DAR File No. 40028

Governor, Economic Development

Rule R357-7

Utah Capital Investment Board

Notice of Proposed Rule

(Repeal and Reenact)

DAR File No.: 40028
Filed: 12/28/2015 07:36:57 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This statute surrounding this program was changed by H.B. 411 in the 2015 General Session and this rule has been updated to reflect the most recent legislative changes.

Summary of the rule or change:

This rule establishes criteria and procedures for the allocation and issuance of contingent tax credits by the Board. The old rule also established the criteria and procedures for the allocation and issuance of contingent tax credits by the Board. However, this new rule removes all of the old criteria and replaces them with a new set of criteria that is contingent on the Utah Capital Investment Corporation showing economic impact of referrals and subsequent investments. The old rule was based on a system where tax credits were issued based on debt financing for the amount of the investment made by the investor. The new criteria is based on equity investments that show economic impact and are calculated based upon what is now listed in the updated statute. The rule further adds how an investor becomes eligible to receive the tax credits including the issuance of a certificate of eligibility and the form such certificate shall take. The rule further adds the process for several newly created requirements including the assessment of likelihood of tax credit redemption, the criteria for calculating the economic impact of any given investment, criteria for establishing the Target Rate of Return for the investment portfolios, and the process for claiming and redeeming the tax credits. The old rule had similar criteria but these have been updated to reflect the new statutory changes to program while keeping the old criteria in rule for tax credits made prior to 07/01/2015.

State statutory or constitutional authorization for this rule:

• Section 63N-6-406
• Section 63N-6-203
• Section 63N-6-401
• Section 63N-6-408

Anticipated cost or savings to:

the state budget:

There is the potential for some impact to state budget regarding this rule because it determines how and in what amount certain tax credits would be given due to investments made by the Utah Capital Investment Corporation. The criteria in this rule will establish how these determinations are made and could impact the state budget.

local governments:

There is no perceived impact to local governments because they cannot apply for or receive these tax credits.

small businesses:

This rule does not impact small businesses because it determines a tax credit for investments based on economic impact as demonstrated by the Utah Capital Investment Corporation. The rule does not create any new requirements for businesses or any other potential costs creations.

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

This rule will not impact any other persons because it pertains solely to the economic impacts created by investments facilitated by the Utah Capital Investment Corporation.

Compliance costs for affected persons:

There are no compliance costs for affected persons because this rule outlines how a tax credit is awarded and calculated.

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

This rule may have some fiscal impact to the state budget in regards to the determination of tax credit eligibility and amount. Otherwise, there are no other costs associated with this rule.

Val Hale, 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
60 E SOUTH TEMPLE 3RD FLR
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Jeffrey Van Hulten at the above address, by phone at 801-538-8694, by FAX at 801-538-8888, or by Internet E-mail at jeffreyvan@utah.gov

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:

02/16/2016

This rule may become effective on:

02/23/2016

Authorized by:

Val Hale, Executive Director

R357. Governor, Economic Development.

[ R357-7. Utah Capital Investment Board.

R357-7-1. Purpose.

(1) The purpose of these rules is to establish criteria and procedures for the allocation and issuance of contingent tax credits to designated investors.

 

R357-7-2. Authority.

(1) U.C.A. 63N-6-203, 63N-6-401, 63N-6-406, 63N-6-408 requires the Utah Capital Investment Board to make rules establishing the manner by which it allocates, issues, certifies, transfers and redeems contingent tax credits.

 

R357-7-3. Definitions.

(1) "Act" means the Utah Venture Capital Enhancement Act U.C.A. 63N-6.

(2) "Actual Return" means the actual aggregate amount of moneys or the fair market value of property received from a fund of funds by a designated investor, with respect to an investment amount for which a certificate is issued, including amounts received as returns of invested capital or returns on invested capital and amounts received in excess of invested capital, in whatever form received for the period from the date of the closing to the applicable maturity date.

(3) "Board" means the Utah Capital Investment Board created under U.C.A. 63N-6-103(1).

(4) "Certificate" or "tax credit certificate" means a document constituting a contract between the state of Utah and a holder and evidencing a tax credit that has been issued and, subject to the contingencies described on the certificate that may become available to the holder.

(5) "Certificate register" means the register to be maintained by the board recording the name, address, and taxpayer identification number of each holder and the maximum potential amount of the tax credits represented by each certificate issued to each holder.

(6) "Certified tax credits" means tax credits that have been verified by the board to the commission and to the holder of the certificate that represents such tax credits.

(7) "Closing" means a time when a certificate is issued to a designated investor in exchange for a commitment to contribute cash to the capital of a fund of funds.

(8) "Commission" means the Utah State Tax Commission.

(9) "Commitment" means either a binding obligation undertaken at closing to invest in a fund of funds in the future or an actual investment made in a fund of funds, but without counting the same amount twice.

(10) "Contingencies" shall mean the conditions under which a tax credit may be claimed and shall include each of the following;

(a) The condition that the tax credits may only be used to the extent that the actual return on the investment amount associated with the certificate is less than the applicable scheduled return on such investment amount, and then only to the extent such tax credit becomes a certified tax credit.

(b) The condition that the amount of the total verified tax credits represented by such certificate that may be claimed during any redemption year will be limited to the amount certified by the board to the commission.

(c) The condition that no amount of the tax credit may be claimed prior to a maturity date stated on the certificate; and

(d) The condition that the receipt by the designated investor of an actual return on the investment amount associated with the certificate equal to the scheduled return on such investment amount will result in the cancellation of the tax credit certificate.

(11) "Corporation" means the Utah Capital Investment Corporation created under Section U.C.A. 63N-6-301.

(12) "Day" means any weekday Monday through Friday that is not a legal holiday of the state of Utah.

(13) "Designated investor" means a natural person or an entity, other than the corporation, that has committed to contribute capital to a fund of funds, and such person's or entity's successors or assignees.

(14) "Designated purchaser" means:

(a) a person who enters into a written undertaking with the board to purchase a commitment; or

(b) a transferee who assumes the obligations to make the purchase described in the commitment.

(15) "Fiscal year" means the fiscal year for the state of Utah.

(16) "Fund of funds" means any private, for-profit limited partnership or limited liability company established by the corporation to which a designated investor commits to make a capital contribution.

(17) "Holder" means a holder of a tax certificate, either as a designated investor or as a transferee of a designated investor, as reflected on the certificate register.

(18) "Investment amount" means the amount of cash contributed by a designated investor to a fund of funds with respect to which a certificate has been issued.

(19) "Maturity date" means a specific date or dates specified in a certificate, representing the earliest date of which a holder of the certificate may use it.

(20) "Percentage of Return" means the percentage represented by the quotient of (1) the actual return for a designated investor on the investment amount associated with a certificate divided by (2) the scheduled return for such designated investor on such investment amount.

(21) "Portfolio entity" means a venture capital fund or direct investment entity in which a fund of funds makes an investment.

(22) "Rate of return" means Internal Rate of Return calculated inclusive of all cash flows both positive and negative in addition to the fair market value of unrealized investments.

(23) "Redeem" means, with respect to a certificate, to present such certificate to the commission as payment due on or after the date of such presentation.

(24) "Redemption reserve" means the reserve established by the corporation to facilitate the cash redemption of certificates.

(25) "Redemption year" means each calendar year for which certified tax credits associated with a certificate may first be utilized.

(26) "Scheduled return" means the scheduled return, whether in money or property, (including returns of and returns on investment) with respect to an investment amount associated with a certificate issued to a designated investor in a fund of funds determined in accordance with the limited partnership agreement or the operating agreement of such fund of funds for the period from the date of the closing to the applicable maturity date. If relevant for determining the amount of the scheduled return, the board shall presume that a verified credit will be transferred at 100 percent of the amount stated on the certified tax credit. It shall be the burden of a designated investor to show that the certified tax credit cannot be transferred without discounting the amount stated on such credit.

(27) "Tax credit" means a contingent, refundable tax credit authorized by U.C.A. 63N-6-406(4)(c).

 

R357-7-4. Requirements of the Utah Capital Investment Corporation.

(1) Within 20 days prior to each closing, the corporation shall deliver a written report to the board containing the following information:

(a) a copy of the certificate of limited partnership or articles of organization of the fund of funds for which a closing is scheduled;

(b) a summary of the terms of the anticipated investments in such fund of funds as contained in the limited partnership agreement or the operating agreement of the funds of funds;

(c) a statement of the anticipated date of the closing; and

(d) evidence that the designated investor is an accredited investor.

(2) No less than two days prior to each closing, the corporation shall deliver to the board a signed statement of an officer of the corporation certifying the names, addresses, and taxpayer identification numbers of the persons expected to be designated investors at the closing, the total amount of the capital commitments expected to be received at the closing, the maximum amount of tax credits to be represented by each certificate to be issued at the closing, the date of the anticipated closing, the maturity date or dates for each certificate to be issued at closing, the contingencies applicable to the tax credits, and the calculation formula for determining the scheduled return.

 

R357-7-5. Allocation and Issuance of Certificates.

(1) Certificates shall be issued only by the board and only with respect to an actual capital commitment to a fund of funds. The board shall not issue a certificate until it has verified that the Utah Fund of Funds has agreed to treat the tax credits as a loan from the state of Utah, and the terms for the repayment of the loan.

(2) Following receipt of the certification of the corporation, the board shall issue a certificate to each such designated investor at closing.

(3) The maximum amount of the tax credits represented by each certificate shall be calculated in accordance with the limited partnership agreement or operating agreement of the applicable fund of funds or loan agreement between a designated investor and a fund of funds and will be subject to the limitations stated in the U.C.A. 63N-6-406(2)(a)(c).

(4) A tax credit certificate shall contain, or incorporate by reference to another document, each of the following:

(a) the name, address, and tax identification number of the holder;

(b) the amount of the investment commitment;

(c) all of the contingencies applicable to the tax credits;

(d) the date of issuance of the certificate;

(e) the maximum amount of the tax credit represented by the certificate;

(f) the maturity date of the certificate;

(g) the formula to be used to determine the total amount of return owed to the designated investor;

(h) if the certificate is issued upon a transfer after certification, the amount of the certified tax credits represented by such certificate and the redemption year(s); and

(i) the credit code to use to claim the credit on the Utah State tax return.

