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H.B. 380 Enrolled

             1     

ECONOMIC DEVELOPMENT REVISIONS

             2     
2013 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: V. Lowry Snow

             5     
Senate Sponsor: Jerry W. Stevenson

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies provisions relating to economic development.
             10      Highlighted Provisions:
             11          This bill:
             12          .    requires the Board of Business and Economic Development to maintain certain
             13      ethical and conflict of interest standards;
             14          .    authorizes the Governor's Office of Economic Development to commit or authorize
             15      a tax credit that exceeds established limits if certain conditions are met;
             16          .    modifies the information that an entity is required to provide to the Governor's
             17      Office of Economic Development in seeking a tax credit;
             18          .    authorizes the Governor's Office of Economic Development to terminate a tax credit
             19      agreement if the entity with the tax credit fails to meet performance standards;
             20          .    modifies tax credit reporting requirements for the Governor's Office of Economic
             21      Development; and
             22          .    requires the Governor's Office of Economic Development to conduct a periodic
             23      audit and review of certain tax credits and recommend whether to continue, modify,
             24      or repeal the tax credits.
             25      Money Appropriated in this Bill:
             26          None
             27      Other Special Clauses:
             28          None
             29      Utah Code Sections Affected:


             30      AMENDS:
             31          63M-1-303, as last amended by Laws of Utah 2011, Chapter 342
             32          63M-1-2404, as last amended by Laws of Utah 2010, Chapter 164
             33          63M-1-2405, as last amended by Laws of Utah 2010, Chapters 104, 164 and last
             34      amended by Coordination Clause, Laws of Utah 2010, Chapter 164
             35          63M-1-2406, as last amended by Laws of Utah 2012, Chapter 246
             36     
             37      Be it enacted by the Legislature of the state of Utah:
             38          Section 1. Section 63M-1-303 is amended to read:
             39           63M-1-303. Board duties and powers.
             40          (1) The board shall:
             41          (a) promote and encourage the economic, commercial, financial, industrial,
             42      agricultural, and civic welfare of the state;
             43          (b) do all lawful acts for the development, attraction, and retention of businesses,
             44      industries, and commerce within the state;
             45          (c) promote and encourage the expansion and retention of businesses, industries, and
             46      commerce located in the state;
             47          (d) support the efforts of local government and regional nonprofit economic
             48      development organizations to encourage expansion or retention of businesses, industries, and
             49      commerce located in the state;
             50          (e) do other acts not specifically enumerated in this chapter, if the acts are for the
             51      betterment of the economy of the state;
             52          (f) work in conjunction with companies and individuals located or doing business
             53      within the state to secure favorable rates, fares, tolls, charges, and classification for
             54      transportation of persons or property by:
             55          (i) railroad;
             56          (ii) motor carrier; or
             57          (iii) other common carriers;


             58          (g) recommend policies, priorities, and objectives to the office regarding the assistance,
             59      retention, or recruitment of business, industries, and commerce in the state; [and]
             60          (h) recommend how any money or program administered by the office or its divisions
             61      for the assistance, retention, or recruitment of businesses, industries, and commerce in the state
             62      shall be administered, so that the money or program is equitably available to all areas of the
             63      state unless federal or state law requires or authorizes the geographic location of a recipient of
             64      the money or program to be considered in the distribution of the money or administration of the
             65      program[.]; and
             66          (i) maintain ethical and conflict of interest standards consistent with those imposed on
             67      a public officer under Title 67, Chapter 16, Utah Public Officers' and Employees' Ethics Act.
             68          (2) The board may:
             69          (a) in furtherance of the authority granted under Subsection (1)(f), appear as a party
             70      litigant on behalf of individuals or companies located or doing business within the state in
             71      proceedings before regulatory commissions of the state, other states, or the federal government
             72      having jurisdiction over such matters; and
             73          (b) make, amend, or repeal rules for the conduct of its business consistent with this part
             74      and in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act.
             75          (3) (a) Subject to Subsection (3)(b), when money is appropriated or otherwise made
             76      available to the office by the Legislature for the purchase of a contract for the sale of land, the
             77      board, with the approval of the state treasurer, may purchase the contract if the board makes a
             78      finding that the purchase of the contract promotes a statewide public interest such as promoting
             79      ease of interstate or intrastate travel or advancing economic development.
             80          (b) (i) As used in this Subsection (3)(b), "net projected debt service cost" means the
             81      money projected to be necessary to pay bond issuance costs for a general obligation bond and
             82      to make any interest payments for that general obligation bond less the projected investment
             83      earnings from the state's investment of that bond's proceeds, if any.
             84          (ii) When some or all of the money made available by the Legislature to purchase a
             85      contract for the sale of land is provided from the proceeds from the issuance of one or more


