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House Study Bill 1 - IntroducedA Bill ForAn Act 1relating to tax credits awarded by the economic
2development authority for specific capital contributions
3made to certified rural business growth funds for investment
4in qualified businesses.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 15.281 Short title.
2This part shall be known and may be cited as the “Iowa Rural
3Development Tax Credit Program”.
4 Sec. 2. NEW SECTION. 15.282 Definitions.
5As used in this part, unless the context otherwise requires:
61. “Affiliate” means a person that directly, or indirectly
7through one or more intermediaries, controls, is controlled
8by, or is under common control with another person. A person
9is controlled by another person if the controlling person
10holds, directly or indirectly, the majority voting or ownership
11interest in the controlled person or has control, by contract
12or by law, over the day-to-day operations of the controlled
13person.
142. “Authority” means the economic development authority
15created in section 15.105.
163. “Closing date” means the date on which a rural business
17growth fund completes collection of all contributions and
18investments and submits all required documentation to the
19authority pursuant to section 15.283, subsection 7, paragraph
20“c”.
214. “Credit-eligible capital contribution” means an investment
22of cash by a person in a rural business growth fund that is
23eligible for a tax credit certificate issued by the authority
24pursuant to section 15.284, subsection 1. The cash investment
25shall purchase either of the following:
26a. An equity interest in the growth fund.
27b. A debt instrument, at par value or premium, issued by the
28growth fund that has a maturity date at least six years after
29the growth fund’s closing date.
305. “Eligible investment authority” means the amount stated
31on the certification notice the authority issues pursuant to
32section 15.283, subsection 7, paragraph “a”. At least sixty
33percent of a growth fund’s eligible investment authority shall
34be comprised of credit-eligible capital contributions.
356. “Employee” means a natural person who is employed in this
-1-1state by a qualified business and who is either salaried, works
2a minimum of thirty-five hours per week, or another period of
3time generally accepted by custom, industry, or practice as
4full-time employment.
57. “Equity holder” means a person that makes an equity
6investment in a rural business growth fund.
78. “Growth investment” means any capital or equity
8investment a growth fund makes in a qualified business, or any
9loan from a growth fund to a qualified business with a stated
10maturity at least one year after the date of issuance.
119. “Jobs created” means the number of new employees at a
12qualified business, after an initial growth investment, at
13the end of each subsequent calendar year. This number is
14calculated annually by adding together the number of employees
15at the qualified business on the last day of each calendar
16month and dividing by twelve, then subtracting the number of
17employees at the qualified business on the date the day before
18the date of the initial growth investment. If the resulting
19total is less than zero, the jobs created is equal to zero.
2010. “Jobs retained” means the number of employees at a
21qualified business the day before the date of an initial growth
22investment that the qualified business’s chief executive
23officer or similar officer certifies as being positions located
24in this state that would have been eliminated but for the
25initial growth investment.
2611. “Located in” means the place or places at which a
27business’s operations are located and where at least sixty
28percent of the business’s employees work, or where employees
29that are paid at least sixty percent of the business’s payroll
30work.
3112. “Program” means the Iowa rural development tax credit
32program administered under this part.
3313. “Qualified business” means any business within this
34state that has fewer than two hundred fifty employees,
35including ostensible subcontractors pursuant to 13 C.F.R.
-2-1§121.103(h).
214. “Revenue” means the total state and local income
3produced by a rural business growth fund’s economic activity.
415. “Rural business growth fund” or “growth fund” means a
5person, or an affiliate of a person, certified by the authority
6pursuant to section 15.283, subsection 7, paragraph “a”.
716. “Within this state” means in the state of Iowa, or an
8out-of-state business that has agreed to use a proposed growth
9investment to become a qualified business within one hundred
10eighty days of receiving the growth investment.
11 Sec. 3. NEW SECTION. 15.283 Application and agreement.
121. The authority shall begin accepting program applications
13on January 3, 2022. An application is deemed received based
14on the date and time stamp that shall be generated by the
15authority upon receipt of the application. Applications
16received by the authority on the same day shall be deemed to
17have been received simultaneously.
182. A person seeking certification as a rural business
19growth fund shall apply to the authority in the form and manner
20prescribed by the authority. The application must include all
21of the following:
22a. The eligible investment authority sought by the
23applicant.
24b. A copy of the applicant’s, or an affiliate of the
25applicant’s, license as a rural business investment company
26as defined under 7 U.S.C. §2009cc(14), or license as a small
27business investment company under 15 U.S.C. §681.
28c. Documentation as required by the authority to establish
29that at least one principal of the applicant has been an
30officer or an employee of the rural business investment
31company, the small business investment company, or an affiliate
32thereof, for a minimum of four years prior to the date of
33application.
34d. A revenue impact assessment for the applicant’s proposed
35growth investments as determined by an econometric analysis
-3-1conducted by a nationally recognized third-party independent
2econometric firm. The revenue impact assessment must provide
3an analysis of the applicant’s proposed growth investments over
4the ten consecutive years following the date the applicant’s
5application is submitted to the authority, and must demonstrate
6that there will be a positive revenue impact on this state
7that exceeds the cumulative amount of tax credits, that if the
8application is approved, may be issued by the authority to the
9rural business growth fund’s investors.
10e. The number of jobs created and the number of jobs
11retained assumed in the revenue impact assessment required by
12paragraph “d”.
13f. A signed affidavit from each investor that identifies
14the investor and the amount of the credit-eligible capital
15contribution that the investor has committed to the applicant’s
16proposed growth fund.
17g. A nonrefundable application fee of five thousand dollars.
18All application fees submitted to the authority pursuant to
19this paragraph shall be used by the authority to administer
20this part.
213. The authority shall review and make a determination
22to approve or deny each application within the time frame
23adopted by rule by the authority. The authority shall review
24applications on a first-come, first-served basis as determined
25pursuant to subsection 1.
264. The authority shall not approve more than one hundred
27million dollars in eligible investment authority and not
28more than sixty million dollars in credit-eligible capital
29contributions under the program. If approved applications
30that are simultaneously received would collectively exceed the
31maximum limit on eligible investment authority or the maximum
32on credit-eligible capital contributions, the authority shall
33proportionally reduce the growth fund’s eligible investment
34authority and credit-eligible capital contributions for each
35of the simultaneous applications as necessary to comply with
-4-1the maximum limits.
25. The authority shall reject an application for any of the
3following reasons:
4a. The applicant failed to comply with any of the
5requirements of subsection 2.
6b. The authority has already approved the maximum eligible
7investment authority or the maximum credit-eligible capital
8contributions pursuant to subsection 4.
96. a. If the authority rejects an application, the
10authority shall send a notice of rejection to the applicant and
11provide a reason for the rejection.
12b. If the authority has rejected an application on any
13grounds other than subsection 5, paragraph “b”, the applicant
14may provide additional information to the authority to cure
15the defects in the application. All additional information
16must be received by the authority within fifteen business days
17from the date the authority sent the notice of rejection to
18the applicant. The authority shall review and reconsider,
19within the time frame adopted by rule by the authority, any
20application for which additional information is provided within
21the fifteen business days. If an application is approved by
22the authority after review and reconsideration, the application
23shall be considered complete as of its original date of
24submission.
25c. If an applicant does not submit additional information
26within fifteen business days from the date the authority sent
27the applicant the notice of rejection, the applicant may submit
28a new application at any time pursuant to subsection 2 and the
29application shall be reviewed by the authority pursuant to
30subsection 3.
