House File 615 - Introduced HOUSE FILE 615 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 494) (SUCCESSOR TO HSB 150) A BILL FOR An Act relating to financial crime enforcement by assessing 1 a drug paraphernalia surcharge, creating a money transfer 2 service fee and related fund and income tax credit, and 3 including retroactive applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2265HZ (2) 87 jm/nh

H.F. 615 Section 1. NEW SECTION . 80.32 Financial crime and wire 1 transmitter fund. 2 1. A financial crime and wire transmitter fund is 3 established in the office of the treasurer of state under the 4 control of the department. Any moneys annually appropriated, 5 granted, or credited to the fund, including any federal moneys, 6 are appropriated to the department for investigating indictable 7 criminal offenses committed for financial gain. 8 2. Notwithstanding section 12C.7, subsection 2, interest 9 and earnings on moneys deposited in the fund shall be credited 10 to the fund. Notwithstanding section 8.33, moneys remaining 11 in the fund at the end of the fiscal year shall not revert to 12 any other fund but shall remain available to be used for the 13 purposes specified in this section. 14 3. For the fiscal year beginning July 1, 2017, and for 15 each fiscal year thereafter, the department shall transfer 16 from the fund to the general fund of the state, the lesser of 17 the amount of fees credited to the fund for the fiscal year 18 pursuant to section 533C.104 or an amount of money equal to the 19 money transfer service tax credits claimed pursuant to section 20 422.10C in that fiscal year, if any. The moneys transferred 21 to the general fund of the state in accordance with this 22 subsection shall not be considered new revenues for purposes 23 of the state general fund expenditure limitation under section 24 8.54 but instead as replacement of a like amount included in 25 the expenditure limitation for the fiscal year in which the 26 transfer is made. 27 Sec. 2. NEW SECTION . 422.10C Money transfer service fee tax 28 credit. 29 1. The taxes imposed under this division, less the credits 30 allowed under section 422.12, shall be reduced by a money 31 transfer service fee tax credit equal to the amount of money 32 transfer service fees under section 533C.104 paid by the 33 taxpayer during the tax year. 34 2. A credit shall not be allowed under this section to 35 -1- LSB 2265HZ (2) 87 jm/nh 1/ 9

H.F. 615 an individual who does not include on the tax return for the 1 taxable year such individual’s valid taxpayer identification 2 number and, if the individual is married, the valid taxpayer 3 identification number of such individual’s spouse. For 4 purposes of this subsection, “taxpayer identification number” 5 means the same as defined in section 32 of the Internal Revenue 6 Code. 7 3. Any credit in excess of the tax liability is refundable. 8 In lieu of claiming a refund, the taxpayer may elect to have 9 the overpayment shown on the taxpayer’s final, completed return 10 credited to the tax liability for the following tax year. 11 Sec. 3. NEW SECTION . 533C.104 Money transfer service fee —— 12 licensee requirements —— enforcement. 13 1. For purposes of this section, unless the context 14 otherwise requires: 15 a. “Department” means the department of revenue. 16 b. “Director” means the director of revenue. 17 c. “Money transfer service” means the transmission of 18 money by any means including transmission within this country 19 or to or from locations abroad by payment instrument, wire, 20 facsimile, or electronic transfer, courier, or otherwise. 21 2. a. A licensee and the authorized delegates of a licensee 22 shall collect from customers a money transfer service fee equal 23 to one percent of the amount of each money transfer service 24 transaction. 25 b. Money transfer service fees shall be paid over to the 26 department by licensees and their authorized delegates who 27 furnish money transfer services. 28 c. The department, in consultation with the superintendent, 29 shall administer and enforce the money transfer service fee as 30 nearly as possible in conjunction with the administration and 31 enforcement of the state sales and use tax law, except that 32 portion of the law which implements the streamlined sales and 33 use tax agreement. 34 d. The director may require licensees and their authorized 35 -2- LSB 2265HZ (2) 87 jm/nh 2/ 9

