H.F. _____ Section 1. NEW SECTION . 15.281 Short title. 1 This part shall be known and may be cited as the “Iowa Rural 2 Development Tax Credit Program” . 3 Sec. 2. NEW SECTION . 15.282 Definitions. 4 As used in this part, unless the context otherwise requires: 5 1. “Affiliate” means a person that directly, or indirectly 6 through one or more intermediaries, controls, is controlled 7 by, or is under common control with another person. A person 8 is controlled by another person if the controlling person 9 holds, directly or indirectly, the majority voting or ownership 10 interest in the controlled person or has control, by contract 11 or by law, over the day-to-day operations of the controlled 12 person. 13 2. “Authority” means the economic development authority 14 created in section 15.105. 15 3. “Closing date” means the date on which a rural business 16 growth fund completes collection of all contributions and 17 investments and submits all required documentation to the 18 authority pursuant to section 15.283, subsection 7, paragraph 19 “c” . 20 4. “Credit-eligible capital contribution” means an investment 21 of cash by a person in a rural business growth fund that is 22 eligible for a tax credit certificate issued by the authority 23 pursuant to section 15.284, subsection 1. The cash investment 24 shall purchase either of the following: 25 a. An equity interest in the growth fund. 26 b. A debt instrument, at par value or premium, issued by the 27 growth fund that has a maturity date at least six years after 28 the growth fund’s closing date. 29 5. “Eligible investment authority” means the amount stated 30 on the certification notice the authority issues pursuant to 31 section 15.283, subsection 7, paragraph “a” . At least sixty 32 percent of a growth fund’s eligible investment authority shall 33 be comprised of credit-eligible capital contributions. 34 6. “Employee” means a natural person who is employed in this 35 -1- LSB 1282YC (2) 89 ko/jh 1/ 19

H.F. _____ state by a qualified business and who is either salaried, works 1 a minimum of thirty-five hours per week, or another period of 2 time generally accepted by custom, industry, or practice as 3 full-time employment. 4 7. “Equity holder” means a person that makes an equity 5 investment in a rural business growth fund. 6 8. “Growth investment” means any capital or equity 7 investment a growth fund makes in a qualified business, or any 8 loan from a growth fund to a qualified business with a stated 9 maturity at least one year after the date of issuance. 10 9. “Jobs created” means the number of new employees at a 11 qualified business, after an initial growth investment, at 12 the end of each subsequent calendar year. This number is 13 calculated annually by adding together the number of employees 14 at the qualified business on the last day of each calendar 15 month and dividing by twelve, then subtracting the number of 16 employees at the qualified business on the date the day before 17 the date of the initial growth investment. If the resulting 18 total is less than zero, the jobs created is equal to zero. 19 10. “Jobs retained” means the number of employees at a 20 qualified business the day before the date of an initial growth 21 investment that the qualified business’s chief executive 22 officer or similar officer certifies as being positions located 23 in this state that would have been eliminated but for the 24 initial growth investment. 25 11. “Located in” means the place or places at which a 26 business’s operations are located and where at least sixty 27 percent of the business’s employees work, or where employees 28 that are paid at least sixty percent of the business’s payroll 29 work. 30 12. “Program” means the Iowa rural development tax credit 31 program administered under this part. 32 13. “Qualified business” means any business within this 33 state that has fewer than two hundred fifty employees, 34 including ostensible subcontractors pursuant to 13 C.F.R. 35 -2- LSB 1282YC (2) 89 ko/jh 2/ 19

