H.F. 478 Section 1. NEW SECTION . 15E.152 Rural microbusiness 1 investment loan program. 2 1. The authority shall establish and administer a rural 3 microbusiness investment loan program. The rural microbusiness 4 investment loan program is established to provide financial 5 assistance for a qualified investment in an eligible rural 6 microbusiness meeting the criteria in subsection 3. Financial 7 assistance provided under this section shall be in the form of 8 a loan provided from the rural microbusiness investment fund 9 created in section 15E.153. 10 2. For purposes of this section, unless the context 11 otherwise requires: 12 a. “Distressed rural area” means an area that has lost 13 at least five percent of its population over the last ten 14 years, an area that has lost ten percent of its population 15 over the last twenty years, an area that has a median family 16 income below eighty-five percent of the national median family 17 income, an area that has a poverty rate that exceeds twelve and 18 one-half percent of the area’s total population, or an area 19 that has an average unemployment rate in the preceding year 20 that exceeds one hundred twenty-five percent of the national 21 average. A distressed rural area does not include a city 22 with a population above fifty thousand or an urbanized area 23 contiguous and adjacent to a city with a population above fifty 24 thousand. 25 b. “Qualified expenditure” means an amount paid to a rural 26 microbusiness and includes but is not limited to costs for 27 capital plant and equipment, inventory expenses, and wages, but 28 does not include interest or the cost of any vehicle or costs 29 associated with purchasing a vehicle. 30 c. “Qualified investment” means the excess of the qualified 31 expenditures paid for the taxable year less the qualified 32 expenditures paid for the preceding taxable year or the average 33 annual qualified expenditures paid over the preceding three 34 taxable years, whichever is greater. 35 -1- LSB 2483YH (2) 86 ad/sc 1/ 6

H.F. 478 3. To be eligible for the program, a rural microbusiness 1 must meet all of the following criteria: 2 a. The trade or business is carried on as a proprietorship, 3 partnership, trust if the trust is an entity in which the 4 distributions flow through to the beneficiaries in accordance 5 with their pro rata share of the principal or income of the 6 trust, S corporation, or any other entity in which the income 7 flows through to the partners, shareholders, or members in 8 accordance with their pro rata share of the income of the 9 entity. 10 b. The trade or business is carried on in a distressed rural 11 area. 12 c. The trade or business has a three-year average annual 13 gross revenue that does not exceed one million dollars for the 14 period ending with the taxable year in which the application 15 for the loan is received. 16 d. The trade or business employs not more than five 17 full-time equivalent employees. 18 e. If the majority of the activity of the trade or business 19 is agricultural production, each individual who is an owner, 20 shareholder, or holds a capital interest, profits interests, or 21 beneficial interests in such trade or business is a first-time 22 farmer. 23 4. The authority may accept, evaluate, and approve 24 applications for financial assistance from rural 25 microbusinesses pursuant to the requirements of this section 26 and may monitor the compliance of the qualifying businesses 27 with the terms of an agreement entered into with the authority. 28 5. Upon approval of the application for financial 29 assistance by the authority, the eligible rural microbusiness 30 shall enter into an agreement with the authority specifying the 31 terms of the loan. 32 6. a. The amount of a loan awarded to an eligible rural 33 microbusiness shall not exceed an amount equal to thirty-five 34 percent of the qualified investments in the eligible rural 35 -2- LSB 2483YH (2) 86 ad/sc 2/ 6

H.F. 478 microbusiness in the previous fiscal year or seven thousand 1 five hundred dollars, whichever is less. 2 b. Interest on a loan, for purposes of this program, shall 3 not exceed three and nine-tenths percent per annum. 4 7. a. An eligible rural microbusiness shall not receive 5 more than one award of financial assistance under this section. 6 b. An eligible rural microbusiness that receives financial 7 assistance under this section may subsequently apply for 8 financial assistance under other programs administered by the 9 authority. 10 8. The maximum amount of the total loans awarded by the 11 authority through the rural microbusiness investment loan 12 program shall not exceed one hundred thousand dollars in 13 a fiscal year. The authority shall award the loans on a 14 first-come, first-served basis. 15 9. The authority shall adopt rules pursuant to chapter 17A 16 as necessary to administer the program. 17 Sec. 2. NEW SECTION . 15E.153 Rural microbusiness investment 18 fund. 19 1. A rural microbusiness investment fund is created in 20 the state treasury under the control of the authority and 21 consisting of any moneys appropriated by the general assembly 22 and any other moneys available to and obtained or accepted by 23 the authority for placement in the fund. 24 2. Payments of interest, repayments of moneys loaned, and 25 recaptures of loans shall be deposited in the fund. 26 3. The fund shall be used to provide financial assistance in 27 the form of low-interest loans under the rural microbusiness 28 investment loan program established in section 15E.152. 29 4. Moneys in the fund are not subject to section 8.33. 30 Notwithstanding section 12C.7, subsection 2, interest or 31 earnings on moneys in the fund shall be credited to the fund. 32 EXPLANATION 33 The inclusion of this explanation does not constitute agreement with 34 the explanation’s substance by the members of the general assembly. 35 -3- LSB 2483YH (2) 86 ad/sc 3/ 6

