House Study Bill 274 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON KAUFMANN) A BILL FOR An Act relating to tax credits awarded by the economic 1 development authority for specific capital contributions 2 made to certified rural business growth funds for investment 3 in qualified businesses. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2290YC (2) 91 jm/jh
H.F. _____ Section 1. NEW SECTION . 15.510 Short title. 1 This part shall be known and may be cited as the Iowa Rural 2 Development Tax Credit Program . 3 Sec. 2. NEW SECTION . 15.511 Definitions. 4 As used in this part, unless the context otherwise requires: 5 1. Affiliate means a person that directly, or indirectly 6 through one or more intermediaries, controls, is controlled 7 by, or is under common control with another person. A person 8 is controlled by another person if the controlling person 9 holds, directly or indirectly, the majority voting or ownership 10 interest in the controlled person or has control, by contract 11 or by law, over the day-to-day operations of the controlled 12 person. 13 2. Authority means the economic development authority 14 created in section 15.105. 15 3. Closing date means the date on which a rural business 16 growth fund completes collection of all contributions and 17 investments and submits all required documentation to the 18 authority pursuant to section 15.512, subsection 7. 19 4. Credit-eligible capital contribution means an investment 20 of cash by a person in a rural business growth fund that is 21 eligible for a tax credit certificate issued by the authority 22 pursuant to section 15.513, subsection 1. The cash investment 23 shall purchase either of the following: 24 a. An equity interest in the growth fund. 25 b. A debt instrument, at par value or premium, issued by the 26 growth fund that has a maturity date at least six years after 27 the growth funds closing date. 28 5. Depository institution means the same as defined in 29 section 524.1802. 30 6. Eligible investment authority means the amount stated 31 on the certification the authority issues pursuant to section 32 15.512, subsection 7, paragraph a . At least sixty percent 33 of a growth funds eligible investment authority shall be 34 comprised of credit-eligible capital contributions. 35 -1- LSB 2290YC (2) 91 jm/jh 1/ 22
H.F. _____ 7. Employee means a natural person who is employed in this 1 state by a qualified business and who is either salaried, works 2 a minimum of thirty-five hours per week, or another period of 3 time generally accepted by custom, industry, or practice as 4 full-time employment. 5 8. Equity holder means a person that makes an equity 6 investment in a rural business growth fund. 7 9. Growth investment means any of the following: 8 a. Capital or equity investments in a qualified business. 9 b. A loan to a qualified business if all of the following 10 conditions apply: 11 (1) The loan has a stated maturity of at least two years. 12 (2) The principal payments have been deferred for at least 13 two years. 14 (3) The pro forma financial statements of the qualified 15 business result in a leverage ratio of greater than three to 16 one when comparing debt to earnings before interest, taxes, 17 depreciation, and amortization. 18 c. A senior secured loan if the senior secured loan is 19 secured first by a mortgage on real estate with a loan to value 20 ratio of less than eighty percent, and the qualified business 21 has a credit refusal letter or similar correspondence from a 22 depository institution located in this state. 23 10. Jobs created means the number of new employees at 24 a qualified business, after an initial growth investment, at 25 the end of each subsequent calendar year. This number is 26 calculated annually by adding together the number of employees 27 at the qualified business on the last day of each calendar 28 month and dividing by twelve, then subtracting the number of 29 employees at the qualified business on the date the day before 30 the date of the initial growth investment. If the resulting 31 total is less than zero, the jobs created is equal to zero. 32 11. Jobs retained means the number of employees at a 33 qualified business the day before the date of an initial growth 34 investment that the qualified businesss chief executive 35 -2- LSB 2290YC (2) 91 jm/jh 2/ 22
H.F. _____ officer or similar officer certifies as being positions located 1 in this state that would have been eliminated but for the 2 initial growth investment. 3 12. Located in means the place or places at which a 4 businesss operations are located and where at least sixty 5 percent of the businesss employees work, or where employees 6 that are paid at least sixty percent of the businesss payroll 7 work. 8 13. Program means the Iowa rural development tax credit 9 program administered under this part. 10 14. Qualified business means any business within this 11 state that has fewer than two hundred fifty employees, 12 including ostensible subcontractors pursuant to 13 C.F.R. 13 121.103(h)(4), and is not located in whole or in part in one 14 or more of the twelve most populous counties in the state, as 15 determined by the most recent decennial census released by the 16 United States bureau of census. 17 15. Revenue means the total state and local income 18 produced by a rural business growth funds economic activity. 19 16. Rural business growth fund or growth fund means a 20 person, or an affiliate of a person, certified by the authority 21 pursuant to section 15.512, subsection 7, paragraph a . 