HB-4481, As Passed House, December 17, 2014HB-4481, As Passed Senate, December 17, 2014

SUBSTITUTE FOR

HOUSE BILL NO. 4481

     A bill to amend 1984 PA 270, entitled

"Michigan strategic fund act,"

by amending sections 88k and 88n (MCL 125.2088k and 125.2088n),

section 88k as amended by 2012 PA 145 and section 88n as added by

2005 PA 215.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 88k. (1) The strategic economic investment and

commercialization board is created within the fund. The Through

October 17, 2010, the commercialization board shall exercise its

powers, duties, and decision-making authority under this chapter

section independently of the fund, the fund board, and the

department of treasury. Beginning October 18, 2010, the fund board

shall exercise all powers, duties, and decision-making authority of

the strategic economic investment and commercialization board.

     (2) The commercialization fund board shall award grants and

loans under this section from the 21st century jobs trust fund

created in the Michigan trust fund act, 2000 PA 489, MCL 12.251 to

12.256, 12.260, and the investment fund only for basic research,

applied research, university technology transfer, and

commercialization of products, processes, and services to encourage

the development of competitive edge technologies to create jobs in

this state.

     (3) Subject to subsection (2), the fund as determined by the

commercialization board shall establish a competitive process to

award grants and make loans under this section for competitive edge

technologies. The competitive process shall include, but is not

limited to, the following:

     (a) A provision that the applications must be reviewed by a

joint-evaluation committee. Scientific and technical merit,

personnel expertise, commercial merit, and the ability to leverage

additional funding may be given equal weight in the review and

scoring process as determined by the fund board.

     (b) A preference for proposals that can contribute to the

development of economic diversification or the creation of

employment opportunities in this state.

     (c) A provision that out-of-state business must have a

significant existing or proposed business presence in this state.

     (d) A provision that the program will utilize contracts with

measurable milestones, clear objectives, provisions to revoke

awards for breach of contract or failing to meet measurable

milestones, repayment of grants for breach of contract or for

failing to meet measurable outcomes, and repayment provisions for

loans given to qualified businesses that leave Michigan within 3

years of the execution of the contract, or that otherwise breach

the terms of the contract, or that fail to meet measurable

outcomes.

     (e) A provision that the applicant leverage other resources as

a condition of the grant or loan. If an applicant is seeking a

grant or a loan under this chapter section to match federal funds

for small business innovation research or small business technology

transfer programs, the grant or loan under this chapter section

shall not exceed 25% of the federal funds and must leverage third-

party commercialization funding at both the phase I and phase II

levels.

     (f) Limit overhead rates, administrative fees, and management

fees for recipients of awards to not more than 25% of the award.

     (g) Except as provided in subdivision (e), a provision that

grants can only be awarded to Michigan institutions of higher

education, Michigan nonprofit research institutions, and Michigan

nonprofit corporations.

     (h) A preference for collaborations between institutions of

higher education, Michigan nonprofit research institutions,

Michigan nonprofit corporations, and qualified businesses.

     (i) A provision authorizing the award of grants to

institutions of higher education to serve as match to promote or

secure the award and receipt of competitively awarded federal

research grants related to competitive edge technologies. A

matching grant shall not exceed 10% of the amount of the

competitively awarded federal research grants received.

     (j) A provision encouraging the redevelopment of existing

scientific wet lab space for the commercialization of life science

technology.

     (k) A preference for proposals that meet 1 or more of the

following:

     (i) Forecast revenues within 2 years.

     (ii) Have outside investments from investors with experience

and management teams with experience in the industry targeted by

the proposal.

     (iii) Have outside directors with expertise in the industry

targeted by the proposal.

     (4) The commercialization fund board shall establish standards

to ensure that money expended under this chapter section will

result in economic benefit to this state and ensure that a major

share of the business activity resulting from the expenditures

occurs in this state.

     (5) The commercialization board shall ensure that a recipient

of money expended under this chapter agrees as a condition of

receiving the money not to use the money for any of the following:

     (a) The development of a stadium or arena for use by a

professional sports team.