H.F. _____ §121.103(h). 1 14. “Revenue” means the total state and local income 2 produced by a rural business growth fund’s economic activity. 3 15. “Rural business growth fund” or “growth fund” means a 4 person, or an affiliate of a person, certified by the authority 5 pursuant to section 15.283, subsection 7, paragraph “a” . 6 16. “Within this state” means in the state of Iowa, or an 7 out-of-state business that has agreed to use a proposed growth 8 investment to become a qualified business within one hundred 9 eighty days of receiving the growth investment. 10 Sec. 3. NEW SECTION . 15.283 Application and agreement. 11 1. The authority shall begin accepting program applications 12 on January 3, 2022. An application is deemed received based 13 on the date and time stamp that shall be generated by the 14 authority upon receipt of the application. Applications 15 received by the authority on the same day shall be deemed to 16 have been received simultaneously. 17 2. A person seeking certification as a rural business 18 growth fund shall apply to the authority in the form and manner 19 prescribed by the authority. The application must include all 20 of the following: 21 a. The eligible investment authority sought by the 22 applicant. 23 b. A copy of the applicant’s, or an affiliate of the 24 applicant’s, license as a rural business investment company 25 as defined under 7 U.S.C. §2009cc(14), or license as a small 26 business investment company under 15 U.S.C. §681. 27 c. Documentation as required by the authority to establish 28 that at least one principal of the applicant has been an 29 officer or an employee of the rural business investment 30 company, the small business investment company, or an affiliate 31 thereof, for a minimum of four years prior to the date of 32 application. 33 d. A revenue impact assessment for the applicant’s proposed 34 growth investments as determined by an econometric analysis 35 -3- LSB 1282YC (2) 89 ko/jh 3/ 19

H.F. _____ conducted by a nationally recognized third-party independent 1 econometric firm. The revenue impact assessment must provide 2 an analysis of the applicant’s proposed growth investments over 3 the ten consecutive years following the date the applicant’s 4 application is submitted to the authority, and must demonstrate 5 that there will be a positive revenue impact on this state 6 that exceeds the cumulative amount of tax credits, that if the 7 application is approved, may be issued by the authority to the 8 rural business growth fund’s investors. 9 e. The number of jobs created and the number of jobs 10 retained assumed in the revenue impact assessment required by 11 paragraph “d” . 12 f. A signed affidavit from each investor that identifies 13 the investor and the amount of the credit-eligible capital 14 contribution that the investor has committed to the applicant’s 15 proposed growth fund. 16 g. A nonrefundable application fee of five thousand dollars. 17 All application fees submitted to the authority pursuant to 18 this paragraph shall be used by the authority to administer 19 this part. 20 3. The authority shall review and make a determination 21 to approve or deny each application within the time frame 22 adopted by rule by the authority. The authority shall review 23 applications on a first-come, first-served basis as determined 24 pursuant to subsection 1. 25 4. The authority shall not approve more than one hundred 26 million dollars in eligible investment authority and not 27 more than sixty million dollars in credit-eligible capital 28 contributions under the program. If approved applications 29 that are simultaneously received would collectively exceed the 30 maximum limit on eligible investment authority or the maximum 31 on credit-eligible capital contributions, the authority shall 32 proportionally reduce the growth fund’s eligible investment 33 authority and credit-eligible capital contributions for each 34 of the simultaneous applications as necessary to comply with 35 -4- LSB 1282YC (2) 89 ko/jh 4/ 19

H.F. _____ the maximum limits. 1 5. The authority shall reject an application for any of the 2 following reasons: 3 a. The applicant failed to comply with any of the 4 requirements of subsection 2. 5 b. The authority has already approved the maximum eligible 6 investment authority or the maximum credit-eligible capital 7 contributions pursuant to subsection 4. 8 6. a. If the authority rejects an application, the 9 authority shall send a notice of rejection to the applicant and 10 provide a reason for the rejection. 11 b. If the authority has rejected an application on any 12 grounds other than subsection 5, paragraph “b” , the applicant 13 may provide additional information to the authority to cure 14 the defects in the application. All additional information 15 must be received by the authority within fifteen business days 16 from the date the authority sent the notice of rejection to 17 the applicant. The authority shall review and reconsider, 18 within the time frame adopted by rule by the authority, any 19 application for which additional information is provided within 20 the fifteen business days. If an application is approved by 21 the authority after review and reconsideration, the application 22 shall be considered complete as of its original date of 23 submission. 24 c. If an applicant does not submit additional information 25 within fifteen business days from the date the authority sent 26 the applicant the notice of rejection, the applicant may submit 27 a new application at any time pursuant to subsection 2 and the 28 application shall be reviewed by the authority pursuant to 29 subsection 3. 30 7. a. If the authority approves an application, the 31 authority shall send a notice to the applicant certifying all 32 of the following: 33 (1) The applicant as a rural business growth fund. 34 (2) The growth fund’s eligible investment authority and 35 -5- LSB 1282YC (2) 89 ko/jh 5/ 19

