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1 1 Section 1. NEW SECTION. 15E.175 SESQUICENTENNIAL
1 2 BUSINESS DEVELOPMENT FUNDS – 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 refund is authorized for
1 10 sesquicentennial business development funds which make
1 11 investments under this division.
1 12 Sec. 2. NEW SECTION. 15E.176 SESQUICENTENNIAL BUSINESS
1 13 DEVELOPMENT FUNDS ESTABLISHED – QUALIFICATIONS.
1 14 A sesquicentennial business development fund, to qualify
1 15 for the refund under section 15E.177, shall meet the following
1 16 requirements:
1 17 1. The fund shall not be a governmental entity.
1 18 2. The fund may be either a for profit or not for profit
1 19 entity created for the purpose of making capital available to
1 20 businesses.
1 21 3. The fund shall comply with the provisions of chapter
1 22 502 and shall register with the securities bureau of the
1 23 insurance division of the department of commerce. Information
1 24 to be filed with the securities bureau includes at least the
1 25 following:
1 26 a. The name of the fund, which must be unique, and contain
1 27 the words "sesquicentennial business development fund".
1 28 b. The principal place of business of the fund, which
1 29 shall be in Iowa.
1 30 c. That the fund has an initial capitalization of at least
1 31 ten million dollars.
1 32 d. That the fund manager certifies that the fund makes
1 33 debt, equity, or other investments in qualified businesses or
1 34 in other businesses which may be located outside of the state.
1 35 e. Only investments in qualified businesses shall qualify
2 1 for the refund.
2 2 4. To remain a qualified fund under this division, the
2 3 fund must renew its registration with the securities bureau
2 4 annually, recertifying the facts upon which the initial
2 5 qualification was based. The fund shall also file a report
2 6 with the securities bureau detailing its investments upon
2 7 dissolution of the fund.
2 8 Sec. 3. NEW SECTION. 15E.177 INVESTMENT REFUND –
2 9 APPORTIONMENT TO INVESTORS – PENALTY.
2 10 1. A qualified sesquicentennial business development fund
2 11 shall receive the following refunds on investments made by the
2 12 fund in qualified businesses:
2 13 a. Twenty-five percent of the share of an early-phase
2 14 investment in a qualified business.
2 15 b. Fifteen percent of the share of a growth-phase
2 16 investment in a qualified business.
2 17 c. Ten percent of the share of a mezzanine-phase
2 18 investment in a qualified business.
2 19 2. For the purposes of this division:
2 20 a. "Early-phase investment" means an investment in a
2 21 business which is formed within the last three years and which
2 22 has gross revenue over the last three years of one million
2 23 dollars or less.
2 24 b. "Growth-phase investment" means an investment in a
2 25 company with an annual gross revenue between one million and
2 26 five million dollars with the prospect of rapid growth in
2 27 revenues and earnings.
2 28 c. "Mezzanine-phase investment" means an investment in a
2 29 company with annual gross revenue of over five million
2 30 dollars.
2 31 d. To qualify for a refund under this section, an
2 32 investment must be in an unaffiliated and nonrelated qualified
2 33 business.
2 34 3. An investor, in order to be qualified to receive a
2 35 refund from the fund, shall leave moneys invested in the fund
3 1 for at least twelve months following the date of original
3 2 investment.
3 3 4. The fund holds debt, equity, or other investments of
3 4 the same value for twelve months following the date of the
3 5 investment unless the debt, equity, or other investment is
3 6 divested and replaced with other eligible investments of the
3 7 same type.
3 8 5. A qualified sesquicentennial business development fund
3 9 may apply once each year to the department of revenue and
3 10 finance for an investment refund. The application shall
3 11 contain the information and be on a form prescribed by the
3 12 department, and shall specify the amount of refund being
3 13 claimed for each type of investment under subsection 1. The
3 14 department shall review the application and shall issue a
3 15 warrant in the amount of the combined refunds under subsection
3 16 1 to the fund. Refunds shall be made out of funds
3 17 appropriated for that purpose.
3 18 6. The fund shall apportion the refund received among the
3 19 qualified investors in the fund in proportion to moneys
3 20 invested in the fund by each investor. Apportionment shall be
3 21 made within forty-five days of the receipt of the refund from
3 22 the department. An investor shall only receive one refund per
3 23 investment per year in the fund.
3 24 7. If the sesquicentennial business development fund fails
3 25 to apportion the refund among the investors in the fund under
3 26 subsection 6, the fund shall pay to the department a penalty
3 27 equal to all the refunds allowed the fund for the year plus
3 28 interest at a rate of two percent per month from the date the
3 29 warrant was issued to the fund. The department may abate the
3 30 penalty if the fund establishes reasonable cause for the
3 31 failure to apportion the refund to investors in the fund.
3 32 Sec. 4. NEW SECTION. 15E.178 QUALIFIED BUSINESS.
3 33 As used in this division, "qualified business" means a
3 34 business which meets the following requirements:
3 35 1. The business is designated a qualified business
4 1 pursuant to an application filed with the securities bureau
4 2 which contains at least the following:
4 3 a. A financial statement for the most recent fiscal year
4 4 or years which has been prepared and certified by an
4 5 independent certified public accountant.
4 6 b. That the business has its principal place of business
4 7 in Iowa.
