Florida Senate - 2019 COMMITTEE AMENDMENT Bill No. SB 298 Ì766474EÎ766474 LEGISLATIVE ACTION Senate . House . . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— The Committee on Finance and Tax (Montford) recommended the following: 1 Senate Amendment (with title amendment) 2 3 Delete everything after the enacting clause 4 and insert: 5 Section 1. Section 288.062, Florida Statutes, is created to 6 read: 7 288.062 Florida Rural Jobs and Business Recovery Act.— 8 (1) This section may be cited as the “Florida Rural Jobs 9 and Business Recovery Act.” 10 (2) The following terms when used in this section shall 11 have the following meanings except where the context clearly 12 indicates a different meaning: 13 (a) “Affiliate” means an entity that directly, or 14 indirectly through one or more intermediaries, controls, is 15 controlled by, or is under common control with another entity. 16 For the purposes of this paragraph, an entity is “controlled by” 17 another entity if the controlling entity holds, directly or 18 indirectly, the majority voting or ownership interest in the 19 controlled entity or has control over the day-to-day operations 20 of the controlled entity. 21 (b) “Closing date” means the date on which a growth fund 22 has collected all amounts specified by paragraph (8)(a). 23 (c) “Department” means the Department of Economic 24 Opportunity. 25 (d) “Full-time high wage employment position” means an 26 employment position that is filled, pays a high wage and 27 requires at least 35 hours of work per week or any other period 28 of time generally accepted by custom, industry, or practice as 29 full-time employment. 30 (e) “Growth business” means a business that, at the time a 31 growth fund initially invests in the business: 32 1. Has fewer than 200 employees; 33 2. Has its principal business operations in at least one 34 growth zone in the state; and 35 3. Is engaged in North American Industry Classification 36 System sectors: 11, 21, 22, 23, 31-33, 48-49, 54, or 62. 37 However, if the business is not engaged in such industries, the 38 department shall determine whether the investment will create 39 new jobs or retain jobs. 40 (f) “Growth fund” means an entity certified by the 41 department under subsection (7). 42 (g) “Growth investment” means any capital or equity 43 investment in a growth business or any loan to a growth business 44 with a stated maturity at least 1 year after the date of 45 issuance. 46 (h) “Growth zone” means: 47 1. All locations outside an urbanized area with a 48 population equal to or greater than 50,000, as identified by the 49 United States Census Bureau; or 50 2. Any urbanized area within a county designated by Federal 51 Emergency management Agency declaration FEMA-4399-DR if the 52 urbanized area had sustained winds in excess of 100 miles per 53 hour during Hurricane Michael. 54 (i) “High wage” means a wage in any county that is greater 55 than 100 percent of the county average. 56 (j) “Investment authority” means the amount certified by 57 the department under subsection (7). At least 75 percent of a 58 growth fund’s investment authority must consist of investor 59 contributions. 60 (k) “Investor contribution” means a cash investment in a 61 growth fund by an entity that is subject to the state premium 62 tax under ss. 624.509 and 624.5091. The cash investment must 63 equal the amount specified for that entity in the department’s 64 approval of a growth fund’s application under subsection (4). 65 The cash investment shall purchase an equity interest in the 66 growth fund or purchase, at par value or premium, a debt 67 instrument that has a maturity date at least 5 years from the 68 closing date and a repayment schedule that is no greater than 69 level principal amortization over 5 years. 70 (l) “Jobs retained” means the number of full-time high wage 71 employment positions that existed before the initial growth 72 investment in a growth business and for which the growth 73 business’s chief executive officer or similar officer certifies 74 that the employment positions would have been eliminated but for 75 the initial growth investment. 76 (m) “New annual jobs” means the difference between: 77 1.a. The average monthly number of full-time high wage 78 employment positions at a growth business in the preceding 79 calendar year; or 80 b. If the initial growth investment occurred during the 81 preceding calendar year, the average monthly number of full-time 82 high wage employment positions for the months during which the 83 initial growth investment was made through the end of the 84 preceding calendar year; and 85 2. The number of full-time high wage employment positions 86 at the growth business on the date of the initial growth 87 investment. 88 89 If the resulting total is less than zero, the new annual jobs 90 amount is equal to zero. 91 (n) “Principal business operation” of a business is the 92 location or locations where at least 60 percent of the 93 business’s employees work or where the employees who are paid at 94 least 60 percent of the business’s payroll are located. A 95 business that agrees to relocate or hire new employees using the 96 proceeds of a growth investment to establish its principal 97 business operation in a growth zone in the state is deemed to 98 have its principal business operations in the new location 99 provided it satisfies this definition within 180 days after 100 receiving the growth investment, unless the department agrees to 101 a later date. 102 (o) “State premium tax” means the tax identified in s. 103 624.509 or s. 624.5091. 