317. a. If the authority approves an application, the
32authority shall send a notice to the applicant certifying all
33of the following:
34(1) The applicant as a rural business growth fund.
35(2) The growth fund’s eligible investment authority and
-5-1required credit-eligible contributions.
2(3) The required number of jobs created and the required
3number of jobs retained based on the number submitted in the
4applicant’s application, prorated if the growth fund’s eligible
5investment authority is reduced pursuant to subsection 4.
6b. Within forty-five calendar days of the date the authority
7sent the notice of certification pursuant to paragraph “a”,
8the rural business growth fund shall comply with all of the
9following requirements:
10(1) Collect all credit-eligible capital contributions
11from each investor whose affidavit was included in the growth
12fund’s application. If the growth fund’s requested eligible
13investment authority has been proportionally reduced pursuant
14to subsection 4, each investor’s required credit-eligible
15capital contribution shall be reduced by the same proportion.
16(2) Collect one or more equity investments contributed
17directly or indirectly by affiliates of the growth fund,
18including employees and principals of such affiliates, that
19must equal at least ten percent of the growth fund’s eligible
20investment authority.
21(3) If the contributions and investments collected under
22subparagraphs (1) and (2) do not equal the growth fund’s total
23eligible investment authority, collect one or more investments
24of cash that, when added to the contributions and investments
25collected under subparagraphs (1) and (2), equal the growth
26fund’s total eligible investment authority.
27c. Within sixty-five calendar days of the date the authority
28sent the notice of certification pursuant to paragraph “a”,
29the rural business growth fund shall comply with all of the
30following requirements:
31(1) Submit documentation to the authority sufficient to
32prove to the satisfaction of the authority that the growth fund
33has collected amounts described in paragraph “b”.
34(2) Submit documentation to the authority that identifies
35all affiliates of an investor described in paragraph “b”,
-6-1subparagraph (1), that may be eligible to claim a tax credit
2issued by the authority pursuant to section 15.284, subsection
31.
48. If a growth fund fails to comply with subsection 7,
5paragraph “b” or “c”, the growth fund’s certification shall
6lapse. Any eligible investment authority and credit-eligible
7capital contributions that lapse pursuant to this subsection
8shall not count toward the maximum limits on eligible
9investment authority and credit-eligible capital contributions
10pursuant to subsection 4. If a growth fund’s eligible
11investment authority lapses pursuant to this subsection, the
12authority shall first award the lapsed eligible investment
13authority pro rata to each rural business growth fund that
14was awarded less than the eligible investment authority that
15the rural business growth fund sought in the growth fund’s
16application. A rural business growth fund that is awarded
17lapsed eligible investment authority pro rata must comply with
18the requirements of subsection 7, paragraph “b”, as related to
19the additional eligible investment authority. The authority
20may award any remaining lapsed eligible investment authority to
21new applicants until the maximum limits on eligible investment
22authority and credit-eligible capital contributions pursuant
23to subsection 4 are met.
249. After a growth fund’s successful submission to the
25authority of the required documentation pursuant to subsection
267, paragraph “c”, the growth fund shall enter into an agreement
27with the authority that specifies the requirements that must be
28met for successful completion of the program. At a minimum,
29the agreement shall contain provisions addressing all of the
30following:
31a. The legal name of the growth fund.
32b. The growth fund’s closing date.
33c. The growth fund’s eligible investment authority as
34certified by the authority.
35d. Each investor of the growth fund and each investor’s
-7-1credit-eligible capital contribution.
2e. The minimum number of jobs that must be created and the
3minimum number of jobs that must be retained as a result of
4the growth fund’s growth investments to avoid paying state
5reimbursement pursuant to section 15.288.
6f. Revocation and recapture of tax credits pursuant to
7section 15.285.
8g. Any terms deemed necessary by the authority to effect
9compliance with the program requirements pursuant to this part.
10 Sec. 4. NEW SECTION. 15.284 Tax credits.
111. After an agreement is executed pursuant to section
1215.283, subsection 9, the authority shall issue a tax credit
13certificate to each investor whose affidavit was included
14in the growth fund’s application and whose credit-eligible
15capital contribution was collected pursuant to section
1615.283, subsection 7, paragraph “b”, subparagraph (1). The
17tax credit certificate shall specify the amount of the
18tax credit allocated to that investor as a result of the
19investor’s credit-eligible capital contribution. The tax
20credit allocated to any one investor shall be equal to the
21investor’s credit-eligible capital contribution to the growth
22fund. The tax credit certificate shall contain the taxpayer’s
23name, address, tax identification number, the amount of the tax
24credit the eligible taxpayer may claim against the insurance
25premium tax and insurance retaliatory premium tax imposed
26in chapter 432, the name of the rural business growth fund
27associated with the tax credit, and any other information
28required by the department of revenue.
292. Twenty-five percent of a tax credit issued to an investor
30pursuant to subsection 1 may be used in each taxable year
31beginning in the calendar year following the second anniversary
32of the closing date of the growth fund in which the investor
33made the credit-eligible capital contribution, and concluding
34in the calendar year following the sixth anniversary of that
35closing date, exclusive of the amount of tax credit carried
-8-1forward pursuant to subsection 4.
23. a. A tax credit issued under this part is not
3refundable and shall not be sold, transferred, or allocated
4by the investor to any person other than an affiliate of the
5investor that was an affiliate at the time of the growth fund’s
6submission of the investor’s affidavit pursuant to subsection
715.283, subsection 2, paragraph “f”.
8b. Within ninety calendar days of the sale, transfer, or
9allocation of a tax credit, the affiliate shall submit the tax
10credit certificate to the department of revenue along with a
11statement containing the affiliate’s name, tax identification
12number, address, and any other information required by the
13department of revenue.
14c. Within thirty calendar days of receiving the tax credit
15certificate and the affiliate’s statement, the department of
16revenue shall issue the affiliate a replacement tax credit
17certificate. The replacement tax credit certificate must
18contain all of the information required for the original tax
19credit certificate and must have the same expiration date that
20appeared on the original tax credit certificate.
214. To claim a tax credit under this section, a taxpayer
22shall submit the tax credit certificate with the taxpayer’s
23tax return for each taxable year in which the tax credit is
24claimed. Any tax credit in excess of the taxpayer’s tax
25liability for the tax year may be carried forward to the
26taxpayer’s tax liability for subsequent years until the tax
27credit is depleted.
28 Sec. 5. NEW SECTION. 15.285 Revocation and recapture of tax
29credits.
301. The authority shall recapture any tax credits used by
31a taxpayer and shall revoke any tax credits issued pursuant
32to section 15.284, subsection 1, if, before a rural business
33growth fund exits the program pursuant to section 15.287, any
34of the following occur:
35a. The growth fund cannot provide documentation to the
-9-1authority to substantiate to the satisfaction of the authority
2all of the following:
3(1) That the growth fund, within two years after the growth
4fund’s closing date, has invested a minimum of two-thirds of
5the growth fund’s eligible investment authority in growth
6investments.
7(2) That the growth fund, within three years after the
8growth fund’s closing date, has invested one hundred percent
9of the growth fund’s eligible investment authority in growth
10investments.
