Florida Senate - 2019 CS for SB 298 By the Committee on Finance and Tax; and Senators Montford, Torres, Baxley, Broxson, and Gruters 593-03884-19 2019298c1 1 A bill to be entitled 2 An act relating to rural communities; 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 approval as 6 growth funds in a specified manner; specifying 7 information required to be submitted in an 8 application; requiring the department to approve or 9 deny the applications within a specified timeframe; 10 prohibiting the department from approving more than a 11 certain amount of investment authority or investor 12 contributions; requiring the department to deny 13 applications under certain circumstances; authorizing 14 an applicant whose application was denied to provide 15 additional information within a certain timeframe to 16 cure defects in the application; prohibiting the 17 department from reducing the investment authority of 18 an application or denying an application unless 19 certain circumstances are met; requiring the 20 department to certify approved applications; requiring 21 the growth fund to collect contributions and 22 investments within a certain timeframe; requiring the 23 department to provide a tax credit certificate to 24 certain taxpayers; requiring the department to revoke 25 a growth fund’s certification under specified 26 conditions; granting a credit against state premium 27 tax liability for specified investors; providing 28 restrictions on the credit; requiring that a taxpayer 29 claiming a credit submit a copy of the tax credit 30 certificate with his or her tax return; requiring the 31 department to revoke a tax credit certificate under 32 certain circumstances; authorizing a growth fund to 33 request certain determinations from the department; 34 providing a formula for calculating the maximum amount 35 of investments; specifying a timeframe within which a 36 growth fund may correct violations to avoid revocation 37 of a tax credit certificate; requiring the department 38 to distribute reverted investment authority among 39 certain growth funds; authorizing the growth fund to 40 submit an exit application; providing procedures for 41 use by the department in handling exit applications; 42 prohibiting a growth fund that has exited the program 43 from making certain distributions or paying certain 44 fees under certain circumstances; requiring the growth 45 fund to remit certain payments to the department under 46 certain circumstances; requiring the growth fund to 47 submit a report to the department at a specified time; 48 prohibiting the department from revoking a growth 49 fund’s tax credit certificate after it exits the 50 program; requiring the growth fund to submit an annual 51 report to the department; requiring that the annual 52 report include certain information; providing for 53 rulemaking; requiring the department to notify the 54 Department of Revenue of any insurance company that is 55 allocated tax credits; specifying that a growth fund 56 is deemed to be a recipient of state financial 57 assistance under certain circumstances; providing 58 applicability; providing for future expiration; 59 providing an effective date. 60 61 Be It Enacted by the Legislature of the State of Florida: 62 63 Section 1. Section 288.062, Florida Statutes, is created to 64 read: 65 288.062 Florida Rural Jobs and Business Recovery Act.— 66 (1) This section may be cited as the “Florida Rural Jobs 67 and Business Recovery Act.” 68 (2) The following terms when used in this section shall 69 have the following meanings except where the context clearly 70 indicates a different meaning: 71 (a) “Affiliate” means an entity that directly, or 72 indirectly through one or more intermediaries, controls, is 73 controlled by, or is under common control with another entity. 74 For the purposes of this paragraph, an entity is “controlled by” 75 another entity if the controlling entity holds, directly or 76 indirectly, the majority voting or ownership interest in the 77 controlled entity or has control over the day-to-day operations 78 of the controlled entity. 79 (b) “Closing date” means the date on which a growth fund 80 has collected all amounts specified by paragraph (8)(a). 81 (c) “Department” means the Department of Economic 82 Opportunity. 83 (d) “Full-time high wage employment position” means an 84 employment position that is filled, pays a high wage and 85 requires at least 35 hours of work per week or any other period 86 of time generally accepted by custom, industry, or practice as 87 full-time employment. 88 (e) “Growth business” means a business that, at the time a 89 growth fund initially invests in the business: 90 1. Has fewer than 200 employees; 91 2. Has its principal business operations in at least one 92 growth zone in the state; and 93 3. Is engaged in North American Industry Classification 94 System sectors: 11, 21, 22, 23, 31-33, 48-49, 54, or 62. 95 However, if the business is not engaged in such industries, the 96 department shall determine whether the investment will create 97 new jobs or retain jobs. 98 (f) “Growth fund” means an entity certified by the 99 department under subsection (7). 