22 17. Within this state means in the state of Iowa, or an 23 out-of-state business that has agreed to use a proposed growth 24 investment to become a qualified business within one hundred 25 eighty days of receiving the growth investment. 26 Sec. 3. NEW SECTION . 15.512 Application and agreement. 27 1. The authority shall begin accepting program applications 28 on January 7, 2026. An application is deemed received based 29 on the date and time stamp that shall be generated by the 30 authority upon receipt of the application. Applications 31 received by the authority on the same day shall be deemed to 32 have been received simultaneously. 33 2. A person seeking certification as a rural business 34 growth fund shall apply to the authority in the form and manner 35 -3- LSB 2290YC (2) 91 jm/jh 3/ 22
H.F. _____ prescribed by the authority. The application must include all 1 of the following: 2 a. The eligible investment authority sought by the 3 applicant. 4 b. A copy of the applicants, or an affiliate of the 5 applicants, license as a rural business investment company 6 as defined under 7 U.S.C. 2009cc(14), or license as a small 7 business investment company under 15 U.S.C. 681. 8 c. Documentation as required by the authority to establish 9 that at least one principal of the applicant has been an 10 officer or an employee of the rural business investment 11 company, the small business investment company, or an affiliate 12 thereof, for a minimum of four years prior to the date of 13 application. 14 d. A revenue impact assessment for the applicants proposed 15 growth investments as determined by an econometric analysis 16 conducted by a nationally recognized third-party independent 17 econometric firm. The revenue impact assessment must provide 18 an analysis of the applicants proposed growth investments over 19 the ten consecutive years following the date the applicants 20 application is submitted to the authority, and must demonstrate 21 that there will be a positive revenue impact on this state 22 that exceeds the cumulative amount of tax credits, that if the 23 application is approved, may be issued by the authority to the 24 rural business growth funds investors. 25 e. The number of jobs created and the number of jobs 26 retained assumed in the revenue impact assessment required by 27 paragraph d . 28 f. A signed affidavit from each investor that identifies 29 the investor and the amount of the credit-eligible capital 30 contribution that the investor has committed to the applicants 31 proposed growth fund. 32 g. A nonrefundable application fee of five thousand dollars. 33 All application fees submitted to the authority pursuant to 34 this paragraph shall be used by the authority to administer 35 -4- LSB 2290YC (2) 91 jm/jh 4/ 22
H.F. _____ this part. 1 3. The authority shall review and make a determination 2 to approve or deny each application within the time frame 3 adopted by rule by the authority. The authority shall review 4 applications on a first-come, first-served basis as determined 5 pursuant to subsection 1. 6 4. The authority shall not approve more than forty-five 7 million dollars in eligible investment authority and not more 8 than twenty-seven million dollars in credit-eligible capital 9 contributions under the program. If approved applications 10 that are simultaneously received would collectively exceed the 11 maximum limit on eligible investment authority or the maximum 12 on credit-eligible capital contributions, the authority shall 13 proportionally reduce the growth funds eligible investment 14 authority and credit-eligible capital contributions for each 15 of the simultaneous applications as necessary to comply with 16 the maximum limits. 17 5. The authority shall reject an application for any of the 18 following reasons: 19 a. The applicant failed to comply with any of the 20 requirements pursuant to subsection 2. 21 b. The authority has already approved the maximum eligible 22 investment authority or the maximum credit-eligible capital 23 contributions pursuant to subsection 4. 24 6. a. If the authority rejects an application, the 25 authority shall send a notice of rejection to the applicant and 26 provide a reason for the rejection. 27 b. If the authority has rejected an application on any 28 grounds other than subsection 5, paragraph b , the applicant 29 may provide additional information to the authority to cure 30 the defects in the application. All additional information 31 must be received by the authority within fifteen business days 32 from the date the authority sent the notice of rejection to 33 the applicant. The authority shall review and reconsider, 34 within the time frame adopted by rule by the authority, any 35 -5- LSB 2290YC (2) 91 jm/jh 5/ 22
