Debate Expected on Limit for Venture Capital Tax Credits

By Paschal, Jan | THE JOURNAL RECORD, June 7, 1986 | Go to article overview

Debate Expected on Limit for Venture Capital Tax Credits


Paschal, Jan, THE JOURNAL RECORD


A debate over whether to set a limit on venture capital tax credits could crop up Monday when House and Senate conferees meet to review House Bill 1442, according to the bill's author, Rep. Robert Henry, D-Shawnee.

The bill would attempt to create, for the first time in Oklahoma, a pool of venture capital to fund new companies and expansions of existing firms - especially companies that develop and market innovative products or services.

The existing version of House Bill 1442 offers a tax credit equal to 20 percent of the investment in a qualified venture capital firm.

"Now some members are talking about a $5,000 cap on the tax credit," said Henry, who also is a candidate for attorney general.

"The only problem with that," Henry said of the proposed $5,000 cap, "is that it sounds good upon first blush. But when you think about it, it would make it very difficult, almost impossible, to raise venture capital.

"It would almost require a public offering and would have to come under the securities laws," Henry said.

Under the proposed 20 percent tax credit, a $5,000 cap on the tax break would limit investors to individual contributions of $25,000 each to a venture capital firm.

"It would be very difficult to raise the kind of money needed, under those conditions," Henry said. "We're thinking in terms of $5 million per company, and helping two or three companies, in terms of what we'd like to raise."

House Speaker Jim Barker, D-Muskogee, has told Henry he will back the bill. Barker also expressed his support for the bill two weeks ago in an interview with The Journal Record.

The venture capital bill was narrowly defeated last year on the last day of the 1985 legislative session.

Now, with only four days left in the 1986 session, Henry is facing a last-minute race to get House Bill 1442 passed.

"We may have a battle," Henry said. "It could be a long committee meeting because of the differing views on caps."

The House and Senate conferees will meet at 9:30 a.m. Monday in Room 412A at the state Capitol to discuss House Bill 1442.

Henry said he is considering two alternatives that could work, to produce a final compromise version of the venture capital bill:

"I thinking of either a much higher cap or controlling the revenue impact. We could have investors get permission from the Oklahoma Tax Commission before taking the tax credit, so we'll know how much money we've raised."

The depressed state of Oklahoma's economy makes the need for locally raised venture capital more critical than ever, Henry said.

A venture capital pool could mean the creation of thousands of new jobs in Oklahoma in the next few years, Henry said.

"We've got to help ourselves in Oklahoma," Henry said. "No one is going to come do it for us."

U.S. Sen. David Boren, D-Seminole, also has proposed a venture capital program as part of his "Operation: Bootstrap" plan to bolster the state's sagging economy.

Corporation Act Ready for Vote

The Oklahoma General Corporation Act, a revised version of a new corporate code for the state, was approved this week by a joint conference committee. The bill previously was known as the Oklahoma Business Corporation Act.

The proposed law is patterned after the corporate code of the state of Delaware, the most commonly used corporate code in international trade.

Most of Oklahoma's largest firms are incorporated in Delaware.

Rep. Robert Henry, the author of House Bill 1979, said a vote on the floor of the Oklahoma House of Representatives could be scheduled Monday.

Henry predicts the bill will pass.

"People think it's a logical example for us to follow the Delaware law," Henry said.

Many Oklahoma-based firms have avoided incorporating in Oklahoma because the existing corporate code is confusing and outdated, in many sections. …

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