S.B. 233 Enrolled

             1     

ECONOMIC DEVELOPMENT AND THE

             2     
UTAH SMALL BUSINESS JOBS ACT

             3     
2014 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: John L. Valentine

             6     
House Sponsor: Brad R. Wilson

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill modifies provisions related to economic development including creating a
             11      small business job tax credit and investment program.
             12      Highlighted Provisions:
             13          This bill:
             14          .    addresses the Industrial Assistance Account;
             15          .    addresses the relationship between the premium tax and corporate taxes;
             16          .    establishes a tax credit against premium tax liability;
             17          .    provides a sunset date;
             18          .    enacts the Utah Small Business Jobs Act, including:
             19              .    defining terms;
             20              .    providing for the certification of qualified equity investments;
             21              .    granting rulemaking authority to the office;
             22              .    allowing for recapture of the tax credit after a time to cure;
             23              .    requiring, under certain circumstances, a refundable performance deposit;
             24              .    creating the Small Business Jobs Performance Guarantee Account;
             25              .    establishing investment requirements;
             26              .    providing for ceasing of certification;
             27              .    imposing limitations on fees being paid;
             28              .    imposing new capital requirements;
             29              .    requiring reporting;


             30              .    requiring revenue impact assessment; and
             31          .     makes technical and conforming amendments.
             32      Money Appropriated in this Bill:
             33          This bill appropriates in fiscal year 2015:
             34          .    to the Governor's Office of Economic Development - Business Development, as an
             35      ongoing appropriation:
             36              .    from Dedicated Credits Revenue, $100,000.
             37      Other Special Clauses:
             38          This bill provides an effective date.
             39      Utah Code Sections Affected:
             40      AMENDS:
             41           31A-3-102 , as last amended by Laws of Utah 1994, Chapter 243
             42           59-7-102 , as last amended by Laws of Utah 2012, Chapter 369
             43           63I-1-263 , as last amended by Laws of Utah 2013, Chapters 28, 62, 101, 167, 250, and
             44      413
             45           63M-1-903 , as last amended by Laws of Utah 2012, Chapters 18 and 208
             46      ENACTS:
             47           59-9-107 , Utah Code Annotated 1953
             48           63M-1-3401 , Utah Code Annotated 1953
             49           63M-1-3402 , Utah Code Annotated 1953
             50           63M-1-3403 , Utah Code Annotated 1953
             51           63M-1-3404 , Utah Code Annotated 1953
             52           63M-1-3405 , Utah Code Annotated 1953
             53           63M-1-3406 , Utah Code Annotated 1953
             54           63M-1-3407 , Utah Code Annotated 1953
             55           63M-1-3408 , Utah Code Annotated 1953
             56           63M-1-3409 , Utah Code Annotated 1953
             57           63M-1-3410 , Utah Code Annotated 1953


             58           63M-1-3411 , Utah Code Annotated 1953
             59           63M-1-3412 , Utah Code Annotated 1953
             60     
             61      Be it enacted by the Legislature of the state of Utah:
             62          Section 1. Section 31A-3-102 is amended to read:
             63           31A-3-102. Exclusive fees and taxes.
             64          (1) The taxes and fees under this chapter, the premium taxes under Sections 59-9-101
             65      through 59-9-104 , the fees under Section 31A-31-108 , and the examination costs under Section
             66      31A-2-205 are in place of all other license fees or assessments that might otherwise be levied
             67      by the state or any other taxing body within the state.
             68          (2) An insurer that [pays] is subject to premium taxes under Sections 59-9-101 through
             69      59-9-104 is not subject to corporate franchise taxes.
             70          (3) Unless otherwise exempt, a licensee under this title is subject to real and personal
             71      property taxes.
             72          Section 2. Section 59-7-102 is amended to read:
             73           59-7-102. Exemptions.
             74          (1) Except as provided in this section, the following are exempt from a tax under this
             75      chapter:
             76          (a) an organization exempt under Section 501, Internal Revenue Code;
             77          (b) an organization exempt under Section 528, Internal Revenue Code;
             78          (c) an insurance company that is [otherwise taxed] subject to taxation on the insurance
             79      company's premiums under Chapter 9, Taxation of Admitted Insurers;
             80          (d) a local building authority as defined in Section 17D-2-102 ;
             81          (e) a farmers' cooperative; or
             82          (f) a public agency, as defined in Section 11-13-103 , with respect to or as a result of an
             83      ownership interest in:
             84          (i) a project, as defined in Section 11-13-103 ; or
             85          (ii) facilities providing additional project capacity, as defined in Section 11-13-103 .


             86          (2) Notwithstanding any other provision in this chapter or Chapter 8, Gross Receipts
             87      Tax on Certain Corporations Not Required to Pay Corporate Franchise or Income Tax Act, a
             88      person not otherwise subject to the tax imposed by this chapter or Chapter 8 is not subject to a
             89      tax imposed by Section 59-7-104 , 59-7-201 , 59-7-701 , or 59-8-104 , because of:
             90          (a) that person's ownership of tangible personal property located at the premises of a
             91      printer's facility in this state with which the person has contracted for printing; or
             92          (b) the activities of the person's employees or agents who are:
             93          (i) located solely at the premises of a printer's facility; and
             94          (ii) performing services:
             95          (A) related to:
             96          (I) quality control;
             97          (II) distribution; or
             98          (III) printing services; and
             99          (B) performed by the printer's facility in this state with which the person has contracted
             100      for printing.
             101          (3) Notwithstanding Subsection (1), an organization, company, authority, farmers'
             102      cooperative, or public agency exempt from this chapter under Subsection (1) is subject to Part
             103      8, Unrelated Business Income, to the extent provided in Part 8.
             104          (4) Notwithstanding Subsection (1)(b), to the extent the income of an organization
             105      described in Subsection (1)(b) is taxable for federal tax purposes under Section 528, Internal
             106      Revenue Code, the organization's income is also taxable under this chapter.
             107          Section 3. Section 59-9-107 is enacted to read:
             108          59-9-107. Nonrefundable small business jobs credit.
             109          (1) As used in this section:
             110          (a) "Credit allowance date" is as defined in Section 63M-1-3402 .
             111          (b) "Office" is as defined in Section 63M-1-102 .
             112          (c) "Tax credit certificate" is as defined in Section 63M-1-3402 .
             113          (2) An entity may claim a nonrefundable tax credit against a tax liability under this


