House File 647 - Introduced HOUSE FILE 647 BY COMMITTEE ON APPROPRIATIONS (SUCCESSOR TO HSB 198) A BILL FOR An Act relating to state finances by prescribing the day on 1 which certain transfers and deposits into and from the 2 general fund of the state shall be made by certain state 3 agencies and amending the duties of the auditor of state 4 with regard to audit and examination reports. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2681HV (1) 87 mm/rj

H.F. 647 Section 1. FINDINGS. The general assembly finds that it 1 is the policy of this state to provide for a reliable and 2 accurate accounting, estimation, and historical comparison 3 of state funds and revenues on a periodic basis and that 4 the provisions of this Act will further that policy goal by 5 fostering predictable and consistent transfers of moneys from 6 and between state agencies and funds. 7 Sec. 2. Section 11.4, subsection 1, Code 2017, is amended by 8 adding the following new paragraph: 9 NEW PARAGRAPH . 0e. With regard to an audit or 10 examination of the department of revenue or the department 11 of administrative services, the auditor’s opinion, after 12 considering the best practices and long-term operations of the 13 department of revenue and the department of administrative 14 services, as to whether the pace at which individual and 15 corporate income tax, franchise tax, and sales and use tax 16 refunds were processed and paid during a fiscal year by the 17 department of revenue was appropriate, and as to whether the 18 fiscal year to which such refunds were accrued and attributed 19 by the department of administrative services was appropriate, 20 or whether a deviation from the best practices and long-term 21 operations of one or more department exists. If a deviation 22 is found to exist, the auditor shall include the auditor’s 23 opinion, if any, as to the reason for the deviation. 24 Sec. 3. Section 123.17, subsection 2, Code 2017, is amended 25 to read as follows: 26 2. a. The director of the department of administrative 27 services shall periodically transfer monthly from the beer 28 and liquor control fund to the general fund of the state 29 those revenues of the division which are not necessary for 30 the purchase of liquor for resale by the division, or for 31 remittances to local authorities or other sources as required 32 by this chapter , or for other obligations and expenses of the 33 division which are paid from such fund. The director shall 34 transfer such amounts on the eighth day of each month or, if 35 -1- LSB 2681HV (1) 87 mm/rj 1/ 13

H.F. 647 such day falls on a weekend or a holiday, the next succeeding 1 business day. The director shall not transfer amounts on any 2 other day unless the director determines that extraordinary 3 circumstances exist. 4 b. All moneys received by the division from the issuance of 5 vintner’s certificates of compliance and wine permits shall be 6 transferred by the director of the department of administrative 7 services to the general fund of the state monthly on the 8 eighth day of the month or, if such day falls on a weekend or 9 a holiday, the next succeeding business day . The director 10 shall not transfer amounts on any other day unless the director 11 determines that extraordinary circumstances exist. 12 Sec. 4. Section 298.14, unnumbered paragraph 2, Code 2017, 13 is amended to read as follows: 14 A school district income surtax fund is created in the 15 office of treasurer of state. Income surtaxes collected by 16 the department of revenue under sections 257.21 , 257.29 , 17 and 298.2 and section 442.15 , Code 1989, shall be deposited 18 in the school district income surtax fund to the credit of 19 each school district. A separate accounting of each surtax, 20 by school district, shall be maintained. Deposits into the 21 school district income surtax fund during any month shall be 22 made on the twentieth day of the month or, if such day falls 23 on a weekend or a holiday, the next succeeding business day. 24 Deposits shall not be made into the school district income 25 surtax fund on any other day unless the director of revenue 26 determines that extraordinary circumstances exist. 27 Sec. 5. Section 421.17, subsections 22, 23, and 24, Code 28 2017, are amended to read as follows: 29 22. To employ collection agencies, within or without 30 the state, to collect delinquent taxes, including penalties 31 and interest, administered by the department or delinquent 32 accounts, charges, loans, fees, or other indebtedness due 33 the state or any state agency, that have formal agreements 34 with the department for central debt collection where the 35 -2- LSB 2681HV (1) 87 mm/rj 2/ 13

