Act No. 505

Public Acts of 2014

Approved by the Governor

January 10, 2015

Filed with the Secretary of State

January 14, 2015

EFFECTIVE DATE: January 14, 2015

STATE OF MICHIGAN

97TH LEGISLATURE

REGULAR SESSION OF 2014

Introduced by Senators Emmons and Kowall

ENROLLED SENATE BILL No. 270

AN ACT to amend 1984 PA 270, entitled “An act relating to the economic development of this state; to create the Michigan strategic fund and to prescribe its powers and duties; to transfer and provide for the acquisition and succession to the rights, properties, obligations, and duties of the job development authority and the Michigan economic development authority to the Michigan strategic fund; to provide for the expenditure of proceeds in certain funds to which the Michigan strategic fund succeeds in ownership; to provide for the issuance of, and terms and conditions for, certain notes and bonds of the Michigan strategic fund; to create certain boards and funds; to create certain permanent funds; to exempt the property, income, and operation of the fund and its bonds and notes, and the interest thereon, from certain taxes; to provide for the creation of certain centers within and for the purposes of the Michigan strategic fund; to provide for the creation and funding of certain accounts for certain purposes; to impose certain powers and duties upon certain officials, departments, and authorities of this state; to make certain loans, grants, and investments; to provide penalties; to make an appropriation; and to repeal acts and parts of acts,” by amending sections 88a, 88b, and 89c (MCL 125.2088a, 125.2088b, and 125.2089c), section 88a as amended by 2011 PA 22, section 88b as amended by 2012 PA 145, and section 89c as added by 2008 PA 98.

The People of the State of Michigan enact:

Sec. 88a. As used in this chapter:

(a) “Advanced automotive, manufacturing, materials, information, and agricultural processing technology” means any technology that involves 1 or more of the following:

(i) Materials with engineered properties created through the development of specialized process and synthesis technology.

(ii) Nanotechnology, including materials, devices, or systems at the atomic, molecular, or macromolecular level, with a scale measured in nanometers.

(iii) Microelectromechanical systems, including devices or systems integrating microelectronics with mechanical parts and a scale measured in micrometers.

(iv) Improvements to vehicle safety, vehicle performance, vehicle production, or environmental impact, including, but not limited to, vehicle equipment and component parts.

(v) A new technology, device, or system that enhances or improves the manufacturing process of wood, timber, or agricultural-based products.

(vi) Any technology that involves an alternative energy vehicle or its components, as alternative energy vehicle is defined under section 2 of the Michigan next energy authority act, 2002 PA 593, MCL 207.822.

(vii) Advanced computing or electronic device technology related to technology described under this subdivision.

(viii) Design, engineering, testing, or diagnostics related to technology described under this subdivision.

(ix) Product research and development related to technology described under this subdivision.

(b) “Advanced computing” means any technology used in the design and development of 1 or more of the following:

(i) Computer hardware and software.

(ii) Data communications.

(iii) Information technologies.

(c) “Alternative energy technology” means applied research or commercialization of new or next generation technology in 1 or more of the following:

(i) Alternative energy technology as that term is defined in section 2 of the Michigan next energy authority act, 2002 PA 593, MCL 207.822.

(ii) Devices or systems designed and used solely for the purpose of generating energy from agricultural crops, residue and waste generated from the production and processing of agricultural products, animal wastes, or food processing wastes, not including a conventional gasoline or diesel fuel engine or retrofitted conventional gasoline or diesel fuel engine.

(iii) A new technology, product, or system that permits the utilization of biomass for the production of specialty, commodity, or foundational chemicals or of novel or economical commodity materials through the application of biotechnology that minimizes, complements, or replaces reliance on petroleum for the production. Alternative energy technology also includes a new technology, product, or system that utilizes wind energy.

(iv) Advanced computing or electronic device technology related to technology described under this subdivision.

(v) Design, engineering, testing, or diagnostics related to technology described under this subdivision.

(vi) Product research and development related to a technology described under this subdivision.