4 8 c. That the business engages in one of the following
4 9 activities:
4 10 (1) Interstate or intrastate commerce for the purpose of
4 11 manufacturing, processing, or assembling products.
4 12 (2) Agricultural, fishery, or forestry processing.
4 13 (3) Software development.
4 14 (4) Service-related industry.
4 15 (5) Research and development of products and processes
4 16 associated with any of the activities enumerated in
4 17 subparagraph (1), (2), or (3).
4 18 d. The business meets the income requirements for early,
4 19 growth, or mezzanine-phase investments.
4 20 2. To remain a qualified business, the business shall
4 21 renew its registration annually by applying for renewal with
4 22 the securities division. The application shall at least
4 23 contain a financial statement for the most recent fiscal year
4 24 and information sufficient to show that the business continues
4 25 to be a early, growth, or mezzanine-phase business.
4 26 3. Applications for registration and renewal of
4 27 registration under this section shall be on forms prescribed
4 28 by the administrator of the securities bureau. The
4 29 administrator may require supporting documentation to be filed
4 30 with applications. All applications shall be signed by a
4 31 person with the authority to enter into contracts on behalf of
4 32 the business.
4 33 Sec. 5. NEW SECTION. 15E.179 EXAMINATIONS.
4 34 The administrator of the securities bureau may examine the
4 35 business records of a sesquicentennial business development
5 1 fund at the times and in the manner the administrator
5 2 determines to be necessary. The administrator may obtain the
5 3 services of private persons with expertise in securities
5 4 matters to conduct the examinations. Examinations of a fund
5 5 may be made without prior notice to the fund. Expenses
5 6 reasonably attributable to the examination shall be paid by
5 7 the fund whose investments are being examined. The
5 8 administrator is directed to cooperate with other state
5 9 agencies to minimize duplicative examinations.
5 10 Sec. 6. NEW SECTION. 15E.180 VIOLATIONS – REMEDIES.
5 11 In addition to any other penalties, a violation of any of
5 12 the provisions of this division is grounds for loss of status
5 13 as a qualifying business. A business alleged to have violated
5 14 a provision of this division shall be allowed a one hundred
5 15 twenty-day grace period to remedy the violation or to comply
5 16 with the provisions of this division.
5 17 Sec. 7. NEW SECTION. 15E.181 LEGISLATIVE REVIEW AND
5 18 OVERSIGHT.
5 19 The director of the department of revenue and finance and
5 20 the administrator of the securities bureau of the insurance
5 21 division shall each report on an annual basis in accordance
5 22 with section 7A.11 concerning sesquicentennial funds receiving
5 23 refunds under this division.
5 24 EXPLANATION
5 25 This bill provides for the creation of sesquicentennial
5 26 business development funds to provide capital for small
5 27 businesses as a means to promote economic development in the
5 28 state. The bill does the following:
5 29 1. Section 15E.176 authorizes the establishment of
5 30 sesquicentennial business development funds. Funds are to be
5 31 nongovernmental entities which must register with the
5 32 securities bureau of the insurance division of the department
5 33 of commerce. Funds are limited to making debt, equity, or
5 34 other investments in Iowa or foreign businesses.
5 35 2. Section 15E.177 provides that a fund is to receive a
6 1 payment from the state based upon the amount of investments
6 2 made in qualified businesses. The payment is 25 percent of an
6 3 early-phase investment by the fund in a qualified business, 15
6 4 percent of a growth-phase investment in a qualified business,
6 5 and 10 percent of a mezzanine-phase investment by the fund in
6 6 a qualified business.
6 7 An early-phase investment is an investment in a business
6 8 which has less than $1 million in revenue over the previous
6 9 three years. A growth-phase investment is an investment in a
6 10 business which has annual revenues between $1 million and $5
6 11 million. A mezzanine-phase investment is an investment in a
6 12 business with over $5 million in annual revenues.
6 13 A sesquicentennial business development fund which receives
6 14 a payment shall apportion the moneys received among the
6 15 investors of the fund within 45 days. If the fund fails to do
6 16 this, it is subject to repaying the amount of the payment paid
6 17 to the fund.
6 18 3. Section 15E.178 sets out the requirements for a
6 19 qualified business. A qualified business is one which meets
6 20 the requirements for early, growth, or mezzanine-phase
6 21 investments, has its principal place of business in Iowa, and
6 22 engages in certain activities, including interstate or
6 23 intrastate, manufacturing or processing of products,
6 24 agricultural processing, software development, or research and
6 25 development. The business must show that it meets eligibility
6 26 requirements annually with the securities bureau of the
6 27 insurance division.
6 28 4. Section 15E.179 provides for examinations of businesses
6 29 in which a fund invests and examinations of sesquicentennial
6 30 funds by the administrator of the securities bureau.
6 31 Examinations shall be in cooperation with those of other
6 32 agencies to minimize duplication of effort.
6 33 5. Section 15E.180 provides that a business which violates
6 34 a provision relating to the qualification of the business has
6 35 120 days to remedy the violation or be subject to loss of
7 1 qualification status.
7 2 6. Section 15E.181 requires the director of the department
7 3 of revenue and finance and the administrator of the securities
7 4 bureau to report to the general assembly regarding the
7 5 payments received by sesquicentennial business development
7 6 funds.
7 7 LSB 4035HV 76
7 8 mk/sc/14
Text: HF02464 Text: HF02466 Text: HF02400 - HF02499 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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