             114      chapter in accordance with this section if the entity is issued a tax credit certificate by the office
             115      under Subsection 63M-1-3403 (11). The office shall issue a tax credit certificate to an entity
             116      that is allocated tax credits under Subsection 63M-1-3403(11)(e).
             117          (3) The tax credit under this section is the amount listed as the tax credit amount on the
             118      tax credit certificate issued to the entity for the calendar year.
             119          (4) An entity may carry forward a tax credit under this section for seven years if:
             120          (a) the entity is allowed to claim a tax credit under this section for a calendar year; and
             121          (b) the amount of the tax credit exceeds the entity's tax liability under this chapter for
             122      that calendar year.
             123          (5) An entity required to pay a retaliatory tax levied under this chapter for a reason
             124      other than claiming the tax credit may claim the tax credit after the retaliatory tax amount is
             125      calculated, and the tax credit may be used to offset retaliatory tax liability.
             126          (6) Notwithstanding the other provisions of this section, this section does not apply to
             127      an admitted insurer to the extent that the admitted insurer writes workers' compensation
             128      insurance in this state and has premiums taxed under Subsection 59-9-101 (2).
             129          Section 4. Section 63I-1-263 is amended to read:
             130           63I-1-263. Repeal dates, Titles 63A to 63M.
             131          (1) Section 63A-4-204 , authorizing the Risk Management Fund to provide coverage to
             132      any public school district which chooses to participate, is repealed July 1, 2016.
             133          (2) Subsections 63A-5-104 (4)(d) and (e) are repealed on July 1, 2014.
             134          (3) Section 63A-5-603 , State Facility Energy Efficiency Fund, is repealed July 1, 2016.
             135          (4) Title 63C, Chapter 4a, Constitutional and Federalism Defense Act, is repealed July
             136      1, 2018.
             137          (5) Section 53B-24-402 , rural residency training program, is repealed July 1, 2015.
             138          (6) Title 63C, Chapter 13, Prison Relocation and Development Authority Act, is
             139      repealed July 1, 2014.
             140          (7) Title 63C, Chapter 14, Federal Funds Commission, is repealed July 1, 2018.
             141          (8) Subsection 63G-6a-1402 (7) authorizing certain transportation agencies to award a


             142      contract for a design-build transportation project in certain circumstances, is repealed July 1,
             143      2015.
             144          (9) Title 63H, Chapter 4, Heber Valley Historic Railroad Authority, is repealed July 1,
             145      2020.
             146          (10) The Resource Development Coordinating Committee, created in Section
             147      63J-4-501 , is repealed July 1, 2015.
             148          (11) Title 63M, Chapter 1, Part 4, Enterprise Zone Act, is repealed July 1, 2018.
             149          (12) (a) Title 63M, Chapter 1, Part 11, Recycling Market Development Zone Act, is
             150      repealed January 1, 2021.
             151          (b) Subject to Subsection (12)(c), Sections 59-7-610 and 59-10-1007 regarding tax
             152      credits for certain persons in recycling market development zones, are repealed for taxable
             153      years beginning on or after January 1, 2021.
             154          (c) A person may not claim a tax credit under Section 59-7-610 or 59-10-1007 :
             155          (i) for the purchase price of machinery or equipment described in Section 59-7-610 or
             156      59-10-1007 , if the machinery or equipment is purchased on or after January 1, 2021; or
             157          (ii) for an expenditure described in Subsection 59-7-610 (1)(b) or 59-10-1007 (1)(b), if
             158      the expenditure is made on or after January 1, 2021.
             159          (d) Notwithstanding Subsections (12)(b) and (c), a person may carry forward a tax
             160      credit in accordance with Section 59-7-610 or 59-10-1007 if:
             161          (i) the person is entitled to a tax credit under Section 59-7-610 or 59-10-1007 ; and
             162          (ii) (A) for the purchase price of machinery or equipment described in Section
             163      59-7-610 or 59-10-1007 , the machinery or equipment is purchased on or before December 31,
             164      2020; or
             165          (B) for an expenditure described in Subsection 59-7-610 (1)(b) or 59-10-1007 (1)(b), the
             166      expenditure is made on or before December 31, 2020.
             167          (13) (a) Section 63M-1-2507 , Health Care Compact is repealed on July 1, 2014.
             168          (b) (i) The Legislature shall, before reauthorizing the Health Care Compact:
             169          (A) direct the Health System Reform Task Force to evaluate the issues listed in


