Florida Senate - 2019 SB 298 By Senator Montford 3-00350B-19 2019298__ 1 A bill to be entitled 2 An act relating to rural businesses; creating s. 3 288.062, F.S.; providing a short title; defining 4 terms; requiring the Department of Economic 5 Opportunity to accept applications for certification 6 as a growth fund beginning on a specified date; 7 providing requirements for the application; requiring 8 the department to grant or deny the application within 9 a specified timeframe; limiting the amount of 10 investment authority that may be approved by the 11 department; requiring the department to deny 12 applications that do not meet certain requirements; 13 authorizing an applicant whose application was denied 14 to provide additional information to the department 15 within a specified timeframe; requiring the department 16 to reconsider an application for which additional 17 information has been submitted and to approve or deny 18 it within a certain timeframe; prohibiting the 19 department from reducing the investment authority of 20 an application or denying an application for reasons 21 other than those specified; requiring the department 22 to certify approved applicants as growth funds and to 23 specify their required investment authority and 24 investor contributions; requiring that the growth 25 fund’s investment authority consist of a certain 26 percentage of equity investments; requiring the growth 27 fund to collect contributions and investments and 28 submit required documentation to the department within 29 a specified timeframe; requiring the department to 30 issue tax credit certificates as appropriate; 31 providing circumstances under which a growth fund’s 32 certification lapses; requiring the department to 33 redistribute lapsed investment authority in a 34 specified manner; providing that an investor who makes 35 an investor contribution is vested with a credit 36 against state premium tax liability; imposing 37 restrictions on the use of the credit; providing for 38 the carryover of tax credits; requiring that investors 39 claiming a credit submit a copy of the tax credit 40 certificate with their tax returns; requiring the 41 department to revoke tax credit certificates under 42 specified circumstances; capping the amount of 43 investments which growth funds can count toward 44 satisfaction of certain requirements; requiring the 45 department to notify growth funds of reasons for a 46 pending revocation of a tax credit certificate; 47 requiring growth funds to address issues identified in 48 the notice within a specified timeframe; providing 49 that reverted investment authority and investor 50 contributions do not count toward the limit on total 51 investment authority and investor contributions; 52 requiring the department to distribute reverted 53 investment authority to certain growth funds; 54 authorizing growth funds to submit an exit application 55 after a specified period of time; requiring the 56 department to respond to an exit application within a 57 certain timeframe; prohibiting the department from 58 unreasonably denying an exit application; requiring 59 that denial notices state the reasons for denial; 60 prohibiting growth funds that have exited the program 61 from making distributions to their equity holders 62 unless they have made certain growth investments; 63 requiring such growth funds to continue to annually 64 report the amount of their growth investments until 65 required investments are made; providing a formula for 66 determining the amount a growth fund must pay the 67 department when making certain distributions; 68 prohibiting the department from revoking the growth 69 fund’s tax credit certificate after the growth fund 70 has exited the program; authorizing growth funds to 71 request a written opinion from the department as to 72 whether a business qualifies as a growth business; 73 requiring that the department notify the growth fund 74 of its determination within a specified timeframe and 75 granting growth business status to the business if the 76 department fails to timely make its determination; 77 specifying that out-of-state businesses relocating 78 employees to this state must satisfy a specific 79 definition within a certain timeframe before a new 80 principal place of business operations is recognized; 81 requiring growth funds to submit annual reports to the 82 department; requiring that the reports provide certain 83 documentation; authorizing rulemaking; requiring the 84 department to provide certain notification to the 85 Department of Revenue; providing applicability; 86 providing an effective date. 87 88 Be It Enacted by the Legislature of the State of Florida: 89 90 Section 1. Section 288.062, Florida Statutes, is created to 91 read: 92 288.062 Florida Rural Job and Business Recovery Act.— 93 (1) This section may be cited as the “Florida Rural Job and 94 Business Recovery Act.” 95 (2) As used in this section, the term: 96 (a) “Affiliate” means an entity that, directly or 97 indirectly through one or more intermediaries, controls, is 98 controlled by, or is under common control with another entity. 