HB 252

This bill would create the Alabama Agribusiness and Rural Jobs Act to provide tax credits for certain investors who invest in rural growth funds established to promote rural business or rural agribusiness, to be administered by the Department of Commerce

Relating to economic development; to define terms; to provide tax credits for certain investors who invest in rural growth funds established to promote rural business or rural agribusiness, to be administered by the Department of Commerce; to provide an application process for the certification of rural growth funds by the department; to provide for the acceptance and denial of applications; to provide for an application fee; to provide limitations for investment authority and investor contributions; to require revenue impact assessments; to require the department to issue tax credit certificates under certain conditions; to provide for tax credits against state tax liability with certain limitations for investors; to provide for the revocation of tax credit certificates; to provide for exit from the program upon approval of the department; to provide reporting requirements for rural growth funds; and to provide rulemaking authority.

Section 1

This act shall be known and may be cited as the Alabama Agribusiness and Rural Jobs Act.

Section 2

(a) For the purposes of this act, the following words, terms, and phrases shall have the following meanings: (1) AFFILIATE. An entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another entity. For the purposes of this subdivision, "controlled by" means circumstances in which the controlling person holds, directly or indirectly, the majority voting or ownership interest in the controlled person or has control over the day-to-day operations of the controlled person by contract or by law. (2) CLOSING DATE. The date on which a rural growth fund has collected all amounts specified by subsection (a) of

Section 3

(3) DEPARTMENT. The Department of Commerce. (4) INVESTMENT AUTHORITY. The amount stated on the notice issued under subsection (e) of Section 3 certifying the rural growth fund. At least 80 percent of a rural growth fund's investment authority shall be comprised of an amount equal to the authorized investor contributions. (5) INVESTOR CONTRIBUTION. An investment of cash by a person with state premium tax liability in a rural growth fund that equals the amount specified on a tax credit certificate issued by the department under subdivision (a)(2) of Section 4. The investment shall purchase an equity interest in the rural growth fund or purchase, at par value or premium, a debt instrument that has a maturity date at least five years from the closing date. (6) PRINCIPAL BUSINESS OPERATIONS. Business that is located at the place or places where at least 60 percent of its employees work or where employees that are paid at least ercent of its payroll work. An out-of-state business that has agreed to relocate employees using the proceeds of a rural growth investment to establish its principal business operations in a rural community in the state shall be deemed to have its principal business operations in this new location provided it satisfies this definition within 180 days after receiving the rural growth investment, unless the department agrees to a later date. (7) RURAL AGRIBUSINESS. A rural business that earns a majority of its revenues from either farming, forestry, biotechnology, fisheries, or biofuels and the processing, manufacturing, packaging, storage, distribution, marketing, and sales of such products or commodities; or the design, creation, manufacture, marketing, or sales of technology, equipment, or supplies related to such businesses. (8) RURAL AREA. Any area of the state outside of census urban areas, as defined by the United States Census Bureau, with a population greater than 50,000. (9) RURAL BUSINESS. A business that, at the time of the initial investment in the company by a rural growth fund, satisfies all of the following: a. Has fewer than 200 employees. b. Has its principal business operations in one or more rural areas in the state. c. Is engaged in industries related to agribusiness, manufacturing, plant sciences, services, or technology or, if not engaged in such industries, the department determines that the investment will be beneficial to the rural area and the economic growth of the state. d. Is not engaged in insurance, banking, or lending, or the provision of professional services by accountants, attorneys, lobbyists, or physicians. (10) RURAL GROWTH FUND. An entity certified by the department under subsection (e) of Section 3. (11) RURAL GROWTH INVESTMENT. Any capital or equity investment in a rural business or rural agribusiness or any loan to a rural business or rural agribusiness with a stated maturity at least one year after the date of issuance, provided the chief executive officer or similar officer of the rural business or rural agribusiness executes an affidavit that the business sought and was denied similar financing from a financial institution domiciled in the state. (12) STATE PREMIUM TAX LIABILITY. Any liability incurred by any entity under Chapter 4A of Title 27, Code of Alabama 1975.