100 (g) “Growth investment” means any capital or equity 101 investment in a growth business or any loan to a growth business 102 with a stated maturity at least 1 year after the date of 103 issuance. 104 (h) “Growth zone” means: 105 1. All locations outside an urbanized area with a 106 population equal to or greater than 50,000, as identified by the 107 United States Census Bureau; or 108 2. Any urbanized area within a county designated by Federal 109 Emergency Management Agency declaration FEMA-4399-DR if the 110 urbanized area had sustained winds in excess of 100 miles per 111 hour during Hurricane Michael. 112 (i) “High wage” means a wage in any county that is greater 113 than 100 percent of the county average. 114 (j) “Investment authority” means the amount certified by 115 the department under subsection (7). At least 75 percent of a 116 growth fund’s investment authority must consist of investor 117 contributions. 118 (k) “Investor contribution” means a cash investment in a 119 growth fund by an entity that is subject to the state premium 120 tax under ss. 624.509 and 624.5091. The cash investment must 121 equal the amount specified for that entity in the department’s 122 approval of a growth fund’s application under subsection (4). 123 The cash investment shall purchase an equity interest in the 124 growth fund or purchase, at par value or premium, a debt 125 instrument that has a maturity date at least 5 years from the 126 closing date and a repayment schedule that is no greater than 127 level principal amortization over 5 years. 128 (l) “Jobs retained” means the number of full-time high wage 129 employment positions that existed before the initial growth 130 investment in a growth business and for which the growth 131 business’s chief executive officer or similar officer certifies 132 that the employment positions would have been eliminated but for 133 the initial growth investment. 134 (m) “New annual jobs” means the difference between: 135 1.a. The average monthly number of full-time high wage 136 employment positions at a growth business in the preceding 137 calendar year; or 138 b. If the initial growth investment occurred during the 139 preceding calendar year, the average monthly number of full-time 140 high wage employment positions for the months during which the 141 initial growth investment was made through the end of the 142 preceding calendar year; and 143 2. The number of full-time high wage employment positions 144 at the growth business on the date of the initial growth 145 investment. 146 147 If the resulting total is less than zero, the new annual jobs 148 amount is equal to zero. 149 (n) “Principal business operation” of a business is the 150 location or locations where at least 60 percent of the 151 business’s employees work or where the employees who are paid at 152 least 60 percent of the business’s payroll are located. A 153 business that agrees to relocate or hire new employees using the 154 proceeds of a growth investment to establish its principal 155 business operation in a growth zone in the state is deemed to 156 have its principal business operations in the new location 157 provided it satisfies this definition within 180 days after 158 receiving the growth investment, unless the department agrees to 159 a later date. 160 (o) “State premium tax” means the tax identified in s. 161 624.509 or s. 624.5091. 162 (3) Beginning September 1, 2019, the department shall 163 accept applications for approval as a growth fund on a form 164 adopted by the department. The application shall include the 165 following: 166 (a) The total investment authority sought by the applicant. 167 (b) Evidence that: 168 1. The applicant or an affiliate of the applicant is 169 licensed as a rural business investment company under 7 U.S.C. 170 s. 2009cc or as a small business investment company under 15 171 U.S.C. s. 681. The applicant or the affiliate must include a 172 certificate executed by an executive officer of the applicant 173 attesting that such license remains in effect and has not been 174 revoked; and 175 2. At least one principal in a rural business investment 176 company or a small business investment company is, and has been 177 for at least 4 years, an officer or employee of the applicant or 178 an affiliate of the applicant on the date the application is 179 submitted. 180 (c) Evidence that as of the date the application is 181 submitted, the applicant or affiliates of the applicant have 182 invested at least $100 million in nonpublic companies located in 183 nonmetropolitan counties as defined by the Office of Management 184 and Budget within the Office of the President of the United 185 States on the basis of county or county-equivalent units. 186 (d) An estimate of the total number of new annual jobs that 187 will be created and jobs retained over the life of the program 188 in this state because of the applicant’s growth investments. 189 (e) A business plan that includes a revenue impact 190 assessment projecting state and local tax revenues to be 191 generated, as well as state expenditures to be reduced, by the 192 applicant’s proposed growth investments, prepared by a 193 nationally recognized third-party independent economic 194 forecasting firm using a dynamic economic forecasting model that 195 analyzes the applicant’s business plan over the 10 years 196 following the date the application is submitted to the 197 department. 