Text: HF02331 Text: HF02333 Text: HF02300 - HF02399 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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1 1 Section 1. NEW SECTION. 15E.175 SESQUICENTENNIAL FUNDS
1 2 – PURPOSE.
1 3 The purpose of this division is to encourage and strengthen
1 4 economic development in Iowa by increasing the availability of
1 5 development capital to new small businesses in Iowa, the
1 6 rehabilitation of existing small businesses, and by
1 7 stimulating the expansion of small business activities that
1 8 promote and maintain the economic stability of the state. To
1 9 carry out this purpose, a payment is authorized for
1 10 sesquicentennial funds which make investments under this
1 11 division.
1 12 Sec. 2. NEW SECTION. 15E.176 SESQUICENTENNIAL FUNDS
1 13 ESTABLISHED – QUALIFICATIONS.
1 14 A sesquicentennial fund, to qualify for the payment under
1 15 section 15E.177, shall meet the following requirements:
1 16 1. The fund shall not be a public entity.
1 17 2. The fund may be either a for profit or not for profit
1 18 entity created for the purpose of making capital available to
1 19 businesses.
1 20 3. The fund shall register with the securities bureau of
1 21 the insurance division of the department of commerce.
1 22 Information to be filed with the securities bureau includes at
1 23 least the following:
1 24 a. The name of the fund, which must be unique, and contain
1 25 the words "sesquicentennial fund".
1 26 b. The principal place of business of the fund, which
1 27 shall be in Iowa.
1 28 c. That the fund has a capital base of at least ten
1 29 million dollars.
1 30 d. That the fund manager certifies that the fund makes
1 31 only debt or equity investments in qualified businesses or in
1 32 other businesses which may be located outside of the state,
1 33 that moneys invested in the fund by an investor remain in the
1 34 fund for at least twelve months following the date of original
1 35 investment, and that the fund holds shares of the same value
2 1 for twelve months following the purchase of the shares, unless
2 2 shares originally purchased are sold and replaced with other
2 3 eligible shares from the same business.
2 4 Only investments in qualified businesses shall qualify for
2 5 the refund.
2 6 4. To remain a qualified fund under this division, the
2 7 business must renew its registration with the securities
2 8 bureau annually, recertifying the facts upon which the initial
2 9 qualification was based. The fund shall also file a report
2 10 with the securities bureau detailing its investments upon
2 11 dissolution of the fund.
2 12 Sec. 3. NEW SECTION. 15E.177 INVESTMENT PAYMENT –
2 13 APPORTIONMENT TO INVESTORS – PENALTY.
2 14 1. A qualified sesquicentennial fund shall receive the
2 15 following payments on investments made by the fund in
2 16 qualified businesses:
2 17 a. Twenty-five percent of the share of an early-phase
2 18 investment in a qualified business.
2 19 b. Fifteen percent of the share of a growth-phase
2 20 investment in a qualified business.
2 21 c. Ten percent of the share of a mezzanine-phase
2 22 investment in a qualified business.
2 23 2. For the purposes of this division:
2 24 a. "Early-phase investment" means an investment in a
2 25 business which is formed within the last three years and which
2 26 has gross revenue over the last three years of one million
2 27 dollars or less. The business may have conducted initial
2 28 product development and market research. Investments by a
2 29 fund may be used to provide product prototypes, commence
2 30 production tooling, test market a product, or provide working
2 31 capital for the early growth state of a portfolio company.
2 32 Early-phase investments have significant speculative
2 33 characteristics and high risk of loss.
2 34 b. "Growth-phase investment" means an investment in a
2 35 company with an annual gross revenue between one million and
3 1 five million dollars with the prospect of rapid growth in
3 2 revenues and earnings. A growth-phase investment may be used
3 3 to finance new product introductions or working capital
3 4 requirements.
3 5 c. "Mezzanine-phase investment" means an investment in a
3 6 company with annual gross revenue of over five million
3 7 dollars. A mezzanine-phase investment may be used to finance
3 8 additional growth or expansion of the business, restructuring
3 9 of business operations, or facilitate the acquisition of
3 10 assets or another business.