104 (3) Beginning September 1, 2019, the department shall 105 accept applications for approval as a growth fund on a form 106 adopted by the department. The application shall include the 107 following: 108 (a) The total investment authority sought by the applicant. 109 (b) Evidence that: 110 1. The applicant or an affiliate of the applicant is 111 licensed as a rural business investment company under 7 U.S.C. 112 s. 2009cc or as a small business investment company under 15 113 U.S.C. s. 681. The applicant or the affiliate must include a 114 certificate executed by an executive officer of the applicant 115 attesting that such license remains in effect and has not been 116 revoked; and 117 2. At least one principal in a rural business investment 118 company or a small business investment company is, and has been 119 for at least 4 years, an officer or employee of the applicant or 120 an affiliate of the applicant on the date the application is 121 submitted. 122 (c) Evidence that as of the date the application is 123 submitted, the applicant or affiliates of the applicant have 124 invested at least $100 million in nonpublic companies located in 125 nonmetropolitan counties as defined by the Office of Management 126 and Budget within the Office of the President of the United 127 States on the basis of county or county-equivalent units. 128 (d) An estimate of the total number of new annual jobs that 129 will be created and jobs retained over the life of the program 130 in this state because of the applicant’s growth investments. 131 (e) A business plan that includes a revenue impact 132 assessment projecting state and local tax revenues to be 133 generated, as well as state expenditures to be reduced, by the 134 applicant’s proposed growth investments, prepared by a 135 nationally recognized third-party independent economic 136 forecasting firm using a dynamic economic forecasting model that 137 analyzes the applicant’s business plan over the 10 years 138 following the date the application is submitted to the 139 department. 140 (f) A signed affidavit from each investor stating the 141 amount of investor contribution the investor will make. 142 (g) A commitment by the growth fund applicant to give first 143 priority to growth investments located in those counties 144 designated by Federal Emergency Management Agency declaration 145 FEMA-4399-DR. 146 (4)(a) Within 45 days after receipt of a completed 147 application containing the information set forth in subsection 148 (3), the department shall approve or deny the application. 149 (b) The department shall deem applications that are 150 received on the same day as having been received simultaneously. 151 (c) The department shall approve investment authority up to 152 an amount that would allow no more than $5 million in tax 153 credits to be taken in any one year, excluding any credits that 154 are carried forward pursuant to paragraph (10)(c). No more than 155 a total of $25 million in tax credits may be approved by the 156 department under the program. If requests for investment 157 authority exceed this tax credit limitation, the department 158 shall proportionally reduce the investment authority and the 159 investor contributions for each approved application as 160 necessary to avoid exceeding the limit. 161 (5) The department shall deny an application if: 162 (a) The application is incomplete; 163 (b) The applicant does not satisfy the criteria set forth 164 in subsection (3); 165 (c) The revenue impact assessment submitted under paragraph 166 (3)(e) does not demonstrate that the applicant’s business plan 167 will result in a positive revenue impact on this state over a 168 10-year period that exceeds the cumulative amount of tax credits 169 that would be issued to the applicant’s investors; 170 (d) The investor contributions described in affidavits 171 submitted under paragraph (3)(f) do not equal at least 75 172 percent of the total amount of investment authority sought under 173 the applicant’s business plan; or 174 (e) The department has already approved the maximum amount 175 of investment authority and investor contributions allowed under 176 subsection (4). 177 (6) If the department denies an application, the applicant, 178 within 15 days after the denial, may provide additional 179 information to the department to cure any defects in the 180 application identified by the department, except for failure to 181 comply with paragraph (5)(c), paragraph (5)(d), or paragraph 182 (5)(e). The department shall review and reconsider such 183 applications within 30 days after receipt and before approving 184 any pending applications submitted after the original submission 185 date of the reconsidered application. 