SB 777: Insurance taxation: credit: California Jumpstart Act.
- Session Year: 2021-2022
- House: Senate
- Latest Version Date: 2022-06-14
Existing statutory law imposes taxes on the gross premiums of an insurer, as defined, and allows various credits against those taxes. The California Constitution imposes exactions against insurers from another state or country under specified conditions.
This bill would establish the California Jumpstart Act. The act would allow a credit against those taxes for each taxable year beginning on or after January 1, 2024, 2025, until January 1, 2030, in an amount equal to the amount of a relief contribution, as defined, that meets specified requirements. The bill would prohibit a taxpayer allowed a credit under the act for a qualified relief investment from being eligible for any other credit, as specified, with respect to that investment. The bill would require the California Pollution Control Financing Authority (CPCFA) to, among other things, accept applications for approval as a relief fund that meet specified requirements, including that the application include a signed certification from the chief executive officer or another similar officer of each investor committing to make a relief contribution and stating the amount of that commitment. commitment, among other attestations. The bill also would authorize the CPCFA to recapture recover any tax credit allowed and revoke the tax credit certificates issued to a taxpayer if the taxpayer engages in specified behavior, including, failing to invest 100% of its investment authority in relief investments within 2 years of the closing date. The bill would require the CPCFA to act in consultation with the Department of Insurance to accomplish these responsibilities where specified.
This bill would require, among other things, the CPCFA to undertake outreach activities to encourage investment in impact businesses, including, but not limited to, partnering with organizations representing persons and business enterprises from small businesses more than 50% owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, as described. The bill would also establish the Treasury Relief Investment Fund in the State Treasury, and would continuously appropriate the fund for purposes of these provisions. The bill would authorize CPCFA to direct the Treasurer to invest moneys in the fund, as specified, and would authorize CPCFA to use proceeds in the fund for administrative purposes. By continuously appropriating moneys in the fund, this bill would make an appropriation.
This bill would provide that the California Jumpstart Act is only operative for taxable years for which an appropriation is made for its purposes in the annual Budget Act or other statute.
This bill would require various certifications by officers of an investor and would require a relief fund that has not decertified to annually certify under penalty of perjury that the relief fund has not violated any of the grounds for revocation and recapture recovery and revocation of credits. By expanding the crime of perjury, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing statutory law imposes taxes on the gross premiums of an insurer, as defined, and allows various credits against those taxes. The California Constitution imposes exactions against insurers from another state or country under specified conditions.
This bill would establish the California Jumpstart Act. The act would allow a credit against those taxes for each taxable year beginning on or after January 1, 2024, in an amount equal to the amount of a relief contribution, as defined, that meets specified requirements. The bill would require the California Pollution Control Financing Authority (CPCFA) to, among other things, accept applications for approval as a relief fund that meet specified requirements, including that the application include a signed certification from the chief executive officer or another similar officer of each investor committing to make a relief contribution and stating the amount of that commitment. The bill also would authorize the CPCFA to recapture any tax credit allowed and revoke the tax credit certificates issued to a taxpayer if the taxpayer engages in specified behavior, including, failing to invest 100% of its investment authority in relief investments within 2 years of the closing date.
This bill would require, among other things, the CPCFA to undertake outreach activities to encourage investment in impact businesses, including, but not limited to, partnering with organizations representing persons and business enterprises from small businesses more than 50% owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, as described. The bill would also establish the Treasury Relief Investment Fund in the State Treasury, and would continuously appropriate the fund for purposes of these provisions. The bill would authorize CPCFA to direct the Treasurer to invest moneys in the fund, as specified, and would authorize CPCFA to use proceeds in the fund for administrative purposes. By continuously appropriating moneys in the fund, this bill would make an appropriation.
This bill would provide that the California Jumpstart Act is only operative for taxable years for which an appropriation is made for its purposes in the annual Budget Act or other statute.
This bill would require various certifications by officers of an investor and would require a relief fund that has not decertified to annually certify under penalty of perjury that the relief fund has not violated any of the grounds for revocation and recapture of credits. By expanding the crime of perjury, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing statutory law imposes taxes on the gross premiums of an insurer, as defined, and allows various credits against those taxes. The California Constitution imposes exactions against insurers from another state or country under specified conditions.
This bill would establish the California Jumpstart Act. The act would allow a credit against those taxes for each taxable year beginning on or after January 1, 2024, in an amount equal to the amount of a relief contribution, as defined, that meets specified requirements. The bill would require the California Pollution Control Financing Authority (CPCFA) to, among other things, accept applications for approval as a relief fund that meet specified requirements, including that the application include a signed certification from the chief executive officer or another similar officer of each investor committing to make a relief contribution and stating the amount of that commitment. The bill also would authorize the CPCFA to recapture any tax credit allowed and revoke the tax credit certificates issued to a taxpayer if the taxpayer engages in specified behavior, including, failing to invest 100% of its investment authority in relief investments within 2 years of the closing date.
This bill would require, among other things, the CPCFA to undertake outreach activities to encourage investment in impact businesses, including, but not limited to, partnering with organizations representing persons and business enterprises from small businesses more than 50% owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, as described. The bill would also establish the Treasury Relief Investment Fund in the State Treasury, and would continuously appropriate the fund for purposes of these provisions. The bill would authorize CPCFA to direct the Treasurer to invest moneys in the fund, as specified, and would authorize CPCFA to use proceeds in the fund for administrative purposes. By continuously appropriating moneys in the fund, this bill would make an appropriation.
This bill would require various certifications by officers of an investor and would require a relief fund that has not decertified to annually certify under penalty of perjury that the relief fund has not violated any of the grounds for revocation and recapture of credits. By expanding the crime of perjury, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing statutory law imposes taxes on the gross premiums of an insurer, as defined, and allows various credits against those taxes. The California Constitution imposes exactions against insurers from another state or country under specified conditions.
This bill would establish the California Jumpstart Act. The act would allow a credit against those taxes for a each taxable year beginning on or after January 1, 2024, in an amount equal to the amount of a relief contribution, as defined, that meets specified requirements. The bill would require the California Pollution Control Financing Authority (CPCFA) to, among other things, accept applications for approval as a relief fund that meet specified requirements, including that the application include a signed certification from the chief executive officer or another similar officer of each investor committing to make a relief contribution and that states stating the amount of that commitment. The bill also would authorize the CPCFA to recapture any tax credit allowed and revoke the tax credit certificates issued to a taxpayer if the taxpayer engages in specified behavior, including, failing to invest 100% of its investment authority in relief investments within 2 years of the closing date.
This bill would require, among other things, the CPCFA to undertake outreach activities to encourage investment in impact businesses, including, but not limited to, partnering with organizations representing persons and business enterprises from small businesses more than 50% owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, and other disadvantaged groups, persons, as described. The bill would also establish the Treasury Relief Investment Fund in the State Treasury. The bill would require moneys appropriated to the CPCFA for purposes of the bill to be deposited or paid into the fund and used only to carry out the provisions of the bill. Treasury, and would continuously appropriate the fund for purposes of these provisions. The bill would authorize CPCFA to direct the Treasurer to invest moneys in the fund, as specified, and would authorize CPCFA to use proceeds in the fund for administrative purposes. By continuously appropriating moneys in the fund, this bill would make an appropriation.
This bill would require various certifications by officers of an investor and would require a relief fund that has not decertified to annually certify under penalty of perjury that the relief fund has not violated any of the grounds for revocation and recapture of credits. By expanding the crime of perjury, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing statutory law imposes taxes on the gross premiums of an insurer, as defined, and allows various credits against those taxes. The California Constitution imposes exactions against insurers from another state or country under specified conditions.
This bill would establish the California Jumpstart Act. The act would allow a credit against those taxes for a taxable year beginning on or after January 1, 2024, in an amount equal to the amount of a relief contribution, as defined, that meets specified requirements. The bill would require the California Pollution Control Financing Authority (CPCFA) to, among other things, accept applications for approval as a relief fund that meet specified requirements, including that the application include a signed certification from the chief executive officer or another similar officer of each investor committing to make a relief contribution and that states the amount of that commitment. The bill also would authorize the CPCFA to recapture any tax credit allowed and revoke the tax credit certificates issued to a taxpayer if the taxpayer engages in specified behavior, including, failing to invest 100% of its investment authority in relief investments within 2 years of the closing date.
This bill would require, among other things, the CPCFA to undertake outreach activities to encourage investment in impact businesses, including, but not limited to, partnering with organizations representing persons and business enterprises from small businesses more than 50% owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, and other disadvantaged groups, as described. The bill would also establish the Treasury Relief Investment Fund in the State Treasury. The bill would require moneys appropriated to the CPCFA for purposes of the bill to be deposited or paid into the fund and used only to carry out the provisions of the bill.
This bill would require various certifications by officers of an investor and would require a relief fund that has not decertified to annually certify under penalty of perjury that the relief fund has not violated any of the grounds for revocation and recapture of credits. By expanding the crime of perjury, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing property tax law, in accordance with the California Constitution, requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing property tax law, open-space land is enforceably restricted if it is subject to specified types of restrictions.This bill would make nonsubstantive changes to these provisions.Existing property tax law, in accordance with the California Constitution, requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing property tax law, open-space land is enforceably restricted if it is subject to specified types of restrictions.
This bill would make nonsubstantive changes to these provisions.
The Legislature finds and declares all of the following:
(a)California continues to face unprecedented challenges from the COVID-19 pandemic and the realities are stark. Total small business revenue in California in November 2020 has decreased by 27.9 percent compared to January 2020, according to a new report from Opportunity Insights. The total unemployment benefits providing support for California workers and local economies has now hit $101 billion in just seven months. Almost $55 billion of that is regular state provided Unemployment Insurance (UI) benefits, which is more than double what was paid in the three worst years of the Great Recession combined, according to October 2020 data from the Employment Development Department (EDD). Black men have recovered fewer than 40 percent of jobs lost the worst of any demographic group, other than Black women while Hispanic men have recovered about 47 percent of lost jobs, according to new research from the Washington Post. As more small businesses shut their doors for good and people fall into poverty, the longer Californias economic recovery will take.
(b)The economic collapse sparked by the ongoing global pandemic is triggering the most unequal recession in modern U.S. history. Californias small businesses and workers are in a prolonged battle for survival and stability, a struggle wrought with geographic, economic, and racial disparities.
(c)Even before the COVID-19 crisis, many California small businesses, particularly those owned by people of color or located in economically disadvantaged and historically underserved areas of the state, still had not fully recovered from the Great Recession. Their economic precarity has only grown more dire amid the extended pandemic devastation.
(d)Bank loans, the principal source of outside financing for small businesses, have been increasingly difficult to secure since the COVID-19 crisis struck. In the Federal Reserves third-quarter survey of senior loan officers, conducted in July 2020, 70 percent of respondents reported tightening lending standards for small firms, which is the most since the fourth quarter of 2008, when the financial crisis struck.
(e)Minority-owned businesses suffer from historic and persistent underinvestment even when the economy is booming. According to the Stanford Institute for Economic Policy Research, only 1 percent of minority business owners obtained loans in their founding year pre-pandemic, compared to 7 percent of white business owners.
(f)According to a December 2020 report from the Public Policy Institute of California, the effects of the current recession are concentrated among low-income workers, African Americans, Latinos, and women. Although no demographic group has been spared from the impacts of the current crisis, larger increases in unemployment and underemployment for low-income, African American, and Latino families are likely to worsen preexisting significant disparities in income and economic opportunity. Importantly, women have also been disproportionately affected, jeopardizing long-term gains in their labor force participation. Uneven economic recoveries tend to exacerbate income inequality, which may mute economic growth by dampening individuals chances of economic mobility and increased productivity.
(g)Achieving a more equitable recovery begins with creating more equitable flows of capital. Comprehensive, targeted, and transparent economic policies with strong safeguards will catalyze small business growth and entrepreneurial activity as California rebuilds.
(h)The COVID-19 pandemics lessons are clear and simple. Policymakers response to these deep, rapid revenue losses will have important consequences in the coming months and years. A targeted response that accounts for the investment gaps in disproportionately impacted businesses and communities, enables small business growth, and generates job creation that can minimize the harm and accelerate Californias equitable economic recovery.
(i)The California Jumpstart Act builds on the states ongoing business support initiatives throughout the pandemic by continuing to help bridge the deepening financial gaps and inequities facing underserved California small businesses and entrepreneurs and providing a long-term recovery solution.
(j)The California Jumpstart Act leverages private expertise, resources, and capital, with no immediate fiscal impact to the state budget, to encourage and expand long-term economic growth in economically disadvantaged and historically underinvested small businesses beyond the initial relief provided under the federal small business stimulus programs.
(k)The California Jumpstart Act incentivizes and mobilizes rapid, scalable private investment, with 100 percent of funds invested within two years into targeted small businesses around the state that historically have been underserved by traditional sources of patient growth capital. Approved funds will make debt and equity investments into small businesses at below market rates with flexible terms, allowing small businesses to access growth-oriented investment capital for broad purposes, including expansion, payroll, inventory, and training among others.
SEC. 2.Article 6 (commencing with Section 12264) is added to Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code, to read:6.California Jumpstart Act12264.This article shall be known, and may be cited, as the California Jumpstart Act.
12264.1.The provisions of this article shall only be operative for taxable years for which an appropriation is made for its purposes in the annual Budget Act or other statute.
12264.5.As used in this article, the following definitions apply:
(a)Affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity. For purposes of this subdivision, an entity is controlled by another entity if the controlling entity holds, directly or indirectly, the majority voting or ownership interest in the controlled entity or has control over the day-to-day operations of the controlled entity. For purposes of subdivision (c) of Section 12265, affiliate shall include taxpayers that satisfy this definition on the date the relief fund submitted its application only.
(b)Applicant means an entity that applies for an allocation of relief investment authority.
(c)Closing date means the date on which a relief fund has collected all amounts specified in subdivision (a) of Section 12268.
(d)CPCFA means the California Pollution Control Financing Authority within the office of the Treasurer.
(e)Federal funds rate means the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank.
(f)Flexible term means any of the following:
(1)Deferral of interest payments for at least one year.
(2)Deferral of principal payments for at least one year.
(3)Convertible into equity.
(g)Impact business means a small business more than 50 percent owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons.
(h)Investment authority means the amount certified by the CPCFA pursuant to Section 12267.
(i)Premium taxes means the taxes imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the California Constitution, or as specified by Section 12221 of this code, or Section 685 of the Insurance Code.
(j)(1)Principal business operations means the location that meets either of the following requirements:
(A)At least 60 percent of the businesss employees work at the location.
(B)Employees who are paid at least 60 percent of the businesss payroll work at the location.
(2)A business that has agreed to use the proceeds of a relief investment to establish its principal business operations in the state shall be deemed to have its principal business operations in a relief zone if it satisfies the requirements of paragraph (1) within 180 days after receiving a relief investment.
(k)Relief contribution means an investment of cash, by an entity subject to premium taxes in this state, in a relief fund that equals the amount specified on a notice of tax credit allocation issued by the CPCFA under subdivision (c) of Section 12267 and that is used to purchase an equity interest in the relief fund or to purchase, at par value or premium, a debt instrument issued by the fund that meets both of the following requirements:
(1)Has an original maturity date of at least five years after the date of issuance.
(2)Has a repayment schedule that is not faster than a level principal amortization over five years.
(l)Relief fund means an entity certified by the office of the CPCFA under subdivision (a) of Section 12267.
(m)(1)Relief investment means any capital or equity investment in a small business or any loan to a small business with a stated maturity of at least two years.
(2)A senior secured loan is a relief investment only if it has an interest rate of less than 4 percent plus the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank and has a flexible term.
(3)Any other loan is a relief investment only if it has an interest rate of less than 9 percent plus the federal funds rate on the date of the relief investment and has a flexible term.
(4)An equity investment is a relief investment only if the relief fund does not acquire a majority investment in the small business as an initial investment in the small business.
(5)Relief investment does not include any transaction that includes an origination fee.
(n)Relief zone means any of the following locations in this state:
(1)A census tract in the state meeting either of the following requirements according to the 2020 United States Census:
(A)The census tract has a poverty rate that is greater than 30 percent.
(B)The census tract has a median family income that does not exceed the following:
(i)If the census tract is not located in a metropolitan area, 60 percent of the county or statewide median family income. income, whichever is less.
(ii)If the census tract is located in a metropolitan area, 60 percent of the greater lesser of the statewide median family income and the metropolitan area median family income.
(C)Relief investments made in a location described in this paragraph shall be verified by CPCFA using a federal New Markets Tax Credit mapping tool it designates that is accessible from its public internet website and is subject to the requirements of Section 11546.7 of the Government Code.
(2)A census tract within the state that is determined by the Department of Finance to have a civilian unemployment rate that is within the top 25 percent of all census tracts within the state and has a poverty rate within the top 25 percent of all census tracts within the state, as prescribed in Section 13073.5 of the Government Code.
(3)Within a city, county, or city and county designated as a full or partial High Unemployment Area in the state as designated by the Employment Training Panel no more than 120 days before the date the relief investment is made.
(o)Senior secured loan means any loan that is secured by a first mortgage on real estate with a loan-to-value ratio of less than 80 percent.
(p)Small business means any business that, at the time a relief fund initially invests in the business, meets all of the following requirements:
(1)The total number of employees the business employs does not exceed 250.
(2)The business has gross receipts, less returns and allowances reportable to the state, of less than ten million dollars ($10,000,000) during the previous taxable year.
(3)The business has its principal business operations in a relief zone in the state.
(4)The business is engaged in North American Industry Classification System sector 11, 22, 23, 31, 32, 33, 42, 44, 45, 48, 49, 51, 54, 56, 62, 71, or 72, or if not engaged in those industries, the CPCFA determines that the investment will create desirable economic outcomes in line with the goals of this article.
(5)Small business shall not include any business whose operations violate state law.