99 For purposes of this paragraph, an entity is controlled by 100 another entity if the controlling entity directly or indirectly 101 holds the majority voting or ownership interest in the 102 controlled entity or has control over the day-to-day operations 103 of the controlled entity by contract or law. 104 (b) “Closing date” means the date on which a growth fund 105 completes the collection of all contributions and investments as 106 required in subparagraph (3)(g)1. 107 (c) “Department” means the Department of Economic 108 Opportunity. 109 (d) “Growth business” means a business that, at the time of 110 the initial investment in the company by a growth fund: 111 1. Has fewer than 200 employees; 112 2. Has its principal place of business operations in one or 113 more growth zones in the state; and 114 3.a. Is engaged in an industry classified under the North 115 American Industry Classification System, as published in 2017 by 116 the Office of Management and Budget, Executive Office of the 117 President, as sector 11, 21, 22, 23, 31-33, 48-49, 54, or 62; or 118 b. If not engaged in an industry sector identified in sub 119 subparagraph a., the department has determined, in light of the 120 investment, will be beneficial to the growth zone. 121 (e) “Growth fund” means an entity certified by the 122 department pursuant to paragraph (3)(f). 123 (f) “Growth investment” means any capital investment or 124 equity investment in a growth business or any loan to a growth 125 business with a stated maturity at least 1 year after the date 126 of issuance. 127 (g) “Growth zone” means all areas that are not an urbanized 128 area as defined by the United States Bureau of the Census. 129 (h) “High wage” means a wage that is at least equal to the 130 county average. 131 (i) “Investment authority” means the amount stated on the 132 certification notice issued pursuant to paragraph (3)(f) 133 certifying the growth fund. 134 (j) “Investor contribution” means an investment of cash, in 135 the amount specified by the department in its approval of the 136 growth fund’s certification application, in a growth fund by a 137 person with a state premium tax liability in exchange for: 138 1. An equity interest in the growth fund, or 139 2. A debt instrument, at par value or premium, which has a 140 maturity date at least 5 years after the closing date and a 141 repayment schedule that does not exceed level principal 142 amortization over 5 years. 143 (k) “Jobs retained” means the number of employment 144 positions that existed before the initial growth investment at a 145 growth business, that pay a high wage, and that require at least 146 35 hours of work each week which the growth business’s chief 147 executive officer or similar officer certifies as being 148 positions that would have been eliminated but for the initial 149 growth investment. 150 (l) “New annual jobs” means the difference between: 151 1.a. The monthly average of employment positions at a 152 growth business which pay a high wage and require at least 35 153 hours of work each week for the preceding calendar year; or 154 b. If the initial growth investment occurred during the 155 preceding calendar year, the monthly average of employment 156 positions at a growth business which pay a high wage and require 157 at least 35 hours of work each week for the month in which the 158 initial growth investment was made and the succeeding months 159 before the end of that calendar year; and 160 2. The number of full-time high-wage employment positions 161 at the growth business on the date of the initial growth 162 investment. 163 (m) “Principal place of business operations” means the 164 place or places at which business operations are located and at 165 which: 166 1. At least 60 percent of the business’s employees work, or 167 2. Employees that are paid at least 60 percent of the 168 business’s payroll work. 169 (n) “State premium tax liability” means any liability 170 incurred by any entity under s. 624.509 or s. 624.5091. 171 (3)(a) Beginning September 1, 2019, the department shall 172 accept applications for certification as a growth fund on a form 173 prescribed by the department. The application must include: 174 1. The total investment authority sought by the applicant; 175 2. A copy of the applicant’s, or an affiliate of the 176 applicant’s, license as a rural business investment company 177 under 7 U.S.C. s. 2009cc or as a small business investment 178 company under 15 U.S.C. s. 681; 179 3. Evidence that, as of the date the application is 180 submitted, the applicant or affiliates of the applicant have 181 invested at least $100 million in private companies located in 182 nonmetropolitan counties as defined by the federal Office of 183 Management and Budget on the basis of county or county 184 equivalent units; 185 4. An estimate of the number of aggregate new annual jobs 186 that will be created and that will be retained in