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.
   88  Be It Enacted by the Legislature of the State of Florida:
   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.