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Montana Venture capital bill popular with most

March 14, 2003 /

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A bipartisan coalition and business leaders lined up Thursday behind a bill aimed at spurring the creation of more venture capital investment in Montana companies.

By CHARLES S. JOHNSON, IR State Bureau

Senate Bill 465, or the Montana Capital Formation Act, by Senate Minority Leader Jon Tester, D-Big Sandy, drew 14 supporters and no opponents before the Senate Taxation Committee. The panel took no immediate vote.

"Venture capital in Montana is short, and it’s extremely important if we’re going to have business growth and jobs," Tester said.

The bill creates up to $50 million in state-issued, deferred contingent tax credits to provide incentives for banks, investment companies and insurance companies to invest in a new Montana Fund of Funds, which in turn would invest in a series of venture capital funds, he said.

A revolving fund would be created that receives the excess returns from the Fund of Funds that would be invested too. The tax credits would be used only if the Fund of Funds doesn’t provide its expected tax rate of return or profit.

State Auditor John Morrison, a Democrat and the state’s securities commissioner, said the bill was written by a diverse group to meet a great need in Montana.

"It’s difficult to get traditional venture capital companies interested in Montana unless we prime the pump a little bit," he said.

Morrison said the bill’s goal is to see three venture capital offices established in Montana in three years so they can invest in Montana businesses and provide a profit for the Fund of Funds.

The bill calls for a Montana capital investment board to determine who gets the tax credits. It also provides for a state government selection committee to pick a Montana capital investment administrator, who in turn would hire a capital investment fund allocation manager. Investors would invest money in the Montana Fund of Funds, which invests in competitive venture opportunities.

However, Sen. Bill Glaser, R-Huntley, said the bill creates a state debt and should require a two-thirds’ majority vote in each chamber. Others disagreed.

Glaser also warned the bill could stick future legislative sessions with reduced tax returns if the investment tax credits are exercised.

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