186 (7) The department shall not reduce the requested 187 investment authority or deny a growth fund application for 188 reasons other than those described in subsection (4) or 189 subsection (5). After the department approves an application, it 190 shall certify: 191 (a) The applicant as a growth fund; 192 (b) The amount of the applicant’s investment authority; 193 (c) The investor contributions required from each investor 194 that submitted an affidavit with the growth fund’s application; 195 and 196 (d) The number of new annual jobs and jobs retained that 197 will be required of the growth fund, as prorated, based on the 198 investment authority awarded to the growth fund. 199 (8)(a) Within 60 days after receiving the certification 200 issued under subsection (7), a growth fund shall collect all 201 investor contributions and collect additional investments of 202 cash that, when added to the investor contributions, at least 203 equal the growth fund’s investment authority. Within 65 days 204 after receiving the certification issued under subsection (7), a 205 growth fund shall send to the department documentation that it 206 has collected the amounts described in this subsection. At least 207 10 percent of the growth fund’s investment authority must 208 consist of equity investments contributed by affiliates of the 209 growth fund. The growth fund shall report to the department the 210 date on which the investor contributions and additional 211 investments of cash were collected. 212 (b) Upon receipt of the documentation required by paragraph 213 (a), the department shall provide a tax credit certificate to 214 each taxpayer who has made an investor contribution in the 215 amount of the investor contribution. 216 (9) If the growth fund fails to fully comply with 217 subsection (8), the department shall revoke the growth fund’s 218 certification and the corresponding investment authority and 219 investor contributions will not count toward the limits on the 220 program size set forth in subsection (4). The department shall 221 first award revoked investment authority pro rata to each growth 222 fund that was awarded less than the investment authority for 223 which it applied, and a growth fund may allocate the associated 224 investor contribution authority to any taxpayer with state 225 premium tax liability in its discretion. Any remaining 226 investment authority may be awarded by the department to new 227 applicants. 228 (10)(a) Any taxpayer that makes an investor contribution is 229 vested with an earned credit against state premium tax liability 230 equal to that investor’s investor contribution. The credit may 231 be used over 5 years such that 20 percent of the credit is 232 applied in each of the taxable years that includes the year of 233 the closing date through the fourth anniversary of the closing 234 date, unless a specific request is made to carry them forward 235 for a period not to exceed 10 years. 236 (b) The credit is nonrefundable and may not be sold, 237 transferred, or allocated to any other entity other than an 238 affiliate that was an affiliate at the time of the submission of 239 the investor’s affidavit included in the growth fund’s 240 application. 241 (c) The amount of the credit claimed by a taxpayer may not 242 exceed the amount of such taxpayer’s state premium tax liability 243 for the tax year for which the credit is claimed. 244 (d) A taxpayer claiming a credit under this section shall 245 submit a copy of the tax credit certificate with the taxpayer’s 246 return for each taxable year for which the credit is claimed. 247 (e) The credit shall be allowed after deducting from the 248 tax the deductions for assessments made pursuant to s. 440.51; 249 the credits for taxes paid under ss. 175.101 and 185.08; the 250 credits for income taxes paid under chapter 220; the credit 251 allowed under s. 624.509(5), as such credit is limited by s. 252 624.509(6); and the credit allowed under s. 624.51055. 253 (11) The department must revoke the tax credit certificates 254 issued under paragraph (8)(b) if any of the following occur with 255 respect to a growth fund before the growth fund exits the 256 program in accordance with paragraph (16)(a): 257 (a) The growth fund does not invest 100 percent of its 258 investment authority in growth investments in this state within 259 2 years of the closing date; 260 (b) The growth fund, after initially satisfying paragraph 261 (a), fails to maintain growth investments equal to 100 percent 262 of its investment authority until the sixth anniversary of the 263 closing date. For purposes of this paragraph, an investment is 264 “maintained” even if it is sold or repaid, so long as the growth 265 fund reinvests an amount equal to the capital returned or 266 recovered from the original investment, exclusive of any profits 267 realized, in other growth investments in this state within 12 268 months of the receipt of such capital. Amounts received 269 periodically by a growth fund shall be treated as continuously 270 invested in growth investments if the amounts are reinvested in 271 one or more growth investments by the end of the following 272 calendar year; 273 (c) The growth fund, before exiting the program in 274 accordance with paragraph (16)(a), makes a distribution or 275 payment that results in the growth fund having less than 100 276 percent of its investment authority invested in growth 277 investments in this state or available for investment in growth 278 investments and held in cash and other marketable securities; or 279 (d) The growth fund invests in a growth business that 280 directly or indirectly through an affiliate owns, has the right 281 to acquire an ownership interest, makes a loan to, or makes an 282 investment in the growth fund, an affiliate of the growth fund, 283 or an investor in the growth fund. This paragraph does not apply 284 to investments in publicly traded securities by a growth 285 business or an owner or affiliate of such growth business. For 286 purposes of this paragraph, a growth fund is not considered an 287 affiliate of a growth business solely because of its growth 288 investment. 