(5) All other requirements as set forth in U.C.A. 63N-6-406(6).

 

R357-7-6. Procedures for Certification of Tax Credits.

(1) At any time after the applicable maturity date for a certificate, the holder may present such certificate to the board for certification no later than June 30 of the calendar year maturity date stated on the certificate.

(2) Prior to certification the board will verify that no funds are available in the redemption reserve account.

(3) The corporation, and any entity with which the corporation has entered into agreements pursuant to the investments and financial transactions described in U.C.A. 63N-6-301(2)(c), shall provide all documents that the board finds are, or may become, necessary for the board to certify the amount of tax credits to be issued pursuant to the chapter. Such documents include but are not limited to the following:

(a) Financial transactions related to the corporation, the Utah Fund of Funds, designated investors, lenders, or portfolio entities.

(b) Financial documents, loan agreements, and security instruments to which any of the corporation, the Utah Fund of Funds, designated investors, lenders, or a portfolio entity is a party.

(c) Investment agreements to which any of the corporation, Utah Fund of Funds, designated investors, lenders, or a portfolio entity is a party.

(d) All legal documents and correspondence outlined herein to which any of the corporation, the Utah Fund of Funds, designated investors, lenders, or a portfolio entity is a party.

(e) All documents and financial information necessary to calculate the actual return, scheduled return, and the percentage of return.

(f) Any other documents the board deems necessary to assess compliance with this chapter or to correctly verify the amount of tax credits related to a certificate issued pursuant to this chapter.

(4) Within 30 days of the receipt of all documents and information pursuant to subsection (3) the board shall establish and certify the amount of tax credits related to that certificate, if any, which may be initially used in each redemption year.

(5) The board shall issue to the holder of such certificate a certification setting forth (a) the amount of certified tax credits represented by such certificate (if any) and (b) the amount of certified tax credits represented by such certificate and redemption year (if any).

(6) If the certified certificate has more than one maturity date, the board shall issue to the holder a certificate for the certified tax credits. The certified certificate will contain no contingencies. The board shall issue one or more balance certificates for any maturity dates for which the tax credits are not then being certified.

(7) Certificates being certified for a maturity date shall be certified pro rata with all other certificates being certified for the same maturity date.

(8) If a contingent certificate has more than one maturity date, the most recent maturity date prior to the date on which the certificate was presented to the board for certification shall be the maturity date used for purposes of certification under this rule.

(9) Once a tax credit has been certified, the board will notify the Commission of such certification within 7 days.

 

R357-7-7. Contractual Nature of Certificates; Irrevocability of Tax Credits.

(1) Upon the issuance of a certificate, the entitlement of a holder to use the tax credits represented by the certificate shall be final and permanent, subject only to the contingencies expressly stated or incorporated by reference in the certificate, and such entitlement shall not be subject to any further condition, reduction, modification, amendment, change, revocation, or recapture.

(2) The entitlement of a holder to claim tax credits represented by a certificate shall constitute a contract between the state of Utah on the one hand and such holder and the holder's successors and assignees on the other hand which shall not be subject to modification, amendment, change or rescission without prior written consent of the holder as of the date of any such purported action. No such modification, amendment, change or recession to which a holder may have agreed shall be binding upon any of the successors or assignees of such holder unless it is stated in the text of the certificate issued to such successor assignee.

(3) The entitlement of a holder to claim tax credits represented by such certificate shall not be affected in any way or become subject to forfeiture or recapture by:

(a) Action or inaction of the holder or designated investor;

(b) The transfer by the designated investor of all our any portion of the designated investor's interest in a fund of funds;

(c) The determination after the closing that a fund of funds was not organized or did not make its investments in accordance with the requirements of the Act or these rules;

(d) The invalidity or illegality for any reason of the existence or functions of the board, a fund of funds, or the corporation or any portfolio entity for any reason;

(e) The bankruptcy, insolvency, reorganization, merger, consolidation, dissolution or liquidation of the board, a fund of funds, or the corporation or any portfolio entity for any reason; or

(f) The level, timing or degree of success of any fund of funds or any portfolio entities, or the extent to which venture capital funds that are portfolio entities are invested in Utah venture capital projects, or are successful in accomplishing any economic development objective.

(4) If the legal existence of the board, a fund of funds, the corporation or the commission is ended or some or all of its respective functions are transferred to another entity at any time prior to the full use of 100 percent of the tax credits that could potentially be represented by all of the certificates, the board or its successor (or the state of Utah if the legal existence of the board ends or the board ceases to have the requisite authority and there is no successor with such authority) shall adopt such rules as may be necessary to ensure the continuity and effectiveness of the entitlement of each holder to use the tax credits represented by such holder's certificate.

 

R357-7-8. Transfer of Tax Credit Certificates.

(1) Certificates shall be transferrable by the holders and any subsequent holders to any transferee or transferees.

(2) Transfer of a certificate may be effected only by the holder's surrender of the certificate to the board with an endorsement in favor of the transferee, or transferees, and a statement containing the name, address and tax identification number of the transferee, and a written request for the board to issue a replacement certificate or certificates in the name of the transferee(s) (as well as, in any case where the transferor request that more than one replacement certificate be issued, a statement by the transferor that sets forth the aggregate amount of tax credits represented by the transferred certificate that are to be represented by each replacement certificate).

(3) Within 20 days after the surrender and endorsement of a certificate, the board shall issue a replacement certificate or certificates in the name of the transferee(s). Once a transferor of a certificate has surrendered a certificate to the board, such transferor may no longer use the tax credits represented by such a certificate.

(4) A holder shall have the right to pledge and grant security interests in certificates and tax credits held by such holder as collateral for loans to or other obligations of the holder.

 

R357-7-9. Cancellation of Tax Credits Upon Receipt of the Scheduled Return.

(1) Tax credits represented by a certificate are subject to cancellation only as provided in the certificate and upon receipt by the designated investor of an actual return equal to the designated investor's scheduled return with respect to such certificate.

(2) At the time of each distribution to a designated investor in a fund of funds, the corporation shall determine the amount of tax credits related to each certificate that have been cancelled and have become null and void by reason of such distribution, if any, and shall certify such amount to the board.

(a) After any such certification, the board shall certify to the holder of each such certificate, at the holder's address as shown on the certificate register, and to the commission the amount of tax credits that are deemed to have been cancelled and to be null and void.

(b) If at any time prior to a certification of a certificate the actual return of a designated investor shall equal the designated investor's scheduled return with respect to such a certificate, and all other conditions for cancellation contained in the certificate have been met, the corporation shall so certify to the board.

(c) After any such certification, the board shall certify to such holder at the holder's address shown on the certificate register and to the commission that such certificates shall be deemed to have been cancelled and to be null and void. Tax credits that are cancelled may be reissued with respect to the same or another fund of funds.

 

R357-7-10. Lost or Mutilated Tax Credit Certificates.

Upon receipt of evidence satisfactory to the board of the loss, theft, destruction or mutilation of any certificate, and in case of any such loss, theft or destruction, upon delivery of any indemnity agreement satisfactory to the board, or in case of any such mutilation, upon surrender and cancellation of such certificate, the board shall issue an deliver to the holder a replacement certificate within twenty days.

 

R357-7-11. Redeeming the Tax Credit Certificates.

(1) Once certified by the board, the holder of the tax credit certificate may present such certificate to the commission for redemption subject to the following provisions:

(a) The contingent tax credit certified by the board shall be claimed for a tax year of the designated investors, or transferee, that begins during the same year as the stated maturity date listed on such certificate. The designated investor (or a transferee of the Certified Contingent Credit) may submit to the commission at any time following the date of such certification by the board, but no later than the general filing deadline for Utah State tax returns (including extensions) for the redemption year.

(b) The person or entity claiming a refund must timely file a Utah State tax return claiming a refundable credit; and no other filing or forms or actions are necessary, and no other conditions apply, for obtaining a refund in respect of such tax credit. The commission will manually process a tax return with a claim for refund certified by the board and will pay the amount indicated on such tax return (such payment generally, but not always, made within ninety (90) days from the date for such return (the "Due Date")). If the board notified the commission of the filing of a claim for refund by the designated investor, the commission will take steps to expedite the refund.

(2) There is no limitation on a person:

(a) filing more than one claim for refund with the commission, or

(b) receiving more than one refund from the commission, in each case, in any one calendar year or other twelve (12) month period.

(3) If an entity is not otherwise a Utah taxpayer, its taxable year, for purposes of the Utah Act, shall be considered to end annually on the same date that its tax year ends for US federal income tax purposes. For a disregarded entity that is not otherwise a Utah taxpayer, such entity may designate any date on which its taxable year ends by stating such date on the Utah tax return on which it files its claim for refund.

(4) If the investor or any transferee is a corporation or other business organization or entity included in a combined Utah state tax return, and such tax return claims a tax credit, the commission will treat such tax credit as a refundable credit for the combined group.

 

R357-7-12. Criteria and Procedures for Assessing the Likelihood of Future Certificate Redemptions by Designated Investors.

(1) On an annual basis, the corporation staff and/or the Allocation Manager will provide the board with a comprehensive report including the following:

(a) a detailed accounting of cash outflows and cash inflows from fund investments during the year.

(b) a detailed accounting of payments made to lenders or equity investors during the year.

(c) a detailed accounting of management fees paid to the corporation during the year.

(d) a detailed accounting of increases or decreases in unrealized value during the year.

(e) a five year projection of cash flows with sensitivity around investment returns, interest rates, and distribution pacing.

(f) third party audit of the Utah Fund of Funds including asset valuation.

(g) verification of individual portfolio fund IRR.

 

R357-7-13. Target Rate of Return or Range of Returns on Venture Capital Investments of the Utah Fund of Funds.

The target rate of return on venture capital investments of the Utah Fund of Funds is a minimum of 5%. The corporation will submit to the board annually a detailed accounting of the calculation of the rate of return. It is understood by the board that the fund that returns in the early years of the fund will likely be negative.

 

R357-7-14. Certificate Registry.

A certificate register detailing all transactions involving the certificates shall be held and maintained at the Office of the Utah Treasurer.]

R357-7. Utah Capital Investment Board.

R357-7-1. Purpose.

