Section 10-3.5-109 - Annual review - decertification - penalties(1) The office shall conduct an annual review of each certified capital company to determine whether the certified capital company is abiding by the requirements of certification, to advise the certified capital company as to the eligibility status of its qualified investments, and to ensure that no investment has been made in violation of this article. The cost of the annual review shall be paid by each certified capital company according to a reasonable fee schedule adopted by the office.(2)(a)(I) Within the period ending ten years after an allocation date, a certified capital company shall have made qualified investments in an amount cumulatively equal to:(A) One hundred percent of the certified capital allocated to its certified investors on such allocation date. Failure to comply with this requirement shall not subject the certified capital company to decertification.(B) At least one-third of the certified capital allocated to its certified investors under section 10-3.5-106 (2)(a)(II) in qualified businesses that are in the seed or early stage. Seed or early stage investments of certified capital allocated under section 10-3.5-106 (2)(a)(II) and section 10-3.5-106 (2)(a)(I) shall both count toward meeting the requirement of this sub-subparagraph (B). Failure to comply with this requirement shall not subject the certified capital company to decertification.(II) Beginning on the tenth anniversary of an allocation date, a certified capital company shall make no further distributions of any kind, including qualified distributions, from certified capital or proceeds or gains from any type of investment of certified capital, unless and until the certified capital company has made qualified investments cumulatively equal to one hundred percent of the certified capital allocated to its certified investors on such allocation date; except that this subparagraph (II) shall not prohibit payments on indebtedness of the certified capital company, including indebtedness to certified investors, on qualified debt instruments or distributions permitted by section 10-3.5-108 (2)(b).(III) If a certified capital company fails to have made qualified investments cumulatively equal to one hundred percent of the certified capital allocated to its certified investors on such allocation date within the period ending:(A) Twelve years after an allocation date, the percentage reported to the division of housing in section 10-3.5-108 (3)(b) shall equal sixty percent.(B) Sixteen years after an allocation date, the percentage reported to the division of housing in section 10-3.5-108 (3)(b) shall equal one hundred percent, and the economic development commission shall have the authority over all monetary and investment assets of the certified capital company, including, but not limited to, the ability to select a new manager for all future investments of the certified capital company's assets.(b) Any material violation of section 10-3.5-107 shall be grounds for decertification of the certified capital company, assessment of an administrative fine determined by the office by rule, or both. Any material violation of this article occurring on or after May 27, 2004, shall be grounds for assessment of an administrative fine pursuant to a schedule determined by the office by rule. Violations involving a use of funds that is unauthorized under this article shall require the repayment or reinvestment of the funds, and fines for such violations shall not exceed an amount equal to the amount of funds involved. Fines for violations not involving the misuse of funds shall not exceed one hundred thousand dollars. If the office determines that a certified capital company is not in compliance with the requirements referenced in this paragraph (b), it shall, by written notice, inform the officers of the certified capital company that the certified capital company may be subject to decertification, or the assessment of a fine as allowed by this paragraph (b), one hundred twenty days after the date of mailing of the notice unless the deficiencies are corrected and the certified capital company is again in compliance with all requirements for certification.(c)(I) For the purpose of determining compliance with this article, including all requirements for distributions and certification, regardless of any claim that such records or operations are confidential or otherwise exempt from inspection, the office may, upon reasonable notice, inspect the records and operations of:(A) A certified capital company; or(B) If the information received pursuant to sub-subparagraph (A) of this subparagraph (I) is insufficient, a qualified business or qualified rural business.(II) A record that is exempt from inspection pursuant to section 24-72-204, C.R.S., shall be exempt from inspection while in the custody of the office if the requirements of part 2 of article 72 of title 24, C.R.S., are complied with, and the office and its employees shall not disclose the confidential or exempt portions of the contents of any such record to anyone outside of the office unless disclosure of the confidential or exempt portions of the contents of such record is required to effectuate final administrative action against a certified capital company pursuant to this section.(3) At the end of the one-hundred-twenty-day period provided in subsection (2) of this section, if the certified capital company is still not in compliance with the requirements referenced in paragraph (b) of subsection (2) of this section, the office may do either or both of the following, as appropriate: (a) Send a notice of decertification to the certified capital company and to all other appropriate state agencies, including without limitation the division of insurance in the department of regulatory agencies;(b) Assess an administrative fine pursuant to paragraph (b) of subsection (2) of this section against the certified capital company. The assessment shall occur only after the director of the office holds a hearing in accordance with section 24-4-105, C.R.S. Judicial review may be obtained in the court of appeals pursuant to section 24-4-106 (11), C.R.S. The office shall transfer any such fine that it receives to the state treasurer, who shall credit it to the general fund.(4) Decertification of a certified capital company may cause the recapture of premium tax credits previously claimed and the forfeiture of future premium tax credits to be claimed by certified investors with respect to such certified capital company, as follows: (a) Decertification of a certified capital company within three years after an allocation date shall cause the recapture of all premium tax credits allocated to its certified investors on such allocation date that were previously claimed and the forfeiture of all premium tax credits allocated to its certified investors on such allocation date that are still to be claimed by certified investors with respect to such certified capital company.(b) When a certified capital company meets all requirements for continued certification under section 10-3.5-107 (1)(a) with respect to certified capital allocated on a particular allocation date and subsequently fails to meet the requirements for continued certification under the provisions of section 10-3.5-107 (1)(b) with respect to such certified capital, those premium tax credits allocated to the certified investors of the certified capital company on such allocation date that have been or will be taken by certified investors within three years after such allocation date shall not be subject to recapture or forfeiture, but all other premium tax credits allocated to the certified investors of the certified capital company on such allocation date that have been or will be taken by certified investors shall be subject to recapture or forfeiture.(c) Once a certified capital company has met all requirements for continued certification under section 10-3.5-107 (1) with respect to certified capital allocated on a particular allocation date and is subsequently decertified, those premium tax credits allocated to the certified investors of the certified capital company on such allocation date that have been or will be taken by certified investors within five years after such allocation date shall not be subject to recapture or forfeiture. Those premium tax credits allocated to the certified investors of the certified capital company on such allocation date to be taken after the fifth anniversary of such allocation date shall be subject to forfeiture only if the certified capital company is decertified within five years after such allocation date.(d) Once a certified capital company has invested an amount cumulatively equal to one hundred percent of the certified capital allocated to its certified investors on a particular allocation date in qualified investments, all premium tax credits allocated to such certified investors on such allocation date that were claimed or remain to be claimed by its certified investors are no longer subject to recapture or forfeiture.(5) Once a certified capital company has invested an amount cumulatively equal to one hundred percent of its certified capital in qualified investments and complied with sections 10-3.5-107 (3)(a) and 10-3.5-108 (2)(a)(I)(B), the certified capital company shall no longer be subject to regulation by the office except insofar as is necessary to oversee the distributions made pursuant to section 10-3.5-108 (3)(b).(6) The office shall send written notice to the address of each certified investor whose premium tax credit has been subject to recapture or forfeiture, using the address shown on the most recent premium tax filing.(7) The office shall have the authority to waive any recapture or forfeiture of credits if, after considering all facts and circumstances, it determines that such waiver will have the effect of furthering the economic development of the state.L. 2001: Entire article added, p. 1538, § 1, effective June 9. L. 2004: (2), (3), and (5) amended, p. 1248, § 6, effective May 27.