12265.(a)For taxable years beginning on or after January 1, 2024, 2025, and before January 1, 2030, there shall be allowed against premium taxes a California Jumpstart Act tax credit in an amount equal to the amount of a relief contribution, eligible for utilization in accordance with paragraph (2) of subdivision (a) of Section 12269.
(b)If the credit allowed by this section exceeds the taxes described in subdivision (a), the excess may be carried over to reduce those taxes in the following year, and the four succeeding years if necessary, until the credit is exhausted. Tax credits shall not be carried forward after the 2031 2030 taxable year.
(c)The credit is nonrefundable and may not be sold, transferred, or allocated to an entity other than an affiliate.
(d)No additional retaliatory tax shall be required as a result of receiving the tax credit described in this subdivision.
(e)A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate issued pursuant to subdivision (a) of Section 12269 with the taxpayers return for each taxable year for which the credit is claimed.
(f)(1)The aggregate amount of investment authority that may be certified shall be three hundred seventy-five million dollars ($375,000,000) and the aggregate amount of credit that may be allocated and certified pursuant to this section shall be three hundred million dollars ($300,000,000) in total for all taxable years for which the California Jumpstart Act tax credit is authorized.
(2)The total amount of credits that may be claimed per year is seventy-five million dollars ($75,000,000) during the taxable years containing the third through sixth anniversaries of the closing date.
(3)If requests for investment authority and credits exceed the limitations described in paragraph (1), the CPCFA shall proportionally reduce the investment authority and credits certified for each approved application as necessary to avoid exceeding the limit.
12266.(a)Beginning 90 days after the enactment of this act, the CPCFA shall accept applications for applicants desiring to apply for certification as a relief fund. The application shall meet all of the following requirements:
(1)The application shall state the total relief investment authority sought by the applicant, which shall not exceed three hundred seventy-five million dollars ($375,000,000).
(2)The applicant shall include evidence to prove, to the satisfaction of the CPCFA, that the applicant meets all of the following criteria:
(A)The applicant, or an affiliate of the applicant, is a federally approved or licensed rural business investment company pursuant to Section 2009cc of Title 7 of the United States Code or a small business investment company pursuant to Section 681 of Title 15 of the United States Code. The applicant shall include a certificate executed by an executive officer of the applicant attesting that the approval or license remains in effect and has not been revoked and evidence that at least one principal or similar officer of the entity applicant is, and has been for at least four years, an officer or employee of the applicant or an affiliate of the applicant on the date the application is submitted.
(B)As of the date the application is submitted, the applicant and its affiliates have invested more than one hundred million dollars ($100,000,000) in nonpublic companies, which are a corporation, limited liability company, partnership, or limited partnership that does not offer or trade its stocks or membership interests to the public on any stock market exchange, is organized under the laws of the United States or a political division thereof, and is not required to have principal business operations in California.
(3)A signed certification from the chief executive officer, or similar officer, of each investor that commits to make a relief contribution to the applicant stating the amount of that commitment.
(4)The sum of all relief-eligible capital contribution commitments described in paragraph (3) of this subdivision, which shall equal at least 80 percent of the total investment authority sought by the applicant.
(5)A nonrefundable application fee of ten thousand dollars ($10,000).
(6)A detailed inclusive outreach plan intended to increase investment sourcing opportunities under the program in impact businesses.
(7)Include a signed certification from an executive officer of the applicant attesting that no senior managers of the fund are under indictment.
(8)Disclose and describe any pending or resolved litigation in which an applicant or an affiliate of the applicant is a party, as well as any violations, citations, fines, or penalties relating to any violations of state labor law, employment law, or environmental law within the last 10 years.
(9)Include evidence from the applicants previous experience demonstrating all of the following:
(A)Improving economic outcomes and net job creation in low-income communities with high unemployment and poverty directly resulting from its investments in small businesses.
(B)Generating improved economic outcomes that would not have occurred but for its investments in small businesses.
(C)Promoting high-quality jobs for workers, including, but not limited to, paying wages in excess of the minimum wage, and promoting full-time employment with health and retirement benefits.
(10)Include a signed certification from an executive officer of the applicant attesting that the information provided in the application is true and correct.
(b)(1)The CPCFA shall verify that the information supplied in the application is true and correct before allocating investment authority to that applicant. may request additional information from an applicant on the information supplied in their application before allocating investment authority to that applicant. Applications received by the CPCFA on the same day shall be deemed to have been received simultaneously.
(2)The CPCFA shall approve investment authority only in an aggregate amount that is not greater than three hundred seventy-five million dollars ($375,000,000).
(c)(1)The CPCFA shall issue application criteria consistent with the purposes of this article, and rank applicants based on those criteria.
(2)The CPCFA shall post the criteria, its rankings of applicants, applications, and the amount of tax credits allocated to each applicant on its internet website.
(d)The CPCFA shall deny an application submitted under this section if any of the following apply:
(1)The application is incomplete.
(2)The application fee is not paid in full.
(3)The application does not satisfy all the criteria described in paragraph (2) of subdivision (a).
(4)The CPCFA has already approved the maximum total relief investment authority and relief contributions allowed pursuant to subdivision (f) of Section 12265.
(5)The applicant fails to submit affidavits equal to 80 percent of the relief investment authority sought.
(6)The applicant did not supply evidence of its experience as provided in paragraph (7) of subdivision (a), or the CPCFA could not verify that the information supplied in the application is true and correct. (a).
12267.After approving an application submitted pursuant to Section 12266, the CPCFA shall issue a written notice to the applicant certifying all of the following:
(a)The applicant is a relief fund.
(b)The amount of the applicants investment authority.
(c)The relief contributions required from each investor that submitted an affidavit with the relief funds application.
12268.(a)(1)Within 60 days after receiving the certification issued pursuant to Section 12267, a relief fund shall do both of the following:
(A)Collect relief contributions equal to the amount certified in Section 12267 from each investor whose certification was included in the application.
(B)Collect additional investments of cash that, when added to the investor contributions, equal the relief funds investment authority.
(2)At least 5 percent of the relief funds investment authority shall consist of direct or indirect equity investments from affiliates of the relief fund, including employees, officers, and directors of the affiliates.
(b)Within 65 days after receiving certification pursuant to Section 12267, the relief fund shall send to the CPCFA documentation to prove that the amounts required by subdivision (a) have been collected.
(c)If the relief fund fails to comply with subdivision (a) or (b), the CPCFA shall revoke the relief funds investment authority certification and provide written notice to the relief fund of the revocation.
12269.(a)(1)Upon receipt of the documentation required by subdivision (b) of Section 12268, the CPCFA shall issue, establish a process in consultation with the Department of Insurance to issue to each investor or affiliate identified in subdivision (b) of Section 12268, a notice of the amount and utilization schedule of the tax credits allocated to that investor or affiliate as a result of its relief contribution.
(2)The CPCFA CPCFA, in consultation with the Department of Insurance, shall issue, to each investor identified in subdivision (b) of Section 12268, a tax credit certificate for one-fourth of the relief contributions made by the investor for each of the taxable years containing the third through sixth anniversaries of the closing date.
(b)The CPCFA CPCFA, in consultation with the Department of Insurance, shall not be required to issue a tax credit certificate if the relief fund does not invest 70 percent of its investment authority in investments within one year of the closing date and 100 percent of its relief investment authority in relief investments within two years of the closing date, subject to satisfaction of these investment milestones during the cure period established by Section 12270.
(c)A taxpayer allowed a credit under this section for a qualified relief investment shall not be eligible for any other credit under this part with respect to that investment.
12269.5.(a)The CPCFA shall independently verify the relief funds compliance with this article, and the CPCFA may require a relief fund to provide any information necessary in the format it prescribes to ensure the relief funds compliance with this article.
(b)An annual fee of one hundred fifty thousand dollars ($150,000), to be prorated amongst all relief funds that have not exited pursuant to Section 12271, shall be payable to the CPCFA.
(c)The initial annual fee is due and payable to the CPCFA within 60 days after receiving the certification issued pursuant to Section 12267.
(d)After payment of the initial annual fee, the annual fee shall be due and payable to the CPCFA before the anniversary date of the closing date.
(e)Application and annual fees paid to the CPCFA shall be deposited in the Treasury Relief Investment Fund established under Section 12276.
12270.(a)(1)The CPCFA shall recapture CPCFA, in consultation with the Department of Insurance, shall recover tax credits claimed pursuant to Section 12264 and revoke the tax credit certificates issued if it determines that any of the following occur with respect to the relief fund:
(A)The relief fund fails to invest 100 percent of its investment authority in relief investments within two years of the closing date.
(B)The relief fund fails to maintain that level of investment until the sixth anniversary of the closing date. For the purposes of this paragraph, an investment is maintained even if the investment is sold or repaid as long as the 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 relief investments in this state within one year of the receipt of such capital. Regularly scheduled principal payments on a loan that is a relief investment shall be deemed continuously invested in a relief investment if the amounts are reinvested in one or more relief instruments by the end of the following calendar year.
(C)The relief fund makes a distribution or payment that results in the fund having less than 100 percent of its relief investment authority invested in relief investments or in cash or marketable securities available for investment in relief investments.
(D)The relief fund makes a relief investment in a small 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 relief fund, an affiliate of the fund, or an investor in the relief fund, excluding investments in publicly traded securities by a small business or an owner or affiliate of a small business.
(E)A relief fund makes an investment in a small business that is not a small business as described in subdivision (o) of Section 12264.5 at the time of the investment.
(2)Before recapturing recovering tax credits or revoking a tax credit certificate pursuant to this section, the CPCFA CPCFA, in consultation with the Department of Insurance, shall notify the relief fund of the reasons for the pending recapture or revocation. recovery or revocation of the tax credit. If the fund corrects the violations outlined in the notice to the satisfaction of the CPCFA within 90 days of the date the notice was dispatched, the CPCFA shall not recapture recover the tax credits or revoke the tax credit certificate, as applicable.
(3)The CPCFA CPCFA, in consultation with the Department of Insurance, shall not recapture recover a tax credit or revoke a tax credit certificate due to any actions of a fund that occur after decertification pursuant to Section 12271, provided the CPCFA may recapture recover a relief funds tax credits or revoke a tax credit certificate related to actions of the relief fund that occurred prior to exit in accordance with Section 12271, even if the actions are discovered after exit.
(b) The amount by which one or more relief investments by a relief fund in the same small business exceeds seven million five hundred thousand dollars ($7,500,000) shall not be considered as a relief investment for purposes of this section, exclusive of capital repaid or redeemed by the small business and reinvested as a relief investment in the small business. A relief investment in an affiliate of a small business shall be treated as a relief investment in that small business for purposes of this subdivision.
12271.(a)(1)On or after the sixth anniversary of the closing date, a relief fund that has invested 100 percent of its relief investment authority in relief investments may apply to the CPCFA to exit regulation by the CPCFA.
(2)The CPCFA shall approve or deny an application made pursuant to paragraph (1) within 30 days after receiving the application.
(b)The CPCFA shall not deny the application unless there is a reasonable basis for the denial. In evaluating the application, whether a tax credit was recaptured recovered with respect to the decertifying relief fund shall be evidence to prove that the relief fund is eligible for exit.
(c)The CPCFA shall send notice of its determination with respect to decertification and reasons for denial, if applicable, to the relief fund requesting exit.
12272.(a)A relief fund may request a written opinion from the CPCFA as to whether the business qualifies as a small business.
(b)The relief fund shall include evidence that the business satisfies the definition of a small business and a certification by an executive officer of the business attesting that the business satisfies such definition.
(c)The CPCFA shall issue a written opinion to the fund within 15 business days of receiving the request.
12273.(a)If the CPCFA revokes a relief funds certification pursuant to subdivision (c) of Section 12268 or revokes or recaptures recovers a tax credit certificate pursuant to subdivision (b) of Section 12267, the associated investment authority and investor contributions will not count toward the limit on total investment authority and investor contributions set forth in subdivision (f) of Section 12265.
(b)(1)The CPCFA shall first award reverted investment authority pro rata to each relief fund that was awarded less than the requested investment authority for which it applied under Section 12267 within 15 days, which a relief fund may allocate to the relief funds investors at the funds discretion.
(2)The CPCFA may award any remaining investment authority to new applicants. applicants before January 1, 2030.
12274.(a)Each relief fund shall submit a report to the CPCFA on or before the 15th day of each April following the end of the calendar year that includes the closing date until the calendar year after the relief fund has been decertified. The report shall provide an itemization of the relief funds relief investments and shall include the following documents and information:
(1)Audited financial statements evidencing each relief funds relief investments.
(2)The name, location, and industry class classification within the North American Industry Classification System of each business that received a relief investment from the fund, evidence that the business qualified as a small business at the time the investment was made by a certification executed by an executive officer of each business attesting that the business was a small business at the time of the initial relief investment in the business.
(3) (A)For each small business receiving a relief investment, the number of full-time employees at each small business at the time the investment was made.
(B)For purposes of this paragraph, a full-time employee means an employee that works at least 30 hours per week throughout the year or meets the customary practices accepted by an industry as full time. The number of a small businesss full-time employees is determined by dividing the total hours for which the small business pays wages to all employees during the year by the number of employee work hours per year. The standard calculation for employee work hours per year is 2080: calculated by multiplying 52 weeks by 40 hours per week.
(4) (A)A certification executed by an executive officer of each business attesting the number of jobs created and jobs retained as a result of each relief investment.
(B)For purposes of this paragraph, jobs created means employment positions that are created by a small business, are located in this state, require at least 30 hours of work each week, and were not located in this state at the time of the initial relief investment in the small business. The number of jobs created by a small business is calculated each year by subtracting the number of employment positions in this state at the small business at the time of the initial relief investment in the small business from the monthly average of those employment positions for that year. If the number calculated under this subsection is less than zero, the number shall be reported as zero. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(C)For purposes of this paragraph, jobs retained means, employment positions that are located in this state, require at least 30 hours of work each week, and existed before the initial relief investment in the small business and would have been lost or moved out of this state had a relief investment in the small business not been made, as certified in writing by an executive officer of the small business. The number of jobs retained by a small business is calculated each year based on the monthly average of employment positions for that year. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(5)The number of relief investments made in impact businesses, disaggregated by classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(6)A certification that the relief fund has not violated any of the grounds for revocation and recapture recovery of credits set forth in subdivision (b) of Section 12267.
(7)Any other information required by the CPCFA except to the extent the information is included in the audit performed pursuant to paragraph (1).
(b)Each fund shall submit a report to the CPCFA on or before the fifth business day after the first and second anniversaries of the closing date that provides documentation to prove that the fund has met the investment thresholds described in subdivision (b) of Section 12269 and has not implicated any of the other recapture credit recovery provisions described in Section 12270.
12275.The CPCFA shall undertake outreach activities to encourage investment in impact businesses, including, but not limited to, by partnering with organizations representing persons and business enterprises from underrepresented groups, in a manner that will inform and educate members of these organizations on investment opportunities through the program provided in this article.
12276.(a)The Treasury Relief Investment Fund is hereby established in the State Treasury, and shall be administered by the CPCFA for purposes of this article. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to CPCFA for carrying out the purposes of this article. All moneys accruing to the CPCFA pursuant to this article from any source shall be deposited into the fund.
(b)The CPCFA may use the proceeds in the Treasury Relief Investment Fund for purposes of administrative costs relating to the program.
(c)The CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. The CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. The CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.
12277.(a)The CPCFA may adopt regulations to implement this article. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the CPCFA is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code.
(b)The CPCFA shall adopt forms and notices necessary to implement this article.
(c)The CPCFA shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this article and the amount of those credits.
SEC. 3.For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Article 6 (commencing with Section 12264) of Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code as added by this act, hereafter the credit, the Legislature finds as follows:
(a)The purpose specific goals, purposes, and objectives of the credit, also known as the California Jumpstart Act, is to address the growing economic hardships California small businesses, workers, and vulnerable communities are grappling with attract private sector investment into underinvested and underserved small businesses and communities in California and provide a long-term recovery solution. The purpose of the credit is also to incentivize and mobilize rapid and scalable private sector investment that encourages economic growth beyond the initial relief provided under the federal small business stimulus programs, enabling small business growth, job creation, and relief for families in communities where such economic assistance is needed the most.
(b)To measure whether the credit achieves its intended purpose, the CPCFA shall, by June 30 of each year this article is in effect, submit an electronic report, in compliance with Section 9795 of the Government Code, to the Legislature containing all of the following: following performance indicators:
(1)The name, location, and industry class classification within the North American Industry Classification System of each business that received a relief investment from the relief fund and notification that evidence was collected that the business qualified as a small business at the time the investment was made.
(2)The number of jobs created and retained as a result of each relief investment.
(3)The cumulative amount of relief investments made in each small business as a result of this credit.
(4)The number of relief investments made in impact businesses of interest, disaggregated by classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(5)Any recommendations for improving the effectiveness, transparency, and accountability of public funds deployed in the form of tax credits allocated pursuant to the California Jumpstart Act, or the CPCFAs administration of the California Jumpstart Act.
(6)Any penalties imposed during the prior 12-month period against a relief fund.
(7)Data collection requirements include:
(A)The amount of tax credits issued in the year.
(B)The number of jobs created and retained as a result of qualified relief investments.
(C)The number of operating businesses located in a relief zone that receive qualified investments.
(8)The baseline measurements include:
(A)The amount of tax credits issued in the year.
(B)The unemployment rate of the area.
(C)The poverty rate of the area.
(7)(9)Beginning on January 1, 2025, and in each annual report thereafter while this article is in effect, the CPCFA shall include the following additional information in its annual electronic report submitted pursuant to this subdivision:
(A)An evaluation of the outcomes of the program on low-income communities with high unemployment and poverty directly resulting from investments in small businesses made under the California Jumpstart Act, including a description of the methodology used to make the evaluation.