H.F. _____ application for which additional information is provided within 1 the fifteen business days. If an application is approved by 2 the authority after review and reconsideration, the application 3 shall be considered complete as of its original date of 4 submission. 5 c. If an applicant does not submit additional information 6 within fifteen business days from the date the authority sent 7 the applicant the notice of rejection, the applicant may submit 8 a new application at any time pursuant to subsection 2 and the 9 application shall be reviewed by the authority pursuant to 10 subsection 3. 11 7. a. If the authority approves an application, the 12 authority shall send a notice to the applicant certifying all 13 of the following: 14 (1) The applicant as a rural business growth fund. 15 (2) The growth funds eligible investment authority and 16 required credit-eligible contributions. 17 (3) The required number of jobs created and the required 18 number of jobs retained based on the number submitted in the 19 applicants application, prorated if the growth funds eligible 20 investment authority is reduced pursuant to subsection 4. 21 b. Within forty-five calendar days of the date the authority 22 sent the notice of certification pursuant to paragraph a , 23 the rural business growth fund shall comply with all of the 24 following requirements: 25 (1) Collect all credit-eligible capital contributions 26 from each investor whose affidavit was included in the growth 27 funds application. If the growth funds requested eligible 28 investment authority has been proportionally reduced pursuant 29 to subsection 4, each investors required credit-eligible 30 capital contribution shall be reduced by the same proportion. 31 (2) Collect one or more equity investments contributed 32 directly or indirectly by affiliates of the growth fund, 33 including employees and principals of such affiliates, that 34 must equal at least ten percent of the growth funds eligible 35 -6- LSB 2290YC (2) 91 jm/jh 6/ 22
H.F. _____ investment authority. 1 (3) Collect one or more investments of cash that, when added 2 to the contributions collected under subparagraphs (1) and (2), 3 equal the growth funds total eligible investment authority. 4 c. Within sixty-five calendar days of the date the authority 5 sent the notice of certification pursuant to paragraph a , 6 the rural business growth fund shall comply with all of the 7 following requirements: 8 (1) Submit documentation to the authority sufficient to 9 prove to the satisfaction of the authority that the growth fund 10 has collected amounts described in paragraph b , subparagraphs 11 (1), (2), and (3). 12 (2) Submit documentation to the authority that identifies 13 all affiliates of an investor described in paragraph b , 14 subparagraph (1), that may be eligible to claim a tax credit 15 issued by the authority pursuant to section 15.513, subsection 16 1. 17 8. If a growth fund fails to comply with subsection 7, 18 paragraph b or c , the growth funds certification shall 19 lapse. Any eligible investment authority and credit-eligible 20 capital contributions that lapse pursuant to this subsection 21 shall not count toward the maximum limits on eligible 22 investment authority and credit-eligible capital contributions 23 pursuant to subsection 4. If a growth funds eligible 24 investment authority lapses pursuant to this subsection, the 25 authority shall first award the lapsed eligible investment 26 authority pro rata to each rural business growth fund that 27 was awarded less than the eligible investment authority that 28 the rural business growth fund sought in the growth funds 29 application. A rural business growth fund that is awarded 30 lapsed eligible investment authority must comply with the 31 requirements of subsection 7, paragraph b , as related to the 32 additional eligible investment authority. The authority may 33 award any remaining lapsed eligible investment authority to 34 new applicants until the maximum limits on eligible investment 35 -7- LSB 2290YC (2) 91 jm/jh 7/ 22
H.F. _____ authority and credit-eligible capital contributions pursuant 1 to subsection 4 are met. 2 9. After a growth funds successful submission to the 3 authority of the required documentation pursuant to subsection 4 7, paragraph c , subparagraphs (1) and (2), the growth fund 5 shall enter into an agreement with the authority that specifies 6 the requirements that must be met for successful completion 7 of the program. At a minimum, the agreement shall contain 8 provisions addressing all of the following: 9 a. The legal name of the growth fund. 10 b. The growth funds closing date. 11 c. The growth funds eligible investment authority as 12 certified by the authority. 13 d. Each investor of the growth fund and each investors 14 credit-eligible capital contribution. 15 e. The minimum number of jobs that must be created and the 16 minimum number of jobs that must be retained as a result of 17 the growth funds growth investments to avoid paying state 18 reimbursement pursuant to section 15.517. 19 f. Revocation and recapture of tax credits pursuant to 20 section 15.514. 21 g. Any terms deemed necessary by the authority to effect 22 compliance with the program requirements pursuant to this part. 23 Sec. 4. NEW SECTION . 15.513 Tax credits. 24 1. After an agreement is executed pursuant to section 25 15.512, subsection 9, the authority shall issue a tax credit 26 certificate to each investor whose affidavit was included 27 in the growth funds application and whose credit-eligible 28 capital contribution was collected pursuant to section 29 15.512, subsection 7, paragraph b , subparagraph (1). The 30 tax credit certificate shall specify the amount of the 31 tax credit allocated to that investor as a result of the 32 investors credit-eligible capital contribution. The tax 33 credit allocated to any one investor shall be equal to the 34 investors credit-eligible capital contribution to the growth 35 -8- LSB 2290YC (2) 91 jm/jh 8/ 22