(d) “Applied research” means translational research conducted with the objective of attaining a specific benefit or to solve a practical problem, or other research activity that seeks to utilize, synthesize, or apply existing knowledge, information, or resources to the resolution of a specified problem, question, or issue, with high potential for commercial application to create jobs in this state.

(e) “Basic research” means any original investigation for the advancement of scientific or technological knowledge that will enhance the research capacity of this state in a way that increases the ability to attract to or develop companies, jobs, researchers, or students in this state.

(f) “Commercialization” means the transition from research to the actions necessary to achieve market entry and general market competitiveness of new innovative technologies, processes, and products and the services that support, assist, equip, finance, or promote a person or an entity with that transition.

(g) “Competitive edge technology” means 1 or more of the following:

(i) Life sciences technology.

(ii) Advanced automotive, manufacturing, materials, information, and agricultural processing technology.

(iii) Homeland security and defense technology.

(iv) Alternative energy technology.

(v) Any other innovative technology as determined by the fund board.

(h) “Electronic device technology” means any technology that involves microelectronics, semiconductors, electronic equipment, and instrumentation, radio frequency, microwave, and millimeter electronics; optical and optic-electrical devices; or data and digital communications and imaging devices.

(i) “Fund board” means the board of the Michigan strategic fund described in section 5.

(j) “Homeland security and defense technology” means technology that assists in the assessment of threats or damage to the general population and critical infrastructure, protection of, defense against, or mitigation of the effects of foreign or domestic threats, disasters, or attacks, or support for crisis or response management, including, but not limited to, 1 or more of the following:

(i) Sensors, systems, processes, or equipment for communications, identification and authentication, screening, surveillance, tracking, and data analysis.

(ii) Advanced computing or electronic device technology related to technology described under this subdivision.

(iii) Aviation technology, including, but not limited to, avionics, airframe design, sensors, early warning systems, and services related to technology described under this subdivision.

(iv) Design, engineering, testing, or diagnostics related to technology described under this subdivision.

(v) Product research and development related to technology described under this subdivision.

(k) “Independent peer review expert” means a person or persons selected by the commercialization board with appropriate expertise to conduct an independent, unbiased, objective, and competitive evaluation of activities funded under section 88k. The person or persons shall demonstrate the capability and experience, as appropriate or necessary for the particular activity funded, to do all of the following:

(i) Conduct a highly competitive and intensive, independent, multiphased, peer-review-based evaluation process.

(ii) Employ personnel with appropriate business, scientific, technical, commercial, or other specialized expertise to carry out each aspect of the evaluation process.

(iii) Provide recommendations to or assist the commercialization board in identifying high-quality activities for funding that are likely to result in the development and commercialization of competitive edge technology and job creation in this state. The recommendations shall include all materials used by the independent peer review expert in making the recommendation.

(iv) Assure that any peer review process developed maintains a high level of integrity.

(l) “Institution of higher education” means an institution of higher education or a community or junior college described in section 4, 5, 6, or 7 of article VIII of the state constitution of 1963 or an independent nonprofit degree‑granting institution of postsecondary education in this state that is approved by the state board of education.

(m) “Jobs for Michigan investment fund” or “investment fund” means the jobs for Michigan investment fund created in section 88h.

(n) “Life sciences” means science for the examination or understanding of life or life processes, including, but not limited to, all of the following:

(i) Bioengineering.

(ii) Biomedical engineering.

(iii) Genomics.

(iv) Proteomics.

(v) Molecular and chemical ecology.

(vi) Biotechnology, including any technology that uses living organisms, cells, macromolecules, microorganisms, umbilical cord blood, or substances from living organisms to make or modify a product for useful purposes. Biotechnology or life sciences does not include any of the following:

(A) Activities prohibited under section 2685 of the public health code, 1978 PA 368, MCL 333.2685.

(B) Activities prohibited under section 2688 of the public health code, 1978 PA 368, MCL 333.2688.

