Utah Admin. Code 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 R357-7-9.
(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 R357-7-9, 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
R357-7-9 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
R357-7-9.
(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
R357-7-9.
(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
R357-7-9 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 R357-7-9.
(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
R357-7-9.
(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 R357-7-9.
(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
R357-7-9 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 4(b) of this
R357-7-9 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
R357-7-9 shall adjust the
Economic Development Impact attributable under sections 2, 3 and 4 of this
R357-7-9 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
R357-7-9 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
R357-7-9.
(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 R357-7-9.
(c) Any independent third party's evaluations
of Economic Development Impact made in accordance with section 5 of this
R357-7-9.
(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 R357-7-9. 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
R357-7-9 and the most recent
determinations of any independent third party made in accordance with section 5
of this R357-7-9, 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
R357-7-9 and within 45 Business
Days, unless good cause exists to extend the number of days, following receipt
from the Corporation of the report of the independent third party 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
9(b) of this R357-7-9, 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.
(10) The Board shall review the amount of
Economic Development Impact reported by the Corporation in accordance with
section 7 of this R357-7-9 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 10(b) of this
R357-7-9, and this section 10(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
R357-7-9.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.