H.F. 647 director finds that departmental personnel are unable to 1 collect the delinquent accounts, charges, loans, fees, or 2 other indebtedness because of a debtor’s location outside 3 the state or for any other reason. Fees for services, 4 reimbursement, or other remuneration, including attorney fees, 5 paid to collection agencies shall be based upon the amount 6 of tax, penalty, and interest or debt actually collected and 7 shall be paid only after the amount of tax, penalty, and 8 interest or debt is collected. All funds collected must be 9 remitted in full to the department within thirty days from 10 the date of collection from a debtor or in a lesser time as 11 the director prescribes. The funds shall be applied toward 12 the debtor’s account and handled as are funds received by 13 other means. An amount is appropriated from the amount of 14 tax, penalty, and interest, delinquent accounts, charges, 15 loans, fees, or other indebtedness actually collected by the 16 collection agency sufficient to pay all fees for services, 17 reimbursement, or other remuneration pursuant to a contract 18 with a collection agency under this subsection . Transfers or 19 remittances from the general fund of the state for purposes 20 of the payment of such fees during any month shall be made 21 on the twentieth day of the month or, if such day falls on 22 a weekend or a holiday, the next succeeding business day. 23 Transfers or remittances shall not be made on any other day 24 unless the director determines that extraordinary circumstances 25 exist. A collection agency entering into a contract with the 26 department for the collection of delinquent taxes, penalties, 27 and interests, delinquent accounts, charges, loans, fees, or 28 other indebtedness pursuant to this subsection is subject to 29 the requirements and penalties of the confidentiality laws of 30 this state regarding tax or indebtedness information. 31 23. To develop, modify, or contract with vendors to create 32 or administer systems or programs which identify nonfilers of 33 returns or nonpayers of taxes administered by the department 34 and to identify and prevent the issuance of fraudulent or 35 -3- LSB 2681HV (1) 87 mm/rj 3/ 13

H.F. 647 erroneous refunds. Fees for services, reimbursements, 1 costs incurred by the department, or other remuneration 2 may be funded from the amount of tax, penalty, or interest 3 actually collected and shall be paid only after the amount 4 is collected. An amount is appropriated from the amount 5 of tax, penalty, and interest actually collected, not to 6 exceed the amount collected, which is sufficient to pay for 7 services, reimbursement, costs incurred by the department, or 8 other remuneration pursuant to this subsection . Transfers or 9 remittances from the general fund of the state for purposes of 10 the payment of such fees or costs during any month shall be 11 made on the twentieth day of the month or, if such day falls 12 on a weekend or a holiday, the next succeeding business day. 13 Transfers or remittances shall not be made on any other day 14 unless the director determines that extraordinary circumstances 15 exist. Vendors entering into a contract with the department 16 pursuant to this subsection are subject to the requirements and 17 penalties of the confidentiality laws of this state regarding 18 tax information. The director shall report annually to the 19 legislative services agency and the chairpersons and ranking 20 members of the ways and means committees on the amount of costs 21 incurred and paid during the previous fiscal year pursuant 22 to this subsection and the incidence of refund fraud and the 23 costs incurred and amounts prevented from issuance during the 24 previous fiscal year pursuant to this subsection . 25 24. To enter into agreements or compacts with remote 26 sellers, retailers, or third-party providers for the voluntary 27 collection of Iowa sales or use taxes attributable to sales 28 into Iowa. The director has the authority to enter into 29 and perform all duties required of the office of director 30 by multistate agreements or compacts that provide for the 31 collection of sales and use taxes, including joint audits 32 with other states or audits on behalf of other states. 33 The agreements or compacts shall generally conform to the 34 provisions of Iowa sales and use tax statutes. All fees for 35 -4- LSB 2681HV (1) 87 mm/rj 4/ 13

