Engrossed Second Substitute House Bill 1015 - Washington Equitable Access to Credit Act (2021 Regular Session)

Summary

Engrossed Second Substitute House Bill 1015, State of Washington 67th Legislature 2021 Regular Session, by House Finance, read first time 02/19/21. The bill is an act relating to creating the Washington equitable access to credit act and adds a new section to chapter 82.04 RCW. Section 2 allows a credit against the tax imposed under that chapter for contributions to the equitable access to credit program, with no person claiming more than $1,000,000 of credit in any calendar year. Credits are available on a first-in-time basis, the department must disallow credits that would exceed $8,000,000 for a calendar year, and the chapter expires July 1, 2031.

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                  ENGROSSED SECOND SUBSTITUTE HOUSE BILL 1015


     State of Washington         67th Legislature     2021 Regular Session

     By House Finance (originally sponsored by Representatives Maycumber,
     Chapman, Tharinger, Graham, Santos, and Macri)

     READ FIRST TIME 02/19/21.




1        AN ACT Relating to creating the Washington equitable access to
2    credit act; adding a new section to chapter 82.04 RCW; adding a new
3    chapter to Title 43 RCW; creating a new section; and providing
4    expiration dates.


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


 6       NEW SECTION. Sec. 1. This chapter may be known and cited as the
 7   Washington equitable access to credit act.


 8       NEW SECTION.   Sec. 2.  A new section is added to chapter 82.04
 9   RCW to read as follows:
10       (1) Subject to the limitations in this section, a credit is
11   allowed against the tax imposed under this chapter for contributions
12   made by a person to the equitable access to credit program created in
13   chapter 43.--- RCW (the new chapter created in section 7 of this
14   act).
15       (2)(a) The person must make the contribution before claiming a
16   credit authorized under this section. The credit may be used against
17   any tax due under this chapter. The amount of the credit claimed for
18   a reporting period may not exceed the tax otherwise due under this
19   chapter for that reporting period. No person may claim more than
20   $1,000,000 of credit in any calendar year, including credit carried
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 1   over from a previous calendar year. No refunds may be granted for any
 2   unused credits.
 3       (b) Any amount of tax credit otherwise allowable under this
 4   section not claimed by the person in any calendar year may be carried
 5   forward and claimed against a person's tax liability for the next
 6   succeeding calendar year; and any credit not used in that next
 7   succeeding calendar year may be carried forward and claimed against
 8   the person's tax liability for the second succeeding calendar year,
 9   but may not be carried over for any calendar year thereafter.
10       (3) Credits are available on a first-in-time basis. The
11   department must disallow any credits, or portions thereof, that would
12   cause the total amount of credits claimed under this section for any
13   calendar year to exceed $8,000,000. If this limitation is reached,
14   the department must notify the department of commerce that the annual
15   statewide limit has been met. In addition, the department must
16   provide written notice to any person who has claimed tax credits in
17   excess of the limitation in this subsection. The notice must indicate
18   the amount of tax due and provide the tax be paid within 30 days from
19   the date of the notice. The department may not assess penalties and
20   interest as provided in chapter 82.32 RCW on the amount due in the
21   initial notice if the amount due is paid by the due date specified in
22   the notice, or any extension thereof.
23       (4) To claim a credit under this section, a person must
24   electronically file with the department all returns, forms, and any
25   other information required by the department, in an electronic format
26   as provided or approved by the department. Any return, form, or
27   information required to be filed in an electronic format under this
28   section is not filed until received by the department in electronic
29   format. As used in this subsection, "returns" has the same meaning as
30   "return" in RCW 82.32.050.
31       (5) No application is necessary for the tax credit. The person
32   must keep records necessary for the department to verify eligibility
33   under this section.
34       (6) The equitable access to credit program must provide to the
35   department, upon request, such information as may be needed to verify
36   eligibility for credit under this section, including information
37   regarding contributions received by the program.
38       (7) The maximum credit that may be earned for each calendar year
39   under this section for a person is limited to the lesser of


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 1   $1,000,000 or an amount equal to 100 percent of the contributions
 2   made by the person to the equitable access to credit program.
 3       (8) No credit may be earned for contributions made on or after
 4   June 30, 2031. Credits may be claimed as provided in subsections (2)
 5   through (4) of this section.
 6       (9) For the purposes of this section, "equitable access to credit
 7   program" means a program established within the department of
 8   commerce pursuant to section 3 of this act.
 9       (10) The provisions of chapter 82.32 RCW apply to the
10   administration of this section.
11       (11) This section expires July 1, 2031.

