1.1                          A bill for an act
  1.2             relating to economic development; establishing an 
  1.3             individual development account demonstration project; 
  1.4             appropriating money; proposing coding for new law in 
  1.5             Minnesota Statutes, chapter 116J. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  [116J.721] [INDIVIDUAL DEVELOPMENT ACCOUNT 
  1.8   DEMONSTRATION PROJECT.] 
  1.9      Subdivision 1.  [DEFINITIONS.] For purposes of sections 
  1.10  116J.721 to 116J.725, the following definitions apply: 
  1.11     (a) "Account holder" or "holder" means an individual who is 
  1.12  the owner of an individual development account. 
  1.13     (b) "Commissioner" means the commissioner of trade and 
  1.14  economic development. 
  1.15     (c) "Community development financial institution" means an 
  1.16  organization that: 
  1.17     (1) has a primary mission of promoting community 
  1.18  development; 
  1.19     (2) serves an investment area or targeted population; 
  1.20     (3) provides development services in conjunction with 
  1.21  equity investments or loans, directly or through a subsidiary or 
  1.22  affiliate; 
  1.23     (4) maintains, through representation on its governing 
  1.24  board or otherwise, accountability to residents of its 
  1.25  investment area or targeted population; and 
  2.1      (5) is not an agency or instrumentality of the United 
  2.2   States, or of the state or a political subdivision of the state. 
  2.3      (d) "Development services" means activities that promote 
  2.4   community development and are integral to lending or investment 
  2.5   activities, including: 
  2.6      (1) business planning; 
  2.7      (2) financial and credit counseling; and 
  2.8      (3) marketing and management assistance. 
  2.9      (e) "Individual development account" or "account" means a 
  2.10  financial instrument certified to meet the requirements of 
  2.11  section 116J.722 by the site administrator. 
  2.12     (f) "Site administrator" means an organization selected by 
  2.13  the commissioner to administer the demonstration project at a 
  2.14  project site. 
  2.15     Subd. 2.  [ESTABLISHMENT.] The commissioner of economic 
  2.16  development shall establish an individual development account 
  2.17  demonstration project.  The project must be operational no later 
  2.18  than January 1, 1999.  The commissioner may implement the 
  2.19  demonstration project in stages beginning July 1, 1998, with 
  2.20  full implementation by January 1, 1999.  The demonstration 
  2.21  project shall operate at each site for a period of two years. 
  2.22     Subd. 3.  [PROJECT SITES.] The commissioner shall select 
  2.23  the following three sites for the project: 
  2.24     (1) the city of Minneapolis or Saint Paul; 
  2.25     (2) a city located within Anoka, Carver, Dakota, Scott, or 
  2.26  Washington county; and 
  2.27     (3) a city located outside of the seven-county metropolitan 
  2.28  area. 
  2.29     Subd. 4.  [ENROLLMENT LIMIT.] The commissioner shall limit 
  2.30  the number of individual development accounts opened to 100 per 
  2.31  site. 
  2.32     Subd. 5.  [FEDERAL AUTHORITY.] The commissioner shall seek 
  2.33  any federal authority necessary to implement sections 116J.721 
  2.34  to 116J.725.  The commissioner, in implementing the 
  2.35  demonstration project, may initially include only those groups 
  2.36  of individuals for which federal approval is not needed for 
  3.1   inclusion, or for which federal authority for inclusion has been 
  3.2   received. 
  3.3      Subd. 6.  [EVALUATION.] The commissioner shall evaluate the 
  3.4   degree to which the demonstration project allows holders of 
  3.5   individual development accounts to achieve goals related to 
  3.6   education, job training, home purchase, and small business 
  3.7   start-up.  The commissioner shall present to the legislature by 
  3.8   February 15, 2001, the results of the evaluation and 
  3.9   recommendations on whether the demonstration project should be 
  3.10  expanded statewide. 
  3.11     Sec. 2.  [116J.722] [INDIVIDUAL DEVELOPMENT ACCOUNTS.] 
  3.12     Subdivision 1.  [ESTABLISHMENT.] A financial instrument 
  3.13  known as an individual development account is established.  An 
  3.14  individual development account must meet the requirements of 
  3.15  this section. 
  3.16     Subd. 2.  [ELIGIBLE INDIVIDUALS.] (a) Individuals residing 
  3.17  in a site administrator's service area with household incomes 
  3.18  that do not exceed 200 percent of the federal poverty guidelines 
  3.19  are eligible to open individual development accounts. 
  3.20     (b) Individuals who are recipients of Minnesota 
  3.21  supplemental aid, supplemental security income, general 
  3.22  assistance, general assistance medical care, or medical 
  3.23  assistance, or are MinnesotaCare enrollees, are eligible to open 
  3.24  individual development accounts, if they meet eligibility 
  3.25  criteria in paragraph (a). 
