HF 478 (LSB 2483YH (2) 86)

HOUSE FILE 478

BY  KELLEY

A BILL FOR

An Act relating to rural microbusinesses by establishing a rural microbusiness investment loan program and fund.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15E.152  Rural microbusiness investment loan program.
   1.  The authority shall establish and administer a rural microbusiness investment loan program. The rural microbusiness investment loan program is established to provide financial assistance for a qualified investment in an eligible rural microbusiness meeting the criteria in subsection 3. Financial assistance provided under this section shall be in the form of a loan provided from the rural microbusiness investment fund created in section 15E.153. 
   2.  For purposes of this section, unless the context otherwise requires:
   a.  “Distressed rural area” means an area that has lost at least five percent of its population over the last ten years, an area that has lost ten percent of its population over the last twenty years, an area that has a median family income below eighty-five percent of the national median family income, an area that has a poverty rate that exceeds twelve and one-half percent of the area’s total population, or an area that has an average unemployment rate in the preceding year that exceeds one hundred twenty-five percent of the national average. A distressed rural area does not include a city with a population above fifty thousand or an urbanized area contiguous and adjacent to a city with a population above fifty thousand.
   b.  “Qualified expenditure” means an amount paid to a rural microbusiness and includes but is not limited to costs for capital plant and equipment, inventory expenses, and wages, but does not include interest or the cost of any vehicle or costs associated with purchasing a vehicle.
   c.  “Qualified investment” means the excess of the qualified expenditures paid for the taxable year less the qualified expenditures paid for the preceding taxable year or the average annual qualified expenditures paid over the preceding three taxable years, whichever is greater.
   3.  To be eligible for the program, a rural microbusiness must meet all of the following criteria:
   a.  The trade or business is carried on as a proprietorship, partnership, trust if the trust is an entity in which the distributions flow through to the beneficiaries in accordance with their pro rata share of the principal or income of the trust, S corporation, or any other entity in which the income flows through to the partners, shareholders, or members in accordance with their pro rata share of the income of the entity.
   b.  The trade or business is carried on in a distressed rural area.
   c.  The trade or business has a three-year average annual gross revenue that does not exceed one million dollars for the period ending with the taxable year in which the application for the loan is received.
   d.  The trade or business employs not more than five full-time equivalent employees.
   e.  If the majority of the activity of the trade or business is agricultural production, each individual who is an owner, shareholder, or holds a capital interest, profits interests, or beneficial interests in such trade or business is a first-time farmer.
   4.  The authority may accept, evaluate, and approve applications for financial assistance from rural microbusinesses pursuant to the requirements of this section and may monitor the compliance of the qualifying businesses with the terms of an agreement entered into with the authority.
   5.  Upon approval of the application for financial assistance by the authority, the eligible rural microbusiness shall enter into an agreement with the authority specifying the terms of the loan.
   6.  a.  The amount of a loan awarded to an eligible rural microbusiness shall not exceed an amount equal to thirty-five percent of the qualified investments in the eligible rural microbusiness in the previous fiscal year or seven thousand five hundred dollars, whichever is less.
   b.  Interest on a loan, for purposes of this program, shall not exceed three and nine-tenths percent per annum.
   7.  a.  An eligible rural microbusiness shall not receive more than one award of financial assistance under this section.
   b.  An eligible rural microbusiness that receives financial assistance under this section may subsequently apply for financial assistance under other programs administered by the authority.
   8.  The maximum amount of the total loans awarded by the authority through the rural microbusiness investment loan program shall not exceed one hundred thousand dollars in a fiscal year. The authority shall award the loans on a first-come, first-served basis.
   9.  The authority shall adopt rules pursuant to chapter 17A as necessary to administer the program.
    Sec. 2.  NEW SECTION.  15E.153  Rural microbusiness investment fund.
   1.  A rural microbusiness investment fund is created in the state treasury under the control of the authority and consisting of any moneys appropriated by the general assembly and any other moneys available to and obtained or accepted by the authority for placement in the fund.
   2.  Payments of interest, repayments of moneys loaned, and recaptures of loans shall be deposited in the fund.
   3.  The fund shall be used to provide financial assistance in the form of low-interest loans under the rural microbusiness investment loan program established in section 15E.152.
   4.  Moneys in the fund are not subject to section 8.33. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys in the fund shall be credited to the fund.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to rural microbusinesses by establishing a rural microbusiness investment loan program and fund. The bill provides that the economic development authority shall establish and administer a rural microbusiness investment loan program to provide low-interest loans for qualified investments in an eligible rural microbusiness.
   The bill defines a “qualified investment” as the excess of the qualified expenditures paid for the taxable year minus the qualified expenditures paid for the preceding taxable year or the average annual qualified expenditures paid in the previous three taxable years, whichever is greater. A “qualified expenditure” is an amount paid to a rural microbusiness and does not include interest or the cost of any vehicle or the cost of purchasing a vehicle.
   The bill defines a “distressed rural area” as an area that has lost at least 5 percent of its population in the last 10 years, an area that has lost 10 percent of its population in the last 20 years, an area that has a median family income below 85 percent of the national median family income, an area that has a poverty rate that exceeds 12.5 percent of the area’s population, or an area that has an average unemployment rate in the preceding year that exceeds 125 percent of the national average. A “distressed rural area” does not include a city or urbanized area contiguous and adjacent to a city with a population over 50,000.
   The bill provides that to qualify for a loan under the rural microbusiness investment loan program, a rural microbusiness must be: a trade or business carried on as a proprietorship, partnership, trust if the trust is an entity in which distributions flow through to beneficiaries based on the beneficiaries’ pro rata share of the principal or income of the trust, S corporation, or any other entity in which the income flows through to partners, shareholders, or members based on their pro rata share of the income in the entity; a trade or business carried on in a distressed rural area; a trade or business with a three-year average annual gross revenue that does not exceed $1 million for the period ending with the taxable year in which the business applied for the loan; a trade or business which employs not more than five full-time equivalent employees; and if the majority of the activity of the trade or business is agricultural production, each individual who is an owner, shareholder, or holds a capital interest, profits interests, or beneficial interests in the trade or business is a first-time farmer.
   The bill provides that the economic development authority may accept, evaluate, and approve applications for financial assistance from rural microbusinesses. Upon approval of an application for financial assistance, the eligible rural microbusiness and the authority shall enter into an agreement discussing the terms of the loan.
   The bill requires that the amount of a loan awarded pursuant to the rural microbusiness investment loan program shall not exceed 35 percent of the funds invested in the eligible rural microbusiness in the previous fiscal year or $7,500, whichever is less. The interest on a loan under the rural microbusiness investment loan program shall not exceed 3.9 percent per annum.
   The bill provides that an eligible rural microbusiness shall not receive more than one award of financial assistance under the program; however, an eligible rural microbusiness may subsequently apply for financial assistance under other programs after receiving financial assistance pursuant to the rural microbusiness investment loan program.
   The bill states that the maximum amount of loans awarded by the economic development authority for the rural microbusiness investment loan program shall not exceed $100,000 in a fiscal year, and the loans shall be awarded on a first-come, first-served basis.
   The bill requires the authority to adopt rules to administer the program.
   The bill establishes a rural microbusiness investment fund to provide low-interest loans for the rural microbusiness investment loan program.