(B)An assessment of whether the economic outcomes resulting from investments in small businesses would have occurred but for the California Jumpstart Act.
(C)Based on the CPCFAs calculations for actual unique jobs created and tax credits allocated, a calculation of the amount of foregone revenue in the form of tax credits allocated pursuant to the California Jumpstart Act per unique job created but for the California Jumpstart Act.
(c)CPCFA may require a relief fund to provide information necessary in a format it prescribes to complete the report.
(d)The CPCFA shall submit the electronic report required by this section to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, the California Legislative Black Caucus, the California Latino Legislative Caucus, the California Asian Pacific Islander Legislative Caucus, the California Legislative Womens Caucus, and the California Legislative LGBTQ Caucus.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The Legislature finds and declares all of the following:
(a)California continues to face unprecedented challenges from the COVID-19 pandemic and the realities are stark. Total small business revenue in California in November 2020 has decreased by 27.9 percent compared to January 2020, according to a new report from Opportunity Insights. The total unemployment benefits providing support for California workers and local economies has now hit $101 billion in just seven months. Almost $55 billion of that is regular state provided Unemployment Insurance (UI) benefits, which is more than double what was paid in the three worst years of the Great Recession combined, according to October 2020 data from the Employment Development Department (EDD). Black men have recovered fewer than 40 percent of jobs lost the worst of any demographic group, other than Black women while Hispanic men have recovered about 47 percent of lost jobs, according to new research from the Washington Post. As more small businesses shut their doors for good and people fall into poverty, the longer Californias economic recovery will take.
(b)The economic collapse sparked by the ongoing global pandemic is triggering the most unequal recession in modern U.S. history. Californias small businesses and workers are in a prolonged battle for survival and stability, a struggle wrought with geographic, economic, and racial disparities.
(c)Even before the COVID-19 crisis, many California small businesses, particularly those owned by people of color or located in economically disadvantaged and historically underserved areas of the state, still had not fully recovered from the Great Recession. Their economic precarity has only grown more dire amid the extended pandemic devastation.
(d)Bank loans, the principal source of outside financing for small businesses, have been increasingly difficult to secure since the COVID-19 crisis struck. In the Federal Reserves third-quarter survey of senior loan officers, conducted in July 2020, 70 percent of respondents reported tightening lending standards for small firms, which is the most since the fourth quarter of 2008, when the financial crisis struck.
(e)Minority-owned businesses suffer from historic and persistent underinvestment even when the economy is booming. According to the Stanford Institute for Economic Policy Research, only 1 percent of minority business owners obtained loans in their founding year pre-pandemic, compared to 7 percent of white business owners.
(f)According to a December 2020 report from the Public Policy Institute of California, the effects of the current recession are concentrated among low-income workers, African Americans, Latinos, and women. Although no demographic group has been spared from the impacts of the current crisis, larger increases in unemployment and underemployment for low-income, African American, and Latino families are likely to worsen preexisting significant disparities in income and economic opportunity. Importantly, women have also been disproportionately affected, jeopardizing long-term gains in their labor force participation. Uneven economic recoveries tend to exacerbate income inequality, which may mute economic growth by dampening individuals chances of economic mobility and increased productivity.
(g)Achieving a more equitable recovery begins with creating more equitable flows of capital. Comprehensive, targeted, and transparent economic policies with strong safeguards will catalyze small business growth and entrepreneurial activity as California rebuilds.
(h)The COVID-19 pandemics lessons are clear and simple. Policymakers response to these deep, rapid revenue losses will have important consequences in the coming months and years. A targeted response that accounts for the investment gaps in disproportionately impacted businesses and communities, enables small business growth, and generates job creation that can minimize the harm and accelerate Californias equitable economic recovery.
(i)The California Jumpstart Act builds on the states ongoing business support initiatives throughout the pandemic by continuing to help bridge the deepening financial gaps and inequities facing underserved California small businesses and entrepreneurs and providing a long-term recovery solution.
(j)The California Jumpstart Act leverages private expertise, resources, and capital, with no immediate fiscal impact to the state budget, to encourage and expand long-term economic growth in economically disadvantaged and historically underinvested small businesses beyond the initial relief provided under the federal small business stimulus programs.
(k)The California Jumpstart Act incentivizes and mobilizes rapid, scalable private investment, with 100 percent of funds invested within two years into targeted small businesses around the state that historically have been underserved by traditional sources of patient growth capital. Approved funds will make debt and equity investments into small businesses at below market rates with flexible terms, allowing small businesses to access growth-oriented investment capital for broad purposes, including expansion, payroll, inventory, and training among others.
SEC. 2.Article 6 (commencing with Section 12264) is added to Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code, to read:6.California Jumpstart Act12264.This article shall be known, and may be cited, as the California Jumpstart Act.
12264.1.The provisions of this article shall only be operative for taxable years for which an appropriation is made for its purposes in the annual Budget Act or other statute.
12264.5.As used in this article, the following definitions apply:
(a)Affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity. For purposes of this subdivision, an entity is controlled by another entity if the controlling entity holds, directly or indirectly, the majority voting or ownership interest in the controlled entity or has control over the day-to-day operations of the controlled entity. For purposes of subdivision (c) of Section 12265, affiliate shall include taxpayers that satisfy this definition on the date the relief fund submitted its application only.
(b)Applicant means an entity that applies for an allocation of relief investment authority.
(c)Closing date means the date on which a relief fund has collected all amounts specified in subdivision (a) of Section 12268.
(d)CPCFA means the California Pollution Control Financing Authority within the office of the Treasurer.
(e)Federal funds rate means the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank.
(f)Flexible term means any of the following:
(1)Deferral of interest payments for at least one year.
(2)Deferral of principal payments for at least one year.
(3)Convertible into equity.
(g)Impact business means a small business more than 50 percent owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons.
(h)Investment authority means the amount certified by the CPCFA pursuant to Section 12267.
(i)Premium taxes means the taxes imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the California Constitution, or as specified by Section 12221 of this code, or Section 685 of the Insurance Code.
(j)(1)Principal business operations means the location that meets either of the following requirements:
(A)At least 60 percent of the businesss employees work at the location.
(B)Employees who are paid at least 60 percent of the businesss payroll work at the location.
(2)A business that has agreed to use the proceeds of a relief investment to establish its principal business operations in the state shall be deemed to have its principal business operations in a relief zone if it satisfies the requirements of paragraph (1) within 180 days after receiving a relief investment.
(k)Relief contribution means an investment of cash, by an entity subject to premium taxes in this state, in a relief fund that equals the amount specified on a notice of tax credit allocation issued by the CPCFA under subdivision (c) of Section 12267 and that is used to purchase an equity interest in the relief fund or to purchase, at par value or premium, a debt instrument issued by the fund that meets both of the following requirements:
(1)Has an original maturity date of at least five years after the date of issuance.
(2)Has a repayment schedule that is not faster than a level principal amortization over five years.
(l)Relief fund means an entity certified by the office of the CPCFA under subdivision (a) of Section 12267.
(m)(1)Relief investment means any capital or equity investment in a small business or any loan to a small business with a stated maturity of at least two years.
(2)A senior secured loan is a relief investment only if it has an interest rate of less than 4 percent plus the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank and has a flexible term.
(3)Any other loan is a relief investment only if it has an interest rate of less than 9 percent plus the federal funds rate on the date of the relief investment and has a flexible term.
(4)An equity investment is a relief investment only if the relief fund does not acquire a majority investment in the small business as an initial investment in the small business.
(5)Relief investment does not include any transaction that includes an origination fee.
(n)Relief zone means any of the following locations in this state:
(1)A census tract in the state meeting either of the following requirements according to the 2020 United States Census:
(A)The census tract has a poverty rate that is greater than 30 percent.
(B)The census tract has a median family income that does not exceed the following:
(i)If the census tract is not located in a metropolitan area, 60 percent of the statewide median family income.
(ii)If the census tract is located in a metropolitan area, 60 percent of the greater of the statewide median family income and the metropolitan area median family income.
(C)Relief investments made in a location described in this paragraph shall be verified by CPCFA using a federal New Markets Tax Credit mapping tool it designates that is accessible from its public internet website and is subject to the requirements of Section 11546.7 of the Government Code.
(2)A census tract within the state that is determined by the Department of Finance to have a civilian unemployment rate that is within the top 25 percent of all census tracts within the state and has a poverty rate within the top 25 percent of all census tracts within the state, as prescribed in Section 13073.5 of the Government Code.
(3)Within a city, county, or city and county designated as a full or partial High Unemployment Area in the state as designated by the Employment Training Panel no more than 120 days before the date the relief investment is made.
(o)Senior secured loan means any loan that is secured by a first mortgage on real estate with a loan-to-value ratio of less than 80 percent.
(p)Small business means any business that, at the time a relief fund initially invests in the business, meets all of the following requirements:
(1)The total number of employees the business employs does not exceed 250.
(2)The business has gross receipts, less returns and allowances reportable to the state, of less than ten million dollars ($10,000,000) during the previous taxable year.
(3)The business has its principal business operations in a relief zone in the state.
(4)The business is engaged in North American Industry Classification System sector 11, 22, 23, 31, 32, 33, 42, 44, 45, 48, 49, 51, 54, 56, 62, 71, or 72, or if not engaged in those industries, the CPCFA determines that the investment will create desirable economic outcomes in line with the goals of this article.
(5)Small business shall not include any business whose operations violate state law.
12265.(a)For taxable years beginning on or after January 1, 2024, there shall be allowed against premium taxes a California Jumpstart Act tax credit in an amount equal to the amount of a relief contribution, eligible for utilization in accordance with paragraph (2) of subdivision (a) of Section 12269.
(b)If the credit allowed by this section exceeds the taxes described in subdivision (a), the excess may be carried over to reduce those taxes in the following year, and the four succeeding years if necessary, until the credit is exhausted. Tax credits shall not be carried forward after the 2031 taxable year.
(c)The credit is nonrefundable and may not be sold, transferred, or allocated to an entity other than an affiliate.
(d)No additional retaliatory tax shall be required as a result of receiving the tax credit described in this subdivision.
(e)A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate issued pursuant to subdivision (a) of Section 12269 with the taxpayers return for each taxable year for which the credit is claimed.
(f)(1)The aggregate amount of investment authority that may be certified shall be three hundred seventy-five million dollars ($375,000,000) and the aggregate amount of credit that may be allocated and certified pursuant to this section shall be three hundred million dollars ($300,000,000) in total for all taxable years for which the California Jumpstart Act tax credit is authorized.
(2)The total amount of credits that may be claimed per year is seventy-five million dollars ($75,000,000) during the taxable years containing the third through sixth anniversaries of the closing date.
(3)If requests for investment authority and credits exceed the limitations described in paragraph (1), the CPCFA shall proportionally reduce the investment authority and credits certified for each approved application as necessary to avoid exceeding the limit.
12266.(a)Beginning 90 days after the enactment of this act, the CPCFA shall accept applications for applicants desiring to apply for certification as a relief fund. The application shall meet all of the following requirements:
(1)The application shall state the total relief investment authority sought by the applicant, which shall not exceed three hundred seventy-five million dollars ($375,000,000).
(2)The applicant shall include evidence to prove, to the satisfaction of the CPCFA, that the applicant meets all of the following criteria:
(A)The applicant, or an affiliate of the applicant, is a federally approved or licensed rural business investment company pursuant to Section 2009cc of Title 7 of the United States Code or a small business investment company pursuant to Section 681 of Title 15 of the United States Code. The applicant shall include a certificate executed by an executive officer of the applicant attesting that the approval or license remains in effect and has not been revoked and evidence that at least one principal or similar officer of the entity is, and has been for at least four years, an officer or employee of the applicant or an affiliate of the applicant on the date the application is submitted.
(B)As of the date the application is submitted, the applicant and its affiliates have invested more than one hundred million dollars ($100,000,000) in nonpublic companies, which are a corporation, limited liability company, partnership, or limited partnership that does not offer or trade its stocks or membership interests to the public on any stock market exchange, is organized under the laws of the United States or a political division thereof, and is not required to have principal business operations in California.
(3)A signed certification from the chief executive officer, or similar officer, of each investor that commits to make a relief contribution to the applicant stating the amount of that commitment.
(4)The sum of all relief-eligible capital contribution commitments described in paragraph (3) of this subdivision, which shall equal at least 80 percent of the total investment authority sought by the applicant.
(5)A nonrefundable application fee of ten thousand dollars ($10,000).
(6)A detailed inclusive outreach plan intended to increase investment sourcing opportunities under the program in impact businesses.
(7)Include a signed certification from an executive officer of the applicant attesting that no senior managers of the fund are under indictment.
(8)Disclose and describe any pending or resolved litigation in which an applicant or an affiliate of the applicant is a party, as well as any violations, citations, fines, or penalties relating to any violations of state labor law, employment law, or environmental law within the last 10 years.
(9)Include evidence from the applicants previous experience demonstrating all of the following:
(A)Improving economic outcomes and net job creation in low-income communities with high unemployment and poverty directly resulting from its investments in small businesses.
(B)Generating improved economic outcomes that would not have occurred but for its investments in small businesses.
(C)Promoting high-quality jobs for workers, including, but not limited to, paying wages in excess of the minimum wage, and promoting full-time employment with health and retirement benefits.
(b)(1)The CPCFA shall verify that the information supplied in the application is true and correct before allocating investment authority to that applicant. Applications received by the CPCFA on the same day shall be deemed to have been received simultaneously.
(2)The CPCFA shall approve investment authority only in an aggregate amount that is not greater than three hundred seventy-five million dollars ($375,000,000).
(c)(1)The CPCFA shall issue application criteria consistent with the purposes of this article, and rank applicants based on those criteria.
(2)The CPCFA shall post the criteria, its rankings of applicants, and the amount of tax credits allocated to each applicant on its internet website.
(d)The CPCFA shall deny an application submitted under this section if any of the following apply:
(1)The application is incomplete.
(2)The application fee is not paid in full.
(3)The application does not satisfy all the criteria described in paragraph (2) of subdivision (a).
(4)The CPCFA has already approved the maximum total relief investment authority and relief contributions allowed pursuant to subdivision (f) of Section 12265.
(5)The applicant fails to submit affidavits equal to 80 percent of the relief investment authority sought.
(6)The applicant did not supply evidence of its experience as provided in paragraph (7) of subdivision (a), or the CPCFA could not verify that the information supplied in the application is true and correct.
12267.After approving an application submitted pursuant to Section 12266, the CPCFA shall issue a written notice to the applicant certifying all of the following:
(a)The applicant is a relief fund.
(b)The amount of the applicants investment authority.
(c)The relief contributions required from each investor that submitted an affidavit with the relief funds application.
12268.(a)(1)Within 60 days after receiving the certification issued pursuant to Section 12267, a relief fund shall do both of the following:
(A)Collect relief contributions equal to the amount certified in Section 12267 from each investor whose certification was included in the application.
(B)Collect additional investments of cash that, when added to the investor contributions, equal the relief funds investment authority.
(2)At least 5 percent of the relief funds investment authority shall consist of direct or indirect equity investments from affiliates of the relief fund, including employees, officers, and directors of the affiliates.
(b)Within 65 days after receiving certification pursuant to Section 12267, the relief fund shall send to the CPCFA documentation to prove that the amounts required by subdivision (a) have been collected.
(c)If the relief fund fails to comply with subdivision (a) or (b), the CPCFA shall revoke the relief funds certification and provide written notice to the relief fund of the revocation.
12269.(a)(1)Upon receipt of the documentation required by subdivision (b) of Section 12268, the CPCFA shall issue, to each investor or affiliate identified in subdivision (b) of Section 12268, a notice of the amount and utilization schedule of the tax credits allocated to that investor or affiliate as a result of its relief contribution.
(2)The CPCFA shall issue, to each investor identified in subdivision (b) of Section 12268, a tax credit certificate for one-fourth of the relief contributions made by the investor for each of the taxable years containing the third through sixth anniversaries of the closing date.
(b)The CPCFA shall not be required to issue a tax credit certificate if the relief fund does not invest 70 percent of its investment authority in investments within one year of the closing date and 100 percent of its relief investment authority in relief investments within two years of the closing date, subject to satisfaction of these investment milestones during the cure period established by Section 12270.
12269.5.(a)The CPCFA shall independently verify the relief funds compliance with this article, and the CPCFA may require a relief fund to provide any information necessary in the format it prescribes to ensure the relief funds compliance with this article.
(b)An annual fee of one hundred fifty thousand dollars ($150,000), to be prorated amongst all relief funds that have not exited pursuant to Section 12271, shall be payable to the CPCFA.
(c)The initial annual fee is due and payable to the CPCFA within 60 days after receiving the certification issued pursuant to Section 12267.
(d)After payment of the initial annual fee, the annual fee shall be due and payable to the CPCFA before the anniversary date of the closing date.
(e)Application and annual fees paid to the CPCFA shall be deposited in the Treasury Relief Investment Fund established under Section 12276.
12270.(a)(1)The CPCFA shall recapture tax credits claimed pursuant to Section 12264 and revoke the tax credit certificates issued if it determines that any of the following occur with respect to the relief fund:
(A)The relief fund fails to invest 100 percent of its investment authority in relief investments within two years of the closing date.
(B)The relief fund fails to maintain that level of investment until the sixth anniversary of the closing date. For the purposes of this paragraph, an investment is maintained even if the investment is sold or repaid as long as the 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 relief investments in this state within one year of the receipt of such capital. Regularly scheduled principal payments on a loan that is a relief investment shall be deemed continuously invested in a relief investment if the amounts are reinvested in one or more relief instruments by the end of the following calendar year.
(C)The relief fund makes a distribution or payment that results in the fund having less than 100 percent of its relief investment authority invested in relief investments or in cash or marketable securities available for investment in relief investments.
(D)The relief fund makes a relief investment in a small 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 relief fund, an affiliate of the fund, or an investor in the relief fund, excluding investments in publicly traded securities by a small business or an owner or affiliate of a small business.