198 (f) A signed affidavit from each investor stating the 199 amount of investor contribution the investor will make. 200 (g) A commitment by the growth fund applicant to give first 201 priority to growth investments located in those counties 202 designated by Federal Emergency Management Agency declaration 203 FEMA-4399-DR. 204 (4)(a) Within 45 days after receipt of a completed 205 application containing the information set forth in subsection 206 (3), the department shall approve or deny the application. 207 (b) The department shall deem applications that are 208 received on the same day as having been received simultaneously. 209 (c) The department shall approve investment authority up to 210 an amount that would allow no more than $5 million in tax 211 credits to be taken in any one year, excluding any credits that 212 are carried forward pursuant to paragraph (10)(c). No more than 213 a total of $25 million in tax credits may be approved by the 214 department under the program. If requests for investment 215 authority exceed this tax credit limitation, the department 216 shall proportionally reduce the investment authority and the 217 investor contributions for each approved application as 218 necessary to avoid exceeding the limit. 219 (5) The department shall deny an application if: 220 (a) The application is incomplete; 221 (b) The applicant does not satisfy the criteria set forth 222 in subsection (3); 223 (c) The revenue impact assessment submitted under paragraph 224 (3)(e) does not demonstrate that the applicant’s business plan 225 will result in a positive revenue impact on this state over a 226 10-year period that exceeds the cumulative amount of tax credits 227 that would be issued to the applicant’s investors; 228 (d) The investor contributions described in affidavits 229 submitted under paragraph (3)(f) do not equal at least 75 230 percent of the total amount of investment authority sought under 231 the applicant’s business plan; or 232 (e) The department has already approved the maximum amount 233 of investment authority and investor contributions allowed under 234 subsection (4). 235 (6) If the department denies an application, the applicant, 236 within 15 days after the denial, may provide additional 237 information to the department to cure any defects in the 238 application identified by the department, except for failure to 239 comply with paragraph (5)(c), paragraph (5)(d), or paragraph 240 (5)(e). The department shall review and reconsider such 241 applications within 30 days after receipt and before approving 242 any pending applications submitted after the original submission 243 date of the reconsidered application. 244 (7) The department shall not reduce the requested 245 investment authority or deny a growth fund application for 246 reasons other than those described in subsection (4) or 247 subsection (5). After the department approves an application, it 248 shall certify: 249 (a) The applicant as a growth fund; 250 (b) The amount of the applicant’s investment authority; 251 (c) The investor contributions required from each investor 252 that submitted an affidavit with the growth fund’s application; 253 and 254 (d) The number of new annual jobs and jobs retained that 255 will be required of the growth fund, as prorated, based on the 256 investment authority awarded to the growth fund. 257 (8)(a) Within 60 days after receiving the certification 258 issued under subsection (7), a growth fund shall collect all 259 investor contributions and collect additional investments of 260 cash that, when added to the investor contributions, at least 261 equal the growth fund’s investment authority. Within 65 days 262 after receiving the certification issued under subsection (7), a 263 growth fund shall send to the department documentation that it 264 has collected the amounts described in this subsection. At least 265 10 percent of the growth fund’s investment authority must 266 consist of equity investments contributed by affiliates of the 267 growth fund. The growth fund shall report to the department the 268 date on which the investor contributions and additional 269 investments of cash were collected. 270 (b) Upon receipt of the documentation required by paragraph 271 (a), the department shall provide a tax credit certificate to 272 each taxpayer who has made an investor contribution in the 273 amount of the investor contribution. 274 (9) If the growth fund fails to fully comply with 275 subsection (8), the department shall revoke the growth fund’s 276 certification and the corresponding investment authority and 277 investor contributions will not count toward the limits on the 278 program size set forth in subsection (4). The department shall 279 first award revoked investment authority pro rata to each growth 280 fund that was awarded less than the investment authority for 281 which it applied, and a growth fund may allocate the associated 282 investor contribution authority to any taxpayer with state 283 premium tax liability in its discretion. Any remaining 284 investment authority may be awarded by the department to new 285 applicants. 