H.F. _____ required credit-eligible contributions. 1 (3) The required number of jobs created and the required 2 number of jobs retained based on the number submitted in the 3 applicant’s application, prorated if the growth fund’s eligible 4 investment authority is reduced pursuant to subsection 4. 5 b. Within forty-five calendar days of the date the authority 6 sent the notice of certification pursuant to paragraph “a” , 7 the rural business growth fund shall comply with all of the 8 following requirements: 9 (1) Collect all credit-eligible capital contributions 10 from each investor whose affidavit was included in the growth 11 fund’s application. If the growth fund’s requested eligible 12 investment authority has been proportionally reduced pursuant 13 to subsection 4, each investor’s required credit-eligible 14 capital contribution shall be reduced by the same proportion. 15 (2) Collect one or more equity investments contributed 16 directly or indirectly by affiliates of the growth fund, 17 including employees and principals of such affiliates, that 18 must equal at least ten percent of the growth fund’s eligible 19 investment authority. 20 (3) If the contributions and investments collected under 21 subparagraphs (1) and (2) do not equal the growth fund’s total 22 eligible investment authority, collect one or more investments 23 of cash that, when added to the contributions and investments 24 collected under subparagraphs (1) and (2), equal the growth 25 fund’s total eligible investment authority. 26 c. Within sixty-five calendar days of the date the authority 27 sent the notice of certification pursuant to paragraph “a” , 28 the rural business growth fund shall comply with all of the 29 following requirements: 30 (1) Submit documentation to the authority sufficient to 31 prove to the satisfaction of the authority that the growth fund 32 has collected amounts described in paragraph “b” . 33 (2) Submit documentation to the authority that identifies 34 all affiliates of an investor described in paragraph “b” , 35 -6- LSB 1282YC (2) 89 ko/jh 6/ 19

H.F. _____ subparagraph (1), that may be eligible to claim a tax credit 1 issued by the authority pursuant to section 15.284, subsection 2 1. 3 8. If a growth fund fails to comply with subsection 7, 4 paragraph “b” or “c” , the growth fund’s certification shall 5 lapse. Any eligible investment authority and credit-eligible 6 capital contributions that lapse pursuant to this subsection 7 shall not count toward the maximum limits on eligible 8 investment authority and credit-eligible capital contributions 9 pursuant to subsection 4. If a growth fund’s eligible 10 investment authority lapses pursuant to this subsection, the 11 authority shall first award the lapsed eligible investment 12 authority pro rata to each rural business growth fund that 13 was awarded less than the eligible investment authority that 14 the rural business growth fund sought in the growth fund’s 15 application. A rural business growth fund that is awarded 16 lapsed eligible investment authority pro rata must comply with 17 the requirements of subsection 7, paragraph “b” , as related to 18 the additional eligible investment authority. The authority 19 may award any remaining lapsed eligible investment authority to 20 new applicants until the maximum limits on eligible investment 21 authority and credit-eligible capital contributions pursuant 22 to subsection 4 are met. 23 9. After a growth fund’s successful submission to the 24 authority of the required documentation pursuant to subsection 25 7, paragraph “c” , the growth fund shall enter into an agreement 26 with the authority that specifies the requirements that must be 27 met for successful completion of the program. At a minimum, 28 the agreement shall contain provisions addressing all of the 29 following: 30 a. The legal name of the growth fund. 31 b. The growth fund’s closing date. 32 c. The growth fund’s eligible investment authority as 33 certified by the authority. 34 d. Each investor of the growth fund and each investor’s 35 -7- LSB 1282YC (2) 89 ko/jh 7/ 19

