Session of 2000
By Representative Helgerson

  9             AN  ACT establishing the Kansas certified capital company act.
11       Be it enacted by the Legislature of the State of Kansas:
12             Section  1. This act shall be known and may be cited as the "Kansas
13       certified capital company act." The purpose of this act is to enhance the
14       development of seed and venture capital in Kansas and to support the
15       modernization and expansion of the state's rural economy. As used in this
16       act, unless the context clearly requires otherwise, the following terms
17       mean:
18             (a) "Affiliate of a certified capital company" means:
19             (1) Any person that directly or indirectly, owns, controls or possesses
20       the power or ability to vote 10% or more of the outstanding voting se-
21       curities or other beneficial ownership interests of the Kansas certified
22       capital company;
23             (2) any person 10% or more of whose outstanding voting securities
24       or other beneficial ownership interests are directly or indirectly owned,
25       controlled or possessed of the power to be voted by the Kansas certified
26       capital company;
27             (3) any person directly or indirectly controlling, controlled by or un-
28       der common control of the Kansas certified capital company;
29             (4) any partnership in which the Kansas certified capital company is
30       a general partner; or
31             (5) any person who is an officer, director, general partner, managing
32       member, manager director or agent of the Kansas certified capital com-
33       pany or an immediate family member of such person.
34             (b) "Affiliate of an investor" means:
35             (1) Any person that directly or indirectly, owns, controls or possesses
36       the power or ability to vote 10% or more of the outstanding voting se-
37       curities or other beneficial ownership interests of the investor;
38             (2) any person 10% or more of whose outstanding voting securities
39       or other beneficial ownership interests are directly or indirectly owned,
40       controlled or possessed with the power to be voted by the investor;
41             (3) any person directly or indirectly controlling, controlled by or un-
42       der common control with the investor;
43             (4) a partnership in which the investor is a general partner; or


  1             (5) any person who is an officer, director or agent of the investor or
  2       an immediate family member of such officer, director or agent.
  3             (c) "Applicable percentage" means 100%.
  4             (d) "Capco" means any certified capital company.
  5             (e) "Capital in a qualified Kansas business" means any note, stock,
  6       partnership or membership interest or other form of equity investment
  7       or hybrid security, of any nature and description whatsoever, including a
  8       debt instrument or security which has the characteristics of indebtedness
  9       but which provides for conversion into equity or equity participation in-
10       struments such as options or warrants which are acquired by a Kansas
11       certified capital company as a result of a transfer of cash to a business.
12       Capital in a qualified Kansas business shall not include secured debt
13       instruments.
14             (f) "Certified capital" means cash, marketable securities and other
15       assets held by a certified capital company equal to the amount of certified
16       capital investment made by investors in the certified capital company.
17             (g) "Certified capital company" means any partnership, corporation,
18       trust or limited liability company, whether organized on a profit or not
19       for profit basis, that is domiciled in and qualified to conduct business in
20       Kansas and that has as its primary business activity, the investment of cash
21       in qualified Kansas businesses, and which is certified by the secretary as
22       satisfying the criteria of this act.
23             (h) "Certified capital investment" means an investment of cash by an
24       investor made in such manner as to acquire a beneficial ownership inter-
25       est in a Kansas certified capital company.
26             (i) "Commissioner" means the securities commissioner of Kansas or
27       persons acting under the supervision of the commissioner.
28             (j) "In existence" means the date of the first sale of goods or services
29       by a qualified Kansas business or a business seeking to be so qualified.
30             (k) "Investor" means any person that invests cash. If the investor is
31       a natural person, the investor shall have a net worth of at least $1,000,000
32       and such net worth shall be at least 10 times the amount of the investor's
33       certified investment in a capco. The investor's net worth shall not include
34       the value of any equity in the investor's primary residence.
35             (l) "Liquidating distribution" means any distribution other than a
36       qualified distribution.
37             (m) "Person" means any natural person or any business association,
38       including but not limited to, a corporation, limited liability company, gen-
39       eral or limited partnership or trust.
40             (n) "Qualified distribution" means any distribution or payment re-
41       mitted to equity holders of a certified capital company for costs and ex-
42       penses of forming, syndicating, managing or operating the certified capital
43       company, including an annual management fee and reasonable and nec-