(1) The purpose of these rules is to establish criteria and procedures for the allocation and issuance of contingent tax credits by the Board.

 

R357-7-2. Authority.

(1) U.C.A. Section 63N-6-203, 63N-6-401, 63N-6-406 and 63N-6-408 require the Board to:

(a) Make rules establishing the manner by which it allocates, issues, calculates, certifies and provides for the application for, transfer and redemption of, contingent tax credits;

(b) Establish criteria and procedures for assessing the likelihood of future certificate redemptions by designated investor; and

(c) Set a target rate of return or range of returns for the investment portfolio of the Utah fund of funds.

 

R357-7-3. Definitions.

(1) "Accredited Investor" has the same meaning as under the U.S. Securities Act of 1933, as amended, including the rules promulgated thereunder.

(2) "Act" means the Utah Venture Capital Enhancement Act, U.C.A. Section 63N-6-101 et seq.

(3) "Actual Return" means the actual aggregate amount of cash or cash equivalents and the fair market value of property received from a Utah Fund of Funds with respect to a Private Investment, including amounts received as returns of contributed capital or returns on capital contributions and amounts received in excess of capital contributed, in whatever form received.

(4) "Annual Report" means the annual report of the activities conducted by the Utah Fund of Funds that is published by the Corporation, in consultation with the Board in accordance with U.C.A. Section 63N-6-301(6).

(5) "Auditor" means the Person that conducts the annual audit made in accordance with U.C.A. Section 63N-6-405.

(6) "Board" means the Utah Capital Investment Board, established in accordance with U.C.A. Section 63N-6-201.

(7) "Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions located in Salt Lake City, Utah are authorized by law to be closed.

(8) "Calendar Year" means, with respect to any date or event, the actual calendar year in which such date or event occurs.

(9) "Capital Invested" means the actual aggregate amount of cash or cash equivalents and the fair market value of property contributed with respect to a Private Investment in a Utah Fund of Funds, including capital contributions made by and distributions returned to such Utah Fund of Funds in accordance with the terms of the limited partnership agreement or operating agreement of the Utah Fund of Funds.

(10) "Certificate" means a "certificate" within the meaning of U.C.A. Section 63N-6-103(2).

(11) "Certificate of Eligibility" means a certificate issued in accordance with section 3 of rule 7.6 to a Designated Investor.

(12) "Certificate Register" means the register maintained by the Board recording the name, address and taxpayer identification number of each Designated Investor and all transactions involving Certificates, Certificates of Eligibility, Tax Credit Redemption Certificates and Tax Credit Balance Certificates, including the maximum amount of tax credits represented by each certificate issued or Transferred to such Designated Investor.

(13) "Certification" means (i) with respect to a Certificate for contingent tax credits, the process by which the Board certifies the amount of tax credits the Designated Investor is entitled to receive in accordance with rule 7.4 or rule 7.5 as applicable, and (ii) with respect to a Certificate of Eligibility or Tax Credit Balance Certificate, the process by which the Board certifies the amount of tax credits a Designated Investor is entitled to receive upon application in accordance with rule 7.6.

(14) "Commission" means the Utah State Tax Commission.

(15) "Corporation" means Utah Capital Investment Corporation, established in accordance with U.C.A. Section 63N-6-301.

(16) "Closing" means the date of acceptance of a Designated Investor's capital commitment and admission of such Designated Investor as a limited partner or member, as applicable, in a Utah Fund of Funds.

(17) "Debt-based Refinancing" means a Private Investment structured as a loan to a Utah Fund of Funds that is used to repay all or a portion of the outstanding principal, premium or interest of an existing loan to such Utah Fund of Funds that was originated before July 1, 2014 or the modification of the terms of such an existing loan in accordance with U.C.A. Section 63N-6-406(2)(e).

(18) "Designated Investor" means (a) a Person who makes a Private Investment to whom a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate is issued, and (b) such Person's successor as a matter of law. A Transferee of a Designated Investor shall succeed to the rights of a Designated Investor with respect to a Certificate, Certification of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate to the extent such rights are Transferred in accordance with rule 7.7 and upon such Transfer shall be a Designated Investor for purposes of these rules.

(19) "Designated Purchaser" means a "designated purchaser" within the meaning of U.C.A. Section 63N-6-103(8).

(20) "Determination Date" means, with respect to each Utah Fund of Funds, December 31 of the Calendar Year in which the Term of such Utah Fund of Funds expires.

(21) "Economic Development Impact" means the dollar amount determined by the Board in accordance with rule 7.9.

(22) "Equity-based Refinancing" means a Private Investment structured as equity in a Utah Fund of Funds that is used to repay all or a portion of the outstanding principal, premium or interest of an existing loan made to such Utah Fund of Funds that was originated before July 1, 2014 in accordance with U.C.A. Section 63N-6-406(2)(e).

(23) "Feeder Fund" means a Designated Investor that is an investment fund, the principal purpose of which is to make a Private Investment in a Utah Fund of Fund and for which the Corporation serves as manager, general partner, or investment manager at the time of such Private Investment. A Feeder Fund may be organized in a jurisdiction other than the state of Utah.

(24) "Fiscal Year" means the fiscal year as established in U.C.A. Section 51-7-3.5.

(25) "Maturity Date" means the date specified in a Certificate, representing the earliest date such Certificate may be presented to the Board for Certification.

(26) "Person" means an individual, partnership, limited liability company, corporation, association, organization, business trust, estate, trust or any other legal or commercial entity.

(27) "Private Investment" means a "private investment" within the meaning of U.C.A. Section 63N-6-103(11).

(28) "Redemption" means the presentation of a certified tax credit to the Commission for payment in accordance with U.C.A. Section 63N-6-408.

(29) "Redemption Reserve" means the "redemption reserve" within the meaning of U.C.A. Section 63N-6-103(12).

(30) "Scheduled Return" means the scheduled return, whether in cash, cash equivalents or other property (including returns of and returns on investment), with respect to a Private Investment as set forth in a Certificate for the period from the date of the Closing for such Private Investment to the applicable Maturity Date.

(31) "Shortfall" means the amount, if any, equal to the amount by which the Capital Invested with respect to a Private Investment in a Utah Fund of Funds exceeds the Actual Return received with respect to such Private Investment.

(32) "Target Rate of Return" means the target rate of return established by the Board in accordance with rule 7.9.

(33) "Tax Credit Balance Certificate" means a certificate issued in accordance with sections 7 or 10 of rule 7.6.

(34) "Tax Credit Eligibility" means the amount of tax credits a Designated Investor is entitled to apply for in accordance with sections 6 and 7 of rule 7.6.

(35) "Tax Credit Redemption Certificate" means a certificate issued by the Board representing a tax credit that may be claimed by a Designated Investor in accordance with U.C.A. Section 63N-6-408(4).

(36) "Term" means the period of the term of a Utah Fund of Funds prior to the commencement of its dissolution and winding up, as specified in the applicable Utah Fund of Funds operating agreement or limited partnership agreement, including any early termination or extension of such term.

(37) "Transfer" means the transfer, assignment or encumbrance of a Designated Investor's interest in a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, made in accordance with rule 7.7.

(38) "Transferee" means the Person to whom a Designated Investor Transfers its interest in a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, in accordance with rule 7.7.

(39) "Transferor" means the Designated Investor that is Transferring its interest in a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, in accordance with rule 7.7.

(40) "Utah-based Investment Fund" means a private investment fund, whose principal office is maintained in the state of Utah.

(41) "Utah-based Operating Company" means an operating company, the principal executive office of which is located in the state of Utah, or that employs more than 50% of its employees in the state of Utah.

(42) "Utah Fund of Funds" means any limited partnership or limited liability company established in accordance with U.C.A. Section 63N-6-401 in which a Designated Investor makes a Private Investment. There may be more than one Utah Fund of Funds.

 

R357-7-4. Procedure for the Issuance, Certification and Redemption of Tax Credits for Debt-based Refinancing Transactions.

This rule 7.4 applies to the Debt-based Refinancing of existing loans to a Utah Fund of Funds that were entered into prior to July 1, 2014 even if the refinancing occurs after July 1, 2015.

(1) No later than 20 Business Days prior to each Closing of a Debt-based Refinancing, the Corporation shall provide the following information to the Board:

(a) A summary of the terms of the loan instrument(s) and other contractual agreements to be entered into by the Utah Fund of Funds or the Corporation in connection with the Debt-based Refinancing; and

(b) The anticipated Closing date.

(2) No later than two Business Days prior to each Closing of a Debt-based Refinancing, the Corporation shall provide the following information to the Board for each Person expected to become a Designated Investor at Closing:

(a) Name of the Designated Investor;

(b) Evidence that the Designated Investor is an Accredited Investor;

(c) The Designated Investor's address and taxpayer identification number;

(d) The aggregate principal amount of loans expected to be made at such Closing by such Designated Investor;

(e) The method of determining the scheduled principal and interest payments applicable to such Debt-based Refinancing;

(f) The Scheduled Return for the Designated Investor applicable to such Debt-based Refinancing.

(g) The maximum amount of contingent tax credits to be certified for each Certificate to be issued at Closing;

(h) The Maturity Date or Maturity Dates for each Certificate to be issued at Closing; and

(i) All of the requested contingencies to be applicable to the contingent tax credits to which such Certificate relates.

(3) Upon receipt of the information identified in sections 1 and 2 of this rule 7.4, the Board shall issue a Certificate for contingent tax credits in accordance with U.C.A. Section 63N-6-406, to each Designated Investor identified at Closing with respect to such Designated Investor's Private Investment to be made at Closing. The following provisions shall apply to such Certificates:

(a) Certificates may only be issued by the Board;

(b) Certificates shall be based on the principal amount invested in the applicable Utah Fund of Funds plus scheduled interest.

(c) The maximum amount of contingent tax credits represented by each Certificate shall be calculated in accordance with the limitations set forth in U.C.A. Section 63N-6-406(2)(a);

(d) The maximum amount of outstanding Certificates that may be redeemed in a Fiscal Year will be calculated on a proportional basis in the proportions set forth in U.C.A. Section 63N-6-406(2)(c).

(e) The maximum amount of tax credits to be certified for a Private Investment may not exceed the difference between (i) the Scheduled Return for such Private Investment and (ii) the Actual Return received with respect to such Private Investment, determined as of the applicable Maturity Date.