H.F. _____ credit-eligible capital contribution. 1 e. The minimum number of jobs that must be created and the 2 minimum number of jobs that must be retained as a result of 3 the growth fund’s growth investments to avoid paying state 4 reimbursement pursuant to section 15.288. 5 f. Revocation and recapture of tax credits pursuant to 6 section 15.285. 7 g. Any terms deemed necessary by the authority to effect 8 compliance with the program requirements pursuant to this part. 9 Sec. 4. NEW SECTION . 15.284 Tax credits. 10 1. After an agreement is executed pursuant to section 11 15.283, subsection 9, the authority shall issue a tax credit 12 certificate to each investor whose affidavit was included 13 in the growth fund’s application and whose credit-eligible 14 capital contribution was collected pursuant to section 15 15.283, subsection 7, paragraph “b” , subparagraph (1). The 16 tax credit certificate shall specify the amount of the 17 tax credit allocated to that investor as a result of the 18 investor’s credit-eligible capital contribution. The tax 19 credit allocated to any one investor shall be equal to the 20 investor’s credit-eligible capital contribution to the growth 21 fund. The tax credit certificate shall contain the taxpayer’s 22 name, address, tax identification number, the amount of the tax 23 credit the eligible taxpayer may claim against the insurance 24 premium tax and insurance retaliatory premium tax imposed 25 in chapter 432, the name of the rural business growth fund 26 associated with the tax credit, and any other information 27 required by the department of revenue. 28 2. Twenty-five percent of a tax credit issued to an investor 29 pursuant to subsection 1 may be used in each taxable year 30 beginning in the calendar year following the second anniversary 31 of the closing date of the growth fund in which the investor 32 made the credit-eligible capital contribution, and concluding 33 in the calendar year following the sixth anniversary of that 34 closing date, exclusive of the amount of tax credit carried 35 -8- LSB 1282YC (2) 89 ko/jh 8/ 19

H.F. _____ forward pursuant to subsection 4. 1 3. a. A tax credit issued under this part is not 2 refundable and shall not be sold, transferred, or allocated 3 by the investor to any person other than an affiliate of the 4 investor that was an affiliate at the time of the growth fund’s 5 submission of the investor’s affidavit pursuant to subsection 6 15.283, subsection 2, paragraph “f” . 7 b. Within ninety calendar days of the sale, transfer, or 8 allocation of a tax credit, the affiliate shall submit the tax 9 credit certificate to the department of revenue along with a 10 statement containing the affiliate’s name, tax identification 11 number, address, and any other information required by the 12 department of revenue. 13 c. Within thirty calendar days of receiving the tax credit 14 certificate and the affiliate’s statement, the department of 15 revenue shall issue the affiliate a replacement tax credit 16 certificate. The replacement tax credit certificate must 17 contain all of the information required for the original tax 18 credit certificate and must have the same expiration date that 19 appeared on the original tax credit certificate. 20 4. To claim a tax credit under this section, a taxpayer 21 shall submit the tax credit certificate with the taxpayer’s 22 tax return for each taxable year in which the tax credit is 23 claimed. Any tax credit in excess of the taxpayer’s tax 24 liability for the tax year may be carried forward to the 25 taxpayer’s tax liability for subsequent years until the tax 26 credit is depleted. 27 Sec. 5. NEW SECTION . 15.285 Revocation and recapture of tax 28 credits. 29 1. The authority shall recapture any tax credits used by 30 a taxpayer and shall revoke any tax credits issued pursuant 31 to section 15.284, subsection 1, if, before a rural business 32 growth fund exits the program pursuant to section 15.287, any 33 of the following occur: 34 a. The growth fund cannot provide documentation to the 35 -9- LSB 1282YC (2) 89 ko/jh 9/ 19

H.F. _____ authority to substantiate to the satisfaction of the authority 1 all of the following: 2 (1) That the growth fund, within two years after the growth 3 fund’s closing date, has invested a minimum of two-thirds of 4 the growth fund’s eligible investment authority in growth 5 investments. 6 (2) That the growth fund, within three years after the 7 growth fund’s closing date, has invested one hundred percent 8 of the growth fund’s eligible investment authority in growth 9 investments. 10 (3) That the growth fund, after investing one hundred 11 percent of the growth fund’s eligible investment authority 12 in growth investments within three years after the growth 13 fund’s closing date, has maintained growth investments equal to 14 one hundred percent of the growth fund’s eligible investment 15 authority at all times up to the sixth anniversary after the 16 growth fund’s closing date. For purposes of this subparagraph, 17 a growth investment is maintained even if it is sold or repaid, 18 as long as the growth fund reinvests an amount equal to the 19 growth investment returned or recovered from the original 20 growth investment, exclusive of any profits realized, in other 21 growth investments in this state within the twelve consecutive 22 months immediately after the date of the return or recovery 23 of such growth investment. Amounts received periodically 24 by a growth fund are deemed continuously invested in growth 25 investments if the amounts are reinvested by the growth fund in 26 one or more qualified businesses by the end of the following 27 calendar year. 28 b. The growth fund makes a growth investment in a qualified 29 business that directly, or indirectly through an affiliate, 30 owns, has the right to acquire an ownership interest in, makes 31 a loan to, or makes an investment in, the growth fund, an 32 affiliate of the growth fund, or an investor in the growth 33 fund. This paragraph shall not apply to investments in 34 publicly traded securities by a qualified business, or to an 35 -10- LSB 1282YC (2) 89 ko/jh 10/ 19

