SENATE BILL 109

56th legislature - STATE OF NEW MEXICO - second session, 2024

INTRODUCED BY

Carrie Hamblen

 

 

 

FOR THE ECONOMIC AND RURAL DEVELOPMENT AND POLICY COMMITTEE

 

AN ACT

RELATING TO PUBLIC FINANCE; ENACTING THE CATASTROPHIC BUSINESS RELIEF ACT; CREATING THE CATASTROPHIC BUSINESS RELIEF LOAN FUND; PROVIDING CATASTROPHIC BUSINESS RELIEF LOANS FOR CERTAIN BUSINESSES; ESTABLISHING TERMS FOR CATASTROPHIC BUSINESS RELIEF LOANS; REQUIRING REPAYMENT; ESTABLISHING REPORTING REQUIREMENTS; MAKING APPROPRIATIONS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Catastrophic Business Relief Act".

     SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Catastrophic Business Relief Act:

          A. "authority" means the New Mexico finance

authority;

          B. "average adjusted monthly business expenses"

means an amount equal to the quotient of:

                (1) a business's total expenses for the most recent taxable year, excluding expenses deducted pursuant to Section 179 of the United States Internal Revenue Code of 1986, as that section may be amended or renumbered, and expenses for depreciation and bonus depreciation deducted pursuant to the United States Internal Revenue Code of 1986, as determined from the business's federal income tax return for the most recent taxable year; and

                (2) twelve;

          C. "catastrophic incident" means a sudden and devastating event that causes significant harm or damage to a business or its assets and that threatens the survival of the business and includes operational disruptions, loss of data, financial losses and equipment or infrastructure loss or destruction caused by events that include public health epidemics such as the coronavirus disease 2019 pandemic, natural disasters, such as floods, earthquakes and tornadoes, and human-made events, such as fires, explosions, acts of terrorism, cyber attacks or technological failures;

          D. "community development financial institution" means a legal entity operating within the state that is certified as a community development financial institution by the federal community development financial institutions fund;

          E. "loan servicer" means a federally insured depository institution or community development financial

institution that assembles and submits the business relief loan documents to the authority;

          F. "New Mexico resident" means an individual who is domiciled in this state during any part of the year or an individual who is physically present in this state for one hundred eighty-five days or more during the taxable year;

          G. "nonprofit corporation" means an entity organized pursuant to Section 501(c)(3) or 501(c)(6) of the Internal Revenue Code of 1986;

          H. "qualifying business" means a business or nonprofit corporation that:

                (1) has experienced a catastrophic incident; and

                (2) is owned as follows:

                     (a) for a sole proprietorship, one hundred percent of the assets of the business are owned or leased by a New Mexico resident; and

                     (b) for a corporation, partnership, joint venture, limited liability company, limited partnership, nonprofit corporation or other business entity, at least eighty percent of the total voting power of the entity and at least eighty percent of the total value of the equity is owned by one or more New Mexico residents and the headquarters and principal place of business are located in New Mexico; and

          I. "service provider" means a nonprofit or governmental organization that provides interactive, technical assistance to businesses, including:

                (1) developing sustainable business practices;

                (2) training in marketing, administration and financial management; and

                (3) complying with legal requirements, licensing requirements and tax liabilities.

     SECTION 3. [NEW MATERIAL] CATASTROPHIC BUSINESS RELIEF LOAN FUND--CREATED.--

          A. The "catastrophic business relief loan fund" is created as a nonreverting fund in the authority. The fund consists of distributions, appropriations, gifts, grants, deposits, transfers, donations, income from investment of the fund and any other money distributed or otherwise allocated to the fund. The authority shall administer the fund, and money in the fund is appropriated to the authority to administer the provisions of the Catastrophic Business Relief Act.

          B. The state investment officer, subject to the approval of the state investment council, shall invest money in the catastrophic business relief loan fund:

                (1) in accordance with the prudent investor rule set forth in the Uniform Prudent Investor Act; and

                (2) in consultation with the state treasurer.

          C. The state investment officer shall report quarterly to the legislative finance committee and the state investment council on the investments made pursuant to this section. Annually, a report shall be submitted no later than November 1 of each year to the legislative finance committee, the revenue stabilization and tax policy committee and any other appropriate interim committees.

     SECTION 4. [NEW MATERIAL] LOANS--TERMS.--

          A. The authority shall receive and review applications for catastrophic business relief loans pursuant to the Catastrophic Business Relief Act. The authority shall review all completed applications in the order in which they were received and shall provide a determination to the applicant within five business days. The authority shall make loans to qualifying businesses; provided that funds are available, prudent lending practices are followed and, as determined by the authority, the qualifying business meets the requisite creditworthiness. The authority shall adopt rules to govern the application procedures and requirements for disbursing loans under the Catastrophic Business Relief Act, including requirements consistent with the purpose of that act, for determining the eligibility of qualifying businesses for catastrophic business relief loans.

          B. The authority shall evaluate the creditworthiness of an applicant based on information received from the applicant, which may include an independent credit reporting agency report when available.

