable, are, or if applicable the initial members, initial directors, or initial shareholders will be, individuals who served in the armed forces and were separated from that service with an honorable character of service or under honorable conditions (general) character of service.</p><p>B. If a jurisdiction provides a special benefit, how was it created – statute, filing office rule or other means (please include the citation to the statute/rule or explain the “other means”)?</p><p>The waiver of fees was created by statute:</p><p>2012 PA 310 amended Section 1101 of the Michigan Limited Liability Company Act to add Section 1101(7).</p><p>2012 PA 315 amended Section 1060 of the Business Corporation Act to add Section 1060(10). 2012 PA 309 amended Section 1060 of the Nonprofit Corporation Act to add Section 1060(5) and 2014 PA 557 amended Section 1060 of the Nonprofit Corporation Act to modify Section 1060(5) and add Section 1060(6) and (10).</p><p>C. If a jurisdiction provides such a benefit: </p><p>1. How does it validate/verify that the filer qualifies for the benefit? </p><p>Profit Corporations and Limited Liability Companies</p><p>To request a fee waiver, both of the following must be submitted to the department:</p><p>- A form DD-214, form DD 215, or any other form that is satisfactory to the department that demonstrates he or she was separated from that service with an honorable character of service or under honorable conditions (general) character of service for each qualifying shareholder or holder of a membership interest.</p><p>- A signed statement, by the shareholders or members, detailing the honorably discharged veterans who hold the majority interests and the percent of interest held by each honorably discharged veteran.</p><p>Nonprofit Corporations</p><p>To request a fee waiver under subsection (5), the person that is submitting the document for filing shall submit both of the following to the administrator with the document: </p><p>- A signed affidavit requesting the fee waiver and certifying that a majority of the initial members of the membership corporation, initial directors of the directorship corporation, or initial shareholders of the stock corporation, as applicable, are, or if applicable the initial members, initial directors, or initial shareholders will be, individuals who served in the armed forces and were separated from that service with an honorable character of service or under honorable conditions (general) character of service.</p><p>- Copies of form DD214 or form DD215, or any other form that is satisfactory to the department, for each individual described in subsection (5) who is or will be an initial member of the corporation, initial director of the corporation, or initial shareholder of the corporation, as applicable.</p><p>2. How many times or how often can the same person make use of the benefit?</p><p>The statute does not set a limit to the number of times or how often the fee waiver can be used, so long as the statutory requirements are met.</p><p>3. How many times has the benefit been used in a given period of time (e.g., a month, quarter, year)?</p><p>Approximately 200 times since the statutory amendments were effective on October 1, 2012. 4. Has the benefit been misused and, if so, to what extent? </p><p>Not to our knowledge.</p><p>5. What are the consequences if a person is found to have misused the benefit?</p><p>Not addressed in the statute. Additional Comments DC</p><p>In DC we do not have any special benefits for any given group. </p><p>We are considering reduction in reinstatement fees for business that will meet the definition of “small business”. We are looking for doing it through revising our regulations governing the fees.</p><p>The problem is the definition of “small business” and how we are going to validate this on processing level.</p><p>No specific focus on veterans although we will work with them on case by case basis in terms of waiving some of the reinstatement fees using our administrative discretion. We have not considered waiving the entire base fees but will consider waiving late fees and expedited fees. Ohio</p><p>Our office does not provide a special benefit to a defined class of persons, however, the idea has been discussed recently so these responses are helpful. In particular we have talked about a reduced fee or no fee for a veteran starting a business. With this very early conversations we have raised a few questions about how to apply this benefit – is it for one business per veteran, how do we track it and how should we verify their status?</p>