             86      general obligation bonds, if the board and state treasurer decide to purchase the contract, the
             87      board and state treasurer shall purchase the contract at a price discounted by an amount equal to
             88      the total net projected debt service cost for those bonds.
             89          (iii) The State Bonding Commission shall certify the total net projected debt service
             90      cost to the board and the state treasurer.
             91          (iv) In purchasing a contract, the board and state treasurer may:
             92          (A) purchase the contract with a single payment; or
             93          (B) arrange to have the contract placed in escrow pending the final payment on the
             94      contract and make multiple payments on the contract according to a schedule that is negotiated
             95      with the holder of the contract and included as part of the contract.
             96          (c) Before purchasing a contract, the board and the state treasurer shall:
             97          (i) contract with a qualified person or entity to prepare a report evaluating the
             98      purchaser of the land;
             99          (ii) ensure that the report evaluates:
             100          (A) the purchaser's financial ability to pay the money to complete the purchase on the
             101      date that the final payment is due under the contract;
             102          (B) whether or not the security underlying the contract is adequate to protect the state if
             103      the purchaser defaults;
             104          (C) the purchaser's balance sheet and general credit-worthiness;
             105          (D) environmental issues affecting the property under federal or state law; and
             106          (E) any other items that will assist the board and the state treasurer in determining
             107      whether or not to purchase the contract;
             108          (iii) ensure that the state has or will have a properly perfected security interest in, title
             109      to, or a deed in escrow for, the property that is the subject of the purchase; and
             110          (iv) after reviewing the report, evaluating the state's security in case of a default on the
             111      contract, and considering the terms of the proposed contract, determine whether or not to
             112      purchase the contract.
             113          (d) The board and the state treasurer may not purchase a contract under this Subsection


             114      (3) if the date of the last payment owed by the land purchaser under the contract is more than
             115      seven years from the date that the board purchases the contract.
             116          Section 2. Section 63M-1-2404 is amended to read:
             117           63M-1-2404. Creation of economic development zones -- Tax credits --
             118      Assignment of tax credit.
             119          (1) The office, with advice from the board, may create an economic development zone
             120      in the state that satisfies all of the following requirements:
             121          (a) the area is zoned commercial, industrial, manufacturing, business park, research
             122      park, or other appropriate use in a community-approved master plan;
             123          (b) the request to create a development zone has been forwarded to the office after first
             124      being approved by an appropriate local government entity; and
             125          (c) local incentives have been committed or will be committed to be provided within
             126      the area.
             127          (2) (a) By following the procedures and requirements of Title 63G, Chapter 3, Utah
             128      Administrative Rulemaking Act, the office shall make rules establishing the conditions that a
             129      business entity or local government entity shall meet to qualify for a tax credit under this part.
             130          (b) The office shall ensure that the conditions described in Subsection (2)(a) include
             131      the following requirements:
             132          (i) the new commercial project must be within the development zone;
             133          (ii) the new commercial project includes direct investment within the geographic
             134      boundaries of the development zone;
             135          (iii) the new commercial project brings new incremental jobs to Utah;
             136          (iv) the new commercial project includes significant capital investment, the creation of
             137      high paying jobs, or significant purchases from Utah vendors and providers, or any
             138      combination of these three economic factors;
             139          (v) the new commercial project generates new state revenues; and
             140          (vi) (A) a business entity or local government entity qualifying for the tax credit meets
             141      the requirements of Section 63M-1-2405 ; or