(D) Activities prohibited under section 16274 of the public health code, 1978 PA 368, MCL 333.16274.

(E) Stem cell research with human embryonic tissue.

(o) “Life sciences technology” means any technology derived from life sciences intended to improve human health or the overall quality of human life, including, but not limited to, systems, processes, or equipment for drug or gene therapies, biosensors, testing, medical devices or instrumentation with a therapeutic or diagnostic value, a pharmaceutical or other product that requires United States food and drug administration approval or registration prior to its introduction in the marketplace and is a drug or medical device as defined by the federal food, drug, and cosmetic act, 21 USC 301 to 399a, or 1 or more of the following:

(i) Advanced computing or electronic device technology related to technology described under this subdivision.

(ii) Design, engineering, testing, or diagnostics related to technology or the commercial manufacturing of technology described under this subdivision.

(iii) Product research and development related to technology described under this subdivision.

(p) “Qualified business” means a business entity located in this state.

(q) “Qualified mezzanine fund” means a person or entity primarily engaged in making loans or investments ranging in size from $250,000.00 to $6,000,000.00 that is managed by 2 or more individuals with no less than 5 years’ direct experience in mezzanine lending or capital investments and that holds investment capital or has commitments from investors other than the fund and at least 2 financial institutions.

(r) “Qualified private equity fund” means a firm principally or primarily engaged in investing in or acquiring businesses that is managed by 2 or more individuals with no less than 5 years of direct experience in private equity investments, and that holds investment capital from investors other than the fund.

(s) “Qualified venture capital fund” means a firm principally or primarily engaged in investing in or acquiring early stage businesses with growth potential that have not yet demonstrated consistent profitability or a proven business model, that is managed by 2 or more individuals with not less than 5 years of direct experience in venture capital, and that holds capital from investors other than the fund.

(t) “Small business” means a business entity formed or doing business in this state, including the affiliates of the business concern, which business entity is independently owned and operated and employs fewer than 250 full-time employees or has gross annual sales of less than $6,000,000.00.

(u) “21st century investments” means investments in 1 or more of the following:

(i) Commercial loan guarantees under a loan enhancement program operated by the fund.

(ii) Private equity investments under a private equity investment program operated by the fund.

(iii) Venture capital investments under a venture capital investment program operated by the fund.

(iv) Mezzanine investments under a mezzanine investment program operated by the fund.

(v) “Strategic economic investment and commercialization board” or “commercialization board” means, except as otherwise provided in this subdivision, the strategic economic investment and commercialization board created in section 88k. Beginning October 18, 2010, the strategic economic investment and commercialization board or the commercialization board means the fund board.

(w) “University technology transfer” means innovative methods to accelerate the creation of start-up companies affiliated with institutions of higher education or the transfer of competitive edge technology research from an institution of higher education to a qualified business in Michigan.

Sec. 88b. (1) The fund shall create and operate programs authorized under this act. The fund board shall determine the annual allocation of money for programs authorized under this act and make authorized expenditures or investments from the investment fund of the 21st century jobs trust fund created in the Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.260, as authorized under this act for programs and activities authorized under this act.

(2) Money transferred or appropriated by law to the fund for the purposes of carrying out this chapter or chapter 8C shall be expended or invested by the fund as authorized by law for the following purposes:

(a) 21st century investments as long as those investments provide for repayment for breach of the written agreement or the failure to meet measurable outcomes.

(b) Grants and loans approved by the commercialization board under section 88k as long as those grants and loans provide for repayment for breach of the written agreement or the failure to meet measurable outcomes.

(c) Other programs or activities authorized under this chapter, any other chapter of this act, or as provided in an appropriation act as long as those programs or activities provide for repayment for breach of the written agreement or the failure to meet measurable outcomes.

