House File 270 - Introduced HOUSE FILE 270 BY KELLEY A BILL FOR An Act relating to rural microbusinesses by establishing a 1 rural microbusiness investment loan program and fund. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2286YH (1) 85 ad/sc

H.F. 270 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, has lost ten percent of its population over the last 15 twenty years, has a median family income below eighty-five 16 percent of the national median family income, has a poverty 17 rate that exceeds twelve and one-half percent of the area’s 18 total population, or the average unemployment in the preceding 19 year exceeds one hundred twenty-five percent of the national 20 average. A distressed rural area does not include a city 21 with a population above fifty thousand or an urbanized area 22 contiguous and adjacent to a city with a population above fifty 23 thousand. 24 b. “Qualified expenditure” means an amount paid to a rural 25 microbusiness and includes but is not limited to costs for 26 capital plant and equipment, inventory expenses, and wages, but 27 does not include interest or the cost of any vehicle or costs 28 associated with purchasing a vehicle. 29 c. “Qualified investment” means the excess of the qualified 30 expenditures paid for the taxable year less the qualified 31 expenditures paid for the preceding taxable year or the average 32 annual qualified expenditures paid over the preceding three 33 taxable years, whichever is greater. 34 3. To be eligible for the program, a rural microbusiness 35 -1- LSB 2286YH (1) 85 ad/sc 1/ 6

H.F. 270 must meet all of the following criteria: 1 a. The trade or business is carried on as a proprietorship, 2 partnership, trust if the trust is an entity in which the 3 distributions flow through to the beneficiaries in accordance 4 with their pro rata share of the principal or income of the 5 trust, S corporation, or any other entity in which the income 6 flows through to the partners, shareholders, or members in 7 accordance with their pro rata share of the income of the 8 entity. 9 b. The trade or business is carried on in a distressed rural 10 area. 11 c. The trade or business has a three-year average annual 12 gross revenue that does not exceed one million dollars for the 13 period ending with the taxable year in which the application 14 for the loan is received. 15 d. The trade or business employs not more than five 16 full-time equivalent employees. 17 e. If the majority of the activity of the trade or business 18 is agricultural production, each individual who is an owner, 19 shareholder, or holds a capital interest, profits interests, or 20 beneficial interests in such trade or business is a first-time 21 farmer. 22 4. The authority may accept, evaluate, and approve 23 applications for financial assistance from rural 24 microbusinesses pursuant to the requirements of this section 25 and may monitor the compliance of the qualifying businesses 26 with the terms of an agreement entered into with the authority. 27 5. Upon approval of the application for financial 28 assistance by the authority, the eligible rural microbusiness 29 shall enter into an agreement with the authority specifying the 30 terms of the loan. 31 6. a. The amount of a loan awarded to an eligible rural 32 microbusiness shall not exceed an amount equal to thirty-five 33 percent of the qualified investments in the eligible rural 34 microbusiness in the previous fiscal year or seven thousand 35 -2- LSB 2286YH (1) 85 ad/sc 2/ 6

H.F. 270 five hundred dollars, whichever is less. 1 b. Interest on a loan, for purposes of this program, shall 2 not exceed three and nine-tenths percent per annum. 3 7. a. An eligible rural microbusiness shall not receive 4 more than one award of financial assistance under this section. 5 b. An eligible rural microbusiness that receives financial 6 assistance under this section may subsequently apply for 7 financial assistance under other programs administered by the 8 authority. 9 8. The maximum amount of the total loans awarded by the 10 authority through the rural microbusiness investment loan 11 program shall not exceed one hundred thousand dollars in 12 a fiscal year. The authority shall award the loans on a 13 first-come, first-served basis. 14 9. The authority shall adopt rules pursuant to chapter 17A 15 as necessary to administer the program. 16 Sec. 2. NEW SECTION . 15E.153 Rural microbusiness investment 17 fund. 18 1. A rural microbusiness investment fund is created in 19 the state treasury under the control of the authority and 20 consisting of any moneys appropriated by the general assembly 21 and any other moneys available to and obtained or accepted by 22 the authority for placement in the fund. 23 2. Payments of interest, repayments of moneys loaned, and 24 recaptures of loans shall be deposited in the fund. 25 3. The fund shall be used to provide financial assistance in 26 the form of low-interest loans under the rural microbusiness 27 investment loan program established in section 15E.152. 28 4. Moneys in the fund are not subject to section 8.33. 29 Notwithstanding section 12C.7, interest or earnings on moneys 30 in the fund shall be credited to the fund. 31 EXPLANATION 32 This bill relates to rural microbusinesses by establishing 33 a rural microbusiness investment loan program and fund. The 34 bill provides that the economic development authority shall 35 -3- LSB 2286YH (1) 85 ad/sc 3/ 6