             170      Subsection (13)(b)(ii), and by January 1, 2013, develop and recommend criteria for the
             171      Legislature to use to negotiate the terms of the Health Care Compact; and
             172          (B) prior to July 1, 2014, seek amendments to the Health Care Compact among the
             173      member states that the Legislature determines are appropriate after considering the
             174      recommendations of the Health System Reform Task Force.
             175          (ii) The Health System Reform Task Force shall evaluate and develop criteria for the
             176      Legislature regarding:
             177          (A) the impact of the Supreme Court ruling on the Affordable Care Act;
             178          (B) whether Utah is likely to be required to implement any part of the Affordable Care
             179      Act prior to negotiating the compact with the federal government, such as Medicaid expansion
             180      in 2014;
             181          (C) whether the compact's current funding formula, based on adjusted 2010 state
             182      expenditures, is the best formula for Utah and other state compact members to use for
             183      establishing the block grants from the federal government;
             184          (D) whether the compact's calculation of current year inflation adjustment factor,
             185      without consideration of the regional medical inflation rate in the current year, is adequate to
             186      protect the state from increased costs associated with administering a state based Medicaid and
             187      a state based Medicare program;
             188          (E) whether the state has the flexibility it needs under the compact to implement and
             189      fund state based initiatives, or whether the compact requires uniformity across member states
             190      that does not benefit Utah;
             191          (F) whether the state has the option under the compact to refuse to take over the federal
             192      Medicare program;
             193          (G) whether a state based Medicare program would provide better benefits to the
             194      elderly and disabled citizens of the state than a federally run Medicare program;
             195          (H) whether the state has the infrastructure necessary to implement and administer a
             196      better state based Medicare program;
             197          (I) whether the compact appropriately delegates policy decisions between the


             198      legislative and executive branches of government regarding the development and
             199      implementation of the compact with other states and the federal government; and
             200          (J) the impact on public health activities, including communicable disease surveillance
             201      and epidemiology.
             202          (14) (a) Title 63M, Chapter 1, Part 34, Utah Small Business Jobs Act, is repealed
             203      January 1, 2021.
             204          (b) Section 59-9-107 regarding tax credits against premium taxes is repealed for
             205      calendar years beginning on or after January 1, 2021.
             206          (c) Notwithstanding Subsection (14)(b), an entity may carry forward a tax credit in
             207      accordance with Section 59-9-107 if:
             208          (i) the person is entitled to a tax credit under Section 59-9-107 on or before December
             209      31, 2020; and
             210          (ii) the qualified equity investment that is the basis of the tax credit is certified under
             211      Section 63M-1-3403 on or before December 31, 2023.
             212          [(14)] (15) The Crime Victim Reparations and Assistance Board, created in Section
             213      63M-7-504 , is repealed July 1, 2017.
             214          [(15)] (16) Title 63M, Chapter 11, Utah Commission on Aging, is repealed July 1,
             215      2017.
             216          Section 5. Section 63M-1-903 is amended to read:
             217           63M-1-903. Industrial Assistance Account created -- Uses -- Administrator duties
             218      -- Costs.
             219          (1) There is created a restricted account within the General Fund known as the
             220      "Industrial Assistance Account" of which:
             221          (a) up to 50% may be used in economically disadvantaged rural areas;
             222          (b) up to 25% may be used to take timely advantage of economic opportunities as they
             223      arise;
             224          (c) up to 4% may be used to promote business and economic development in rural
             225      areas of the state with the Business Expansion and Retention Initiative; and


             226          (d) up to $3,000,000 [one-time shall] may be used for the purpose of incubating
             227      technology solutions related to economic and workforce development.
             228          (2) The administrator shall administer:
             229          (a) the restricted account created under Subsection (1), under the policy direction of the
             230      board; and
             231          (b) the Business Expansion and Retention Initiative for the rural areas of the state.
             232          (3) The administrator may hire appropriate support staff to perform the duties required
             233      under this section.
             234          (4) The cost of administering the restricted account shall be paid from money in the
             235      restricted account.
             236          (5) Interest accrued from investment of money in the restricted account shall remain in
             237      the restricted account.
             238          Section 6. Section 63M-1-3401 is enacted to read:
             239     
Part 34. Utah Small Business Jobs Act

             240          63M-1-3401. Title.
             241          This part is known as the "Utah Small Business Jobs Act."
             242          Section 7. Section 63M-1-3402 is enacted to read:
             243          63M-1-3402. Definitions.
             244          As used in this part:
             245          (1) "Affiliate" means an entity that directly, or indirectly through one or more
             246      intermediaries, controls, or is controlled by, or is under common control with, the entity
             247      specified.
             248          (2) "Applicable percentage" means:
             249          (a) 0% for the first two credit allowance dates;
             250          (b) 12% for the next three credit allowance dates; and
             251          (c) 11% for the next two credit allowance dates.
             252          (3) "Community Development Financial Institutions Fund" means the fund created in
             253      12 U.S.C. Sec. 4703.


             254          (4) "Credit allowance date" means with respect to a qualified equity investment:
             255          (a) the date on which the qualified equity investment is initially made; and
             256          (b) each of the six anniversary dates of the date described in Subsection (4)(a).
             257          (5) "Federal New Markets Tax Credit Program" means the program created under
             258      Section 45D, Internal Revenue Code.
             259          (6) "Long-term debt security" means a debt instrument issued by a qualified
             260      community development entity:
             261          (a) with an original maturity date of at least seven years from the date of its issuance;
             262      and
             263          (b) with no repayment, amortization, or prepayment features before its original
             264      maturity date.
             265          (7) "Purchase price" means the amount paid to the qualified community development
             266      entity that issues a qualified equity investment for the qualified equity investment that may not
             267      exceed the amount of qualified equity investment authority certified pursuant to Section
             268      63M-1-3403 .
             269          (8) (a) "Qualified active low-income community business" is as defined in Section
             270      45D, Internal Revenue Code, and 26 C.F.R. Sec. 1.45D-1, but is limited to those businesses
             271      meeting the United States Small Business Administration size eligibility standards established
             272      in 13 C.F.R. Sec. 121.101-201 at the time the qualified low-income community investment is
             273      made.
             274          (b) Notwithstanding Subsection (8)(a), "qualified active low-income community
             275      business" does not include a business that derives or projects to derive 15% or more of its
             276      annual revenue from the rental or sale of real estate, unless the business is controlled by or
             277      under common control with another business if the second business:
             278          (i) does not derive or project to derive 15% or more of its annual revenue from the
             279      rental or sale of real estate; and
             280          (ii) is the primary tenant of the real estate leased from the initial business.
             281          (c) A business is considered a qualified active low-income community business for the


