Certified Louisiana Capital Companies (CAPCOs)
Certified Louisiana Capital Companies (CAPCOs) are licensed and regulated by the Louisiana Office of Financial Institutions and the Department of Economic Development.
Under the Louisiana Capital Companies Tax Credit Program, investors are granted tax credits, under certain circumstances, for investing in CAPCOs. CAPCOs are allowed to invest funds in return for equity in “qualified Louisiana businesses.” This type of financing assistance will encourage and assist in the creation, development, and expansion of Louisiana businesses and provide maximum opportunities for the employment of Louisiana citizens.
A qualified business “takes on a partner” when funds are invested by a CAPCO. Typically, a CAPCO concentrates on direct equity investments into a business (as much as 49% of a company’s stock could be required). CAPCOs will usually expect to cash in on their investment within five to ten years. Some will request a put option within five years, requiring that their partner buy them out at a pre-negotiated multiple of earnings or book value. CAPCOs are an effective source of financing for businesses that have a window of opportunity, yet are unable to capitalize on these opportunities in a timely manner because of limited internally generated funds and/or a lack of conventional financing.
In order to qualify for Certification, an initial capitalization of at least $200,000 is required. Please note that the ability of OFI to certify new CAPCOs ceased on June 30, 2003. An investor in a CAPCO receives either an income tax credit, calculated at 35% of the cash investment, on income taxed in the year in which the investment is made, or a premium tax credit, calculated at 100% of the cash investment, subject to certain limitations, which is taken over a minimum period of ten years. Any remaining income tax or premium tax credits may be carried forward until exhausted. The value of property or services contributed cannot be included for purposes of determining tax credits.
Many companies operate as both a CAPCO and a BIDCO. If you would like further information on these programs, please contact Deputy Chief Examiner Chris White at (225) 925-4639.