  1       essary fees in accordance with industry custom for professional fees in-
  2       cluding, but not limited to, legal and accounting fees, relating to operating
  3       the certified capital company.
  4             (o) "Qualified Kansas business" means:
  5             (1) A business that satisfies the requirements of subparagraphs (A)
  6       through (F) of this subsection.
  7             (A) Such business is independently owned and operated and has its
  8       principal business office located in Kansas or, in the case of a company
  9       domiciled outside the state of Kansas, which certifies that the company's
10       principal business office will be located in Kansas within six months fol-
11       lowing the date of the initial investment.
12             (B) At least 50% of the employees of the business shall reside in
13       Kansas or, in the case of a company domiciled outside the state of Kansas,
14       certifies that at least 50% of its employees will reside in Kansas within six
15       months following the date of the initial qualified venture capital
16       investment.
17             (C) Such business is in need of venture capital and cannot obtain
18       conventional financing to fund its further development and future
19       operations.
20             (D) Such business shall be engaged in commerce for the purpose of
21       manufacturing, processing, assembling or distributing products, conduct-
22       ing research and development or providing services in interstate
23       commerce.
24             (E) For businesses involved in commerce for the purpose of provid-
25       ing services in interstate commerce, that business must demonstrate that
26       more than 50% of its gross revenues are derived from sales outside the
27       state of Kansas, or in the case of an early stage business, provide reason-
28       able documentation that the company will derive at least 50% of its gross
29       sales outside the state within a three-year period.
30             (F) Such business, at the time of the initial qualified venture capital
31       investment, shall have been in existence less than five years and shall not
32       have had gross sales in excess of $1,000,000 in any single fiscal year.
33             (2) Any business which, subject to paragraph (a)(6) of section 5 and
34       amendments thereto, is approved as a qualified Kansas business at the
35       time of the first qualified venture capital investment in such business by
36       a Kansas certified capital company, for a period of seven years following
37       the date of such first investment, shall continue to be classified as a qual-
38       ified Kansas business and may receive follow-on investments from any
39       Kansas certified capital company, and such follow-on investments shall
40       constitute qualified venture capital investments even though such busi-
41       ness may not meet other qualifications of this subsection at the time of
42       such follow-on investments.
43             (3) A qualified Kansas business shall not include:


  1             (A) Any commercial enterprise primarily engaged in the sale at retail
  2       of goods or services taxable under the Kansas retailer's sales tax act; any
  3       service provider set forth in K.S.A. 17-2707, and amendments thereto;
  4       any bank, savings and loan or lending institution; any real estate, real
  5       estate development or insurance company; or any commercial enterprise
  6       deriving its revenues directly from noncommercial customers in exchange
  7       for personal services;
  8             (B) a business engaged primarily as a passive business, irregular or
  9       noncontinuous operations, or which derives substantially all of its income
10       from passive investments that generate interest, dividends, royalties or
11       capital gains;
12             (C) a business engaged in oil and gas exploration and development;
13             (D) a business engaged in agricultural activity as defined by K.S.A.
14       2-3203 and amendments thereto;
15             (E) a subsidiary of a certified capital company;
16             (F) another certified capital company;
17             (G) an affiliate of the certified capital company; or
18             (H) an investor of the certified capital company or an affiliate or sub-
19       sidiary of an investor of the certified capital company unless approved in
20       writing by the secretary.
21             (4) At the time of the initial qualified venture capital investment, the
22       qualified Kansas business shall certify that the business shall remain dom-
23       iciled in Kansas for the next 10 years and any new manufacturing facility
24       financed directly by a qualified investment shall be located in and shall
25       remain in Kansas for the 10 years following.
26             (p) "Qualified venture capital investment" means the investment of
27       cash by a Kansas certified capital company in such a manner as to acquire
28       capital in a qualified Kansas business.
29             (q) "Secretary" means the secretary of commerce and housing or per-
30       sons under the secretary's direction.
31             (r) "Tax credit" means a transferable, nonrefundable credit against
32       the tax imposed by the Kansas income tax act, the premium tax or priv-
33       ilege fee imposed pursuant to K.S.A. 40-252, and amendments thereto,
34       or the privilege tax as measured by net income of financial institutions
35       imposed pursuant to chapter 79, article 11 of the Kansas Statutes
36       Annotated.
37             Sec.  2. (a) Any investor that makes a certified capital investment shall
38       earn a vested tax credit against state tax liability equal to 100% of the
39       amount of such investor's certified capital investment. The investor, or a
40       person to whom the credits were duly transferred, shall be entitled to use
41       not more than 10% of the vested credit per taxable year for taxable years
42       commencing after taxable year 2001. If the amount of the tax credit al-
43       lowed under subsection (a) exceeds the tax liability of the taxpayer for