             142          (B) a community development and renewal agency to which a local government entity
             143      assigns a tax credit under this section meets the requirements of Section 63M-1-2405 .
             144          (3) (a) Subject to the other provisions of this Subsection (3), the office, with advice
             145      from the board, may enter into an agreement with a business entity or local government entity
             146      authorizing a tax credit to the business entity or local government entity if the business entity or
             147      local government entity meets the standards established under Subsection (2).
             148          (b) (i) With respect to one new commercial project, the office may authorize a tax
             149      credit to a business entity or a local government entity, but not both.
             150          (ii) In determining whether to authorize a tax credit with respect to one new
             151      commercial project to a business entity or a local government entity, the office shall authorize
             152      the tax credit in a manner that the office determines will result in providing the most effective
             153      incentive for the new commercial project.
             154          (c) (i) The office may not authorize or commit to authorize a tax credit if that tax credit
             155      exceeds:
             156          [(i)] (A) 50% of the new state revenues from the new commercial project in any given
             157      year; or
             158          [(ii)] (B) 30% of the new state revenues from the new commercial project over the life
             159      of a new commercial project or 20 years, whichever is less.
             160          (ii) Notwithstanding Subsection (3)(c)(i), the office may authorize or commit to
             161      authorize a tax credit not exceeding 60% of new state revenues from the new commercial
             162      project in any given year, if the eligible business entity creates a significant number of high
             163      paying jobs and makes capital expenditures in the state of at least $1,000,000,000.
             164          (d) (i) A local government entity may by resolution assign a tax credit that the office
             165      authorizes to the local government entity to a community development and renewal agency.
             166          (ii) The local government entity shall provide a copy of the resolution described in
             167      Subsection (3)(d)(i) to the office.
             168          (iii) If a local government entity assigns a tax credit to a community development and
             169      renewal agency:


             170          (A) the agreement described in this section shall:
             171          (I) be among the office, the local government entity, and the community development
             172      and renewal agency; and
             173          (II) establish:
             174          (Aa) the obligations of the local government entity and the community development
             175      and renewal agency; and
             176          (Bb) the extent to which any of the local government entity's obligations are transferred
             177      to the community development and renewal agency;
             178          (B) the community development and renewal agency shall retain records as described
             179      in Subsection (4)(d); and
             180          (C) a tax credit certificate issued in accordance with Section 63M-1-2406 shall list the
             181      community development and renewal agency as the name of the applicant.
             182          (4) Subject to Subsection (3), the office shall ensure that the agreement described in
             183      Subsection (3):
             184          (a) details the requirements that the business entity or local government entity shall
             185      meet to qualify for a tax credit under this part;
             186          (b) specifies the maximum amount of tax credit that the business entity or local
             187      government entity may be authorized for a taxable year and over the life of the new commercial
             188      project;
             189          (c) establishes the length of time the business entity or local government entity may
             190      claim a tax credit;
             191          (d) requires the business entity or local government entity to retain records supporting a
             192      claim for a tax credit for at least four years after the business entity or local government entity
             193      claims a tax credit under this part; and
             194          (e) requires the business entity or local government entity to submit to audits for
             195      verification of the tax credit claimed.
             196          Section 3. Section 63M-1-2405 is amended to read:
             197           63M-1-2405. Qualifications for tax credit -- Procedure.


