SECTION 1. Chapter 63 of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by inserting the following section:-
Section 38XX. (a) The purpose of this section shall be to attract capital investment to businesses in rural areas of the commonwealth in order to promote the retention and expansion of existing jobs, stimulate the creation of new jobs, and attract new business and industry to rural areas of the commonwealth.
(b) For the purposes of this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:--
“Affiliate”, an entity that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another entity; provided that: (i) an entity is “controlled by” another entity if the controlling person holds, directly or indirectly, the majority voting; (ii) 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.
“Closing date”, the date on which a rural growth fund has collected all of the amounts specified by subsection (c).
“Credit-eligible capital contribution”, an investment of cash by a person subject to tax under this chapter in a rural growth fund that equals the amount specified on a tax credit certificate issued by the MOBD under paragraph (5) of subsection (c) of this section; provided that 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 5 years from the closing date.
“MOBD”, the Massachusetts office of business development established in section 3A of Chapter 23A.
“Investment authority”, the amount stated on the notice issued under paragraph (5) of subsection (c) of this section certifying the rural growth fund; provided however that at least 60 per cent of a rural growth fund's investment authority shall be comprised of credit-eligible capital contributions.
“Principal business operations”, the principal operations of a business are located at the place or places where at least 60 per cent of its employees work or where employees that are paid at least 60 per cent of its payroll work; provided however, that 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 area in the commonwealth 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 MOBD agrees to a later date.
“Rural area”, an area of the commonwealth not in a city or town that has a population of more than 50,000 according to the latest decennial census of the United States or in the urbanized area contiguous and adjacent to a city or town that has a population of more than 50,000 inhabitants; or any area determined to be “rural in character” by the under-secretary of agriculture for rural development within the United States department of agriculture.
“Rural business concern”, a business that, at the time of the initial investment in the company by a rural growth fund: (i) has less than 250 employees and not more than $10,000,000 in net income for the preceding taxable year; (ii) has its principal business operations in one or more rural areas in the Commonwealth; and (iii) is engaged in industries related to manufacturing, plant sciences, services or technology or, if not engaged in such industries, the MOBD makes a determination that the investment will be highly beneficial to the economic growth of the commonwealth.
“Rural growth fund”, an entity certified by the MOBD under subsection (c).
“Rural growth investment”, any capital or equity investment in a rural business concern or any loan to a rural business concern with a stated maturity at least one year after the date of issuance.
(c) (1) The MOBD shall accept applications for approval as a rural growth fund; provided, however, that the application shall include:
(i) the total investment authority sought by the applicant under the business plan;
(ii) documents and other evidence sufficient to prove, to the satisfaction of the MOBD, that the applicant meets all of the following criteria:
(A) copy of the applicant or an affiliate of the applicant’s 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; and
(B) evidence that as of the date the application is submitted, the applicant or affiliates of the applicant have invested at least $100,000,000 in non-public companies located in rural areas;
(iii) an estimate of the number of jobs that will be created or retained in this commonwealth as a result of the applicant's rural growth investments;
(iv) 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 MOBD;
(v) a signed affidavit from each investor stating the amount of credit-eligible capital contributions each taxpayer commits to make; and
(vi) a non-refundable application fee of $5,000.
(2) The MOBD shall make an application determination within 30 days of receipt in the order in which the applications are received. The MOBD shall deem applications received on the same day to have been received simultaneously. The MOBD shall not approve more than $200,000,000 in investment authority and not more than $60,000,000 in credit-eligible capital contributions under this section. If requests for investment authority exceed this limitation, the MOBD shall proportionally reduce the investment authority and the credit-eligible capital contributions for each approved application as necessary to avoid exceeding the limit.