H.F. 647 services, reimbursements, remuneration, incentives, and costs 1 incurred by the department associated with these agreements 2 or compacts may be paid or reimbursed from the additional 3 revenue generated. An amount is appropriated from amounts 4 generated to pay or reimburse all costs associated with this 5 subsection . Transfers or remittances from the general fund of 6 the state for purposes of the payment of such fees or costs 7 during any month shall be made on the twentieth day of the 8 month or, if such day falls on a weekend or a holiday, the 9 next succeeding business day. Transfers or remittances shall 10 not be made on any other day unless the director determines 11 that extraordinary circumstances exist. Persons entering into 12 an agreement or compact with the department pursuant to this 13 subsection are subject to the requirements and penalties of the 14 confidentiality laws of this state regarding tax information. 15 Notwithstanding any other provisions of law, the contract, 16 agreement, or compact shall provide for the registration, 17 collection, report, and verification of amounts subject to this 18 subsection . 19 Sec. 6. Section 422.16, subsection 2, Code 2017, is amended 20 by adding the following new paragraph: 21 NEW PARAGRAPH . e. A withholding agent that is a state 22 agency or department and that withholds more than five thousand 23 dollars in a semimonthly period shall deposit such required 24 semimonthly deposit amounts on the tenth day of the month and 25 the twenty-fifth day of the month or, if such day falls on a 26 weekend or a holiday, the next succeeding business day, and 27 shall not deposit semimonthly withholding amounts with the 28 department on any other day unless the director determines that 29 extraordinary circumstances exist. 30 Sec. 7. Section 422.16A, Code 2017, is amended to read as 31 follows: 32 422.16A Job training withholding —— certification and 33 transfer. 34 Upon the completion by a business of its repayment 35 -5- LSB 2681HV (1) 87 mm/rj 5/ 13

H.F. 647 obligation for a training project funded under chapter 260E , 1 including a job training project funded under section 15A.8 2 or repaid in whole or in part by the supplemental new jobs 3 credit from withholding under section 15A.7 or section 15E.197, 4 Code 2014, the sponsoring community college shall report to 5 the economic development authority the amount of withholding 6 paid by the business to the community college during the 7 final twelve months of withholding payments. The economic 8 development authority shall notify the department of revenue 9 of that amount. The department shall credit to the workforce 10 development fund account established in section 15.342A 11 twenty-five percent of that amount each quarter four times per 12 year for a period of ten years. The department shall credit 13 such amounts on October 20, December 20, March 20, and June 20 14 or, if one of those days falls on a weekend or a holiday, on 15 the next succeeding business day. The department shall not 16 credit amounts on any other day unless the director determines 17 that extraordinary circumstances exist. If the amount of 18 withholding from the business or employer is insufficient, 19 the department shall prorate the quarterly amount credited to 20 the workforce development fund account. The maximum amount 21 from all employers which shall be transferred to the workforce 22 development fund account in any year is six million dollars. 23 Sec. 8. Section 422.69, subsection 1, Code 2017, is amended 24 to read as follows: 25 1. All fees, taxes, interest, and penalties imposed under 26 this chapter shall be paid to the department in the form of 27 remittances payable to the state treasurer and the department 28 shall transmit each payment daily to the state treasurer. The 29 department shall transmit withholding amounts considered to 30 be timely paid to the department pursuant to section 422.16 31 no later than one business day following the due date of the 32 withholding amount. 33 Sec. 9. Section 422D.3, unnumbered paragraph 4, Code 2017, 34 is amended to read as follows: 35 -6- LSB 2681HV (1) 87 mm/rj 6/ 13

