Indiana 2025 Regular Session

Indiana House Bill HB1038 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	~~HB1038.1~~
2		-	~~January 21, 2025~~
	1	+
	2	+	Introduced Version
3	3		HOUSE BILL No. 1038
4	4		_____
5		-	DIGEST OF ~~HB 1038 (Updated January 21, 2025 1:16 pm - DI 154)~~
	5	+	DIGEST OF INTRODUCED BILL
6	6		Citations Affected: IC 5-35.
7	7		Synopsis: ESOP linked deposit program. Requires the treasurer of
8	8		state (treasurer) to establish and administer a program to assist Indiana
9	9		companies in obtaining financing from a financial institution for the
10	10		purchase of company shares by an employee stock ownership plan
11	11		(ESOP). Allows the treasurer and a financial institution to enter into an
12	12		agreement under which: (1) the treasurer places a certificate of deposit
13	13		(CD) with the financial institution at not more than 3% below the
14		-	comparable Treasury Bill rate; (2) the financial institution makes a loan
15		-	to a company at a reduced percentage rate of interest that corresponds
16		-	to the CD's reduced rate of interest; and (3) the rate of interest of both
17		-	the loan and the certificate of deposit move in tandem for the duration
18		-	of the loan term.
	14	+	comparable Treasury Bill rate; and (2) the financial institution makes
	15	+	a loan to a company at a reduced percentage rate of interest that
	16	+	corresponds to the CD's reduced rate of interest.
19	17		Effective: July 1, 2025.
20	18		Teshka
21	19		January 8, 2025, read first time and referred to Committee on Financial Institutions.
22		-	January 21, 2025, amended, reported — Do Pass. Referred to Committee on Ways and
23		-	Means pursuant to Rule 126.3.
24		-	HB 1038—LS 6499/DI 87 January 21, 2025
	20	+	2025 IN 1038—LS 6499/DI 87 Introduced
25	21		First Regular Session of the 124th General Assembly (2025)
26	22		PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
27	23		Constitution) is being amended, the text of the existing provision will appear in this style type,
28	24		additions will appear in this style type, and deletions will appear in this style type.
29	25		Additions: Whenever a new statutory provision is being enacted (or a new constitutional
30	26		provision adopted), the text of the new provision will appear in this style type. Also, the
31	27		word NEW will appear in that style type in the introductory clause of each SECTION that adds
32	28		a new provision to the Indiana Code or the Indiana Constitution.
33	29		Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
34	30		between statutes enacted by the 2024 Regular Session of the General Assembly.
35	31		HOUSE BILL No. 1038
36	32		A BILL FOR AN ACT to amend the Indiana Code concerning state
37	33		and local administration.
38	34		Be it enacted by the General Assembly of the State of Indiana:
39	35		1 SECTION 1. IC 5-35 IS ADDED TO THE INDIANA CODE AS A
40	36		2 NEW ARTICLE TO READ AS FOLLOWS [EFFECTIVE JULY 1,
41	37		3 2025]:
42	38		4 ARTICLE 35. ESOP LINKED DEPOSIT PROGRAM
43	39		5 Chapter 1. Definitions
44	40		6 Sec. 1. The definitions in this chapter apply throughout this
45	41		7 article.
46	42		8 Sec. 2. "Company" means a business entity that:
47	43		9 (1) is headquartered in Indiana; and
48	44		10 (2) establishes a tax-qualified ESOP.
49	45		11 Sec. 3. "ESOP" means an employee stock ownership plan under
50	46		12 26 U.S.C. 401(a).
51	47		13 Sec. 4. "Fund" refers to the linked deposit fund established by
52	48		14 IC 5-35-9-1.
53	49		15 Sec. 5. "Lender" means a financial institution (as defined in
54	50		16 IC 5-13-4-10) that:
55	51		17 (1) agrees to participate in the program;
56		-	HB 1038—LS 6499/DI 87 2
	52	+	2025 IN 1038—LS 6499/DI 87 2
57	53		1 (2) is eligible to make commercial loans; and
58	54		2 (3) has been designated as a depository for public funds of the
59	55		3 state as provided in IC 5-13-9.5.