(3) the MOBD shall deny an application submitted under this section if any of the following are true:
(i) the application is incomplete or the application fee is not paid in full;
(ii) the applicant does not satisfy all the criteria described in clause (ii) of paragraph (1) of this subsection;
(iii) the revenue impact assessment submitted under clause (iv) of paragraph (1) of this subsection does not demonstrate that the applicant's business plan will result in a positive economic impact on this commonwealth over a 10-year period that exceeds the cumulative amount of tax credits that would be issued to the applicant’s investors under subsection (d) of this section if the application were approved;
(iv) the credit-eligible capital contributions described in affidavits submitted under clause (v) of paragraph (1) of this subsection do not equal at least 60 per cent of the total amount of investment authority sought under the applicant's business plan; or
(v) the MOBD has already approved the maximum amount of investment authority and credit eligible capital contributions allowed under paragraph (2) of this subsection.
(4) If the MOBD denies an application, the applicant may provide additional information to the MOBD to complete, clarify, or cure defects in the application identified by the MOBD within 15 days of the notice of denial for reconsideration and determination. The MOBD shall review and reconsider such applications within 30 days before any pending application submitted after the original submission date of the reconsidered application.
(5) The MOBD shall not deny a rural growth fund application or reduce the requested investment authority for reasons other than those described in paragraphs (2) and (3) of this subsection. Upon approval of an application, the MOBD shall provide a written approval to the applicant as a rural growth fund specifying the amount of the applicant’s investment authority and a tax credit certificate to each investor whose affidavit was included in the application specifying the amount of the investor’s credit-eligible capital contribution.
(6) After receiving the approval issued under paragraph (5) of this subsection, a rural growth fund shall:
(i) within 60 days:
(A) collect the credit-eligible capital contributions from each taxpayer issued a tax credit certificate under paragraph 5 of this subsection; and
(B) collect one or more investments of cash that, when added to the contributions collected under clause (i) of this paragraph, equal the rural growth fund's investment authority; provided that at least 10 percent of the rural growth fund's investment authority shall be comprised of equity investments contributed by affiliates of the rural growth fund, including employees, officers, and directors of such affiliates.
(ii) within 65 days, send to the MOBD documentation sufficient to prove that the amounts described in clause (i) of this paragraph have been collected.
(7) If the rural growth fund fails to fully comply with paragraph (6) of this subsection, the rural growth fund's approval shall lapse and the corresponding investment authority and credit-eligible capital contributions under paragraph (6) will not count toward the limits on the program size prescribed by paragraph (2) of this subsection. The MOBD shall first award lapsed investment authority pro rata to each rural growth fund that was awarded less than the requested investment authority under said paragraph (2) which a rural growth fund may allocate to its investors in its discretion. Any remaining investment authority may be awarded by the MOBD to new applicants.
(8) Application fees submitted to the MOBD under clause (vi) of paragraph (1) of this subsection shall be credited to the Massachusetts rural jobs fund, which is hereby created, and used by the MOBD to administer provisions of this section.
(d) (1) There is hereby allowed a nonrefundable tax credit for taxpayers that made a credit-eligible capital contribution to a rural growth fund and were issued a tax credit certificate under paragraph 5 of subsection (c) of this section. The credit may be claimed against the tax imposed by this chapter. The credit may not be sold, transferred or allocated to any other entity other than an affiliate subject to the tax imposed by this chapter.
(2) On the closing date, the taxpayer shall earn a vested credit equal to the amount of the taxpayer's credit-eligible capital contribution to the rural growth fund as specified on the tax credit certificate. The taxpayer may claim up to 25 percent of the credit authorized under this subsection for each of the taxable years that includes the third through sixth anniversaries of the closing date, exclusive of amounts carried forward pursuant to paragraph 3 of this subsection.