12       NEW SECTION.     Sec. 3.    (1) Subject to appropriation, the
13   department of commerce shall create and operate the equitable access
14   to credit program. The purpose of the equitable access to credit
15   program is to award grants to qualified lending institutions, using
16   funds generated by business and occupation tax credits created in
17   section 2 of this act, for the purpose of providing access to credit
18   for historically underserved communities. The equitable access to
19   credit program must be governed by the provisions of this chapter and
20   by any guidelines developed and rules adopted by the department of
21   commerce pursuant to this chapter.
22       (2) The following requirements apply to the operation of the
23   equitable access to credit program:
24       (a) No more than 25 percent of all grants awarded in any calendar
25   year may be awarded to the same grant recipient;
26       (b) Up to 20 percent of an individual grant award may be used by
27   the grant recipient to fund a loan loss reserve, technical
28   assistance, and/or small business training programs;
29       (c) At least 65 percent of the value of all grants awarded in any
30   calendar year must be provided for native community development
31   financial institution grantees or grantees to provide services or
32   invest, or both, in rural counties as defined in RCW 82.14.370; and
33       (d) Beginning in fiscal year 2022, up to five percent of the
34   program revenues may be used for all agencies' staffing and other
35   administrative costs related to the implementation of this act. In
36   the event that the statewide limit in section 2(3) of this act is not
37   reached, the percentage used for administration may be increased as
38   necessary to maintain normal staffing operations, not to exceed 10
39   percent.
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 1       (3) In order to receive a grant award under the equitable access
 2   to credit program, a qualified lending institution must:
 3       (a) Be recognized by the United States department of the treasury
 4   as:
 5       (i) An emerging community development financial institution; or
 6       (ii) A certified community development financial institution;
 7       (b) Match any grant awarded by the equitable access to credit
 8   program on:
 9       (i) At least a 20 percent basis, if the institution is recognized
10   by the United States department of the treasury as an emerging
11   community development financial institution;
12       (ii) At least a 50 percent basis, if the institution:
13       (A) Is recognized by the United States department of the treasury
14   as a certified community development financial institution; and
15       (B) Has net assets of fewer than $3,000,000 at the time of the
16   grant application; or
17       (iii) At least a one-to-one basis, if the institution:
18       (A) Is recognized by the United States department of the treasury
19   as a certified emerging community development financial institution;
20   and
21       (B) Has net assets of $3,000,000 or more at the time of the grant
22   application;
23       (c) Be registered as a nonprofit organization exempt from
24   taxation under Title 26 U.S.C. Sec. 501(c)(3) of the federal internal
25   revenue code of 1986, as amended, as of the effective date of this
26   section; and
27       (d) Demonstrate a history of lending in Washington.
28       (4) The director must appoint members to an advisory board that
29   will assist the department in ranking applications for the grants.
30   The department is encouraged to seek representation from members with
31   relevant expertise, including those from the banking industry
32   familiar with community development financial institutions, rural
33   economic development professionals, local government representatives,
34   and representatives from federally recognized Indian tribes. The
35   department shall seek, to the greatest extent possible, a fair
36   geographic balance.
37       (5)(a) The following criteria must be considered in ranking
38   applications:
39       (i) The number and total value of loans and investments closed
40   during the previous five-year period by the qualified lending
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 1   institution in Washington and the percentage of those loans and
 2   investments that went to historically underserved communities;
 3       (ii) Funds leveraged by the proposed grant award, which may be no
 4   less than one-to-one for certified community development financial
 5   institutions with net assets of $3,000,000 or more at the time of the
 6   grant application;
 7       (iii) Projected loan or investment production with the award over
 8   the performance period of the grant;
 9       (iv) How the award supports the growth of the qualified lending
10   institution;
11       (v) Past performance of loans and investments made by the
12   qualified lending institution including, where applicable, past
13   performance of loans and investments made using funds from the
14   equitable access to credit program; and
15       (vi) Awards to a diversity of qualified lending institution
16   awardees, including institutions of different sizes or with different
17   target markets or products, access to historically underserved
18   communities, or other differentiators that ensure a broad-base access
19   to capital.
20       (b) The department may also include such additional criteria as
21   it deems helpful in achieving the goal of ensuring access to credit
22   to underserved communities across the state.
23       (6) Grants may be awarded from the equitable access to credit
24   program beginning six months after the first tax credits are claimed
25   pursuant to section 2 of this act. Grant awards must cease from the
26   equitable access to credit program upon the expiration of this
27   chapter.
28       (7) Once a loan or investment made by a qualified lending
29   institution using funds awarded from the equitable access to credit
30   program has been repaid, the qualified lending institution must
31   reloan the repaid funds consistent with the terms of this chapter for
32   a period of 10 years from the date of the grant award.
33       (8) A qualified lending institution that receives funds from the
34   equitable access to credit program must submit a report to the
35   department of commerce by June 30th of each year that contains the
36   following information:
37       (a) A list of loans and investments made using funds from the
38   equitable access to credit program's grant and associated match,
39   including, on a per-borrower or per-investee basis:
40       (i) The date the loan or investment was originated;
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 1       (ii) The amount of the loan or investment;
 2       (iii) The total cost of the project, including owner equity and
 3   leverage;
 4       (iv) The interest rate and interest type;
 5       (v) The term;
 6       (vi) The number of permanent full-time equivalent jobs projected
 7   to be created in the business due to this financing;
 8       (vii) Whether the loan or investment utilized a guarantee
 9   program;
10       (viii) The North American industry classification system code;
11       (ix) The entity structure;
12       (x) Whether the investee or borrower is more than 50 percent
13   owned or controlled by:
14       (A) One or more minorities;
15       (B) One or more women; or
16       (C) One or more low-income persons;
17       (xi) The race of the primary investee(s) or borrower(s);
18       (xii) Whether the primary investee or borrower is Hispanic or
19   Latino; and
20       (xiii) The location, by city and county, in which funds from the
21   program will be invested;
22       (b) Certification that each loan or investment made using funds
23   from the program was to a historically underserved community; and
24       (c) Other information as required by the department of commerce.
25       (9) No later than September 15th of each year, beginning in 2021,
26   the department of commerce must submit a report to the appropriate
27   committees   of   the   legislature  that   contains   the   following
28   information:
29       (a) The list of grant applicants, total value of grants
30   requested, and the location of each applicant;
31       (b) The list of grant recipients, total amount of awards, and
32   required match amounts; and
33       (c) On an aggregate basis, information on loans and investments
34   as reported under subsection (8) of this section.
35       (10) The department may contract for all or part of the
36   administration of this section.
37       (11) The department may adopt rules as necessary to implement
38   this section.



