HSB 1

This bill relates to tax credits awarded by the economic development authority for specific capital contributions made to certified rural business growth funds for investment in qualified businesses. The bill directs the economic development authority (authority) to begin accepting Iowa rural development tax credit program (program) applications beginning January 3, 2022. §681, documentation that establishes that at least one principal of the applicant has been an officer or an employee of the rural business investment company, the small business investment company, or an affiliate thereof, for a minimum of four years prior to the date of application, a revenue impact assessment for the applicant’s proposed growth investments as determined by an econometric analysis, the proposed number of jobs created and the number of jobs retained, a signed affidavit from each investor that states the amount of the credit-eligible capital contribution that the investor has committed to the applicant’s proposed growth fund, and a nonrefundable $5,000 application fee. The bill defines “credit-eligible capital contribution” as an investment of cash by a person in a growth fund that is eligible for a tax credit issued by the authority. _____ premium, issued by the growth fund that has a maturity date at least six years after the growth fund’s closing date. “Eligible investment authority” is defined in the bill as the amount of investment authority that the authority certifies for a specific growth fund. The bill requires the authority to review each application on a first-come, first-served basis and to approve or deny each application within the time frame adopted by rule by the authority. The authority cannot approve more than $100 million in eligible investment authority and not more than $60 million in credit-eligible capital contributions. The authority must reject an application if the applicant fails to submit any of the required information, or if the authority has already approved the maximum eligible investment authority or the maximum credit-eligible capital contributions. If the authority rejects an application, the authority must send a notice to the applicant, and provide a reason for the rejection. If an application has been rejected because the applicant failed to submit all of the required information, the applicant has days to cure any defects in the application. The authority must review and reconsider, within the time frame adopted by rule by the authority, any application which is cured within the business days. If an application is approved by the authority after reconsideration, the application is considered complete as of its original date of submission. If the authority approves an application, it must send a notice to the applicant certifying the applicant as a rural business growth fund, the growth fund’s eligible investment authority, and the required number of jobs to be created and retained based on the number submitted in the applicant’s application. _____ application, collect one or more equity investments contributed directly or indirectly by affiliates of the growth fund, including employees and principals of such affiliates, that equal at least percent of the growth fund’s eligible investment authority, and, if applicable, collect one or more investments of cash that when added to the credit-eligible capital contributions and the equity investments equal the growth fund’s eligible investment authority. Within days of the date the authority sent the certification notice, the growth fund must submit documentation to the authority as detailed in the bill. If the growth fund fails to comply with the collection and documentation requirements, all eligible investment authority and credit-eligible capital contributions lapse. Authority and contributions that lapse do not count toward the maximum limits on eligible investment authority and credit-eligible capital contributions and may be awarded by the authority as outlined in the bill. After a growth fund complies with the collection and documentation requirements, the fund must enter into an agreement with the authority that specifies the requirements that must be met for successful completion of the program. The minimum requirements for the agreement are detailed in the bill. After the agreement is executed, the authority must issue a tax credit certificate to each investor whose affidavit was included in the growth fund’s application and whose credit-eligible capital contribution was collected by the growth fund. The certificate must specify the amount of tax credit allocated to that investor and the amount of the tax credit the eligible taxpayer may claim against the insurance premium tax and insurance retaliatory premium tax imposed in Code chapter 432. _____ anniversary of the closing date. Any tax credit in excess of the taxpayer’s tax liability for a tax year may be carried forward to the taxpayer’s tax liability for subsequent tax years until the tax credit is depleted. The tax credits are not refundable and cannot be sold, transferred, or allocated by the investor to any person other than an affiliate of the investor. The affiliate must submit the tax credit certificate within days to the department of revenue (department) and the department must issue the affiliate a replacement tax credit certificate with the same expiration date that appeared on the original tax credit certificate. The authority must revoke or recapture a tax credit if, before a growth fund exits the program, the growth fund cannot provide documentation to substantiate that the growth fund, within two years after the growth fund’s closing date, has invested a minimum of two-thirds of the growth fund’s investment authority in growth investments; that the growth fund, within three years after the growth fund’s closing date, has invested 100 percent of the growth fund’s investment authority in growth investments; that the growth fund, after investing 100 percent of the growth fund’s investment authority in growth investments within three years after the growth fund’s closing date, has maintained growth investments equal to 100 percent of its investment authority at all times up to the sixth anniversary after the growth fund’s closing date. The bill specifies that amounts received periodically by a growth fund are deemed continuously invested in growth investments if the amounts are reinvested by the growth fund in one or more qualified businesses by the end of the following calendar year. The bill details the other requirements and prohibitions related to revocation or recapture of tax credits by the authority. _____ program. A growth fund is eligible to exit the program if a tax credit associated with the growth fund has not been revoked or recaptured. The growth fund’s application to exit the program must include the state reimbursement calculation. The state reimbursement owed by a rural business growth fund to the authority is calculated as detailed in the bill. Within the time frame adopted by rule by the authority, the authority must send notice to the growth fund of the authority’s determination regarding the application and confirmation of the state reimbursement owed by the growth fund. If the authority approves the application, the growth fund is deemed to have exited the program on the date the notice is sent by the authority to the growth fund. If the growth fund owes the state reimbursement, the growth fund is prohibited from making any distributions to equity holders of the fund until the state reimbursement amount has been remitted to the authority. “Equity holder” is defined in the bill as a person that makes a credit-eligible capital contribution, an equity investment, or a cash investment in a rural business growth fund. The bill specifies that all state reimbursement amounts remitted to the authority shall be deposited in the general fund of the state. Unless a growth fund has exited the program, the growth fund must submit an annual report to the authority that covers the preceding calendar year. The report must include the documentation and information as detailed in the bill. The bill provides that the only remedies for a breach or default of any of the terms of the program by a growth fund are revocation or recapture of tax credits and the collection of the state reimbursement as detailed in the bill. The bill requires the authority, in conjunction with the department of revenue, to adopt rules as necessary to implement and administer the program.