11(3) That the growth fund, after investing one hundred
12percent of the growth fund’s eligible investment authority
13in growth investments within three years after the growth
14fund’s closing date, has maintained growth investments equal to
15one hundred percent of the growth fund’s eligible investment
16authority at all times up to the sixth anniversary after the
17growth fund’s closing date. For purposes of this subparagraph,
18a growth investment is maintained even if it is sold or repaid,
19as long as the growth fund reinvests an amount equal to the
20growth investment returned or recovered from the original
21growth investment, exclusive of any profits realized, in other
22growth investments in this state within the twelve consecutive
23months immediately after the date of the return or recovery
24of such growth investment. Amounts received periodically
25by a growth fund are deemed continuously invested in growth
26investments if the amounts are reinvested by the growth fund in
27one or more qualified businesses by the end of the following
28calendar year.
29b. The growth fund makes a growth investment in a qualified
30business that directly, or indirectly through an affiliate,
31owns, has the right to acquire an ownership interest in, makes
32a loan to, or makes an investment in, the growth fund, an
33affiliate of the growth fund, or an investor in the growth
34fund. This paragraph shall not apply to investments in
35publicly traded securities by a qualified business, or to an
-10-1owner or an affiliate of the qualified business. For purposes
2of this paragraph, a growth fund shall not be considered an
3affiliate of a qualified business solely because of the growth
4fund’s growth investment in the qualified business.
5c. The growth fund, before exiting the program pursuant to
6section 15.287, makes a distribution or payment that results
7in the growth fund having less than one hundred percent of its
8initial investment authority invested in growth investments in
9this state, available for growth investments, or held in cash
10and marketable securities.
112. The maximum amount of a growth investment in a qualified
12business, including any amounts invested in affiliates of the
13qualified business, that a growth fund may count toward the
14growth fund’s satisfaction of the requirements pursuant to
15subsection 1, paragraph “a”, subparagraphs (2) and (3), is
16the greater of twenty percent of the growth fund’s eligible
17investment authority and five million dollars, excluding any
18amounts reinvested in a qualified business.
193. Before revoking or recapturing a tax credit, the
20authority shall provide notice to the growth fund of the reason
21for the pending revocation or recapture. The growth fund shall
22have ninety calendar days after the date the authority sends
23the notice to cure to the satisfaction of the authority the
24issues identified in the notice. Failure of the growth fund to
25satisfactorily cure the issues in the notice shall result in
26revocation or recapture of the tax credit.
274. The authority shall not revoke or recapture a tax credit
28for any action of a growth fund that occurs after the growth
29fund has exited the program pursuant to section 15.287. This
30subsection shall not prohibit the authority from revoking or
31recapturing a tax credit due to an action of a growth fund
32pursuant to subsection 1 that occurs before the date the growth
33fund exits the program, even if the growth fund’s action is
34discovered after the date the growth fund exits the program.
35 Sec. 6. NEW SECTION. 15.286 Annual report.
-11- 1On or before March 31, unless a growth fund has exited the
2program pursuant to section 15.287, each growth fund shall
3submit an annual report to the authority in the form and manner
4the authority prescribes that covers the preceding calendar
5year. The report must include each of the growth fund’s growth
6investments and must contain all of the following information:
71. Financial statements that provide evidence of each
8growth investment.
92. Evidence that the growth fund is in compliance with
10applicable investment requirements pursuant to section 15.285,
11subsection 1, paragraph “a”, subparagraphs (1), (2), and (3).
123. The name, location, and industry for each qualified
13business that received a growth investment, and evidence that
14the business met the requirements to be a qualified business at
15the time the growth investment was made.
164. The number of employees at each qualified business on
17the date of the growth fund’s initial growth investment in the
18qualified business.
195. The number of jobs created at each qualified business and
20the average annual salary for the jobs created.
216. The number of jobs retained at each qualified business
22and the average annual salary for the jobs retained. The
23number of jobs retained at a qualified business may not exceed
24the number of jobs retained at the same qualified business on
25the first annual report submitted by the growth fund.
267. Any other information the authority requires.
27 Sec. 7. NEW SECTION. 15.287 Exiting the program.
281. On or after the sixth anniversary of a rural business
29growth fund’s closing date, in the form and manner the
30authority prescribes, the growth fund may apply to the
31authority to exit the program. The growth fund’s application
32must include the state reimbursement calculation pursuant to
33section 15.288.
342. The growth fund shall be eligible to exit the program
35if a tax credit associated with the growth fund has not been
-12-1revoked or recaptured pursuant to section 15.285.
23. Within the time frame adopted by rule by the authority,
3the authority shall send notice to the growth fund of the
4authority’s determination regarding the growth fund’s
5application and confirmation of the state reimbursement the
6growth fund owes pursuant to section 15.288, if any. If the
7authority denies the growth fund’s application, the notice
8shall include the reasons for the denial. If the authority
9approves the growth fund’s application, the growth fund is
10deemed to have exited the program on the date the authority
11sends notice to the growth fund. If the growth fund owes the
12state reimbursement, the growth fund shall be prohibited from
13making any distributions to any equity holders of the fund
14until the growth fund has remitted the state reimbursement
15amount to the authority. All state reimbursement amounts
16remitted to the authority shall be deposited in the general
17fund of the state.
18 Sec. 8. NEW SECTION. 15.288 State reimbursement
19calculation.
201. A state reimbursement shall be calculated any time a
21rural business growth fund exits the program or any time a
22rural business growth fund proposes to make a distribution to
23the growth fund’s equity holders. The state reimbursement
24shall equal the proposed distribution multiplied by one minus a
25fraction that is composed of the following:
26a. The numerator shall be the aggregate number of jobs
27created plus the number of jobs retained as reported pursuant
28to section 15.286, subsections 5 and 6, with the following
29modifiers.
30(1) Any job created or retained at a qualified business
31located in a rural area shall be counted as one job.
32(2) Any job created or retained at a qualified business
33located in a rural area and in a county with a population of
34less than thirty thousand, as determined by the most recent
35population estimates issued by the United States bureau of
-13-1census, shall be counted as one and one-half of a job.
2(3) Any job created or retained at a qualified business
3located in an area other than an area in subparagraph (1) or
4(2) shall be counted as one-half of a job.
5b. The denominator shall be the number of jobs created plus
6the number of jobs retained as stated in the certification
7pursuant to section 15.283, subsection 7, paragraph “a”,
8subparagraph (3).
92. If the fraction is greater than one hundred percent, the
10growth fund shall not owe state reimbursement.
113. The authority may adopt by rule additional options
12for the state reimbursement calculation that are equivalent
13to job creation and job retention to measure a growth fund’s
14growth investments impact on economic activity at a qualified
15business.
164. For purposes of this section, “rural area” means the
17same as defined in 7 C.F.R. §4279.108(c), in which a business
18must be located to qualify as an eligible borrower for a United
19States department of agriculture business and industry loan
20pursuant to 7 C.F.R. §4279.108.
21 Sec. 9. NEW SECTION. 15.289 Remedies.
22The remedies for a breach or default of any of the terms of
23this part by a rural business growth fund shall be revocation
24or recapture of tax credits pursuant to section 15.285 and
25remission of the state reimbursement pursuant to section
2615.288.
27 Sec. 10. NEW SECTION. 15.290 Rules.
28The authority, in conjunction with the department of
29revenue, shall adopt rules pursuant to chapter 17A as necessary
30for the implementation and administration of this part.
31 Sec. 11. NEW SECTION. 432.12N Rural development tax
32credits.
33The taxes imposed under this chapter shall be reduced by a
34rural development tax credit allowed under section 15.284 for a
35credit-eligible capital contribution to a rural business growth
-14-1fund.
2EXPLANATION
3The inclusion of this explanation does not constitute agreement with
4the explanation’s substance by the members of the general assembly.