H.F. _____ owner or an affiliate of the qualified business. For purposes 1 of this paragraph, a growth fund shall not be considered an 2 affiliate of a qualified business solely because of the growth 3 fund’s growth investment in the qualified business. 4 c. The growth fund, before exiting the program pursuant to 5 section 15.287, makes a distribution or payment that results 6 in the growth fund having less than one hundred percent of its 7 initial investment authority invested in growth investments in 8 this state, available for growth investments, or held in cash 9 and marketable securities. 10 2. The maximum amount of a growth investment in a qualified 11 business, including any amounts invested in affiliates of the 12 qualified business, that a growth fund may count toward the 13 growth fund’s satisfaction of the requirements pursuant to 14 subsection 1, paragraph “a” , subparagraphs (2) and (3), is 15 the greater of twenty percent of the growth fund’s eligible 16 investment authority and five million dollars, excluding any 17 amounts reinvested in a qualified business. 18 3. Before revoking or recapturing a tax credit, the 19 authority shall provide notice to the growth fund of the reason 20 for the pending revocation or recapture. The growth fund shall 21 have ninety calendar days after the date the authority sends 22 the notice to cure to the satisfaction of the authority the 23 issues identified in the notice. Failure of the growth fund to 24 satisfactorily cure the issues in the notice shall result in 25 revocation or recapture of the tax credit. 26 4. The authority shall not revoke or recapture a tax credit 27 for any action of a growth fund that occurs after the growth 28 fund has exited the program pursuant to section 15.287. This 29 subsection shall not prohibit the authority from revoking or 30 recapturing a tax credit due to an action of a growth fund 31 pursuant to subsection 1 that occurs before the date the growth 32 fund exits the program, even if the growth fund’s action is 33 discovered after the date the growth fund exits the program. 34 Sec. 6. NEW SECTION . 15.286 Annual report. 35 -11- LSB 1282YC (2) 89 ko/jh 11/ 19

H.F. _____ On or before March 31, unless a growth fund has exited the 1 program pursuant to section 15.287, each growth fund shall 2 submit an annual report to the authority in the form and manner 3 the authority prescribes that covers the preceding calendar 4 year. The report must include each of the growth fund’s growth 5 investments and must contain all of the following information: 6 1. Financial statements that provide evidence of each 7 growth investment. 8 2. Evidence that the growth fund is in compliance with 9 applicable investment requirements pursuant to section 15.285, 10 subsection 1, paragraph “a” , subparagraphs (1), (2), and (3). 11 3. The name, location, and industry for each qualified 12 business that received a growth investment, and evidence that 13 the business met the requirements to be a qualified business at 14 the time the growth investment was made. 15 4. The number of employees at each qualified business on 16 the date of the growth fund’s initial growth investment in the 17 qualified business. 18 5. The number of jobs created at each qualified business and 19 the average annual salary for the jobs created. 20 6. The number of jobs retained at each qualified business 21 and the average annual salary for the jobs retained. The 22 number of jobs retained at a qualified business may not exceed 23 the number of jobs retained at the same qualified business on 24 the first annual report submitted by the growth fund. 25 7. Any other information the authority requires. 26 Sec. 7. NEW SECTION . 15.287 Exiting the program. 27 1. On or after the sixth anniversary of a rural business 28 growth fund’s closing date, in the form and manner the 29 authority prescribes, the growth fund may apply to the 30 authority to exit the program. The growth fund’s application 31 must include the state reimbursement calculation pursuant to 32 section 15.288. 33 2. The growth fund shall be eligible to exit the program 34 if a tax credit associated with the growth fund has not been 35 -12- LSB 1282YC (2) 89 ko/jh 12/ 19