(E)A relief fund makes an investment in a small business that is not a small business as described in subdivision (o) of Section 12264.5 at the time of the investment.
(2)Before recapturing tax credits or revoking a tax credit certificate pursuant to this section, the CPCFA shall notify the relief fund of the reasons for the pending recapture or revocation. If the fund corrects the violations outlined in the notice to the satisfaction of the CPCFA within 90 days of the date the notice was dispatched, the CPCFA shall not recapture the tax credits or revoke the tax credit certificate, as applicable.
(3)The CPCFA shall not recapture a tax credit or revoke a tax credit certificate due to any actions of a fund that occur after decertification pursuant to Section 12271, provided the CPCFA may recapture a relief funds tax credits or revoke a tax credit certificate related to actions of the relief fund that occurred prior to exit in accordance with Section 12271, even if the actions are discovered after exit.
(b) The amount by which one or more relief investments by a relief fund in the same small business exceeds seven million five hundred thousand dollars ($7,500,000) shall not be considered as a relief investment for purposes of this section, exclusive of capital repaid or redeemed by the small business and reinvested as a relief investment in the small business. A relief investment in an affiliate of a small business shall be treated as a relief investment in that small business for purposes of this subdivision.
12271.(a)(1)On or after the sixth anniversary of the closing date, a relief fund that has invested 100 percent of its relief investment authority in relief investments may apply to the CPCFA to exit regulation by the CPCFA.
(2)The CPCFA shall approve or deny an application made pursuant to paragraph (1) within 30 days after receiving the application.
(b)The CPCFA shall not deny the application unless there is a reasonable basis for the denial. In evaluating the application, whether a tax credit was recaptured with respect to the decertifying relief fund shall be evidence to prove that the relief fund is eligible for exit.
(c)The CPCFA shall send notice of its determination with respect to decertification and reasons for denial, if applicable, to the relief fund requesting exit.
12272.(a)A relief fund may request a written opinion from the CPCFA as to whether the business qualifies as a small business.
(b)The relief fund shall include evidence that the business satisfies the definition of a small business and a certification by an executive officer of the business attesting that the business satisfies such definition.
(c)The CPCFA shall issue a written opinion to the fund within 15 business days of receiving the request.
12273.(a)If the CPCFA revokes a relief funds certification pursuant to subdivision (c) of Section 12268 or revokes or recaptures a tax credit certificate pursuant to subdivision (b) of Section 12267, the associated investment authority and investor contributions will not count toward the limit on total investment authority and investor contributions set forth in subdivision (f) of Section 12265.
(b)(1)The CPCFA shall first award reverted investment authority pro rata to each relief fund that was awarded less than the requested investment authority for which it applied under Section 12267 within 15 days, which a relief fund may allocate to the relief funds investors at the funds discretion.
(2)The CPCFA may award any remaining investment authority to new applicants.
12274.(a)Each relief fund shall submit a report to the CPCFA on or before the 15th day of each April following the end of the calendar year that includes the closing date until the calendar year after the relief fund has been decertified. The report shall provide an itemization of the relief funds relief investments and shall include the following documents and information:
(1)Audited financial statements evidencing each relief funds relief investments.
(2)The name, location, and industry class of each business that received a relief investment from the fund, evidence that the business qualified as a small business at the time the investment was made by a certification executed by an executive officer of each business attesting that the business was a small business at the time of the initial relief investment in the business.
(3) (A)For each small business receiving a relief investment, the number of full-time employees at each small business at the time the investment was made.
(B)For purposes of this paragraph, a full-time employee means an employee that works at least 30 hours per week throughout the year or meets the customary practices accepted by an industry as full time. The number of a small businesss full-time employees is determined by dividing the total hours for which the small business pays wages to all employees during the year by the number of employee work hours per year. The standard calculation for employee work hours per year is 2080: calculated by multiplying 52 weeks by 40 hours per week.
(4) (A)A certification executed by an executive officer of each business attesting the number of jobs created and retained as a result of each relief investment.
(B)For purposes of this paragraph, jobs created means employment positions that are created by a small business, are located in this state, require at least 30 hours of work each week, and were not located in this state at the time of the initial relief investment in the small business. The number of jobs created by a small business is calculated each year by subtracting the number of employment positions in this state at the small business at the time of the initial relief investment in the small business from the monthly average of those employment positions for that year. If the number calculated under this subsection is less than zero, the number shall be reported as zero. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(C)For purposes of this paragraph, jobs retained means, employment positions that are located in this state, require at least 30 hours of work each week, and existed before the initial relief investment in the small business and would have been lost or moved out of this state had a relief investment in the small business not been made, as certified in writing by an executive officer of the small business. The number of jobs retained by a small business is calculated each year based on the monthly average of employment positions for that year. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(5)The number of relief investments made in impact businesses, disaggregated by classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(6)A certification that the relief fund has not violated any of the grounds for revocation and recapture of credits set forth in subdivision (b) of Section 12267.
(7)Any other information required by the CPCFA except to the extent the information is included in the audit performed pursuant to paragraph (1).
(b)Each fund shall submit a report to the CPCFA on or before the fifth business day after the first and second anniversaries of the closing date that provides documentation to prove that the fund has met the investment thresholds described in subdivision (b) of Section 12269 and has not implicated any of the other recapture provisions described in Section 12270.
12275.The CPCFA shall undertake outreach activities to encourage investment in impact businesses, including, but not limited to, by partnering with organizations representing persons and business enterprises from underrepresented groups, in a manner that will inform and educate members of these organizations on investment opportunities through the program provided in this article.
12276.(a)The Treasury Relief Investment Fund is hereby established in the State Treasury, and shall be administered by the CPCFA for purposes of this article. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to CPCFA for carrying out the purposes of this article. All moneys accruing to the CPCFA pursuant to this article from any source shall be deposited into the fund.
(b)The CPCFA may use the proceeds in the Treasury Relief Investment Fund for purposes of administrative costs relating to the program.
(c)The CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. The CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. The CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.
12277.(a)The CPCFA may adopt regulations to implement this article. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the CPCFA is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code.
(b)The CPCFA shall adopt forms and notices necessary to implement this article.
(c)The CPCFA shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this article and the amount of those credits.
SEC. 3.For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Article 6 (commencing with Section 12264) of Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code as added by this act, hereafter the credit, the Legislature finds as follows:
(a)The purpose of the credit, also known as the California Jumpstart Act, is to address the growing economic hardships California small businesses, workers, and vulnerable communities are grappling with and provide a long-term recovery solution. The purpose of the credit is also to incentivize and mobilize rapid and scalable private sector investment that encourages economic growth beyond the initial relief provided under the federal small business stimulus programs, enabling small business growth, job creation, and relief for families in communities where such economic assistance is needed the most.
(b)To measure whether the credit achieves its intended purpose, the CPCFA shall, by June 30 of each year this article is in effect, submit an electronic report, in compliance with Section 9795 of the Government Code, to the Legislature containing all of the following:
(1)The name, location, and industry class of each business that received a relief investment from the relief fund and notification that evidence was collected that the business qualified as a small business at the time the investment was made.
(2)The number of jobs created and retained as a result of each relief investment.
(3)The cumulative amount of relief investments made in each small business as a result of this credit.
(4)The number of relief investments made in impact businesses of interest, disaggregated by classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(5)Any recommendations for improving the effectiveness, transparency, and accountability of public funds deployed in the form of tax credits allocated pursuant to the California Jumpstart Act, or the CPCFAs administration of the California Jumpstart Act.
(6)Any penalties imposed during the prior 12-month period against a relief fund.
(7)Beginning on January 1, 2025, and in each annual report thereafter while this article is in effect, the CPCFA shall include the following additional information in its annual electronic report submitted pursuant to this subdivision:
(A)An evaluation of the outcomes of the program on low-income communities with high unemployment and poverty directly resulting from investments in small businesses made under the California Jumpstart Act, including a description of the methodology used to make the evaluation.
(B)An assessment of whether the economic outcomes resulting from investments in small businesses would have occurred but for the California Jumpstart Act.
(C)Based on the CPCFAs calculations for actual unique jobs created and tax credits allocated, a calculation of the amount of foregone revenue in the form of tax credits allocated pursuant to the California Jumpstart Act per unique job created but for the California Jumpstart Act.
(c)CPCFA may require a relief fund to provide information necessary in a format it prescribes to complete the report.
(d)The CPCFA shall submit the electronic report required by this section to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, the California Legislative Black Caucus, the California Latino Legislative Caucus, the California Asian Pacific Islander Legislative Caucus, the California Legislative Womens Caucus, and the California Legislative LGBTQ Caucus.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The Legislature finds and declares all of the following:
(a)California continues to face unprecedented challenges from the COVID-19 pandemic and the realities are stark. Total small business revenue in California in November 2020 has decreased by 27.9 percent compared to January 2020, according to a new report from Opportunity Insights. The total unemployment benefits providing support for California workers and local economies has now hit $101 billion in just seven months. Almost $55 billion of that is regular state provided Unemployment Insurance (UI) benefits, which is more than double what was paid in the three worst years of the Great Recession combined, according to October 2020 data from the Employment Development Department (EDD). Black men have recovered fewer than 40 percent of jobs lost the worst of any demographic group, other than Black women while Hispanic men have recovered about 47 percent of lost jobs, according to new research from the Washington Post. As more small businesses shut their doors for good and people fall into poverty, the longer Californias economic recovery will take.
(b)The economic collapse sparked by the ongoing global pandemic is triggering the most unequal recession in modern U.S. history. Californias small businesses and workers are in a prolonged battle for survival and stability, a struggle wrought with geographic, economic, and racial disparities.
(c)Even before the COVID-19 crisis, many California small businesses, particularly those owned by people of color or located in economically disadvantaged and historically underserved areas of the state, still had not fully recovered from the Great Recession. Their economic precarity has only grown more dire amid the extended pandemic devastation.
(d)Bank loans, the principal source of outside financing for small businesses, have been increasingly difficult to secure since the COVID-19 crisis struck. In the Federal Reserves third-quarter survey of senior loan officers, conducted in July 2020, 70 percent of respondents reported tightening lending standards for small firms, which is the most since the fourth quarter of 2008, when the financial crisis struck.
(e)Minority-owned businesses suffer from historic and persistent underinvestment even when the economy is booming. According to the Stanford Institute for Economic Policy Research, only 1 percent of minority business owners obtained loans in their founding year pre-pandemic, compared to 7 percent of white business owners.
(f)According to a December 2020 report from the Public Policy Institute of California, the effects of the current recession are concentrated among low-income workers, African Americans, Latinos, and women. Although no demographic group has been spared from the impacts of the current crisis, larger increases in unemployment and underemployment for low-income, African American, and Latino families are likely to worsen preexisting significant disparities in income and economic opportunity. Importantly, women have also been disproportionately affected, jeopardizing long-term gains in their labor force participation. Uneven economic recoveries tend to exacerbate income inequality, which may mute economic growth by dampening individuals chances of economic mobility and increased productivity.
(g)Achieving a more equitable recovery begins with creating more equitable flows of capital. Comprehensive, targeted, and transparent economic policies with strong safeguards will catalyze small business growth and entrepreneurial activity as California rebuilds.
(h)The COVID-19 pandemics lessons are clear and simple. Policymakers response to these deep, rapid revenue losses will have important consequences in the coming months and years. A targeted response that accounts for the investment gaps in disproportionately impacted businesses and communities, enables small business growth, and generates job creation that can minimize the harm and accelerate Californias equitable economic recovery.
(i)The California Jumpstart Act builds on the states ongoing business support initiatives throughout the pandemic by continuing to help bridge the deepening financial gaps and inequities facing underserved California small businesses and entrepreneurs and providing a long-term recovery solution.
(j)The California Jumpstart Act leverages private expertise, resources, and capital, with no immediate fiscal impact to the state budget, to encourage and expand long-term economic growth in economically disadvantaged and historically underinvested small businesses beyond the initial relief provided under the federal small business stimulus programs.
(k)The California Jumpstart Act incentivizes and mobilizes rapid, scalable private investment, with 100 percent of funds invested within two years into targeted small businesses around the state that historically have been underserved by traditional sources of patient growth capital. Approved funds will make debt and equity investments into small businesses at below market rates with flexible terms, allowing small businesses to access growth-oriented investment capital for broad purposes, including expansion, payroll, inventory, and training among others.
SEC. 2.Article 6 (commencing with Section 12264) is added to Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code, to read:6.California Jumpstart Act12264.This article shall be known, and may be cited, as the California Jumpstart Act.
12264.5.As used in this article, the following definitions apply:
(a)Affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity. For purposes of this subdivision, an entity is controlled by another entity if the controlling entity holds, directly or indirectly, the majority voting or ownership interest in the controlled entity or has control over the day-to-day operations of the controlled entity. For purposes of subdivision (c) of Section 12265, affiliate shall include taxpayers that satisfy this definition on the date the relief fund submitted its application only.
(b)Applicant means an entity that applies for an allocation of relief investment authority.
(c)Closing date means the date on which a relief fund has collected all amounts specified in subdivision (a) of Section 12268.
(d)CPCFA means the California Pollution Control Financing Authority within the office of the Treasurer.
(e)Federal funds rate means the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank.
(f)Flexible term means any of the following:
(1)Deferral of interest payments for at least one year.
(2)Deferral of principal payments for at least one year.
(3)Convertible into equity.
(g)Impact business means a small business more than 50 percent owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons.
(h)Investment authority means the amount certified by the CPCFA pursuant to Section 12267.
(i)Premium taxes means the taxes imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the California Constitution, or as specified by Section 12221 of this code, or Section 685 of the Insurance Code.
(j)(1)Principal business operations means the location that meets either of the following requirements:
(A)At least 60 percent of the businesss employees work at the location.
(B)Employees who are paid at least 60 percent of the businesss payroll work at the location.
(2)A business that has agreed to use the proceeds of a relief investment to establish its principal business operations in the state shall be deemed to have its principal business operations in a relief zone if it satisfies the requirements of paragraph (1) within 180 days after receiving a relief investment.
(k)Relief contribution means an investment of cash, by an entity subject to premium taxes in this state, in a relief fund that equals the amount specified on a notice of tax credit allocation issued by the CPCFA under subdivision (c) of Section 12267 and that is used to purchase an equity interest in the relief fund or to purchase, at par value or premium, a debt instrument issued by the fund that meets both of the following requirements:
(1)Has an original maturity date of at least five years after the date of issuance.
(2)Has a repayment schedule that is not faster than a level principal amortization over five years.
(l)Relief fund means an entity certified by the office of the CPCFA under subdivision (a) of Section 12267.
(m)(1)Relief investment means any capital or equity investment in a small business or any loan to a small business with a stated maturity of at least two years.
(2)A senior secured loan is a relief investment only if it has an interest rate of less than 4 percent plus the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank and has a flexible term.
(3)Any other loan is a relief investment only if it has an interest rate of less than 9 percent plus the federal funds rate on the date of the relief investment and has a flexible term.
(4)An equity investment is a relief investment only if the relief fund does not acquire a majority investment in the small business as an initial investment in the small business.
(5)Relief investment does not include any transaction that includes an origination fee.
(n)Relief zone means any of the following locations in this state:
(1)A census tract in the state meeting either of the following requirements: requirements according to the 2020 United States Census:
(A)The census tract has a poverty rate that is greater than 20 30 percent.
(B)The census tract has a median family income that does not exceed the following:
(i)If the census tract is not located in a metropolitan area, 60 percent of the statewide median family income.
(ii)If the census tract is located in a metropolitan area, 60 percent of the greater of the statewide median family income and the metropolitan area median family income.
(C)Relief investments made in a location described in this paragraph shall be verified by CPCFA using a federal New Markets Tax Credit mapping tool it designates that is accessible from its public internet website and is subject to the requirements of Section 11546.7 of the Government Code.
(2)All locations in the state but outside of census places with a population greater than or equal to 50,000 as of the latest decennial census and their adjacent and contiguous urbanized areas. A census tract within the state that is determined by the Department of Finance to have a civilian unemployment rate that is within the top 25 percent of all census tracts within the state and has a poverty rate within the top 25 percent of all census tracts within the state, as prescribed in Section 13073.5 of the Government Code.
(3)A Within a city, county, or city and county designated as a full or partial High Unemployment Area in the state as designated by the Employment Training Panel at the time a relief fund initially invests in the business. no more than 120 days before the date the relief investment is made.
(o)Senior secured loan means any loan that is secured by a first mortgage on real estate with a loan-to-value ratio of less than 80 percent.
(p)Small business means any business that, at the time a relief fund initially invests in the business, meets all of the following requirements:
(1)The total number of employees the business employs does not exceed 250.
(2)The business has gross receipts, less returns and allowances reportable to the state, of less than ten million dollars ($10,000,000) during the previous taxable year.
(3)The business has its principal business operations in a relief zone in the state.
(4)The business is engaged in North American Industry Classification System sector 11, 22, 23, 31, 32, 33, 42, 44, 45, 48, 49, 51, 54, 56, 62, 71, or 72, or if not engaged in those industries, the CPCFA determines that the investment will create desirable economic outcomes in line with the goals of this article.
(5)Small business shall not include any business whose operations violate state law.
12265.(a)For taxable years beginning on or after January 1, 2024, there shall be allowed against premium taxes a California Jumpstart Act tax credit in an amount equal to the amount of a relief contribution, eligible for utilization in accordance with paragraph (2) of subdivision (a) of Section 12269.
(b)If the credit allowed by this section exceeds the taxes described in subdivision (a), the excess may be carried over to reduce those taxes in the following year, and the four succeeding years if necessary, until the credit is exhausted. Tax credits shall not be carried forward after the 2031 taxable year.
(c)The credit is nonrefundable and may not be sold, transferred, or allocated to an entity other than an affiliate.