H.F. _____ fund. The tax credit certificate shall contain the taxpayers 1 name, address, tax identification number, the name of the 2 rural business growth fund associated with the tax credit, and 3 any other information required by the department of revenue. 4 The tax credit may be claimed against the taxes imposed in 5 chapter 422, subchapter V, the insurance premium and insurance 6 retaliatory premium tax imposed in chapter 432, or the moneys 7 and credits tax imposed in section 533.329. 8 2. One-third of the amount of a tax credit issued to an 9 investor pursuant to subsection 1 may be claimed in the tax 10 year of the third, fourth, and fifth anniversaries of the 11 growth funds closing date, exclusive of the amount of tax 12 credit carried forward pursuant to subsection 4. 13 3. a. A tax credit issued under this part is not 14 refundable and shall not be sold, transferred, or allocated 15 by the investor to any person other than an affiliate of the 16 investor that was an affiliate at the time of the growth funds 17 submission of the investors affidavit pursuant to section 18 15.512, subsection 2, paragraph f . 19 b. Within ninety calendar days of the sale, transfer, or 20 allocation of a tax credit, the affiliate shall submit the tax 21 credit certificate to the department of revenue along with a 22 statement containing the affiliates name, tax identification 23 number, address, and any other information required by the 24 department of revenue. 25 c. Within thirty calendar days of receiving the tax credit 26 certificate and the affiliates statement, the department of 27 revenue shall issue the affiliate a replacement tax credit 28 certificate. The replacement tax credit certificate must 29 contain all of the information required for the original tax 30 credit certificate and must have the same expiration date that 31 appeared on the original tax credit certificate. 32 4. To claim a tax credit under this section, a taxpayer 33 shall submit the tax credit certificate with the taxpayers 34 tax return for each taxable year in which the tax credit is 35 -9- LSB 2290YC (2) 91 jm/jh 9/ 22
H.F. _____ claimed. Any tax credit in excess of the taxpayers tax 1 liability for the tax year may be carried forward to the 2 taxpayers tax liability for subsequent years until the tax 3 credit is depleted. 4 Sec. 5. NEW SECTION . 15.514 Revocation and recapture of tax 5 credits. 6 1. The authority shall recapture any tax credits used by 7 a taxpayer and shall revoke any tax credits issued pursuant 8 to section 15.513, subsection 1, if, before a rural business 9 growth fund exits the program pursuant to section 15.516, any 10 of the following occur: 11 a. The growth fund cannot provide documentation to the 12 authority to substantiate to the satisfaction of the authority 13 all of the following: 14 (1) That the growth fund, within thirty months after the 15 growth funds closing date, has invested one hundred percent 16 of the growth funds eligible investment authority in growth 17 investments. 18 (2) That the growth fund, after investing one hundred 19 percent of the growth funds eligible investment authority 20 in growth investments within thirty months after the growth 21 funds closing date, has maintained growth investments equal to 22 one hundred percent of the growth funds eligible investment 23 authority at all times up to the fifth anniversary after the 24 growth funds closing date. For purposes of this subparagraph, 25 a growth investment is maintained even if it is sold or repaid, 26 as long as the growth fund reinvests an amount equal to the 27 growth investment returned or recovered from the original 28 growth investment, exclusive of any profits realized, in other 29 growth investments in this state within the twelve consecutive 30 months immediately after the date of the return or recovery 31 of such growth investment. Amounts received periodically 32 by a growth fund are deemed continuously invested in growth 33 investments if the amounts are reinvested by the growth fund in 34 one or more qualified businesses by the end of the following 35 -10- LSB 2290YC (2) 91 jm/jh 10/ 22
H.F. _____ calendar year. 1 b. The growth fund makes a growth investment in a qualified 2 business that directly, or indirectly through an affiliate, 3 owns, has the right to acquire an ownership interest in, makes 4 a loan to, or makes an investment in, the growth fund, an 5 affiliate of the growth fund, or an investor in the growth 6 fund. This paragraph shall not apply to investments in 7 publicly traded securities by a qualified business, or to an 8 owner or an affiliate of the qualified business. For purposes 9 of this paragraph, a growth fund shall not be considered an 10 affiliate of a qualified business solely because of the growth 11 funds growth investment in the qualified business. 12 c. The growth fund, before exiting the program pursuant to 13 section 15.516, makes a distribution or payment that results 14 in the growth fund having less than one hundred percent of its 15 initial investment authority invested in growth investments in 16 this state, available for growth investments, or held in cash 17 and marketable securities. 18 2. The maximum amount of a growth investment in a qualified 19 business, including any amounts invested in affiliates of the 20 qualified business, that a growth fund may count toward the 21 growth funds satisfaction of the requirements pursuant to 22 subsection 1, paragraph a , is the greater of twenty percent of 23 the growth funds eligible investment authority and two million 24 five hundred thousand dollars, excluding any amounts reinvested 25 in a qualified business. 26 3. Before revoking or recapturing a tax credit, the 27 authority shall provide notice to the growth fund of the reason 28 for the pending revocation or recapture. The growth fund shall 29 have ninety calendar days after the date the authority sends 30 the notice to address to the satisfaction of the authority any 31 issues identified in the notice. Failure of the growth fund to 32 satisfactorily address any issues in the notice shall result in 33 revocation or recapture of the tax credit. 34 4. The authority shall not revoke or recapture a tax credit 35 -11- LSB 2290YC (2) 91 jm/jh 11/ 22
