H-4468.2

SUBSTITUTE HOUSE BILL 2541

ByHouse Rural Development, Agriculture, & Natural Resources (originally sponsored by Representatives Maycumber, Chapman, Blake, Harris, Kloba, Chambers, Stonier, Dent, Griffey, Barkis, Van Werven, Graham, Walsh, Goehner, Rude, Kretz, Tharinger, and Lekanoff)

AN ACT Relating to creating the Washington rural development act; adding a new section to chapter 82.04 RCW; adding a new chapter to Title 43 RCW; creating a new section; and providing expiration dates.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 2. A new section is added to chapter 82.04 RCW to read as follows:

(1) Subject to the limitations in this section, a credit is allowed against the tax imposed under this chapter for contributions made by a person to the rural development fund program created in chapter 43.--- RCW (the new chapter created in section 7 of this act).

(2) The person must make the contribution before claiming a credit authorized under this section. Credits earned under this section may be claimed against taxes due in the calendar year in which the contribution is made. The amount of the credit claimed for a reporting period may not exceed the tax otherwise due under this chapter for that reporting period. No person may claim more than one million dollars of credit in any calendar year, including credit carried over from a previous calendar year. No refunds may be granted for any unused credits.

(3) The maximum credit that may be earned for each calendar year under this section is limited to the lesser of one million dollars or an amount equal to one hundred percent of the contributions made by the person to the rural development fund program during the calendar year.

(4) The credit may be used against any tax due under this chapter and may be carried over until used.

(5) Credits are available on a first-in-time basis. The department must disallow any credits, or portions thereof, that would cause the total amount of credits claimed under this section for any calendar year to exceed eight million dollars. If this limitation is reached, the department must notify the department of commerce that the annual statewide limit has been met. In addition, the department must provide written notice to any person who has claimed tax credits in excess of the limitation in this subsection. The notice must indicate the amount of tax due and provide the tax be paid within thirty days from the date of the notice. The department may not assess penalties and interest as provided in chapter 82.32 RCW on the amount due in the initial notice if the amount due is paid by the due date specified in the notice, or any extension thereof.

(6) To claim a credit under this section, a person must electronically file with the department all returns, forms, and any other information required by the department, in an electronic format as provided or approved by the department. Any return, form, or information required to be filed in an electronic format under this section is not filed until received by the department in electronic format. As used in this subsection, "returns" has the same meaning as "return" in RCW 82.32.050.

(7) No application is necessary for the tax credit. The person must keep records necessary for the department to verify eligibility under this section.

(8) The rural development fund program must provide to the department, upon request, such information as needed to verify eligibility for credit under this section, including information regarding contributions received by the program.

(9) The department may not allow any credit under this section before January 1, 2021.

(10) No credit may be earned for contributions made on or after June 30, 2030. Credits may be claimed as provided in subsections (4) through (6) of this section.

(11) For the purposes of this section, "rural development fund program" means a program established within the department of commerce pursuant to section 3 of this act.

(12) The provisions of chapter 82.32 RCW apply to the administration of this section.

(13) This section expires July 1, 2030.

(2) The following requirements apply to the operation of the rural development fund program:

(a) No more than twenty-five percent of all grants awarded in any calendar year may be awarded to the same grant recipient; and

(b) Any project receiving a loan or investment that includes funds awarded from the rural development fund program or match must occur in a rural county as defined in RCW 82.14.370.

(3) In order to receive a grant award under the rural development fund program, a qualified lending institution must:

(a) Match any grant awarded by the rural development fund program on at least a one-to-one basis;

(b) Be a certified community development financial institution as recognized by the United States department of the treasury;

(c) Be registered as a nonprofit organization exempt from taxation under Title 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code of 1986, as amended, as of the effective date of this section; and

(d) Demonstrate a successful history of lending in Washington.

(4) Grants from the rural development fund program to a qualified lending institution will be awarded by a review committee. The department of commerce is responsible for convening and staffing the review committee. The department of commerce shall seek, to the greatest extent possible, to achieve a fair geographic balance in the composition of the review committee. The department of commerce is encouraged to seek representation on the committee from the following: Representatives of the banking industry who are familiar with community development financial institutions; economic development professionals who have experience in rural development; representatives of local government; and representatives of federally recognized Indian tribes.

(5) In making awards from the rural development fund program, the review committee must consider the following:

(a) The number and total value of loans and investments closed during the previous five-year period by the qualified lending institution in Washington;

(b) Funds leveraged by the proposed grant award, which may be no less than one-to-one;

(c) Projected loan or investment production with the award over the performance period of the grant, including projected project leverage;

(d) How the award supports the growth of the qualified lending institution; and

(e) Past performance of loans and investments made by the qualified lending institution including, where applicable, past performance of loans and investments made using funds from the rural development fund program.

(6) The department of commerce may award grants from the rural development fund program beginning six months after the first tax credits are claimed pursuant to section 2 of this act. The department of commerce must cease to award grants from the rural development fund program upon the expiration of this chapter.

(7) Once a loan or investment made by a qualified lending institution using funds awarded from the rural development fund program has been repaid, the qualified lending institution must reloan the repaid funds consistent with the terms of this chapter for a period of ten years from the date of the grant award.

(8) A qualified lending institution that receives funds from the rural development fund program must submit a report to the department of commerce by June 30th of each year that contains the following information:

(a) The number and value of loans and investments made using funds from the rural development fund program's grant and associated match;

(b) Certification that each loan and investment made using funds from the program is qualified and located in a rural county;

(c) The amount of capital available, as of report date, to lend or invest from the qualified lending institution's grant and associated match;

(d) Outreach conducted by the lender within rural counties; and

(e) Other information as required by the department of commerce.

(9) No later than September 15th of each year, beginning in 2021, the department of commerce must submit a report to the appropriate committees of the legislature that contains the following information:

(a) The number of grant applicants and the total value of grants requested;

(b) The number of grant awardees and the total value of grants awarded, as well as relevant information from the successful applications, including fund leverage and projected lending;

(c) Performance of loans and investments made under the program on an aggregate basis;

(d) Average interest rate, term, and loan size, or investment terms and size, on an aggregate basis;

(e) The cities and counties in which grant recipients are located; and

(f) The cities and counties in which projects that receive loans or investments from the rural development fund program are located.

(2) The legislature categorizes this tax preference as one intended to create or retain jobs pursuant to RCW 82.32.808(2)(c) as well as encourage economic development growth in rural Washington.

(3) It is the legislature's specific public policy objective to create a program that encourages investment in small and rural businesses to encourage economic development in rural Washington.

(4) The legislature intends to extend the expiration date of this tax preference if a review finds that the rural development fund program has had a net positive impact on investment in Washington's rural counties and on state and local tax revenues. In conducting its review under this section, the joint legislative audit and review committee should consider, among other data:

(a) The number and aggregate amount of loans and investments closed under the program, including with revolved dollars;

(b) Fund leverage, which should equal or exceed a one-to-one ratio;

(c) Project leverage, which should equal or exceed a one-to-one ratio;

(d) The balance sheet growth of community development financial institutions that received grants from the program;

(e) Whether participants in the program achieved balance sheet growth during the time of their participation in the program;

(f) The percentage of community development financial institutions in Washington that received funding from the program; and

(g) The level of ongoing demand for funding from the program.

(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to any data collected by the state.

(6) This section expires July 1, 2030.

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