(3) If the amount of the credit for a taxable year exceeds the tax otherwise due for that year, the excess shall be carried forward to ensuing taxable years until fully used. 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)(1) The MOBD shall revoke a tax credit certificate issued under subsection (c) if any of the following occurs with respect to a rural growth fund before it exits the program in accordance with paragraph (5) of this subsection:
(i) the rural growth fund in which the credit-eligible capital contribution was made does not invest 100 per cent of its investment authority in rural growth investments in this commonwealth within 2 years of the closing date;
(ii) the rural growth fund, after satisfying clause (i), fails to maintain rural growth investments equal to 100 percent of its investment authority until the sixth anniversary of the closing date; provided however, that, an investment is “maintained” even if the investment is sold or repaid so long as the rural growth fund reinvests an amount equal to the capital returned or recovered by the fund from the original investment, exclusive of any profits realized, in other rural growth investments in this commonwealth within 12 months of the receipt of such capital; provided further that amounts received periodically by a rural growth fund shall be treated as continually 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; and provided further that a rural growth fund is not required to reinvest capital returned from rural growth investments after the fifth anniversary of the closing date, and such rural growth investments shall be considered held continuously by the rural growth fund through the sixth anniversary of the closing date;
(iii) the rural growth fund, before exiting the program in accordance with paragraph (4) of this subsection, makes a distribution or payment that results in the rural growth fund having less than 100 per cent of its investment authority invested in rural growth investments in this commonwealth or available for investment in rural growth investments and held in cash and other marketable securities;
(iv) the rural growth fund invests more than the greater of $5,000,000 or 20 per cent of its investment authority in the same rural business concern, including amounts invested in affiliates of the rural business concern; or
(v) the rural growth fund makes a rural growth investment in a rural business concern 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; provided however, that this clause does not apply to investments in publicly traded securities by a rural business concern or an owner or affiliate of such concern; and provided further that a rural growth fund will not be considered an affiliate of a rural business concern solely as a result of its rural growth investment.
(2) Before revoking one or more tax credit certificates under this subsection, the MOBD 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 MOBD and avoid revocation of the tax credit certificate.
(3) If tax credit certificates are revoked under this subsection, the associated investment authority and credit-eligible capital contributions shall not count toward the limit on total investment authority and credit-eligible capital contributions described in paragraph (2) of subsection (c). The MOBD shall first award reverted authority pro rata to each rural growth fund that was awarded less than the requested investment authority under paragraph (5) of subsection (c). The MOBD may award any remaining investment authority to new applicants.
(4) On or after the sixth anniversary of the closing date, a rural growth fund may apply to the MOBD to exit the program and no longer be subject to regulation hereunder. The MOBD 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 paragraph (2) of this subsection shall be sufficient evidence to prove that the rural growth fund is eligible for exit. The MOBD shall not unreasonably deny an application submitted under this paragraph. If the application is denied, the notice shall include the reasons for the determination.
(5) The MOBD shall not revoke a tax credit certificate after the rural growth fund’s exit from the program.
(f) A rural growth fund, before making a rural growth investment, may request from the MOBD a written opinion as to whether the business in which it proposed to invest is a rural business concern. The MOBD, 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 MOBD 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 concern.
(g)(1) Each rural growth fund shall submit a report to the MOBD on or before the fifth business day after the second anniversary of the closing date. The report shall provide documentation as to the rural growth fund’s rural growth investments and include:
(i) a bank statement evidencing each rural growth investment;
(ii) the name, location and industry of each business receiving a rural growth investment, including either the determination letter set forth in subsection (f) or evidence that the business qualified as a rural business concern at the time the investment was made;
(iii) the number of employment positions created or retained as a result of the rural growth fund's rural growth investments as of the last day of the preceding calendar year; and
(iv) any other information required by the MOBD.
(2) On or before the last day of February of each year following the year in which the report required under paragraph (1) of this subsection is due, the rural growth fund shall submit an annual report to the MOBD including the following:
(i) the number of employment positions created or retained as a result of the rural growth fund's rural growth investments as of the last day of the preceding calendar year;
(ii) the average annual salary of the positions described in clause (i) of this paragraph; and
(iii) any other information required by the MOBD.
(h) The MOBD shall adopt rules necessary to implement the provisions in this section.
SECTION 2. The MOBD shall accept applications for approval as a rural growth fund as required under subsection (c) of section 38XX of chapter 63 of the General Laws not more than 90 days after the effective date of this act.
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