5This bill relates to tax credits awarded by the economic
6development authority for specific capital contributions made
7to certified rural business growth funds for investment in
8qualified businesses.
9The bill directs the economic development authority
10(authority) to begin accepting Iowa rural development tax
11credit program (program) applications beginning January 3,
122022.
13The bill provides that a person seeking certification
14as a rural business growth fund (growth fund) must apply
15to the authority and that the application must include the
16eligible investment authority sought by the applicant, a copy
17of the applicant’s license as a rural business investment
18company under 7 U.S.C. §2009cc(14) or as a small business
19investment company under 15 U.S.C. §681, documentation that
20establishes that at least one principal of the applicant
21has been an officer or an employee of the rural business
22investment company, the small business investment company,
23or an affiliate thereof, for a minimum of four years prior
24to the date of application, a revenue impact assessment for
25the applicant’s proposed growth investments as determined by
26an econometric analysis, the proposed number of jobs created
27and the number of jobs retained, a signed affidavit from each
28investor that states the amount of the credit-eligible capital
29contribution that the investor has committed to the applicant’s
30proposed growth fund, and a nonrefundable $5,000 application
31fee. The bill defines “credit-eligible capital contribution”
32as an investment of cash by a person in a growth fund that
33is eligible for a tax credit issued by the authority. The
34investment must be used to purchase either an equity interest
35in the growth fund or a debt instrument, at par value or
-15-1premium, issued by the growth fund that has a maturity date
2at least six years after the growth fund’s closing date.
3“Eligible investment authority” is defined in the bill as the
4amount of investment authority that the authority certifies for
5a specific growth fund.
6The bill requires the authority to review each application
7on a first-come, first-served basis and to approve or deny
8each application within the time frame adopted by rule by the
9authority. The authority cannot approve more than $100 million
10in eligible investment authority and not more than $60 million
11in credit-eligible capital contributions.
12The authority must reject an application if the applicant
13fails to submit any of the required information, or if the
14authority has already approved the maximum eligible investment
15authority or the maximum credit-eligible capital contributions.
16If the authority rejects an application, the authority must
17send a notice to the applicant, and provide a reason for the
18rejection. If an application has been rejected because the
19applicant failed to submit all of the required information, the
20applicant has 15 days to cure any defects in the application.
21The authority must review and reconsider, within the time
22frame adopted by rule by the authority, any application which
23is cured within the 15 business days. If an application
24is approved by the authority after reconsideration, the
25application is considered complete as of its original date of
26submission.
27If the authority approves an application, it must send a
28notice to the applicant certifying the applicant as a rural
29business growth fund, the growth fund’s eligible investment
30authority, and the required number of jobs to be created and
31retained based on the number submitted in the applicant’s
32application. Within 45 days of the date the authority sent
33the certification notice, the growth fund is required to
34collect all credit-eligible capital contributions from each
35investor whose affidavit was included in the growth fund’s
-16-1application, collect one or more equity investments contributed
2directly or indirectly by affiliates of the growth fund,
3including employees and principals of such affiliates, that
4equal at least 10 percent of the growth fund’s eligible
5investment authority, and, if applicable, collect one or more
6investments of cash that when added to the credit-eligible
7capital contributions and the equity investments equal the
8growth fund’s eligible investment authority. Within 65 days
9of the date the authority sent the certification notice, the
10growth fund must submit documentation to the authority as
11detailed in the bill. If the growth fund fails to comply with
12the collection and documentation requirements, all eligible
13investment authority and credit-eligible capital contributions
14lapse. Authority and contributions that lapse do not count
15toward the maximum limits on eligible investment authority and
16credit-eligible capital contributions and may be awarded by the
17authority as outlined in the bill.
18After a growth fund complies with the collection and
19documentation requirements, the fund must enter into an
20agreement with the authority that specifies the requirements
21that must be met for successful completion of the program. The
22minimum requirements for the agreement are detailed in the
23bill.
24After the agreement is executed, the authority must issue
25a tax credit certificate to each investor whose affidavit
26was included in the growth fund’s application and whose
27credit-eligible capital contribution was collected by the
28growth fund. The certificate must specify the amount of tax
29credit allocated to that investor and the amount of the tax
30credit the eligible taxpayer may claim against the insurance
31premium tax and insurance retaliatory premium tax imposed in
32Code chapter 432. An investor may use 25 percent of the tax
33credit in each taxable year beginning in the calendar year
34following the second anniversary of the growth fund’s closing
35date and ending in the calendar year following the sixth
-17-1anniversary of the closing date. Any tax credit in excess of
2the taxpayer’s tax liability for a tax year may be carried
3forward to the taxpayer’s tax liability for subsequent tax
4years until the tax credit is depleted.
5The tax credits are not refundable and cannot be sold,
6transferred, or allocated by the investor to any person other
7than an affiliate of the investor. The affiliate must submit
8the tax credit certificate within 90 days to the department
9of revenue (department) and the department must issue the
10affiliate a replacement tax credit certificate with the same
11expiration date that appeared on the original tax credit
12certificate.
13The authority must revoke or recapture a tax credit if,
14before a growth fund exits the program, the growth fund
15cannot provide documentation to substantiate that the growth
16fund, within two years after the growth fund’s closing date,
17has invested a minimum of two-thirds of the growth fund’s
18investment authority in growth investments; that the growth
19fund, within three years after the growth fund’s closing date,
20has invested 100 percent of the growth fund’s investment
21authority in growth investments; that the growth fund, after
22investing 100 percent of the growth fund’s investment authority
23in growth investments within three years after the growth
24fund’s closing date, has maintained growth investments equal to
25100 percent of its investment authority at all times up to the
26sixth anniversary after the growth fund’s closing date. The
27bill specifies that amounts received periodically by a growth
28fund are deemed continuously invested in growth investments
29if the amounts are reinvested by the growth fund in one or
30more qualified businesses by the end of the following calendar
31year. The bill details the other requirements and prohibitions
32related to revocation or recapture of tax credits by the
33authority.
34On or after the sixth anniversary of a growth fund’s closing
35date, the growth fund may apply to the authority to exit the
-18-1program. A growth fund is eligible to exit the program if a
2tax credit associated with the growth fund has not been revoked
3or recaptured. The growth fund’s application to exit the
4program must include the state reimbursement calculation. The
5state reimbursement owed by a rural business growth fund to
6the authority is calculated as detailed in the bill. Within
7the time frame adopted by rule by the authority, the authority
8must send notice to the growth fund of the authority’s
9determination regarding the application and confirmation of
10the state reimbursement owed by the growth fund. If the
11authority approves the application, the growth fund is deemed
12to have exited the program on the date the notice is sent by
13the authority to the growth fund. If the growth fund owes the
14state reimbursement, the growth fund is prohibited from making
15any distributions to equity holders of the fund until the
16state reimbursement amount has been remitted to the authority.
17“Equity holder” is defined in the bill as a person that makes
18a credit-eligible capital contribution, an equity investment,
19or a cash investment in a rural business growth fund. The bill
20specifies that all state reimbursement amounts remitted to the
21authority shall be deposited in the general fund of the state.
22Unless a growth fund has exited the program, the growth
23fund must submit an annual report to the authority that covers
24the preceding calendar year. The report must include the
25documentation and information as detailed in the bill.
26The bill provides that the only remedies for a breach or
27default of any of the terms of the program by a growth fund are
28revocation or recapture of tax credits and the collection of
29the state reimbursement as detailed in the bill.
30The bill requires the authority, in conjunction with the
31department of revenue, to adopt rules as necessary to implement
32and administer the program.