286 (10)(a) Any taxpayer that makes an investor contribution is 287 vested with an earned credit against state premium tax liability 288 equal to that investor’s investor contribution. The credit may 289 be used over 5 years such that 20 percent of the credit is 290 applied in each of the taxable years that includes the year of 291 the closing date through the fourth anniversary of the closing 292 date, unless a specific request is made to carry them forward 293 for a period not to exceed 10 years. 294 (b) The credit is nonrefundable and may not be sold, 295 transferred, or allocated to any other entity other than an 296 affiliate that was an affiliate at the time of the submission of 297 the investor’s affidavit included in the growth fund’s 298 application. 299 (c) The amount of the credit claimed by a taxpayer may not 300 exceed the amount of such taxpayer’s state premium tax liability 301 for the tax year for which the credit is claimed. 302 (d) A taxpayer claiming a credit under this section shall 303 submit a copy of the tax credit certificate with the taxpayer’s 304 return for each taxable year for which the credit is claimed. 305 (e) The credit shall be allowed after deducting from the 306 tax the deductions for assessments made pursuant to s. 440.51; 307 the credits for taxes paid under ss. 175.101 and 185.08; the 308 credits for income taxes paid under chapter 220; the credit 309 allowed under s. 624.509(5), as such credit is limited by s. 310 624.509(6); and the credit allowed under s. 624.51055. 311 (11) The department must revoke the tax credit certificates 312 issued under paragraph (8)(b) if any of the following occur with 313 respect to a growth fund before the growth fund exits the 314 program in accordance with paragraph (16)(a): 315 (a) The growth fund does not invest 100 percent of its 316 investment authority in growth investments in this state within 317 2 years of the closing date; 318 (b) The growth fund, after initially satisfying paragraph 319 (a), fails to maintain growth investments equal to 100 percent 320 of its investment authority until the sixth anniversary of the 321 closing date. For purposes of this paragraph, an investment is 322 “maintained” even if it is sold or repaid, so long as the growth 323 fund reinvests an amount equal to the capital returned or 324 recovered from the original investment, exclusive of any profits 325 realized, in other growth investments in this state within 12 326 months of the receipt of such capital. Amounts received 327 periodically by a growth fund shall be treated as continuously 328 invested in growth investments if the amounts are reinvested in 329 one or more growth investments by the end of the following 330 calendar year; 331 (c) The growth fund, before exiting the program in 332 accordance with paragraph (16)(a), makes a distribution or 333 payment that results in the growth fund having less than 100 334 percent of its investment authority invested in growth 335 investments in this state or available for investment in growth 336 investments and held in cash and other marketable securities; or 337 (d) The growth fund invests in a growth business that 338 directly or indirectly through an affiliate owns, has the right 339 to acquire an ownership interest, makes a loan to, or makes an 340 investment in the growth fund, an affiliate of the growth fund, 341 or an investor in the growth fund. This paragraph does not apply 342 to investments in publicly traded securities by a growth 343 business or an owner or affiliate of such growth business. For 344 purposes of this paragraph, a growth fund is not considered an 345 affiliate of a growth business solely because of its growth 346 investment. 347 (12) Before making a growth investment, a growth fund may 348 request a written opinion from the department as to whether the 349 business in which it proposes to invest satisfies the definition 350 of a growth business. The department, not later than the 15th 351 business day after the date of receipt of the request, shall 352 provide the growth fund with a determination letter providing 353 its opinion. If the department fails to issue a determination 354 letter by the 15th business day, the business in which the 355 growth fund proposes to invest shall be considered a growth 356 business. 357 (13) The maximum amount of growth investments in a growth 358 business, including amounts invested in affiliates of the growth 359 business, that a growth fund may count in satisfying the 360 requirements of paragraphs (11)(a) and (b) is the greater of $5 361 million or 20 percent of its investment authority, exclusive of 362 repaid or redeemed growth investments. 363 (14) Before revoking a tax credit certificate under 364 subsection (11), the department shall notify the growth fund of 365 the reasons for the pending revocation. The growth fund shall 366 have 90 days from the date the notice was received to correct 367 any violation outlined in the notice to the satisfaction of the 368 department and avoid revocation of the tax credit certificate. 369 (15) If the department revokes any tax credit certificates 370 under subsection (11), the associated investment authority and 371 investor contributions will not count toward the limit on total 372 investment authority and investor contributions described in 373 subsection (4). The department may award any remaining 374 investment authority to new applicants. 