(4) Each Certificate issued to a Designated Investor in connection with a Debt-based Refinancing shall contain, or incorporate by reference to another document, each of the following:

(a) The name, address and taxpayer identification number of the Designated Investor to which such Certificate relates;

(b) The amount of the Designated Investor's maximum principal loan amount and interest rate;

(c) All contingencies applicable to the tax credits to which such Certificate relates;

(d) The date of issuance of such Certificate;

(e) The Maturity Date or Maturity Dates of such Certificate;

(f) The maximum amount of contingent tax credits represented by such Certificate;

(g) The process for presenting the Certificate for Certification and Redemption; and

(h) Such other provisions the Board determines to be include that are consistent with the Act and these rules.

(5) Certification of Contingent Tax Credits:

(a) To redeem a Certificate for tax credits, a Designated Investor shall present the Board with its Certificate for Certification no later than June 30 of the Calendar Year in which the earliest Maturity Date stated on the Certificate occurs.

(b) Prior to Certification, the Board will determine the amount of funds available in the Redemption Reserve.

(i) If funds are available in the Redemption Reserve, the Board shall direct the Corporation to make a cash payment with respect to such Certificate in accordance with U.C.A. Section 63N-6-408 to the extent funds are available therefor and tax credits are eligible for Certification under such Certificate, such payment to be allocated among Designated Investors in proportion to the outstanding balances of all Certificates, Certificates of Eligibility and Tax Credit Balance Certificates timely presented to the Board pending Certification.

(ii) Any such payments referenced in paragraph (i) shall reduce, dollar for dollar, the amount of tax credits that may be certified by the Board with respect to such Certificates.

(c) Prior to Certification, the Board, at its election, may make a demand upon a Designated Purchaser to purchase the tax credits represented by the Certificate in accordance with U.C.A. Section 63N-6-409.

(d) The Corporation shall provide all information and documents reasonably available to it that the Board requests and determines are necessary for the Board to be able to certify the amount of tax credits to be claimed by the Designated Investor. Such information and documents shall include but are not limited to the following:

(i) Contractual agreements to which either any of the Corporation, the Designated Investor or any applicable Utah Fund of Funds is a party that were entered into in connection with the Debt-based Refinancing.

(ii) All documents and financial information necessary to calculate the actual amounts paid by the Utah Fund of Funds to the Designated Investor with respect to its Private Investment in the Utah Fund of Funds.

(iii) Any other documents the Board deems necessary to assess compliance with this chapter or to verify the amount of certifiable tax credits related to a Certificate.

(e) No later than the date that is the later of (i) September 1 of the Calendar Year in which the earliest Maturity Date stated on the Certificate occurs or (ii) the date that is 20 Business Days after receipt of all information and documents pursuant to section 5(d) of this rule 7.4 the Board shall establish and certify to the Designated Investor the amount of tax credits related to the Certificate, if any.

(f) The Board shall provide the Designated Investor a Tax Credit Redemption Certificate setting forth the amount of certified tax credits represented by such Certificate (if any) that may be claimed by the Designated Investor, in accordance with U.C.A. Section 63N-6-408 and rule 7.11.

(g) If the certified Certificate has more than one Maturity Date, the Board shall issue to the Designated Investor a Tax Credit Redemption Certificate for the certified tax credits for the applicable Maturity Date in accordance with section 5(f) of this rule 7.4 and shall issue to the Designated Investor one or more Certificates for the balance of any contingent tax credits applicable to future Maturity Dates for which the tax credits are not then being certified.

(h) Certificates being certified for a Maturity Date shall be certified pro rata with all other Certificates being certified for the same Maturity Date.

(i) If a Certificate for contingent tax credits has more than one Maturity Date, the Maturity Date or Maturity Dates occurring in the same Calendar Year on which the Certificate was presented to the Board for certification shall be the Maturity Date or Maturity Dates used for purposes of Certification under this rule 7.4.

(j) Once a Tax Credit Redemption Certificate has been issued, the Board shall notify the Commission of such issuance within five Business Days.

(k) Upon Certification of a Certificate, the Board shall cancel such Certificate, unless such Certificate has a Maturity Date that has not expired, in which case the Board shall issue a balance Certificate in accordance with section 5(g) of this rule 7.4.

(6) Expiration or Cancellation of Tax Credits Represented by Certificates. Tax credits represented by a Certificate shall expire or be cancelled as provided in the Certificate.

(7) The agreements between a Utah Fund of Funds and a Designated Investor regarding a Private Investment shall provide that upon timely presentation of the Certificate applicable to such Private Investment to the Board for Certification in accordance with this rule 7.4 by such Designated Investor or its Transferee, such Designated Investor shall be deemed to have assigned to the Corporation effective as of the Maturity Date all of the indebtedness owed to such Designated Investor by the applicable Utah Fund of Funds. Any payments made by such Utah Fund of Funds to such Designated Investor after the Maturity Date with respect to such assigned indebtedness shall reduce the amount of tax credits represented by the Tax Redemption Certificate to be issued to such Designated Investor. Any amounts received by the Corporation with respect to such assigned indebtedness shall be paid first to the state of Utah in an amount up to the amount of tax credits granted by the state of Utah to such Designated Investor and the balance shall be retained by the Corporation to be included in the Redemption Reserve.

 

R357-7-5. Procedure for the Issuance, Certification and Redemption of Tax Credits for Equity-based Refinancing Transactions.

This rule 7.5 applies to the Equity-based Refinancing of existing loans to Utah Fund of Funds that were entered into prior to July 1, 2014 even if the refinancing occurs after July 1, 2015.

(1) No later than 20 Business Days prior to each Closing of an Equity-based Refinancing, the Corporation shall provide the following information to the Board:

(a) A summary of the terms of the limited partnership agreement or the operating agreement of the issuing Utah Fund of Funds and other contractual agreements to be entered into by the Utah Fund of Funds or the Corporation in connection with the Equity-based Refinancing; and

(b) The anticipated Closing date.

(2) No later than two Business Days prior to each Closing of an Equity-based Refinancing, the Corporation shall provide the following information to the Board for each Person expected to become a Designated Investor at Closing:

(a) Name of the Designated Investor;

(b) Evidence that the Designated Investor is an Accredited Investor;

(c) The Designated Investor's address and taxpayer identification number;

(d) The aggregate amount of the capital commitment expected to be made at such Closing by such Designated Investor;

(e) The maximum amount of contingent tax credits to be certified for each Certificate to be issued at Closing;

(f) The Maturity Date or Maturity Dates for each Certificate to be issued at Closing; and

(g) All of the requested contingencies to be applicable to the contingent tax credits to which such Certificate relates.

(3) Upon receipt of the information identified in sections 1 and 2 of this rule 7.5, the Board shall issue a Certificate for contingent tax credits in accordance with U.C.A. Section 63N-6-406, to each Designated Investor identified at Closing with respect to such Designated Investor's Private Investment to be made at Closing. The following provisions shall apply to such Certificates:

(a) Certificates may only be issued by the Board;

(b) Certificates shall be based on the Capital Invested in the applicable Utah Fund of Funds.

(c) The maximum amount of contingent tax credits represented by each Certificate shall be calculated in accordance with the limitations set forth in U.C.A. Section 63N-6-406(2)(a);

(d) The maximum amount of outstanding Certificates that can be redeemed in a Fiscal Year will be calculated on a proportional basis in the proportions set forth in U.C.A. Section 63N-6-406(2)(c).

(e) The maximum amount of tax credits to be certified for a Designated Investor may not exceed any Shortfall attributable to such Designated Investor's Private Investment, determined as of the applicable Maturity Date.

(4) Each Certificate issued to a Designated Investor in connection with an Equity-based Refinancing shall contain, or incorporate by reference to another document, each of the following:

(a) The name, address and taxpayer identification number of the Designated Investor to which such Certificate relates;

(b) The amount of the Designated Investor's maximum investment commitment;

(c) All contingencies applicable to the tax credits to which such Certificate relates;

(d) The date of issuance of such Certificate;

(e) The Maturity Date or Maturity Dates of such Certificate;

(f) The maximum amount of the contingent tax credits represented by such Certificate;

(g) The process for presenting the Certificate for Certification and Redemption; and

(h) Such other provisions the Board determines to include that are consistent with the Act and these rules.

(5) Certification of Contingent Tax Credits:

(a) To redeem a Certificate for tax credits, a Designated Investor shall present the Board with its Certificate for Certification no later than June 30 of the Calendar Year in which the earliest Maturity Date stated on the Certificate occurs.

(b) Prior to Certification, the Board will determine the amount of funds available in the Redemption Reserve.

(i) If funds are available in the Redemption Reserve, the Board shall direct the Corporation to make a cash payment with respect to such Certificate in accordance with U.C.A. Section 63N-6-408 to the extent funds are available therefor and tax credits are eligible for certification under such Certificate, such payment to be allocated among Designated Investors in proportion to the outstanding balances of all Certificates, Certificates of Eligibility and Tax Credit Balance Certificates timely presented to the Board pending Certification.

(ii) Any such payments referenced in paragraph (i) shall reduce, dollar for dollar, the amount of tax credits that may be certified by the Board with respect to such Certificates.

(c) Prior to Certification, the Board, at its election, may make a demand upon a Designated Purchaser to purchase the tax credits represented by the Certificate in accordance with U.C.A. Section 63N-6-409.

(d) The Corporation shall provide all information and documents reasonably available to it that the Board requests and determines are necessary for the Board to be able to certify the amount of tax credits to be claimed by the Designated Investor. Such information and documents include but are not limited to the following:

(i) Contractual agreements to which any of the Corporation, the Designated Investor or any applicable Utah Fund of Funds is a party that were entered into in connection with the Equity-based Refinancing.

(ii) All documents and financial information necessary to calculate the actual amounts paid by the Utah Fund of Funds to the Designated Investor with respect to its Private Investment in the Utah Fund of Funds.

(iii) Any other documents the Board deems necessary to assess compliance with this chapter or to verify the amount of certifiable tax credits related to a Certificate.