this state 187 because of the applicant’s growth investments; 188 5. A business plan that includes a revenue impact 189 assessment projecting state and local tax revenue and reductions 190 in state expenditures attributable to the applicant’s proposed 191 growth investments. The business plan must be prepared by a 192 nationally recognized independent third-party economic 193 forecasting firm using a dynamic economic forecasting model that 194 projects the impact of the investment over a period of 10 years 195 following the date the application is submitted to the 196 department; and 197 6. A signed affidavit from each investor stating the amount 198 of investor contributions each investor commits to make. 199 (b) Within 30 days after receipt of a completed 200 application, the department shall grant or deny the application. 201 The department shall deem applications received on the same day 202 as being simultaneously received. 203 (c) The investment authority approved by the department may 204 not exceed an amount that would result in more than $15 million 205 in tax credits being taken in any one year, excluding any 206 credits that are carried forward as authorized in paragraph 207 (4)(c). If approved applications that are simultaneously 208 received for investment authority collectively would exceed that 209 limit, the department shall proportionally reduce the investment 210 authority and the investor contributions for each such 211 application as necessary to comply with the limit. 212 (d) The department shall deny an application if: 213 1. The application is incomplete; 214 2. The revenue impact assessment submitted pursuant to 215 subparagraph (a)5. does not demonstrate that the applicant’s 216 business plan will result in a positive economic impact on this 217 state over a 10-year period which exceeds the cumulative amount 218 of tax credits which would be issued to the applicant’s 219 investors; 220 3. The investor contributions described in affidavits 221 submitted pursuant to subparagraph (a)6. do not total at least 222 75 percent of the total amount of investment authority sought 223 under the applicant’s business plan; or 224 4. The department has already approved the maximum amount 225 of investment authority allowed under paragraph (c). 226 (e) Within 15 days after receipt of notice that the 227 department has denied an application on grounds identified in 228 subparagraph (d)1., subparagraph (d)2., or subparagraph (d)4., 229 the applicant may provide additional information to the 230 department to complete, clarify, or cure such defects. The 231 department shall review the additional information and approve 232 or deny the application within 30 days after the original 233 submission date of the application. The department may not 234 approve any application submitted after the original submission 235 date of the initially denied application until it approves or 236 denies the application for which additional information was 237 submitted. 238 (f) The department may not reduce the requested investment 239 authority of a growth fund or deny a growth fund application for 240 reasons other than those described in paragraphs (c) and (d). 241 Upon approval of an application, the department shall send to 242 the applicant a notice certifying the applicant as a growth fund 243 and specifying the amount of the applicant’s investment 244 authority and the investor contributions required from each 245 investor who submitted an affidavit with the growth fund’s 246 application. At least 10 percent of the growth fund’s investment 247 authority must consist of equity investments contributed by 248 affiliates of the growth fund. 249 (g)1. Within 60 days after receiving a certification notice 250 issued pursuant to paragraph (f), a growth fund shall collect 251 all investor contributions and additional investments of cash 252 which are, when added to the investor contributions, at least 253 equal to the growth fund’s investment authority. 254 2. Within 65 days after receiving a certification notice 255 issued pursuant to paragraph (f), a growth fund shall provide to 256 the department documentation that sufficiently proves that such 257 contributions and investments have been collected. 258 3. Upon receipt of the documentation required by 259 subparagraph 2., the department shall provide to each investor 260 who made an investor contribution a tax credit certificate in an 261 amount equal to that investor’s contribution. 262 (h) A growth fund’s certification lapses if the growth fund 263 fails to fully comply with subparagraphs (g)1. and (g)2. If a 264 certification lapses, the corresponding investment authority and 265 investor contributions do not count toward the limits on program 266 funding prescribed by paragraph (c) and the department must 267 allocate any lapsed investment authority on a pro rata basis to 268 each growth fund that was not awarded the full investment 269 authority it applied for. A growth fund may allocate, at its 270 discretion, the additional investor contribution authority to 271 any investor that has state premium tax liability. The 272 department may award any remaining investment authority to new 273 applicants. 