             282      duration of the qualified community development entity's investment in, or loan to, the
             283      business if the qualified community development entity reasonably expects, at the time it
             284      makes the investment or loan, that the business will continue to satisfy the requirements for
             285      being a qualified active low-income community business, other than the United States Small
             286      Business Administration size standards, throughout the entire period of the investment or loan.
             287          (9) (a) "Qualified community development entity" is as defined in Section 45D,
             288      Internal Revenue Code, if the entity has entered into an allocation agreement with the
             289      Community Development Financial Institutions Fund of the United States Treasury
             290      Department with respect to credits authorized by Section 45D, Internal Revenue Code, that
             291      includes Utah within the service area set forth in the allocation agreement.
             292          (b) An entity may not be considered to be controlled by another entity solely as a result
             293      of the entity having made a direct or indirect equity investment in the other entity that earns tax
             294      credits under Section 45D, Internal Revenue Code, or in a similar state program.
             295          (c) "Qualified community development entity" includes a subsidiary community
             296      development entity of a qualified community development entity.
             297          (10) (a) "Qualified equity investment" means an equity investment in, or long-term
             298      debt security issued by, a qualified community development entity that:
             299          (i) is acquired on or after September 2, 2014, at its original issuance solely in exchange
             300      for cash;
             301          (ii) has at least 85% of its cash purchase price used by the qualified community
             302      development entity to make qualified low-income community investments in qualified active
             303      low-income community businesses located in this state by the first anniversary of the initial
             304      credit allowance date; and
             305          (iii) is designated by the qualified community development entity as a qualified equity
             306      investment and is certified by the office pursuant to Section 63M-1-3403 .
             307          (b) Notwithstanding Subsection (10)(a), "qualified equity investment" includes a
             308      qualified equity investment that does not meet the provisions of Subsection (10)(a) if the
             309      investment was a qualified equity investment in the hands of a prior holder.


             310          (11) "Qualified low-income community investment" means a capital or equity
             311      investment in, or a loan to, a qualified active low-income community business, except, with
             312      respect to any one qualified active low-income community business, the maximum amount of
             313      qualified low-income community investments made in such business, on a collective basis with
             314      all of the business's affiliates, with the proceeds of qualified equity investments certified under
             315      Section 63M-1-3403 shall be $4,000,000, exclusive of qualified low-income community
             316      investments made with repaid or redeemed qualified low-income community investments or
             317      interest or profits realized on the repaid or redeemed qualified low-income community
             318      investments.
             319          (12) "Tax credit certificate" is a certificate issued by the office under Subsection
             320      63M-1-3403 (11) to an entity eligible for a tax credit under Section 59-9-107 that:
             321          (a) lists the name of the entity eligible for a tax credit;
             322          (b) lists the entity's taxpayer identification number;
             323          (c) lists the amount of tax credit that the office determines the entity is eligible for the
             324      calendar year; and
             325          (d) may include other information as determined by the office.
             326          Section 8. Section 63M-1-3403 is enacted to read:
             327          63M-1-3403. Certification of qualified equity investments -- Issuance of tax credit
             328      related certificates.
             329          (1) A qualified community development entity that seeks to have an equity investment
             330      or long-term debt security certified as a qualified equity investment and as eligible for tax
             331      credits under Section 59-9-107 shall apply to the office. The office shall begin accepting
             332      applications on September 2, 2014. The qualified community development entity shall include
             333      the following in the qualified community development entity's application:
             334          (a) evidence of the applicant's certification as a qualified community development
             335      entity, including evidence of the service area of the applicant that includes this state;
             336          (b) a copy of an allocation agreement executed by the applicant, or its controlling
             337      entity, and the Community Development Financial Institutions Fund;


             338          (c) a certificate executed by an executive officer of the applicant attesting that:
             339          (i) the applicant or its controlling entity has received more than one allocation of
             340      qualified equity investment authority under the Federal New Markets Tax Credit Program; and
             341          (ii) the allocation agreement submitted with the application remains in effect and has
             342      not been revoked or cancelled by the Community Development Financial Institutions Fund;
             343          (d) a description of the proposed amount, structure, and purchaser of the qualified
             344      equity investment;
             345          (e) examples of the types of qualified active low-income businesses in which the
             346      applicant, its controlling entity, or affiliates of its controlling entity have invested under the
             347      Federal New Markets Tax Credit Program, except that when submitting an application an
             348      applicant is not required to identify qualified active low-income community businesses in
             349      which the applicant will invest;
             350          (f) the amount of qualified equity investment authority the applicant agrees to
             351      designate as a federal qualified equity investment under Section 45D, Internal Revenue Code,
             352      including a copy of the screen shot from the Community Development Financial Institutions
             353      Fund's Allocation Tracking System of the applicant's remaining federal qualified equity
             354      investment authority;
             355          (g) if applicable, the refundable performance deposit required by Subsection
             356      63M-1-3406 (1);
             357          (h) a copy of a certificate of qualified equity investment authority under another state's
             358      new markets tax credit program; and
             359          (i) evidence that the applicant, its controlling entity, and subsidiary qualified
             360      community development entities of the controlling entity have collectively made at least
             361      $40,000,000 in qualified low-income community investments under the Federal New Markets
             362      Tax Credit Program and other state's new markets tax credit programs with a maximum
             363      qualified low-income community investment size of $4,000,000 per business.
             364          (2) (a) Within 30 days after receipt of a completed application containing the
             365      information set forth in Subsection (1), including, if applicable, the refundable performance


