Representative Stephen G. Handy proposes the following substitute bill:


1     
URBAN REDEVELOPMENT TAX CREDIT

2     
2016 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Stephen G. Handy

5     
Senate Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill creates an urban redevelopment tax credit.
10     Highlighted Provisions:
11          This bill:
12          ▸     creates a nonrefundable urban redevelopment tax credit;
13          ▸     provides a process by which a qualified investor may claim an urban redevelopment
14     tax credit; and
15          ▸     requires the developer to submit an annual report regarding an urban redevelopment
16     project.
17     Money Appropriated in this Bill:
18          None
19     Other Special Clauses:
20          This bill provides a special effective date.
21     Utah Code Sections Affected:
22     ENACTS:
23          35A-8-2101, Utah Code Annotated 1953
24          35A-8-2102, Utah Code Annotated 1953
25          35A-8-2103, Utah Code Annotated 1953

26          35A-8-2104, Utah Code Annotated 1953
27          35A-8-2105, Utah Code Annotated 1953
28          35A-8-2106, Utah Code Annotated 1953
29          59-7-621, Utah Code Annotated 1953
30          59-10-1036, Utah Code Annotated 1953
31     

32     Be it enacted by the Legislature of the state of Utah:
33          Section 1. Section 35A-8-2101 is enacted to read:
34     
Part 21. Urban Redevelopment Tax Credit

35          35A-8-2101. Title.
36          This part is known as "Urban Redevelopment Tax Credit."
37          Section 2. Section 35A-8-2102 is enacted to read:
38          35A-8-2102. Definitions.
39          (1) "Agency" means a community development and renewal agency as defined in
40     Section 17C-1-102.
41          (2) "Community" means a county, city, or town within which an urban redevelopment
42     project is located or is proposed to be located.
43          (3) "Credit allowance date" means:
44          (a) the date on which a qualified investor first claims a tax credit; and
45          (b) each of the nine anniversary dates of the date described in Subsection (3)(a).
46          (4) "Developer" means a person that executes a development agreement with an agency
47     for the purpose of constructing an urban redevelopment project.
48          (5) (a) "Local contribution" means money, an asset, or other valuable contribution that
49     the community or the agency agrees to contribute to an urban redevelopment project, including:
50          (i) simplified procedures for obtaining a permit;
51          (ii) dedication of an available government grant;
52          (iii) infrastructure improvements;
53          (iv) a utility rate concession; or
54          (v) any portion of the agency's housing funds, as defined in Section 17C-1-102.
55          (b) Except as provided in Subsection (5)(a)(v), "local contribution" does not include
56     tax increment, as defined in Section 17C-1-102.

57          (6) "Long-term debt instrument" means a debt instrument issued by an investor:
58          (a) with an original maturity date of at least 10 years after the day on which the debt
59     instrument is issued; and
60          (b) with no repayment, amortization, or prepayment features before the debt
61     instrument's maturity date.
62          (7) "Project" means a redevelopment project that improves previously developed land,
63     including:
64          (a) constructing or altering the land; or
65          (b) demolishing, constructing, or reconstructing a building.
66          (8) "Qualified investment" means an investment in an urban redevelopment project
67     that:
68          (a) includes:
69          (i) an equity investment; or
70          (ii) a long-term debt instrument; and
71          (b) is certified by the division in accordance with Section 35A-8-2105.
72          (9) "Qualified investor" means a person, including a developer, that makes a qualified
73     investment and is eligible to claim a tax credit.
74          (10) "Tax credit" means a nonrefundable tax credit for an urban redevelopment project
75     as described in Section 59-7-621 or 59-10-1036.
76          (11) "Tax credit allocation" means the amount of a tax credit that a qualified investor is
77     eligible to claim.
78          (12) "Tax credit certificate" means a certificate issued by the division to a qualified
79     investor that:
80          (a) states the qualified investor's:
81          (i) name; and
82          (ii) tax identification number;
83          (b) confirms that the division authorizes the qualified investor to receive a tax credit;
84          (c) states the amount of tax credit that the division authorizes the qualified investor to
85     receive for the calendar year; and
86          (d) includes any other information determined by the division.
87          (13) "Urban redevelopment project" means a project that meets the requirements of

88     Subsection 35A-8-2103(5).
89          Section 3. Section 35A-8-2103 is enacted to read:
90          35A-8-2103. Tax credit -- Eligibility -- Application process.
91          (1) An agency shall, in accordance with this section, make a recommendation to the
92     division regarding:
93          (a) whether a project is an urban redevelopment project;
94          (b) whether an investment is a qualified investment; and
95          (c) the amount of the qualified investor's tax credit allocation.
96          (2) A developer seeking a recommendation from an agency shall file an application
97     with the agency that includes:
98          (a) a letter of intent from an investor that states the amount of the investor's investment
99     in the project;
100          (b) a detailed estimation of the project's total costs;
101          (c) a statement that includes the amount and source of all money that the developer will
102     use to pay for the project, including documentation of the developer's own equity; and
103          (d) any other documentation the agency requests.
104          (3) Upon receipt of a complete application described in Subsection (2), an agency
105     shall:
106          (a) provide notice and hold a public hearing in accordance with Title 17C, Chapter 2,
107     Part 4, Hearing and Notice Requirements; and
108          (b) at the public hearing:
109          (i) evaluate the developer's application using the criteria described in Subsections (5)
110     and (6); and
111          (ii) by resolution:
112          (A) make a recommendation described in Subsection (1); and
113          (B) certify the amount of any local contribution.
114          (4) After the agency adopts a resolution described in Subsection (3)(b)(ii), a qualified
115     investor may apply to the division for a tax credit certificate in accordance with Section
116     35A-8-2104.
117          (5) An agency may recommend that a project is an urban redevelopment project if the
118     project:

119          (a) provides positive direct and indirect benefits to the tax base of the community;
120          (b) reduces or eliminates blight;
121          (c) is only financially feasible with a tax credit;
122          (d) costs at least $3,500,000 to complete;
123          (e) is located within a project area, as defined in Section 17C-1-102, in which the
124     agency makes a finding of blight in accordance with Section 17C-2-102;
125          (f) upon completion, has no more than 20% of the land area dedicated for commercial
126     use;
127          (g) is subject to a development agreement between a developer and an agency; and
128          (h) provides additional benefits that align with the agency's goals.
129          (6) (a) An agency may recommend that an investment in an urban redevelopment
130     project is a qualified investment if:
131          (i) the developer provides the agency with a letter of intent from an investor to invest in
132     the project; and
133          (ii) the agency determines that the investor's investment will be used to pay for all or a
134     portion of the urban redevelopment project.
135          (b) If the agency recommends that the investment is a qualified investment in
136     accordance with Subsection (6)(a), subject to Subsection 35A-8-2105(2), the agency shall
137     determine the amount of the qualified investor's tax credit allocation.
138          Section 4. Section 35A-8-2104 is enacted to read:
139          35A-8-2104. Applying for a tax credit certificate.
140          (1) A qualified investor:
141          (a) may claim a tax credit against the qualified investor's tax liability under:
142          (i) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
143          (ii) Title 50, Chapter 10, Individual Income Tax Act; and
144          (b) is eligible to apply for a tax credit certificate in accordance with this section:
145          (i) after the qualified investor pays the qualified investment to the developer for an
146     urban redevelopment project; and
147          (ii) if the urban redevelopment project receives one or more local contributions that
148     equal at least 50% of the tax credit allocation.
149          (2) (a) A qualified investor shall submit an application to the division for a tax credit

150     certificate.
151          (b) The application described in Subsection (2)(a) shall include:
152          (i) a copy of the resolution described in Subsection 35A-8-2103(4);
153          (ii) the qualified investor's tax identification number;
154          (iii) proof that the qualified investor made the qualified investment; and
155          (iv) any additional information the division requests.
156          (3) The division shall verify the application described in Subsection (2) and issue a tax
157     credit certificate as described in Subsection (4).
158          (4) The division shall, in accordance with Section 35A-8-2105:
159          (a) issue the first tax credit certificate no later than January 1 of the year immediately
160     following the year in which the division verifies an application described in Subsection (2);
161          (b) issue a tax credit certificate on each subsequent credit allocation date; and
162          (c) provide the State Tax Commission a copy of each tax credit certificate described in
163     Subsections (4)(a) and (b).
164          Section 5. Section 35A-8-2105 is enacted to read:
165          35A-8-2105. Tax credit structure.
166          (1) (a) The division may allocate up to $4,000,000 of tax credit to all qualified
167     investors each fiscal year.
168          (b) The division shall allocate tax credits to qualified investors in the order in which
169     the division receives the qualified investors' applications described in Subsection
170     35A-8-2104(2).
171          (2) (a) A tax credit allocation may not exceed 35% of the qualified investment.
172          (b) On each credit allowance date for 10 consecutive years, the qualified investor may
173     claim an equal proportion of the tax credit allocation.
174          Section 6. Section 35A-8-2106 is enacted to read:
175          35A-8-2106. Monitoring and recapture.
176          (1) On or before December 1 of each year during which a qualified investor claims a
177     portion of the qualified investor's tax credit allocation, the developer shall prepare and
178     electronically submit a report to the agency and the division that includes:
179          (a) a description of the progress made toward completing the urban redevelopment
180     project;