274 (4)(a) An investor who makes an investor contribution is 275 vested with an earned credit against state premium tax liability 276 which is equal to its investor contribution. Twenty percent of 277 the credit may be used in each taxable year, beginning in the 278 calendar year following the second anniversary of the closing 279 date and concluding in the calendar year following the sixth 280 anniversary of the closing date, exclusive of amounts carried 281 forward pursuant to paragraph (c). 282 (b) The credit is nonrefundable and may not be sold, 283 transferred, or allocated to any entity other than an affiliate 284 that was an affiliate at the time of the submission of the 285 investor’s affidavit included in the approved application. 286 (c) The amount of the credit claimed by an investor may not 287 exceed the amount of the investor’s state premium tax liability 288 for the tax year in which the credit is claimed. Any amount of 289 tax credit which the entity does not claim in a taxable year may 290 be carried forward for use in future taxable years for a period 291 not to exceed 10 years. 292 (d) An investor claiming a credit under this section must 293 submit a copy of the tax credit certificate with his or her tax 294 return for each taxable year in which the credit is claimed. 295 (5)(a) The department shall revoke a tax credit certificate 296 issued under subparagraph (3)(g)3. if, before a growth fund 297 exits the program in accordance with paragraph (e), any of the 298 following occurs: 299 1. Within 2 years after the closing date, the growth fund 300 does not invest 100 percent of its investment authority in 301 growth investments in this state; 302 2. The growth fund, after investing 100 percent of its 303 investment authority in growth investments in this state within 304 2 years after the closing date, fails to maintain growth 305 investments equal to 100 percent of its investment authority at 306 any time prior to the sixth anniversary after the closing date. 307 For the purposes of this subparagraph, an investment is 308 “maintained” even if it is sold or repaid, so long as the growth 309 fund reinvests an amount equal to the capital returned or 310 recovered from the original investment, exclusive of any profits 311 realized, in other growth investments in this state within 12 312 months after the receipt of such capital. Amounts received 313 periodically by a growth fund are deemed continuously invested 314 in growth investments if the amounts are reinvested in one or 315 more growth investments by the end of the following calendar 316 year; 317 3. Before exiting the program in accordance with paragraph 318 (e), the growth fund makes a distribution or payment that 319 results in the growth fund having less than 100 percent of its 320 investment authority invested in growth investments in this 321 state or available for investment in growth investments and held 322 in cash and other marketable securities; or 323 4. The growth fund makes a growth investment in a growth 324 business that directly, or indirectly through an affiliate, 325 owns; has the right to acquire an ownership interest in; makes a 326 loan to; or makes an investment in the growth fund, an affiliate 327 of the growth fund, or an investor in the growth fund. This 328 subparagraph does not apply to investments in publicly traded 329 securities by a growth business or an owner or an affiliate of 330 the growth business. For purposes of this subparagraph, a growth 331 fund is not considered an affiliate of a growth business solely 332 because of its growth investment in that business. 333 (b) The maximum amount of growth investments in a growth 334 business, including amounts invested in affiliates of the growth 335 business, which a growth fund may count toward its satisfaction 336 of the requirements of subparagraphs (a)1. and 2. is 20 percent 337 of its investment authority, up to a maximum of $5 million. 338 (c) Before revoking tax credit certificates under this 339 subsection, the department must notify the growth fund of the 340 reasons for the pending revocation. The growth fund has 90 days 341 after the date the notice is received to address, to the 342 satisfaction of the department, any issue identified in the 343 notice. 344 (d) If a tax credit certificate is revoked under this 345 subsection, the associated investment authority and investor 346 contributions do not count toward the limit on total investment 347 authority and investor contributions imposed in paragraph 348 (3)(c). The department shall distribute reverted investment 349 authority pro rata to each growth fund awarded less than the 350 requested investment authority for which it applied. Such a 351 growth fund may allocate, at its discretion, the associated 352 investor contribution authority to any investor that has state 353 premium tax liability. The department may award any remaining 354 investment authority to new applicants. 