H.F. 647 The director, in consultation with local officials, shall 1 collect and account for a local income surtax and any interest 2 and penalties. The director shall credit local income surtax 3 receipts and any interest and penalties collected from returns 4 filed on or before November 1 of the calendar year following 5 the tax year for which the local income surtax is imposed to 6 a “local income surtax fund” established in the department of 7 revenue. The director shall credit such amounts during any 8 month on the twentieth day of the month or, if such day falls on 9 a weekend or a holiday, on the next succeeding business day. 10 The director shall not credit amounts on any other day unless 11 the director determines that extraordinary circumstances exist. 12 All local income surtax receipts and any interest and penalties 13 received or refunded from returns filed after November 1 of the 14 calendar year following the tax year for which the local income 15 surtax is imposed shall be deposited in or withdrawn from the 16 state general fund and shall be considered part of the cost of 17 administering the local income surtax. 18 Sec. 10. Section 423.2, subsection 11, Code 2017, is amended 19 by adding the following new paragraph: 20 NEW PARAGRAPH . c. Notwithstanding any other provision of 21 law to the contrary, the department shall transfer amounts 22 during any month from the general fund of the state pursuant 23 to paragraph “b” to the local sales and services tax fund 24 created in section 423B.6, the natural resources and outdoor 25 recreation trust fund created in section 461.31, the secure an 26 advanced vision for education fund created in section 423F.2, 27 the baseball and softball complex sales tax rebate fund created 28 in section 423.4, subsection 10, paragraph “e” , the state 29 reinvestment district fund created in section 15J.6, the sales 30 tax increment fund created in section 418.12, and the raceway 31 facility tax rebate fund created in section 423.4, subsection 32 11, paragraph “e” , on the twentieth day of the month or, if such 33 day falls on a weekend or a holiday, on the next succeeding 34 business day. The department shall not transfer amounts on any 35 -7- LSB 2681HV (1) 87 mm/rj 7/ 13

H.F. 647 other day unless the director determines that extraordinary 1 circumstances exist. 2 Sec. 11. NEW SECTION . 423.32A Transmittance of sales and 3 use tax revenues. 4 The department shall transmit all fees, taxes, interest, 5 and penalties imposed under this chapter and received by the 6 department for deposit into the general fund of the state 7 pursuant to section 423.2, subsection 11, or section 423.43, 8 subsection 1, daily to the state treasurer for such deposit. 9 The department shall transmit sales and use tax deposit amounts 10 that are timely paid to the department pursuant to sections 11 423.31 and 423.32 and that are to be deposited in the general 12 fund of the state pursuant to section 423.2, subsection 11, or 13 section 423.43, subsection 1, to the state treasurer no later 14 than one business day following the due date of the deposit 15 amount. 16 Sec. 12. Section 423A.6, subsections 2 and 3, Code 2017, are 17 amended to read as follows: 18 2. If a reinvestment district is established under chapter 19 15J , beginning the first day of the calendar quarter beginning 20 on the reinvestment district’s commencement date, the director 21 of revenue shall, subject to remittance limitations established 22 by the economic development authority board pursuant to section 23 15J.4, subsection 3 , transfer from the general fund of the 24 state to a district account created in the state reinvestment 25 district fund for each reinvestment district established under 26 chapter 15J , the amount of the new state hotel and motel tax 27 revenue, determined in section 15J.5, subsection 2 , paragraph 28 “b” , in the district. Such transfers shall cease pursuant 29 to section 15J.8 . The director shall make such transfers 30 during any month on the twentieth day of the month or, if such 31 day falls on a weekend or a holiday, on the next succeeding 32 business day. The director shall not transfer amounts on any 33 other day unless the director determines that extraordinary 34 circumstances exist. 35 -8- LSB 2681HV (1) 87 mm/rj 8/ 13