(e) No later than the date that is the later of (i) September 1 of the Calendar Year in which the earliest Maturity Date stated on the Certificate occurs or (ii) the date that is 20 Business Days after receipt of all information and documents pursuant to section 5(d) of this rule 7.5 the Board shall establish and certify to the Designated Investor the amount of tax credits related to the Certificate, if any.

(f) The Board shall provide the Designated Investor a Tax Credit Redemption Certificate setting forth the amount of certified tax credits represented by such Certificate (if any) that may be claimed by the Designated Investor, in accordance with U.C.A. Section 63N-6-408 and rule 7.11.

(g) If the certified Certificate has more than one Maturity Date, the Board shall issue to the Designated Investor a Tax Credit Redemption Certificate for the certified tax credits for the applicable Maturity Date in accordance with section 5(f) of this rule 7.5 and shall issue to the Designated Investor one or more Certificates for the balance of any contingent tax credits applicable to future Maturity Dates for which the tax credits are not then being certified.

(h) Certificates being certified for a Maturity Date shall be certified pro rata with all other Certificates being certified for the same Maturity Date.

(i) If a Certificate for contingent tax credits has more than one Maturity Date, the Maturity Date or Maturity Dates occurring in the same Calendar Year on which the Certificate was presented to the Board for certification shall be the Maturity Date or Maturity Dates used for purposes of Certification under this rule 7.5.

(j) Once a Tax Credit Redemption Certificate has been issued, the Board will notify the Commission of such issuance within five Business Days.

(k) Upon Certification of a Certificate, the Board shall cancel such Certificate, unless such Certificate has a Maturity Date that has not expired, in which case the Board shall issue a balance Certificate in accordance with section 5(g) of this rule 7.5.

(6) Expiration or Cancellation of Tax Credits Represented by Certificates. Tax credits represented by a Certificate shall expire or be cancelled as provided in the Certificate.

(7) The agreements between a Utah Fund of Funds and a Designated Investor regarding a Private Investment shall provide that upon timely presentation of the Certificate applicable to such Private Investment to the Board for Certification in accordance with this rule 7.5 by such Designated Investor or its Transferee, such Designated Investor shall be deemed to have assigned to the Corporation effective as of the Maturity Date all of such Designated Investor's Private Investment in the applicable Utah Fund of Funds. Such assignment shall include, without limitation, any and all rights to future distributions, dividends, redemption proceeds or other payments from such Utah Fund of Funds attributable to such Private Investment. Any payments made by such Utah Fund of Funds to such Designated Investor after the Maturity Date with respect to such assigned interest shall reduce the amount of tax credits represented by the Tax Redemption Certificate to be issued to such Designated Investor. Any amounts received by the Corporation with respect to such assigned interest shall be paid first to the state of Utah in an amount up to the amount of certified tax credits granted by the state of Utah to such Designated Investor and the balance shall be retained by the Corporation to be included in the Redemption Reserve.

 

R357-7-6. Procedure for the Application, Issuance, Certification and Redemption of Economic Development Incentive-based Tax Credits for Equity-based Investments in a Utah Fund of Funds.

This rule 7.6 applies to Private Investments structured as equity investments in any Utah Fund of Funds initiated on or after July 1, 2015, excluding any Equity-based Refinancing.

(1) No later than 20 Business Days prior to each Closing to which this rule 7.6 applies, the Corporation shall provide the following information to the Board:

(a) A summary of the terms of the limited partnership agreement or the operating agreement of the applicable Utah Fund of Funds and any other contractual agreements to be entered into by the applicable Utah Fund of Funds, the Corporation and any Designated Investor in connection with its Private Investment in a Utah Fund of Funds; and

(b) The anticipated Closing date.

(2) No later than two Business Days prior to each Closing, the Corporation shall provide the Board with the following information with respect to each Person expected to become a Designated Investor at such Closing:

(a) Name of the Designated Investor;

(b) Evidence that the Designated Investor is an Accredited Investor;

(c) The Designated Investor's address and taxpayer identification number;

(d) The aggregate amount of the capital commitment expected to be made at such Closing by the Designated Investor; and

(e) The Term of the applicable Utah Fund of Funds.

(3) Within 20 Business Days after each Closing, the Board shall issue to each Designated Investor that has invested in the applicable Utah Fund of Funds at such Closing a Certificate of Eligibility.

(a) The maximum aggregate amount of tax credits for which a Designated Investor may apply as represented by its Certificate of Eligibility shall be calculated in accordance with the limitations set forth in U.C.A. Section 63N-6-406(2)(a).

(b) A Certificate of Eligibility shall entitle a Designated Investor to apply for a Tax Credit Redemption Certificate in accordance with this rule 7.6 as in effect at the time such Certificate of Eligibility was certified by the Board and may not be modified, terminated or rescinded without the consent of such Designated Investor.

(4) Each Certificate of Eligibility shall contain, or incorporate by reference to another document, each of the following:

(a) The name, address and taxpayer identification number of the Designated Investor to whom the Certificate of Eligibility is issued;

(b) The maximum amount of tax credits represented by such Certificate of Eligibility for which such Designated Investor is eligible to apply (which shall be equal to such Designated Investor's capital commitment to the applicable Utah Fund of Funds);

(c) The date of issuance of the Certificate of Eligibility; and

(d) A statement that such Designated Investor is eligible to apply for tax credits represented by a Tax Credit Redemption Certificate, subject to the limitations set forth in this rule 7.6.

(e) A Designated Investor who has received a Certificate of Eligibility may apply to the Board for tax credits represented by a Tax Credit Redemption Certificate if the following conditions are satisfied:

(i) Subject to section 5(c) of this rule 7.6, such Designated Investor has contributed capital to the applicable Utah Fund of Funds in the amount required under the agreement between such Utah Fund of Funds and the Designated Investor;

(ii) The Term of the applicable Utah Fund of Funds has expired.

(iii) As of the Determination Date, there is a Shortfall attributable to such Designated Investor's Private Investment.

(iv) There is Economic Development Impact attributable to the applicable Utah Fund of Funds as most recently certified by the Board in accordance with rule 7.9 and section 12 of this rule 7.6 prior to the Determination Date.

(v) As of the Determination Date, there are insufficient funds in the Redemption Reserve available to make a cash payment equal to the amount of the lesser of (i) the Shortfall described in section 5(a)(iii) of this rule 7.6 for all Designated Investors of the applicable Utah Fund of Funds, and (ii) the amount of Economic Development Impact described in section 5(a)(iv) of this rule 7.6 attributable to such Designated Investors.

(f) Any Designated Investor not eligible to apply for tax credits as a result of the condition set forth in section 5(a)(v) of this rule 7.6, may present its Certificate of Eligibility to the Board no later than the June 30 following the Determination Date, and to the extent such Certificate of Eligibility would otherwise be certified in accordance with this rule 7.6 absent such condition, the Board shall direct the Corporation to make a cash payment from the Redemption Reserve or other sources with respect to such Designated Investors in accordance with U.C.A. Section 63N-6-408 to the extent funds are available therefor by no later than September 1 of the Calendar Year immediately following the Determination Date, such payment to be allocated among Designated Investors in proportion to the outstanding balances of all Certificates, Certificates of Eligibility and Tax Credit Balance Certificates timely presented to the Board pending Certification.

(g) If a Feeder Fund fails to contribute capital to a Utah Fund of Funds with respect to which such Feeder Fund is a Designated Investor in the amount required under the agreement between such Utah Fund of Funds and such Feeder Fund, and such failure is a direct result of the failure of any member, partner or other equity investor of such Feeder Fund (a "Feeder Fund Investor") to make a contribution of capital required to be made to such Feeder Fund, then the restriction on applying for tax credits set forth in section 5(a)(i) of this rule 7.6 shall apply only to (i) that portion of the tax credits represented by the Certificate of Eligibility issued to such Feeder Fund that bears the same proportion to the aggregate tax credits represented by such Certificate of Eligibility, as the obligation to contribute capital to such Feeder Fund of such Feeder Fund Investor bears to the aggregate obligations to contribute capital to such Feeder Fund of all its Feeder Fund Investors or (ii) any Certificate of Eligibility Transferred to such Feeder Fund Investor by such Feeder Fund.

(5) Upon the satisfaction of the conditions set forth in section 5(a) of this rule 7.6, a Designated Investor may apply for a Tax Credit Redemption Certificate, in a form prescribed by the Board in accordance with this rule 7.6. The Tax Credit Redemption Certificate shall be issued in an amount equal to the lesser of (i) the Economic Development Impact attributable to such Designated Investor determined in accordance with rule 7.9 and section 12 of this rule 7.6 and (ii) the Shortfall attributable to such Designated Investor's Private Investment, in each case calculated as of the Determination Date.

(6) To apply for tax credits, a Designated Investor shall present the Board with its Certificate of Eligibility no later than the first June 30 following the Determination Date. If for any reason a Designated Investor fails to present its Certificate of Eligibility to the Board on time, such Certificate of Eligibility shall automatically expire without further action of the Board and any eligibility to apply for tax credits represented thereby shall be forfeited.

(a) The amount of tax credits represented by a Certificate of Eligibility that the Board is permitted to certify in a Fiscal Year upon application by a Designated Investor will be calculated and allocated in accordance with section 12 of this rule 7.6.

(b) The Corporation shall provide all information and documents reasonably available to it that the Board requests and determines are necessary for the Board to be able to certify the amount of tax credits to be claimed by the Designated Investor. Such information and documents include but are not limited to the following:

(i) Contractual agreements to which either the Corporation or any applicable Utah Fund of Funds is a party that were entered into in connection with the Designated Investor's Private Investment in the applicable Utah Fund of Funds.

(ii) All financial information and related documents necessary to calculate the Shortfall attributable to such Designated Investor's Private Investment.

(iii) Any other documents the Board deems necessary to assess compliance with this chapter or to verify the amount of certifiable tax credits related to such Certificate of Eligibility.

(c) Prior to Certification, the Board will determine the amount of funds available in the Redemption Reserve.

(i) If funds are available in the Redemption Reserve, the Board shall direct the Corporation to make a cash payment with respect to such Certificate of Eligibility in accordance with U.C.A. Section 63N-6-408 to the extent funds are available therefor and tax credits are eligible for certification under such Certificate of Eligibility, such payment to be allocated among Designated Investors in proportion to the outstanding balances of all Certificates, Certificates of Eligibility and Tax Credit Balance Certificates timely presented to the Board pending Certification.