H.F. 615 delegates to register with the department for purposes of this 1 section. The director may also require a permit applicable 2 only to this section for any licensee or the authorized 3 delegate of a licensee not collecting taxes under chapter 423. 4 e. All powers and requirements of the director to administer 5 the state sales and use tax law are applicable to the 6 administration of the money transfer service fee, including but 7 not limited to the provisions of section 422.25, subsection 4, 8 sections 422.30, 422.67, and 422.68, section 422.69, subsection 9 1, sections 422.70 through 422.75, section 423.14, subsection 10 1 and subsection 2, paragraphs “b” through “e” , and sections 11 423.15, 423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 12 through 423.42, 423.46, and 423.47. 13 f. Failure by a licensee or a licensee’s authorized 14 delegate to collect and remit money transfer service fees 15 or to comply with any other provision of this section shall 16 subject the licensee and the authorized delegates of a licensee 17 to the enforcement provisions of article 7 of this chapter. 18 The director and the department shall cooperate with the 19 superintendent in identifying violations of this section and in 20 discharging the superintendent’s enforcement responsibilities 21 under article 7 of this chapter. 22 g. All money transfer service fees collected under this 23 section shall be deposited in a separate account in the 24 financial crime and wire transmitter fund established by 25 section 80.32. 26 3. A licensee and the authorized delegates of a licensee 27 furnishing money transfer services shall post a notice in the 28 form and manner prescribed by the superintendent that notifies 29 customers that upon filing an individual income tax return with 30 a valid taxpayer identification number, the customer shall be 31 entitled to an individual income tax credit equal to the amount 32 of money transfer service fees paid by the customer during the 33 tax year. 34 4. A money transfer service fee shall not be applied to any 35 -3- LSB 2265HZ (2) 87 jm/nh 3/ 9

H.F. 615 of the following: 1 a. A transaction between an individual and a business 2 registered with the secretary of state of Iowa or another 3 state in the United States, or between an individual and a 4 utility company authorized to do business in this state, which 5 is conducted through a bill payment system and for which the 6 money being transferred is for a good or service not otherwise 7 prohibited by state or federal law for a traceable debt. 8 b. An internet or telephone transfer conducted through a 9 debit card or credit card, or transfer by automated clearing 10 house. 11 c. The sale or servicing of a prepaid debit card or a 12 stored-value card. 13 d. The sale of a money order. 14 e. A check cashing transaction or a delayed deposit 15 transaction. 16 f. Any of the following: 17 (1) The United States or a department, agency, or 18 instrumentality thereof. 19 (2) A money transmission by the United States postal service 20 or by a contractor on behalf of the United States postal 21 service. 22 (3) A state, county, city, or any other governmental agency 23 or governmental subdivision of a state. 24 (4) The following entities whether chartered or organized 25 under the laws of a state or of the United States: a bank, bank 26 holding company, savings and loan association, savings bank, 27 credit union, office of an international banking corporation, 28 branch of a foreign bank, corporation organized pursuant to the 29 federal Bank Service Company Act, 12 U.S.C. §1861 – 1867, or 30 corporation organized under the federal Edge Act, 12 U.S.C. 31 §611 — 633. 32 (5) An electronic funds transfer of governmental benefits 33 for a federal, state, county, or governmental agency by a 34 contractor on behalf of the United States or a department, 35 -4- LSB 2265HZ (2) 87 jm/nh 4/ 9