H.F. 647 3. The director of revenue , in consultation with local 1 officials, shall collect and account for a local hotel and 2 motel tax and shall credit all revenues to the local transient 3 guest tax fund created in section 423A.7 . Local authorities 4 shall not require any tax permit not required by the director 5 of revenue . The director shall credit such amounts during any 6 month on the twentieth day of the month or, if such day falls on 7 a weekend or a holiday, on the next succeeding business day. 8 The director shall not credit amounts on any other day unless 9 the director determines that extraordinary circumstances exist. 10 Sec. 13. Section 556.18, subsections 1 and 3, Code 2017, are 11 amended to read as follows: 12 1. Except as provided in subsection 3 , all funds received 13 under this chapter , including the proceeds from the sale of 14 abandoned property under section 556.17 , shall be deposited 15 quarterly four times per year by the treasurer of state in 16 the general fund of the state on October 20, December 20, 17 March 20, and June 20 or, if one of those days falls on a 18 weekend or a holiday, on the next succeeding business day . The 19 treasurer of state shall not deposit amounts on any other day 20 unless the treasurer of state determines that extraordinary 21 circumstances exist. However, the treasurer of state shall 22 retain in a separate trust fund a sufficient amount from which 23 the treasurer of state shall make prompt payment of claims duly 24 allowed under section 556.20 . Before making the deposit, the 25 treasurer of state shall record the name and last known address 26 of each person appearing from the holders’ reports to be 27 entitled to the abandoned property and the name and last known 28 address of each insured person or annuitant, and with respect 29 to each policy or contract listed in the report of a life 30 insurance corporation, its number, the name of the corporation, 31 and the amount due. The record shall be available for public 32 inspection at all reasonable business hours. 33 3. The treasurer of state shall annually credit on January 34 20 all moneys received under section 556.4 to the general 35 -9- LSB 2681HV (1) 87 mm/rj 9/ 13

H.F. 647 fund of the state. If January 20 falls on a weekend or a 1 holiday, the moneys shall be credited on the next succeeding 2 business day. The treasurer of state shall not credit moneys 3 on any other day unless the treasurer of state determines 4 that extraordinary circumstances exist. Moneys credited to 5 the general fund of the state pursuant to this subsection are 6 subject to the requirements of subsections 1 and 2 and section 7 8.60 . 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill relates to state finances, and includes findings. 12 Current law requires certain revenues and other moneys to be 13 deposited in or withdrawn from the general fund of the state 14 (general fund) by certain state agencies, but does not dictate 15 the day on which such deposits or withdrawals are made. The 16 bill provides a day or days on which certain deposits or 17 withdrawals must be made. 18 The bill provides that beer and liquor revenues and 19 vintner’s certificate and wine permit revenues required under 20 Code section 123.17 to be transferred by the department of 21 administrative services (DAS) from the beer and liquor control 22 fund to the general fund shall be transferred monthly on the 23 eighth day of the month, or the next succeeding business day if 24 the eighth day falls on a weekend or holiday. Transfers on any 25 other day are prohibited unless the director of DAS determines 26 extraordinary circumstances exist. 27 The bill provides that deposits and credits by the 28 department of revenue (DOR) of school district and emergency 29 medical services income surtax revenues into the school 30 district income surtax fund as required by Code section 298.14 31 and the local income surtax fund as required by Code section 32 422D.3 shall be made on the 20th day of a month, or the next 33 succeeding business day if the 20th day falls on a weekend 34 or holiday. Deposits and credits shall not be made on any 35 -10- LSB 2681HV (1) 87 mm/rj 10/ 13

H.F. 647 other day unless the director of DOR determines extraordinary 1 circumstances exist. 2 Current law in Code section 421.17 allows DOR to contract 3 with third-party vendors for the collection of taxes and other 4 amounts, and from those collections current law provides for 5 several appropriations to DOR of amounts sufficient to pay 6 for the third-party vendor services. The bill provides that 7 transfers or remittances from the general fund for the payment 8 of the services shall be made on the 20th day of the month, 9 or the next succeeding business day if the 20th day falls on 10 a weekend or holiday. Transfers shall not be made on any 11 other day unless the director of DOR determines extraordinary 12 circumstances exist. 13 The bill provides that moneys credited by DOR from the 14 general fund to the workforce development fund account 15 established in Code section 15.342A shall be credited on 16 October 20, December 20, March 20, and June 20, or on the 17 next succeeding business day if one of those days falls on 18 a weekend or holiday. The director of DOR shall not credit 19 amounts on any other day unless the director of DOR determines 20 extraordinary circumstances exist. 21 The bill provides that sales and use tax revenues received 22 by DOR for deposit in the general fund shall be transmitted 23 daily to the treasurer of state for such deposit, and further 24 provides that sales and use tax deposit amounts that are timely 25 paid by taxpayers to DOR shall be transmitted by DOR to the 26 treasurer of state no later than one business day following the 27 due date of the deposit amount. 28 Current law in Code section 423.3(11)(b) provides for 29 several transfers of sales and use tax revenues by DOR from 30 the general fund to various other funds for various purposes, 31 including a local option sales tax fund, the natural resources 32 and outdoor recreation trust fund, the secure an advanced 33 vision for education fund, a baseball and softball complex 34 sales tax rebate fund, a reinvestment district fund, a flood 35 -11- LSB 2681HV (1) 87 mm/rj 11/ 13