(ii) Any such payments referenced in paragraph (i) shall reduce, dollar for dollar, the amount of tax credits that may be certified by the Board with respect to such Certificates of Eligibility and Tax Credit Balance Certificates.

(d) Prior to Certification, the Board, at its election, may make a demand upon a Designated Purchaser to purchase the tax credits represented by the Certificate of Eligibility in accordance with U.C.A. Section 63N-6-409.

(e) No later than the date that is the later of (i) September 1 of the Calendar Year immediately following the Determination Date or (ii) the date that is 20 Business Days after receipt of all information and documents pursuant to section 7(d) of this rule 7.6, the Board shall establish and certify to the Designated Investor the amount of tax credits related to the Certificate of Eligibility, if any.

(f) The Board shall Issue each Designated Investor a Tax Credit Redemption Certificate setting forth the amount of certified tax credits represented by such certificate (if any) that may be claimed by such Designated Investor, in accordance with U.C.A. Section 63N-6-408 and rule 7.11.

(g) Once a Tax Credit Redemption Certificate has been issued, the Board will notify the Commission of such issuance within five Business Days.

(h) Upon issuance of a Tax Credit Redemption Certificate, the Board shall cancel the related Certificate of Eligibility.

(7) To the extent that, in accordance with section 7(a) of this rule 7.6, the Board is not permitted to certify all of the tax credits represented by a Designated Investor's Certificate of Eligibility, upon cancellation of the Certificate of Eligibility in accordance with section 7(h) of this rule 7.6, the Board shall issue to such Designated Investor a Tax Credit Balance Certificate for the amount of remaining tax credits that were limited by section 7(a) of this rule 7.6. The amount of tax credits for which a Designated Investor is eligible to apply represented by its Tax Credit Balance Certificate shall not be adjusted for any Economic Development Impact measurements made in accordance with rule 7.9 for any period after the applicable Determination Date.

(8) A Tax Credit Redemption Certificate issued to a Designated Investor shall contain each of the following:

(a) The name, address and taxpayer identification number of such Designated Investor;

(b) The date of issuance of the Tax Credit Redemption Certificate; and

(c) The amount of tax credits to be claimed.

(9) A Tax Credit Balance Certificate issued to a Designated Investor shall contain each of the following:

(a) The name, address and taxpayer identification number of such Designated Investor;

(b) The date of issuance of the Tax Credit Balance Certificate;

(c) The certificate number of the cancelled Certificate of Eligibility to which the Tax Credit Balance Certificate relates;

(d) The amount tax credits represented by such Tax Credit Balance Certificate; and

(e) The Fiscal Year or Fiscal Years in which such Designated Investor shall be eligible to apply for tax credits represented by such Tax Credit Balance Certificate.

(10) During each the Fiscal Year set forth on a Tax Credit Balance Certificate, a Designated Investor may apply for Certification of the tax credits represented by such Tax Credit Balance Certificate by presenting it to the Board no later than June 30 of such Fiscal Year. If for any reason a Designated Investor fails to present its Tax Credit Balance Certificate to the Board in a timely fashion, such Tax Credit Balance Certificate shall automatically expire without further action of the Board and any amount of tax credits represented thereby shall be forfeited.

(a) The amount of tax credits represented by a Tax Credit Balance Certificate that the Board is permitted to certify in a Fiscal Year upon application by a Designated Investor will be calculated and allocated in accordance with section 13 of this rule 7.6.

(b) Prior to Certification, the Board will determine the amount of funds available in the Redemption Reserve and payments shall be made in a manner consistent with that specified in section 7(c) of this rule 7.6.

(c) Prior to Certification, the Board, at its election, may make a demand upon a Designated Purchaser to purchase the tax credits represented by the Tax Credit Balance Certificate in accordance with U.C.A. Section 63N-6-409.

(d) No later than September 1 of the applicable Fiscal Year set forth in applying Designated Investor's Tax Balance Certificate, the Board shall determine and certify to such Designated Investor the amount of tax credits related to such Tax Credit Balance Certificate (if any) that may be redeemed in such Fiscal Year.

(e) The Board shall issue to the Designated Investor a Tax Credit Redemption Certificate setting forth the amount of certified tax credits represented by such certificate (if any) that may be claimed by the Designated Investor, in accordance with U.C.A. Section 63N-6-408 and rule 7.11.

(f) Once a tax credit has been certified for redemption, the Board will notify the Commission of such certification within five Business Days.

(g) Upon Certification for redemption of a Tax Credit Balance Certificate, the Board shall cancel such Tax Credit Balance Certificate.

(h) To the extent that, in accordance with section 10(a) of this rule 7.6, the Board was not permitted to certify all of the tax credits represented by a Designated Investor's Tax Credit Balance Certificate in the Fiscal Year applied for, upon cancellation of the Tax Credit Balance Certificate in accordance with section 12(g) of this rule 7.6, the Board shall issue to such Designated Investor a new Tax Credit Balance Certificate for the amount of remaining tax credits that were limited by section 7(a) of this rule 7.6, and the Designated Investor may apply for Certification of such certificate in the following Fiscal Year or Fiscal Years in accordance with this section 10.

(11) The amount of Economic Development Impact certified by the Board in accordance with rule 7.9 shall be allocated to each Designated Investor in accordance with this section 12.

(a) The amount of Economic Development Impact measured in accordance with sections 2 and 3 of rule 7.9 shall be allocated to each Designated Investor of the applicable Utah Fund of Funds on a pro rata basis, based on its aggregate capital commitment to such applicable Utah Fund of Funds compared to the aggregate capital commitments of all other Designated Investors in such applicable Utah Fund of Funds.

(b) The amount of Economic Development Impact measured in accordance with section 4 of rule 7.9 shall be allocated to the Designated Investors of the various Utah Funds of Funds as determined by the contractual agreements between such Designated Investors and such Utah Funds of Funds with respect to such Designated Investors' respective Private Investments in such Utah Funds of Funds.

(c) The amount of Economic Development Impact determined in accordance with section 5 of rule 7.9 shall be allocated:

(i) to each Designated Investor of the applicable Utah Fund of Funds on a pro rata basis based on its aggregate capital commitment to such applicable Utah Fund of Funds compared to the aggregate capital commitments of all other Designated Investors in such applicable Utah Fund of Funds, if such Economic Development Impact is in respect of an applicable Utah Fund of Funds; or

(ii) to the Designated Investors of the various Utah Funds of Funds as determined by the contractual agreements between such Designated Investors and such Utah Funds of Funds with respect to such Designated Investors' respective Private Investments in such Utah Funds of Funds, if such Economic Development Impact is in respect of the activities of the Corporation.

(12) The maximum amount of tax credits the Board is permitted to certify in accordance with this rule 7.6 with respect to Certificates of Eligibility and Tax Credit Balance Certificates presented to the Board by Designated Investors of a Utah Fund of Funds in any Fiscal Year shall be calculated on a proportional basis in the proportions set forth in U.C.A. Section 63N-6-406(2)(c). For the purposes of such calculation:

(a) The $100,000,000 increment set forth in U.C.A. Section 63N-6-406(2)(c) shall be determined by reference to the aggregate capital commitments made by each of the Designated Investors that is eligible to apply for such credits in such Fiscal Year, as set forth on the applicable Certificate of Eligibility of such Designated Investor; and

(b) Available tax credits shall be allocated among such Designated Investors on a pro rata basis in accordance with on their respective capital commitments to the applicable Utah Fund of Funds.

(13) A tax credit represented by a Certificate of Eligibility or Tax Credit Balance Certificate may only be redeemed by a Designated Investor in accordance with the terms of the Certificate of Eligibility or Tax Credit Balance Certificate, as applicable, this rule 7.6 and U.C.A. Section 63N-6-408.

(14) The agreements between a Utah Fund of Funds and a Designated Investor regarding a Private Investment shall provide that upon timely presentation of the Certificate of Eligibility applicable to such Private Investment to the Board for Certification of tax credits represented by such certificate in accordance with this rule 7.6 by such Designated Investor or its Transferee, such Designated Investor shall be deemed to have assigned to the Corporation effective as of the Determination Date a portion of such Designated Investor's Private Investment in the applicable Utah Fund of Funds equal to a fraction, calculated as of the Determination Date, the numerator of which is the amount of such Designated Investor's Tax Credit Eligibility and the denominator of which is the Shortfall attributable to such Designated Investor's Private Investment. Such assignment shall include, without limitation, any and all rights to distributions, dividends, redemption proceeds or other payments from such Utah Fund of Funds attributable to such Private Investment that are made after the Determination Date. Any distributions, dividends, redemption proceeds or other payments made by such Utah Fund of Funds after the Determination Date with respect to such assigned interest to such Designated Investor shall reduce the amount of tax credits that may be issued with respect to the applicable Certificate of Eligibility. Any amounts received by the Corporation with respect to such assigned interest shall be paid first to the state of Utah in an amount up to the amount of tax credits granted by the state of Utah to such Designated Investor and the balance shall be retained by the Corporation to be included in the Redemption Reserve.

 

R357-7-7. Transfer of Certificates, Tax Credit Redemption Certificates, Certificates of Eligibility and Tax Credit Balance Certificates.

(1) Certificates, Certificates of Eligibility, Tax Credit Redemption Certificates and Tax Credit Balance Certificates shall be transferrable in whole or in part by a Designated Investor to any Transferee or Transferees.

(2) Transfer of a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate may be effected by the Transferor's surrender of such certificate to the Board with an endorsement in favor of the Transferee, a statement containing the name, address and taxpayer identification number of the Transferee and a written request for the Board to issue a replacement certificate in the name of the Transferee.

(a) In any case where the Transferor requests that more than one replacement certificate be issued, such request must be accompanied by a statement by the Transferor that sets forth the amount of tax credits represented by the Transferred Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate that are requested to be represented by each replacement Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate.

(3) Within 20 Business Days after the surrender and endorsement of a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, the Board shall issue one or more replacement Certificates, Certificates of Eligibility, Tax Credit Redemption Certificates or Tax Credit Balance Certificates, as applicable, in the name of the applicable Transferee. If a Transferor requests the Transfer of only a portion of a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, the Board shall issue a replacement Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate to the Transferor setting forth the aggregate amount of remaining tax credits represented by such Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate.