H.F. 615 agency, or instrumentality thereof, or a state or governmental 1 subdivision, agency, or instrumentality thereof. 2 (6) A board of trade designated as a contract market under 3 the federal Commodity Exchange Act, 7 U.S.C. §1 – 25, or a 4 person who, in the ordinary course of business, provides 5 clearance and settlement services for a board of trade to the 6 extent of its operation as or for such a board. 7 (7) A registered futures commission merchant under the 8 federal commodities laws to the extent of its operation as such 9 a merchant. 10 (8) A person who provides clearance or settlement services 11 pursuant to a registration as a clearing agency or an exemption 12 from such registration granted under the federal securities 13 laws to the extent of its operation as such a provider. 14 (9) An operator of a payment system to the extent that 15 the operator provides processing, clearing, or settlement 16 services, between or among persons excluded by this subsection, 17 in connection with wire transfers, credit card transactions, 18 debit card transactions, stored-value transactions, automated 19 clearing house transfers, or similar funds transfers. 20 (10) A person registered as a securities broker-dealer 21 under federal or state securities laws to the extent of the 22 person’s operation as such a broker-dealer. 23 Sec. 4. Section 602.8102, subsection 135A, Code 2017, is 24 amended to read as follows: 25 135A. Assess the surcharges provided by sections 911.1 , 26 911.2 , 911.2A , 911.2B , 911.2C , 911.3 , and 911.4 , and 911.5 . 27 Sec. 5. Section 602.8108, Code 2017, is amended by adding 28 the following new subsection: 29 NEW SUBSECTION . 13. The clerk of the district court shall 30 remit all moneys collected from the assessment of the drug 31 paraphernalia surcharge provided in section 911.5 to the state 32 court administrator for deposit in the financial crime and wire 33 transmitter fund established in section 80.32. 34 Sec. 6. NEW SECTION . 911.5 Drug paraphernalia surcharge. 35 -5- LSB 2265HZ (2) 87 jm/nh 5/ 9

H.F. 615 1. In addition to any other surcharge, the clerk of the 1 district court shall assess a drug paraphernalia surcharge of 2 five dollars if an adjudication of guilt or a deferred judgment 3 has been entered for a criminal violation of section 124.414 or 4 a similar city or county ordinance. 5 2. The surcharge shall be remitted by the clerk of court as 6 provided in section 602.8108, subsection 13. 7 Sec. 7. RETROACTIVE APPLICABILITY. The following provision 8 or provisions of this Act apply retroactively to January 1, 9 2017, for tax years beginning on or after that date: 10 1. The section of this division enacting section 422.10C. 11 EXPLANATION 12 The inclusion of this explanation does not constitute agreement with 13 the explanation’s substance by the members of the general assembly. 14 This bill relates to financial crime enforcement by 15 assessing a drug paraphernalia surcharge and creating a money 16 transfer service fee and related fund and income tax credit. 17 DRUG PARAPHERNALIA SURCHARGE. The bill provides that the 18 clerk of the district court shall assess a drug paraphernalia 19 surcharge of five dollars if an adjudication of guilt or 20 a deferred judgment has been entered for possessing drug 21 paraphernalia in violation of Code section 124.414 or a similar 22 city or county ordinance. The bill specifies that the clerk of 23 the district court shall remit all moneys collected from the 24 assessment of the surcharge to the state court administrator 25 for deposit in the financial crime and wire transmitter fund 26 established by the bill. 27 MONEY TRANSFER SERVICE FEE AND RELATED FUND AND TAX CREDIT. 28 The bill requires a licensee under Code chapter 533C, the 29 uniform money services Act, to collect from customers a money 30 transfer service fee equal to 1 percent of the amount of each 31 money transfer service transaction. The bill defines “money 32 transfer service” as the transmission of money by any means 33 including transmission within this country or to or from 34 locations abroad by payment instrument, wire, facsimile, or 35 -6- LSB 2265HZ (2) 87 jm/nh 6/ 9