     (b) The development of a casino regulated by this state under

the Michigan gaming control and revenue act, 1996 IL 1, MCL 432.201

to 432.226, a casino at which gaming is conducted under the Indian

gaming regulatory act, Public Law 100-497, 102 Stat. 2467, or

property associated or affiliated with the operation of either type

of casino described in this subdivision, including, but not limited

to, a parking lot, hotel, motel, or retail store.

     (6) The commercialization board shall establish requirements

to ensure that money expended under this section shall not be used

for any of the following:

     (a) Grants or loans to a person who has been convicted of a

criminal offense incident to the application for or performance of

a state contract or subcontract. As used in this subdivision, if a

person is a business entity, then person includes affiliates,

subsidiaries, officers, directors, managerial employees as

determined by the fund board, and any person who, directly or

indirectly, holds a pecuniary interest in that business entity of

20% or more.

     (b) Grants or loans to a person who has been convicted of a

criminal offense, or held liable in a civil proceeding, that

negatively reflects on the person's business integrity, based on a

finding of embezzlement, theft, forgery, bribery, falsification or

destruction of records, receiving stolen property, or violation of

state or federal antitrust statutes. As used in this subdivision,

if a person is a business entity, then person includes affiliates,

subsidiaries, officers, directors, managerial employees as

determined by the fund board, and any person who, directly or

indirectly, holds a pecuniary interest in that business entity of

20% or more.

     (c) Grants or loans to induce a qualified business or a small

business to leave this state.

     (d) Grants or loans that would contribute to the violation of

internationally recognized workers rights, as defined in section

507(4) of the trade act of 1974, 19 USC 2467(4), of workers in a

country other than the United States, including any designated zone

or area in that country.

     (e) Grants or loans to a corporation or an affiliate of the

corporation incorporated in a tax haven country after September 11,

2001, but with the United States as the principal market for the

public trading of the corporation's stock. As used in this section,

"tax haven country" includes a country with tax laws that

facilitate avoidance by a corporation or an affiliate of the

corporation of United States tax obligations, including Barbados,

Bermuda, British Virgin Islands, Cayman Islands, Commonwealth of

the Bahamas, Cyprus, Gibraltar, Isle of Man, the Principality of

Liechtenstein, the Principality of Monaco, and the Republic of the

Seychelles.

(5) (7) When the commercialization fund board approves a grant

or a loan under this chapter, section, the commercialization fund

board shall state the specific objective reasons the applicant was

selected over other applicants for a grant or loan under this

chapter.section.

     (8) After March 31, 2006, before adopting a resolution that

establishes or substantially changes a program operated by the

commercialization board, including any fees, charges, or penalties

attached to that program, the commercialization board shall give

notice of the proposed resolution to the governor, to the secretary

of the senate, to the clerk of the house of representatives, to

members of the senate and house of representatives standing

committees on appropriations, and to each person who requested from

the fund in writing or electronically to be notified regarding

proposed resolutions. The notice and proposed resolution and all

attachments shall be published on the fund's internet website at

least 10 days prior to the date that the proposed resolution is

considered by the commercialization board. The commercialization

board shall hold a public hearing not sooner than 14 days and not

longer than 30 days from the date notice of a proposed resolution

is given and offer a person an opportunity to present data, views,

questions, and arguments. Commercialization board members or 1 or

more persons designated by the commercialization board who have

knowledge of the subject matter of the proposed resolution shall be

present at the public hearing and shall participate in the

discussion of the proposed resolution. The commercialization board

may act on the proposed resolution on the day of the public

hearing. The commercialization board shall produce a final decision

document that describes the basis for its decision. The final

resolution and all attachments and the decision document shall be

provided to the governor, to the secretary of the senate, to the

clerk of the house of representatives, and to members of the senate

and house of representatives standing committees on appropriations

and shall be published on the fund's internet website.

     (9) The notice described in subsection (8) shall include all

of the following:

     (a) A copy of the proposed resolution and all attachments.

     (b) A statement that the addressee may express any data,

views, or arguments regarding the proposed resolution.

     (c) The address to which written comments may be sent and the

date by which comments must be mailed or electronically

transmitted, which date shall not be before the date of the public

hearing.

     (d) The date, time, and place of the public hearing.