-19-ko/jh
2development authority for specific capital contributions
3made to certified rural business growth funds for investment
4in qualified businesses.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 15.281 Short title.
2This part shall be known and may be cited as the “Iowa Rural
3Development Tax Credit Program”.
4 Sec. 2. NEW SECTION. 15.282 Definitions.
5As used in this part, unless the context otherwise requires:
61. “Affiliate” means a person that directly, or indirectly
7through one or more intermediaries, controls, is controlled
8by, or is under common control with another person. A person
9is controlled by another person if the controlling person
10holds, directly or indirectly, the majority voting or ownership
11interest in the controlled person or has control, by contract
12or by law, over the day-to-day operations of the controlled
13person.
142. “Authority” means the economic development authority
15created in section 15.105.
163. “Closing date” means the date on which a rural business
17growth fund completes collection of all contributions and
18investments and submits all required documentation to the
19authority pursuant to section 15.283, subsection 7, paragraph
20“c”.
214. “Credit-eligible capital contribution” means an investment
22of cash by a person in a rural business growth fund that is
23eligible for a tax credit certificate issued by the authority
24pursuant to section 15.284, subsection 1. The cash investment
25shall purchase either of the following:
26a. An equity interest in the growth fund.
27b. A debt instrument, at par value or premium, issued by the
28growth fund that has a maturity date at least six years after
29the growth fund’s closing date.
305. “Eligible investment authority” means the amount stated
31on the certification notice the authority issues pursuant to
32section 15.283, subsection 7, paragraph “a”. At least sixty
33percent of a growth fund’s eligible investment authority shall
34be comprised of credit-eligible capital contributions.
356. “Employee” means a natural person who is employed in this
-1-1state by a qualified business and who is either salaried, works
2a minimum of thirty-five hours per week, or another period of
3time generally accepted by custom, industry, or practice as
4full-time employment.
57. “Equity holder” means a person that makes an equity
6investment in a rural business growth fund.
78. “Growth investment” means any capital or equity
8investment a growth fund makes in a qualified business, or any
9loan from a growth fund to a qualified business with a stated
10maturity at least one year after the date of issuance.
119. “Jobs created” means the number of new employees at a
12qualified business, after an initial growth investment, at
13the end of each subsequent calendar year. This number is
14calculated annually by adding together the number of employees
15at the qualified business on the last day of each calendar
16month and dividing by twelve, then subtracting the number of
17employees at the qualified business on the date the day before
18the date of the initial growth investment. If the resulting
19total is less than zero, the jobs created is equal to zero.
2010. “Jobs retained” means the number of employees at a
21qualified business the day before the date of an initial growth
22investment that the qualified business’s chief executive
23officer or similar officer certifies as being positions located
24in this state that would have been eliminated but for the
25initial growth investment.
2611. “Located in” means the place or places at which a
27business’s operations are located and where at least sixty
28percent of the business’s employees work, or where employees
29that are paid at least sixty percent of the business’s payroll
30work.
3112. “Program” means the Iowa rural development tax credit
32program administered under this part.
3313. “Qualified business” means any business within this
34state that has fewer than two hundred fifty employees,
35including ostensible subcontractors pursuant to 13 C.F.R.
-2-1§121.103(h).
214. “Revenue” means the total state and local income
3produced by a rural business growth fund’s economic activity.
415. “Rural business growth fund” or “growth fund” means a
5person, or an affiliate of a person, certified by the authority
6pursuant to section 15.283, subsection 7, paragraph “a”.
716. “Within this state” means in the state of Iowa, or an
8out-of-state business that has agreed to use a proposed growth
9investment to become a qualified business within one hundred
10eighty days of receiving the growth investment.
11 Sec. 3. NEW SECTION. 15.283 Application and agreement.
121. The authority shall begin accepting program applications
13on January 3, 2022. An application is deemed received based
14on the date and time stamp that shall be generated by the
15authority upon receipt of the application. Applications
16received by the authority on the same day shall be deemed to
17have been received simultaneously.
182. A person seeking certification as a rural business
19growth fund shall apply to the authority in the form and manner
20prescribed by the authority. The application must include all
21of the following:
22a. The eligible investment authority sought by the
23applicant.
24b. A copy of the applicant’s, or an affiliate of the
25applicant’s, license as a rural business investment company
26as defined under 7 U.S.C. §2009cc(14), or license as a small
27business investment company under 15 U.S.C. §681.
28c. Documentation as required by the authority to establish
29that at least one principal of the applicant has been an
30officer or an employee of the rural business investment
31company, the small business investment company, or an affiliate
32thereof, for a minimum of four years prior to the date of
33application.
34d. A revenue impact assessment for the applicant’s proposed
35growth investments as determined by an econometric analysis
-3-1conducted by a nationally recognized third-party independent
2econometric firm. The revenue impact assessment must provide
3an analysis of the applicant’s proposed growth investments over
4the ten consecutive years following the date the applicant’s
5application is submitted to the authority, and must demonstrate
6that there will be a positive revenue impact on this state
7that exceeds the cumulative amount of tax credits, that if the
8application is approved, may be issued by the authority to the
9rural business growth fund’s investors.
10e. The number of jobs created and the number of jobs
11retained assumed in the revenue impact assessment required by
12paragraph “d”.
13f. A signed affidavit from each investor that identifies
14the investor and the amount of the credit-eligible capital
15contribution that the investor has committed to the applicant’s
16proposed growth fund.
17g. A nonrefundable application fee of five thousand dollars.
18All application fees submitted to the authority pursuant to
19this paragraph shall be used by the authority to administer
20this part.
213. The authority shall review and make a determination
22to approve or deny each application within the time frame
23adopted by rule by the authority. The authority shall review
24applications on a first-come, first-served basis as determined
25pursuant to subsection 1.
264. The authority shall not approve more than one hundred
27million dollars in eligible investment authority and not
28more than sixty million dollars in credit-eligible capital
29contributions under the program. If approved applications
30that are simultaneously received would collectively exceed the
31maximum limit on eligible investment authority or the maximum
32on credit-eligible capital contributions, the authority shall
33proportionally reduce the growth fund’s eligible investment
34authority and credit-eligible capital contributions for each
35of the simultaneous applications as necessary to comply with
-4-1the maximum limits.
25. The authority shall reject an application for any of the
3following reasons:
4a. The applicant failed to comply with any of the
5requirements of subsection 2.
6b. The authority has already approved the maximum eligible
7investment authority or the maximum credit-eligible capital
8contributions pursuant to subsection 4.
96. a. If the authority rejects an application, the
10authority shall send a notice of rejection to the applicant and
11provide a reason for the rejection.
12b. If the authority has rejected an application on any
13grounds other than subsection 5, paragraph “b”, the applicant
14may provide additional information to the authority to cure
15the defects in the application. All additional information
16must be received by the authority within fifteen business days
17from the date the authority sent the notice of rejection to
18the applicant. The authority shall review and reconsider,
19within the time frame adopted by rule by the authority, any
20application for which additional information is provided within
21the fifteen business days. If an application is approved by
22the authority after review and reconsideration, the application
23shall be considered complete as of its original date of
24submission.
25c. If an applicant does not submit additional information
26within fifteen business days from the date the authority sent
27the applicant the notice of rejection, the applicant may submit
28a new application at any time pursuant to subsection 2 and the
29application shall be reviewed by the authority pursuant to
30subsection 3.