(d) For promotion of tourism in this state. For fiscal year 2010-2011 only, $20,000,000.00 for the promotion of tourism in this state from funds appropriated in the jobs for Michigan investment program - 21st century jobs fund line in section 109 of 2010 PA 191 with not less than $1,500,000.00 to be used for the 2010-2011 winter advertisement buy. For all funds used for promotion of tourism in this state under this subdivision, the fund shall report to the legislature at the same time and in the same manner as provided in section 89d.

(e) Grants, loans, or other economic assistance under section 88r and community revitalization incentives under chapter 8C as long as those grants, loans, other economic assistance, and community revitalization incentives provide for repayment for breach of the written agreement or the failure to meet measurable outcomes.

(3) Not more than 4% of the annual appropriation as provided by law from the 21st century jobs trust fund created in the Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.260, may be used for the purposes of administering the programs and activities authorized under this chapter. However, the fund and the fund board shall not use more than 3% of the annual appropriation for administering the programs and activities authorized under this chapter unless the fund board by a 2/3 vote authorizes the additional 1% for administration. The MEDC may charge actual and reasonable fees for costs associated with loans, grants, or other economic assistance under this chapter. These fees are in addition to an amount of the appropriation used for administering the programs and activities authorized under this chapter.

(4) Not more than 5% of the annual appropriation as provided by law from the 21st century jobs trust fund created in the Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.260, may be used for business development and business marketing costs. No funds may be used for any business development and business marketing effort that includes a reference to or the image or voice of an elected state officer or a candidate for elective state office and that is targeted to a media market in Michigan.

(5) The fund shall not use any money appropriated or transferred for purposes authorized under this chapter to acquire interests in or improve real property. The restriction under this subsection does not prohibit the fund from taking a security interest in real property. The restriction under this subsection applies only to the fund and not to recipients of expenditures or investments under this chapter.

(6) The fund board may select all vendors for all expenditures and for program awards under this chapter by issuing a request for proposal or an alternative competitive process as determined by the fund board. At a minimum, the request for proposal shall require the responding entities to disclose any conflict of interest, disclose any criminal convictions, disclose any investigations by the internal revenue service or any other federal or state taxing body or court, disclose any litigation involving the entity, and maintain records and evidence pertaining to work performed. The fund board shall establish a standard process to evaluate proposals submitted as a result of a request for proposal and appoint a committee to review the proposals. The fund or the fund board shall not appoint or designate any person paid or unpaid to a committee to review proposals if that person has a conflict of interest with any potential vendors as determined by the office of the chief compliance officer established in section 88i.

(7) Application fees received for programs and activities authorized under this chapter or chapter 8C may be used by the fund for administering the programs and activities authorized under this chapter or chapter 8C. The restrictions on expenditures under subsection (3) do not apply to expenditure of application fee revenue under this subsection.

(8) Funds appropriated by law to the fund board or the fund may be expended by the fund board or fund without further appropriation regardless of the source of those funds.

Sec. 89c. (1) The fund board shall select vendors for Michigan promotion program expenditures under this chapter exceeding $250,000.00 by issuing a request for proposal. At a minimum, the request for proposal shall require the responding entities to disclose any conflict of interest, disclose any criminal convictions, disclose any investigations by the internal revenue service or any other federal or state taxing body or court, disclose any pertinent litigation regarding the conduct of the entity, and maintain records and evidence pertaining to work performed for at least 5 years. The fund board shall establish a standard process to evaluate proposals submitted as a result of a request for proposal and appoint a committee to review the proposals. Members of any committee or individuals working on behalf of the Michigan strategic fund, paid or unpaid, shall have no conflict of interest as determined by the office of the chief compliance officer established in section 88i. This subsection does not apply to a contract that was in existence on March 25, 2008 or to the extension of a contract in which the right to extend was in existence on or before March 25, 2008.

(2) No funds may be used for any Michigan promotion program effort that includes a reference to or the image or voice of an elected official, appointed state employee, state employee governed by a senior executive service limited term employment agreement, or a candidate for elective office, and that is targeted to a media market in this state.

This act is ordered to take immediate effect.

Secretary of the Senate

Clerk of the House of Representatives

Approved

Governor