60	56		4 Sec. 6. "Loan" means a linked deposit loan.
61	57		5 Sec. 7. "Program" means the linked deposit program
62	58		6 established by the treasurer of state under this article.
63	59		7 Chapter 2. Linked Deposit Program
64	60		8 Sec. 1. The treasurer of state shall establish and administer the
65	61		9 linked deposit program to assist a company in obtaining financing
66	62		10 for the purchase of company shares by an ESOP. To participate in
67	63		11 the program, a company must satisfy one (1) of the following:
68	64		12 (1) The company must be:
69	65		13 (A) at least fifty-one percent (51%) employee owned; and
70	66		14 (B) seeking to increase the level of employee ownership of
71	67		15 the company to more than fifty-one percent (51%)
72	68		16 employee owned, as a result of the ESOP purchase.
73	69		17 (2) The company must be:
74	70		18 (A) less than fifty-one percent (51%) employee owned; and
75	71		19 (B) seeking to increase the level of employee ownership of
76	72		20 the company to at least fifty-one percent (51%) employee
77	73		21 owned, as a result of the ESOP purchase.
78	74		22 Sec. 2. The program shall allow the treasurer of state and a
79	75		23 lender to enter into a linked deposit agreement in the form
80	76		24 prescribed by the treasurer of state. Under the linked deposit
81	77		25 agreement:
82	78		26 (1) the treasurer of state shall place a certificate of deposit
83	79		27 with the lender at not more than three percent (3%) below the
84	80		28 comparable Treasury Bill rate as determined and calculated
85		-	29 by the treasurer of state;
	81	+	29 by the treasurer of state; and
86	82		30 (2) the lender will make a loan of an equivalent value to a
87	83		31 company at a percentage rate of interest reduced by at least
88	84		32 the same number of percentage points that the certificate of
89	85		33 deposit under subdivision (1) was reduced upon placement
90		-	34 with the lender; and
91		-	35 (3) the interest rates of both the loan and the certificate of
92		-	36 deposit shall move in tandem for the duration of the loan
93		-	37 term.
94		-	38 Sec. 3. A lender shall certify in writing to the treasurer of state,
95		-	39 in the form and manner prescribed by the treasurer of state, that
96		-	40 the loan complies with section 2(2) of this chapter.
97		-	41 Chapter 3. Linked Deposit Loan Application
98		-	42 Sec. 1. (a) To participate in the program, a company must apply
99		-	HB 1038—LS 6499/DI 87 3
100		-	1 for a loan from a lender in the manner that is customarily required
101		-	2 by the lender.
102		-	3 (b) A lender shall make a credit decision with respect to a loan
103		-	4 application in accordance with all usual lending standards to
104		-	5 determine the creditworthiness of a company.
105		-	6 Sec. 2. If the lender approves the loan application, the lender
106		-	7 shall submit to the treasurer of state, a linked deposit application
107		-	8 completed by the lender and company.
108		-	9 Chapter 4. Linked Deposit Application
109		-	10 Sec. 1. The treasurer of state shall prescribe the form of a linked
110		-	11 deposit application. However the form must require at least the
111		-	12 following information:
112		-	13 (1) The amount of the company's loan.
113		-	14 (2) A copy of the company's business plan showing that at
114		-	15 least fifty-one percent (51%) of all interests in the company
115		-	16 are or will be owned or controlled by an ESOP.
116		-	17 (3) A feasibility study by an objective third party with a
117		-	18 positive determination that the company will generate
118		-	19 sufficient margin to repay the loan.
119		-	20 (4) A certification by the lender of the present borrowing rate
120		-	21 applicable to a company.
121		-	22 (5) A certification by the company that:
122		-	23 (A) the company is not currently participating in the
123		-	24 program; and
124		-	25 (B) the information contained in the linked deposit
125		-	26 application is, to the best of the company's knowledge, true
126		-	27 and correct.
127		-	28 (6) Any other information the treasurer of state requires.
128		-	29 Sec. 2. The treasurer of state shall approve or reject a linked
129		-	30 deposit application:
130		-	31 (1) not more than thirty (30) days after receipt of a complete
131		-	32 application; and
132		-	33 (2) in accordance with the guidelines adopted by the treasurer
133		-	34 of state.
