House Study Bill 722 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON KAUFMANN)
A BILL FOR
1 An Act relating to tax credits awarded by the economic
2 development authority for specific capital contributions
3 made to certified rural business growth funds for investment
4 in qualified businesses.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 Section 1. NEW SECTION. 15.490 Short title.
2 This part shall be known and may be cited as the “Iowa Rural
3 Development Tax Credit Program”.
4 Sec. 2. NEW SECTION. 15.491 Definitions.
5 As used in this part, unless the context otherwise requires:
6 1. “Affiliate” means a person that directly, or indirectly
7 through one or more intermediaries, controls, is controlled
8 by, or is under common control with another person. A person
9 is controlled by another person if the controlling person
10 holds, directly or indirectly, the majority voting or ownership
11 interest in the controlled person or has control, by contract
12 or by law, over the day-to-day operations of the controlled
13 person.
14 2. “Authority” means the economic development authority
15 created in section 15.105.
16 3. “Closing date” means the date on which a rural business
17 growth fund completes collection of all contributions and
18 investments and submits all required documentation to the
19 authority pursuant to section 15.492, subsection 7.
20 4. “Credit-eligible capital contribution” means an investment
21 of cash by a person in a rural business growth fund that is
22 eligible for a tax credit certificate issued by the authority
23 pursuant to section 15.493, subsection 1. The cash investment
24 shall purchase either of the following:
25 a. An equity interest in the growth fund.
26 b. A debt instrument, at par value or premium, issued by the
27 growth fund that has a maturity date at least six years after
28 the growth fund’s closing date.
29 5. “Depository institution” means the same as defined in
30 section 524.1802.
31 6. “Eligible investment authority” means the amount stated
32 on the certification the authority issues pursuant to section
33 15.492, subsection 7, paragraph “a”. At least sixty percent
34 of a growth fund’s eligible investment authority shall be
35 comprised of credit-eligible capital contributions.
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1 7. “Employee” means a natural person who is employed in this
2 state by a qualified business and who is either salaried, works
3 a minimum of thirty-five hours per week, or another period of
4 time generally accepted by custom, industry, or practice as
5 full-time employment.
6 8. “Equity holder” means a person that makes an equity
7 investment in a rural business growth fund.
8 9. “Growth investment” means any of the following:
9 a. Capital or equity investments in a qualified business.
10 b. A loan to a qualified business if all of the following
11 conditions apply:
12 (1) The loan has a stated maturity of at least two years.
13 (2) The principal payments have been deferred for at least
14 two years.
15 (3) The pro forma financial statements of the qualified
16 business result in a leverage ratio of greater than three to
17 one when comparing debt to earnings before interest, taxes,
18 depreciation, and amortization.
19 c. A senior secured loan if the senior secured loan is
20 secured first by a mortgage on real estate with a loan to value
21 ratio of less than eighty percent, and the qualified business
22 has a credit refusal letter or similar correspondence from a
23 depository institution located in this state.
24 10. “Jobs created” means the number of new employees at
25 a qualified business, after an initial growth investment, at
26 the end of each subsequent calendar year. This number is
27 calculated annually by adding together the number of employees
28 at the qualified business on the last day of each calendar
29 month and dividing by twelve, then subtracting the number of
30 employees at the qualified business on the date the day before
31 the date of the initial growth investment. If the resulting
32 total is less than zero, the jobs created is equal to zero.
33 11. “Jobs retained” means the number of employees at a
34 qualified business the day before the date of an initial growth
35 investment that the qualified business’s chief executive
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1 officer or similar officer certifies as being positions located
2 in this state that would have been eliminated but for the
3 initial growth investment.
4 12. “Located in” means the place or places at which a
5 business’s operations are located and where at least sixty
6 percent of the business’s employees work, or where employees
7 that are paid at least sixty percent of the business’s payroll
8 work.
9 13. “Program” means the Iowa rural development tax credit
10 program administered under this part.
11 14. “Qualified business” means any business within this
12 state that has fewer than two hundred fifty employees,
13 including ostensible subcontractors pursuant to 13 C.F.R.
14 §121.103(h)(4), and is not located in whole or in part in one
15 or more of the twelve most populous counties in the state, as
16 determined by the most recent decennial census released by the
17 United States bureau of census.
18 15. “Revenue” means the total state and local income
19 produced by a rural business growth fund’s economic activity.