289 (12) Before making a growth investment, a growth fund may 290 request a written opinion from the department as to whether the 291 business in which it proposes to invest satisfies the definition 292 of a growth business. The department, not later than the 15th 293 business day after the date of receipt of the request, shall 294 provide the growth fund with a determination letter providing 295 its opinion. If the department fails to issue a determination 296 letter by the 15th business day, the business in which the 297 growth fund proposes to invest shall be considered a growth 298 business. 299 (13) The maximum amount of growth investments in a growth 300 business, including amounts invested in affiliates of the growth 301 business, that a growth fund may count in satisfying the 302 requirements of paragraphs (11)(a) and (b) is the greater of $5 303 million or 20 percent of its investment authority, exclusive of 304 repaid or redeemed growth investments. 305 (14) Before revoking a tax credit certificate under 306 subsection (11), the department shall notify the growth fund of 307 the reasons for the pending revocation. The growth fund shall 308 have 90 days from the date the notice was received to correct 309 any violation outlined in the notice to the satisfaction of the 310 department and avoid revocation of the tax credit certificate. 311 (15) If the department revokes any tax credit certificates 312 under subsection (11), the associated investment authority and 313 investor contributions will not count toward the limit on total 314 investment authority and investor contributions described in 315 subsection (4). The department may award any remaining 316 investment authority to new applicants. 317 (16)(a) On or after the seventh anniversary of the closing 318 date, a growth fund may apply to the department to exit the 319 program and no longer be subject to regulation except as set 320 forth in paragraph (b). The department shall approve or deny the 321 application within 30 days of receipt. In evaluating the 322 application, the fact that no tax credit certificates have been 323 revoked and that the growth fund has not received a notice of 324 revocation that has not been cured pursuant to subsection (14) 325 is sufficient evidence to prove that the growth fund is eligible 326 for exit. The department shall not unreasonably deny an 327 application submitted under this paragraph. If the application 328 is denied, the notice shall include the reasons for the 329 determination. 330 (b) After its exit from the program in accordance with 331 paragraph (a), a growth fund may not make distributions or pay 332 any fees except as allowed under paragraph (11)(c) to its 333 investors unless it has made growth investments equal to at 334 least 150 percent of its investment authority. Each growth fund 335 shall continue to report the amount of growth investments made 336 to the department annually until it has made growth investments 337 equal to at least 150 percent of its investment authority. 338 (c) After its exit from the program in accordance with 339 paragraph (a), at any time the growth fund proposes to make a 340 distribution to its investors that, when added to all previous 341 distributions to its investors, exceeds its investment 342 authority, the growth fund shall remit to the department a 343 payment equal the product of the proposed distribution and the 344 difference between one and a fraction, the numerator of which is 345 the aggregate number of new annual jobs and jobs retained 346 reported to the department pursuant to subsection (18) and the 347 denominator of which is the number of new annual jobs and jobs 348 retained as set forth in the growth fund’s certification. No 349 payment is due if the aggregate number of new annual jobs and 350 jobs retained as of the date of the proposed distribution equal 351 or exceed the number of new annual jobs and jobs retained as 352 projected set forth in the growth fund’s certificate issued 353 under subsection (7). 354 (17) The department may not revoke a tax credit certificate 355 after a growth fund exits from the program. 