134		-	35 Sec. 3. If the treasurer of state rejects the linked deposit
135		-	36 application, the treasurer of state shall provide a written notice of
136		-	37 rejection to the lender and company that states the reasons for
137		-	38 rejecting the application.
138		-	39 Sec. 4. (a) If the treasurer of state approves the linked deposit
139		-	40 application, the treasurer of state shall:
140		-	41 (1) provide written notice of the approval to the lender and
141		-	42 the company; and
142		-	HB 1038—LS 6499/DI 87 4
143		-	1 (2) place a certificate of deposit with the lender at a rate
144		-	2 below current market rates, as provided in IC 5-35-2-2.
145		-	3 (b) The treasurer of state may purchase a certificate of deposit
146		-	4 under subsection (a) using either or both of the following:
147		-	5 (1) Excess state funds under IC 5-13-10-1.
148		-	6 (2) Funds in the linked deposit fund established by
149		-	7 IC 5-35-9-1.
150		-	8 Chapter 5. Linked Deposit Loan
151		-	9 Sec. 1. The following apply to a loan made by a lender under the
152		-	10 program:
153		-	11 (1) The lender shall fund a loan in accordance with the linked
154		-	12 deposit agreement entered into with the treasurer of state.
155		-	13 (2) The purpose of the loan must be to finance an ESOP
156		-	14 purchase of company shares to increase employee ownership
157		-	15 as provided in IC 5-35-2-1.
158		-	16 Sec. 2. A company may have only one (1) outstanding loan
159		-	17 under the program at any time. However, a loan may be
160		-	18 refinanced. The treasurer of state shall establish criteria regarding
161		-	19 the amount of a loan for refinancing.
162		-	20 Sec. 3. A loan may not be made to any of the following:
163		-	21 (1) An officer or director of the lender or an entity in which
164		-	22 any officer or director of the lender maintains a controlling
165		-	23 interest.
166		-	24 (2) An officer or employee of the office of the treasurer of
167		-	25 state or any entity in which any officer or employee of the
168		-	26 office of the treasurer of state maintains a controlling interest.
169		-	27 (3) An immediate family member of an officer or employee of
170		-	28 the office of the treasurer of state.
171		-	29 Chapter 6. Certificates of Deposit
172		-	30 Sec. 1. A certificate of deposit placed with a lender under the
173		-	31 program shall have a maturity date identical to the maturity date
174		-	32 of the loan with a term not exceeding ten (10) years.
175		-	33 Sec. 2. (a) Subject to subsection (b), at the discretion of the
176		-	34 treasurer of state and with the approval of the lender:
177		-	35 (1) a certificate of deposit may be renewed not more than
178		-	36 three (3) times; and
179		-	37 (2) each renewal must have a maturity date that matches the
180		-	38 maturity date of the loan not exceeding a maximum of five (5)
181		-	39 years.
182		-	40 (b) A certificate of deposit may only be renewed if:
183		-	41 (1) the loan principal has been reduced by at least five percent
184		-	42 (5%); and
185		-	HB 1038—LS 6499/DI 87 5
186		-	1 (2) all interest has been paid to date from the time of the prior
187		-	2 loan or renewal.
188		-	3 (c) Interest shall be paid at the times determined by the
189		-	4 treasurer of state.
190		-	5 Chapter 7. Liability
191		-	6 Sec. 1. The state and treasurer of state are not liable to a lender
192		-	7 for payment of the principal or interest on a loan made to a
193		-	8 company.
194		-	9 Sec. 2. Any delay in payments in default on the part of a
195		-	10 company does not affect the linked deposit agreement between the
196		-	11 lender and the treasurer of state.
197		-	12 Chapter 8. Annual Report
198		-	13 Sec. 1. Not later than July 1, 2027, and before July 1 of each
199		-	14 year thereafter, the treasurer of state shall submit a report on the
200		-	15 status of the program to the following:
201		-	16 (1) The governor.
202		-	17 (2) The lieutenant governor.
203		-	18 (3) The legislative council in an electronic format under
204		-	19 IC 5-14-6.