  1       any taxable year, such excess amount shall be refunded to the taxpayer.
  2             (b) No certified capital investment in a capco by any one person shall
  3       be less than $25,000.
  4             (c) The total amount of tax credits which may be allowed shall not
  5       exceed $50,000,000. The total amount of tax credits which may be allowed
  6       under this act shall not exceed $5,000,000 per fiscal year.
  7             Sec.  3. (a) The secretary may certify profit or not-for-profit entities
  8       which submit an application to be designated as a capco. The secretary
  9       shall compile a list of every capco, including the address and telephone
10       number of the capco's principal place of business. The secretary shall
11       publicize the list in order to inform Kansas companies of the availability
12       of potential investment capital.
13             (b) The secretary shall review the organizational documents for each
14       applicant for certification and the business history of the applicant to
15       determine:
16             (1) That at the time of application, the applicant owns cash, market-
17       able securities and other liquid assets valued at no less than $500,000;
18       that prior to January 1, 2000, the applicant was designated as an inno-
19       vation and commercialization corporation or an affiliate of an innovation
20       and commercialization corporation created under the Kansas technology
21       enterprise corporation innovation and commercialization corporation
22       program; and
23             (2) that the officers and the board of directors, general partners, trus-
24       tees, managing members or managers, as the case may be, are thoroughly
25       acquainted with the requirements of this act and acknowledge such by a
26       signed certification.
27             (c) To continue to be certified, the capco must own and periodically
28       shall demonstrate to the secretary, as the secretary may require, that the
29       liquid asset base for the certified capital company is at least $500,000 at
30       all times during the capco's participation in the program authorized by
31       this act and that such moneys have been used for making qualified venture
32       capital investments.
33             (d) With respect to any person who submits or has submitted an
34       application to become a capco, the commissioner shall investigate to de-
35       termine and shall report annually to the secretary whether any of the
36       directors, trustees, managers, officers, general partners, beneficial owners
37       of 10% or more of any class of equity securities, or any promoters em-
38       ployed or otherwise associated with that person at the time of such
39       application:
40             (1) Has been affiliated with any company that has filed a registration
41       statement which is subject to a currently effective stop order entered
42       pursuant to any state law;
43             (2) has been convicted of any felony or misdemeanor in connection


  1       with the purchase or sale of any security or any felony involving fraud or
  2       deceit including, but not limited to, forgery, embezzlement of money
  3       under false pretenses, larceny or conspiracy to defraud;
  4             (3) is currently subject to any state administrative order or judgment
  5       entered by a state securities administrator or is subject to any state ad-
  6       ministrative order or judgment in which fraud or deceit was found and
  7       an order or judgment was entered;
  8             (4) is currently subject to any state administrative order or judgment
  9       which prohibits the use of any exemption from registration in connection
10       with the purchase or sale of securities;
11             (5) is subject to any order, judgment or decree of any court of com-
12       petent jurisdiction temporarily or preliminarily restraining or enjoining,
13       or is subject to any order, judgment or decree of any court of competent
14       jurisdiction permanently restraining or enjoining that person from engag-
15       ing in or continuing any conduct or practice in connection with the pur-
16       chase or sale of any security, rendering investment advice or involving the
17       making or any false filing with any state; and
18             (6) has been convicted of or plead nolo contendere to any criminal
19       offense other than a misdemeanor involving motor vehicle violations.
20             (e) The secretary shall review documentation regarding the qualifi-
21       cations of the persons who will actively manage the capco and make a
22       determination as to whether such persons possessed sufficient knowledge
23       and professional experience in the areas of investment, venture capital,
24       business management and evaluation, portfolio management and such
25       other area of expertise to the degree that a reasonable person would be
26       confident in such manager's ability to manage the capco. No certification
27       shall be issued when it is the finding of the secretary that such persons
28       do not possess this requisite degree of knowledge and expertise. If the
29       secretary makes such a finding, the secretary shall communicate the basis
30       for the finding to the applicant within 30 days of making the finding.
31             (f) No investor shall individually, or collectively with or through one
32       or more affiliates, by means of ownership, agreement or otherwise, own,
33       control or possess the power or ability to cause or direct the making of
34       any qualified venture capital investments by a capco.
35             (g) Within 75 days of application, the secretary shall either issue the
36       certification and notify the secretary of the department of revenue of such
37       certification or shall refuse the certification and communicate in detail to
38       the applicant the grounds for the refusal, including any suggestions for
39       the removal of those grounds.
40             Sec.  4. (a) A capco shall have a period of 365 days from the date of
41       receiving certification from the secretary in which to procure the amount
42       of certified capital investment required by subsection (b). All certified
43       capital investments in the capco shall be received within such 365 day