355 (e)1. On or after the seventh anniversary of the closing 356 date, a growth fund may apply to the department to exit the 357 program and no longer be subject to regulation under this 358 section except as provided in this paragraph. The department 359 shall respond to the application within 30 days after receiving 360 the application. The department shall approve the application if 361 none of the growth fund’s tax credit certificates have been 362 revoked and the growth fund has not received a notice of 363 revocation that is currently pending. The department may not 364 unreasonably deny an exit application submitted pursuant to this 365 paragraph. If the application is denied, the notice must include 366 the reasons for the denial. 367 2. After its exit from the program pursuant to subparagraph 368 1., a growth fund may not make distributions to its equity 369 holders unless it has made growth investments equal to at least 370 150 percent of its investment authority. The growth fund must 371 continue to annually report the amount of its growth investments 372 to the department until it has made the required growth 373 investments. 374 3. At any time the growth fund proposes to make a 375 distribution to its equity holders which, when added to all 376 previous distributions to its equity holders, would be in excess 377 of its investment authority, the growth fund must remit to the 378 department a payment equal to the proposed distribution 379 multiplied by a fraction, the numerator of which is the 380 aggregate number of new annual jobs and jobs retained reported 381 to the department pursuant to subsection (8) and the denominator 382 of which is the projected number of new annual jobs and jobs 383 retained in an application made by the growth fund under 384 subsection (3). 385 (f) The department may not revoke a tax credit certificate 386 after a growth fund exits the program. 387 (6) Before making a growth investment, a growth fund may 388 request that the department issue a written opinion as to 389 whether the business in which it proposes to invest qualifies as 390 a growth business. The department, no later than 15 business 391 days after the receipt of the request, shall notify the growth 392 fund of its determination. If the department fails to timely 393 notify the growth fund of its determination, the business is 394 considered a growth business. 395 (7) An out-of-state business that uses the proceeds of a 396 growth investment to establish its principal place of business 397 operations in a growth zone in the state and relocate or hire 398 employees at the new location is deemed to have its principal 399 place of business operations in this new location if it meets 400 the definition of the term “principal place of business” 401 provided in paragraph (2)(m) within 180 days after receiving the 402 growth investment, unless granted an extension of time by the 403 department. 404 (8)(a) Each growth fund shall submit a report to the 405 department on or before the fifth business day after each 406 anniversary of the closing date unless the growth fund has 407 exited the program. The report must provide documentation as to 408 each growth investment made by the growth fund and include: 409 1. A bank statement evidencing each growth investment; 410 2. The name, location, and industry of each growth business 411 receiving a growth investment, including evidence that the 412 business qualified as a growth business at the time the 413 investment was made or a determination notice was issued 414 pursuant to subsection (6); 415 3. The number of employment positions at each growth 416 business on the date of the growth fund’s initial investment; 417 4. The number of new annual jobs and retained jobs at each 418 growth business. The number of retained jobs must be calculated 419 based on the monthly average of high-wage employment positions 420 and may not exceed the number of retained jobs on the first 421 anniversary report. If the number of new annual jobs is less 422 than zero, the growth fund must report the number of new annual 423 jobs as zero; 424 5. The average annual salary of the jobs reported under 425 subparagraph 4.; 426 6. The cumulative amount of growth investments made in the 427 growth business; and 428 7. Any other information required by the department. 429 (b) The growth fund shall provide the department with an 430 annual report for redeemed or repaid growth investments if the 431 annual report for such investments is available. 432 (9) The department may adopt rules to implement this 433 section. 434 (10) The department shall notify the Department of Revenue 435 of the name of any insurance company allocated tax credits 436 pursuant to this act and the amount of such credits. 437 (11) This section applies to tax returns or reports 438 originally due on or after January 1, 2020. 439 Section 2. This act shall take effect October 1, 2019.