205		-	20 Chapter 9. Linked Deposit Fund
206		-	21 Sec. 1. (a) The linked deposit fund is established. The fund shall
207		-	22 be administered by the treasurer of state. Money in the fund may
208		-	23 used for placing certificates of deposit with lenders to implement
209		-	24 the program.
210		-	25 (b) The fund consists of money appropriated by the general
211		-	26 assembly.
212		-	27 (c) The expenses of administering the fund shall be paid from
213		-	28 money in the fund.
214		-	29 Sec. 2. (a) The treasurer of state shall invest the money in the
215		-	30 fund not currently needed to meet the obligations of the fund in the
216		-	31 same manner as other public funds may be invested. Interest that
217		-	32 accrues from these investments shall be deposited in the fund.
218		-	33 (b) Money in the fund at the end of a state fiscal year does not
219		-	34 revert to the state general fund.
220		-	35 Chapter 10. Guidelines
221		-	36 Sec. 1. The treasurer of state shall adopt guidelines to
222		-	37 implement this article, including guidelines governing:
223		-	38 (1) the form and content of applications for linked deposits;
224		-	39 (2) a process for requesting renewal of a linked deposit;
225		-	40 (3) loan refinancing;
226		-	41 (4) monitoring compliance of lenders and companies;
227		-	42 (5) the form and terms of linked deposit agreements;
228		-	HB 1038—LS 6499/DI 87 6
229		-	1 (6) standards for approval or rejection of linked deposit
230		-	2 applications; and
231		-	3 (7) any other guidelines the board determines are necessary
232		-	4 to implement and administer the program.
233		-	5 Sec. 2. In adopting the guidelines described in section 1 of this
234		-	6 chapter, the treasurer of state shall collaborate with or seek
235		-	7 guidance from:
236		-	8 (1) the state board of finance under IC 4-9.1; and
237		-	9 (2) the board for depositories under IC 5-13.
238		-	HB 1038—LS 6499/DI 87 7
239		-	COMMITTEE REPORT
240		-	Mr. Speaker: Your Committee on Financial Institutions, to which
241		-	was referred House Bill 1038, has had the same under consideration
242		-	and begs leave to report the same back to the House with the
243		-	recommendation that said bill be amended as follows:
244		-	Page 2, line 29, delete "and".
245		-	Page 2, line 34, delete "lender." and insert "lender; and".
246		-	Page 2, between lines 34 and 35, begin a new line block indented
247		-	and insert:
248		-	"(3) the interest rates of both the loan and the certificate of
249		-	deposit shall move in tandem for the duration of the loan
250		-	term.".
251		-	Page 4, delete line 10.
252		-	Page 4, line 11, delete "(3)" and insert "(2)".
253		-	Page 4, between lines 27 and 28, begin a new paragraph and insert:
254		-	"Sec. 1. A certificate of deposit placed with a lender under the
255		-	program shall have a maturity date identical to the maturity date
256		-	of the loan with a term not exceeding ten (10) years.".
257		-	Page 4, delete lines 28 through 31.
258		-	Page 4, between lines 35 and 36, begin a new line block indented
259		-	and insert:
260		-	"(2) each renewal must have a maturity date that matches the
261		-	maturity date of the loan not exceeding a maximum of five (5)
262		-	years.".
263		-	Page 4, delete lines 36 through 37.
264		-	Page 6, line 4, delete "may" and insert "shall".
265		-	Page 6, line 6, after "IC 4-9.1;" insert "and".
266		-	Page 6, line 7, delete "IC 5-13; and" and insert "IC 5-13.".
267		-	Page 6, delete line 8.
268		-	and when so amended that said bill do pass.
269		-	(Reference is to HB 1038 as introduced.)
270		-	TESHKA
271		-	Committee Vote: yeas 10, nays 0.
272		-	HB 1038—LS 6499/DI 87
	86	+	34 with the lender.
	87	+	35 Sec. 3. A lender shall certify in writing to the treasurer of state,
	88	+	36 in the form and manner prescribed by the treasurer of state, that
	89	+	37 the loan complies with section 2(2) of this chapter.
	90	+	38 Chapter 3. Linked Deposit Loan Application
	91	+	39 Sec. 1. (a) To participate in the program, a company must apply
	92	+	40 for a loan from a lender in the manner that is customarily required
	93	+	41 by the lender.