H.F. 615 electronic transfer, courier, or otherwise. 1 The bill requires such licensees to pay such fees over to the 2 department of revenue. The bill requires the department, in 3 consultation with the superintendent of banking, to administer 4 and enforce the money transfer service fee as nearly as 5 possible in conjunction with the administration and enforcement 6 of the state sales and use tax law, except that portion of 7 the law which implements the streamlined sales and use tax 8 agreement. 9 The bill permits the director of revenue to require 10 licensees to register with the department for purposes of 11 the bill. The bill permits the director to require a permit 12 applicable only to the bill for any licensee not collecting 13 taxes under Code chapter 423. The bill provides that all 14 powers and requirements of the director to administer the state 15 sales and use tax law are applicable to the administration of 16 the money transfer service fee. 17 Failure by a licensee to collect and remit money transfer 18 service fees or to comply with any other provision of the bill 19 shall subject the licensee to the enforcement provisions of 20 article 7 of Code chapter 533C. The bill requires the director 21 and the department to cooperate with the superintendent in 22 identifying violations of the bill and in discharging the 23 superintendent’s enforcement responsibilities under article 7 24 of Code chapter 533C. 25 Penalties provided for in article 7 of Code chapter 533C 26 include suspension and revocation of a license under Code 27 chapter 533C, civil penalties, and criminal penalties that 28 include class “C” and “D” felonies and aggravated and simple 29 misdemeanors. A class “C” felony is punishable by confinement 30 for no more than 10 years and a fine of at least $1,000 but 31 not more than $10,000. A class “D” felony is punishable by 32 confinement for no more than five years and a fine of at least 33 $750 but not more than $7,500. An aggravated misdemeanor 34 is punishable by confinement for no more than two years and 35 -7- LSB 2265HZ (2) 87 jm/nh 7/ 9

H.F. 615 a fine of at least $625 but not more than $6,250. A simple 1 misdemeanor is punishable by confinement for no more than 30 2 days or a fine of at least $65 but not more than $625 or by 3 both. 4 The bill provides that all money transfer service fees 5 collected under the bill shall be deposited in the financial 6 crime and wire transmitter fund established by the bill. 7 The money transfer service fee does not apply to numerous 8 types of transactions including but not limited to a sale 9 between an individual and any business registered in the United 10 States, an internet or telephone transfer, the sale of a 11 prepaid debit card or stored-value card, or a check cashing or 12 delayed deposit transaction. 13 The money transfer service fee also does not apply to 14 numerous types of entities including but not limited to the 15 United States government, any state or local government, a 16 money transmission by the United States postal service, an 17 operator of a credit or debit payment system, or a commodity 18 or security trader. 19 The bill requires a licensee furnishing money transfer 20 services to post a notice in the form and manner prescribed 21 by the superintendent that notifies customers that upon 22 filing an individual income tax return with a valid taxpayer 23 identification number, the customer shall be entitled to an 24 individual income tax credit equal to the amount of money 25 transfer service fees paid by the customer during the tax year. 26 The bill also applies to authorized delegates of a licensee 27 under Code chapter 533C. 28 The bill provides an individual income tax credit equal to 29 the amount of money transfer service fees paid by the taxpayer 30 during the tax year. The bill provides that the credit shall 31 not be allowed to an individual who does not include on the tax 32 return for the taxable year the individual’s valid taxpayer 33 identification number and that of the individual’s spouse if 34 applicable. The bill provides that the credit is refundable 35 -8- LSB 2265HZ (2) 87 jm/nh 8/ 9

H.F. 615 and may be credited to the individual’s tax liability for the 1 following tax year. The provision enacting the tax credit 2 applies retroactively to January 1, 2017, for tax years 3 beginning on or after that date. 4 The bill establishes a financial crime and wire transmitter 5 fund in the office of the treasurer of state under the control 6 of the department of public safety. Any moneys annually 7 appropriated, granted, or credited to the fund, including any 8 federal moneys, are appropriated to the department of public 9 safety for the purpose of investigating indictable criminal 10 offenses committed for financial gain. Interest and earnings 11 on moneys deposited in the fund shall be credited to the fund 12 and moneys remaining in the fund at the end of the fiscal year 13 shall not revert. 14 The bill requires the department of public safety, for 15 the fiscal year beginning July 1, 2017, and for each fiscal 16 year thereafter, to transfer from the fund to the general 17 fund of the state, the lesser of the amount of money transfer 18 service fees collected or an amount of money equal to the money 19 transfer service tax credits claimed in that fiscal year, if 20 any. The bill provides that the moneys transferred to the 21 general fund of the state in accordance with the bill shall not 22 be considered new revenues for purposes of the state general 23 fund expenditure limitation under Code section 8.54 but instead 24 as replacement of a like amount included in the expenditure 25 limitation for the fiscal year in which the transfer is made. 26 -9- LSB 2265HZ (2) 87 jm/nh 9/ 9