(d)No additional retaliatory tax shall be required as a result of receiving the tax credit described in this subdivision.
(e)A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate issued pursuant to subdivision (a) of Section 12269 with the taxpayers return for each taxable year for which the credit is claimed.
(f)(1)The aggregate amount of investment authority that may be certified shall be three hundred seventy-five million dollars ($375,000,000) and the aggregate amount of credit that may be allocated and certified pursuant to this section shall be three hundred million dollars ($300,000,000) in total for all taxable years for which the California Jumpstart Act tax credit is authorized.
(2)The total amount of credits that may be claimed per year is seventy-five million dollars ($75,000,000) during the taxable years containing the third through sixth anniversaries of the closing date.
(3)If requests for investment authority and credits exceed the limitations described in paragraph (1), the CPCFA shall proportionally reduce the investment authority and credits certified for each approved application as necessary to avoid exceeding the limit.
12266.(a)Beginning 90 days after the enactment of this act, the CPCFA shall accept applications for applicants desiring to apply for certification as a relief fund. The application shall meet all of the following requirements:
(1)The application shall state the total relief investment authority sought by the applicant, which shall not exceed three hundred seventy-five million dollars ($375,000,000).
(2)The applicant shall include evidence to prove, to the satisfaction of the CPCFA, that the applicant meets all of the following criteria:
(A)The applicant, or an affiliate of the applicant, is a federally approved or licensed rural business investment company pursuant to Section 2009cc of Title 7 of the United States Code or a small business investment company pursuant to Section 681 of Title 15 of the United States Code. The applicant shall include a certificate executed by an executive officer of the applicant attesting that the approval or license remains in effect and has not been revoked and evidence that at least one principal or similar officer of the entity is, and has been for at least four years, an officer or employee of the applicant or an affiliate of the applicant on the date the application is submitted.
(B)As of the date the application is submitted, the applicant and its affiliates have invested more than one hundred million dollars ($100,000,000) in nonpublic companies, which are a corporation, limited liability company, partnership, or limited partnership that does not offer or trade its stocks or membership interests to the public on any stock market exchange, is organized under the laws of the United States or a political division thereof, and is not required to have principal business operations in California.
(3)A signed certification from the chief executive officer, or similar officer, of each investor that commits to make a relief contribution to the applicant stating the amount of that commitment.
(4)The sum of all relief-eligible capital contribution commitments described in paragraph (3) of this subdivision, which shall equal at least 80 percent of the total investment authority sought by the applicant.
(5)A nonrefundable application fee of ten thousand dollars ($10,000).
(6)A detailed inclusive outreach plan intended to increase investment sourcing opportunities under the program in impact businesses.
(7)Include a signed certification from an executive officer of the applicant attesting that no senior managers of the fund are under indictment.
(8)Disclose and describe any pending or resolved litigation in which an applicant or an affiliate of the applicant is a party, as well as any violations, citations, fines, or penalties relating to any violations of state labor law, employment law, or environmental law within the last 10 years.
(9)Include evidence from the applicants previous experience demonstrating all of the following:
(A)Improving economic outcomes and net job creation in low-income communities with high unemployment and poverty directly resulting from its investments in small businesses.
(B)Generating improved economic outcomes that would not have occurred but for its investments in small businesses.
(C)Promoting high-quality jobs for workers, including, but not limited to, paying wages in excess of the minimum wage, and promoting full-time employment with health and retirement benefits.
(b)(1)The CPCFA shall verify that the information supplied in the application is true and correct before allocating investment authority to that applicant. Applications received by the CPCFA on the same day shall be deemed to have been received simultaneously.
(2)The CPCFA shall approve investment authority only in an aggregate amount that is not greater than three hundred seventy-five million dollars ($375,000,000).
(c)(1)The CPCFA shall issue application criteria consistent with the purposes of this article, and rank applicants based on those criteria.
(2)The CPCFA shall post the criteria, its rankings of applicants, and the amount of tax credits allocated to each applicant on its internet website.
(d)The CPCFA shall deny an application submitted under this section if any of the following apply:
(1)The application is incomplete.
(2)The application fee is not paid in full.
(3)The application does not satisfy all the criteria described in paragraph (2) of subdivision (a).
(4)The CPCFA has already approved the maximum total relief investment authority and relief contributions allowed pursuant to subdivision (f) of Section 12265.
(5)The applicant fails to submit affidavits equal to 80 percent of the relief investment authority sought.
(6)The applicant did not supply evidence of its experience as provided in paragraph (7) of subdivision (a), or the CPCFA could not verify that the information supplied in the application is true and correct.
12267.After approving an application submitted pursuant to Section 12266, the CPCFA shall issue a written notice to the applicant certifying all of the following:
(a)The applicant is a relief fund.
(b)The amount of the applicants investment authority.
(c)The relief contributions required from each investor that submitted an affidavit with the relief funds application.
12268.(a)(1)Within 60 days after receiving the certification issued pursuant to Section 12267, a relief fund shall do both of the following:
(A)Collect relief contributions equal to the amount certified in Section 12267 from each investor whose certification was included in the application.
(B)Collect additional investments of cash that, when added to the investor contributions, equal the relief funds investment authority.
(2)At least 5 percent of the relief funds investment authority shall consist of direct or indirect equity investments from affiliates of the relief fund, including employees, officers, and directors of the affiliates.
(b)Within 65 days after receiving certification pursuant to Section 12267, the relief fund shall send to the CPCFA documentation to prove that the amounts required by subdivision (a) have been collected.
(c)If the relief fund fails to comply with subdivision (a) or (b), the CPCFA shall revoke the relief funds certification and provide written notice to the relief fund of the revocation.
12269.(a)(1)Upon receipt of the documentation required by subdivision (b) of Section 12268, the CPCFA shall issue, to each investor or affiliate identified in subdivision (b) of Section 12268, a notice of the amount and utilization schedule of the tax credits allocated to that investor or affiliate as a result of its relief contribution.
(2)The CPCFA shall issue, to each investor identified in subdivision (b) of Section 12268, a tax credit certificate for one-fourth of the relief contributions made by the investor for each of the taxable years containing the third through sixth anniversaries of the closing date.
(b)The CPCFA shall not be required to issue a tax credit certificate if the relief fund does not invest 70 percent of its investment authority in investments within one year of the closing date and 100 percent of its relief investment authority in relief investments within two years of the closing date, subject to satisfaction of these investment milestones during the cure period established by Section 12270.
12269.5.(a)The CPCFA shall independently verify the relief funds compliance with this article, and the CPCFA may require a relief fund to provide any information necessary in the format it prescribes to ensure the relief funds compliance with this article.
(b)An annual fee of one hundred fifty thousand dollars ($150,000), to be prorated amongst all relief funds that have not exited pursuant to Section 12271, shall be payable to the CPCFA.
(c)The initial annual fee is due and payable to the CPCFA within 60 days after receiving the certification issued pursuant to Section 12267.
(d)After payment of the initial annual fee, the annual fee shall be due and payable to the CPCFA before the anniversary date of the closing date.
(e)Application and annual fees paid to the CPCFA shall be deposited in the Treasury Relief Investment Fund established under Section 12276.
12270.(a)(1)The CPCFA shall recapture tax credits claimed pursuant to Section 12264 and revoke the tax credit certificates issued if it determines that any of the following occur with respect to the relief fund:
(A)The relief fund fails to invest 100 percent of its investment authority in relief investments within two years of the closing date.
(B)The relief fund fails to maintain that level of investment until the sixth anniversary of the closing date. For the purposes of this paragraph, an investment is maintained even if the investment is sold or repaid as long as the 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 relief investments in this state within one year of the receipt of such capital. Regularly scheduled principal payments on a loan that is a relief investment shall be deemed continuously invested in a relief investment if the amounts are reinvested in one or more relief instruments by the end of the following calendar year.
(C)The relief fund makes a distribution or payment that results in the fund having less than 100 percent of its relief investment authority invested in relief investments or in cash or marketable securities available for investment in relief investments.
(D)The relief fund makes a relief investment in a small 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 relief fund, an affiliate of the fund, or an investor in the relief fund, excluding investments in publicly traded securities by a small business or an owner or affiliate of a small business.
(E)A relief fund makes an investment in a small business that is not a small business as described in subdivision (o) of Section 12264.5 at the time of the investment.
(2)Before recapturing tax credits or revoking a tax credit certificate pursuant to this section, the CPCFA shall notify the relief fund of the reasons for the pending recapture or revocation. If the fund corrects the violations outlined in the notice to the satisfaction of the CPCFA within 90 days of the date the notice was dispatched, the CPCFA shall not recapture the tax credits or revoke the tax credit certificate, as applicable.
(3)The CPCFA shall not recapture a tax credit or revoke a tax credit certificate due to any actions of a fund that occur after decertification pursuant to Section 12271, provided the CPCFA may recapture a relief funds tax credits or revoke a tax credit certificate related to actions of the relief fund that occurred prior to exit in accordance with Section 12271, even if the actions are discovered after exit.
(b) The amount by which one or more relief investments by a relief fund in the same small business exceeds seven million five hundred thousand dollars ($7,500,000) shall not be considered as a relief investment for purposes of this section, exclusive of capital repaid or redeemed by the small business and reinvested as a relief investment in the small business. A relief investment in an affiliate of a small business shall be treated as a relief investment in that small business for purposes of this subdivision.
12271.(a)(1)On or after the sixth anniversary of the closing date, a relief fund that has invested 100 percent of its relief investment authority in relief investments may apply to the CPCFA to exit regulation by the CPCFA.
(2)The CPCFA shall approve or deny an application made pursuant to paragraph (1) within 30 days after receiving the application.
(b)The CPCFA shall not deny the application unless there is a reasonable basis for the denial. In evaluating the application, whether a tax credit was recaptured with respect to the decertifying relief fund shall be evidence to prove that the relief fund is eligible for exit.
(c)The CPCFA shall send notice of its determination with respect to decertification and reasons for denial, if applicable, to the relief fund requesting exit.
12272.(a)A relief fund may request a written opinion from the CPCFA as to whether the business qualifies as a small business.
(b)The relief fund shall include evidence that the business satisfies the definition of a small business and a certification by an executive officer of the business attesting that the business satisfies such definition.
(c)The CPCFA shall issue a written opinion to the fund within 15 business days of receiving the request.
12273.(a)If the CPCFA revokes a relief funds certification pursuant to subdivision (c) of Section 12268 or revokes or recaptures a tax credit certificate pursuant to subdivision (b) of Section 12267, the associated investment authority and investor contributions will not count toward the limit on total investment authority and investor contributions set forth in subdivision (f) of Section 12265.
(b)(1)The CPCFA shall first award reverted investment authority pro rata to each relief fund that was awarded less than the requested investment authority for which it applied under Section 12267 within 15 days, which a relief fund may allocate to the relief funds investors at the funds discretion.
(2)The CPCFA may award any remaining investment authority to new applicants.
12274.(a)Each relief fund shall submit a report to the CPCFA on or before the 15th day of each April following the end of the calendar year that includes the closing date until the calendar year after the relief fund has been decertified. The report shall provide an itemization of the relief funds relief investments and shall include the following documents and information:
(1)Audited financial statements evidencing each relief funds relief investments.
(2)The name, location, and industry class of each business that received a relief investment from the fund, evidence that the business qualified as a small business at the time the investment was made by a certification executed by an executive officer of each business attesting that the business was a small business at the time of the initial relief investment in the business.
(3) (A)For each small business receiving a relief investment, the number of full-time employees at each small business at the time the investment was made.
(B)For purposes of this paragraph, a full-time employee means an employee that works at least 30 hours per week throughout the year or meets the customary practices accepted by an industry as full time. The number of a small businesss full-time employees is determined by dividing the total hours for which the small business pays wages to all employees during the year by the number of employee work hours per year. The standard calculation for employee work hours per year is 2080: calculated by multiplying 52 weeks by 40 hours per week.
(4) (A)A certification executed by an executive officer of each business attesting the number of jobs created and retained as a result of each relief investment.
(B)For purposes of this paragraph, jobs created means employment positions that are created by a small business, are located in this state, require at least 30 hours of work each week, and were not located in this state at the time of the initial relief investment in the small business. The number of jobs created by a small business is calculated each year by subtracting the number of employment positions in this state at the small business at the time of the initial relief investment in the small business from the monthly average of those employment positions for that year. If the number calculated under this subsection is less than zero, the number shall be reported as zero. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(C)For purposes of this paragraph, jobs retained means, employment positions that are located in this state, require at least 30 hours of work each week, and existed before the initial relief investment in the small business and would have been lost or moved out of this state had a relief investment in the small business not been made, as certified in writing by an executive officer of the small business. The number of jobs retained by a small business is calculated each year based on the monthly average of employment positions for that year. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(5)The number of relief investments made in impact businesses, disaggregated by classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(6)A certification that the relief fund has not violated any of the grounds for revocation and recapture of credits set forth in subdivision (b) of Section 12267.
(7)Any other information required by the CPCFA except to the extent the information is included in the audit performed pursuant to paragraph (1).
(b)Each fund shall submit a report to the CPCFA on or before the fifth business day after the first and second anniversaries of the closing date that provides documentation to prove that the fund has met the investment thresholds described in subdivision (b) of Section 12269 and has not implicated any of the other recapture provisions described in Section 12270.
12275.The CPCFA shall undertake outreach activities to encourage investment in impact businesses, including, but not limited to, by partnering with organizations representing persons and business enterprises from underrepresented groups, in a manner that will inform and educate members of these organizations on investment opportunities through the program provided in this article.
12276.(a)The Treasury Relief Investment Fund is hereby established in the State Treasury, and shall be administered by the CPCFA for purposes of this article. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to CPCFA for carrying out the purposes of this article. All moneys accruing to the CPCFA pursuant to this article from any source shall be deposited into the fund.
(b)The CPCFA may use the proceeds in the Treasury Relief Investment Fund for purposes of administrative costs relating to the program.
(c)The CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. The CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. The CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.
12277.(a)The CPCFA may adopt regulations to implement this article. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the CPCFA is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code.
(b)The CPCFA shall adopt forms and notices necessary to implement this article.
(c)The CPCFA shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this article and the amount of those credits.
SEC. 3.For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Article 6 (commencing with Section 12264) of Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code as added by this act, hereafter the credit, the Legislature finds as follows:
(a)The purpose of the credit, also known as the California Jumpstart Act, is to address the growing economic hardships California small businesses, workers, and vulnerable communities are grappling with and provide a long-term recovery solution. The purpose of the credit is also to incentivize and mobilize rapid and scalable private sector investment that encourages economic growth beyond the initial relief provided under the federal small business stimulus programs, enabling small business growth, job creation, and relief for families in communities where such economic assistance is needed the most.
(b)To measure whether the credit achieves its intended purpose, the CPCFA shall, by June 30 of each year this article is in effect, submit an electronic report, in compliance with Section 9795 of the Government Code, to the Legislature containing all of the following:
(1)The name, location, and industry class of each business that received a relief investment from the relief fund and notification that evidence was collected that the business qualified as a small business at the time the investment was made.
(2)The number of jobs created and retained as a result of each relief investment.
(3)The cumulative amount of relief investments made in each small business as a result of this credit.
(4)The number of relief investments made in impact businesses of interest, disaggregated by classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(5)Any recommendations for improving the effectiveness, transparency, and accountability of public funds deployed in the form of tax credits allocated pursuant to the California Jumpstart Act, or the CPCFAs administration of the California Jumpstart Act.
(6)Any penalties imposed during the prior 12-month period against a relief fund.
(7)Beginning on January 1, 2025, and in each annual report thereafter while this article is in effect, the CPCFA shall include the following additional information in its annual electronic report submitted pursuant to this subdivision:
(A)An evaluation of the outcomes of the program on low-income communities with high unemployment and poverty directly resulting from investments in small businesses made under the California Jumpstart Act, including a description of the methodology used to make the evaluation.
(B)An assessment of whether the economic outcomes resulting from investments in small businesses would have occurred but for the California Jumpstart Act.
(C)Based on the CPCFAs calculations for actual unique jobs created and tax credits allocated, a calculation of the amount of foregone revenue in the form of tax credits allocated pursuant to the California Jumpstart Act per unique job created but for the California Jumpstart Act.
(c)CPCFA may require a relief fund to provide information necessary in a format it prescribes to complete the report.
(d)The CPCFA shall submit the electronic report required by this section to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, the California Legislative Black Caucus, the California Latino Legislative Caucus, the California Asian Pacific Islander Legislative Caucus, the California Legislative Womens Caucus, and the California Legislative LGBTQ Caucus.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The Legislature finds and declares all of the following:
(a)California continues to face unprecedented challenges from the COVID-19 pandemic and the realities are stark. Total small business revenue in California in November 2020 has decreased by 27.9 percent compared to January 2020, according to a new report from Opportunity Insights. The total unemployment benefits providing support for California workers and local economies has now hit $101 billion in just seven months. Almost $55 billion of that is regular state provided Unemployment Insurance (UI) benefits, which is more than double what was paid in the three worst years of the Great Recession combined, according to October 2020 data from the Employment Development Department (EDD). Black men have recovered fewer than 40 percent of jobs lost the worst of any demographic group, other than Black women while Hispanic men have recovered about 47 percent of lost jobs, according to new research from the Washington Post. As more small businesses shut their doors for good and people fall into poverty, the longer Californias economic recovery will take.
(b)The economic collapse sparked by the ongoing global pandemic is triggering the most unequal recession in modern U.S. history. Californias small businesses and workers are in a prolonged battle for survival and stability, a struggle wrought with geographic, economic, and racial disparities.
(c)Even before the COVID-19 crisis, many California small businesses, particularly those owned by people of color or located in economically disadvantaged and historically underserved areas of the state, still had not fully recovered from the Great Recession. Their economic precarity has only grown more dire amid the extended pandemic devastation.