  1       funding period, notwithstanding the provisions of subsection (c).
  2             (b) Before closing its fund of certified capital investment, and pur-
  3       suant to subsection (b) of section 3, and amendments thereto, a capco
  4       shall raise a minimum aggregate certified capital investment of no less
  5       than $5,000,000. In the case of a capco designated prior to January 1,
  6       2000, as an innovation and commercialization corporation or an affiliate
  7       of an innovation and commercialization corporation created under the
  8       Kansas technology enterprise corporation innovation and commerciali-
  9       zation corporation program, such minimum certified capital investment
10       shall be no less than $1,000,000. No capital investments shall be certified
11       by the secretary until such time when the minimum cumulative invest-
12       ments are met. Failure of a capco to raise the minimum cumulative in-
13       vestments may result in the revocation of the certification by the
14       secretary.
15             (c) Once fully capitalized pursuant to the provisions of subsection (b),
16       a capco may make application to the secretary for authorization to seek
17       additional certified capital investment.
18             Sec.  5. (a) To continue to be certified, a capco shall make qualified
19       venture capital investments according to the following schedule:
20             (1) Within three years after the date on which a capco is certified as
21       a capco, at least 25% of its certified capital shall be, or have been, used
22       for making qualified venture capital investments;
23             (2) within four years after the date on which a capco is certified as a
24       capco, at least 40% of its certified capital shall be, or have been, used for
25       making qualified venture capital investments;
26             (3) within five years after the date on which a capco is certified as a
27       capco, at least 50% of its total certified capital shall be, or have been,
28       used for making qualified venture capital investments;
29             (4) within seven years after the date on which a capco is certified as
30       a capco, at least 70% of its total certified capital shall be, or have been,
31       used for making qualified venture capital investments;
32             (5) a capco shall not make an investment in an affiliate of the capco
33       or an affiliate of an investor. For the purposes of this subsection, if a
34       company is not an affiliate before a capco initially invests in the company,
35       it shall not be deemed to be an affiliate if such capco provides additional
36       qualified venture capital investment to such company subsequent to its
37       initial investment. No corporate officer, employee or shareholder, no lim-
38       ited or general partner or other person personally affiliated with any capco
39       shall personally invest in any portfolio company regardless of whether the
40       portfolio company is affiliated with the capco;
41             (6) a capco, at least 15 working days prior to making what it deter-
42       mines to be any initial qualified venture capital investment, shall first
43       certify to the secretary that the company in which it proposes to invest


  1       meets the definition of a qualified Kansas business pursuant to section 1,
  2       and amendments thereto. The capco shall state the amount of capital it
  3       intends to invest and identify the business in which it intends to make
  4       the investment. The capco shall also provide to the secretary a written
  5       explanation of the basis for its determination that the business meets the
  6       definition of a qualified Kansas business, if the secretary determines that
  7       the business does not meet the definition of a qualified Kansas business,
  8       the secretary, within the 15 working-day period prior to the making of
  9       the proposed investment, shall notify the capco of the determination and
10       provide the capco an explanation thereof. If the secretary fails to notify
11       the capco of the determination within the 15 working-day period pre-
12       scribed herein, the business in which the capco proposes to invest shall
13       be deemed to be a qualified Kansas business. If a capco fails to notify the
14       secretary prior to making an initial investment in a business, the business
15       in which the capco invested shall be deemed not to be a qualified Kansas
16       business even though the business, at the time of the investment, met
17       the requirements of section 1, and amendments thereto; and
18             (7) all certified capital which is not then required to be invested in
19       qualified venture capital investments or which has been previously in-
20       vested in qualified venture capital investments and returned by the com-
21       pany, may be held or invested in such manner as the capco, in its discre-
22       tion, deems appropriate. The proceeds of all certified capital which is
23       returned by a capco after it was originally invested in qualified venture
24       capital investments, may be invested in other qualified venture capital
25       investments and shall be credited toward any requirement in this act with
26       respect to placing certified capital in qualified venture capital
27       investments.
28             (b) A capco may make qualified distributions at any time. In order to
29       lawfully make liquidating distributions, a capco must have invested an
30       aggregate amount equal to 100% of its certified capital in qualified ven-
31       ture capital investments.
32             (c) Cumulative liquidating distributions to equity holders in excess of
33       the certified capital company's original certified capital and any additional
34       capital contributions to the certified capital company shall be subject to
35       audit by a certified public accounting firm acceptable to the secretary, at
36       the expense of the certified capital company.
37             (d) If at the time any liquidating distribution is made by a capco, the
38       aggregate sum of all liquidating distributions of the capco exceeds the
39       aggregate sum of the capco's original certified capital and any subsequent
40       qualified venture capital contributions to the capco, as determined by
41       audit, the capco, prior to any additional distributions, shall pay to the state
42       treasurer's office 10% of the proportion of the distribution in excess of
43       such amount.