181          (b) a detailed statement of the developer's expenditures related to the urban
182     redevelopment project; and
183          (c) any additional information the agency or division requests.
184          (2) The division may recapture a tax credit from a qualified investor that claims a tax
185     credit authorized under Section 59-7-621 or 59-10-1036:
186          (a) if the developer redeems or makes principal repayment with respect to a qualified
187     investment before the 10th anniversary of the first credit allocation date; and
188          (b) in an amount proportionate to the amount of the redemption or repayment.
189          (3) The division may not recapture a tax credit until the division:
190          (a) notifies the qualified investor of noncompliance; and
191          (b) gives the qualified investor six months from the day on which the division provides
192     the notice described in Subsection (3)(a) to cure the noncompliance.
193          (4) A recaptured tax credit under this section reverts back to the division and shall be
194     reissued in accordance with Section 35A-8-2104.
195          Section 7. Section 59-7-621 is enacted to read:
196          59-7-621. Nonrefundable tax credit for urban redevelopment project.
197          (1) As used in this section:
198          (a) "Agency" means a community development and renewal agency, as defined in
199     Section 17C-1-102.
200          (b) "Division" means the Housing and Community Development Division.
201          (c) "Qualified investor" means the same as that term is defined in Section 35A-8-2102.
202          (d) "Tax credit certificate" means the same as that term is defined in Section
203     35A-8-2102.
204          (e) "Urban redevelopment project" means the same as that term is defined in Section
205     35A-8-2102.
206          (2) Subject to the provisions of this section, a qualified investor may claim a
207     nonrefundable tax credit against the qualified investor's tax liability under this chapter.
208          (3) The tax credit under this section is the amount listed as the tax credit amount on a
209     tax credit certificate that the division issues under Title 35A, Chapter 8, Part 21, Urban
210     Redevelopment Tax Credit, to the qualified investor for a taxable year.
211          (4) A qualified investor may carry forward a tax credit claimed for a given taxable year

212     for a period that does not exceed 10 taxable years after the taxable year indicated on the tax
213     credit certificate if, for the taxable year:
214          (a) the qualified investor is allowed to claim a tax credit under this section; and
215          (b) the amount of the tax credit exceeds the qualified investor's tax liability under this
216     chapter.
217          (5) (a) On or before October 1, 2021, and every five years after October 1, 2021, the
218     Revenue and Taxation Interim Committee shall study the tax credit authorized by this section
219     and make a recommendation to the Legislative Management Committee concerning whether
220     the Legislature should continue, modify, or repeal the tax credit.
221          (b) For purposes of the study described in Subsection (5)(a), the division shall, in
222     consultation with the agency, provide the following information to the Revenue and Taxation
223     Interim Committee by electronic means:
224          (i) the amount of tax credit that the division grants to each qualified investor for each
225     taxable year;
226          (ii) the progress of each urban redevelopment project for which a tax credit was
227     authorized; and
228          (iii) any other information that the Revenue and Taxation Interim Committee requests.
229          (c) The Revenue and Taxation Interim Committee shall ensure that the Revenue and
230     Taxation Interim Committee's recommendation under Subsection (5)(a) includes an evaluation
231     of:
232          (i) the cost of the tax credit to the state;
233          (ii) the purpose and effectiveness of the tax credit; and
234          (iii) the extent to which the state benefits from the tax credit.
235          Section 8. Section 59-10-1036 is enacted to read:
236          59-10-1036. Nonrefundable tax credit for urban redevelopment project.
237          (1) As used in this section:
238          (a) "Agency" means a community development and renewal agency, as defined in
239     Section 17C-1-102.
240          (b) "Division" means the Housing and Community Development Division.
241          (c) "Qualified investor" means the same as that term is defined in Section 35A-8-2102.
242          (d) "Tax credit certificate" means the same as that term is defined in Section

243     35A-8-2102.
244          (e) "Urban redevelopment project" means the same as that term is defined in Section
245     35A-8-2102.
246          (2) Subject to the provisions of this section, a qualified investor may claim a
247     nonrefundable tax credit against the qualified investor's tax liability under this chapter.
248          (3) The tax credit under this section is the amount listed as the tax credit amount on a
249     tax credit certificate that the division issues under Title 35A, Chapter 8, Part 21, Urban
250     Redevelopment Tax Credit, to the qualified investor for a taxable year.
251          (4) A qualified investor may carry forward a tax credit claimed for a taxable year for a
252     period that does not exceed 10 taxable years after the taxable year indicated on the tax credit
253     certificate if, for the taxable year:
254          (a) the qualified investor is allowed to claim a tax credit under this section; and
255          (b) the amount of the tax credit exceeds the qualified investor's tax liability under this
256     chapter.
257          (5) (a) On or before October 1, 2021, and every five years after October 1, 2021, the
258     Revenue and Taxation Interim Committee shall study the tax credit authorized by this section
259     and make a recommendation to the Legislative Management Committee concerning whether
260     the Legislature should continue, modify, or repeal the tax credit.
261          (b) For purposes of the study described in Subsection (5)(a), the division shall, in
262     consultation with the agency, provide the following information to the Revenue and Taxation
263     Interim Committee by electronic means:
264          (i) the amount of tax credit that the division grants to each qualified investor for each
265     taxable year;
266          (ii) the progress of each urban redevelopment project for which a tax credit was
267     authorized; and
268          (iii) any other information that the Revenue and Taxation Interim Committee requests.
269          (c) The Revenue and Taxation Interim Committee shall ensure that the Revenue and
270     Taxation Interim Committee's recommendation under Subsection (5)(a) includes an evaluation
271     of:
272          (i) the cost of the tax credit to the state;
273          (ii) the purpose and effectiveness of the tax credit; and

274          (iii) the extent to which the state benefits from the tax credit.
275          Section 9. Effective date.
276          This bill takes effect for a taxable year beginning on or after January 1, 2016.