     Sec. 88n. (1) In addition to any audit requirements under

section 9, not later than May 1, 2007 and each subsequent May 1,

the auditor general shall conduct and report a financial postaudit

of the commercialization board, the fund, and the investment fund

for the immediately preceding fiscal year. Not less than once every

3 years beginning not later than October 1, 2007, the auditor

general shall conduct and report a performance postaudit of the

commercialization board, the fund, and the investment fund. The

results of the performance postaudit and the postaudit of financial

transactions and accounts shall be published on the internet and

disseminated by other means in a manner determined by the fund to

advise the citizens of this state of the result of the audits.

Copies of the audits shall be provided to the governor, the clerk

of the house of representatives, the secretary of the senate, and

the chairpersons of the senate and house of representatives

standing committees on appropriations.

     (2) The auditor general may employ an independent public

accounting firm to conduct the audits described in this section.

The costs of the auditor general or of the independent public

accounting firm in conducting the audits described in this chapter

shall be funded by money in the 21st century jobs trust fund

created in the Michigan trust fund act, 2000 PA 489, MCL 12.251 to

12.256, as provided in an appropriation. Prior to employing the

services of an independent public accounting firm under this

section, the auditor general shall require the entity to disclose

any conflict of interest, criminal convictions, investigations by

the internal revenue service or other federal or state taxing body

or court, and any pertinent litigation regarding the conduct of the

entity.

(1) (3) All contracts approved by the fund for 21st century

investments and all contracts approved by the commercialization

board or fund board for grants or loans under this chapter shall

contain a provision that the auditor general has access to the

books and records, including financial records and all other

information and data relevant to the terms of the contract related

to the use of the grant, loan, or 21st century investment.

(2) (4) If the fund board or the commercialization board has a

reasonable belief that a breach of contract has occurred, the fund

has the right to have the recipient's annual financial statements

separately audited by an independent certified public accountant at

its sole cost and expense. If the audit reveals that a breach of

contract has occurred, the recipient shall reimburse the fund for

the fees and expenses incurred to perform the audit.

     (5) In addition to any reporting requirements under section 9,

not later than March 31, 2007 and each subsequent March 31, the

commercialization board and the fund shall report to the governor,

the clerk of the house of representatives, the secretary of the

senate, and the chairpersons of the senate and house of

representatives standing committees on appropriations. The report

shall contain all of the following for the immediately preceding

fiscal year that are related to a grant or loan made by the fund as

determined by the commercialization board:

     (a) A list of entities that received funding, the amount

received, and the type of funding.

     (b) The number of new patents, copyrights, or trademarks

applied for and issued.

     (c) The number of new start-up businesses.

     (d) The number of new jobs and projected new job growth.

     (e) Amounts of other funds leveraged.

     (f) Money or other revenue or property returned to the

investment fund.

     (g) The total number of new licensing agreements by

institution and the number of new licensing agreements entered into

with Michigan based firms.

     (h) Products commercialized.

     (6) Not later than March 31, 2007 and each subsequent March

31, the fund shall report to the governor, the clerk of the house

of representatives, the secretary of the senate, and the

chairpersons of the senate and house of representatives standing

committees on appropriations. The report shall contain all of the

following for the immediately preceding fiscal year that are

related to a 21st century investment made by the fund board:

     (a) A list of entities that received funding, the amount

received, and the type of funding.

     (b) The amount of qualified venture capital fund investments,

qualified mezzanine fund investments, and qualified private equity

fund investments under management in this state, including year-to-

year growth.

     (c) The value of loan enhancement program investments,

qualified private equity fund investments, qualified mezzanine fund

investments, and qualified venture capital investments in qualified

businesses, including year-to-year growth.

     (d) A statement of the amount of money received by or returned

to the investment fund under this chapter.

     (e) A statement of the loan enhancement activity of the fund

board under this chapter.

     (f) A statement of the amount of money in each loan reserve

fund established under the small business capital access program

required under this chapter.

     (g) Any recommendations for needed changes and any other

information the board believes would be of interest to the

governor, the legislature, and the public.

(3) (7) As a condition of receiving funding under this

chapter, the fund shall require a recipient to agree to provide to

the fund the information necessary for the fund to produce the

reports required under this section.

     Enacting section 1. This amendatory act does not take effect

unless House Bill No. 4480 of the 97th Legislature is enacted into

law.