HOUSE BILL NO. 5099

October 05, 2023, Introduced by Reps. Hood, Hoskins, Rogers, Grant, Tsernoglou, Rheingans, Pohutsky, O'Neal, Byrnes, Andrews, Conlin, Puri and Martus and referred to the Committee on Economic Development and Small Business.

A bill to amend 1984 PA 270, entitled

"Michigan strategic fund act,"

by amending the title and section 9 (MCL 125.2009), the title as amended by 2005 PA 225 and section 9 as amended by 2021 PA 136, and by adding chapter 8F.

the people of the state of michigan enact:

TITLE

An act relating to the economic development of this state; to create the Michigan strategic fund and to prescribe its powers and duties; to transfer and provide for the acquisition and succession to the rights, properties, obligations, and duties of the job development authority and the Michigan economic development authority to the Michigan strategic fund; to provide for the expenditure of proceeds in certain funds to which the Michigan strategic fund succeeds in ownership; to provide for the issuance of, and terms and conditions for, certain notes and bonds of the Michigan strategic fund; to create certain boards and funds; to create certain permanent funds; to exempt the property, income, and operation of the fund and its bonds and notes, and the interest thereon, from certain taxes; to provide for the creation of certain centers within and for the purposes of the Michigan strategic fund; to provide for the creation and funding of certain accounts for certain purposes; to impose certain powers and duties upon certain officials, departments, and authorities of this state; to make certain loans, grants, and investments; to provide qualifications for and determine eligibility for tax credits and other incentives for authorized businesses and for qualified taxpayers; to assess and collect certain fees; to provide penalties; to make an appropriation; and to repeal acts and parts of acts.

Sec. 9. (1) The fund shall transmit to each member of the legislature, the governor, the clerk of the house of representatives, the secretary of the senate, and the senate and house fiscal agencies annually a report of its activities. The report shall must be transmitted not later than April 10 of each year for activities in the immediately preceding state fiscal year. The report shall must not include information exempt from disclosure under section 5. The report shall must include, but is not limited to, all of the following for each program operated under this act:

(a) A list of entities that received financial assistance.

(b) The type of project or product being financed.

(c) The amount and type of financial assistance.

(d) For each separate form of financial assistance, all of the following:

(i) The number of new jobs committed or projected when the financial assistance was applied for.

(ii) The number of retained jobs committed or projected when the financial assistance was applied for.

(iii) The actual number of new jobs created that are not temporary employees.

(iv) The actual number of retained jobs that are not temporary employees.

(v) The average annual salary of the new jobs created that are not temporary employees.

(vi) The average annual salary of the retained jobs that are not temporary employees.

(e) The duration of the financial assistance.

(f) The amount of financial support other than state resources.

(g) Money or other revenue or property returned to the fund, including any repayments through a clawback provision in the agreement.

(h) The status of all loans of the fund.

(i) A list of all entities that are in bankruptcy, that of which the fund has received actual notice, of, filed by a direct recipient of an active single incentive of at least not less than $500,000.00. In addition, the fund shall, within 120 days after the fund receives notice, provide a report of the notice of bankruptcy on its website and shall forward the report to each of the following:

(i) The senate majority leader and the senate minority leader.

(ii) The speaker of the house and the house minority leader.

(iii) The members of the house commerce and tourism committee.

(iv) The members of the house appropriations subcommittee on general government.

(v) The members of the senate economic and small business development committee.

(vi) The members of the senate appropriations subcommittee on general government.

(j) A summary of the approximate administrative costs used to administer the programs and activities authorized under this act.

(k) Any other information as required in by this section.

(2) The auditor general or a certified public accountant appointed by the auditor general annually shall conduct and remit to the legislature an audit of the fund and, in the conduct of the audit, shall have access to all records of the fund at any time, whether or not confidential. Each audit required by this section shall must include a determination of whether the fund is likely to be able to continue to meet its obligations, including a report on the status of outstanding loans and agreements made by the fund.

(3) The fund shall also transmit the audit described in subsection (2) to the chairperson and minority vice-chairperson of the senate appropriations subcommittee on general government and the house of representatives appropriations subcommittee on general government. The fund shall make the report and audit available to the public on the fund's website.

(4) The report described in subsection (1) must also contain all of the following that are related to a 21st century investment made by the fund board under chapter 8A:

(a) The amount of qualified venture capital fund investments, qualified mezzanine fund investments, and qualified private equity fund investments under management in this state, including year-to-year growth.