  1             (e) Documents and other materials submitted by capcos or by busi-
  2       nesses for purposes of original certification or the continuance of certi-
  3       fication as a capco shall not be public records if it is determined by the
  4       secretary that disclosure of such information would compromise trade
  5       secrets of qualified Kansas businesses unless otherwise specified in this
  6       act.
  7             (f) Each capco shall report the following to the secretary:
  8             (1) As soon as practicable, but in any case no later than 15 days, after
  9       the receipt of a certified capital investment, the name of each investor
10       from whom the certified capital investment was received, the amount of
11       each investor's certified capital investment and the date when the certi-
12       fied capital investment was received;
13             (2) within 90 days of the close of the capco's fiscal year, annual au-
14       dited financial statements. The audit shall address the methods of oper-
15       ation and conduct of business of the capco to determine if the capco is
16       complying with the statutes and program rules and that the funds received
17       by the capco have been invested in accordance with the time limits pro-
18       vided by this act; and
19             (3) at the end of each quarter, that no more than 20% of the assets
20       of a capco shall be invested in a single qualified Kansas business at any
21       one time unless the capco can demonstrate that a greater percentage in
22       a single qualified Kansas business at any one time is the result of losses
23       suffered by the capco in other qualified venture capital investments.
24             (g) Any material related to the sale of ownership in a capco or solic-
25       iting investment in a capco shall include the following statement: "By
26       authorizing the formation of a certified capital company, the State of
27       Kansas does not endorse the quality of management or the potential for
28       earnings of a particular company. the use of the word "certified" in an
29       offering does not constitute a recommendation or endorsement of an
30       investment by the Kansas Securities Commission or any other State
31       Official."
32             (h) The secretary may establish reasonable initial filing fees for ap-
33       plications for certification pursuant to this act and may also establish an
34       annual nonrefundable fee for capcos seeking continued certification.
35             Sec.  6. (a) To ensure that no qualified venture capital investment or
36       investor's certified capital investment has been made in violation of this
37       act, the secretary shall conduct an annual review of each capco to deter-
38       mine if the capco is complying with the requirements of certification. The
39       costs of the annual review shall be paid by each capco according to a
40       reasonable fee schedule adopted by the secretary.
41             (b) Any material violation of this act shall be grounds for decertifi-
42       cation under this section. If the secretary determines that a capco is not
43       in compliance with the requirements for continuing certification, the sec-