3 11 d. To qualify for a payment under this section, an
3 12 investment must be in an unaffiliated and nonrelated qualified
3 13 business.
3 14 3. A qualified sesquicentennial fund may apply once each
3 15 year to the department of revenue and finance for an
3 16 investment payment. The application shall contain the
3 17 information and be on a form prescribed by the department, and
3 18 shall specify the amount of payment being claimed for each
3 19 type of investment under subsection 1. The department shall
3 20 review the application and shall issue a warrant in the amount
3 21 of the combined payments under subsection 1 to the fund.
3 22 Payments shall be made out of funds appropriated for that
3 23 purpose.
3 24 4. The fund shall apportion the payment received among the
3 25 investors in the fund in proportion to moneys invested in the
3 26 fund by each investor. Apportionment shall be made within
3 27 forty-five days of the receipt of the payment from the
3 28 department. An investor shall only receive one payment per
3 29 investment in the fund.
3 30 5. If the sesquicentennial fund fails to apportion the
3 31 payment among the investors in the fund under subsection 4,
3 32 the fund shall pay to the department a penalty equal to all
3 33 the payments allowed the fund for the year plus interest at a
3 34 rate of two percent per month from the date the warrant was
3 35 issued to the fund. The department may abate the penalty if
4 1 the fund establishes reasonable cause for the failure to
4 2 apportion the payment to investors in the fund.
4 3 Sec. 4. NEW SECTION. 15E.178 QUALIFIED BUSINESS.
4 4 As used in this division, "qualified business" means a
4 5 business which meets the following requirements:
4 6 1. The business is designated a qualified business
4 7 pursuant to an application filed with the securities bureau
4 8 which contains at least the following:
4 9 a. A financial statement for the most recent fiscal year
4 10 or years which has been prepared and certified by an
4 11 independent certified public accountant showing that the
4 12 business meets the income requirements for early, growth, or
4 13 mezzanine-phase investments.
4 14 b. That the business has its principal place of business
4 15 in Iowa.
4 16 c. That the business engages in one of the following
4 17 activities:
4 18 (1) Interstate or intrastate commerce for the purpose of
4 19 manufacturing, processing, or assembling products.
4 20 (2) Agricultural, fishery, or forestry processing.
4 21 (3) Software development.
4 22 (4) Service-related industry.
4 23 (5) Research and development of products and processes
4 24 associated with any of the activities enumerated in
4 25 subparagraph (1), (2), or (3).
4 26 2. To remain a qualified business, the business shall
4 27 renew its registration annually by applying for renewal with
4 28 the securities division. The application shall at least
4 29 contain a financial statement for the most recent fiscal year
4 30 and the certification of the business that the business
4 31 continues to be a early, growth, or mezzanine-phase business.
4 32 3. Applications for registration and renewal of
4 33 registration under this section shall be on forms prescribed
4 34 by the administrator of the securities bureau. The
4 35 administrator may require supporting documentation to be filed
5 1 with applications. All applications shall be signed by a
5 2 person with the authority to enter into contracts on behalf of
5 3 the business.
5 4 Sec. 5. NEW SECTION. 15E.179 EXAMINATIONS.
5 5 The administrator of the securities bureau may examine a
5 6 business located in or outside of the state and the business
5 7 records of a sesquicentennial fund at the times and in the
5 8 manner the administrator determines to be necessary. The
5 9 administrator may obtain the services of private persons with
5 10 expertise in securities matters to conduct the examinations.
5 11 Examinations of a fund may be made without prior notice to the
5 12 fund. Expenses reasonably attributable to the examination
5 13 shall be paid by the fund whose investments are being
5 14 examined. The administrator is directed to cooperate with
5 15 other state agencies to minimize duplicative examinations.
5 16 Sec. 6. NEW SECTION. 15E.180 VIOLATIONS – REMEDIES.