(d)Bank loans, the principal source of outside financing for small businesses, have been increasingly difficult to secure since the COVID-19 crisis struck. In the Federal Reserves third-quarter survey of senior loan officers, conducted in July 2020, 70 percent of respondents reported tightening lending standards for small firms, which is the most since the fourth quarter of 2008, when the financial crisis struck.
(e)Minority-owned businesses suffer from historic and persistent underinvestment even when the economy is booming. According to the Stanford Institute for Economic Policy Research, only 1 percent of minority business owners obtained loans in their founding year pre-pandemic, compared to 7 percent of white business owners.
(f)According to a December 2020 report from the Public Policy Institute of California, the effects of the current recession are concentrated among low-income workers, African Americans, Latinos, and women. Although no demographic group has been spared from the impacts of the current crisis, larger increases in unemployment and underemployment for low-income, African American, and Latino families are likely to worsen preexisting significant disparities in income and economic opportunity. Importantly, women have also been disproportionately affected, jeopardizing long-term gains in their labor force participation. Uneven economic recoveries tend to exacerbate income inequality, which may mute economic growth by dampening individuals chances of economic mobility and increased productivity.
(g)Achieving a more equitable recovery begins with creating more equitable flows of capital. Comprehensive, targeted, and transparent economic policies with strong safeguards will catalyze small business growth and entrepreneurial activity as California rebuilds.
(h)The COVID-19 pandemics lessons are clear and simple. Policymakers response to these deep, rapid revenue losses will have important consequences in the coming months and years. A targeted response that accounts for the investment gaps in disproportionately impacted businesses and communities, enables small business growth, and generates job creation that can minimize the harm and accelerate Californias equitable economic recovery.
(i)The California Jumpstart Act builds on the states ongoing business support initiatives throughout the pandemic by continuing to help bridge the deepening financial gaps and inequities facing underserved California small businesses and entrepreneurs and providing a long-term recovery solution.
(j)The California Jumpstart Act leverages private expertise, resources, and capital, with no immediate fiscal impact to the state budget, to encourage and expand long-term economic growth in economically disadvantaged and historically underinvested small businesses beyond the initial relief provided under the federal small business stimulus programs.
(k)The California Jumpstart Act incentivizes and mobilizes rapid, scalable private investment, with 100 percent of funds invested within two years into targeted small businesses around the state that historically have been underserved by traditional sources of patient growth capital. Approved funds will make debt and equity investments into small businesses at below market rates with flexible terms, allowing small businesses to access growth-oriented investment capital for broad purposes, including expansion, payroll, inventory, and training among others.
SEC. 2.Article 6 (commencing with Section 12264) is added to Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code, to read:6.California Jumpstart Act12264.This article shall be known, and may be cited, as the California Jumpstart Act.
12264.5.As used in this article, the following definitions apply:
(a)Affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity. For purposes of this subdivision, an entity is controlled by another entity if the controlling entity holds, directly or indirectly, the majority voting or ownership interest in the controlled entity or has control over the day-to-day operations of the controlled entity. For purposes of subdivision (c) of Section 12265, affiliate shall include only taxpayers that satisfy this definition on the date the relief fund submitted its application. application only.
(b)Applicant means an entity that applies for an allocation of relief investment authority.
(b)(c)Closing date means the date on which a relief fund has collected all amounts specified in subdivision (a) of Section 12268.
(c)(d)CPCFA means the California Pollution Control Financing Authority within the office of the Treasurer.
(d)(e)Federal funds rate means the effective federal funds rate, rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank.
(e)(f)Flexible term means any of the following:
(1)Deferral of interest payments for at least one year.
(2)Deferral of principal payments for at least one year.
(3)Convertible into equity.
(f)(g)Impact business means a small business more than 50 percent owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, and other disadvantaged groups identified or approved by the CPCFA. persons.
(g)(h)Investment authority means the amount certified by the CPCFA pursuant to Section 12267.
(h)(i)Premium taxes means the taxes imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the California Constitution, or as specified by Section 12221 of this code, or Section 685 of the Insurance Code.
(i)(j)(1)Principal business operations means the location that meets either of the following requirements:
(A)At least 60 percent of the businesss employees work at the location.
(B)Employees who are paid at least 60 percent of the businesss payroll work at the location.
(2)A business that has agreed to use the proceeds of a relief investment to establish its principal business operations in the state shall be deemed to have its principal business operations in a relief zone if it satisfies the requirements of paragraph (1) within 180 days after receiving a relief investment.
(j)(k)Relief contribution means an investment of cash, by an entity subject to premium taxes in this state, in a relief fund that equals the amount specified on a notice of tax credit allocation issued by the CPCFA under subdivision (c) of Section 12267 and that is used to purchase an equity interest in the relief fund or to purchase, at par value or premium, a debt instrument issued by the fund that meets both of the following requirements:
(1)Has an original maturity date of at least five years after the date of issuance.
(2)Has a repayment schedule that is not faster than a level principal amortization over five years.
(k)(l)Relief fund means an entity certified by the office of the CPCFA under subdivision (a) of Section 12267.
(l)(m)(1)Relief investment means any capital or equity investment in a small business or any loan to a small business with a stated maturity of at least two years.
(2)A senior secured loan is a relief investment only if it has an interest rate of less than 4 percent plus the effective federal funds rate on the date of the relief investment, as measured and published by the New York Federal Reserve Bank and has a flexible term.
(3)Any other loan is a relief investment only if it has an interest rate of less than 9 percent plus the federal funds rate on the date of the relief investment and has a flexible term.
(4)An equity investment is a relief investment only if the relief fund does not acquire a majority investment in the small business as an initial investment in the small business.
(5)Relief investment does not include any transaction that includes an origination fee.
(m)(n)Relief zone means any of the following locations in this state:
(1)A census tract in the state meeting either of the following requirements:
(A)The census tract has a poverty rate that is greater than 20 percent.
(B)The census tract has a median family income that does not exceed the following:
(i)If the census tract is not located in a metropolitan area, the statewide median family income.
(ii)If the census tract is located in a metropolitan area, the greater of the statewide median family income and the metropolitan area median family income.
(2)All locations in the state but outside of census places with a population greater than or equal to 50,000 as of the latest decennial census and their adjacent and contiguous urbanized areas.
(3)A High Unemployment Area (HUA) in the state as designated by the Employment Training Panel at the time a relief fund initially invests in the business.
(n)(o)Senior secured loan means any loan that is secured by a first mortgage on real estate with a loan-to-value ratio of less than 80 percent.
(o)(p)Small business means any business that, at the time a relief fund initially invests in the business, meets all of the following requirements:
(1)The total number of employees the business has employs does not exceed 250.
(2)The business has gross receipts, less returns and allowances reportable to the state, of less than ten million dollars ($10,000,000) during the previous taxable year.
(3)The business has its principal business operations in a relief zone in the state.
(4)The business is engaged in North American Industry Classification System sector 11, 22, 23, 31, 32, 33, 42, 44, 45, 48, 49, 51, 54, 56, 62, 71, or 72, or if not engaged in those industries, the CPCFA determines that the investment will create desirable economic outcomes in line with the goals of this article.
(5)Small business shall not include any trade or business consisting of the operation of any private or commercial golf course, country club, massage parlor, sauna or hot tub facility, sun tan facility, racetrack, facility primarily used for gambling or to facilitate gambling, liquor store, a store or other facility whose principal business is the sale of firearms, a shooting range or gallery or a business which presents live performances of a prurient sexual nature or derives directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature. business whose operations violate state law.
12265.(a)For taxable years beginning on or after January 1, 2024, there shall be allowed against premium taxes a California Jumpstart Act tax credit in an amount equal to the amount of a relief contribution, eligible for utilization in accordance with paragraph (2) of subdivision (a) of Section 12269.
(b)If the credit allowed by this section exceeds the taxes described in subdivision (a), the excess may be carried over to reduce those taxes in the following year, and the four succeeding years if necessary, until the credit is exhausted. Tax credits shall not be carried forward after the 2031 taxable year.
(c)The credit is nonrefundable and may not be sold, transferred, or allocated to an entity other than an affiliate.
(d)No additional retaliatory tax shall be required as a result of receiving the tax credit described in this subdivision.
(e)A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate issued pursuant to subdivision (a) of Section 12269 with the taxpayers return for each taxable year for which the credit is claimed.
(f)(1)The aggregate amount of investment authority that may be certified shall be three hundred seventy-five million dollars ($375,000,000) and the aggregate amount of credit that may be allocated and certified pursuant to this section shall be three hundred million dollars ($300,000,000) in total for all taxable years for which the California Jumpstart Act tax credit is authorized.
(2)The total amount of credits that may be claimed per year is seventy-five million dollars ($75,000,000) during the taxable years containing the third through sixth anniversaries of the closing date.
(3)If requests for investment authority and credits exceed the limitations described in paragraph (1), the CPCFA shall proportionally reduce the investment authority and credits certified for each approved application as necessary to avoid exceeding the limit.
12266.(a)Beginning 90 days after the enactment of this act, the CPCFA shall accept applications for entities applicants desiring to apply for certification as a relief fund. The application shall meet all of the following requirements:
(1)The application shall state the total relief investment authority sought by the applicant, which shall not exceed three hundred seventy-five million dollars ($375,000,000).
(2)The applicant shall include evidence to prove, to the satisfaction of the CPCFA, that the applicant meets all of the following criteria:
(A)The applicant, or an affiliate of the applicant, is a federally approved or licensed rural business investment company pursuant to Section 2009cc of Title 7 of the United States Code or a small business investment company pursuant to Section 681 of Title 15 of the United States Code. The applicant shall include a certificate executed by an executive officer of the applicant attesting that the approval or license remains in effect and has not been revoked and evidence that at least one principal or similar officer of the entity is, and has been for at least four years, an officer or employee of the applicant or an affiliate of the applicant on the date the application is submitted.
(B)As of the date the application is submitted, the applicant and its affiliates have invested more than one hundred million dollars ($100,000,000) in small businesses. As used in this subparagraph, a small business is not required to have principal business operations in California. nonpublic companies, which are a corporation, limited liability company, partnership, or limited partnership that does not offer or trade its stocks or membership interests to the public on any stock market exchange, is organized under the laws of the United States or a political division thereof, and is not required to have principal business operations in California.
(3)A signed certification from the chief executive officer, or similar officer, of each investor that commits to make a relief contribution to the applicant stating the amount of that commitment.
(4)The sum of all relief-eligible capital contribution commitments described in paragraph (3) of this subdivision, which shall equal at least 80 percent of the total investment authority sought by the applicant.
(5)A nonrefundable application fee of ten thousand dollars ($10,000).
(6)A detailed inclusive outreach plan intended to increase investment sourcing opportunities under the program in impact businesses.
(7)Include a signed certification from an executive officer of the applicant attesting that no senior managers of the fund are under indictment.
(8)Disclose and describe any pending or resolved litigation in which an applicant or an affiliate of the applicant is a party, as well as any violations, citations, fines, or penalties relating to any violations of state labor law, employment law, or environmental law within the last 10 years.
(9)Include evidence from the applicants previous experience demonstrating all of the following:
(A)Improving economic outcomes and net job creation in low-income communities with high unemployment and poverty directly resulting from its investments in small businesses.
(B)Generating improved economic outcomes that would not have occurred but for its investments in small businesses.
(C)Promoting high-quality jobs for workers, including, but not limited to, paying wages in excess of the minimum wage, and promoting full-time employment with health and retirement benefits.
(b)(1)Except as provided in paragraph (2) of this subdivision, the CPCFA shall review and make determinations with respect to applications within 30 business days of receipt. The CPCFA shall verify that the information supplied in the application is true and correct before allocating investment authority to that applicant. Applications received by the CPCFA on the same day shall be deemed to have been received simultaneously.
(2)The CPCFA shall approve investment authority only in an aggregate amount that is not greater than three hundred seventy-five million dollars ($375,000,000).
(c)(1)The CPCFA shall issue application criteria consistent with the purposes of this article, and rank applicants based on those criteria.
(2)The CPCFA shall post the criteria, its rankings of applicants, and the amount of tax credits allocated to each applicant on its internet website.
(c)(d)The CPCFA shall deny an application submitted under this section if any of the following apply:
(1)The application is incomplete.
(2)The application fee is not paid in full.
(3)The application does not satisfy all the criteria described in paragraph (2) of subdivision (a).
(4)The CPCFA has already approved the maximum total relief investment authority and relief contributions allowed pursuant to subdivision (f) of Section 12265.
(5)The applicant fails to submit affidavits equal to 80 percent of the relief investment authority sought.
(d) The CPCFA shall not deny a relief fund application or reduce the requested relief investment authority for reasons other than those described in subdivisions (b) and (c). (e) (1)If the CPCFA denies an application, the CPCFA shall notify the applicant of the reasons for denial. If the application was denied for any reason other than the reasons specified in paragraph (3), (4) or (5) of subdivision (c), the applicant may provide additional information to the agency to cure defects in the application, provided the information is submitted within 15 days of receipt of the notice of denial.(2)If the CPCFA denies an application for certification as a relief fund, and approving a subsequently submitted application would result in exceeding the dollar limitation on relief investment authority or relief contributions if the previously denied application is completed, clarified, or cured pursuant to this subdivision, the CPCFA shall refrain from making a determination on the subsequently submitted application until the previously denied application is reconsidered or the 15-day period for submitting additional information for the previously denied application has passed, whichever comes first. If subsequently approved, the CPCFA shall treat the application as approved as of its original filing date.(6)The applicant did not supply evidence of its experience as provided in paragraph (7) of subdivision (a), or the CPCFA could not verify that the information supplied in the application is true and correct.
12267.After approving an application submitted pursuant to Section 12266, the CPCFA shall issue a written notice to the applicant certifying all of the following:
(a)The applicant is a relief fund.
(b)The amount of the applicants investment authority.
(c)The relief contributions required from each investor that submitted an affidavit with the relief funds application.
12268.(a)(1)Within 60 days after receiving the certification issued pursuant to Section 12267, a relief fund shall do both of the following:
(A)Collect relief contributions equal to the amount certified in Section 12267 from each investor whose certification was included in the application.
(B)Collect additional investments of cash that, when added to the investor contributions, equal the relief funds investment authority.
(2)At least 5 percent of the relief funds investment authority shall consist of direct or indirect equity investments from affiliates of the relief fund, including employees, officers, and directors of the affiliates.
(b)Within 65 days after receiving certification pursuant to Section 12267, the relief fund shall send to the CPCFA documentation to prove that the amounts required by subdivision (a) have been collected.
(c)If the relief fund fails to comply with subdivision (a) or (b), the CPCFA shall revoke the relief funds certification and provide written notice to the relief fund of the revocation.
12269.(a)(1)Upon receipt of the documentation required by subdivision (b) of Section 12268, the CPCFA shall issue, to each investor or affiliate identified in subdivision (b) of Section 12268, a notice of the amount and utilization schedule of the tax credits allocated to that investor or affiliate as a result of its relief contribution.
(2)The CPCFA shall issue, to each investor identified in subdivision (b) of Section 12268, a tax credit certificate for one-fourth of the relief contributions made by the investor for each of the taxable years containing the third through sixth anniversaries of the closing date.
(b)The CPCFA shall not be required to issue a tax credit certificate if the relief fund does not invest 70 percent of its investment authority in investments within one year of the closing date and 100 percent of its relief investment authority in relief investments within two years of the closing date, subject to satisfaction of these investment milestones during the cure period established by Section 12270.
12269.5.(a)An The CPCFA shall independently verify the relief funds compliance with this article, and the CPCFA may require a relief fund to provide any information necessary in the format it prescribes to ensure the relief funds compliance with this article.
(b)An annual fee of one hundred fifty thousand dollars ($150,000), to be prorated amongst all relief funds that have not exited pursuant to Section 12271, shall be payable to the CPCFA.
(b)(c)The initial annual fee is due and payable to the CPCFA within 60 days after receiving the certification issued pursuant to Section 12267.
(c)(d)After payment of the initial annual fee, the annual fee shall be due and payable to the CPCFA before the anniversary date of the closing date.
(d)(e)Application and annual fees paid to the CPCFA shall be deposited in the Treasury Relief Investment Fund established under Section 12276.
12270.(a)(1)The CPCFA may shall recapture tax credits claimed pursuant to Section 12264 and revoke the tax credit certificates issued if it determines that any of the following occur with respect to the relief fund:
(A)The relief fund fails to invest 100 percent of its investment authority in relief investments within two years of the closing date.
(B)The relief fund fails to maintain that level of investment until the sixth anniversary of the closing date. For the purposes of this paragraph, an investment is maintained even if the investment is sold or repaid as long as the 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 relief investments in this state within one year of the receipt of such capital. Regularly scheduled principal payments on a loan that is a relief investment shall be deemed continuously invested in a relief investment if the amounts are reinvested in one or more relief instruments by the end of the following calendar year.
(C)The relief fund makes a distribution or payment that results in the fund having less than 100 percent of its relief investment authority invested in relief investments or in cash or marketable securities available for investment in relief investments.
(D)The relief fund makes a relief investment in a small 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 relief fund, an affiliate of the fund, or an investor in the relief fund, excluding investments in publicly traded securities by a small business or an owner or affiliate of a small business.
(E)A relief fund makes an investment in a small business that is not a small business as described in subdivision (o) of Section 12264.5 at the time of the investment.
(2)Before recapturing tax credits or revoking a tax credit certificate pursuant to this section, the CPCFA shall notify the relief fund of the reasons for the pending recapture or revocation. If the fund corrects the violations outlined in the notice to the satisfaction of the CPCFA within 90 days of the date the notice was dispatched, the CPCFA shall not recapture the tax credits or revoke the tax credit certificate, as applicable.
(3)The CPCFA shall not recapture a tax credit or revoke a tax credit certificate due to any actions of a fund that occur after decertification pursuant to Section 12271, provided the CPCFA may recapture a relief funds tax credits or revoke a tax credit certificate related to actions of the relief fund that occurred prior to exit in accordance with Section 12271, even if the actions are discovered after exit.