H.F. _____ for any action of a growth fund that occurs after the growth 1 fund has exited the program pursuant to section 15.516. This 2 subsection shall not prohibit the authority from revoking or 3 recapturing a tax credit due to an action of a growth fund 4 pursuant to subsection 1 that occurs before the date the growth 5 fund exits the program, even if the growth funds action is 6 discovered after the date the growth fund exits the program. 7 Sec. 6. NEW SECTION . 15.515 Annual report. 8 On or before March 31, unless a growth fund has exited the 9 program pursuant to section 15.516, each growth fund shall 10 submit an annual report to the authority in the form and manner 11 the authority prescribes that covers the preceding calendar 12 year. The report must include each of the growth funds growth 13 investments and must contain all of the following information: 14 1. Financial statements that provide evidence of each 15 growth investment. 16 2. Evidence that the growth fund is in compliance with 17 applicable investment requirements pursuant to section 15.514, 18 subsection 1, paragraph a . 19 3. The name, location, and industry for each qualified 20 business that received a growth investment, and evidence that 21 the business met the requirements to be a qualified business at 22 the time the growth investment was made. 23 4. The number of employees at each qualified business on 24 the date of the growth funds initial growth investment in the 25 qualified business. 26 5. The number of jobs created at each qualified business and 27 the average annual salary for the jobs created. 28 6. The number of jobs retained at each qualified business 29 and the average annual salary for the jobs retained. The 30 number of jobs retained at a qualified business may not exceed 31 the number of jobs retained at the same qualified business on 32 the first annual report submitted by the growth fund. 33 7. Any other information the authority requires. 34 Sec. 7. NEW SECTION . 15.516 Exiting the program. 35 -12- LSB 2290YC (2) 91 jm/jh 12/ 22
H.F. _____ 1. On or after the fifth anniversary of a rural business 1 growth funds closing date, in the form and manner the 2 authority prescribes, the growth fund may apply to the 3 authority to exit the program. The growth funds application 4 must include the state reimbursement calculation pursuant to 5 section 15.517. 6 2. The growth fund shall be eligible to exit the program 7 if a tax credit associated with the growth fund has not been 8 revoked or recaptured pursuant to section 15.514. 9 3. Within the time frame adopted by rule by the authority, 10 the authority shall send notice to the growth fund of the 11 authoritys determination regarding the growth funds 12 application and confirmation of the state reimbursement the 13 growth fund owes pursuant to section 15.517. If the authority 14 denies the growth funds application, the notice shall include 15 the reasons for the denial. If the authority approves the 16 growth funds application, the growth fund is deemed to have 17 exited the program on the date the authority sends notice 18 to the growth fund. If the growth fund owes the state 19 reimbursement, the growth fund shall be prohibited from making 20 any distributions to any equity holders of the fund until the 21 growth fund has remitted the state reimbursement amount to the 22 authority. All state reimbursement amounts remitted to the 23 authority shall be deposited in the general fund of the state. 24 Sec. 8. NEW SECTION . 15.517 State reimbursement 25 calculation. 26 1. A state reimbursement shall be calculated any time a 27 rural business growth fund exits the program or any time a 28 rural business growth fund proposes to make a distribution to 29 the growth funds equity holders. The state reimbursement 30 shall equal the proposed distribution multiplied by one minus a 31 fraction that is composed of the following: 32 a. The numerator shall be the aggregate number of jobs 33 created plus the number of jobs retained as reported pursuant 34 to section 15.515, subsections 5 and 6. 35 -13- LSB 2290YC (2) 91 jm/jh 13/ 22
H.F. _____ b. The denominator shall be the number of jobs created plus 1 the number of jobs retained as stated in the certification 2 pursuant to section 15.512, subsection 7, paragraph a , 3 subparagraph (3). 4 2. If the fraction is greater than one hundred percent, the 5 growth fund shall not owe state reimbursement. 6 3. The authority may adopt by rule additional options 7 for the state reimbursement calculation that are equivalent 8 to job creation and job retention to measure a growth funds 9 growth investments impact on economic activity at a qualified 10 business. 11 Sec. 9. NEW SECTION . 15.518 Remedies. 12 The remedies for a breach or default of any of the terms of 13 this part by a rural business growth fund shall be revocation 14 or recapture of tax credits pursuant to section 15.514 and the 15 state reimbursement pursuant to section 15.517. 