  1       retary, by written notice, shall inform the officers of the capco and the
  2       board of directors, managers, trustees or general partners that they may
  3       be decertified within 120 days from the date of mailing of the notice,
  4       unless they correct the deficiencies detailed in the notice and demon-
  5       strate to the secretary's satisfaction that the capco is again in compliance
  6       with the requirements for certification as determined by the secretary.
  7             (c) At the end of the 120-day grace period, if the capco is still not in
  8       compliance, the secretary may send a notice of decertification to the
  9       capco and to the secretary of revenue including a list of the decertified
10       capitol investment by investor and transferee.
11             (d) Decertification of a capco prior to the capco meeting all require-
12       ments of paragraphs (1) through (4) of subsection (a) of section 5, and
13       amendments thereto, shall cause the recapture of all tax credits previously
14       allowed to an investor or transferee and the forfeiture of all future tax
15       credits to otherwise be claimed by an investor or transferee with respect
16       to any certified capital investment in the decertified capco.
17             (e) Decertification of a capco after it has met all requirements of
18       paragraphs (1) through (4) of subsection (a) of section 5, and amendments
19       thereto, shall cause the forfeiture of tax credits commencing with the
20       taxable year of the investor or transferee in which the decertification arose
21       and for all future taxable years with no recapture of tax credits allowed
22       to an investor or transferee with respect to the taxable years which ended
23       before the decertification occurred. Once a capco has invested 100% of
24       its certified capital in qualified Kansas businesses, all future tax credits to
25       be claimed by investors with respect to the capco pursuant to this act
26       shall not be subject to recapture.
27             Sec.  7. The secretary shall prepare and submit an annual report to
28       the governor and the legislature no later than October 1 of each year.
29       Such report shall be presented to the standing committee on commerce
30       in the senate, standing committee on economic development in the house
31       of representatives and the joint committee on economic development.
32       Such report shall include but not be limited to:
33             (a) The total dollar amount each capco received from all investors
34       allowed tax credits and any other investors and the identity of all investors
35       allowed tax credits;
36             (b) the total amount invested by each capco in qualified Kansas busi-
37       nesses, the identity and location of those businesses, the amount invested
38       in each qualified Kansas business and the total number of permanent full-
39       time jobs created or retained by each qualified Kansas business as a result
40       of the investment; and
41             (c) the cumulative amount of any liquidating disbursements received
42       by the state from the capcos.
43             Sec.  8. The secretary may revoke the certification of a capco if any


  1       material representation to the secretary in connection with the application
  2       process proves to have been falsely made or if the application materially
  3       violates any requirement established by the secretary.
  4             Sec.  9. (a) Any investor that is not subject to taxation under the pro-
  5       visions of the Kansas income, privilege or premium tax that makes a cer-
  6       tified capital investment shall be deemed to acquire an interest in the
  7       nature of a transferable tax credit limited to 100% of such investment.
  8       The credit established pursuant to this act may be sold or transferred
  9       subject to approval by the secretary. An investor as described in this sec-
10       tion shall not be allowed a refund for the interest herein created. Only
11       the full amount of the credit for any one investment may be transferred
12       and the credit may be transferred only one time. Documentation of any
13       credit transfer shall be provided to the secretary. The secretary shall trans-
14       mit a copy of such documentation to the secretary of revenue.
15             (b) The secretary, after consulting with the secretary of revenue, shall
16       develop such rules and regulations as are necessary to facilitate the op-
17       eration of the transfer program consistent with the interest of the state
18       in tracking the transfer of ownership and the use of tax credits earned by
19       the transferee, but which shall not be overly burdensome to the transfer
20       process.
21             (c) Any such sale or transfer shall not affect the time schedule for
22       taking the tax credit, as provided in this act. Any tax credits recaptured
23       pursuant to section 6 and amendments thereto shall be the liability of the
24       taxpayer which actually claimed the tax credit. In approving the sale or
25       transfer of the tax credit pursuant to this section, the secretary may re-
26       quire the transferor or the transferee or both to execute guarantees or
27       post bonds with respect to any potential tax credit recapture.
28             (d) Any payment received for tax credits pursuant to this section is
29       taxable income of the transferor of the credit and the amount equal to
30       the difference the dollar value of the tax credit transferred minus the
31       sales price of the tax credit shall be taxable income of the transferee.
32             (e) The secretary shall make and promulgate rules and regulations
33       consistent with the provisions of this act as are necessary or useful to carry
34       out the provisions of this act.
35             (f) Every final order, decision, license or other official act of the sec-
36       retary pursuant to this act is subject to review in accordance with the act
37       for judicial review and civil enforcement of agency actions, K.S.A. 77-601
38       et seq. and amendments thereto.
39             (g) In view of the objectives of these requirements and the underlying
40       policies of the act, the act is not available with respect to any transaction
41       or series of transactions that, although in technical compliance with these
42       rules, is part of a plan or scheme to evade the requirements of this act or
43       to distort the benefits entitled to be realized under the act. In such cases,


  1       no investor in any capco shall be entitled to the benefit of any tax credits
  2       provided for hereunder.
  3             (h) The offer or sale of a security by a capco pursuant to this act shall
  4       be subject to the registration requirements of K.S.A. 17-1254, 17-1255,
  5       17-1257, 17-1258, 17-1259 and 17-1260 and amendments thereto.
  6        Sec.  10. This act shall take effect and be in force from and after its
  7       publication in the statute book.