-----Original Message-----
From: 	Chad Landry  
Sent:	Thursday, May 10, 2001 8:06 PM
To:	Jean Ryall
Subject:	Legislative Analysis on SB 601

Below is the original e-mail I sent you on SB 601.  If you like, I could also walk you through the e-mail I sent you regarding "CAPCO Structures."

CKL
---------------------- Forwarded by Chad Landry/HOU/ECT on 05/10/2001 03:04 PM ---------------------------

 
Chad Landry
03/27/2001 01:47 PM
To:	Jean Ryall/NA/Enron@ENRON
cc:	 
Subject:	Legislative Analysis on SB 601

Senator Carona has sponsored a bill (SB 601) that will provide premium tax credits for Investment in Certified Capital Companies (Cap Co's).  A Certified Capital Company means a partnership, corporation, or trust or limited liability  company, whether organized on a profit or not-for-profit basis, that has as its primary business activity the investment of cash in qualified businesses and that is certifed as meeting the criteria of this subchapter.  

The comptroller by rule shall establish the application procedures for certifed capital companiesTo qualify as a certified capital company,  the applicant must have:
At the time of application for certification, an equity capitalization of at least $500, 000 in the form of unencumbered cash or cash equivalents;
At least two principals or persons employed to manage the funds of the applicant
Must have at least four years of experience in the venture capital industry   

These Cap Co's partner with Certified Investors (e.g. insurance companies or other person that has a state premium tax liability) to unlock the value of the premium tax credits.  This partnership involves the Certified Investor contributing capital to the Cap. Co.  in exchange for an allocation by the Cap Co. of premium tax credits to the Certified Investor.   Cap Co's use this certified capital to invest in Early stage businesses across the state of Texas.


Under SB 601, the Cap Co's are only allowed to make "qualified distributions" or payments.  These qualified distributions include:  the reasonable costs and expenses of forming, syndicating, managing, and operating the company, provided that the distribution or payment is not made directly or indirectly to a certified investor or an affiliate of a certified investor, including:  (i) reasonable and necessary fees paid for professional services, including legal and accounting services, related to the formation and operation of the company; and (ii) an annual management fee in an amount that does not exceed two and one-half percent of the value of the assets of the company.

CKL




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