             366      deposit, the office shall grant or deny the application in full or in part.
             367          (b) If the office denies any part of the application, the office shall inform the applicant
             368      of the grounds for the denial. If the applicant provides additional information required by the
             369      office or otherwise completes its application within 15 days of the notice of denial, the
             370      application shall be considered completed as of the original date of submission.
             371          (c) If the applicant fails to provide the information or complete its application within
             372      the 15-day period:
             373          (i) the application is denied;
             374          (ii) the applicant shall resubmit an application in full with a new submission date; and
             375          (iii) the office shall return any refundable performance deposit required by Subsection
             376      63M-1-3406 (1).
             377          (3) (a) If the application is complete, the office shall certify the proposed equity
             378      investment or long-term debt security as a qualified equity investment, subject to the limitation
             379      contained in Subsection (6).
             380          (b) The office shall provide written notice of the certification to the qualified
             381      community development entity.
             382          (4) The office shall certify qualified equity investments in the order applications are
             383      received by the office. Applications received on the same day are considered to have been
             384      received simultaneously.
             385          (5) For applications that are complete and received on the same day, the office shall
             386      certify, consistent with remaining qualified equity investment capacity, qualified equity
             387      investments of applicants as follows:
             388          (a) First, the office shall certify applications by applicants that agree to designate
             389      qualified equity investments as federal qualified equity investments in accordance with
             390      Subsection (1)(f) in proportionate percentages based upon the ratio of the amount of qualified
             391      equity investments requested in an application to be designated as federal qualified equity
             392      investments to the total amount of qualified equity investments to be designated as federal
             393      qualified equity investments requested in all applications received on the same day.


             394          (b) After complying with Subsection (5)(a), the office shall certify the qualified equity
             395      investments of all other applicants, including the remaining qualified equity investment
             396      authority requested by applicants not designated as federal qualified equity investments in
             397      accordance with Subsection (1)(f), in proportionate percentages based upon the ratio of the
             398      amount of qualified equity investments requested in the applications to the total amount of
             399      qualified equity investments requested in all applications received on the same day.
             400          (6) (a) The office shall certify $50,000,000 in qualified equity investments pursuant to
             401      this section. If a pending request cannot be fully certified due to this limit, the office shall
             402      certify the portion that may be certified unless the qualified community development entity
             403      elects to withdraw its request rather than receive partial certification.
             404          (b) If a qualified community development entity withdraws its request pursuant to
             405      Subsection (6)(a), the office shall return any refundable performance deposit required by
             406      Subsection 63M-1-3406 (1).
             407          (c) A partial certification does not decrease the amount of the refundable performance
             408      deposit required under Subsection 63M-1-3406 (1).
             409          (7) An approved applicant may transfer all or a portion of its certified qualified equity
             410      investment authority to its controlling entity or a subsidiary qualified community development
             411      entity of the controlling entity, provided that the applicant and the transferee notify the office of
             412      the transfer with the notice set forth in Subsection (8) and include with the notice the
             413      information required in the application with respect to the transferee.
             414          (8) (a) Within 45 days of the applicant receiving notice of certification, the qualified
             415      community development entity or any transferee under Subsection (7) shall:
             416          (i) issue the qualified equity investment;
             417          (ii) receive cash in the amount of the certified amount; and
             418          (iii) if applicable, designate the required amount of qualified equity investment
             419      authority as federal qualified equity investments.
             420          (b) The qualified community development entity or transferee under Subsection (7)
             421      shall provide the office with evidence of the receipt of the cash investment and designation of


             422      the qualified equity investment as a federal qualified equity investment within 50 days of the
             423      applicant receiving notice of certification.
             424          (c) The certification under this section lapses and the qualified community
             425      development entity may not issue the qualified equity investment without reapplying to the
             426      office for certification if, within 45 days following receipt of the certification notice, the
             427      qualified community development entity or any transferee under Subsection (7) does not:
             428          (i) receive the cash investment;
             429          (ii) issue the qualified equity investment; and
             430          (iii) if applicable, designate the required amount of qualified equity investment
             431      authority as federal qualified equity investments.
             432          (d) A lapsed certification under this Subsection (8) reverts back to the office and shall
             433      be reissued as follows:
             434          (i) first, pro rata to applicants whose qualified equity investment allocations were
             435      reduced under Subsection (5)(a), if applicable;
             436          (ii) second, pro rata to applicants whose qualified equity investment allocations were
             437      reduced under Subsection (5)(b); and
             438          (iii) after complying with Subsections (8)(d)(i) and (ii), in accordance with the
             439      application process.
             440          (e) (i) The office shall:
             441          (A) calculate an annual fee to be paid by each applicant certified pursuant to
             442      Subsection (3)(a), regardless of the number of transferees under Subsection (7), by dividing
             443      $100,000 by the number of applications certified pursuant to Subsection (3)(a); and
             444          (B) notify each successful applicant of the amount of the annual fee.
             445          (ii) The initial annual fee shall be due and payable to the office with the evidence of
             446      receipt of cash investment set forth in Subsection (8)(b). After the initial annual fee, an annual
             447      fee shall be due and payable to the office with each report submitted pursuant to Section
             448      63M-1-3410 .
             449          (iii) An annual fee may not be required once a qualified community development entity


