Section 8078.1 - Federal Capital Access Program and Funding(a) Where the Contribution comes from funds provided under the State Small Business Credit Initiative enacted pursuant to the American Rescue Plan Act (H.R. 1319, Public Law No. 117-2) the following shall apply, notwithstanding any other provision of this article, to the extent allowed by the American Rescue Plan Act (H.R. 1319, Public Law No. 117-2) (American Rescue Plan Act):(b) "Participating Financial Institution" also includes all those listed in Health and Safety Code Section 44559.1(d) and all certified community development financial institutions whether or not organized for profit.(c) The Participating Financial Institution must obtain written assurance from the Borrower that:(1) the loan will be used solely for a business purpose;(2) the loan will not be used to repay delinquent federal or jurisdiction income taxes unless the borrower has a payment plan in place with the relevant taxing authority;(3) the loan will not be used to repay taxes held in trust or escrow (e.g. payroll or sales tax);(4) the loan will not be used to reimburse funds owed to any owner, including any equity investment or investment of capital for the business' continuance;(5) the loan will not be used to purchase any portion of the ownership interest of any owner of the business;(6) the loan will not be used for business purposes prohibited by the U.S. Treasury;(7) the loan will not be used to finance ineligible businesses;(8) no principal of the borrowing entity has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act 42 U.S.C. § 16911); and(9) the Borrower is not: (A) an executive officer, director, or principal shareholder of the Participating Financial Institution;(B) a member of the immediate family of an executive officer, director, or principal shareholder of the Participating Financial Institution; or(C) a related interest or immediate family member of such executive officer, director, principal shareholder, or member of the immediate family of the Participating Financial Institution.(d) Ineligible businesses include the following business types: (1) a business engaged in speculative activities that develop profits from fluctuations in price, such as wildcatting for oil and dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business through the normal course of trade;(2) a business that earns more than half of its annual net revenue from lending activities, unless the business is a Community Development Financial Institution that is not a depository institution or a bank holding company;(3) a business engaged in pyramid sales plans, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants;(4) a business engaged in activities that are prohibited by federal law or, if permitted by federal law, applicable law in the jurisdiction where the business is located or conducted (this includes businesses that make, sell, service, or distribute products or services used in connection with illegal activity, unless such use can be shown to be completely outside of the business's intended market); this category of businesses includes direct and indirect marijuana businesses;(5) a business deriving more than one-third of gross annual revenue from legal gambling activities; or(6) other businesses that are restricted by federal fund law or the Department of Treasury.(e) The Participating Financial Institution must provide written assurance affirming the following: (1) the Qualified Loan has not been made in order to place under the protection of the CalCAP prior debt that is not covered under CalCAP and that is or was owed by the Borrower to the Participating Financial Institution or to an affiliate of the Participating Financial Institution;(2) the Qualified Loan is not a refinancing of a loan previously made to the borrower by the Participating Financial Institution or an affiliate of the Participating Financial Institution;(3) no principal of the Participating Financial Institution has been convicted of a sex offense against a minor (as such terms are defined in Section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. § 16911));(4) the Participating Financial Institution will make available to the Treasury Inspector General all books and records related to the use of the Allocated Funds, subject to the Right of Financial Privacy Act (12 U.S.C. § 3401 et seq.) as applicable; and(5) the Participating Financial Institution is in compliance with the requirements of 31 C.F.R. § 103.121.(f) Federal capital access funds shall not be used for the following: (1) activities that relate to acquiring or holding passive investments in real estate, the purchase of securities; and lobbying activities as defined in Section 3(7) of the Lobbying Disclosure Act of 1995. P.L. 104-65, as amended (2 U.S.C. 1602(7));(2) financing a non-business purpose;(3) covering the unguaranteed portions of an SBA loan unless CalCAP receives prior written consent of the U.S. Treasury;(4) supporting existing extension of credit, including but not limited to prior loans, lines of credit or other borrowings that were previously made available as part of a state small business credit enhancement program.(g) The federal Matching Contribution shall be equal to the sum of the Fees paid by the Borrower and Participating Financial Institution, unless another amount is allowed by the American Rescue Plan Act.(h) No more than $5,000,000 shall be borrowed by any one Borrower using the State Small Business Credit Initiative funds, unless another amount is allowed by the American Rescue Plan Act.(i) Any Borrower or Participating Financial Institution fees assessed by the Authority as allowed by the American Rescue Plan Act may be deposited in a Loss Reserve Account.(j) Claims for reimbursement may be processed according to the requirements of the American Rescue Plan Act.Cal. Code Regs. Tit. 4, § 8078.1
Note: Authority cited: Sections 44520 and 44559.5(f), Health and Safety Code. Reference: Sections 44559.2, 44559.4 and 44559.11, Health and Safety Code.
1. New section filed 11-3-2022 as an emergency; operative 11/3/2022 (Register 2022, No. 44). A Certificate of Compliance must be transmitted to OAL by 5-2-2023 or emergency language will be repealed by operation of law on the following day. For prior history, see Register 2018, No. 11.
2. New section refiled 5-4-2023 as an emergency; operative 5/4/2023 (Register 2023, No. 18). A Certificate of Compliance must be transmitted to OAL by 8-2-2023 or emergency language will be repealed by operation of law on the following day.
3. Certificate of Compliance as to 5-4-2023 order transmitted to OAL 6-8-2023 and filed 7/17/2023 (Register 2023, No. 29).