Section 4

(a) Beginning September 1, 2018, the department shall accept applications for approval as a rural growth fund on a form prescribed by the department. The application shall include all of the following: (1) The total investment authority sought by the applicant under the business plan. (2) A copy of the applicant's, or an affiliate of the applicant, license as a rural business investment company under 7 U.S.C. §2009cc, or as a small business investment company under 15 U.S.C. §681. (3) Evidence that as of the date the application is submitted, the applicant or affiliates of the applicant have invested at least one hundred million dollars ($100,000,000) in nonpublic companies located in rural areas. (4) An estimate of the number of jobs that will be created or retained in this state because of the applicant's rural growth investments. (5) A business plan that includes a revenue impact assessment projecting state and local tax revenue to be generated by the applicant's proposed rural growth investments prepared by a nationally recognized third-party independent economic forecasting firm using a dynamic economic forecasting model that analyzes the applicant's business plan over the 10 years following the date the application is submitted to the department. (6) A signed affidavit from each investor stating the amount of investor contributions to which each taxpayer commits. (7) A nonrefundable application fee of fifteen thousand dollars ($15,000) payable to the department. (b) Within 30 days after receipt of a completed application containing the information set forth in subsection (a), the department shall grant or deny the application. The department shall deem applications received on the same day to have been received simultaneously. The department shall not approve more than one hundred million dollars ($100,000,000) in investment authority and not more than eighty million dollars ($80,000,000) in investor contributions under this section. If requests for investment authority exceed this limitation, the department shall proportionally reduce the investment authority and the investor contributions for each approved application as necessary to avoid exceeding the limit. (c) The department shall deny an application if any of the following exist: (1) The application is incomplete or the application fee is not paid in full. (2) The applicant does not satisfy all the criteria described in subdivisions (2) and (3) of subsection (a). (3) The revenue impact assessment submitted under subdivision (5) of subsection (a) does not demonstrate that the applicant's business plan will result in a positive economic impact on this state over a 10-year period that exceeds the cumulative amount of tax credits that would be issued to the applicant's investors. (4) The investor contributions described in affidavits submitted under subdivision (6) of subsection (a) do not equal at least 80 percent of the total amount of investment authority sought under the applicant's business plan. (5) The department has already approved the maximum amount of investment authority and investor contributions allowed under subsection (b). (d) If the department denies an application, the applicant may provide additional information to the department to complete, clarify, or cure defects in the application identified by the department within 15 days of the notice of denial for reconsideration and determination. The department shall review and reconsider such applications within 30 days before any pending application submitted after the original submission date of the reconsidered application. (e) The department shall not reduce the requested investment authority or deny a rural growth fund application or for reasons other than those described in subsections (b) and (c). Upon approval of an application, the department shall certify the applicant as a rural growth fund specifying the amount of the applicant's investment authority and the investor contributions required from each taxpayer that submitted an affidavit with the rural growth fund's application.

Section 5

(a)(1) Within 60 days of receiving the approval issued under subsection (e) of Section 3, a rural growth fund shall collect all investor contributions and collect additional investments of cash that, when added to the investor contributions, at least equal the rural growth fund's investment authority. Within 65 days of receiving the approval issued under subsection (e) of Section 3, a rural growth fund shall send to the department documentation sufficient to prove that the amounts described in this subdivision have been collected. (2) Upon receipt of the documentation required by subdivision (1), the department shall provide a tax credit certificate to each taxpayer that made an investor contribution in the amount of such taxpayer's investor contribution. (b) If the rural growth fund fails to fully comply with subsection (a), the rural growth fund's certification shall lapse and the corresponding investment authority and investor contributions will not count toward the limits on the program size prescribed by subsection (b) of Section 3. The department shall first award lapsed investment authority pro rata to each rural growth fund that was awarded less than the investment authority for which it applied, and a rural growth fund may allocate the associated investor contribution authority to any taxpayer with state premium tax liability in its discretion. Any remaining investment authority may be awarded by the department to new applicants.

Section 6

(a) Any taxpayer that makes an investor contribution is vested with an earned credit against state premium tax liability equal to the investor contribution that may be utilized 20 percent in each of the taxable years that includes the second through sixth anniversaries of the closing date, inclusive of amounts carried forward pursuant to subsection (c). A taxpayer claiming a credit against state premium tax liability earned through an investor contribution is not required to pay any additional retaliatory tax levied by law as a result of claiming the credit. (b) The credit is nonrefundable and may not be sold, transferred, or allocated to any other entity other than an affiliate that had state premium tax liability at the time of the submission of the investor's affidavit included in the rural growth fund's application. (c) The amount of the credit claimed by a taxpayer shall not exceed the amount of the taxpayer's state premium tax liability for the tax year for which the credit is claimed. Any amount of tax credit that the entity does not claim in a taxable year may be carried forward for use in future taxable years for a period not to exceed 10 years from the date of the first anniversary of the closing date. (d) A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate with the taxpayer's return for each taxable year for which the credit is claimed. (e) Notwithstanding any provision of this act to the contrary, to the extent any credits are used against the tax imposed under Chapter 4A of Title 27, Code of Alabama 1975, the Department of Finance shall adopt rules to ensure that such credits would reduce the thirty million, nine hundred ninety three thousand, two hundred sixty-nine dollars ($30,993,269) distribution for the Education Trust Fund in an amount equal to the credits used in any fiscal year.