16 Sec. 10. NEW SECTION . 15.519 Rules. 17 The authority, in conjunction with the department of 18 revenue, shall adopt rules pursuant to chapter 17A as necessary 19 for the implementation and administration of this part. 20 Sec. 11. Section 422.60, Code 2025, is amended by adding the 21 following new subsection: 22 NEW SUBSECTION . 16. The taxes imposed under this subchapter 23 shall be reduced by a rural development tax credit allowed 24 under section 15.513. 25 Sec. 12. NEW SECTION . 432.12P Rural development tax 26 credits. 27 The taxes imposed under this chapter shall be reduced by a 28 rural development tax credit allowed under section 15.513 for a 29 credit-eligible capital contribution to a rural business growth 30 fund. 31 Sec. 13. Section 533.329, subsection 2, Code 2025, is 32 amended by adding the following new paragraph: 33 NEW PARAGRAPH . n. The moneys and credits tax imposed under 34 this section shall be reduced by a rural development tax credit 35 -14- LSB 2290YC (2) 91 jm/jh 14/ 22
H.F. _____ under section 15.513. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanations substance by the members of the general assembly. 4 This bill relates to tax credits awarded by the economic 5 development authority for specific capital contributions made 6 to certified rural business growth funds for investment in 7 qualified businesses. The bill defines qualified business 8 to mean any business within this state that has fewer than 250 9 employees, including certain subcontractors, and is not located 10 in whole or in part in one or more of the 12 most populous 11 counties in the state. 12 The bill directs the economic development authority 13 (authority) to begin accepting Iowa rural development tax 14 credit program (program) applications beginning January 7, 15 2026. 16 The bill provides that a person seeking certification as 17 a rural business growth fund (growth fund) must apply to the 18 authority and that the application must include the eligible 19 investment authority sought by the applicant, a copy of the 20 applicants license as a rural business investment company 21 under 7 U.S.C. 2009cc(14) or as a small business investment 22 company under 15 U.S.C. 681, documentation that establishes 23 that at least one principal of the applicant has been an 24 officer or an employee of the rural business investment 25 company, the small business investment company or an affiliate, 26 for a minimum of four years prior to the date of application, a 27 revenue impact assessment for the applicants proposed growth 28 investments as determined by an econometric analysis conducted 29 by a third-party independent econometric firm, the number 30 of jobs created and the number of jobs retained assumed in 31 the revenue impact assessment, a signed affidavit from each 32 investor that states the amount of the credit-eligible capital 33 contribution that the investor has committed to the applicants 34 proposed growth fund, and a nonrefundable $5,000 application 35 -15- LSB 2290YC (2) 91 jm/jh 15/ 22
H.F. _____ fee. The bill defines growth investment to mean any of 1 the following: capital or equity investments in a qualified 2 business, a loan to a qualified business subject to certain 3 conditions, or a senior secured loan under certain conditions. 4 The bill defines credit-eligible capital contribution 5 as an investment of cash by a person in a growth fund that 6 is eligible for a tax credit issued by the authority. The 7 investment must be used to purchase either an equity interest 8 in the growth fund or a debt instrument, at par value or 9 premium, issued by the growth fund that has a maturity date 10 at least six years after the growth funds closing date. 11 Eligible investment authority is defined in the bill as the 12 amount of investment authority that the authority certifies for 13 a specific growth fund. 14 The bill requires the authority to review each application 15 on a first-come, first-served basis and to make a determination 16 to approve or deny each application within the time frame 17 adopted by rule by the authority. The authority shall not 18 approve more than $45 million in eligible investment authority 19 and not more than $27 million in credit-eligible capital 20 contributions. 21 The authority must reject an application if the applicant 22 fails to submit any of the required information, or if the 23 authority has already approved the maximum eligible investment 24 authority or the maximum credit-eligible capital contributions. 25 If the authority rejects an application, the authority must 26 send a notice of rejection to the applicant, and provide a 27 reason for the rejection. If an application has been rejected 28 because the applicant failed to submit all of the required 29 information, the applicant has 15 days to provide additional 30 information to cure any defects in the application. The 31 authority shall review and reconsider, within the time frame 32 adopted by rule by the authority, any application for which 33 additional information is provided within the 15 business days. 34 If an application is approved by the authority after review and 35 -16- LSB 2290YC (2) 91 jm/jh 16/ 22