317. a. If the authority approves an application, the
32authority shall send a notice to the applicant certifying all
33of the following:
34(1) The applicant as a rural business growth fund.
35(2) The growth fund’s eligible investment authority and
-5-1required credit-eligible contributions.
2(3) The required number of jobs created and the required
3number of jobs retained based on the number submitted in the
4applicant’s application, prorated if the growth fund’s eligible
5investment authority is reduced pursuant to subsection 4.
6b. Within forty-five calendar days of the date the authority
7sent the notice of certification pursuant to paragraph “a”,
8the rural business growth fund shall comply with all of the
9following requirements:
10(1) Collect all credit-eligible capital contributions
11from each investor whose affidavit was included in the growth
12fund’s application. If the growth fund’s requested eligible
13investment authority has been proportionally reduced pursuant
14to subsection 4, each investor’s required credit-eligible
15capital contribution shall be reduced by the same proportion.
16(2) Collect one or more equity investments contributed
17directly or indirectly by affiliates of the growth fund,
18including employees and principals of such affiliates, that
19must equal at least ten percent of the growth fund’s eligible
20investment authority.
21(3) If the contributions and investments collected under
22subparagraphs (1) and (2) do not equal the growth fund’s total
23eligible investment authority, collect one or more investments
24of cash that, when added to the contributions and investments
25collected under subparagraphs (1) and (2), equal the growth
26fund’s total eligible investment authority.
27c. Within sixty-five calendar days of the date the authority
28sent the notice of certification pursuant to paragraph “a”,
29the rural business growth fund shall comply with all of the
30following requirements:
31(1) Submit documentation to the authority sufficient to
32prove to the satisfaction of the authority that the growth fund
33has collected amounts described in paragraph “b”.
34(2) Submit documentation to the authority that identifies
35all affiliates of an investor described in paragraph “b”,
-6-1subparagraph (1), that may be eligible to claim a tax credit
2issued by the authority pursuant to section 15.284, subsection
31.
48. If a growth fund fails to comply with subsection 7,
5paragraph “b” or “c”, the growth fund’s certification shall
6lapse. Any eligible investment authority and credit-eligible
7capital contributions that lapse pursuant to this subsection
8shall not count toward the maximum limits on eligible
9investment authority and credit-eligible capital contributions
10pursuant to subsection 4. If a growth fund’s eligible
11investment authority lapses pursuant to this subsection, the
12authority shall first award the lapsed eligible investment
13authority pro rata to each rural business growth fund that
14was awarded less than the eligible investment authority that
15the rural business growth fund sought in the growth fund’s
16application. A rural business growth fund that is awarded
17lapsed eligible investment authority pro rata must comply with
18the requirements of subsection 7, paragraph “b”, as related to
19the additional eligible investment authority. The authority
20may award any remaining lapsed eligible investment authority to
21new applicants until the maximum limits on eligible investment
22authority and credit-eligible capital contributions pursuant
23to subsection 4 are met.
249. After a growth fund’s successful submission to the
25authority of the required documentation pursuant to subsection
267, paragraph “c”, the growth fund shall enter into an agreement
27with the authority that specifies the requirements that must be
28met for successful completion of the program. At a minimum,
29the agreement shall contain provisions addressing all of the
30following:
31a. The legal name of the growth fund.
32b. The growth fund’s closing date.
33c. The growth fund’s eligible investment authority as
34certified by the authority.
35d. Each investor of the growth fund and each investor’s
-7-1credit-eligible capital contribution.
2e. The minimum number of jobs that must be created and the
3minimum number of jobs that must be retained as a result of
4the growth fund’s growth investments to avoid paying state
5reimbursement pursuant to section 15.288.
6f. Revocation and recapture of tax credits pursuant to
7section 15.285.
8g. Any terms deemed necessary by the authority to effect
9compliance with the program requirements pursuant to this part.
10 Sec. 4. NEW SECTION. 15.284 Tax credits.
111. After an agreement is executed pursuant to section
1215.283, subsection 9, the authority shall issue a tax credit
13certificate to each investor whose affidavit was included
14in the growth fund’s application and whose credit-eligible
15capital contribution was collected pursuant to section
1615.283, subsection 7, paragraph “b”, subparagraph (1). The
17tax credit certificate shall specify the amount of the
18tax credit allocated to that investor as a result of the
19investor’s credit-eligible capital contribution. The tax
20credit allocated to any one investor shall be equal to the
21investor’s credit-eligible capital contribution to the growth
22fund. The tax credit certificate shall contain the taxpayer’s
23name, address, tax identification number, the amount of the tax
24credit the eligible taxpayer may claim against the insurance
25premium tax and insurance retaliatory premium tax imposed
26in chapter 432, the name of the rural business growth fund
27associated with the tax credit, and any other information
28required by the department of revenue.
292. Twenty-five percent of a tax credit issued to an investor
30pursuant to subsection 1 may be used in each taxable year
31beginning in the calendar year following the second anniversary
32of the closing date of the growth fund in which the investor
33made the credit-eligible capital contribution, and concluding
34in the calendar year following the sixth anniversary of that
35closing date, exclusive of the amount of tax credit carried
-8-1forward pursuant to subsection 4.
23. a. A tax credit issued under this part is not
3refundable and shall not be sold, transferred, or allocated
4by the investor to any person other than an affiliate of the
5investor that was an affiliate at the time of the growth fund’s
6submission of the investor’s affidavit pursuant to subsection
715.283, subsection 2, paragraph “f”.
8b. Within ninety calendar days of the sale, transfer, or
9allocation of a tax credit, the affiliate shall submit the tax
10credit certificate to the department of revenue along with a
11statement containing the affiliate’s name, tax identification
12number, address, and any other information required by the
13department of revenue.
14c. Within thirty calendar days of receiving the tax credit
15certificate and the affiliate’s statement, the department of
16revenue shall issue the affiliate a replacement tax credit
17certificate. The replacement tax credit certificate must
18contain all of the information required for the original tax
19credit certificate and must have the same expiration date that
20appeared on the original tax credit certificate.
214. To claim a tax credit under this section, a taxpayer
22shall submit the tax credit certificate with the taxpayer’s
23tax return for each taxable year in which the tax credit is
24claimed. Any tax credit in excess of the taxpayer’s tax
25liability for the tax year may be carried forward to the
26taxpayer’s tax liability for subsequent years until the tax
27credit is depleted.
28 Sec. 5. NEW SECTION. 15.285 Revocation and recapture of tax
29credits.
301. The authority shall recapture any tax credits used by
31a taxpayer and shall revoke any tax credits issued pursuant
32to section 15.284, subsection 1, if, before a rural business
33growth fund exits the program pursuant to section 15.287, any
34of the following occur:
35a. The growth fund cannot provide documentation to the
-9-1authority to substantiate to the satisfaction of the authority
2all of the following:
3(1) That the growth fund, within two years after the growth
4fund’s closing date, has invested a minimum of two-thirds of
5the growth fund’s eligible investment authority in growth
6investments.
7(2) That the growth fund, within three years after the
8growth fund’s closing date, has invested one hundred percent
9of the growth fund’s eligible investment authority in growth
10investments.
11(3) That the growth fund, after investing one hundred
12percent of the growth fund’s eligible investment authority
13in growth investments within three years after the growth
14fund’s closing date, has maintained growth investments equal to
15one hundred percent of the growth fund’s eligible investment
16authority at all times up to the sixth anniversary after the
17growth fund’s closing date. For purposes of this subparagraph,
18a growth investment is maintained even if it is sold or repaid,
19as long as the growth fund reinvests an amount equal to the
20growth investment returned or recovered from the original
21growth investment, exclusive of any profits realized, in other
22growth investments in this state within the twelve consecutive
23months immediately after the date of the return or recovery
24of such growth investment. Amounts received periodically
25by a growth fund are deemed continuously invested in growth
26investments if the amounts are reinvested by the growth fund in
27one or more qualified businesses by the end of the following
28calendar year.