             198          (1) The office shall certify a business entity's or local government entity's eligibility for
             199      a tax credit as provided in this section.
             200          (2) A business entity or local government entity seeking to receive a tax credit shall
             201      provide the office with:
             202          (a) an application for a tax credit certificate, including a certification, by an officer of
             203      the business entity, of any signature on the application;
             204          (b) (i) for a business entity, documentation of the new state revenues from the business
             205      entity's new commercial project that were paid during the preceding calendar year; or
             206          (ii) for a local government entity, documentation of the new state revenues from the
             207      new commercial project within the local government entity that were paid during the preceding
             208      calendar year;
             209          (c) known or expected detriments to the state or existing businesses in the state;
             210          [(c)] (d) if a local government entity seeks to assign the tax credit to a community
             211      development and renewal agency in accordance with Section 63M-1-2404 , a statement
             212      providing the name and taxpayer identification number of the community development and
             213      renewal agency to which the local government entity seeks to assign the tax credit;
             214          [(d)] (e) (i) with respect to a business entity, a document that expressly directs and
             215      authorizes the State Tax Commission to disclose the business entity's returns and other
             216      information that would otherwise be subject to confidentiality under Section 59-1-403 or
             217      Section 6103, Internal Revenue Code, to the office;
             218          (ii) with respect to a local government entity that seeks to claim the tax credit:
             219          (A) a document that expressly directs and authorizes the State Tax Commission to
             220      disclose the local government entity's returns and other information that would otherwise be
             221      subject to confidentiality under Section 59-1-403 or Section 6103, Internal Revenue Code, to
             222      the office; and
             223          (B) if the new state revenues collected as a result of a new commercial project are
             224      attributable in whole or in part to a new or expanded industrial, manufacturing, distribution, or
             225      business service within a new commercial project within the local government, a document


             226      signed by an authorized representative of the new or expanded industrial, manufacturing,
             227      distribution, or business service that:
             228          (I) expressly directs and authorizes the State Tax Commission to disclose the returns of
             229      that new or expanded industrial, manufacturing, distribution, or business service and other
             230      information that would otherwise be subject to confidentiality under Section 59-1-403 or
             231      Section 6103, Internal Revenue Code, to the office; and
             232          (II) lists the taxpayer identification number of that new or expanded industrial,
             233      manufacturing, distribution, or business service; or
             234          (iii) with respect to a local government entity that seeks to assign the tax credit to a
             235      community development and renewal agency:
             236          (A) a document signed by the members of the governing body of the community
             237      development and renewal agency that expressly directs and authorizes the State Tax
             238      Commission to disclose the returns of the community development and renewal agency and
             239      other information that would otherwise be subject to confidentiality under Section 59-1-403 or
             240      Section 6103, Internal Revenue Code, to the office; and
             241          (B) if the new state revenues collected as a result of a new commercial project are
             242      attributable in whole or in part to a new or expanded industrial, manufacturing, distribution, or
             243      business service within a new commercial project within the community development and
             244      renewal agency, a document signed by an authorized representative of the new or expanded
             245      industrial, manufacturing, distribution, or business service that:
             246          (I) expressly directs and authorizes the State Tax Commission to disclose the returns of
             247      that new or expanded industrial, manufacturing, distribution, or business service and other
             248      information that would otherwise be subject to confidentiality under Section 59-1-403 or
             249      Section 6103, Internal Revenue Code, to the office; and
             250          (II) lists the taxpayer identification number of that new or expanded industrial,
             251      manufacturing, distribution, or business service; and
             252          [(e)] (f) for a business entity only, documentation that the business entity has satisfied
             253      the performance benchmarks outlined in the agreement described in Subsection