H.F. _____ revoked or recaptured pursuant to section 15.285. 1 3. Within the time frame adopted by rule by the authority, 2 the authority shall send notice to the growth fund of the 3 authority’s determination regarding the growth fund’s 4 application and confirmation of the state reimbursement the 5 growth fund owes pursuant to section 15.288, if any. If the 6 authority denies the growth fund’s application, the notice 7 shall include the reasons for the denial. If the authority 8 approves the growth fund’s application, the growth fund is 9 deemed to have exited the program on the date the authority 10 sends notice to the growth fund. If the growth fund owes the 11 state reimbursement, the growth fund shall be prohibited from 12 making any distributions to any equity holders of the fund 13 until the growth fund has remitted the state reimbursement 14 amount to the authority. All state reimbursement amounts 15 remitted to the authority shall be deposited in the general 16 fund of the state. 17 Sec. 8. NEW SECTION . 15.288 State reimbursement 18 calculation. 19 1. A state reimbursement shall be calculated any time a 20 rural business growth fund exits the program or any time a 21 rural business growth fund proposes to make a distribution to 22 the growth fund’s equity holders. The state reimbursement 23 shall equal the proposed distribution multiplied by one minus a 24 fraction that is composed of the following: 25 a. The numerator shall be the aggregate number of jobs 26 created plus the number of jobs retained as reported pursuant 27 to section 15.286, subsections 5 and 6, with the following 28 modifiers. 29 (1) Any job created or retained at a qualified business 30 located in a rural area shall be counted as one job. 31 (2) Any job created or retained at a qualified business 32 located in a rural area and in a county with a population of 33 less than thirty thousand, as determined by the most recent 34 population estimates issued by the United States bureau of 35 -13- LSB 1282YC (2) 89 ko/jh 13/ 19

H.F. _____ census, shall be counted as one and one-half of a job. 1 (3) Any job created or retained at a qualified business 2 located in an area other than an area in subparagraph (1) or 3 (2) shall be counted as one-half of a job. 4 b. The denominator shall be the number of jobs created plus 5 the number of jobs retained as stated in the certification 6 pursuant to section 15.283, subsection 7, paragraph “a” , 7 subparagraph (3). 8 2. If the fraction is greater than one hundred percent, the 9 growth fund shall not owe state reimbursement. 10 3. The authority may adopt by rule additional options 11 for the state reimbursement calculation that are equivalent 12 to job creation and job retention to measure a growth fund’s 13 growth investments impact on economic activity at a qualified 14 business. 15 4. For purposes of this section, “rural area” means the 16 same as defined in 7 C.F.R. §4279.108(c), in which a business 17 must be located to qualify as an eligible borrower for a United 18 States department of agriculture business and industry loan 19 pursuant to 7 C.F.R. §4279.108. 20 Sec. 9. NEW SECTION . 15.289 Remedies. 21 The remedies for a breach or default of any of the terms of 22 this part by a rural business growth fund shall be revocation 23 or recapture of tax credits pursuant to section 15.285 and 24 remission of the state reimbursement pursuant to section 25 15.288. 26 Sec. 10. NEW SECTION . 15.290 Rules. 27 The authority, in conjunction with the department of 28 revenue, shall adopt rules pursuant to chapter 17A as necessary 29 for the implementation and administration of this part. 30 Sec. 11. NEW SECTION . 432.12N Rural development tax 31 credits. 32 The taxes imposed under this chapter shall be reduced by a 33 rural development tax credit allowed under section 15.284 for a 34 credit-eligible capital contribution to a rural business growth 35 -14- LSB 1282YC (2) 89 ko/jh 14/ 19