29b. The growth fund makes a growth investment in a qualified
30business that directly, or indirectly through an affiliate,
31owns, has the right to acquire an ownership interest in, makes
32a loan to, or makes an investment in, the growth fund, an
33affiliate of the growth fund, or an investor in the growth
34fund. This paragraph shall not apply to investments in
35publicly traded securities by a qualified business, or to an
-10-1owner or an affiliate of the qualified business. For purposes
2of this paragraph, a growth fund shall not be considered an
3affiliate of a qualified business solely because of the growth
4fund’s growth investment in the qualified business.
5c. The growth fund, before exiting the program pursuant to
6section 15.287, makes a distribution or payment that results
7in the growth fund having less than one hundred percent of its
8initial investment authority invested in growth investments in
9this state, available for growth investments, or held in cash
10and marketable securities.
112. The maximum amount of a growth investment in a qualified
12business, including any amounts invested in affiliates of the
13qualified business, that a growth fund may count toward the
14growth fund’s satisfaction of the requirements pursuant to
15subsection 1, paragraph “a”, subparagraphs (2) and (3), is
16the greater of twenty percent of the growth fund’s eligible
17investment authority and five million dollars, excluding any
18amounts reinvested in a qualified business.
193. Before revoking or recapturing a tax credit, the
20authority shall provide notice to the growth fund of the reason
21for the pending revocation or recapture. The growth fund shall
22have ninety calendar days after the date the authority sends
23the notice to cure to the satisfaction of the authority the
24issues identified in the notice. Failure of the growth fund to
25satisfactorily cure the issues in the notice shall result in
26revocation or recapture of the tax credit.
274. The authority shall not revoke or recapture a tax credit
28for any action of a growth fund that occurs after the growth
29fund has exited the program pursuant to section 15.287. This
30subsection shall not prohibit the authority from revoking or
31recapturing a tax credit due to an action of a growth fund
32pursuant to subsection 1 that occurs before the date the growth
33fund exits the program, even if the growth fund’s action is
34discovered after the date the growth fund exits the program.
35 Sec. 6. NEW SECTION. 15.286 Annual report.
-11- 1On or before March 31, unless a growth fund has exited the
2program pursuant to section 15.287, each growth fund shall
3submit an annual report to the authority in the form and manner
4the authority prescribes that covers the preceding calendar
5year. The report must include each of the growth fund’s growth
6investments and must contain all of the following information:
71. Financial statements that provide evidence of each
8growth investment.
92. Evidence that the growth fund is in compliance with
10applicable investment requirements pursuant to section 15.285,
11subsection 1, paragraph “a”, subparagraphs (1), (2), and (3).
123. The name, location, and industry for each qualified
13business that received a growth investment, and evidence that
14the business met the requirements to be a qualified business at
15the time the growth investment was made.
164. The number of employees at each qualified business on
17the date of the growth fund’s initial growth investment in the
18qualified business.
195. The number of jobs created at each qualified business and
20the average annual salary for the jobs created.
216. The number of jobs retained at each qualified business
22and the average annual salary for the jobs retained. The
23number of jobs retained at a qualified business may not exceed
24the number of jobs retained at the same qualified business on
25the first annual report submitted by the growth fund.
267. Any other information the authority requires.
27 Sec. 7. NEW SECTION. 15.287 Exiting the program.
281. On or after the sixth anniversary of a rural business
29growth fund’s closing date, in the form and manner the
30authority prescribes, the growth fund may apply to the
31authority to exit the program. The growth fund’s application
32must include the state reimbursement calculation pursuant to
33section 15.288.
342. The growth fund shall be eligible to exit the program
35if a tax credit associated with the growth fund has not been
-12-1revoked or recaptured pursuant to section 15.285.
23. Within the time frame adopted by rule by the authority,
3the authority shall send notice to the growth fund of the
4authority’s determination regarding the growth fund’s
5application and confirmation of the state reimbursement the
6growth fund owes pursuant to section 15.288, if any. If the
7authority denies the growth fund’s application, the notice
8shall include the reasons for the denial. If the authority
9approves the growth fund’s application, the growth fund is
10deemed to have exited the program on the date the authority
11sends notice to the growth fund. If the growth fund owes the
12state reimbursement, the growth fund shall be prohibited from
13making any distributions to any equity holders of the fund
14until the growth fund has remitted the state reimbursement
15amount to the authority. All state reimbursement amounts
16remitted to the authority shall be deposited in the general
17fund of the state.
18 Sec. 8. NEW SECTION. 15.288 State reimbursement
19calculation.
201. A state reimbursement shall be calculated any time a
21rural business growth fund exits the program or any time a
22rural business growth fund proposes to make a distribution to
23the growth fund’s equity holders. The state reimbursement
24shall equal the proposed distribution multiplied by one minus a
25fraction that is composed of the following:
26a. The numerator shall be the aggregate number of jobs
27created plus the number of jobs retained as reported pursuant
28to section 15.286, subsections 5 and 6, with the following
29modifiers.
30(1) Any job created or retained at a qualified business
31located in a rural area shall be counted as one job.
32(2) Any job created or retained at a qualified business
33located in a rural area and in a county with a population of
34less than thirty thousand, as determined by the most recent
35population estimates issued by the United States bureau of
-13-1census, shall be counted as one and one-half of a job.
2(3) Any job created or retained at a qualified business
3located in an area other than an area in subparagraph (1) or
4(2) shall be counted as one-half of a job.
5b. The denominator shall be the number of jobs created plus
6the number of jobs retained as stated in the certification
7pursuant to section 15.283, subsection 7, paragraph “a”,
8subparagraph (3).
92. If the fraction is greater than one hundred percent, the
10growth fund shall not owe state reimbursement.
113. The authority may adopt by rule additional options
12for the state reimbursement calculation that are equivalent
13to job creation and job retention to measure a growth fund’s
14growth investments impact on economic activity at a qualified
15business.
164. For purposes of this section, “rural area” means the
17same as defined in 7 C.F.R. §4279.108(c), in which a business
18must be located to qualify as an eligible borrower for a United
19States department of agriculture business and industry loan
20pursuant to 7 C.F.R. §4279.108.
21 Sec. 9. NEW SECTION. 15.289 Remedies.
22The remedies for a breach or default of any of the terms of
23this part by a rural business growth fund shall be revocation
24or recapture of tax credits pursuant to section 15.285 and
25remission of the state reimbursement pursuant to section
2615.288.
27 Sec. 10. NEW SECTION. 15.290 Rules.
28The authority, in conjunction with the department of
29revenue, shall adopt rules pursuant to chapter 17A as necessary
30for the implementation and administration of this part.
31 Sec. 11. NEW SECTION. 432.12N Rural development tax
32credits.
33The taxes imposed under this chapter shall be reduced by a
34rural development tax credit allowed under section 15.284 for a
35credit-eligible capital contribution to a rural business growth
-14-1fund.
2EXPLANATION
3The inclusion of this explanation does not constitute agreement with
4the explanation’s substance by the members of the general assembly.
5This bill relates to tax credits awarded by the economic
6development authority for specific capital contributions made
7to certified rural business growth funds for investment in
8qualified businesses.