20 16. “Rural business growth fund” or “growth fund” means a
21 person, or an affiliate of a person, certified by the authority
22 pursuant to section 15.492, subsection 7, paragraph “a”.
23 17. “Within this state” means in the state of Iowa, or an
24 out-of-state business that has agreed to use a proposed growth
25 investment to become a qualified business within one hundred
26 eighty days of receiving the growth investment.
27 Sec. 3. NEW SECTION. 15.492 Application and agreement.
28 1. The authority shall begin accepting program applications
29 on January 7, 2025. An application is deemed received based
30 on the date and time stamp that shall be generated by the
31 authority upon receipt of the application. Applications
32 received by the authority on the same day shall be deemed to
33 have been received simultaneously.
34 2. A person seeking certification as a rural business
35 growth fund shall apply to the authority in the form and manner
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1 prescribed by the authority. The application must include all
2 of the following:
3 a. The eligible investment authority sought by the
4 applicant.
5 b. A copy of the applicant’s, or an affiliate of the
6 applicant’s, license as a rural business investment company
7 as defined under 7 U.S.C. §2009cc(14), or license as a small
8 business investment company under 15 U.S.C. §681.
9 c. Documentation as required by the authority to establish
10 that at least one principal of the applicant has been an
11 officer or an employee of the rural business investment
12 company, the small business investment company, or an affiliate
13 thereof, for a minimum of four years prior to the date of
14 application.
15 d. A revenue impact assessment for the applicant’s proposed
16 growth investments as determined by an econometric analysis
17 conducted by a nationally recognized third-party independent
18 econometric firm. The revenue impact assessment must provide
19 an analysis of the applicant’s proposed growth investments over
20 the ten consecutive years following the date the applicant’s
21 application is submitted to the authority, and must demonstrate
22 that there will be a positive revenue impact on this state
23 that exceeds the cumulative amount of tax credits, that if the
24 application is approved, may be issued by the authority to the
25 rural business growth fund’s investors.
26 e. The number of jobs created and the number of jobs
27 retained assumed in the revenue impact assessment required by
28 paragraph “d”.
29 f. A signed affidavit from each investor that identifies
30 the investor and the amount of the credit-eligible capital
31 contribution that the investor has committed to the applicant’s
32 proposed growth fund.
33 g. A nonrefundable application fee of five thousand dollars.
34 All application fees submitted to the authority pursuant to
35 this paragraph shall be used by the authority to administer
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1 this part.
2 3. The authority shall review and make a determination
3 to approve or deny each application within the time frame
4 adopted by rule by the authority. The authority shall review
5 applications on a first-come, first-served basis as determined
6 pursuant to subsection 1.
7 4. The authority shall not approve more than forty-five
8 million dollars in eligible investment authority and not more
9 than twenty-seven million dollars in credit-eligible capital
10 contributions under the program. If approved applications
11 that are simultaneously received would collectively exceed the
12 maximum limit on eligible investment authority or the maximum
13 on credit-eligible capital contributions, the authority shall
14 proportionally reduce the growth fund’s eligible investment
15 authority and credit-eligible capital contributions for each
16 of the simultaneous applications as necessary to comply with
17 the maximum limits.
18 5. The authority shall reject an application for any of the
19 following reasons:
20 a. The applicant failed to comply with any of the
21 requirements pursuant to subsection 2.
22 b. The authority has already approved the maximum eligible
23 investment authority or the maximum credit-eligible capital
24 contributions pursuant to subsection 4.
25 6. a. If the authority rejects an application, the
26 authority shall send a notice of rejection to the applicant and
27 provide a reason for the rejection.
28 b. If the authority has rejected an application on any
29 grounds other than subsection 5, paragraph “b”, the applicant
30 may provide additional information to the authority to cure
31 the defects in the application. All additional information
32 must be received by the authority within fifteen business days
33 from the date the authority sent the notice of rejection to
34 the applicant. The authority shall review and reconsider,
35 within the time frame adopted by rule by the authority, any
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1 application for which additional information is provided within
2 the fifteen business days. If an application is approved by
3 the authority after review and reconsideration, the application
4 shall be considered complete as of its original date of
5 submission.
6 c. If an applicant does not submit additional information
7 within fifteen business days from the date the authority sent
8 the applicant the notice of rejection, the applicant may submit
9 a new application at any time pursuant to subsection 2 and the
10 application shall be reviewed by the authority pursuant to
11 subsection 3.