             450      together with all transferees under Subsection (7) have decertified all qualified equity
             451      investments in accordance with Subsection 63M-1-3407 (2).
             452          (iv) To maintain an aggregate annual fee of $100,000 for all qualified community
             453      development entities, the office shall recalculate the annual fee as needed upon:
             454          (A) the lapse of any certification under Subsection (8)(c);
             455          (B) the recapture of tax credits pursuant to Section 63M-1-3404 ; or
             456          (C) the decertification of qualified equity investments pursuant to Subsection
             457      63M-1-3407 (2).
             458          (v) An annual fee collected under this Subsection (8)(e) shall be deposited into the
             459      General Fund as a dedicated credit for use by the office to implement this part.
             460          (9) A qualified community development entity that issues a debt instrument described
             461      in Subsection 63M-1-3402 (6) may not make cash interest payments on the debt instrument
             462      during the period beginning on the date of issuance and ending on the final credit allowance
             463      date in an amount that exceeds the cumulative operating income, as defined by regulations
             464      adopted under Section 45D, Internal Revenue Code, of the qualified community development
             465      entity for that period before giving effect to the interest expense of the long-term debt security.
             466      This Subsection (9) does not limit the holder of the debt instrument's ability to accelerate
             467      payments on the debt instrument in situations when the qualified community development
             468      entity has defaulted on covenants designed to ensure compliance with this part or Section 45D,
             469      Internal Revenue Code.
             470          (10) (a) A qualified community development entity that issues qualified equity
             471      investments shall notify the office of the names of the entities that are eligible to use tax credits
             472      under this section and Section 59-9-107 :
             473          (i) pursuant to an allocation of tax credits;
             474          (ii) pursuant to a change in allocation of tax credits; or
             475          (iii) due to a transfer of a qualified equity investment.
             476          (b) The office may by rule, made in accordance with Title 63G, Chapter 3, Utah
             477      Administrative Rulemaking Act, provide for the form and content of the notice required under


             478      this Subsection (10).
             479          (11) (a) An entity may claim a tax credit under Section 59-9-107 against tax liability
             480      under Title 59, Chapter 9, Taxation of Admitted Insurers, if the entity:
             481          (i) makes a qualified equity investment; and
             482          (ii) obtains a tax credit certificate in accordance with Subsection (11)(b).
             483          (b) For each calendar year, beginning with calendar year 2016, an entity is eligible for a
             484      tax credit under this section and Section 59-9-107 , the office shall issue to the entity a tax
             485      credit certificate for use after January 1, 2017, and provide the State Tax Commission a copy of
             486      the tax credit certificate.
             487          (c) On each credit allowance date of the qualified equity investment, the entity that
             488      made the qualified equity investment, or the subsequent holder of the qualified equity
             489      investment, may claim a portion of the tax credit during the calendar year that includes the
             490      credit allowance date.
             491          (d) The office shall calculate the tax credit amount and the tax credit amount shall be
             492      equal to the applicable percentage for the credit allowance date multiplied by the purchase
             493      price paid to the qualified community development entity for the qualified equity investment.
             494          (e) A tax credit allowed to a partnership, limited liability company, or S-corporation
             495      shall be allocated to the partners, members, or shareholders of the partnership, limited liability
             496      company, or S-corporation for the partners', members', or shareholders' direct use in accordance
             497      with the provisions of any agreement among the partners, members, or shareholders.
             498          (f) An entity may not sell a tax credit allowed under this section on the open market.
             499          (12) (a) An entity that claims a tax credit under Section 59-9-107 and this section shall
             500      provide the office with a document that expressly directs and authorizes the State Tax
             501      Commission to disclose the entity's tax returns and other information concerning the entity that
             502      are required by the office and that would otherwise be subject to confidentiality under Section
             503      59-1-403 or Section 6103, Internal Revenue Code, to the office.
             504          (b) The office shall submit the document described in Subsection (12)(a) to the State
             505      Tax Commission.


             506          (c) Upon receipt of the document described in Subsection (12)(a), the State Tax
             507      Commission shall provide the office with the information requested by the office that the entity
             508      authorized the State Tax Commission to provide to the office in the document described in
             509      Subsection (12)(a).
             510          Section 9. Section 63M-1-3404 is enacted to read:
             511          63M-1-3404. Recapture.
             512          (1) The office may recapture a tax credit from an entity that claimed the tax credit
             513      allowed under Section 59-9-107 on a return, if any of the following occur:
             514          (a) If any amount of a federal tax credit available with respect to a qualified equity
             515      investment that is eligible for a tax credit under this part is recaptured under Section 45D,
             516      Internal Revenue Code, the office may recapture the tax credit in an amount that is
             517      proportionate to the federal recapture with respect to the qualified equity investment.
             518          (b) If the qualified community development entity redeems or makes principal
             519      repayment with respect to a qualified equity investment before the seventh anniversary of the
             520      issuance of the qualified equity investment, the office may recapture an amount proportionate
             521      to the amount of the redemption or repayment with respect to the qualified equity investment.
             522          (c) (i) If the qualified community development entity fails to invest an amount equal to
             523      85% of the purchase price of the qualified equity investment in qualified low-income
             524      community investments in Utah within 12 months of the issuance of the qualified equity
             525      investment and maintains at least 85% of the level of investment in qualified low-income
             526      community investments in Utah until the last credit allowance date for the qualified equity
             527      investment, the office may recapture the tax credit.
             528          (ii) For purposes of this part, an investment is considered held by a qualified
             529      community development entity even if the investment has been sold or repaid if the qualified
             530      community development entity reinvests an amount equal to the capital returned to or
             531      recovered by the qualified community development entity from the original investment,
             532      exclusive of any profits realized, in another qualified low-income community investment
             533      within 12 months of the receipt of the capital.