(b) The amount by which one or more relief investments by a relief fund in the same small business exceeds seven million five hundred thousand dollars ($7,500,000) shall not be considered as a relief investment for purposes of this section, exclusive of capital repaid or redeemed by the small business and reinvested as a relief investment in the small business. A relief investment in an affiliate of a small business shall be treated as a relief investment in that small business for purposes of this subdivision.
12271.(a)(1)On or after the sixth anniversary of the closing date, a relief fund that has invested 100 percent of its relief investment authority in relief investments may apply to the CPCFA to exit regulation by the CPCFA.
(2)The CPCFA shall approve or deny an application made pursuant to paragraph (1) within 30 days after receiving the application.
(b)The CPCFA shall not deny the application unless there is a reasonable basis for the denial. In evaluating the application, whether a tax credit was recaptured with respect to the decertifying relief fund shall be evidence to prove that the relief fund is eligible for exit.
(c)The CPCFA shall send notice of its determination with respect to decertification and reasons for denial, if applicable, to the relief fund requesting exit.
12272.(a)A relief fund may request a written opinion from the CPCFA as to whether the business qualifies as a small business.
(b)The relief fund shall include evidence that the business satisfies the definition of a small business and a certification by an executive officer of the business attesting that the business satisfies such definition.
(c)The CPCFA shall issue a written opinion to the fund within 15 business days of receiving the request. If the CPCFA determines that the business qualifies as a small business or if the CPCFA fails to timely issue the written opinion, the business shall be considered a small business for purposes of this article.
12273.(a)If the CPCFA revokes a relief funds certification pursuant to subdivision (c) of Section 12268 or revokes or recaptures a tax credit certificate pursuant to subdivision (b) of Section 12267, the associated investment authority and investor contributions will not count toward the limit on total investment authority and investor contributions set forth in subdivision (f) of Section 12265.
(b)(1)The CPCFA shall first award reverted investment authority pro rata to each relief fund that was awarded less than the requested investment authority for which it applied under Section 12267 within 15 days, which a relief fund may allocate to the relief funds investors at the funds discretion.
(2)The CPCFA may award any remaining investment authority to new applicants.
12274.(a)Each relief fund shall submit a report to the CPCFA on or before the first 15th day of each April following the end of the calendar year that includes the closing date until the calendar year after the relief fund has been decertified. The report shall provide an itemization of the relief funds relief investments and shall include the following documents and information:
(1)A bank statement Audited financial statements evidencing each relief funds relief investments.
(2)The name, location, and industry class of each business that received a relief investment from the fund, evidence that the business qualified as a small business at the time the investment was made by a certification executed by an executive officer of each business attesting that the business was a small business at the time of the initial relief investment in the business.
(3) (A)For each small business receiving a relief investment, the number of full-time employees at each small business at the time the investment was made.
(B)For purposes of this paragraph, a full-time employee means an employee that works at least 30 hours per week throughout the year or meets the customary practices accepted by an industry as full time. The number of a small businesss full-time employees is determined by dividing the total hours for which the small business pays wages to all employees during the year by the number of employee work hours per year. The standard calculation for employee work hours per year is 2080: calculated by multiplying 52 weeks by 40 hours per week.
(4) (A)A certification executed by an executive officer of each business attesting the number of jobs created and retained as a result of each relief investment.
(B)For purposes of this paragraph, jobs created means employment positions that are created by a small business, are located in this state, require at least 30 hours of work each week, and were not located in this state at the time of the initial relief investment in the small business. The number of jobs created by a small business is calculated each year by subtracting the number of employment positions in this state at the small business at the time of the initial relief investment in the small business from the monthly average of those employment positions for that year. If the number calculated under this subsection is less than zero, the number shall be reported as zero. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(C)For purposes of this paragraph, jobs retained means, employment positions that are located in this state, require at least 30 hours of work each week, and existed before the initial relief investment in the small business and would have been lost or moved out of this state had a relief investment in the small business not been made, as certified in writing by an executive officer of the small business. The number of jobs retained by a small business is calculated each year based on the monthly average of employment positions for that year. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(5) The number of jobs created and retained as result of each relief investment. (6) The cumulative amount of relief investments made in each small business as a result of this credit. (7)(5)The number of relief investments made in impact businesses, disaggregated by classifications. classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(8)(6)A certification that the relief fund has not violated any of the grounds for revocation and recapture of credits set forth in subdivision (b) of Section 12267.
(9)(7)Any other information required by the CPCFA. CPCFA except to the extent the information is included in the audit performed pursuant to paragraph (1).
(b)Each fund shall submit a report to the CPCFA on or before the fifth business day after the first and second anniversaries of the closing date that provides documentation to prove that the fund has met the investment thresholds described in subdivision (b) of Section 12269 and has not implicated any of the other recapture provisions described in Section 12270.
12275.The CPCFA shall undertake outreach activities to encourage investment in impact businesses, including, but not limited to, by partnering with organizations representing persons and business enterprises from underrepresented groups, in a manner that will inform and educate members of these organizations on investment opportunities through the program provided in this article.
12276.(a)(1)There is hereby established in the State Treasury the Treasury Relief Investment Fund. (2)All moneys appropriated to the CPCFA for purposes of this article shall be deposited or paid into this fund and shall be used only to carry out the CPCFAs duties specified in this article and those rules and regulations promulgated to implement this article.(b)CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.12276.(a)The Treasury Relief Investment Fund is hereby established in the State Treasury, and shall be administered by the CPCFA for purposes of this article. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to CPCFA for carrying out the purposes of this article. All moneys accruing to the CPCFA pursuant to this article from any source shall be deposited into the fund.
(b)The CPCFA may use the proceeds in the Treasury Relief Investment Fund for purposes of administrative costs relating to the program.
(c)The CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. The CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. The CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.
12277.(a)The CPCFA may adopt regulations to implement this article. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the CPCFA is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code.
(b)The CPCFA shall adopt forms and notices necessary to implement this article.
(c)The CPCFA shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this article and the amount of those credits.
SEC. 3.For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Article 6 (commencing with Section 12264) of Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code as added by this act, hereafter the credit, the Legislature finds as follows:
(a)The purpose of the credit, also known as the California Jumpstart Act, is to address the growing economic hardships California small businesses, workers, and vulnerable communities are grappling with and provide a long-term recovery solution. The purpose of the credit is also to incentivize and mobilize rapid and scalable private sector investment that encourages economic growth beyond the initial relief provided under the federal small business stimulus programs, enabling small business growth, job creation, and relief for families in communities where such economic assistance is needed the most.
(b)To measure whether the credit achieves its intended purpose, the CPCFA shall, by June 30 of each year this article is in effect, submit an electronic report, in compliance with Section 9795 of the Government Code, to the Legislature containing all of the following:
(1)The name, location, and industry class of each business that received a relief investment from the relief fund and notification that evidence was collected that the business qualified as a small business at the time the investment was made, if applicable. made.
(2)The number of jobs created and retained as a result of each relief investment.
(3)The cumulative amount of relief investments made in each small business as a result of this credit.
(4)The number of relief investments made in impact businesses of interest, disaggregated by classifications. classifications based on information voluntarily provided by businesses that identify as an impact business and in accordance with state law.
(5)Any recommendations for improving the effectiveness, transparency, and accountability of public funds deployed in the form of tax credits allocated pursuant to the California Jumpstart Act, or the CPCFAs administration of the California Jumpstart Act.
(6)Any penalties imposed during the prior 12-month period against a relief fund.
(7)Beginning on January 1, 2025, and in each annual report thereafter while this article is in effect, the CPCFA shall include the following additional information in its annual electronic report submitted pursuant to this subdivision:
(A)An evaluation of the outcomes of the program on low-income communities with high unemployment and poverty directly resulting from investments in small businesses made under the California Jumpstart Act, including a description of the methodology used to make the evaluation.
(B)An assessment of whether the economic outcomes resulting from investments in small businesses would have occurred but for the California Jumpstart Act.
(C)Based on the CPCFAs calculations for actual unique jobs created and tax credits allocated, a calculation of the amount of foregone revenue in the form of tax credits allocated pursuant to the California Jumpstart Act per unique job created but for the California Jumpstart Act.
(c)CPCFA may require a relief fund to provide information necessary in a format it prescribes to complete the report.
(c)(d)The CPCFA shall submit the electronic report required by this section to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, the California Legislative Black Caucus, the California Latino Legislative Caucus, the California Asian Pacific Islander Legislative Caucus, the California Legislative Womens Caucus, and the California Legislative LGBTQ Caucus.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The Legislature finds and declares all of the following:
(a)California continues to face unprecedented challenges from the COVID-19 pandemic and the realities are stark. Total small business revenue in California in November 2020 has decreased by 27.9 percent compared to January 2020, according to a new report from Opportunity Insights. The total unemployment benefits providing support for California workers and local economies has now hit $101 billion in just seven months. Almost $55 billion of that is regular state provided Unemployment Insurance (UI) benefits, which is more than double what was paid in the three worst years of the Great Recession combined, according to October 2020 data from the Employment Development Department (EDD). Black men have recovered fewer than 40 percent of jobs lost the worst of any demographic group, other than Black women while Hispanic men have recovered about 47 percent of lost jobs, according to new research from the Washington Post. As more small businesses shut their doors for good and people fall into poverty, the longer Californias economic recovery will take.
(b)The economic collapse sparked by the ongoing global pandemic is triggering the most unequal recession in modern U.S. history. Californias small businesses and workers are in a prolonged battle for survival and stability, a struggle wrought with geographic, economic, and racial disparities.
(c)Even before the COVID-19 crisis, many California small businesses, particularly those owned by people of color or located in economically disadvantaged and historically underserved areas of the state, still had not fully recovered from the Great Recession. Their economic precarity has only grown more dire amid the extended pandemic devastation.
(d)Bank loans, the principal source of outside financing for small businesses, have been increasingly difficult to secure since the COVID-19 crisis struck. In the Federal Reserves third-quarter survey of senior loan officers, conducted in July 2020, 70 percent of respondents reported tightening lending standards for small firms, which is the most since the fourth quarter of 2008, when the financial crisis struck.
(e)Minority-owned businesses suffer from historic and persistent underinvestment even when the economy is booming. According to the Stanford Institute for Economic Policy Research, only 1 percent of minority business owners obtained loans in their founding year pre-pandemic, compared to 7 percent of white business owners.
(f)According to a December 2020 report from the Public Policy Institute of California, the effects of the current recession are concentrated among low-income workers, African Americans, Latinos, and women. Although no demographic group has been spared from the impacts of the current crisis, larger increases in unemployment and underemployment for low-income, African American, and Latino families are likely to worsen preexisting significant disparities in income and economic opportunity. Importantly, women have also been disproportionately affected, jeopardizing long-term gains in their labor force participation. Uneven economic recoveries tend to exacerbate income inequality, which may mute economic growth by dampening individuals chances of economic mobility and increased productivity.
(g)Achieving a more equitable recovery begins with creating more equitable flows of capital. Comprehensive, targeted, and transparent economic policies with strong safeguards will catalyze small business growth and entrepreneurial activity as California rebuilds.
(h)The COVID-19 pandemics lessons are clear and simple. Policymakers response to these deep, rapid revenue losses will have important consequences in the coming months and years. A targeted response that accounts for the investment gaps in disproportionately impacted businesses and communities, enables small business growth, and generates job creation that can minimize the harm and accelerate Californias equitable economic recovery.
(i)The California Jumpstart Act builds on the states ongoing business support initiatives throughout the pandemic by continuing to help bridge the deepening financial gaps and inequities facing underserved California small businesses and entrepreneurs and providing a long-term recovery solution.
(j)The California Jumpstart Act leverages private expertise, resources, and capital, with no immediate fiscal impact to the state budget, to encourage and expand long-term economic growth in economically disadvantaged and historically underinvested small businesses beyond the initial relief provided under the federal small business stimulus programs.
(k)The California Jumpstart Act incentivizes and mobilizes rapid, scalable private investment, with 100 percent of funds invested within two years into targeted small businesses around the state that historically have been underserved by traditional sources of patient growth capital. Approved funds will make debt and equity investments into small businesses at below market rates with flexible terms, allowing small businesses to access growth-oriented investment capital for broad purposes, including expansion, payroll, inventory, and training among others.
SEC. 2.Article 6 (commencing with Section 12264) is added to Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code, to read:6.California Jumpstart Act12264.This article shall be known, and may be cited, as the California Jumpstart Act.
12264.5.As used in this article, the following definitions apply:
(a)Affiliate means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity. For purposes of this subdivision, an entity is controlled by another entity if the controlling entity holds, directly or indirectly, the majority voting or ownership interest in the controlled entity or has control over the day-to-day operations of the controlled entity. For purposes of subdivision (c) of Section 12265, affiliate shall include only taxpayers that satisfy this definition on the date the relief fund submitted its application.
(b)Closing date means the date on which a relief fund has collected all amounts specified in subdivision (a) of Section 12268.
(c)CPCFA means the California Pollution Control Financing Authority within the office of the Treasurer.
(d)Federal funds rate means the effective federal funds rate, as measured and published by the New York Federal Reserve Bank.
(e)Flexible term means any of the following:
(1)Deferral of interest payments for at least one year.
(2)Deferral of principal payments for at least one year.
(3)Convertible into equity.
(f)Impact business means a small business more than 50 percent owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, and other disadvantaged groups identified or approved by the CPCFA.
(g)Investment authority means the amount certified by the CPCFA pursuant to Section 12267.
(h)Premium taxes means the taxes imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the California Constitution, or as specified by Section 12221 of this code, or Section 685 of the Insurance Code.
(i)(1)Principal business operations means the location that meets either of the following requirements:
(A)At least 60 percent of the businesss employees work at the location.
(B)Employees who are paid at least 60 percent of the businesss payroll work at the location.
(2)A business that has agreed to use the proceeds of a relief investment to establish its principal business operations in the state shall be deemed to have its principal business operations in a relief zone if it satisfies the requirements of paragraph (1) within 180 days after receiving a relief investment.
(j)Relief contribution means an investment of cash, by an entity subject to premium taxes in this state, in a relief fund that equals the amount specified on a notice of tax credit allocation issued by the CPCFA under subdivision (c) of Section 12267 and that is used to purchase an equity interest in the relief fund or to purchase, at par value or premium, a debt instrument issued by the fund that meets both of the following requirements:
(1)Has an original maturity date of at least five years after the date of issuance.
(2)Has a repayment schedule that is not faster than a level principal amortization over five years.
(k)Relief fund means an entity certified by the office of the CPCFA under subdivision (a) of Section 12267.
(l)(1)Relief investment means any capital or equity investment in a small business or any loan to a small business with a stated maturity of at least two years.
(2)A senior secured loan is a relief investment only if it has an interest rate of less than 4 percent plus the effective federal funds rate as measured and published by the New York Federal Reserve Bank and has a flexible term.
(3)Any other loan is a relief investment only if it has an interest rate of less than 9 percent plus the federal funds rate and has a flexible term.
(4)An equity investment is a relief investment only if the relief fund does not acquire a majority investment in the small business as an initial investment in the small business.
(5)Relief investment does not include any transaction that includes an origination fee.
(m)Relief zone means any of the following locations in this state:
(1)A census tract in the state meeting either of the following requirements:
(A)The census tract has a poverty rate that is greater than 20 percent.
(B)The census tract has a median family income that does not exceed the following:
(i)If the census tract is not located in a metropolitan area, the statewide median family income.
(ii)If the census tract is located in a metropolitan area, the greater of the statewide median family income and the metropolitan area median family income.
(2)All locations in the state but outside of census places with a population greater than or equal to 50,000 as of the latest decennial census and their adjacent and contiguous urbanized areas.
(3)A High Unemployment Area (HUA) in the state as designated by the Employment Training Panel at the time a relief fund initially invests in the business.
(n)Senior secured loan means any loan that is secured by a first mortgage on real estate with a loan-to-value ratio of less than 80 percent.
(o)Small business means any business that, at the time a relief fund initially invests in the business, meets all of the following requirements:
(1)The total number of employees the business has does not exceed 250.
(2)The business has gross receipts, less returns and allowances reportable to the state, of less than ten million dollars ($10,000,000) during the previous taxable year.
(3)The business has its principal business operations in a relief zone in the state.
(4)The business is engaged in North American Industry Classification System sector 11, 22, 23, 31, 32, 33, 42, 44, 45, 48, 49, 51, 54, 56, 62, 71, or 72, or if not engaged in those industries, the CPCFA determines that the investment will create desirable economic outcomes in line with the goals of this article.
(5)Small business shall not include any trade or business consisting of the operation of any private or commercial golf course, country club, massage parlor, sauna or hot tub facility, sun tan facility, racetrack, facility primarily used for gambling or to facilitate gambling, liquor store, a store or other facility whose principal business is the sale of firearms, a shooting range or gallery or a business which presents live performances of a prurient sexual nature or derives directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature.
12265.(a)For taxable years beginning on or after January 1, 2024, there shall be allowed against premium taxes a California Jumpstart Act tax credit in an amount equal to the amount of a relief contribution, eligible for utilization in accordance with paragraph (2) of subdivision (a) of Section 12269.
(b)If the credit allowed by this section exceeds the taxes described in subdivision (a), the excess may be carried over to reduce those taxes in the following year, and the four succeeding years if necessary, until the credit is exhausted. Tax credits shall not be carried forward after the 2031 taxable year.
(c)The credit is nonrefundable and may not be sold, transferred, or allocated to an entity other than an affiliate.
(d)No additional retaliatory tax shall be required as a result of receiving the tax credit described in this subdivision.
(e)A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate issued pursuant to subdivision (a) of Section 12269 with the taxpayers return for each taxable year for which the credit is claimed.