Section 7

(a) The department shall revoke a tax credit certificate issued under subsection (a) of Section 4 if any of the following occur with respect to a rural growth fund before a rural growth fund exits the program in accordance with subsection (e): (1) The rural growth fund does not invest 100 percent of its investment authority in rural growth investments in this state of which at least 50 percent must be rural agribusinesses within two years of the closing date. (2) The rural growth fund, after satisfying subdivision (1), fails to maintain rural growth investments equal to 100 percent of its investment authority until the seventh anniversary of the closing date. For the purposes of this subdivision, an investment is maintained even if it is sold or repaid so long as the rural growth fund reinvests an amount equal to the capital returned or recovered from the original investment, exclusive of any profits realized, in other rural growth investments in this state within 12 months of the receipt of such capital. Amounts received periodically by a rural growth fund shall be treated as continuously invested in rural growth investments if the amounts are reinvested in one or more rural growth investments by the end of the following calendar year. A rural growth fund is not required to reinvest capital returned from rural growth investments after the sixth anniversary of the closing date, and such rural growth investments shall be considered held continuously by the rural growth fund through the seventh anniversary of the closing date. (3) The rural growth fund, before exiting the program in accordance with subsection (e), makes a distribution or payment that results in the rural growth fund having less than 100 percent of its investment authority invested in rural growth investments in this state or available for investment in rural growth investments and held in cash and other marketable securities. (4) The rural growth fund makes a rural growth investment in a rural business that directly or indirectly through an affiliate owns, has the right to acquire an ownership interest, makes a loan to, or makes an investment in the rural growth fund, an affiliate of the rural growth fund, or an investor in the rural growth fund. This subdivision does not apply to investments in publicly traded securities by a rural business or an owner or affiliate of such rural business. For purposes of this subdivision, a rural growth fund will not be considered an affiliate of a rural business solely because of its rural growth investment. (b) The maximum amount of rural growth investments in a rural business, including amounts invested in affiliates of the rural business, that a rural growth fund may count towards its satisfaction of the requirements of subdivisions (1) and (2) of subsection (a) the greater of five million dollars ($5,000,000), 20 percent of its investment authority. (c) Before revoking tax credit certificates under this section, the department shall notify the rural growth fund of the reasons for the pending revocation. The rural growth fund shall have 90 days from the date the notice was dispatched to correct any violation outlined in the notice to the satisfaction of the department and avoid revocation of the tax credit certificate. (d) If tax credit certificates are revoked under this section, the associated investment authority and investor contributions shall not count toward the limit on total investment authority and investor contributions described by subsection (b) of Section 3. The department shall first award reverted investment authority pro rata to each rural growth fund that was awarded less than the requested investment authority for which it applied, a rural growth fund may allocate the associated investor contribution authority to any taxpayer with state premium tax liability in its discretion. The department may award any remaining investment authority to new applicants. (e) On or after the seventh anniversary of the closing date, a rural growth fund may apply to the department to exit the program and no longer be subject to regulation. The department shall respond to the application within 30 days of receipt. In evaluating the application, the fact that no tax credit certificates have been revoked and that the rural growth fund has not received a notice of revocation that has not been cured under subsection (c) shall be sufficient evidence to prove that the rural growth fund is eligible for exit. The department shall not unreasonably deny an application submitted under this subsection. Upon exiting the program, the rural growth fund shall make the first two hundred fifty thousand dollars ($250,000) of distributions to the department if the rural growth fund's rural growth investments enable the creation or retention of between 85 percent and 60 percent of the jobs set forth in the rural growth fund's application and the first one million dollars ($1,000,000) of distributions to the department if less than ercent of the jobs set forth in the rural growth fund's application are created or retained. (f) If the application is denied, the notice shall include the reasons for the determination. (g) The department shall not revoke a tax credit certificate after the rural growth fund's exit from the program.

Section 8

A rural growth fund, before making a rural growth investment, may request from the department a written opinion as to whether the business in which it proposes to invest satisfies the definition of a rural business. The department, not later than the fifteenth business day after the date of receipt of the request, shall notify the rural growth fund of its determination. If the department fails to notify the rural growth fund by the fifteenth business day of its determination, the business in which the rural growth fund proposes to invest shall be considered a rural business.

Section 9

(a) Each rural growth fund shall submit a report to the department on or before the fifth business day after the second anniversary of the closing date. The report shall provide documentation as to each rural growth investment and include all of the following: (1) A bank statement evidencing each rural growth investment. (2) The name, location, and industry of each rural business concern receiving a rural growth investment, including either the determination letter set forth in Section r evidence that the business qualified as a rural business at the time the investment was made. (3) The number of employment positions created or retained because of the rural growth fund's rural growth investments as of the last day of the preceding calendar year. (4) An audited financial statement of the rural growth fund. (5) An annual compliance fee of one thousand dollars ($1,000). (6) Any other information required by the department. (b) Thereafter, the rural growth fund will submit an annual report to the department within 45 days of the beginning of the calendar year during the compliance period. The report shall include all of the following: (1) The number of employment positions created or retained because of the rural growth fund's rural growth investments as of the last day of the preceding calendar year. (2) The average annual salary of the positions described in subdivision (1). (3) Any other information required by the department. (c) The rural growth fund is not required to provide the annual report set forth in subsection (b) for rural growth investments that have been redeemed or repaid but shall provide such information if available.

Section 10

(a) The department may adopt rules to implement this act, including rules to ensure the program shall be inclusive and reflect the racial, gender, geographic and economic diversity of the state. (b) The department shall issue all forms and notices required by this act in accordance with this act. Section 10. The department shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this act and the amount of such credits. Section 11. The provisions of this act shall apply only to tax returns or reports originally due on or after January 1, 2018. Section 12. This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.