(b) The value of loan enhancement program investments, qualified private equity fund investments, qualified mezzanine fund investments, and qualified venture capital investments in qualified businesses, including year-to-year growth.

(c) A statement of the amount of money in each loan reserve fund established under the small business capital access program required under chapter 8A.

(5) The report described in subsection (1) must also include, but is not limited to, all of the following for all actions under section 88r:

(a) The total actual amount of qualified investment attracted under section 88r as reported to the fund.

(b) The total actual number of new jobs created under section 88r as reported to the fund.

(c) The actual amount of the grant, loan, or other economic assistance made under section 88r separately for each qualified business verified by the fund.

(d) For each qualified business, whether it is a new business, whether it is an expansion of an existing business, or whether it relocated from outside of this state.

(e) An evaluation of the aggregate return on investment that this state realizes on the actual qualified new jobs and actual qualified investment made by qualified businesses.

(6) The report described in subsection (1) must also include, but is not limited to, all of the following for all actions under chapter 8B:

(a) For tourism promotion efforts, all of the following:

(i) An itemized list, by market, of how much was spent, types of media purchased, and target of the tourism promotion campaign.

(ii) The return on investment analysis that utilizes existing baseline data and compares results with prior outcome evaluations funded by Travel Michigan.

(b) For business development efforts, all of the following:

(i) An itemized list, by market, of how much was spent, types of media purchased, and target of the business promotion campaign.

(ii) A performance analysis that compares the program or campaign objectives and outcome of the campaign or program.

(7) The report described in subsection (1) must also include, but is not limited to, all of the following for all actions under section 90d:

(a) The total actual amount of private investment attracted under section 90d as reported to the fund.

(b) The actual amount of the community revitalization incentives made under chapter 8C separately for each project.

(c) The total actual amount of square footage revitalized or added for each project approved under section 90d as reported to the fund. When reporting square footage, the person must report the square footage by category, including, but not limited to, commercial, residential, or retail.

(d) The aggregate increase in taxable value of all property subject to a written agreement under chapter 8C when established and recorded by the local units of government and as reported to the fund.

(e) The total actual number of residential units revitalized or added for each project approved under section 90d as reported to the fund.

(f) Each project that received a community revitalization incentive outside the fund program standards and guidelines and why the variance was given.

(8) Beginning on and after January 1, 2012, on a monthly basis the fund shall provide exact copies of all information regarding all actions under chapter 8C that is provided to board members of the fund for the purpose of monthly board meetings, subject to confidentiality under section 5, to each of the following and post that information on the fund's website:

(a) The chairperson and minority vice-chairperson of the house commerce and tourism committee.

(b) The chairperson and minority vice-chairperson of the house appropriations subcommittee on general government.

(c) The chairperson and minority vice-chairperson of the senate economic and small business development committee.

(d) The chairperson and minority vice-chairperson of the senate appropriations subcommittee on general government.

(9) The report described in subsection (1) must also include a summary of the approximate administrative costs used to administer the programs and activities authorized in the following sections:

(a) Section 88b.

(b) Section 88h.

(c) Section 90b.

(10) The report described in subsection (1) must also include, but is not limited to, all of the following for all actions for business incubators approved by the fund after January 14, 2015:

(a) The number of new jobs created and projected new job growth by current clients of the business incubator.

(b) Amounts of other funds leveraged by current clients of the business incubator.

(c) Increases in revenue for current clients of the business incubator.

(11) The report described in subsection (1) must also include the actual repayments received by the fund for failure to comply with clawback provisions of the written agreement under all of the following:

(a) Section 78.

(b) Section 88d.

(c) Section 88k.

(d) Section 88q.

(e) Section 88r.

(f) Section 90b.

(12) Beginning on July 1, 2015, the fund shall post on the fund's website a list of each contract, agreement, or other written loan or grant documentation for financial assistance under sections 88r and 90b that the fund entered into or modified in the immediately preceding fiscal year.

(13) Beginning on July 1, 2015, the fund shall post and update periodically all of the following on its website for all loans made under sections 88r and 90b:

(a) A description of the project for which the loan was made.

(b) The total amount of the loan.

(c) Whether payments on the loan balance are current or delinquent.

(d) The interest rate of the loan.

(14) Beginning July 1, 2015, the report described in subsection (1) shall must also contain all of the following for each program that provides financial assistance under this act that requires a site visit:

(a) A copy of the site visit guidelines for that program.

(b) The number of site visits conducted under that program.