             254      63M-1-2404 (3)(a), including:
             255          (i) significant capital investment;
             256          (ii) the creation of high paying jobs;
             257          (iii) significant purchases from Utah vendors and providers; or
             258          (iv) any combination of Subsections (2)[(e)](f)(i), (ii), and (iii).
             259          (3) (a) The office shall submit the documents described in Subsection (2)[(d)](e) to the
             260      State Tax Commission.
             261          (b) Upon receipt of a document described in Subsection (2)[(d)](e), the State Tax
             262      Commission shall provide the office with the returns and other information requested by the
             263      office that the State Tax Commission is directed or authorized to provide to the office in
             264      accordance with Subsection (2)[(d)](e).
             265          (4) If, after review of the returns and other information provided by the State Tax
             266      Commission, or after review of the ongoing performance of the business entity or local
             267      government entity, the office determines that the returns and other information are inadequate
             268      to provide a reasonable justification for authorizing or continuing a tax credit, the office shall
             269      [either]:
             270          (a) (i) deny the tax credit; or
             271          (ii) terminate the agreement described in Subsection 63M-1-2404 (3)(a) for failure to
             272      meet the performance standards established in the agreement; or
             273          (b) inform the business entity or local government entity that the returns or other
             274      information were inadequate and ask the business entity or local government entity to submit
             275      new documentation.
             276          (5) If after review of the returns and other information provided by the State Tax
             277      Commission, the office determines that the returns and other information provided by the
             278      business entity or local government entity provide reasonable justification for authorizing a tax
             279      credit, the office shall, based upon the returns and other information:
             280          (a) determine the amount of the tax credit to be granted to the business entity, local
             281      government entity, or if the local government entity assigns the tax credit in accordance with


             282      Section 63M-1-2404 , to the community development and renewal agency to which the local
             283      government entity assigns the tax credit;
             284          (b) issue a tax credit certificate to the business entity, local government entity, or if the
             285      local government entity assigns the tax credit in accordance with Section 63M-1-2404 , to the
             286      community development and renewal agency to which the local government entity assigns the
             287      tax credit; and
             288          (c) provide a duplicate copy of the tax credit certificate to the State Tax Commission.
             289          (6) A business entity, local government entity, or community development and renewal
             290      agency may not claim a tax credit unless the business entity, local government entity, or
             291      community development and renewal agency has a tax credit certificate issued by the office.
             292          (7) (a) A business entity, local government entity, or community development and
             293      renewal agency may claim a tax credit in the amount listed on the tax credit certificate on its
             294      tax return.
             295          (b) A business entity, local government entity, or community development and renewal
             296      agency that claims a tax credit under this section shall retain the tax credit certificate in
             297      accordance with Section 59-7-614.2 or 59-10-1107 .
             298          Section 4. Section 63M-1-2406 is amended to read:
             299           63M-1-2406. Report to the Legislature -- Posting monthly and annual reports --
             300      Audit and study of tax credits.
             301          (1) The office shall submit an annual written report to the Economic Development and
             302      Workforce Services Interim Committee describing:
             303          [(1)] (a) its success in attracting new commercial projects to development zones under
             304      this part and the corresponding increase in new incremental jobs;
             305          [(2)] (b) the estimated amount of tax credit commitments made by the office and the
             306      period of time over which tax credits will be paid; [and]
             307          [(3)] (c) the economic impact on the state related to generating new state revenues and
             308      providing tax credits under this part[.];
             309          (d) the estimated costs and economic benefits of the tax credit commitments that the


             310      office made;
             311          (e) the actual costs and economic benefits of the tax credit commitments that the office
             312      made; and
             313          (f) tax credit commitments that the office made, with the associated calculation.
             314          (2) The office shall post the annual report under Subsection (1) on its website and on a
             315      state website.
             316          (3) The office shall monthly post on its website and on a state website:
             317          (a) the new tax credit commitments that the office made during the previous month;
             318      and
             319          (b) the estimated costs and economic benefits of those tax credit commitments.
             320          (4) (a) On or before November 1, 2014, and every five years after November 1, 2014,
             321      the office shall:
             322          (i) conduct an audit of the tax credits allowed under Section 63M-1-2405 ;
             323          (ii) study the tax credits allowed under Section 63M-1-2405 ; and
             324          (iii) make recommendations concerning whether the tax credits should be continued,
             325      modified, or repealed.
             326          (b) An audit under Subsection (4)(a)(i) shall include an evaluation of:
             327          (i) the cost of the tax credits;
             328          (ii) the purposes and effectiveness of the tax credits; and
             329          (iii) the extent to which the state benefits from the tax credits.


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