356 (18)(a) Each growth fund shall submit an annual report to 357 the department on or before the 5th business day after each 358 anniversary of the closing date prior to its exit from the 359 program in accordance with paragraph (16)(a). The report shall 360 identify each growth investment made by the growth fund and 361 shall include: 362 1. A bank statement evidencing each growth investment, if 363 not previously reported; 364 2. The name, location, and industry of each growth business 365 receiving a growth investment, including either the 366 determination letter set forth in subsection (12) or evidence 367 that the business qualified as a growth business at the time the 368 investment was made, if not previously reported; 369 3. The number of full-time high wage employment positions 370 at each growth business and jobs retained on the date of the 371 growth fund’s initial growth investment; 372 4. The number of new annual jobs and jobs retained at each 373 growth business, provided the number of jobs retained may not 374 exceed the number of jobs retained, as reported in subsection 375 (3) and the number of jobs retained that must be reduced if the 376 full-time high wage employment positions reported drops below 377 the jobs retained as reported in subsection (3); 378 5. The average annual salary of the positions described in 379 paragraph (3)(d); 380 6. The cumulative amount of growth investments made in 381 growth businesses; and 382 7. Any other information required by the department. 383 (b) The growth fund is not required to provide information 384 with respect to growth investments that have been redeemed or 385 repaid as part of the annual report set forth in paragraph (a) 386 but shall provide such information if available. 387 (19) The department: 388 (a) May adopt rules to implement the provisions of this 389 section. 390 (b) Shall adopt forms and notices to implement this 391 section. 392 (c) Shall notify the Department of Revenue of the name and 393 federal employer identification number of any insurance company 394 allocated tax credits under this act and the amount of such 395 credits. 396 (20) A growth fund that issues a growth investment approved 397 by the department shall be deemed a recipient of state financial 398 assistance under s. 215.97, the Florida Single Audit Act. 399 However, a growth fund business that receives a growth fund 400 investment is not a subrecipient for the purposes of s. 215.97. 401 (21) The provisions of this section apply only to tax 402 returns or reports originally due on or after January 1, 2020. 403 (22) This section expires on December 21, 2030. 404 Section 2. This act shall take effect July 1, 2019. 405 406 ================= T I T L E A M E N D M E N T ================ 407 And the title is amended as follows: 408 Delete everything before the enacting clause 409 and insert: 410 A bill to be entitled 411 An act relating to rural communities; creating s. 412 288.062, F.S.; providing a short title; defining 413 terms; requiring the Department of Economic 414 Opportunity to accept applications for approval as 415 growth funds in a specified manner; specifying 416 information required to be submitted in an 417 application; requiring the department to approve or 418 deny the applications within a specified timeframe; 419 prohibiting the department from approving more than a 420 certain amount of investment authority or investor 421 contributions; requiring the department to deny 422 applications under certain circumstances; authorizing 423 an applicant whose application was denied to provide 424 additional information within a certain timeframe to 425 cure defects in the application; prohibiting the 426 department from reducing the investment authority of 427 an application or denying an application unless 428 certain circumstances are met; requiring the 429 department to certify approved applications; requiring 430 the growth fund to collect contributions and 431 investments within a certain timeframe; requiring the 432 department to provide a tax credit certificate to 433 certain taxpayers; requiring the department to revoke 434 a growth fund’s certification under specified 435 conditions; granting a credit against state premium 436 tax liability for specified investors; providing 437 restrictions on the credit; requiring that a taxpayer 438 claiming a credit submit a copy of the tax credit 439 certificate with his or her tax return; requiring the 440 department to revoke a tax credit certificate under 441 certain circumstances; authorizing a growth fund to 442 request certain determinations from the department; 443 providing a formula for calculating the maximum amount 444 of investments; specifying a timeframe within which a 445 growth fund may correct violations to avoid revocation 446 of a tax credit certificate; requiring the department 447 to distribute reverted investment authority among 448 certain growth funds; authorizing the growth fund to 449 submit an exit application; providing procedures for 450 use by the department in handling exit applications; 451 prohibiting a growth fund that has exited the program 452 from making certain distributions or paying certain 453 fees under certain circumstances; requiring the growth 454 fund to remit certain payments to the department under 455 certain circumstances; requiring the growth fund to 456 submit a report to the department at a specified time; 457 prohibiting the department from revoking a growth 458 fund’s tax credit certificate after it exits the 459 program; requiring the growth fund to submit an annual 460 report to the department; requiring that the annual 461 report include certain information; providing for 462 rulemaking; requiring the department to notify the 463 Department of Revenue of any insurance company that is 464 allocated tax credits; specifying that a growth fund 465 is deemed to be a recipient of state financial 466 assistance under certain circumstances; providing 467 applicability; providing for future expiration; 468 providing an effective date.