(c) The chief compliance officer shall review and evaluate compliance with the site visit guidelines.

(15) The fund shall post on its website and update periodically all of the information described in subsection (14).

(16) The report described in subsection (1) must also include, but is not limited to, all of the following for all written agreements related to the good jobs for Michigan program created under chapter 8D:

(a) The name of the authorized business.

(b) The number of certified new jobs required to be maintained.

(c) The amount and duration of the withholding tax capture revenues.

(17) The report described in subsection (1) must also include the activities of the critical industry program described in section 88s.

(18) The report described in subsection (1) must also include the activities of the Michigan strategic site readiness program described in section 88t.

(19) The report described in subsection (1) must also include, but is not limited to, all of the following for all written agreements related to the research and development tax credit program created under chapter 8F:

(a) The name of the authorized business.

(b) The amount and duration of authorized research and development tax credits.

(c) A description of the authorized business's investment in research and development that is the basis for the research and development tax credit.

(20) (19) As used in this section, "financial assistance" means grants, loans, other economic assistance, and any other incentives or assistance under this act.

CHAPTER 8F

Sec. 90t. The fund has the powers necessary or convenient to carry out and effectuate the purposes of this chapter, including, but not limited to, all of the following:

(a) To authorize eligible businesses to receive research and development tax credits to foster research and development in this state.

(b) To determine which businesses qualify for research and development tax credits under this chapter.

(c) To determine the amount and duration of research and development tax credits authorized under this chapter.

(d) To issue certificates and enter into written agreements specifying the conditions under which research and development tax credits are authorized under this chapter and the circumstances under which those research and development tax credits may be reduced or terminated.

(e) To charge and collect reasonable administrative fees.

(f) To assist an eligible business in obtaining the benefits of a research and development tax credit or the research and development tax credit program.

(g) To delegate to the chairperson of the fund, staff, or others the functions and powers it considers necessary and appropriate to administer the research and development tax credit program.

Sec. 90u. As used in this chapter:

(a) "Authorized business" means an eligible business that has met the requirements of this chapter and with which the fund has entered into a written agreement for a research and development tax credit.

(b) "Base amount" means the average annual amount of research and development expenses incurred by the eligible business in this state during the 3 tax years immediately preceding the first tax year for which the research and development credit is being claimed under the written agreement. An eligible business with no prior research and development spending in this state has a base amount of zero. The base amount remains the same for the duration of a written agreement.

(c) "Certificate of tax credit" means the certificate of tax credit issued to an authorized business by the fund under section 90x to verify that the authorized business is eligible for a research and development tax credit.

(d) "Eligible business" means a business that proposes to increase research and development spending in this state through projects that have the potential for significant technological advancements, job creation, and positive economic impact as follows:

(i) For a business with 250 or more employees, an increase of at least $500,000.00 per year above the base amount.

(ii) For a business with less than 250 employees, an increase of at least $100,000.00 per year above the base amount.

(e) "Qualified research" means that term as defined in 26 USC 41.

(f) "Qualified research services" means qualified services as that term is defined in 26 USC 41.

(g) "Qualified research supplies" means supplies as that term is defined in 26 USC 41 that are used in the conduct of qualified research.

(h) "Research and development expenses" means qualified research expenses as that term is defined in 26 USC 41.

(i) "Research and development spending" means spending for research and development expenses.

(j) "Research and development tax credit" means a research and development tax credit allowed under section 277, 277a, 277b, 677, 677a, or 677b of the income tax act of 1967, 1967 PA 281, MCL 206.277, 206.277a, 206.277b, 206.677, 206.677a, and 206.677b.

(k) "Research and development tax credit program" means the research and development tax credit program created under section 90v.

(l) "Written agreement" means a written agreement made between the eligible business and the fund under this chapter.

Sec. 90v. (1) The fund shall create and operate the research and development tax credit program to authorize the receipt of research and development tax credits by authorized businesses. The fund shall develop and use a detailed application, approval, compliance, and certification process published and available on the fund's website.

(2) An eligible business may apply to the fund, in the form and manner prescribed by the fund, to enter into a written agreement under section 90w that authorizes the receipt of a research and development tax credit.

(3) The fund may request information, in addition to that contained in an application, if needed to permit the fund to discharge its responsibilities under this chapter.

Sec. 90w. (1) After receipt of an application under section 90v, the fund may enter into a written agreement with an eligible business for research and development tax credits if the fund determines that all of the following are met:

(a) The eligible business proposes to invest in and maintain research and development spending in this state that is above the base amount as follows:

(i) For a business with 250 or more employees, an increase of at least $500,000.00 per year above the base amount.