(f)(1)The aggregate amount of investment authority that may be certified shall be three hundred seventy-five million dollars ($375,000,000) and the aggregate amount of credit that may be allocated and certified pursuant to this section shall be three hundred million dollars ($300,000,000) in total for all taxable years for which the California Jumpstart Act tax credit is authorized.
(2)The total amount of credits that may be claimed per year is seventy-five million dollars ($75,000,000) during the taxable years containing the third through sixth anniversaries of the closing date.
(3)If requests for investment authority and credits exceed the limitations described in paragraph (1), the CPCFA shall proportionally reduce the investment authority and credits certified for each approved application as necessary to avoid exceeding the limit.
12266.(a)Beginning 90 days after the enactment of this act, the CPCFA shall accept applications for entities desiring to apply for certification as a relief fund. The application shall meet all of the following requirements:
(1)The application shall state the total relief investment authority sought by the applicant, which shall not exceed three hundred seventy-five million dollars ($375,000,000).
(2)The applicant shall include evidence to prove, to the satisfaction of the CPCFA, that the applicant meets all of the following criteria:
(A)The applicant, or an affiliate of the applicant, is a federally approved or licensed rural business investment company pursuant to Section 2009cc of Title 7 of the United States Code or a small business investment company pursuant to Section 681 of Title 15 of the United States Code. The applicant shall include a certificate executed by an executive officer of the applicant attesting that the approval or license remains in effect and has not been revoked and evidence that at least one principal or similar officer of the entity is, and has been for at least four years, an officer or employee of the applicant or an affiliate of the applicant on the date the application is submitted.
(B)As of the date the application is submitted, the applicant and its affiliates have invested more than one hundred million dollars ($100,000,000) in small businesses. As used in this subparagraph, a small business is not required to have principal business operations in California.
(3)A signed certification from the chief executive officer, or similar officer, of each investor that commits to make a relief contribution to the applicant stating the amount of that commitment.
(4)The sum of all relief-eligible capital contribution commitments described in paragraph (3) of this subdivision, which shall equal at least 80 percent of the total investment authority sought by the applicant.
(5)A nonrefundable application fee of ten thousand dollars ($10,000).
(6)A detailed inclusive outreach plan intended to increase investment sourcing opportunities under the program in impact businesses.
(b)(1)Except as provided in paragraph (2) of this subdivision, the CPCFA shall review and make determinations with respect to applications within 30 business days of receipt. Applications received by the CPCFA on the same day shall be deemed to have been received simultaneously.
(2)The CPCFA shall approve investment authority only in an aggregate amount that is not greater than three hundred seventy-five million dollars ($375,000,000).
(c)The CPCFA shall deny an application submitted under this section if any of the following apply:
(1)The application is incomplete.
(2)The application fee is not paid in full.
(3)The application does not satisfy all the criteria described in paragraph (2) of subdivision (a).
(4)The CPCFA has already approved the maximum total relief investment authority and relief contributions allowed pursuant to subdivision (f) of Section 12265.
(5)The applicant fails to submit affidavits equal to 80 percent of the relief investment authority sought.
(d)The CPCFA shall not deny a relief fund application or reduce the requested relief investment authority for reasons other than those described in subdivisions (b) and (c).
(e)(1)If the CPCFA denies an application, the CPCFA shall notify the applicant of the reasons for denial. If the application was denied for any reason other than the reasons specified in paragraph (3), (4) or (5) of subdivision (c), the applicant may provide additional information to the agency to cure defects in the application, provided the information is submitted within 15 days of receipt of the notice of denial.
(2)If the CPCFA denies an application for certification as a relief fund, and approving a subsequently submitted application would result in exceeding the dollar limitation on relief investment authority or relief contributions if the previously denied application is completed, clarified, or cured pursuant to this subdivision, the CPCFA shall refrain from making a determination on the subsequently submitted application until the previously denied application is reconsidered or the 15-day period for submitting additional information for the previously denied application has passed, whichever comes first. If subsequently approved, the CPCFA shall treat the application as approved as of its original filing date.
12267.After approving an application submitted pursuant to Section 12266, the CPCFA shall issue a written notice to the applicant certifying all of the following:
(a)The applicant is a relief fund.
(b)The amount of the applicants investment authority.
(c)The relief contributions required from each investor that submitted an affidavit with the relief funds application.
12268.(a)(1)Within 60 days after receiving the certification issued pursuant to Section 12267, a relief fund shall do both of the following:
(A)Collect relief contributions equal to the amount certified in Section 12267 from each investor whose certification was included in the application.
(B)Collect additional investments of cash that, when added to the investor contributions, equal the relief funds investment authority.
(2)At least 5 percent of the relief funds investment authority shall consist of direct or indirect equity investments from affiliates of the relief fund, including employees, officers, and directors of the affiliates.
(b)Within 65 days after receiving certification pursuant to Section 12267, the relief fund shall send to the CPCFA documentation to prove that the amounts required by subdivision (a) have been collected.
(c)If the relief fund fails to comply with subdivision (a) or (b), the CPCFA shall revoke the relief funds certification and provide written notice to the relief fund of the revocation.
12269.(a)(1)Upon receipt of the documentation required by subdivision (b) of Section 12268, the CPCFA shall issue, to each investor or affiliate identified in subdivision (b) of Section 12268, a notice of the amount and utilization schedule of the tax credits allocated to that investor or affiliate as a result of its relief contribution.
(2)The CPCFA shall issue, to each investor identified in subdivision (b) of Section 12268, a tax credit certificate for one-fourth of the relief contributions made by the investor for each of the taxable years containing the third through sixth anniversaries of the closing date.
(b)The CPCFA shall not be required to issue a tax credit certificate if the relief fund does not invest 70 percent of its investment authority in investments within one year of the closing date and 100 percent of its relief investment authority in relief investments within two years of the closing date, subject to satisfaction of these investment milestones during the cure period established by Section 12270.
12269.5.(a)An annual fee of one hundred fifty thousand dollars ($150,000), to be prorated amongst all relief funds that have not exited pursuant to Section 12271, shall be payable to the CPCFA.
(b)The initial annual fee is due and payable to the CPCFA within 60 days after receiving the certification issued pursuant to Section 12267.
(c)After payment of the initial annual fee, the annual fee shall be due and payable to the CPCFA before the anniversary date of the closing date.
(d)Application and annual fees paid to the CPCFA shall be deposited in the Treasury Relief Investment Fund established under Section 12276.
12270.(a)(1)The CPCFA may recapture tax credits claimed pursuant to Section 12264 and revoke the tax credit certificates issued if any of the following occur with respect to the relief fund:
(A)The relief fund fails to invest 100 percent of its investment authority in relief investments within two years of the closing date.
(B)The relief fund fails to maintain that level of investment until the sixth anniversary of the closing date. For the purposes of this paragraph, an investment is maintained even if the investment is sold or repaid as long as the 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 relief investments in this state within one year of the receipt of such capital. Regularly scheduled principal payments on a loan that is a relief investment shall be deemed continuously invested in a relief investment if the amounts are reinvested in one or more relief instruments by the end of the following calendar year.
(C)The relief fund makes a distribution or payment that results in the fund having less than 100 percent of its relief investment authority invested in relief investments or in cash or marketable securities available for investment in relief investments.
(D)The relief fund makes a relief investment in a small 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 relief fund, an affiliate of the fund, or an investor in the relief fund, excluding investments in publicly traded securities by a small business or an owner or affiliate of a small business.
(2)Before recapturing tax credits or revoking a tax credit certificate pursuant to this section, the CPCFA shall notify the relief fund of the reasons for the pending recapture or revocation. If the fund corrects the violations outlined in the notice to the satisfaction of the CPCFA within 90 days of the date the notice was dispatched, the CPCFA shall not recapture the tax credits or revoke the tax credit certificate, as applicable.
(3)The CPCFA shall not recapture a tax credit or revoke a tax credit certificate due to any actions of a fund that occur after decertification pursuant to Section 12271, provided the CPCFA may recapture a relief funds tax credits or revoke a tax credit certificate related to actions of the relief fund that occurred prior to exit in accordance with Section 12271, even if the actions are discovered after exit.
(b)The amount by which one or more relief investments by a relief fund in the same small business exceeds seven million five hundred thousand dollars ($7,500,000) shall not be considered as a relief investment for purposes of this section, exclusive of capital repaid or redeemed by the small business and reinvested as a relief investment in the small business. A relief investment in an affiliate of a small business shall be treated as a relief investment in that small business for purposes of this subdivision.
12271.(a)(1)On or after the sixth anniversary of the closing date, a relief fund that has invested 100 percent of its relief investment authority in relief investments may apply to the CPCFA to exit regulation by the CPCFA.
(2)The CPCFA shall approve or deny an application made pursuant to paragraph (1) within 30 days after receiving the application.
(b)The CPCFA shall not deny the application unless there is a reasonable basis for the denial. In evaluating the application, whether a tax credit was recaptured with respect to the decertifying relief fund shall be evidence to prove that the relief fund is eligible for exit.
(c)The CPCFA shall send notice of its determination with respect to decertification and reasons for denial, if applicable, to the relief fund requesting exit.
12272.(a)A relief fund may request a written opinion from the CPCFA as to whether the business qualifies as a small business.
(b)The relief fund shall include evidence that the business satisfies the definition of a small business and a certification by an executive officer of the business attesting that the business satisfies such definition.
(c)The CPCFA shall issue a written opinion to the fund within 15 business days of receiving the request. If the CPCFA determines that the business qualifies as a small business or if the CPCFA fails to timely issue the written opinion, the business shall be considered a small business for purposes of this article.
12273.(a)If the CPCFA revokes a relief funds certification pursuant to subdivision (c) of Section 12268 or revokes or recaptures a tax credit certificate pursuant to subdivision (b) of Section 12267, the associated investment authority and investor contributions will not count toward the limit on total investment authority and investor contributions set forth in subdivision (f) of Section 12265.
(b)(1)The CPCFA shall first award reverted investment authority pro rata to each relief fund that was awarded less than the requested investment authority for which it applied under Section 12267 within 15 days, which a relief fund may allocate to the relief funds investors at the funds discretion.
(2)The CPCFA may award any remaining investment authority to new applicants.
12274.(a)Each relief fund shall submit a report to the CPCFA on or before the first day of each April following the end of the calendar year that includes the closing date until the calendar year after the relief fund has been decertified. The report shall provide an itemization of the relief funds relief investments and shall include the following documents and information:
(1)A bank statement evidencing each relief funds relief investments.
(2)The name, location, and industry class of each business that received a relief investment from the fund, evidence that the business qualified as a small business at the time the investment was made by a certification executed by an executive officer of each business attesting that the business was a small business at the time of the initial relief investment in the business.
(3)(A)For each small business receiving a relief investment, the number of full-time employees at each small business at the time the investment was made.
(B)For purposes of this paragraph, a full-time employee means an employee that works at least 30 hours per week throughout the year or meets the customary practices accepted by an industry as full time. The number of a small businesss full-time employees is determined by dividing the total hours for which the small business pays wages to all employees during the year by the number of employee work hours per year. The standard calculation for employee work hours per year is 2080: calculated by multiplying 52 weeks by 40 hours per week.
(4)(A)A certification executed by an executive officer of each business attesting the number of jobs created and retained as a result of each relief investment.
(B)For purposes of this paragraph, jobs created means employment positions that are created by a small business, are located in this state, require at least 30 hours of work each week, and were not located in this state at the time of the initial relief investment in the small business. The number of jobs created by a small business is calculated each year by subtracting the number of employment positions in this state at the small business at the time of the initial relief investment in the small business from the monthly average of those employment positions for that year. If the number calculated under this subsection is less than zero, the number shall be reported as zero. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(C)For purposes of this paragraph, jobs retained means, employment positions that are located in this state, require at least 30 hours of work each week, and existed before the initial relief investment in the small business and would have been lost or moved out of this state had a relief investment in the small business not been made, as certified in writing by an executive officer of the small business. The number of jobs retained by a small business is calculated each year based on the monthly average of employment positions for that year. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(5)The number of jobs created and retained as result of each relief investment.
(6)The cumulative amount of relief investments made in each small business as a result of this credit.
(7)The number of relief investments made in impact businesses, disaggregated by classifications.
(8)A certification that the relief fund has not violated any of the grounds for revocation and recapture of credits set forth in subdivision (b) of Section 12267.
(9)Any other information required by the CPCFA.
(b)Each fund shall submit a report to the CPCFA on or before the fifth business day after the first and second anniversaries of the closing date that provides documentation to prove that the fund has met the investment thresholds described in subdivision (b) of Section 12269 and has not implicated any of the other recapture provisions described in Section 12270.
12275.The CPCFA shall undertake outreach activities to encourage investment in impact businesses, including, but not limited to, by partnering with organizations representing persons and business enterprises from underrepresented groups, in a manner that will inform and educate members of these organizations on investment opportunities through the program provided in this article.
12276.(a)(1)There is hereby established in the State Treasury the Treasury Relief Investment Fund.
(2)All moneys appropriated to the CPCFA for purposes of this article shall be deposited or paid into this fund and shall be used only to carry out the CPCFAs duties specified in this article and those rules and regulations promulgated to implement this article.
(b)CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.
12277.(a)The CPCFA may adopt regulations to implement this article. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the CPCFA is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code.
(b)The CPCFA shall adopt forms and notices necessary to implement this article.
(c)The CPCFA shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this article and the amount of those credits.
SEC. 3.For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Article 6 (commencing with Section 12264) of Chapter 3 of Part 7 of Division 2 of the Revenue and Taxation Code as added by this act, hereafter the credit, the Legislature finds as follows:
(a)The purpose of the credit, also known as the California Jumpstart Act, is to address the growing economic hardships California small businesses, workers, and vulnerable communities are grappling with and provide a long-term recovery solution. The purpose of the credit is also to incentivize and mobilize rapid and scalable private sector investment that encourages economic growth beyond the initial relief provided under the federal small business stimulus programs, enabling small business growth, job creation, and relief for families in communities where such economic assistance is needed the most.
(b)To measure whether the credit achieves its intended purpose, the CPCFA shall, by June 30 of each year this article is in effect, submit an electronic report, in compliance with Section 9795 of the Government Code, to the Legislature containing all of the following:
(1)The name, location, and industry class of each business that received a relief investment from the relief fund and evidence that the business qualified as a small business at the time the investment was made, if applicable.
(2)The number of jobs created and retained as a result of each relief investment.
(3)The cumulative amount of relief investments made in each small business as a result of this credit.
(4)The number of relief investments made in impact businesses of interest, disaggregated by classifications.
(c)The CPCFA shall submit the electronic report required by this section to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, the California Legislative Black Caucus, the California Latino Legislative Caucus, the California Asian Pacific Islander Legislative Caucus, the California Legislative Womens Caucus, and the California Legislative LGBTQ Caucus.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SECTION 1.Section 422 of the Revenue and Taxation Code is amended to read:422.(a)For purposes of this article, and within the meaning of Section 8 of Article XIII of the Constitution, open-space land is enforceably restricted if it is subject to any of the following:(1)A contract.(2)An agreement.(3)A scenic restriction entered into prior to January 1, 1975.(4)An open-space easement.(5)A wildlife habitat contract.(b)For purposes of this article, a restriction upon the use of land other than those enumerated in this section shall not be considered to be an enforceable restriction.(a)For the purposes of this article article, and within the meaning of Section 8 of Article XIII of the Constitution, open-space land is enforceably restricted if it is subject to any of the following:
(a)(1)A contract; contract.
(b)(2)An agreement; agreement.
(c)(3)A scenic restriction entered into prior to January 1, 1975; 1975.
(d)(4)An open-space easement; or easement.
(e)(5)A wildlife habitat contract.
For the(b)For purposes of this article no article, a restriction upon the use of land other than those enumerated in this section shall not be considered to be an enforceable restriction.
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Date
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Status
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| Jun 27, 2022 | June 27 hearing: Heard for testimony only. |
| Jun 21, 2022 | From committee: Do pass and re-refer to Com. on REV. & TAX. (Ayes 6. Noes 0.) (June 21). Re-referred to Com. on REV. & TAX. |
| Jun 14, 2022 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on J.,E.D., & E. |
| Jun 24, 2021 | June 29 set for first hearing canceled at the request of author. |
| Jun 10, 2021 | Referred to Coms. on J.,E.D., & E. and REV. & TAX. |
| Jun 2, 2021 | In Assembly. Read first time. Held at Desk. |
| Jun 2, 2021 | Read third time. Passed. (Ayes 38. Noes 0. Page 1382.) Ordered to the Assembly. |
| May 24, 2021 | Read second time. Ordered to third reading. |
| May 20, 2021 | From committee: Do pass as amended. (Ayes 7. Noes 0. Page 1204.) (May 20). |
| May 14, 2021 | Set for hearing May 20. |
| May 10, 2021 | May 10 hearing: Placed on APPR suspense file. |
| Apr 30, 2021 | Set for hearing May 10. |
| Apr 27, 2021 | Read second time and amended. Re-referred to Com. on APPR. |
| Apr 26, 2021 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 4. Noes 0. Page 896.) (April 22). |
| Apr 19, 2021 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on GOV. & F. |
| Apr 13, 2021 | Set for hearing April 22. |
| Mar 18, 2021 | Re-referred to Com. on GOV. & F. |
| Mar 10, 2021 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS. |
| Mar 3, 2021 | Referred to Com. on RLS. |
| Feb 22, 2021 | Art. IV. Sec. 8(a) of the Constitution dispensed with. |
| Feb 22, 2021 | From printer. May be acted upon on or after March 24. |
| Feb 19, 2021 | Introduced. To Com. on RLS. for assignment. To print. |
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Date
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Description
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Location
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Votes
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| Jun 2, 2021 | Senate 3rd Reading SB777 Bradford et al. | Senate Floor |
Passed |
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Positions by individuals are not included.
Bill Author
