Governor, Economic Development

Rule R357-6

Technology and Life Science Economic Development and Related Tax Credits

Notice of Proposed Rule

(New Rule)

DAR File No.: 34930
Filed: 06/15/2011 04:27:26 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section 63M-1-2907 requires a rule establishing the criteria to prioritize the issuance of tax credits and the procedures for documenting the Governor's Office of Economic Development's application of the criteria. This rule is being filed to address H.B. 496 from the 2011 General Session of the Utah State Legislature which funded tax credits for technology and life sciences companies. (DAR NOTE: H.B. 496 (2011) was effective 05/10/2011.)

Summary of the rule or change:

This proposed new rule establishes the criteria for an entity to qualify for the technology and life sciences tax credit. (DAR NOTE: A corresponding 120-day (emergency) rule that is effective 06/15/2011 is under DAR No. 34510 in this issue, July 1, 2011, of the Bulletin.)

State statutory or constitutional authorization for this rule:

• Section 63M-1-2907

Anticipated cost or savings to:

the state budget:

There are no immediate anticipated costs or savings to the state budget due to this rule. However, should companies receive a tax credit, it will be paid out based on the criteria outlined in the rule which can result in costs to the state. It is worth noting that this incentive is post-performance and the percentage paid out is less than a company actually pays in to the economy.

local governments:

There are no immediate anticipated costs or savings to local government. However, should these companies receive an incentive and do a project in Utah, the local government(s) where they decide to do their projects should greatly benefit economically.

small businesses:

The rule anticipates issuing tax credit certificates up to $1,300,000 to small businesses and investors in small businesses.

persons other than small businesses, businesses, or local governmental entities:

There are no direct anticipated costs or savings to persons other than small businesses. However, once projects are approved they could result in positive economic benefits for all persons in the state of Utah.

Compliance costs for affected persons:

There are no anticipated compliance costs for affected persons because the rule outlines an internal review procedure.

Comments by the department head on the fiscal impact the rule may have on businesses:

The rule implements a statutory mandate to issue tax credits to qualifying technology and life sciences applicants. By design, the rule seeks to attract capital and investment into Utah's growing technology and life sciences industries. This rule will grow, expand, and capitalize Utah technology and life sciences companies.

Spencer Eccles, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Governor
Economic Development
324 S State
5th Floor
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Greg Hartley at the above address, by phone at 801-538-8743, by FAX at 801-538-8888, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/01/2011

This rule may become effective on:

08/08/2011

Authorized by:

Spencer Eccles, Executive Director

R357. Governor, Economic Development.

R357-6. Technology and Life Science Economic Development and Related Tax Credits.

R357-6-1. Purpose.

(1) The purpose of these rules is to provide:

(a) the criteria upon which the Governor's Office of Economic Development will determine whether to award tax credits to applicants;

(b) the procedures for documenting the Governor's Office of Economic Development's application of this criteria;

(c) the procedures by which the Governor's Office of Economic Development issues tax credit certificates;

(d) the available tax credits for which applicants may apply.

 

R357-6-2. Authority.

(1) UCA 63M-1-2907 requires the office to make rules establishing criteria to prioritize the issuance of tax credits among applicants and to establish procedures for documenting the office's application of the criteria.

 

R357-6-3. Definitions.

(1) Terms in these rules are used as defined in UCA 63M-1-2902.

 

R357-6-4. Conditions.

(1) Applicants shall use the application form provided by the office and follow the procedures and requirements set forth in UCA 63M-1-2905 for obtaining a tax credit certificate.

(2) The office shall review and rank for approval accepted applications based upon the following criteria:

(a) The overall economic impact on the state related to providing tax credits, taking into

account such factors as:

(i) the number of new incremental jobs to Utah; or

(ii) capital investment in the state; or

(iii) new state revenues; or

(iv) any combination of Subsections (i), (ii), or (iii); or

(v) other criteria as established by the office by policy publication.

(3) The office shall keep a record of the review and ranking of applications based on the criteria in subsection (2).

(4) The office, with advice from the board, may enter into an agreement with a business entity authorizing a tax credit if the business entity meets the standards under subsections (2) and (3) and according to the requirements and procedures set forth in UCA 63M-1-2909.

(5) A business entity is eligible for an economic development tax credit only if the office has entered into an agreement under subsection (4) with the business entity.

 

R357-6-5. Available Tax Credits

(1) An applicant may seek one of three types of tax credits, drawn from funds expressly set aside by the Legislature:

(a) a refundable tax credit for generating state tax revenue; or

(b) a non-refundable tax credit for investment in certain life sciences establishments; or

(c) a non-refundable tax credit for capital gains transactions related to a life sciences establishment.

(2) Eligibility shall be determined by:

(a) statutory requirements; and

(b) policy established by the office, with advice and consent of the board, which shall be

posted on the office's public website; and

(c) the criteria listed in R357-6-4(2).

 

KEY: economic development, life sciences, new state revenue

Date of Enactment or Last Substantive Amendment: 2011

Authorizing, and Implemented or Interpreted Law: 63M-1-2901