             534          (iii) Periodic amounts received as repayment of principal pursuant to regularly
             535      scheduled amortization payments on a loan that is a qualified low-income community
             536      investment shall be treated as continuously invested in a qualified low-income community
             537      investment if the amounts are reinvested in one or more qualified low-income community
             538      investments by the end of the following calendar year.
             539          (iv) A qualified community development entity is not required to reinvest capital
             540      returned from a qualified low-income community investment after the sixth anniversary of the
             541      issuance of the qualified equity investment, and the qualified low-income community
             542      investment shall be considered held by the qualified community development entity through
             543      the seventh anniversary of the qualified equity investment's issuance.
             544          (d) If a qualified community development entity makes a distribution or debt payment
             545      in violation of Subsection 63M-1-3407 (1), the office may recapture the tax credit.
             546          (e) If there is a violation of Section 63M-1-3409 , the office may recapture the tax
             547      credit.
             548          (2) A recaptured tax credit and the related qualified equity investment authority revert
             549      back to the office and shall be reissued:
             550          (a) first, pro rata to applicants whose qualified equity investment allocations were
             551      reduced under Subsection 63M-1-3403 (5)(a);
             552          (b) second, pro rata to applicants whose qualified equity investment allocations were
             553      reduced under Subsection 63M-1-3403 (5)(b); and
             554          (c) after complying with Subsections (2)(a) and (b), in accordance with the application
             555      process.
             556          Section 10. Section 63M-1-3405 is enacted to read:
             557          63M-1-3405. Notice of noncompliance.
             558          Enforcement of a recapture provision under Subsection 63M-1-3404 (1) is subject to a
             559      six-month cure period. The office may not recapture a tax credit until the office notifies the
             560      qualified community development entity of noncompliance and affords the qualified
             561      community development entity six months from the date of the notice to cure the


             562      noncompliance.
             563          Section 11. Section 63M-1-3406 is enacted to read:
             564          63M-1-3406. Refundable performance deposit -- Small Business Jobs
             565      Performance Guarantee Account.
             566          (1) (a) A qualified community development entity that seeks to have an equity
             567      investment or long-term debt security certified as a qualified equity investment and as eligible
             568      for tax credits under Section 59-9-107 shall pay a deposit in the amount of .5% of the amount
             569      of the equity investment or long-term debt security requested in an application to be certified as
             570      a qualified equity investment to the office for deposit into the Small Business Jobs
             571      Performance Guarantee Account.
             572          (b) (i) There is created in the General Fund a restricted account known as the "Small
             573      Business Jobs Performance Guarantee Account" that consists of deposits made under
             574      Subsection (1)(a).
             575          (ii) The Small Business Jobs Performance Guarantee Account does not earn interest.
             576          (iii) At the end of a fiscal year, any amount in the Small Business Jobs Performance
             577      Guarantee Account that a qualified community development entity forfeits under this section is
             578      to be transferred to the General Fund.
             579          (iv) The office shall work with the Division of Finance to ensure that money in the
             580      Small Business Jobs Performance Guarantee Account is properly accounted for at the end of
             581      each fiscal year.
             582          (c) A qualified community development entity shall forfeit the deposit required under
             583      Subsection (1)(a) in its entirety if:
             584          (i) the qualified community development entity and its subsidiary qualified community
             585      development entities fail to issue the total amount of qualified equity investments certified by
             586      the office and receive cash in the total amount certified under Section 63M-1-3403 ; or
             587          (ii) the qualified community development entity or any subsidiary qualified community
             588      development entity that issues a qualified equity investment certified under this part fails to
             589      make qualified low-income community investments in qualified active low-income community


             590      businesses in Utah equal to at least 85% of the purchase price of the qualified equity
             591      investment by the second credit allowance date of such qualified equity investment.
             592          (d) The six-month cure period established under Section 63M-1-3405 is not applicable
             593      to the forfeiture of a deposit under Subsection (1)(c).
             594          (2) A deposit required under Subsection (1) shall be paid to the office and held in the
             595      Small Business Jobs Performance Guarantee Account until such time as compliance with this
             596      Subsection (2) is established. A qualified community development entity may request a refund
             597      of the deposit from the office no sooner than 30 days after the qualified community
             598      development entity and all transferees under Subsection 63M-1-3403 (7) have invested 85% of
             599      the purchase price of the qualified equity investment authority certified by the office pursuant
             600      to Subsection 63M-1-3403 (3). The office has 30 days to comply with the request for a refund
             601      or give notice of noncompliance.
             602          Section 12. Section 63M-1-3407 is enacted to read:
             603          63M-1-3407. 150% investment requirement -- Ceasing of certification.
             604          (1) (a) Once certified under Section 63M-1-3403 , a qualified equity investment shall
             605      remain certified until all of the requirements of Subsection (2) have been met.
             606          (b) Until such time as the qualified equity investments issued by a qualified community
             607      development entity are no longer certified, the qualified community development entity may
             608      not distribute to its equity holders or make cash payments on long-term debt securities that
             609      have been certified as qualified equity investments in an amount that exceeds the sum of:
             610          (i) the cumulative operating income, as defined by regulations adopted under Section
             611      45D, Internal Revenue Code, earned by the qualified community development entity since
             612      issuance of the qualified equity investment, before giving effect to any interest expense from
             613      long-term debt securities certified as qualified equity investments; and
             614          (ii) 50% of the purchase price of the qualified equity investments issued by the
             615      qualified community development entity.
             616          (2) Subject to the other provisions of this section, a qualified equity investment ceases
             617      to be certified when:


             618          (a) it is beyond its seventh credit allowance date;
             619          (b) the qualified community development entity issuing the qualified equity investment
             620      has been in compliance with Section 63M-1-3404 through its seventh credit allowance date,
             621      including any cures under Section 63M-1-3405 ;
             622          (c) the qualified community development entity issuing such qualified equity
             623      investment has used the cash purchase of such qualified equity investment, together with
             624      capital returned, repaid, or redeemed or profits realized with qualified low-income community
             625      investments, to invest in qualified active low-income community businesses such that the total
             626      qualified low-income community investments made, cumulatively including reinvestments,
             627      exceeds 150% of the qualified equity investment; and
             628          (d) the qualified community development complies with Subsection (4).
             629          (3) For purposes of making the calculation under Subsection (2)(c), qualified
             630      low-income community investments to any one qualified active low-income community
             631      business, on a collective basis with its affiliates, in excess of $4,000,000 may not be included,
             632      unless such investments are made with capital returned or repaid from qualified low-income
             633      community investments made by the qualified community development entity in other
             634      qualified active low-income community businesses or interest earned on or profits realized
             635      from any qualified low-income community investments.
             636          (4) A qualified community development entity shall file a request for ceasing
             637      certification of a qualified equity investment in a form, provided by the office, that establishes
             638      that the qualified community development entity has met the requirements of Subsection (2)
             639      along with evidence supporting the request for ceasing certification. Subsection (2)(b) shall be
             640      considered to be met if no recapture action has been commenced by the office as of the seventh
             641      credit allowance date.
             642          (5) (a) A request for ceasing certification may not be unreasonably denied and the
             643      office shall respond to the request within 30 days of the office receiving the request.
             644          (b) Upon grant of a request for ceasing certification, the qualified community
             645      development entity is no longer subject to Section 63M-1-3410 .