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 1       NEW SECTION.   Sec. 4.    The equitable access to credit program
 2   account is created in the custody of the state treasurer. All
 3   receipts from contributions to the equitable access to credit program
 4   created by this chapter must be deposited in the account.
 5   Expenditures from the account may be used only for the award of
 6   grants to qualified lending institutions from the equitable access to
 7   credit program and administrative costs pursuant to section 3 of this
 8   act. Only the director of the department of commerce or the
 9   director's designee may authorize expenditures from the account. The
10   account is subject to allotment procedures under chapter 43.88 RCW,
11   but an appropriation is not required for expenditures. Any funds
12   remaining in the account upon the expiration of this chapter must be
13   transferred to the state general fund.


14       NEW SECTION.    Sec. 5.   (1) This section is the tax preference
15   performance statement for the tax preference contained in section 2,
16   chapter . . ., Laws of 2021 (section 2 of this act). This performance
17   statement is only intended to be used for subsequent evaluation of
18   the tax preference. It is not intended to create a private right of
19   action by any party or to be used to determine eligibility for
20   preferential tax treatment.
21        (2) The legislature categorizes this tax preference as one
22   intended to create or retain jobs pursuant to RCW 82.32.808(2)(c), as
23   well    as  encourage  community   and  economic   development  within
24   communities that have historically lacked access to capital.
25        (3) It is the legislature's specific public policy objective to
26   create a program that encourages investment in small, underserved
27   businesses to encourage community and economic development in
28   Washington.
29        (4) The legislature intends to extend the expiration date of this
30   tax preference if a review finds that the equitable access to credit
31   program has had a net positive impact on investment in communities
32   historically underserved by credit and on state and local tax
33   revenues. In conducting its review under this section, the joint
34   legislative audit and review committee should consider, among other
35   data:
36       (a) The number and aggregate amount of loans and investments
37   originated under the program, including with revolved dollars;
38       (b) Overall match, including project leverage, invested by grant
39   recipients, which should exceed a one-to-one ratio;
                                     p. 7                       E2SHB 1015
 1       (c) The balance sheet growth of community development financial
 2   institutions that received grants from the program;
 3       (d) Whether participants in the program achieved balance sheet
 4   growth during the time of their participation in the program;
 5       (e)   The   percentage   of    community   development   financial
 6   institutions in Washington that received funding from the program;
 7   and
 8       (f) The level of ongoing demand for funding from the program.
 9       (5) In order to obtain the data necessary to perform the review
10   in subsection (4) of this section, the joint legislative audit and
11   review committee may refer to any data collected by the state.
12       (6) This section expires July 1, 2031.

13       NEW SECTION.   Sec. 6.   This chapter expires July 1, 2031.


14       NEW SECTION.    Sec. 7.   Sections 1, 3, 4, and 6 of this act
15   constitute a new chapter in Title 43 RCW.

                                    --- END ---




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