12 7. a. If the authority approves an application, the
13 authority shall send a notice to the applicant certifying all
14 of the following:
15 (1) The applicant as a rural business growth fund.
16 (2) The growth fund’s eligible investment authority and
17 required credit-eligible contributions.
18 (3) The required number of jobs created and the required
19 number of jobs retained based on the number submitted in the
20 applicant’s application, prorated if the growth fund’s eligible
21 investment authority is reduced pursuant to subsection 4.
22 b. Within forty-five calendar days of the date the authority
23 sent the notice of certification pursuant to paragraph “a”,
24 the rural business growth fund shall comply with all of the
25 following requirements:
26 (1) Collect all credit-eligible capital contributions
27 from each investor whose affidavit was included in the growth
28 fund’s application. If the growth fund’s requested eligible
29 investment authority has been proportionally reduced pursuant
30 to subsection 4, each investor’s required credit-eligible
31 capital contribution shall be reduced by the same proportion.
32 (2) Collect one or more equity investments contributed
33 directly or indirectly by affiliates of the growth fund,
34 including employees and principals of such affiliates, that
35 must equal at least ten percent of the growth fund’s eligible
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1 investment authority.
2 (3) Collect one or more investments of cash that, when added
3 to the contributions collected under subparagraphs (1) and (2),
4 equal the growth fund’s total eligible investment authority.
5 c. Within sixty-five calendar days of the date the authority
6 sent the notice of certification pursuant to paragraph “a”,
7 the rural business growth fund shall comply with all of the
8 following requirements:
9 (1) Submit documentation to the authority sufficient to
10 prove to the satisfaction of the authority that the growth fund
11 has collected amounts described in paragraph “b”, subparagraphs
12 (1), (2), and (3).
13 (2) Submit documentation to the authority that identifies
14 all affiliates of an investor described in paragraph “b”,
15 subparagraph (1), that may be eligible to claim a tax credit
16 issued by the authority pursuant to section 15.493, subsection
17 1.
18 8. If a growth fund fails to comply with subsection 7,
19 paragraph “b” or “c”, the growth fund’s certification shall
20 lapse. Any eligible investment authority and credit-eligible
21 capital contributions that lapse pursuant to this subsection
22 shall not count toward the maximum limits on eligible
23 investment authority and credit-eligible capital contributions
24 pursuant to subsection 4. If a growth fund’s eligible
25 investment authority lapses pursuant to this subsection, the
26 authority shall first award the lapsed eligible investment
27 authority pro rata to each rural business growth fund that
28 was awarded less than the eligible investment authority that
29 the rural business growth fund sought in the growth fund’s
30 application. A rural business growth fund that is awarded
31 lapsed eligible investment authority must comply with the
32 requirements of subsection 7, paragraph “b”, as related to the
33 additional eligible investment authority. The authority may
34 award any remaining lapsed eligible investment authority to
35 new applicants until the maximum limits on eligible investment
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1 authority and credit-eligible capital contributions pursuant
2 to subsection 4 are met.
3 9. After a growth fund’s successful submission to the
4 authority of the required documentation pursuant to subsection
5 7, paragraph “c”, subparagraphs (1) and (2), the growth fund
6 shall enter into an agreement with the authority that specifies
7 the requirements that must be met for successful completion
8 of the program. At a minimum, the agreement shall contain
9 provisions addressing all of the following:
10 a. The legal name of the growth fund.
11 b. The growth fund’s closing date.
12 c. The growth fund’s eligible investment authority as
13 certified by the authority.
14 d. Each investor of the growth fund and each investor’s
15 credit-eligible capital contribution.
16 e. The minimum number of jobs that must be created and the
17 minimum number of jobs that must be retained as a result of
18 the growth fund’s growth investments to avoid paying state
19 reimbursement pursuant to section 15.497.
20 f. Revocation and recapture of tax credits pursuant to
21 section 15.494.
22 g. Any terms deemed necessary by the authority to effect
23 compliance with the program requirements pursuant to this part.
24 Sec. 4. NEW SECTION. 15.493 Tax credits.
25 1. After an agreement is executed pursuant to section
26 15.492, subsection 9, the authority shall issue a tax credit
27 certificate to each investor whose affidavit was included
28 in the growth fund’s application and whose credit-eligible
29 capital contribution was collec