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.
   61  Be It Enacted by the Legislature of the State of Florida:
   63         Section 1. Section 288.062, Florida Statutes, is created to
   64  read:
   65         288.062Florida 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.
  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.