  3.26     (c) Participation in the demonstration project is subject 
  3.27  to any necessary federal approvals and to limits on the number 
  3.28  of individual development accounts that may be opened. 
  3.29     Subd. 3.  [EXEMPTION FROM PROGRAM ASSET AND INCOME 
  3.30  LIMITS.] (a) The commissioner shall exclude money in individual 
  3.31  development accounts when calculating assets and shall exclude 
  3.32  interest income from those accounts when calculating income to 
  3.33  determine eligibility for the general assistance and general 
  3.34  assistance medical care programs. 
  3.35     (b) Subject to federal approval, the commissioner shall 
  3.36  exclude money in individual development accounts when 
  4.1   calculating assets and shall exclude interest income from those 
  4.2   accounts when calculating income to determine eligibility for 
  4.3   the medical assistance, Minnesota supplemental aid, and 
  4.4   supplemental security income programs. 
  4.5      (c) Subject to federal approval, the commissioner shall 
  4.6   exclude interest income from individual development accounts 
  4.7   when calculating income for purposes of determining eligibility 
  4.8   or establishing enrollee premiums for the MinnesotaCare 
  4.9   program.  Upon federal approval of and implementation of the 
  4.10  MinnesotaCare asset limit, the commissioner, subject to federal 
  4.11  approval, shall exclude money in individual development accounts 
  4.12  when calculating assets under the MinnesotaCare program. 
  4.13     Subd. 4.  [OWNERSHIP OF ACCOUNT; LIMITATION.] Accounts must 
  4.14  be kept in the name of the individual account holder.  
  4.15  Individual development accounts are limited to one per household.
  4.16     Subd. 5.  [DEPOSITS.] Deposits to the account can be made 
  4.17  only by:  
  4.18     (1) the account holder; 
  4.19     (2) the commissioner, in providing the state match; 
  4.20     (3) the site administrator, in providing any private sector 
  4.21  match; and 
  4.22     (4) other holders of individual development accounts, in 
  4.23  transferring money from their accounts.  
  4.24  The maximum amount per calendar year that can be deposited into 
  4.25  an account from all sources is $5,000. 
  4.26     Subd. 6.  [INTEREST.] The account must earn interest. 
  4.27     Sec. 3.  [116J.723] [WITHDRAWALS AND TRANSFERS FROM 
  4.28  ACCOUNT.] 
  4.29     Subdivision 1.  [WITHDRAWALS FOR ALLOWED USES.] An account 
  4.30  holder may make withdrawals from the holder's account only for 
  4.31  an allowed use.  For purposes of this requirement, an "allowed 
  4.32  use" means a withdrawal to pay for: 
  4.33     (1) educational costs at an accredited institution of 
  4.34  higher education; 
  4.35     (2) training costs for an accredited or licensed training 
  4.36  program; 
  5.1      (3) purchase of a primary residence; or 
  5.2      (4) capitalization of a small business start-up. 
  5.3      Subd. 2.  [PROCEDURE FOR WITHDRAWALS.] An account holder 
  5.4   must request all withdrawals from the site administrator.  Upon 
  5.5   making a determination that a requested withdrawal is for an 
  5.6   approved use, a site administrator shall approve the request and 
  5.7   forward this approval to the financial institution managing the 
  5.8   holder's individual development account.  Upon receipt of this 
  5.9   approval, the financial institution shall issue the holder with 
  5.10  a check, made out to the entity providing the service being 
  5.11  purchased by the holder.  Financial institutions shall not issue 
  5.12  checks made out to the account holder. 
  5.13     Subd. 3.  [RESIDENCY IN SERVICE AREA.] In order to make a 
  5.14  withdrawal, an account holder must reside in the site 
  5.15  administrator's service area.  Site administrators may develop 
  5.16  criteria and a procedure for reviewing and approving exceptions 
  5.17  to this requirement. 
  5.18     Subd. 4.  [CLOSING OF AN ACCOUNT.] (a) An account holder 
  5.19  who closes an account prior to the end of the demonstration 
  5.20  project may retain ten percent of the money deposited by the 
  5.21  account holder, plus interest earned on this amount.  The site 
  5.22  administrator shall deposit all remaining money in the account 
  5.23  into the pool used by the administrator to provide the private 
  5.24  sector match.  If the private sector match pool has sufficient 
  5.25  funds to provide all account holders with the maximum private 
  5.26  sector match, this money shall revert to the general fund. 
  5.27     (b) If money remains in an account at the conclusion of the 
  5.28  demonstration project, the account holder shall retain all of 
  5.29  the money deposited by the account holder, plus interest earned 
  5.30  on this amount.  The site administrator shall deposit all other 
  5.31  money in the account into the general fund. 