H.F. _____ fund. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanation’s substance by the members of the general assembly. 4 This bill relates to tax credits awarded by the economic 5 development authority for specific capital contributions made 6 to certified rural business growth funds for investment in 7 qualified businesses. 8 The bill directs the economic development authority 9 (authority) to begin accepting Iowa rural development tax 10 credit program (program) applications beginning January 3, 11 2022. 12 The bill provides that a person seeking certification 13 as a rural business growth fund (growth fund) must apply 14 to the authority and that the application must include the 15 eligible investment authority sought by the applicant, a copy 16 of the applicant’s license as a rural business investment 17 company under 7 U.S.C. §2009cc(14) or as a small business 18 investment company under 15 U.S.C. §681, documentation that 19 establishes that at least one principal of the applicant 20 has been an officer or an employee of the rural business 21 investment company, the small business investment company, 22 or an affiliate thereof, for a minimum of four years prior 23 to the date of application, a revenue impact assessment for 24 the applicant’s proposed growth investments as determined by 25 an econometric analysis, the proposed number of jobs created 26 and the number of jobs retained, a signed affidavit from each 27 investor that states the amount of the credit-eligible capital 28 contribution that the investor has committed to the applicant’s 29 proposed growth fund, and a nonrefundable $5,000 application 30 fee. The bill defines “credit-eligible capital contribution” 31 as an investment of cash by a person in a growth fund that 32 is eligible for a tax credit issued by the authority. The 33 investment must be used to purchase either an equity interest 34 in the growth fund or a debt instrument, at par value or 35 -15- LSB 1282YC (2) 89 ko/jh 15/ 19

H.F. _____ premium, issued by the growth fund that has a maturity date 1 at least six years after the growth fund’s closing date. 2 “Eligible investment authority” is defined in the bill as the 3 amount of investment authority that the authority certifies for 4 a specific growth fund. 5 The bill requires the authority to review each application 6 on a first-come, first-served basis and to approve or deny 7 each application within the time frame adopted by rule by the 8 authority. The authority cannot approve more than $100 million 9 in eligible investment authority and not more than $60 million 10 in credit-eligible capital contributions. 11 The authority must reject an application if the applicant 12 fails to submit any of the required information, or if the 13 authority has already approved the maximum eligible investment 14 authority or the maximum credit-eligible capital contributions. 15 If the authority rejects an application, the authority must 16 send a notice to the applicant, and provide a reason for the 17 rejection. If an application has been rejected because the 18 applicant failed to submit all of the required information, the 19 applicant has 15 days to cure any defects in the application. 20 The authority must review and reconsider, within the time 21 frame adopted by rule by the authority, any application which 22 is cured within the 15 business days. If an application 23 is approved by the authority after reconsideration, the 24 application is considered complete as of its original date of 25 submission. 26 If the authority approves an application, it must send a 27 notice to the applicant certifying the applicant as a rural 28 business growth fund, the growth fund’s eligible investment 29 authority, and the required number of jobs to be created and 30 retained based on the number submitted in the applicant’s 31 application. Within 45 days of the date the authority sent 32 the certification notice, the growth fund is required to 33 collect all credit-eligible capital contributions from each 34 investor whose affidavit was included in the growth fund’s 35 -16- LSB 1282YC (2) 89 ko/jh 16/ 19

H.F. _____ application, collect one or more equity investments contributed 1 directly or indirectly by affiliates of the growth fund, 2 including employees and principals of such affiliates, that 3 equal at least 10 percent of the growth fund’s eligible 4 investment authority, and, if applicable, collect one or more 5 investments of cash that when added to the credit-eligible 6 capital contributions and the equity investments equal the 7 growth fund’s eligible investment authority. Within 65 days 8 of the date the authority sent the certification notice, the 9 growth fund must submit documentation to the authority as 10 detailed in the bill. If the growth fund fails to comply with 11 the collection and documentation requirements, all eligible 12 investment authority and credit-eligible capital contributions 13 lapse. Authority and contributions that lapse do not count 14 toward the maximum limits on eligible investment authority and 15 credit-eligible capital contributions and may be awarded by the 16 authority as outlined in the bill. 17 After a growth fund complies with the collection and 18 documentation requirements, the fund must enter into an 19 agreement with the authority that specifies the requirements 20 that must be met for successful completion of the program. The 21 minimum requirements for the agreement are detailed in the 22 bill. 23 After the agreement is executed, the authority must issue 24 a tax credit certificate to each investor whose affidavit 25 was included in the growth fund’s application and whose 26 credit-eligible capital contribution was collected by the 27 growth fund. The certificate must specify the amount of tax 28 credit allocated to that investor and the amount of the tax 29 credit the eligible taxpayer may claim against the insurance 30 premium tax and insurance retaliatory premium tax imposed in 31 Code chapter 432. An investor may use 25 percent of the tax 32 credit in each taxable year beginning in the calendar year 33 following the second anniversary of the growth fund’s closing 34 date and ending in the calendar year following the sixth 35 -17- LSB 1282YC (2) 89 ko/jh 17/ 19