             646          (c) If the request is denied for any reason, the office has the burden of proof in any
             647      administrative or legal proceeding that follows.
             648          Section 13. Section 63M-1-3408 is enacted to read:
             649          63M-1-3408. Limitation on fees.
             650          (1) A qualified community development entity or purchaser of a qualified equity
             651      investment may not pay to any qualified community development entity or affiliate of a
             652      qualified community development entity any fee in connection with any activity under this part
             653      before meeting the requirements of Subsection 63M-1-3407 (2) with respect to all qualified
             654      equity investments issued by such qualified community development entity and its affiliates.
             655          (2) Subsection (1) does not prohibit the allocation or distribution of income earned by a
             656      qualified community development entity or purchaser of a qualified equity investment to the
             657      qualified community development entity's or purchaser's equity owners or the payment of
             658      reasonable interest on amounts lent to a qualified community development entity or purchaser
             659      of a qualified equity investment.
             660          Section 14. Section 63M-1-3409 is enacted to read:
             661          63M-1-3409. New capital requirement.
             662          (1) A qualified active low-income community business that receives a qualified
             663      low-income community investment from a qualified community development entity that issues
             664      qualified equity investments under this part, or any affiliates of a qualified active low-income
             665      community business, may not directly or indirectly:
             666          (a) own or have the right to acquire an ownership interest in a qualified community
             667      development entity or member or affiliate of a qualified community development entity,
             668      including a holder of a qualified equity investment issued by the qualified community
             669      development entity; or
             670          (b) loan to or invest in a qualified community development entity or member or
             671      affiliate of a qualified community development entity, including a holder of a qualified equity
             672      investment issued by a qualified community development entity when the proceeds of the loan
             673      or investment are directly or indirectly used to fund or refinance the purchase of a qualified


             674      equity investment under this part.
             675          (2) For purposes of this section, a qualified community development entity may not be
             676      considered an affiliate of a qualified active low-income community business solely as a result
             677      of its qualified low-income community investment in the business.
             678          Section 15. Section 63M-1-3410 is enacted to read:
             679          63M-1-3410. Reporting.
             680          (1) A qualified community development entity that issues qualified equity investments
             681      shall submit a report to the office within the first five business days after the first anniversary
             682      of the initial credit allowance date that provides documentation as to the investment of 85% of
             683      the purchase price in qualified low-income community investments in qualified active
             684      low-income community businesses located in Utah. The report shall include:
             685          (a) a bank statement of the qualified community development entity evidencing each
             686      qualified low-income community investment; and
             687          (b) evidence that the business was a qualified active low-income community business
             688      at the time of the qualified low-income community investment.
             689          (2) After the initial report under Subsection (1), a qualified community development
             690      entity shall submit an annual report to the office within 60 days of the beginning of the
             691      calendar year during the compliance period. An annual report is not due before the first
             692      anniversary of the initial credit allowance date. The annual report shall include the following:
             693          (a) the number of employment positions created and retained as a result of qualified
             694      low-income community investments;
             695          (b) the average annual salary of positions described in Subsection (2)(a); and
             696          (c) certification from the qualified community development entity that the grounds for
             697      recapture under Section 63M-1-3404 have not occurred.
             698          Section 16. Section 63M-1-3411 is enacted to read:
             699          63M-1-3411. Revenue impact assessment.
             700          (1) Before making a qualified low-income community investment, a qualified
             701      community development entity shall submit to the office a revenue impact assessment prepared


             702      using a nationally recognized economic development model that demonstrates that the
             703      qualified low-income community investment will have a revenue positive impact on the state
             704      over 10 years against the 58% tax credit utilization over the same 10-year period.
             705          (2) The office must notify the qualified community development entity within five
             706      business days if the qualified low-income community investment does not have a revenue
             707      positive impact on the state over 10 years against the 58% tax credit utilization over the same
             708      10-year period using the revenue impact assessment submitted.
             709          (3) If the office determines that the revenue impact assessment does not reflect a
             710      revenue positive qualified low-income community investment, the office may waive the
             711      requirement under this section if the office determines that the proposed qualified low-income
             712      community investment will further economic development.
             713          Section 17. Section 63M-1-3412 is enacted to read:
             714          63M-1-3412. Scope of part.
             715          This part applies only to a return or report originally due on or after September 2, 2014.
             716          Section 18. Appropriation.
             717          Under the terms and conditions of Title 63J, Chapter 1, Budgetary Procedures Act, for
             718      the fiscal year beginning July 1, 2014, and ending June 30, 2015, the following sums of money
             719      are appropriated from resources not otherwise appropriated, or reduced from amounts
             720      previously appropriated, out of the funds or accounts indicated. These sums of money are in
             721      addition to any amounts previously appropriated for fiscal year 2015.
             722          To Governor's Office of Economic Development - Business Development
             723              From Dedicated Credits Revenue
$100,000

             724              Schedule of Programs:
             725                  Corporate Recruitment and Business Services    $100,000
             726          Section 19. Effective date.
             727          (1) Except as provided in Subsection (2), this bill takes effect on September 2, 2014.
             728          (2) Uncodified Section 18, Appropriation, takes effect on July 1, 2014.


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