375 (16)(a) On or after the seventh anniversary of the closing 376 date, a growth fund may apply to the department to exit the 377 program and no longer be subject to regulation except as set 378 forth in paragraph (b). The department shall approve or deny the 379 application within 30 days of receipt. In evaluating the 380 application, the fact that no tax credit certificates have been 381 revoked and that the growth fund has not received a notice of 382 revocation that has not been cured pursuant to subsection (14) 383 is sufficient evidence to prove that the growth fund is eligible 384 for exit. The department shall not unreasonably deny an 385 application submitted under this paragraph. If the application 386 is denied, the notice shall include the reasons for the 387 determination. 388 (b) After its exit from the program in accordance with 389 paragraph (a), a growth fund may not make distributions or pay 390 any fees except as allowed under paragraph (11)(c) to its 391 investors unless it has made growth investments equal to at 392 least 150 percent of its investment authority. Each growth fund 393 shall continue to report the amount of growth investments made 394 to the department annually until it has made growth investments 395 equal to at least 150 percent of its investment authority. 396 (c) After its exit from the program in accordance with 397 paragraph (a), at any time the growth fund proposes to make a 398 distribution to its investors that, when added to all previous 399 distributions to its investors, exceeds its investment 400 authority, the growth fund shall remit to the department a 401 payment equal the product of the proposed distribution and the 402 difference between one and a fraction, the numerator of which is 403 the aggregate number of new annual jobs and jobs retained 404 reported to the department pursuant to subsection (18) and the 405 denominator of which is the number of new annual jobs and jobs 406 retained as set forth in the growth fund’s certification. No 407 payment is due if the aggregate number of new annual jobs and 408 jobs retained as of the date of the proposed distribution equal 409 or exceed the number of new annual jobs and jobs retained as 410 projected set forth in the growth fund’s certificate issued 411 under subsection (7). 412 (17) The department may not revoke a tax credit certificate 413 after a growth fund exits from the program. 414 (18)(a) Each growth fund shall submit an annual report to 415 the department on or before the 5th business day after each 416 anniversary of the closing date prior to its exit from the 417 program in accordance with paragraph (16)(a). The report shall 418 identify each growth investment made by the growth fund and 419 shall include: 420 1. A bank statement evidencing each growth investment, if 421 not previously reported; 422 2. The name, location, and industry of each growth business 423 receiving a growth investment, including either the 424 determination letter set forth in subsection (12) or evidence 425 that the business qualified as a growth business at the time the 426 investment was made, if not previously reported; 427 3. The number of full-time high wage employment positions 428 at each growth business and jobs retained on the date of the 429 growth fund’s initial growth investment; 430 4. The number of new annual jobs and jobs retained at each 431 growth business, provided the number of jobs retained may not 432 exceed the number of jobs retained, as reported in subsection 433 (3) and the number of jobs retained that must be reduced if the 434 full-time high wage employment positions reported drops below 435 the jobs retained as reported in subsection (3); 436 5. The average annual salary of the positions described in 437 paragraph (3)(d); 438 6. The cumulative amount of growth investments made in 439 growth businesses; and 440 7. Any other information required by the department. 441 (b) The growth fund is not required to provide information 442 with respect to growth investments that have been redeemed or 443 repaid as part of the annual report set forth in paragraph (a) 444 but shall provide such information if available. 445 (19) The department: 446 (a) May adopt rules to implement the provisions of this 447 section. 448 (b) Shall adopt forms and notices to implement this 449 section. 450 (c) Shall notify the Department of Revenue of the name and 451 federal employer identification number of any insurance company 452 allocated tax credits under this act and the amount of such 453 credits. 454 (20) A growth fund that issues a growth investment approved 455 by the department shall be deemed a recipient of state financial 456 assistance under s. 215.97, the Florida Single Audit Act. 457 However, a growth fund business that receives a growth fund 458 investment is not a subrecipient for the purposes of s. 215.97. 459 (21) The provisions of this section apply only to tax 460 returns or reports originally due on or after January 1, 2020. 461 (22) This section expires on December 21, 2030. 462 Section 2. This act shall take effect July 1, 2019.