  5.32     Subd. 5.  [TRANSFERS.] (a) An account holder age 18 or 
  5.33  older may transfer all or part of the assets in the holder's 
  5.34  account to any other account holder's account.  An account 
  5.35  holder who is less than 18 years of age is prohibited from 
  5.36  transferring account assets to any other account holder. 
  6.1      (b) In the event of an account holder's death, the account 
  6.2   may be transferred to the ownership of a beneficiary or to the 
  6.3   individual development account of another account holder.  An 
  6.4   account holder may name beneficiaries or transferees at the time 
  6.5   the account is established.  Beneficiaries or transferees may 
  6.6   also be changed after an account is established, at the 
  6.7   discretion of the account holder.  If the named beneficiary or 
  6.8   transferee is deceased or otherwise cannot accept the transfer, 
  6.9   the site administrator shall deposit the money in the account 
  6.10  into the private sector match pool. 
  6.11     Sec. 4.  [116J.724] [STATE AND PRIVATE SECTOR MATCHING 
  6.12  DEPOSITS.] 
  6.13     Subdivision 1.  [STATE MATCH.] Subject to the availability 
  6.14  of appropriations, the commissioner shall provide a $2 match for 
  6.15  each $1 an account holder deposits into the holder's individual 
  6.16  development account. 
  6.17     Subd. 2.  [PRIVATE SECTOR MATCH.] Site administrators shall 
  6.18  seek contributions from businesses, foundations, and other 
  6.19  private sector organizations for a private sector match, and 
  6.20  shall deposit all contributions into a private sector match 
  6.21  pool.  A site administrator shall provide a match of at least $2 
  6.22  for each $1 an account holder deposits into the holder's 
  6.23  individual development account.  This private sector match is in 
  6.24  addition to any state match provided under subdivision 1. 
  6.25     Sec. 5.  [116J.725] [SELECTION OF AND REQUIREMENTS FOR SITE 
  6.26  ADMINISTRATORS.] 
  6.27     Subdivision 1.  [REQUEST FOR PROPOSALS.] The commissioner, 
  6.28  by July 1, 1998, shall issue a request for proposals for site 
  6.29  administrators.  For each site, the commissioner shall select as 
  6.30  the site administrator the applicant that best demonstrates the 
  6.31  ability to work effectively with populations with very low 
  6.32  incomes and satisfies the requirements of subdivision 2.  In 
  6.33  selecting a site administrator, the commissioner shall give 
  6.34  preference to community development financial institutions.  A 
  6.35  community development financial institution chosen as a site 
  6.36  administrator may serve as a financial institution for purposes 
  7.1   of managing individual development accounts. 
  7.2      Subd. 2.  [REQUIREMENTS FOR A SITE ADMINISTRATOR.] A site 
  7.3   administrator shall: 
  7.4      (1) define the service area in which the demonstration 
  7.5   project shall operate; 
  7.6      (2) provide a safe and secure investment mechanism for 
  7.7   individual development accounts, by selecting a financial 
  7.8   institution or financial institutions to participate in the 
  7.9   demonstration project; 
  7.10     (3) require participating financial institutions to 
  7.11  establish separate accounting procedures for individual 
  7.12  development accounts; 
  7.13     (4) certify that a financial instrument is an individual 
  7.14  development account and meets the requirements of section 
  7.15  116J.722; 
  7.16     (5) determine the eligibility of individuals seeking to 
  7.17  open individual development accounts; 
  7.18     (6) administer and manage accounts, monitor and track 
  7.19  withdrawals, and approve requests for withdrawals in accordance 
  7.20  with section 116J.723; 
  7.21     (7) seek private sector contributions for individual 
  7.22  development accounts; 
  7.23     (8) provide development services for account holders; 
  7.24     (9) make other long-term investment vehicles available to 
  7.25  project participants whose individual development accounts reach 
  7.26  the $5,000 annual threshold; 
  7.27     (10) provide to the commissioner all information the 
  7.28  commissioner determines necessary to effectively monitor 
  7.29  implementation of the demonstration project and effectively 
  7.30  evaluate the demonstration project; and 
  7.31     (11) meet all other requirements established by the 
  7.32  commissioner. 
  7.33     Sec. 6.  [APPROPRIATION.] 
  7.34     $....... is appropriated from the general fund to the 
  7.35  commissioner of trade and economic development for the fiscal 
  7.36  year ending June 30, 1999, to implement sections 1 to 5. 
  8.1      Sec. 7.  [EFFECTIVE DATE.] 
  8.2      Sections 1 to 5 are effective the day following final 
  8.3   enactment.