9The bill directs the economic development authority
10(authority) to begin accepting Iowa rural development tax
11credit program (program) applications beginning January 3,
122022.
13The bill provides that a person seeking certification
14as a rural business growth fund (growth fund) must apply
15to the authority and that the application must include the
16eligible investment authority sought by the applicant, a copy
17of the applicant’s license as a rural business investment
18company under 7 U.S.C. §2009cc(14) or as a small business
19investment company under 15 U.S.C. §681, documentation that
20establishes that at least one principal of the applicant
21has been an officer or an employee of the rural business
22investment company, the small business investment company,
23or an affiliate thereof, for a minimum of four years prior
24to the date of application, a revenue impact assessment for
25the applicant’s proposed growth investments as determined by
26an econometric analysis, the proposed number of jobs created
27and the number of jobs retained, a signed affidavit from each
28investor that states the amount of the credit-eligible capital
29contribution that the investor has committed to the applicant’s
30proposed growth fund, and a nonrefundable $5,000 application
31fee. The bill defines “credit-eligible capital contribution”
32as an investment of cash by a person in a growth fund that
33is eligible for a tax credit issued by the authority. The
34investment must be used to purchase either an equity interest
35in the growth fund or a debt instrument, at par value or
-15-1premium, issued by the growth fund that has a maturity date
2at least six years after the growth fund’s closing date.
3“Eligible investment authority” is defined in the bill as the
4amount of investment authority that the authority certifies for
5a specific growth fund.
6The bill requires the authority to review each application
7on a first-come, first-served basis and to approve or deny
8each application within the time frame adopted by rule by the
9authority. The authority cannot approve more than $100 million
10in eligible investment authority and not more than $60 million
11in credit-eligible capital contributions.
12The authority must reject an application if the applicant
13fails to submit any of the required information, or if the
14authority has already approved the maximum eligible investment
15authority or the maximum credit-eligible capital contributions.
16If the authority rejects an application, the authority must
17send a notice to the applicant, and provide a reason for the
18rejection. If an application has been rejected because the
19applicant failed to submit all of the required information, the
20applicant has 15 days to cure any defects in the application.
21The authority must review and reconsider, within the time
22frame adopted by rule by the authority, any application which
23is cured within the 15 business days. If an application
24is approved by the authority after reconsideration, the
25application is considered complete as of its original date of
26submission.
27If the authority approves an application, it must send a
28notice to the applicant certifying the applicant as a rural
29business growth fund, the growth fund’s eligible investment
30authority, and the required number of jobs to be created and
31retained based on the number submitted in the applicant’s
32application. Within 45 days of the date the authority sent
33the certification notice, the growth fund is required to
34collect all credit-eligible capital contributions from each
35investor whose affidavit was included in the growth fund’s
-16-1application, collect one or more equity investments contributed
2directly or indirectly by affiliates of the growth fund,
3including employees and principals of such affiliates, that
4equal at least 10 percent of the growth fund’s eligible
5investment authority, and, if applicable, collect one or more
6investments of cash that when added to the credit-eligible
7capital contributions and the equity investments equal the
8growth fund’s eligible investment authority. Within 65 days
9of the date the authority sent the certification notice, the
10growth fund must submit documentation to the authority as
11detailed in the bill. If the growth fund fails to comply with
12the collection and documentation requirements, all eligible
13investment authority and credit-eligible capital contributions
14lapse. Authority and contributions that lapse do not count
15toward the maximum limits on eligible investment authority and
16credit-eligible capital contributions and may be awarded by the
17authority as outlined in the bill.
18After a growth fund complies with the collection and
19documentation requirements, the fund must enter into an
20agreement with the authority that specifies the requirements
21that must be met for successful completion of the program. The
22minimum requirements for the agreement are detailed in the
23bill.
24After the agreement is executed, the authority must issue
25a tax credit certificate to each investor whose affidavit
26was included in the growth fund’s application and whose
27credit-eligible capital contribution was collected by the
28growth fund. The certificate must specify the amount of tax
29credit allocated to that investor and the amount of the tax
30credit the eligible taxpayer may claim against the insurance
31premium tax and insurance retaliatory premium tax imposed in
32Code chapter 432. An investor may use 25 percent of the tax
33credit in each taxable year beginning in the calendar year
34following the second anniversary of the growth fund’s closing
35date and ending in the calendar year following the sixth
-17-1anniversary of the closing date. Any tax credit in excess of
2the taxpayer’s tax liability for a tax year may be carried
3forward to the taxpayer’s tax liability for subsequent tax
4years until the tax credit is depleted.
5The tax credits are not refundable and cannot be sold,
6transferred, or allocated by the investor to any person other
7than an affiliate of the investor. The affiliate must submit
8the tax credit certificate within 90 days to the department
9of revenue (department) and the department must issue the
10affiliate a replacement tax credit certificate with the same
11expiration date that appeared on the original tax credit
12certificate.
13The authority must revoke or recapture a tax credit if,
14before a growth fund exits the program, the growth fund
15cannot provide documentation to substantiate that the growth
16fund, within two years after the growth fund’s closing date,
17has invested a minimum of two-thirds of the growth fund’s
18investment authority in growth investments; that the growth
19fund, within three years after the growth fund’s closing date,
20has invested 100 percent of the growth fund’s investment
21authority in growth investments; that the growth fund, after
22investing 100 percent of the growth fund’s investment authority
23in growth investments within three years after the growth
24fund’s closing date, has maintained growth investments equal to
25100 percent of its investment authority at all times up to the
26sixth anniversary after the growth fund’s closing date. The
27bill specifies that amounts received periodically by a growth
28fund are deemed continuously invested in growth investments
29if the amounts are reinvested by the growth fund in one or
30more qualified businesses by the end of the following calendar
31year. The bill details the other requirements and prohibitions
32related to revocation or recapture of tax credits by the
33authority.
34On or after the sixth anniversary of a growth fund’s closing
35date, the growth fund may apply to the authority to exit the
-18-1program. A growth fund is eligible to exit the program if a
2tax credit associated with the growth fund has not been revoked
3or recaptured. The growth fund’s application to exit the
4program must include the state reimbursement calculation. The
5state reimbursement owed by a rural business growth fund to
6the authority is calculated as detailed in the bill. Within
7the time frame adopted by rule by the authority, the authority
8must send notice to the growth fund of the authority’s
9determination regarding the application and confirmation of
10the state reimbursement owed by the growth fund. If the
11authority approves the application, the growth fund is deemed
12to have exited the program on the date the notice is sent by
13the authority to the growth fund. If the growth fund owes the
14state reimbursement, the growth fund is prohibited from making
15any distributions to equity holders of the fund until the
16state reimbursement amount has been remitted to the authority.
17“Equity holder” is defined in the bill as a person that makes
18a credit-eligible capital contribution, an equity investment,
19or a cash investment in a rural business growth fund. The bill
20specifies that all state reimbursement amounts remitted to the
21authority shall be deposited in the general fund of the state.
22Unless a growth fund has exited the program, the growth
23fund must submit an annual report to the authority that covers
24the preceding calendar year. The report must include the
25documentation and information as detailed in the bill.
26The bill provides that the only remedies for a breach or
27default of any of the terms of the program by a growth fund are
28revocation or recapture of tax credits and the collection of
29the state reimbursement as detailed in the bill.
30The bill requires the authority, in conjunction with the
31department of revenue, to adopt rules as necessary to implement
32and administer the program.
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