Bill Summary – FastDemocracy

Enrolled Copy                                                                         H.B. 25
                        UTAH RURAL JOBS ACT AMENDMENTS
                                      2022 GENERAL SESSION
                                          STATE OF UTAH
                               Chief Sponsor: Nelson T. Abbott
                               Senate Sponsor: Curtis S. Bramble
 6
 LONG TITLE
 General Description:
        This bill modifies the Utah Rural Jobs Act.
 Highlighted Provisions:
        This bill:
        < defines terms;
        < authorizes additional nonrefundable tax credits related to investments in eligible
 small businesses located in specified counties;
        < requires each eligible small business that receives a growth investment to submit a
 document that directs and authorizes the State Tax Commission to disclose to the
 GO Utah office the eligible small business's returns;
        < addresses the method for allocating new annual jobs at an eligible small business
 that receives a growth investment from more than one rural investment company;
        < establishes a deadline for each rural investment company to exit the program; and
        < makes technical and conforming changes.
 Money Appropriated in this Bill:
        None
 Other Special Clauses:
        This bill provides retrospective operation.
 Utah Code Sections Affected:
 AMENDS:
        59-7-621, as last amended by Laws of Utah 2021, Chapter 282
        59-10-1038, as last amended by Laws of Utah 2021, Chapter 282
       H.B. 25                                                                          Enrolled Copy
        63N-4-302, as last amended by Laws of Utah 2020, Chapter 354
        63N-4-303, as enacted by Laws of Utah 2017, Chapter 274
        63N-4-305, as enacted by Laws of Utah 2017, Chapter 274
        63N-4-307, as enacted by Laws of Utah 2017, Chapter 274
        63N-4-309, as enacted by Laws of Utah 2017, Chapter 274
35
 Be it enacted by the Legislature of the state of Utah:
        Section 1. Section 59-7-621 is amended to read:
        59-7-621. Nonrefundable rural job creation tax credit.
        (1) As used in this section, "office" means the Governor's Office of Economic
 Opportunity created in Section 63N-1a-301.
        (2) Subject to the other provisions of this section, a taxpayer may claim a
 nonrefundable tax credit for rural job creation as provided in this section.
        (3) The tax credit under this section is the amount listed as the tax credit amount on a
 tax credit certificate that the office issues under Title 63N, Chapter 4, Part 3, Utah Rural Jobs
 Act, to the taxpayer for the taxable year.
        [(4) A taxpayer may carry forward a tax credit under this section for the next seven
 taxable years if the amount of the tax credit exceeds the taxpayer's tax liability under this
 chapter for the taxable year in which the taxpayer claims the tax credit.]
        (4) If the amount of a tax credit under this section exceeds the taxpayer's tax liability
 under this chapter for the taxable year in which the taxpayer claims the tax credit, the taxpayer
 may carry forward the tax credit for:
        (a) the next seven taxable years, if the credit-eligible contribution as defined in Section
 63N-4-302 is made before November 1, 2022; or
        (b) the next four taxable years, if the credit-eligible contribution as defined in Section
 63N-4-302 is made on or after November 1, 2022.
        Section 2. Section 59-10-1038 is amended to read:
        59-10-1038. Nonrefundable rural job creation tax credit.
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       Enrolled Copy                                                                             H.B. 25
         (1) As used in this section, "office" means the Governor's Office of Economic
 Opportunity created in Section 63N-1a-301.
         (2) Subject to the other provisions of this section, a taxpayer may claim a
 nonrefundable tax credit for rural job creation as provided in this section.
         (3) The tax credit under this section is the amount listed as the tax credit amount on a
 tax credit certificate that the office issues under Title 63N, Chapter 4, Part 3, Utah Rural Jobs
 Act, to the taxpayer for the taxable year.
         [(4) A taxpayer may carry forward a tax credit under this section for the next seven
 taxable years if the amount of the tax credit exceeds the taxpayer's tax liability under this
 chapter for the taxable year in which the taxpayer claims the tax credit.]
         (4) If the amount of a tax credit under this section exceeds the taxpayer's tax liability
 under this chapter for the taxable year in which the taxpayer claims the tax credit, the taxpayer
 may carry forward the tax credit for:
         (a) the next seven taxable years, if the credit-eligible contribution as defined in Section
 63N-4-302 is made before November 1, 2022; or
         (b) the next four taxable years, if the credit-eligible contribution as defined in Section
 63N-4-302 is made on or after November 1, 2022.
         Section 3. Section 63N-4-302 is amended to read:
         63N-4-302. Definitions.