	94	+	42 (b) A lender shall make a credit decision with respect to a loan
	95	+	2025 IN 1038—LS 6499/DI 87 3
	96	+	1 application in accordance with all usual lending standards to
	97	+	2 determine the creditworthiness of a company.
	98	+	3 Sec. 2. If the lender approves the loan application, the lender
	99	+	4 shall submit to the treasurer of state, a linked deposit application
	100	+	5 completed by the lender and company.
	101	+	6 Chapter 4. Linked Deposit Application
	102	+	7 Sec. 1. The treasurer of state shall prescribe the form of a linked
	103	+	8 deposit application. However the form must require at least the
	104	+	9 following information:
	105	+	10 (1) The amount of the company's loan.
	106	+	11 (2) A copy of the company's business plan showing that at
	107	+	12 least fifty-one percent (51%) of all interests in the company
	108	+	13 are or will be owned or controlled by an ESOP.
	109	+	14 (3) A feasibility study by an objective third party with a
	110	+	15 positive determination that the company will generate
	111	+	16 sufficient margin to repay the loan.
	112	+	17 (4) A certification by the lender of the present borrowing rate
	113	+	18 applicable to a company.
	114	+	19 (5) A certification by the company that:
	115	+	20 (A) the company is not currently participating in the
	116	+	21 program; and
	117	+	22 (B) the information contained in the linked deposit
	118	+	23 application is, to the best of the company's knowledge, true
	119	+	24 and correct.
	120	+	25 (6) Any other information the treasurer of state requires.
	121	+	26 Sec. 2. The treasurer of state shall approve or reject a linked
	122	+	27 deposit application:
	123	+	28 (1) not more than thirty (30) days after receipt of a complete
	124	+	29 application; and
	125	+	30 (2) in accordance with the guidelines adopted by the treasurer
	126	+	31 of state.
	127	+	32 Sec. 3. If the treasurer of state rejects the linked deposit
	128	+	33 application, the treasurer of state shall provide a written notice of
	129	+	34 rejection to the lender and company that states the reasons for
	130	+	35 rejecting the application.
	131	+	36 Sec. 4. (a) If the treasurer of state approves the linked deposit
	132	+	37 application, the treasurer of state shall:
	133	+	38 (1) provide written notice of the approval to the lender and
	134	+	39 the company; and
	135	+	40 (2) place a certificate of deposit with the lender at a rate
	136	+	41 below current market rates, as provided in IC 5-35-2-2.
	137	+	42 (b) The treasurer of state may purchase a certificate of deposit
	138	+	2025 IN 1038—LS 6499/DI 87 4
	139	+	1 under subsection (a) using either or both of the following:
	140	+	2 (1) Excess state funds under IC 5-13-10-1.
	141	+	3 (2) Funds in the linked deposit fund established by
	142	+	4 IC 5-35-9-1.
	143	+	5 Chapter 5. Linked Deposit Loan
	144	+	6 Sec. 1. The following apply to a loan made by a lender under the
	145	+	7 program:
	146	+	8 (1) The lender shall fund a loan in accordance with the linked
	147	+	9 deposit agreement entered into with the treasurer of state.
	148	+	10 (2) A loan may not exceed one million dollars ($1,000,000).
	149	+	11 (3) The purpose of the loan must be to finance an ESOP
	150	+	12 purchase of company shares to increase employee ownership
	151	+	13 as provided in IC 5-35-2-1.
	152	+	14 Sec. 2. A company may have only one (1) outstanding loan
	153	+	15 under the program at any time. However, a loan may be
	154	+	16 refinanced. The treasurer of state shall establish criteria regarding
	155	+	17 the amount of a loan for refinancing.
	156	+	18 Sec. 3. A loan may not be made to any of the following:
	157	+	19 (1) An officer or director of the lender or an entity in which
	158	+	20 any officer or director of the lender maintains a controlling
	159	+	21 interest.
	160	+	22 (2) An officer or employee of the office of the treasurer of
	161	+	23 state or any entity in which any officer or employee of the
	162	+	24 office of the treasurer of state maintains a controlling interest.