H.F. 270 establish and administer a rural microbusiness investment loan 1 program to provide low-interest loans for qualified investments 2 in an eligible rural microbusiness. 3 The bill defines a “qualified investment” as the excess of 4 the qualified expenditures paid for the taxable year minus the 5 qualified expenditures paid for the preceding taxable year or 6 the average annual qualified expenditures paid in the previous 7 three taxable years, whichever is greater. A “qualified 8 expenditure” is an amount paid to a rural microbusiness and 9 does not include interest or the cost of any vehicle or the 10 cost of purchasing a vehicle. 11 The bill defines a “distressed rural area” as an area that 12 has lost at least 5 percent of its population in the last 10 13 years, 10 percent of its population in the last 20 years, has a 14 median family income below 85 percent of the national median 15 family income, has a poverty rate that exceeds 12.5 percent 16 of the area’s population, or the average unemployment in the 17 preceding year exceeds 125 percent of the national average. A 18 “distressed rural area” does not include a city or urbanized 19 area contiguous and adjacent to a city with a population over 20 50,000. 21 The bill provides that to qualify for a loan under the rural 22 microbusiness investment loan program, a rural microbusiness 23 must be: a trade or business carried on as a proprietorship, 24 partnership, trust if the trust is an entity in which 25 distributions flow through to beneficiaries based on the 26 beneficiaries’ pro rata share of the principal or income of the 27 trust, S corporation, or any other entity in which the income 28 flows through to partners, shareholders, or members based on 29 their pro rata share of the income in the entity; a trade or 30 business carried on in a distressed rural area; a trade or 31 business with a three-year average annual gross revenue that 32 does not exceed $1 million for the period ending with the 33 taxable year in which the business applied for the loan; a 34 trade or business which employs not more than five full-time 35 -4- LSB 2286YH (1) 85 ad/sc 4/ 6

H.F. 270 equivalent employees; and if the majority of the activity 1 of the trade or business is agricultural production, each 2 individual who is an owner, shareholder, or holds a capital 3 interest, profits interests, or beneficial interests in the 4 trade or business is a first-time farmer. 5 The bill provides that the economic development authority 6 may accept, evaluate, and approve applications for financial 7 assistance from rural microbusinesses. Upon approval of an 8 application for financial assistance, the eligible rural 9 microbusiness and the authority shall enter into an agreement 10 discussing the terms of the loan. 11 The bill requires that the amount of a loan awarded pursuant 12 to the rural microbusiness investment loan program shall not 13 exceed 35 percent of the funds invested in the eligible rural 14 microbusiness in the previous fiscal year or $7,500, whichever 15 is less. The interest on a loan under the rural microbusiness 16 investment loan program shall not exceed 3.9 percent per annum. 17 The bill provides that an eligible rural microbusiness 18 shall not receive more than one award of financial assistance 19 under the program; however, an eligible rural microbusiness 20 may subsequently apply for financial assistance under other 21 programs after receiving financial assistance pursuant to the 22 rural microbusiness investment loan program. 23 The bill states that the maximum amount of loans awarded by 24 the economic development authority for the rural microbusiness 25 investment loan program shall not exceed $100,000 in a 26 fiscal year, and the loans shall be awarded on a first-come, 27 first-served basis. 28 The bill requires the authority to adopt rules to administer 29 the program. 30 The bill establishes a rural microbusiness investment fund 31 to provide low-interest loans for the rural microbusiness 32 investment loan program. The fund consists of moneys 33 appropriated by the general assembly or any other moneys 34 available to and obtained or accepted by the economic 35 -5- LSB 2286YH (1) 85 ad/sc 5/ 6

H.F. 270 development authority for placement in the fund. Payments of 1 interest, repayments of moneys provided, and recaptures of 2 moneys provided shall be deposited in the fund. The moneys in 3 the fund are not subject to reversion of funds to the fund from 4 which appropriated or crediting of interest to the general fund 5 of the state. 6 -6- LSB 2286YH (1) 85 ad/sc 6/ 6