         As used in this part:
         (1) (a) "Affiliate" means a person that directly, or indirectly through one or more
 intermediaries, controls, is controlled by, or is under common control with another person.
         (b) For the purposes of this part, a person controls another person if the person holds,
 directly or indirectly, the majority voting or ownership interest in the controlled person or has
 control over the day-to-day operations of the controlled person by contract or by law.
         (2) "Claimant" means a resident or nonresident person that has state taxable income.
         (3) "Closing date" means the date on which a rural investment company [has collected]
 collects:
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        H.B. 25                                                                        Enrolled Copy
         (a) all of the investments described in Subsection 63N-4-303(7) related to phase one
 investment authority; or
         (b) all of the investments described in Subsection 63N-4-303(7) related to phase two
 investment authority.
         (4) (a) "Credit-eligible contribution" means an investment of cash by a claimant in a
 rural investment company that is or will be eligible for a tax credit as evidenced by notification
 issued by the office under Subsection 63N-4-303(5)(c).
         (b) The investment shall purchase an equity interest in the rural investment company or
 purchase, at par value or premium, a debt instrument issued by the rural investment company
 that has a maturity date at least five years after the closing date.
         (5) "Eligible small business" means a business that at the time of an initial growth
 investment in the business by a rural investment company:
         (a) has fewer than 150 employees;
         (b) has less than $10,000,000 in net income for the preceding taxable year;
         (c) maintains the business's principal business operations in the state; and
         (d) is engaged in an industry related to:
         (i) aerospace;
         (ii) defense;
         (iii) energy and natural resources;
         (iv) financial services;
         (v) life sciences;
         (vi) outdoor products;
         (vii) software development;
         (viii) information technology;
         (ix) manufacturing; or
         (x) agribusiness.
         (6) (a) "Excess return" means the difference between:
         (i) the present value of all growth investments made by a rural investment company on
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        Enrolled Copy                                                                              H.B. 25
 the day the rural investment company applies to exit the program under Section 63N-4-309,
 including the present value of all distributions and gains from the growth investments; and
        (ii) the sum of the amount of the original growth investment and an amount equal to
 any projected increase in the equity holder's federal or state tax liability, including penalties and
 interest, related to the equity holder's ownership, management, or operation of the rural
 investment company.
        (b) If the amount calculated in Subsection (6)(a) is less than zero, the excess return is
 equal to zero.
        (7) "Federally licensed rural business investment company" means a person licensed as
 a rural business investment company under 7 U.S.C. Sec. 2009cc.
        (8) "Federally licensed small business investment company" means a person licensed
 as a small business investment company under 15 U.S.C. Sec. 681.
        (9) (a) "Full-time employee" means an employee that throughout the year works at
 least 30 hours per week or meets the customary practices accepted by that industry as full time.
        (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
 office may make rules that establish additional hour or other criteria to determine what
 constitutes a full-time employee.
        (10) (a) "Growth investment" means any capital or equity investment in an eligible
 small business or any loan made from the investment authority to an eligible small business
 with a stated maturity at least one year after the date of issuance.
        (b) "Growth investment" does not include, with respect to phase two investment
 authority:
        (i) a secured loan or a revolving line of credit to an eligible small business, unless the
 eligible small business sought and was denied similar financing from a commercial bank, as
 established by an affidavit from the president or chief executive officer of the eligible small
 business; or
        (ii) any portion of an investment, including any amount reinvested, in an eligible small
 business that, when added to existing investments in the eligible small business from all rural
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        H.B. 25                                                                        Enrolled Copy
 investment companies under phase two investment authority, exceeds $15,000,000.
         (11) (a) "High wage" means a wage that is at least 100% of the county average wage.
         (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
 office may make rules that establish additional criteria to determine what constitutes a high
 wage.
         (12) "Investment authority" means the minimum amount of investment a rural
 investment company must make in eligible small businesses in order for credit-eligible
 contributions to the rural investment company to qualify for a rural job creation tax credit
 under Section 59-7-621 or 59-10-1038.
         (13) (a) "New annual jobs" means the difference between:
         (i) (A) the monthly average of full-time employees that are paid a high wage at an
 eligible small business for the preceding calendar year; or
         (B) if the preceding calendar year contains the initial growth investment, the monthly
 average of full-time employees that are paid a high wage at an eligible small business for the
 months including and after the initial growth investment and before the end of the preceding
 calendar year; and
         (ii) the number of full-time employees that are paid a high wage at the eligible small
 business on the date of the initial growth investment.