          C. The authority may use funding made available for the purposes of the Catastrophic Business Relief Act to contract with a loan servicer to assist in carrying out the provisions of the Catastrophic Business Relief Act, including determining:

                (1) whether an entity meets the requirements to be considered a qualifying business;

                (2) whether a qualifying business is eligible for a catastrophic business relief loan; and

                (3) the amount that the qualifying business is eligible to receive for a catastrophic business relief loan.          D. The authority shall make catastrophic business relief loans in accordance with the following:

                (1) the loan amount shall be in an amount up to two hundred percent of the qualifying business's average adjusted monthly business expenses from the previous calendar or fiscal year; provided that the maximum loan amount shall be no greater than twenty-five thousand dollars ($25,000);

                (2) prudent lending practices shall be followed; and

                (3) the terms of the loan shall require that

the loan recipient:

                     (a) use a minimum of eighty percent of the proceeds of the loan to recover from the catastrophic incident or for ordinary and necessary business expenses, including capital expenses, other than compensation for employees who own equity in the business;

                     (b) provide a written certification signed by an appropriate officer of the qualifying business that certifies that: 1) the officer understands that the business is receiving a loan under the Catastrophic Business Relief Act that must be repaid by the business with interest under the terms of the loan agreement; 2) all documents submitted in support of the loan application are true and accurate to the best of the officer's knowledge; 3) the officer has a reasonable basis to believe that, as of the date of origination of the loan and receipt of the loan proceeds, the business does not expect to permanently cease business operations or file for bankruptcy; 4) prior to the catastrophic incident, the business was current on all obligations pursuant to the Income Tax Act, the Corporate Income and Franchise Tax Act, the Withholding Tax Act, the Gross Receipts and Compensating Tax Act and the Unemployment Compensation Law applicable to the business's operations; and 5) all loan proceeds will be used for purposes as provided in the Catastrophic Business Relief Act, including that no more than twenty percent of the proceeds may be used as compensation for employees who own equity in the business;

                     (c) provide the authority with ongoing

information relevant to the reporting requirements of the authority provided in Section 7 of the Catastrophic Business Relief Act; and

                     (d) provide specific guidelines related to personal guarantees or collateral, as determined by the authority.

          E. The authority may exercise any power provided to the authority in the New Mexico Finance Authority Act to assist in the administration of this; provided that the power is consistent with the provisions of the Catastrophic Business Relief Act.

     SECTION 5. [NEW MATERIAL] LOAN REPAYMENT.--

          A. Catastrophic business relief loans shall be made for an initial loan period of three years. The loans shall bear an annual interest rate of one percent.

          B. Payment of the interest accrued on a catastrophic business relief loan shall be due in annual installments, with the first interest payment due on the first anniversary of the funding date of the loan, and with each subsequent interest payment due on each subsequent anniversary of the funding date of the loan thereafter until the loan is paid in full. Payment on the outstanding principal of a catastrophic business relief loan may be made on the third anniversary of the funding date of the loan, or the outstanding principal and interest on the loan may be converted to a loan, at the request of the borrower and with the consent of the authority, to be paid in monthly installments over a period of three additional years.

          C. Receipts from the repayment of principal or interest accrued on the loans made pursuant to the Catastrophic Business Relief Act shall be deposited in the catastrophic business relief loan fund.

          D. No provision in a catastrophic business relief loan or the evidence of indebtedness of the loan shall include a penalty or premium for prepayment of the balance of the indebtedness.

     SECTION 6. [NEW MATERIAL] SMALL BUSINESS TECHNICAL ASSISTANCE--SERVICE PROVIDERS.--

          A. A qualified business with an annual gross revenue of five hundred thousand dollars ($500,000) or less that applies for and receives a catastrophic business relief loan and that is receiving technical assistance from a service provider is eligible to receive additional funding in the amount of one-half percent of the loan amount to pay the service provider for continued technical assistance during the term of the loan or until the service provider certifies to the authority that the qualified business no longer needs the assistance of the service provider; provided that the authority shall use funding made available pursuant to the Catastrophic Business Relief Act to provide the service provider with the additional amount, and the additional amount shall require repayment from the qualified business.

          B. Nothing in this section shall be construed to require a qualified business with an annual gross revenue of five hundred thousand dollars ($500,000) or less to contract with or use the services of a service provider to meet the qualifications of a catastrophic business relief loan.

     SECTION 7. [NEW MATERIAL] REPORTS--CONFIDENTIALITY.--

          A. Prior to October 1, 2024 and each October 1 for the proceeding four years, the authority shall submit a report to the legislature, the legislative finance committee, the New Mexico finance authority oversight committee, the revenue stabilization and tax policy committee and any other appropriate legislative interim committee. The report shall provide details regarding the loans made pursuant to the Catastrophic Business Relief Act. The report shall include:

                (1) the number of loans made pursuant to that act;

                (2) the number of loan applications;

                (3) the average amount provided to loan applicants;

                (4) the number of loans and the amount of those loan