5 17 In addition to any other penalties, a violation of any of
5 18 the provisions of this division is grounds for loss of status
5 19 as a qualifying business or sesquicentennial fund. A business
5 20 or fund alleged to have violated a provision of this division
5 21 shall be allowed a one-hundred-twenty-day grace period to
5 22 remedy the violation or to comply with the provisions of this
5 23 division. Loss of qualifying status shall cause the
5 24 forfeiture of any right or interest to a payment under section
5 25 15E.177 and shall cause the total amount of the payment for
5 26 all tax years under section 15E.177 to be due and payable with
5 27 income tax liability for the tax year when the loss of status
5 28 is effective.
5 29 Sec. 7. NEW SECTION. 15E.181 LEGISLATIVE REVIEW AND
5 30 OVERSIGHT.
5 31 The director of the department of revenue and finance and
5 32 the administrator of the securities bureau of the insurance
5 33 division shall each report on an annual basis to the ways and
5 34 means committees of the senate and house of representatives
5 35 concerning sesquicentennial funds receiving payments under
6 1 this division.
6 2 EXPLANATION
6 3 This bill provides for the creation of sesquicentennial
6 4 funds to provide capital for small businesses as a means to
6 5 promote economic development in the state. The bill does the
6 6 following:
6 7 1. Section 15E.176 authorizes the establishment of
6 8 sesquicentennial funds. Funds are to be private entities
6 9 which must register with the securities bureau of the
6 10 insurance division of the department of commerce. Funds are
6 11 limited to making debt or equity investments in Iowa or
6 12 foreign businesses.
6 13 2. Section 15E.177 provides that a fund is to receive a
6 14 payment from the state based upon the amount of investments
6 15 made in qualified businesses. The payment is 25 percent of an
6 16 early-phase investment by the fund in a qualified business, 15
6 17 percent of a growth-phase investment in a qualified business,
6 18 and 10 percent of a mezzanine-phase investment by the fund in
6 19 a qualified business.
6 20 An early-phase investment is an investment in a business
6 21 which has less than $1 million in revenue over the previous
6 22 three years and which may include funds for product
6 23 prototypes, test marketing, or production tooling. A growth-
6 24 phase investment is an investment in a business which has
6 25 annual revenues between $1 million and $5 million with the
6 26 prospect of rapid growth in earnings or revenues. A
6 27 mezzanine-phase investment is an investment in a business with
6 28 over $5 million in annual revenues and which may include funds
6 29 for a restructuring of business operations or the acquisition
6 30 of additional assets.
6 31 A sesquicentennial fund which receives a payment shall
6 32 apportion the refund among the investors of the fund within 45
6 33 days. If the fund fails to do this, it is subject to repaying
6 34 the amount of the payment paid to the fund.
6 35 3. Section 15E.178 sets out the requirements for a
7 1 qualified business. A qualified business is one which meets
7 2 the requirements for early, growth, or mezzanine-phase
7 3 investments, has its principal place of business in Iowa, and
7 4 engages in certain activities, including interstate or
7 5 intrastate, manufacturing or processing of products,
7 6 agricultural processing, software development, or research and
7 7 development. The business must certify its eligibility
7 8 annually with the securities bureau of the insurance division.
7 9 4. Section 15E.179 provides for examinations of businesses
7 10 in which a fund invests and examinations of sesquicentennial
7 11 funds by the administrator of the securities bureau.
7 12 Examinations shall be in cooperation with those of other
7 13 agencies to minimize duplication of effort.
7 14 5. Section 15E.180 provides that a business or fund which
7 15 violates a provision relating to the qualification of the
7 16 business or fund has 120 days to remedy the violation or be
7 17 subject to loss of qualification status. A fund shall also
7 18 forfeit the right to a payment and have to repay all payments
7 19 received.
7 20 6. Section 15E.181 requires the director of the department
7 21 of revenue and finance and the administrator of the securities
7 22 bureau to report to the ways and means committees of the
7 23 senate and house of representatives regarding the refunds
7 24 received by sesquicentennial.
7 25 LSB 4035YH 76
7 26 mk/sc/14
Text: HF02331 Text: HF02333 Text: HF02300 - HF02399 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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