H.F. _____ reconsideration, the application shall be considered complete 1 as of its original date of submission. 2 If the authority approves an application, the authority 3 must send a notice to the applicant certifying the applicant 4 as a rural business growth fund, the growth funds eligible 5 investment authority, and the required number of jobs created 6 and the required number of jobs retained based on the number 7 submitted in the applicants application. Within 45 days of 8 the date the authority sent the notice of certification, the 9 growth fund is required to collect all credit-eligible capital 10 contributions from each investor whose affidavit was included 11 in the growth funds application, collect one or more equity 12 investments contributed directly or indirectly by affiliates 13 of the growth fund, including employees and principals of 14 such affiliates, that equal at least 10 percent of the growth 15 funds eligible investment authority, and collect one or more 16 investments of cash that when added to the credit-eligible 17 capital contributions and the equity investments equal the 18 growth funds eligible investment authority. Within 65 days 19 of the date the authority sent the notice of certification, 20 the growth fund must submit documentation to the authority 21 to prove that the appropriate amounts have been collected 22 by the growth fund, and documentation that identifies all 23 affiliates of the investor that may be eligible to claim a 24 tax credit issued by the authority. If the growth fund fails 25 to comply with the collection and documentation requirements, 26 all eligible investment authority and credit-eligible capital 27 contributions lapse. Eligible investment authority and 28 credit-eligible capital contributions that lapse do not count 29 toward the maximum limits on eligible investment authority and 30 credit-eligible capital contributions and may be awarded by the 31 authority as outlined in the bill. 32 If a growth fund successfully complies with the collection 33 and documentation requirements, the growth fund must enter 34 into an agreement with the authority that specifies the 35 -17- LSB 2290YC (2) 91 jm/jh 17/ 22
H.F. _____ requirements that must be met for successful completion of 1 the program. The agreement must contain, at a minimum, the 2 legal name of the growth fund, the growth funds closing date, 3 the growth funds eligible investment authority as certified 4 by the authority, each investor of the growth fund and each 5 investors credit-eligible capital contribution, the minimum 6 number of jobs that must be created and the minimum number of 7 jobs that must be retained as a result of the growth funds 8 growth investments to avoid paying state reimbursement, and a 9 provision related to revocation and recapture of tax credits if 10 the growth fund fails to meet the applicable program investment 11 requirements. 12 After the agreement is executed, the authority must issue 13 a tax credit certificate to each investor whose affidavit 14 was included in the growth funds application and whose 15 credit-eligible capital contribution was collected by the 16 growth fund. The certificate must specify the amount of tax 17 credit allocated to that investor and the amount of the tax 18 credit the eligible taxpayer may claim against the franchise 19 tax imposed in Code section 422.60, the insurance premium tax 20 and insurance retaliatory premium tax imposed in Code chapter 21 432, or the moneys and credits tax imposed in Code section 22 533.329. The tax credit allocated to any one investor is equal 23 to the investors credit-eligible capital contribution to the 24 growth fund. An investor may use one-third percent of the tax 25 credit in each taxable year beginning in the calendar year 26 following the third, fourth, and fifth anniversaries of the 27 growth funds closing date. Any tax credit in excess of the 28 taxpayers tax liability for a tax year may be carried forward 29 to the taxpayers tax liability for subsequent tax years until 30 the tax credit is depleted. 31 The tax credits are not refundable and cannot be sold, 32 transferred, or allocated by the investor to any person other 33 than an affiliate of the investor. The affiliate must submit 34 the tax credit certificate within 90 days to the department 35 -18- LSB 2290YC (2) 91 jm/jh 18/ 22
H.F. _____ of revenue (department) along with a statement containing the 1 affiliates name, tax identification number, address, and any 2 other information required by the department. The department 3 must issue the affiliate a replacement tax credit certificate 4 with the same expiration date that appeared on the original tax 5 credit certificate. 6 The authority shall revoke or recapture a tax credit if, 7 before a growth fund exits the program, the growth fund cannot 8 provide documentation to the authority to substantiate that the 9 growth fund, within 30 months after the growth funds closing 10 date, has invested 100 percent of the growth funds investment 11 authority in growth investments; that the growth fund, after 12 investing 100 percent of the growth funds investment authority 13 in growth investments within 30 months after the growth funds 14 closing date, has maintained growth investments equal to 100 15 percent of its investment authority at all times up to the 16 fifth anniversary after the growth funds closing date. The 17 bill specifies that a growth investment is maintained even if 18 it is sold or repaid, as long as the growth fund reinvests an 19 amount equal to the growth investment returned or recovered 20 from the original investment, exclusive of any profits 21 realized, in other growth investments in this state within the 22 12 consecutive months immediately after the date of the return 23 or recovery of such growth investment. The bill also specifies 24 that amounts received periodically by a growth fund are deemed 25 continuously invested in growth investments if the amounts 26 are reinvested by the growth fund in one or more qualified 27 businesses by the end of the following calendar year. 28 The authority must also revoke or recapture a tax credit 29 if, before a growth fund exits the program, the growth 30 fund makes a growth investment in a qualified business that 31 directly, or indirectly through an affiliate, owns, has the 32 right to acquire an ownership interest in, makes a loan to, 33 or makes an investment in, the growth fund, an affiliate of 34 the growth fund, or an investor in the growth fund. This does 35 -19- LSB 2290YC (2) 91 jm/jh 19/ 22