	163	+	25 (3) An immediate family member of an officer or employee of
	164	+	26 the office of the treasurer of state.
	165	+	27 Chapter 6. Certificates of Deposit
	166	+	28 Sec. 1. A certificate of deposit placed with a lender under the
	167	+	29 program may have any maturity:
	168	+	30 (1) considered appropriate by the treasurer of state; and
	169	+	31 (2) not to exceed two (2) years.
	170	+	32 Sec. 2. (a) Subject to subsection (b), at the discretion of the
	171	+	33 treasurer of state and with the approval of the lender:
	172	+	34 (1) a certificate of deposit may be renewed not more than
	173	+	35 three (3) times; and
	174	+	36 (2) each renewal may have a maturity of not more than two
	175	+	37 (2) years.
	176	+	38 (b) A certificate of deposit may only be renewed if:
	177	+	39 (1) the loan principal has been reduced by at least five percent
	178	+	40 (5%); and
	179	+	41 (2) all interest has been paid to date from the time of the prior
	180	+	42 loan or renewal.
	181	+	2025 IN 1038—LS 6499/DI 87 5
	182	+	1 (c) Interest shall be paid at the times determined by the
	183	+	2 treasurer of state.
	184	+	3 Chapter 7. Liability
	185	+	4 Sec. 1. The state and treasurer of state are not liable to a lender
	186	+	5 for payment of the principal or interest on a loan made to a
	187	+	6 company.
	188	+	7 Sec. 2. Any delay in payments in default on the part of a
	189	+	8 company does not affect the linked deposit agreement between the
	190	+	9 lender and the treasurer of state.
	191	+	10 Chapter 8. Annual Report
	192	+	11 Sec. 1. Not later than July 1, 2027, and before July 1 of each
	193	+	12 year thereafter, the treasurer of state shall submit a report on the
	194	+	13 status of the program to the following:
	195	+	14 (1) The governor.
	196	+	15 (2) The lieutenant governor.
	197	+	16 (3) The legislative council in an electronic format under
	198	+	17 IC 5-14-6.
	199	+	18 Chapter 9. Linked Deposit Fund
	200	+	19 Sec. 1. (a) The linked deposit fund is established. The fund shall
	201	+	20 be administered by the treasurer of state. Money in the fund may
	202	+	21 used for placing certificates of deposit with lenders to implement
	203	+	22 the program.
	204	+	23 (b) The fund consists of money appropriated by the general
	205	+	24 assembly.
	206	+	25 (c) The expenses of administering the fund shall be paid from
	207	+	26 money in the fund.
	208	+	27 Sec. 2. (a) The treasurer of state shall invest the money in the
	209	+	28 fund not currently needed to meet the obligations of the fund in the
	210	+	29 same manner as other public funds may be invested. Interest that
	211	+	30 accrues from these investments shall be deposited in the fund.
	212	+	31 (b) Money in the fund at the end of a state fiscal year does not
	213	+	32 revert to the state general fund.
	214	+	33 Chapter 10. Guidelines
	215	+	34 Sec. 1. The treasurer of state shall adopt guidelines to
	216	+	35 implement this article, including guidelines governing:
	217	+	36 (1) the form and content of applications for linked deposits;
	218	+	37 (2) a process for requesting renewal of a linked deposit;
	219	+	38 (3) loan refinancing;
	220	+	39 (4) monitoring compliance of lenders and companies;
	221	+	40 (5) the form and terms of linked deposit agreements;
	222	+	41 (6) standards for approval or rejection of linked deposit
	223	+	42 applications; and
	224	+	2025 IN 1038—LS 6499/DI 87 6
	225	+	1 (7) any other guidelines the board determines are necessary
	226	+	2 to implement and administer the program.
	227	+	3 Sec. 2. In adopting the guidelines described in section 1 of this
	228	+	4 chapter, the treasurer of state may collaborate with or seek
	229	+	5 guidance from:
	230	+	6 (1) the state board of finance under IC 4-9.1;
	231	+	7 (2) the board for depositories under IC 5-13; and
	232	+	8 (3) any other state agency.
	233	+	2025 IN 1038—LS 6499/DI 87