HOUSE OF REPRESENTATIVES
TWENTY-NINTH LEGISLATURE, 2017
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO NEW MARKET TAX CREDITS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the business community, nonprofit organizations, and other entrepreneurs require a functional, service-oriented agency that is readily available to provide business counseling, financial backing, and general support to foster real community-based economic development for the various products and services demonstrating and embracing Hawaii's diversified economy.
The Hawaii community-based economic development technical and financial assistance program in the department of business, economic development, and tourism was established for this purpose. Chapter 210D, Hawaii Revised Statutes, provides financial assistance to community-based businesses and enterprises through low-interest loans and grants to qualifying applicants.
There are various programs provided by the federal government, nonprofit organizations, and foundations, as well as opportunities provided by public-private partnerships that further these goals. These programs and partnerships can be used to provide a portion of the funding needed by economic development projects. The project funding provided by the State will be made more efficient and more effective if provided in the form most compatible with these programs and in the manner most suitable to optimize all sources of funding. To achieve this, some modifications are necessary to the types of financial products offered by the community-based economic development program and the manner in which those products are provided, along with an increase in the total amount that may be provided for an individual project and borrower.
The purpose of this Act is to:
(1) Add the definition of "qualified community development entity" to allow financing to be provided by the State through a structure that facilitates the use of federal new markets tax credits;
(2) Expand the methods of delivering funding to a project by providing loans to capitalize a qualified community development entity and to provide guarantees or other credit enhancements that will facilitate private lenders' participation in new markets tax credit financing; and
(3) Adjust loan maximums and establish guarantees or credit enhancements to reflect current available funding and facilitate monetization of existing project assets for purposes of new markets tax credit financing.
SECTION 2. Section 210D-2, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:
""Qualified community development entity" has the same meaning as in section 45D(c)(1) of the Internal Revenue Code of 1986, as amended."
SECTION 3. Section 210D-8, Hawaii Revised Statutes, is amended to read as follows:
"§210D-8 Powers and duties. The department shall have the necessary powers to carry out the purposes of this chapter, including the following:
(1) With advice from the council, prescribe the
qualifications for eligibility of applicants for loans [
grants[ ;], guarantees, and credit enhancements;
(2) With advice from the council, establish preferences and priorities in determining eligibility for financial assistance;
(3) Establish the conditions, consistent with the purpose of this chapter, for the awarding of financial assistance;
(4) Provide for inspection at reasonable hours of facilities, books, and records of a community-based organization that has applied for or has been awarded financial assistance and require the submission of progress and final reports;
(5) Provide loans [
guarantees, and credit enhancements for community-based economic
development activities and community-based enterprises for purposes consistent
with this chapter;
(6) Provide, participate in, and acquire loans used to capitalize entities that make financing available for activities and enterprises, including qualified community development entities;
(6)] (7) Determine the necessity for
and the extent of security required [ in a loan;] for loans,
guarantees, and credit enhancements;
(7)] (8) Prescribe and provide
appropriate management counseling and monitoring of business activities;
(8)] (9) Administer the Hawaii
community-based economic development revolving fund;
(9)] (10) Include in its budget for
subsequent fiscal periods amounts necessary to effectuate the purposes of this
(10)] (11) Participate in loans made to
qualified persons by private lenders;
(11)] (12) Establish interest rates
chargeable by the State for [ direct and participation] loans; [ and]
(13) Establish interest rates, fees, and charges chargeable by the State for guarantees and credit enhancements; and
(12)] (14) Adopt rules pursuant to
chapter 91 to implement this chapter."
SECTION 4. Section 210D-9, Hawaii Revised Statutes, is amended to read as follows:
; limitation and
terms]. Loans made under this chapter shall be [ for the purposes
and in accordance with the terms specified in paragraphs (1) and (2) and shall
be made only to applicants who meet the eligibility requirements specified
therein.] limited to the following:
(1) Community-based enterprise establishment and
improvement loans [
may be made] to provide for:
(A) The start-up costs, purchase or improvement of a community-based enterprise or working capital; and
(B) The purchase, construction, or improvement
of facilities; [
(2) Operating loans [
may be made] to carry on
and improve an existing enterprise, including:
(A) The purchase of equipment; and
(B) The payment of production and marketing
expenses including materials, labor, and services[
(3) Loans to entities that capitalize qualified community development entities that use the proceeds to make loans to borrowers.
The loans shall be for an amount not to
exceed $250,000 and for a term not to exceed ten years.]"
SECTION 5. Section 210D-10, Hawaii Revised Statutes, is amended to read as follows:
"§210D-10 Terms and limitations
.], guarantees, and credit enhancements. [ Loans
shall be made to qualified applicants with the] The following terms
and conditions[ :] shall apply:
(1) The amount of the outstanding balance on all
loans, guarantees, and other
credit enhancements issued under this chapter to any one applicant
at any one time shall not exceed [
$250,000;] $ ;
(2) The maximum term of a loan, guarantee, or credit enhancement shall not exceed ten years;
(3) Each loan shall bear simple interest at a rate of
not less than three and not more than six per cent a year, depending on the
nature of the loan; [
(4) Interest rates for guarantees and credit enhancements shall not be more than the market rate for similar instruments; and
(4)] (5) The commencement date for the
repayment of the first installment on principal and interest of each loan may
be deferred by the director of business, economic development, and tourism for
a period not to exceed two years."
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect on July 1, 2038.
Economic Development; New Markets Tax Credits; Loans; Qualified Community Development Entity
Expands methods for the delivery of funding to a project by providing loans to capitalize a qualified community development entity and provide guarantees or other credit enhancements to facilitate private lender participation in new markets tax credit financing. Increases total maximum funding amounts. (HB644 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.