(4) Upon the surrender of a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate to the Board, and the issuance of the applicable replacement certificate or certificates for Transfer, such surrendered certificate shall be cancelled.

(5) A Designated Investor may grant security interests in such Designated Investor's Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, and any tax credits represented thereby, as collateral for loans to or other obligations of such Designated Investor. The Designated Investor shall provide notice to the Board of any such grant of a security interest promptly after any such grant is made.

(6) A Designated Investor shall be entitled to Transfer a Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate without also transferring its corresponding Private Investment in a Utah Fund of Funds. In such event, a Transferee will be entitled to exercise its rights with respect to a Transferred Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate, as described in such certificate, and as set forth in the Act and the rules set forth in this chapter, by reference to the portion of the Transferor's Private Investment held prior to such Transfer that bears the same proportion to the Transferor's total Private Investment held prior to such Transfer that the tax credits represented by such Transferred Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate bears to the total tax credits represented by the Transferor's Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate prior to such Transfer, as if such portion of the Transferor's Private Investment had been Transferred to the Transferee. Accordingly, the Capital Invested, Scheduled Return, and Actual Return applicable to the Transferee shall be determined by reference to such portion of the Transferor's Private Investment, including amounts related to principal loaned, capital contributed, receipts and returns that are transacted prior to such Transfer with respect to such portion. If a Transferor does not hold a Private Investment, a Transferee of a Transferred Certificate, Certificate of Eligibility, Tax Credit Redemption Certificate or Tax Credit Balance Certificate shall be entitled to the exercise the rights with respect thereto by reference to the Private Investment of such Transferor's predecessor or successor in interest, as the case may be, in the same proportions as described above.

 

R357-7-8. Criteria and Procedures for Assessing the Likelihood of Future Certificate Redemption.

(1) Each year, the Corporation and/or the allocation manager designated in accordance with U.C.A. Section 63N-6-301(2)(b) will provide the Board with a comprehensive report including the following:

(a) A detailed accounting of cash outflows and cash inflows from investments made by each Utah Fund of Funds during the previous Calendar Year.

(b) A detailed accounting of payments made to lenders to or equity investors in each Utah Fund of Funds during the previous Calendar Year.

(c) A detailed accounting of management fees paid to the Corporation by each Utah Fund of Funds during the previous Calendar Year.

(d) A detailed accounting of increases or decreases in unrealized value of the assets of each Utah Fund of Funds during the Previous Calendar Year.

(e) A five year projection of cash flows with sensitivity around investment returns, interest rates and distribution pacing for each Utah Fund of Funds.

(f) Third party audit of each Utah Fund of Funds including asset valuation as of the end of the previous Calendar Year.

(g) The internal rate of return on each investment made by each Utah Fund of Funds through the end of the previous Calendar Year.

 

R357-7-9. Criteria and Procedures for Calculating the Economic Development Impact of Each Utah Fund of Funds and the Corporation for Purposes of Incentive-Based Tax Credits.

The Economic Development Impact attributable to each Utah Fund of Funds for equity-based Private Investments that were initiated on or after July 1, 2015 and to the Corporation shall be measured and determined in accordance with this rule 7.9.

(1) The Economic Development Impact attributable to each Utah Fund of Funds for equity-based Private Investments determined in accordance with U.C.A. Section 63N-6-406(3)(d)(i) shall be equal to the sum of all investments made by such Utah Fund of Funds directly or indirectly in Utah-based Operating Companies plus verifiable amounts invested in Utah-based Operating Companies and Utah-based Investment Funds by third parties (other than amounts invested directly by a Utah Fund of Funds or indirectly by any portfolio fund held by any Utah Fund of Funds) that are directly facilitated by the Corporation's economic development plan and economic development activities, calculated in accordance with sections 2, 3 and 4 of this rule 7.9, respectively.

(2) Direct Investments. A direct investment made by a Utah Fund of Funds in a Utah-based Operating Company shall, at the time of determination, be measured by reference to the greater of the Cost of such investment or the Exit Value of such investment.

(a) The "Cost" of a direct investment by a Utah Fund of Funds shall mean the sum of all amounts paid by such Utah Fund of Funds to make debt or equity investments in such Utah-based Operating Company as reported in the financial statements of such Utah Fund of Funds.

(b) The "Exit Value" of a direct investment by a Utah Fund of Funds shall mean, without duplication, the sum of all amounts received upon the sale or other disposition of any debt or equity investments made in such Utah-based Operating Company as reported in the financial statements of such Utah Fund of Funds plus the fair market value of all equity investments held by such Utah Fund of Funds based on the closing sale price of such equity investments on the expiration date of any applicable contractual restrictions on transfer of such equity investments that are entered into by such Utah Fund of Funds in connection with an underwritten initial public offering of such Utah-based Operating Company.

(c) The Exit Value of a direct investment in such Utah-based Operating Company by a Utah Fund of Funds shall apply only to that portion of an investment that is actually sold or otherwise disposed of, or that is held by such Utah Fund of Funds on the expiration date of any applicable contractual restrictions on transfer of equity investments that are entered into by such Utah Fund of Funds in connection with an underwritten initial public offering of such Utah-based Operating Company; all other direct investments made in a Utah-based Operating Company shall be measured by reference to Cost.

(3) Indirect Investments. An indirect investment made by a Utah Fund of Funds in a Utah-based Operating Company shall, at the time of determination, be measured by reference to the greater of the Cost of such investment or the Exit Value of such investment, in each case as attributable to such Utah Fund of Funds.

(a) The amount of indirect investments attributable to such Utah Fund of Funds in a Utah-based Operating Company shall be the amount of all investments in such Utah-based Operating Company made by a portfolio fund held by such Utah Fund of Funds multiplied by a fraction, the numerator of which is such Utah fund of fund's capital commitment to the applicable portfolio fund and the denominator of which is the aggregate capital commitments of all partners, members or other category of equity investor with similar status of such portfolio fund, each as reported in the financial statements or other investor reports of such portfolio fund.

(b) The "Cost" of a portfolio fund's investment shall mean the sum of all amounts paid by such portfolio fund to make debt or equity investments in such Utah-based Operating Company, as reported in the financial statements or other investor reports of such portfolio fund.

(c) The "Exit Value" of a portfolio fund's investment in such Utah-based Operating Company shall mean, without duplication, the sum of all amounts received upon the sale or other disposition of all debt or equity investments in such Utah-based Operating Company and the value attributed to such investment made at the time of the distribution in kind of such investment to the partners, members or other category of equity investor with similar status of such portfolio fund as reported in the financial statements or other investor reports of such portfolio fund.

(d) The Exit Value of a portfolio fund's investment shall only apply to that portion of the investment that is actually sold, disposed of, or distributed in kind as of the time of determination; all other investments made by a portfolio fund shall be measured by reference to Cost.

(4) Investments by Third Parties Facilitated by the Corporation. Verifiable amounts invested in Utah-based Operating Companies (other than amounts invested directly by a Utah Fund of Funds or indirectly by any portfolio fund held by any Utah Fund of Funds) and in Utah-based Investment Funds that are directly facilitated by the Corporation's economic development plan and economic development activities shall, at the time of determination, be measured as follows:

(a) The amount invested directly by a third party (other than a Utah Fund of Funds or a portfolio fund held by any Utah Fund of Funds) in a Utah-based Operating Company will be included in the Economic Development Impact attributable to the Corporation if the Corporation's facilitation of such investment and the investment amount is confirmed in writing to the Corporation by either such third party or such Utah-based Operating Company in a manner consistent with section 4(c) of this rule 7.9 and shall be measured in accordance with this section 4(a) by reference to the greater of Cost of such investment or the Exit Value of such investment.

(i) The "Cost" of a direct investment by such third party in a Utah-based Operating Company shall mean the sum of all amounts paid by such third party to make debt or equity investments in such Utah-based Operating Company as confirmed in writing by such third party in accordance with section 4(c) of this rule 7.9.

(ii) The "Exit Value" of a direct investment by such third party shall mean, without duplication, the sum of all amounts received upon the sale or other disposition of any debt or equity investments made in such Utah-based Operating Company plus the fair market value of all equity investments held by such third party based on the closing sale price of such equity investments on the expiration date of any applicable contractual restrictions on transfer of such equity investments that are entered into by such third party in connection with an underwritten initial public offering of such Utah-based Operating Company, in each case as confirmed in writing by such third party in accordance with section 4(c) of this rule 7.9.

(iii) The Exit Value of a direct investment in such Utah-based Operating Company by a Utah Fund of Funds shall apply only to that portion of an investment that is actually sold or otherwise disposed of, or that is held by such third party on the expiration date of any applicable contractual restrictions on transfer of equity investments that are entered into by such third party in connection with an underwritten initial public offering of such Utah-based Operating Company; all other direct investments made in a Utah-based Operating Company by such third party shall be measured by reference to Cost.

(b) The amount invested indirectly by a third party (other than a Utah Fund of Funds or a portfolio fund held by any Utah Fund of Funds) in a Utah-based Operating Company through its investment in a Utah-based Investment Fund will be included in the Economic Development Impact attributable to the Corporation if the Corporation's facilitation of such investment and the investment amount is confirmed in writing to the Corporation by either such third party or such Utah-based Investment Fund in a manner consistent with section 4(c) of this rule 7.9 and shall be measured in accordance with this section 4(b). The Economic Development Impact of the amount indirectly invested by such third party in a Utah-based Operating Company through its investment in a Utah-based Investment Fund shall, at the time of determination, be measured by reference to the greater of the Cost of such investment or the Exit Value of such investment, in each case, as attributable to such third party.

(i) The amount of indirect investments attributable to such third party in a Utah-based Operating Company shall be the amount of all investments in such Utah-based Operating Company made by such Utah-based Investment Fund multiplied by a fraction, the numerator of which is such third party's capital commitment to such Utah-based Investment Fund and the denominator of which is the aggregate capital commitments of all partners, members or other category of equity investor with similar status of such Utah-based Investment Fund, each as confirmed in writing by the Utah-based Investment Fund in accordance with section 4(c) of this rule 7.9.