H.F. _____ not apply to investments in publicly traded securities by a 1 qualified business, or to an owner or an affiliate of the 2 qualified business. Further, a growth fund is not considered 3 an affiliate of a qualified business solely because of its 4 growth investment in the qualified business. The authority 5 is also required to revoke or recapture a tax credit if the 6 growth fund, before it exits the program, makes a distribution 7 or payment that results in the growth fund having less than 100 8 percent of its initial investment authority invested in growth 9 investments in this state, available for growth investments, 10 or held in cash and marketable securities. A growth fund may 11 count the greater of 20 percent of the growth funds eligible 12 investment authority and $5 million, excluding any amounts 13 reinvested in a qualified business, toward the growth funds 14 satisfaction of the investment requirements. Before the 15 authority revokes or recaptures a tax credit, the authority 16 must provide notice to the growth fund of the reason for the 17 pending revocation or recapture and the growth fund has 90 days 18 to address any issues identified in the notice. Failure of the 19 growth fund to address any of the issues in the notice results 20 in revocation or recapture of the tax credit. 21 The bill prohibits the authority from revoking or 22 recapturing a tax credit for any action of a growth fund that 23 occurs after the growth fund has exited the program. The bill 24 does not, however, prohibit the authority from revoking a tax 25 credit due to an action of a growth fund that occurs before the 26 growth fund exits the program, even if the growth funds action 27 is discovered after the growth fund exits the program. 28 On or after the fifth anniversary of a growth funds closing 29 date, the growth fund may apply to the authority to exit the 30 program. A growth fund is eligible to exit the program if a 31 tax credit associated with the growth fund has not been revoked 32 or recaptured. The growth funds application must include the 33 state reimbursement calculation. The state reimbursement owed 34 by a rural business growth fund to the authority is calculated 35 -20- LSB 2290YC (2) 91 jm/jh 20/ 22
H.F. _____ as detailed in the bill. Within the time frame adopted by rule 1 by the authority, the authority shall send notice to the growth 2 fund of the authoritys determination regarding the application 3 and confirmation of the state reimbursement owed by the growth 4 fund. If the authority denies the application, the notice must 5 include the reasons for the denial. If the authority approves 6 the application, the growth fund is deemed to have exited the 7 program on the date the notice is sent by the authority to the 8 growth fund. If the growth fund owes the state reimbursement, 9 the growth fund is prohibited from making any distributions to 10 equity holders of the fund until the state reimbursement amount 11 has been remitted to the authority. Equity holder is defined 12 in the bill as a person that makes a credit-eligible capital 13 contribution, an equity investment, or a cash investment in 14 a rural business growth fund. The bill specifies that all 15 state reimbursement amounts remitted to the authority shall be 16 deposited in the general fund of the state. 17 Unless a growth fund has exited the program, the growth 18 fund must submit an annual report to the authority that 19 covers the preceding calendar year. The report must include 20 documentation for each of the growth funds growth investments 21 and must include financial statements that provide evidence 22 of each growth investment, evidence that the growth fund is 23 in compliance with applicable investment requirements; the 24 name, location, and industry for each qualified business that 25 received a growth investment; evidence that each business met 26 the requirements to be a qualified business at the time the 27 growth investment was made; the number of employees at each 28 qualified business on the date of the growth funds initial 29 growth investment; the number of jobs created at each qualified 30 business; the average annual salary for the jobs created; the 31 number of jobs retained at each qualified business; and the 32 average annual salary for the jobs retained. 33 The bill provides that the only remedies for a breach or 34 default of any of the terms of the program by a growth fund 35 -21- LSB 2290YC (2) 91 jm/jh 21/ 22
H.F. _____ are revocation or recapture of tax credits and the state 1 reimbursement as detailed in the bill. 2 The bill requires the authority, in conjunction with the 3 department, to adopt rules as necessary to implement and 4 administer the program. 5 -22- LSB 2290YC (2) 91 jm/jh 22/ 22