(ii) For a business with less than 250 employees, an increase of at least $100,000.00 per year above the base amount.

(b) The eligible business's plans for investment in research and development in this state are economically sound.

(c) The investment in research and development by the eligible business will benefit the people of this state by increasing opportunities and strengthening the economy of the state.

(2) If the fund determines that the eligible business satisfies all of the requirements under subsection (1), subject to section 90z, the fund shall determine the amount and duration of the research and development tax credit to be authorized under this chapter and shall enter into a written agreement as provided in this section.

(3) A written agreement between an eligible business and the fund must include, but is not limited to, all of the following:

(a) A description of the business location that is the subject of the agreement.

(b) Conditions on which the authorized business designation is made.

(c) The duration of the agreement and the amount of the research and development tax credit that may be claimed each tax year for the duration of the agreement, including the calculation of the base amount.

(d) A statement by the eligible business that a violation of the written agreement may result in the revocation of the designation as an authorized business or the loss or reduction of the research and development tax credit.

(e) A statement by the eligible business that a misrepresentation in the application may result in the revocation of the designation as an authorized business and eligibility to claim the research and development tax credit.

(4) On execution of a written agreement, an eligible business is an authorized business. The fund shall provide a copy of each written agreement to the department of treasury. On execution of the written agreement, the research and development tax credit as specified in this chapter and in the written agreement is binding on this state.

(5) If there is a proposed reorganization, merger, or other change of ownership of the authorized business for which reimbursement will continue pursuant to a written agreement, the approval of the fund is required before the assignment or transfer of the written agreement.

Sec. 90x. (1) An authorized business is eligible for a research and development tax credit as provided in the written agreement.

(2) The fund shall issue a certificate of tax credit each year to an authorized business that is eligible for a research and development tax credit. The certificate of tax credit must state all of the following:

(a) That the eligible business is an authorized business.

(b) The amount of the research and development tax credit for the designated tax year.

(c) The authorized business's federal employer identification number or the Michigan department of treasury number assigned to the authorized business.

(3) The fund shall provide the department of treasury with a copy of each certificate of tax credit issued under this section.

Sec. 90y. In determining whether qualified research and development expenses are incurred in this state, the fund and the department of treasury shall consider all of the following factors:

(a) The place where the qualified research services are performed or the qualified research is conducted.

(b) The residence or business location of the person or persons performing the qualified research services or conducting the qualified research.

(c) The place where qualified research supplies are consumed.

(d) Any other factors relevant to determining where qualified research occurred.

Sec. 90z. (1) The fund shall not enter into written agreements that authorize more than $100,000,000.00 in total research and development credits under this chapter for a single calendar year. To the extent the fund receives applications from eligible businesses with less than 250 employees, not less than $25,000,000.00 of the $100,000,000.00 each calendar year must be approved for those eligible businesses.

(2) In determining the amount of the research and development credit to be authorized under the written agreement, the fund shall comply with amounts and limitations established under section 277, 277a, 277b, 677, 677a, or 677b of the income tax act of 1967, 1967 PA 281, MCL 206.277, 206.277a, 206.277b, 206.677, 206.677a, and 206.677b, whichever is applicable. The fund shall not enter into a written agreement under this chapter with a duration of more than 5 years.

Sec. 90aa. (1) An authorized business shall file any returns and reports required under the written agreement, this chapter, or the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.847, and shall provide any other information reasonably requested by the fund or the department of treasury.

(2) The fund may charge an authorized business a reasonable fee for administrative expenses. The fee must not exceed 5% of the amount of the research and development tax credit received by the authorized business.

Sec. 90bb. (1) After a written agreement expires, the eligible business that was party to the written agreement may reapply under section 90v, but the base amount must be recalculated and a new written agreement executed.

(2) As used in this section, "expires" means a written agreement terminates on its scheduled expiration date. Expires does not include the termination of a written agreement due to a breach of the written agreement by the eligible business.

Enacting section 1. This amendatory act does not take effect unless all of the following bills of the 102nd Legislature are enacted into law:

(a) Senate Bill No.____ or House Bill No. 5100 (request no. 03343'23).

(b) Senate Bill No.____ or House Bill No. 5101 (request no. 03631'23).

(c) Senate Bill No.____ or House Bill No. 5102 (request no. 04159'23).