H.F. 478 This bill relates to rural microbusinesses by establishing 1 a rural microbusiness investment loan program and fund. The 2 bill provides that the economic development authority shall 3 establish and administer a rural microbusiness investment loan 4 program to provide low-interest loans for qualified investments 5 in an eligible rural microbusiness. 6 The bill defines a “qualified investment” as the excess of 7 the qualified expenditures paid for the taxable year minus the 8 qualified expenditures paid for the preceding taxable year or 9 the average annual qualified expenditures paid in the previous 10 three taxable years, whichever is greater. A “qualified 11 expenditure” is an amount paid to a rural microbusiness and 12 does not include interest or the cost of any vehicle or the 13 cost of purchasing a vehicle. 14 The bill defines a “distressed rural area” as an area that 15 has lost at least 5 percent of its population in the last 10 16 years, an area that has lost 10 percent of its population in 17 the last 20 years, an area that has a median family income 18 below 85 percent of the national median family income, an area 19 that has a poverty rate that exceeds 12.5 percent of the area’s 20 population, or an area that has an average unemployment rate 21 in the preceding year that exceeds 125 percent of the national 22 average. A “distressed rural area” does not include a city 23 or urbanized area contiguous and adjacent to a city with a 24 population over 50,000. 25 The bill provides that to qualify for a loan under the rural 26 microbusiness investment loan program, a rural microbusiness 27 must be: a trade or business carried on as a proprietorship, 28 partnership, trust if the trust is an entity in which 29 distributions flow through to beneficiaries based on the 30 beneficiaries’ pro rata share of the principal or income of the 31 trust, S corporation, or any other entity in which the income 32 flows through to partners, shareholders, or members based on 33 their pro rata share of the income in the entity; a trade or 34 business carried on in a distressed rural area; a trade or 35 -4- LSB 2483YH (2) 86 ad/sc 4/ 6

H.F. 478 business with a three-year average annual gross revenue that 1 does not exceed $1 million for the period ending with the 2 taxable year in which the business applied for the loan; a 3 trade or business which employs not more than five full-time 4 equivalent employees; and if the majority of the activity 5 of the trade or business is agricultural production, each 6 individual who is an owner, shareholder, or holds a capital 7 interest, profits interests, or beneficial interests in the 8 trade or business is a first-time farmer. 9 The bill provides that the economic development authority 10 may accept, evaluate, and approve applications for financial 11 assistance from rural microbusinesses. Upon approval of an 12 application for financial assistance, the eligible rural 13 microbusiness and the authority shall enter into an agreement 14 discussing the terms of the loan. 15 The bill requires that the amount of a loan awarded pursuant 16 to the rural microbusiness investment loan program shall not 17 exceed 35 percent of the funds invested in the eligible rural 18 microbusiness in the previous fiscal year or $7,500, whichever 19 is less. The interest on a loan under the rural microbusiness 20 investment loan program shall not exceed 3.9 percent per annum. 21 The bill provides that an eligible rural microbusiness 22 shall not receive more than one award of financial assistance 23 under the program; however, an eligible rural microbusiness 24 may subsequently apply for financial assistance under other 25 programs after receiving financial assistance pursuant to the 26 rural microbusiness investment loan program. 27 The bill states that the maximum amount of loans awarded by 28 the economic development authority for the rural microbusiness 29 investment loan program shall not exceed $100,000 in a 30 fiscal year, and the loans shall be awarded on a first-come, 31 first-served basis. 32 The bill requires the authority to adopt rules to administer 33 the program. 34 The bill establishes a rural microbusiness investment fund 35 -5- LSB 2483YH (2) 86 ad/sc 5/ 6