SF 455 – Sales tax exemption for environmental testing services
HF 599 – Beginning farmer tax credits
HF 615 – Innovation Investment Tax Credits
HF 620 – Economic Development Tax Credit Cap Increase
HF 640 — Blending of biofuels
HF 641 – Reinvestment Zones
FLOOR ACTION:
SF 455 exempts the furnishing of environmental testing services from the state’s sales tax. [5/16: 45-0 (Behn, Guth, Houser, Kapucian, Zumbach excused]
FLOOR & COMMITTEE ACTION:
HF 599 increases the Beginning Farmer Tax Credits cap from $6 million to $12 million and restricts individual tax credits from exceeding $50,000. The Senate amended the bill on the floor to include a report to the Legislature and a sunset of the credit in five years. [Floor 5/16: 47-1 (Dearden “no”; Behn, Houser excused); Committee 5/15: short form]
HF 615 relates to Innovation Investment Tax Credits. The Senate adopted an amendment to the bill that strikes everything after the enacting clause and inserts new language. The bill, as amended, changes the tax credit percentage from 20 percent of the taxpayer’s equity investment in an innovation fund to 25 percent. The bill strikes the three-year wait for redeeming the tax credit. The bill allows the tax credit to be transferrable, but it can only be transferred once.
In addition, the bill puts certain current IEDA administrative rules regarding the program into the Code. To receive a tax credit, a taxpayer must submit an application to the IEDA board and then the board shall issue certificates on a first-come, first-served basis. If in a fiscal year the aggregate amount of tax credits applied for exceeds the amount allocated, the IEDA board shall establish a wait list for certificates.
The bill adds criteria requirements for an innovation fund to be certified. Criteria are added to further the goals of the program. The fund has to propose to obtain at least $15 million in binding investment commitments and to invest a minimum of $15 million in Iowa companies.
The bill requires IEDA to submit an annual report to the Legislature and the Governor. The report will describe the activities of the innovation funds in the preceding fiscal year.
IEDA will not be allowed to certify any new funds after June 30, 2018. In addition, the tax credit program will be reviewed by the Legislative Tax Expenditure Committee in the year 2017.
The changes in the bill are effective upon enactment and apply retroactively to tax years beginning on or after January 1, 2013. IEDA cannot issue tax credit certificates until after September 1, 2014 (fiscal impact will begin in FY15). [Floor 5/16: 46-1 (Chelgren “no”; Behn, Houser, Kapucian excused); Committee 5/15: short form]
HF 620 makes changes to Iowa Economic Development Authority’s tax credit cap and Endow Iowa. The bill, as amended by the Senate, allows the Authority to assess, collect and retain fees from businesses and individuals seeking and receiving financial assistance through IEDA. A charge of $500 would be collected prior to the issuance of tax incentives under the High Quality Jobs and Enterprise Zones programs. In addition, a fee will be charged equal to 0.5 percent of the value of tax incentives claimed under any High Quality Jobs or Enterprise Zones agreement where the agreement has an aggregate incentive value of $100,000 or more. The fee provisions are effective upon enactment and apply to agreements entered into on or after the effective date of the bill.
The bill increases the aggregate tax credit cap for certain economic development programs under IEDA’s administration. The bill also restricts IEDA from not exceeding 20 percent of the tax credit cap in the next fiscal year. Currently there is no restriction on the amount of the next year’s cap that can be allocated in the current fiscal year.
The cap is increased by $50 million ($120 million to $170 million). This provision is retroactively effective to include the FY 13 cap. HF 620 allows IEDA to reallocate an amount of tax credits awarded that were declined or not all claimed within the same fiscal year and in the previous fiscal year. In addition, the bill allows IEDA to reallocate unused capacity within the allocation for community-based seed capital funds ($2 million) and Innovation fund tax credits ($8 million).
The bill increases Brownfields tax credits from no more than $5 million to no more than $10 million (the tax credit is still under the $170 million cap).
The bill increases the cap on the annual amount of Endow Iowa Tax Credit awards that may be approved for a calendar year from the present level of $3.5 million to a level of $6 million. The bill strikes the reference to the allocation of Gambling Tax receipts (usually around $1 million per year) to the Endow Iowa Tax Credit. The change is effective retroactive to calendar year 2012.
The bill allocates to the City Development Board any fees collected by the Board for application and petitions submitted to the Board. The Board is to use the fees collected to reimburse the Authority for the administrative expenses association with Board operations. Currently, if any fees are collect by the Board, they are deposited in the state’s General Fund. This provision is effective FY14.
Finally, the bill allows IEDA to use no more than $1 million of the High Quality Jobs Incentives that are appropriated in the Skilled Worker Fund in HF 604 (out of the $16.9 million) for infrastructure grants for Main Street Communities. [Floor 5/17: 44-1 (Bolkcom “no”; Behn, Bertrand, Houser, Kapucian, Sorenson excused); Committee 5/17: short form]
HF 640 protects the right of motor fuel retailers to blend renewable fuels on their own instead of being required by a fuel distributor (refiner) to use the blended fuel delivered to them. This preserves the ability of Iowa retailers to access “blender’s credits” under the federal renewable fuel standard. The bill also provides that service contracts between a fuel supplier (refiner) and a retailer cannot impede the retailer’s ability to offer higher renewable fuel blends of motor fuel.
The bill extends liability protections in the event blended fuel is used in a vehicle not designed to use that blend of fuel. It also increases the cost for registering aboveground storage tanks from $10 per year to $20, and exempts aboveground storage tanks up to 5,000 gallons in capacity from registration if the tank is located on a farm. Currently, all tanks up to 1,100 gallons in capacity are exempt from registration. [Floor 5/16: 47-0 (Behn, Houser, Kapucian excused); Committee 5/15: short form]
HF 641 establishes a program to help municipalities develop projects and encourage economic development across Iowa. This program will allow municipalities to establish reinvestment districts where a portion of the sales tax revenue and the applicable hotel and motel sales tax revenues to help finance the capital investment associated with the project. The bill authorizes local governments to establish reinvestment districts to encourage development within their boundaries by using a portion of the sales tax generated by the project and hotel and motel taxes generated by the project. The district will only incorporate areas that will be substantially and directly benefitted by the development within the district.
A district will be established by the local government, and then a proposed district plan will be developed to be submitted to the Economic Development Authority Board. The plan will list all projects to be undertaken within the district and the amount of funding and the type of funding sources proposed to be used to fund the project development. The plan must be accompanied by a feasibility study for the project.
The board will review the plan to ensure:
•That the area of the proposed district meets the requirements of a district
•The project is of a unique nature and will have a substantial beneficial economic impact to the state and municipality
•The proposed funding sources are feasible
•The project has a minimum capital investment of $10 million
•The project does not propose to use retained sales taxes or hotel and motel taxes to finance more than 35 percent of the costs in the proposed district plan
•The plan does not include capital investment for retail businesses that exceed 50 percent of the capital investment for the project or a gaming facility or any facility connected to or operated in conjunction with a gaming facility
The board will not approve any applications after five years. The board may only approve plans that use up to $100 million of retained taxes for financing, and the Department of Revenue may not remit more than $100 million to projects approved by the board. [Floor 5/15: 43-2 (Greiner, Segebart “no”; Behn, Guth, Houser, Kapucian, Zumbach excused); Committee 5/9: short form]