(ii) The "Cost" of such Utah-based Investment Fund's investment shall mean the sum of all amounts paid by such Utah-based Investment Fund to make debt or equity investments in such Utah-based Operating Company, as confirmed in writing by the Utah-based Investment Fund in accordance with section 4(c) of this rule 7.9.

(iii) The "Exit Value" of a such Utah-based Fund of Fund's investment in such Utah-based Operating Company shall mean, without duplication, the sum of all amounts received upon the sale or other disposition of all debt or equity investments in such Utah-based Operating Company and the value attributed to such investment made at the time of the distribution in kind of such investment to the partners, members or other category of equity investor with similar status of third party as confirmed in writing by the Utah-based Investment Fund in accordance with section 4(c) of this rule 7.9.

(iv) The Exit Value of a third party's investment shall only apply to that portion of the investment that is actually sold, disposed of, or distributed in kind as of the time of determination; all other investments made by such third party shall be measured by reference to Cost.

(c) The confirmation in writing referred to in sections 4(a) and 4(b) of this rule 7.9 shall be made by a responsible officer or equivalent representative of the third party, the Utah-based Operating Company or the Utah-based Investment Fund and shall include (i) the identity of the Utah-based Operating Company or the Utah-based Investment Fund, (ii) a statement that the Corporation was a significant factor in an investment in such Utah-based Operating Company or Utah-based Investment Fund having been made, (iii) the Cost of such investment made by such third party through the date of the confirmation, (iv) the amount of commitments by such third party to make additional investments in the future, and (v) to the extent applicable, the Exit Value of such investment made by such third party through the date of the confirmation. A confirmation may be provided from time to time to update the Cost of investments made, any outstanding commitments to invest and the Exit Value of investments, which update shall be taken into account in determining Economic Development Impact attributable to the Corporation through the date of the most recent confirmation. Any such written confirmation may be contained in an email or other electronic transmission.

(d) The Economic Development Impact attributable to the Corporation shall be measured by reference to amounts invested as specified in sections 4(a) and 2(b) of this rule 7.9 after enactment of the 2015 amendments to the Utah Venture Capital Enhancement Act.

(5) Third Party Evaluations Authorized by the Board. With approval from the Board, the Corporation may engage an independent third party experienced in evaluating economic development activities to evaluate a Utah Fund of Funds and determine the Economic Development Impact of such Utah Fund of Funds and the activities of the Corporation in accordance with U.C.A. Section 63N-6-406(3)(d)(ii) as follows.

(a) The independent third party shall use a nationally recognized economic development modeling tool approved by the Board.

(b) The Economic Development Impact of a Utah Fund of Funds shall be determined by reference to the economic development impact of the Utah-based Operating Companies in which such Utah Fund of Funds has directly or indirectly invested.

(c) The Economic Development Impact of the Corporation shall be determined by reference to the result of the economic development activities engaged in by the Corporation, including the facilitation by the Corporation of investment in Utah-based Operating Companies and Utah-based Investment Funds.

(d) The Corporation shall provide to the independent third party all information and documents reasonably available to it that the independent third party requests and determines are necessary for the third party make its determination in accordance with this section 5.

(6) Any determination by an independent third party conducted in accordance with section 5 of this rule 7.9 shall adjust the Economic Development Impact attributable under sections 2, 3 and 4 of this rule 7.9 to any Utah Fund of Funds or the Corporation with respect to any investment in a Utah-based Operating Company or Utah-based Investment Fund to account only for Economic Development Impact incremental to the Economic Development Impact that has been attributed under sections 2, 3 and 4 of this rule 7.9 in order to avoid double counting.

(7) The Corporation's Annual Report made in accordance with U.C.A. Section 63N-6-301(6) shall include the following information.

(a) The amounts invested directly or indirectly by each Utah funds of funds into Utah-based Operating Companies and the resulting measurement of Economic Development Impact determined in accordance with sections 2 and 3 of this rule 7.9.

(b) The amounts invested in Utah-based Operating Companies (other than amounts invested by portfolio funds held by any Utah Fund of Funds) and Utah-based Investment Funds that are facilitated by the Corporation's economic development plan and activities and the resulting measurement of Economic Development Impact determined in accordance with section 4 of this rule 7.9.

(c) Any independent third party's evaluations of Economic Development Impact made in accordance with section 5 of this rule 7.9.

(8) The Auditor's opinion required by U.C.A. Section 63N-6-405(4)(d) shall address the information in the Annual Report included in accordance with section 7 of this rule 7.9. Such opinion may be based upon the performance by the Auditor of agreed upon procedures as specified by the Board, which procedures may include reliance upon the financial statements or other investor reports of the portfolio funds of the Utah Fund of Funds, the certifications of the third party investors, Utah-based Operating Companies and Utah-based Investment Funds made in accordance with sections 2, 3 and 4 of this rule 7.9 and the most recent determinations of any independent third party made in accordance with section 5 of this rule 7.9, in each case without the need to verify the accuracy of such financial statements, certifications or determinations.

(9) The Board shall review the amount of Economic Development Impact reported by the Corporation in accordance with section 5 of this rule 7.10 and within 45 Business Days, unless good cause exists to extend the number of days, following receipt of the Corporation's Annual Report the Board shall either (a) approve the amount of Economic Development Impact stated in the report, or (b) notify the Corporation of any disagreement with such amount setting forth the reasons for such disagreement.

(a) Upon approval of the amount of Economic Development Impact set forth in the report, the Board shall certify the Economic Development Impact to the Corporation.

(b) If the Board notifies the Corporation of its disagreement with the amount of Economic Development Impact stated in the report, the Corporation shall respond in writing to the Board within 15 Business Days of receipt of notice from the Board of its disagreement. The Corporation's response shall include either an explanation addressing the Board's reasons for disagreement or a revised determination of the amount of Economic Development Impact and the basis therefore.

(c) The Board shall certify to the Corporation within 15 Business Days of receipt of such explanation or revised determination that it agrees with such explanation or revised determination, or shall state its reasons for disagreement and the procedure set forth in section 7(b) of this rule 7.10, and this section 7(c) shall continue until all such determinations have been certified by the Board.

(d) The Corporation shall provide to the Board all information and documents reasonably available to it that the Board requests and determines are necessary for the Board to make its certification in accordance with this section 7.

(10) The Board shall review the amount of Economic Development Impact reported by the Corporation in accordance with section 7 of this rule 7.9 and within 40 Business Days following receipt of the Corporation's Annual Report the Board shall either (a) approve the amount of Economic Development Impact stated in the report, or (b) reduce such amount by the amount of Economic Development Impact it determines to have been counted in more than one category.

(a) Upon approval of the amount of Economic Development Impact set forth in the report, the Board shall certify the Economic Development Impact to the Corporation.

(b) If the Board determines to make a reduction to avoid double counting, it shall notify the Corporation such determination. The Corporation shall respond in writing to the Board within 15 Business Days of receipt of such a notice from the Board. The Corporation's response shall include an explanation addressing the Board's reasons for reduction or a revised determination of the amount of Economic Development Impact and the basis therefore.

(c) The Board shall certify to the Corporation within 15 Business Days of receipt of such explanation or revised determination that it agrees with such explanation or revised determination, or shall state its reasons for reduction and the procedure set forth in section 9(b) of this rule 7.9, and this section 9(c) shall continue until all such determinations have been certified by the Board.

(d) The Corporation shall provide to the Board all information and documents reasonably available to it that the Board requests and determines are necessary for the Board to make its certification in accordance with this section 9.

(11) The total amount of Economic Development Impact as of any Determination Date shall be the sum of the Economic Development Impact for each year through the Determination Date, determined in accordance with section 9 of this Rule 7.9.

 

R357-7-10. Criteria for Establishing the Target Rate of Return of the Investment Portfolio.

For investment portfolios of each Utah Fund of Fund:

(1) The "Target Rate of Return" on venture capital investments of such Utah Fund of Funds is a minimum of 5%. The Corporation will submit to the Board annually a detailed accounting of the calculation of the rate of return. It is understood by the Board that returns in the early years of each Utah Fund of Funds will likely be negative.

 

R357-7-11. Claiming Tax Credits Represented by Tax Credit Redemption Certificates.

(1) Once certified by the board, the holder of the tax credit certificate may present such certificate to the commission for redemption subject to the following provisions:

(a) The contingent tax credit certified by the board shall be claimed for a tax year of the designated investors, or transferee, that begins during the same year as the stated maturity date listed on such certificate. The designated investor (or a transferee of the Certified Contingent Credit) may submit to the commission at any time following the date of such certification by the board, but no later than the general filing deadline for Utah State tax returns (including extensions) for the redemption year.

(b) The person or entity claiming a refund must timely file a Utah State tax return claiming a refundable credit; and no other filing or forms or actions are necessary, and no other conditions apply, for obtaining a refund in respect of such tax credit. The commission will manually process a tax return with a claim for refund certified by the board and will pay the amount indicated on such tax return (such payment generally, but not always, made within ninety (90) days from the date for such return (the "Due Date")). If the board notified the commission of the filing of a claim for refund by the designated investor, the commission will take steps to expedite the refund.

(2) There is no limitation on a person:

(a) filing more than one claim for refund with the commission, or

(b) receiving more than one refund from the commission, in each case, in any one calendar year or other twelve (12) month period.

(3) If an entity is not otherwise a Utah taxpayer, its taxable year, for purposes of the Utah Act, shall be considered to end annually on the same date that its tax year ends for US federal income tax purposes. For a disregarded entity that is not otherwise a Utah taxpayer, such entity may designate any date on which its taxable year ends by stating such date on the Utah tax return on which it files its claim for refund.

(4) If the investor or any transferee is a corporation or other business organization or entity included in a combined Utah state tax return, and such tax return claims a tax credit, the commission will treat such tax credit as a refundable credit for the combined group.

 

R357-7-12. Certificate Register.

The Certificate Register detailing all transactions involving the Certificates, Certificates of Eligibility, Tax Credit Redemption Certificates and Tax Credit Balance Certificates shall be held and maintained at the Office of the Utah Treasurer.

 

KEY: economic development, capital investments, tax credits, Utah Capital Investment Board

Date of Enactment or Last Substantive Amendment: [September 11, 2014]2016

Authorizing, Implemented, or Interpreted Law: 63N-6-203