HOUSE BILL 4
54th legislature - STATE OF NEW MEXICO - first special session, 2020
INTRODUCED BY
Marian Matthews and Daymon Ely and Andrea Romero
AN ACT
RELATING TO PUBLIC FINANCE; ENACTING THE SMALL BUSINESS RECOVERY ACT OF 2020; CREATING THE SMALL BUSINESS RECOVERY LOAN FUND; PROVIDING SMALL BUSINESS RECOVERY LOANS FOR CERTAIN BUSINESSES; ESTABLISHING TERMS FOR SMALL BUSINESS RECOVERY LOANS; REQUIRING REPAYMENT; PROVIDING FOR THE INVESTMENT OF THE SEVERANCE TAX PERMANENT FUND IN CERTAIN LOANS; PROVIDING TERMS; REQUIRING A CERTAIN AMOUNT OF THE SEVERANCE TAX PERMANENT FUND TO BE INVESTED IN LOANS FOR LOCAL GOVERNMENTS THAT EXPERIENCE A DECLINE IN REVENUE DUE TO THE CORONAVIRUS DISEASE 2019 PANDEMIC; ALLOWING FOR AN INCREASE IN THE INVESTMENT OF THE SEVERANCE TAX PERMANENT FUND IN NEW MEXICO PRIVATE EQUITY FUNDS OR NEW MEXICO BUSINESSES; ESTABLISHING REPORTING REQUIREMENTS; REPEALING LAWS 2020, CHAPTER 75, SECTION 1 TO MAKE CONFORMING TECHNICAL CHANGES; MAKING AN APPROPRIATION; DECLARING AN EMERGENCY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 7 of this act may be cited as the "Small Business Recovery Act of 2020".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Small Business Recovery Act of 2020:
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 taxable year 2019, 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 taxable year 2019, less the amount of any loan obtained by the business pursuant to Section 1102 of the federal Coronavirus Aid, Relief, and Economic Security Act; and
(2) twelve;
C. "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;
D. "loan servicer" means a federally insured depository institution or community development financial institution that assembles and submits the small business recovery loan documents to the authority;
E. "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;
F. "ordinary and necessary business expenses" means all expenses, including expenses and capital expenses incurred to operate the business in compliance with a public health order;
G. "qualifying small business" means a business or nonprofit corporation that:
(1) has closed or reduced operations due to the public health order issued by the secretary of health on March 23, 2020;
(2) had an annual gross revenue of less than one million five hundred thousand dollars ($1,500,000) as determined from the business's federal income tax return for taxable year 2019;
(3) during the months of April and May 2020, experienced one of the following:
(a) for a business entity other than a nonprofit corporation, a decline in the business's monthly gross receipts by more than thirty percent from the business's monthly gross receipts for that month in 2019, as reported monthly by the business to the taxation and revenue department; or
(b) for a business entity that is organized and operated as a nonprofit corporation, a decline in the business's monthly revenue by more than thirty percent from the business's monthly revenue for that month in 2019, as determined through accounting information that is provided by the business and certified to be accurate and information reported by the business to the federal internal revenue service for the previous year;
(4) is classified as retail trade, accommodation and food services, construction, administrative and support services, health care and social assistance or child daycare services by the most recent edition of the United States census bureau's North American industry classification system, is a small independent movie theater or is a tribal entity; and
(5) is organized and operated as a nonprofit corporation or 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 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
H. "service provider" means a nonprofit or governmental organization that provides interactive, technical assistance to small 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] SMALL BUSINESS RECOVERY LOAN FUND--CREATED.--The "small business recovery loan fund" is created in the authority. The fund consists of appropriations, gifts, grants, deposits, transfers and donations to the fund. Money in the fund is appropriated to the authority to administer the provisions of the Small Business Recovery Act of 2020. The authority shall administer the fund. Balances remaining in the fund at the end of fiscal year 2022 shall revert to the severance tax permanent fund. The authority may expend no more than one percent of the balance of the fund for administering the Small Business Recovery Act of 2020.
SECTION 4. [NEW MATERIAL] LOANS--TERMS.--
A. The authority shall receive and review applications for small business recovery loans pursuant to the Small Business Recovery Act of 2020. The authority shall review all small business recovery loan applications in the order in which the completed applications were received and shall provide a determination to the applicant as soon as practicable. The authority shall make loans to qualifying small businesses; provided that funds are available. The authority shall adopt rules to govern the application procedures and requirements for disbursing loans under the Small Business Recovery Act of 2020, including requirements consistent with the purpose of that act for determining the eligibility of qualifying small businesses for loans; provided that the authority shall not create additional requirements for eligibility other than those provided by that act.
B. The authority may use funding made available for the Small Business Recovery Act of 2020 to contract with a loan servicer to assist in carrying out the provisions of the Small Business Recovery Act of 2020, including determining:
(1) whether an entity meets the requirements to be considered a qualifying small business;
(2) whether a qualifying small business is eligible for a small business recovery loan; and
(3) the amount that the qualifying small business is eligible to receive for a small business recovery loan.
C. The authority shall make small business recovery loans in accordance with the following:
(1) the loan amount shall be in an amount equal to two hundred percent of the qualifying small 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 seventy-five thousand dollars ($75,000);
(2) the terms of the loan shall require that the loan recipient:
(a) use a minimum of eighty percent of the proceeds of the loan 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 small business that certifies that: 1) the officer understands that the business is receiving a loan under the Small Business Recovery Act of 2020 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 issuance of the public health order issued by the secretary of health on March 23, 2020, 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 Small Business Recovery Act of 2020, including that no more than twenty percent of the proceeds may be used as compensation for employees who own equity in the business; and
(c) provide the authority with ongoing information relevant to the reporting requirements of the authority provided in Section 7 of the Small Business Recovery Act of 2020;
(3) the terms of the loan shall not require that the qualifying small business provide a personal guarantee or collateral to secure the loan; and
(4) the application for a loan must be received no later than December 31, 2020.
SECTION 5. [NEW MATERIAL] REPAYMENT.--
A. Small business recovery loans shall be made for an initial loan period of three years. The loans shall bear an annual interest rate equal to one-half of the Wall Street Journal prime rate on the date the loan is made.
B. Payment of the interest accrued on a small business recovery 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 small business recovery 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 loans made pursuant to the Small Business Recovery Act of 2020 shall be deposited in the severance tax permanent fund.
D. No provision in a small business recovery 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. SMALL BUSINESS TECHNICAL ASSISTANCE--SERVICE PROVIDERS.--
A. A qualified small business with an annual gross revenue of five hundred thousand dollars ($500,000) or less that applies for and receives a small business recovery 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 small business no longer needs the assistance of the service provider; provided that the:
(1) additional amount shall not be included in the small business recovery loan and shall not require repayment;
(2) additional amount shall be provided to the service provider; and
(3) authority shall use funding made available for the Small Business Recovery Act of 2020 to provide the service provider with the additional amount.
B. Nothing in this section shall be construed to require a small 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