H.F. _____ anniversary of the closing date. Any tax credit in excess of 1 the taxpayer’s tax liability for a tax year may be carried 2 forward to the taxpayer’s tax liability for subsequent tax 3 years until the tax credit is depleted. 4 The tax credits are not refundable and cannot be sold, 5 transferred, or allocated by the investor to any person other 6 than an affiliate of the investor. The affiliate must submit 7 the tax credit certificate within 90 days to the department 8 of revenue (department) and the department must issue the 9 affiliate a replacement tax credit certificate with the same 10 expiration date that appeared on the original tax credit 11 certificate. 12 The authority must revoke or recapture a tax credit if, 13 before a growth fund exits the program, the growth fund 14 cannot provide documentation to substantiate that the growth 15 fund, within two years after the growth fund’s closing date, 16 has invested a minimum of two-thirds of the growth fund’s 17 investment authority in growth investments; that the growth 18 fund, within three years after the growth fund’s closing date, 19 has invested 100 percent of the growth fund’s investment 20 authority in growth investments; that the growth fund, after 21 investing 100 percent of the growth fund’s investment authority 22 in growth investments within three years after the growth 23 fund’s closing date, has maintained growth investments equal to 24 100 percent of its investment authority at all times up to the 25 sixth anniversary after the growth fund’s closing date. The 26 bill specifies that amounts received periodically by a growth 27 fund are deemed continuously invested in growth investments 28 if the amounts are reinvested by the growth fund in one or 29 more qualified businesses by the end of the following calendar 30 year. The bill details the other requirements and prohibitions 31 related to revocation or recapture of tax credits by the 32 authority. 33 On or after the sixth anniversary of a growth fund’s closing 34 date, the growth fund may apply to the authority to exit the 35 -18- LSB 1282YC (2) 89 ko/jh 18/ 19

H.F. _____ program. A growth fund is eligible to exit the program if a 1 tax credit associated with the growth fund has not been revoked 2 or recaptured. The growth fund’s application to exit the 3 program must include the state reimbursement calculation. The 4 state reimbursement owed by a rural business growth fund to 5 the authority is calculated as detailed in the bill. Within 6 the time frame adopted by rule by the authority, the authority 7 must send notice to the growth fund of the authority’s 8 determination regarding the application and confirmation of 9 the state reimbursement owed by the growth fund. If the 10 authority approves the application, the growth fund is deemed 11 to have exited the program on the date the notice is sent by 12 the authority to the growth fund. If the growth fund owes the 13 state reimbursement, the growth fund is prohibited from making 14 any distributions to equity holders of the fund until the 15 state reimbursement amount has been remitted to the authority. 16 “Equity holder” is defined in the bill as a person that makes 17 a credit-eligible capital contribution, an equity investment, 18 or a cash investment in a rural business growth fund. The bill 19 specifies that all state reimbursement amounts remitted to the 20 authority shall be deposited in the general fund of the state. 21 Unless a growth fund has exited the program, the growth 22 fund must submit an annual report to the authority that covers 23 the preceding calendar year. The report must include the 24 documentation and information as detailed in the bill. 25 The bill provides that the only remedies for a breach or 26 default of any of the terms of the program by a growth fund are 27 revocation or recapture of tax credits and the collection of 28 the state reimbursement as detailed in the bill. 29 The bill requires the authority, in conjunction with the 30 department of revenue, to adopt rules as necessary to implement 31 and administer the program. 32 -19- LSB 1282YC (2) 89 ko/jh 19/ 19