The Office of General Counsel issued the following informal opinion on December 18, 2001, representing the position of the New York State Insurance Department.

CAPCO Investment Limitation


Does the "15%" limitation in the CAPCO statute apply to each CAPCO program, or may a CAPCO aggregate amounts raised in multiple CAPCO programs?


The limitation is applied separately to each CAPCO program.


Company A has presently invested $2,048,549 in Company B, of which $836,826 was from Company As CAPCO Program Two allocation and $1,211,723 was from Company As CAPCO Program Three allocation. Company A is currently considering a follow-on investment in Company B, proposing that the source of funds for the investment be the Program Two allocation. If made, Company B's share of Company A's Program Two allocation would exceed 15%.


N.Y. Tax Law § 11(c)(3) (McKinney Supp. 2001) provides as follows:

(3) No qualified investment may be made by a certified capital company to the extent such investment would cause the company's total qualified investment outstanding with respect to the qualified business receiving such investment to exceed fifteen percent of the total certified capital of the certified capital company at the time of such investment.

The letter written by Attorney X, General Counsel of Company C, argues that a CAPCO should be permitted to aggregate its investment allocations from two or more CAPCO programs in order to avoid having an investment disqualified as exceeding the 15% limit.

Attorney X's analysis is not without merit, but the Department's position is that a CAPCO cannot so aggregate investment allocations from different programs. Each CAPCO program is the creation of a separate statutory enactment, and the allocations are made only with respect to one program at a time. Similarly, all of the percentage limits are applied separately to each program. To do otherwise would be unnecessarily complicated for the overall administration of the CAPCO programs. In addition, the CAPCO statute has been modified in various ways incident to the enactment of each program. Different statutory standards apply for each program. Therefore, allowing the aggregation of allocations/investments across program lines could lead to confusion as to the proper application of the relevant statutory requirements.

Contrary to Attorney X's assertion, the program-by-program imposition of the 15% limit does serve a public policy purpose, namely the maximization of the total number of businesses that may obtain funding through the CAPCO mechanism. If CAPCOs are allowed to aggregate investments across all programs, a CAPCO obtaining allocations in all three extant programs could conceivably make investments in as few as eight businesses. On the other hand, by enforcing the investment limitation on a program-by-program basis, any CAPCO receiving allocations in all three programs, if fully invested, will invest in at least twenty-four (24) different entities.

Finally, the program-by-program standard has already been imposed on several CAPCOs. An abandonment of this policy at this time could unfairly benefit Company A vis `a vis these other CAPCOs.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.