         (b) If the amount calculated in Subsection (13)(a) is less than zero, the new annual jobs
 amount is equal to zero.
         (14) "Phase one investment authority" means investment authority the office grants a
 rural investment company based on an application submitted under Subsection
 63N-4-303(1)(b)(i).
         (15) "Phase two investment authority" means investment authority the office grants a
 rural investment company based on an application submitted under Subsection
 63N-4-303(1)(b)(ii).
         [(14)] (16) (a) "Principal business operations" means the location where at least 60% of
 a business's employees work or where employees that are paid at least 60% of a business's
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        Enrolled Copy                                                                               H.B. 25
 payroll work.
         (b) For the purposes of this part, an out-of-state business that agrees to relocate
 employees to this state to establish the business's principal business operations in this state
 using the proceeds of a growth investment is considered to have the business's principal
 business operations in this state if the business satisfies the requirements of Subsection [(14)]
 (16)(a) within 180 days after receiving the growth investment, unless the office agrees to a later
 date.
         [(15)] (17) "Program" means the provisions of this part applicable to a rural investment
 company.
         [(16)] (18) "Rural county" means:
         (a) with respect to phase one investment authority, any county in this state except Salt
 Lake, Utah, Davis, Weber, Washington, Cache, Tooele, and Summit counties[.]; or
         (b) with respect to phase two investment authority, any county in this state except Salt
 Lake, Utah, Davis, and Weber counties.
         [(17)] (19) "Rural investment company" means a person approved by the office under
 Section 63N-4-303.
         [(18)] (20) (a) "State reimbursement amount" means the difference between:
         (i) 50% of the rural investment company's credit-eligible capital contributions; and
         (ii) the product of:
         (A) the total sum of new annual jobs reported to the [state in the rural investment
 company's exit report described in Section 63N-4-309] office; and
         (B) $20,000 with respect to phase one investment authority, or $15,000 with respect to
 phase two investment authority.
         (b) If the amount calculated in Subsection [(18)] (20)(a) is less than zero, the state
 reimbursement amount is equal to zero.
         [(19)] (21) "Tax credit" means a rural job creation tax credit created by Section
 59-7-621 or 59-10-1038.
         [(20)] (22) "Tax credit certificate" means a certificate issued by the office that:
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        H.B. 25                                                                          Enrolled Copy
        (a) lists the name of the person to which the office authorizes a tax credit;
        (b) lists the person's taxpayer identification number;
        (c) lists the amount of tax credit that the office authorizes the person to claim for the
 taxable year; and
        (d) may include other information as determined by the office.
        Section 4. Section 63N-4-303 is amended to read:
        63N-4-303. Application, approval, and allocations.
        (1) (a) A person seeking approval as a rural investment company shall submit an
 application to the office.
        (b) (i) [The] For the investment authority described in Subsection (6)(a)(i), the office
 shall begin accepting applications on November 1, 2017.
        (ii) For the investment authority described in Subsection (6)(a)(ii), the office shall
 begin accepting applications on November 1, 2022.
        (2) An application submitted under Subsection (1) shall be in a form and in accordance
 with procedures prescribed by the office, and shall include the following:
        (a) the total investment authority sought by the applicant, which may not exceed
 $42,000,000;
        (b) a copy of the applicant's or an affiliate of the applicant's license as a federally
 licensed rural business investment company or as a federally licensed small business
 investment company;
        (c) evidence that before the date the application is submitted, the applicant or affiliates
 of the applicant have invested at least $50,000,000 in nonpublic companies located in counties
 in the United States with fewer than 50,000 inhabitants;
        (d) a signed affidavit from each claimant that commits to make a credit-eligible capital
 contribution to the applicant, stating the amount of that commitment; and
        (e) the sum of all credit-eligible capital contribution commitments described in
 Subsection (2)(d), which must equal 58% of the total investment authority sought by the
 applicant.
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        Enrolled Copy                                                                              H.B. 25
         (3) The office shall:
         (a) review and evaluate the applications submitted under this section within 30 days of
 receipt in the order in which the applications are received; and
         (b) consider applications received on the same day to have been received
 simultaneously.
         (4) (a) If, after review and evaluation of an application, the office determines that the
 application does not meet the requirements of Subsection (2), the office shall:
         (i) deny the application; or
         (ii) (A) notify the applicant that the application was inadequate and allow the applicant
 to provide additional information to the office to complete, clarify, or cure defects identified by
 the office in the application; and
         (B) inform