H.F. 647 mitigation program fund, and a raceway facility tax rebate 1 fund. The bill provides that these transfers shall be made on 2 the 20th day of the month, or on the next succeeding business 3 day if the 20th day falls on a weekend or holiday. Transfers 4 shall not be made on any other day unless the director of DOR 5 determines extraordinary circumstances exist. 6 Current law in Code section 423A.6 provides for several 7 transfers of hotel and motel tax revenues by DOR from the 8 general fund to various other funds for various purposes, 9 including a reinvestment district fund and a local hotel and 10 motel tax fund. The bill provides that these transfers shall 11 be made on the 20th day of the month, or on the next succeeding 12 business day if the 20th day falls on a weekend or holiday. 13 Transfers shall not be made on any other day unless the 14 director of DOR determines extraordinary circumstances exist. 15 Current law in Code section 556.18 requires the treasurer 16 of state to transfer unclaimed property funds received by the 17 treasurer quarterly to the general fund. The bill requires 18 such transfers to be made four times per year on October 20, 19 December 20, March 20, and June 20, or on the next succeeding 20 business day if one of those dates falls on a weekend or 21 holiday. Transfers shall not be made on any other day unless 22 the treasurer of state determines extraordinary circumstances 23 exist. Current law further provides that certain unclaimed 24 deposits and refunds held by utilities shall be annually 25 credited by the treasurer of state to the general fund. The 26 bill requires such annual credits to be made on January 20, 27 or on the next succeeding business day if January 20 falls 28 on a weekend or holiday. The treasurer of state shall not 29 credit amounts on any other day unless the treasurer of state 30 determines extraordinary circumstances exist. 31 Current law requires employers (withholding agents) to 32 withhold income tax from employees and remit that tax to DOR 33 at varying frequencies depending on the total amount withheld 34 by the employer. The bill requires a withholding agent that 35 -12- LSB 2681HV (1) 87 mm/rj 12/ 13

H.F. 647 is a state agency or department and that withholds more than 1 $5,000 from employees in a semimonthly period (semimonthly 2 depositor) to deposit such required semimonthly deposit amounts 3 with DOR on the 10th day and 25th day of the month, or on the 4 next succeeding business day if such day falls on a weekend or 5 holiday. Such agencies or departments shall not deposit these 6 withholding amounts on any other day unless the director of DOR 7 determines extraordinary circumstances exist. 8 Furthermore, the bill requires withholding amounts that 9 are timely paid by any withholding agent to be transmitted by 10 DOR to the treasurer of state no later than one business day 11 following the due date of the withholding amount. 12 Finally, Code section 11.4 requires the auditor of state 13 to file written reports following all audits and examinations 14 and requires such reports to include certain information or 15 opinions. The bill adds a requirement that the auditor of 16 state, when auditing or examining DOR or DAS, include in the 17 report the auditor’s opinion, after considering the best 18 practices and long-term operations of each department, as to 19 whether the pace at which certain tax refunds were processed 20 and paid during a fiscal year by DOR was appropriate, and as 21 to whether the fiscal year to which such refunds were accrued 22 and attributed by DAS was appropriate, or whether a deviation 23 from the best practices and long-term operations of one or 24 more department exists. If a deviation is found to exist, the 25 auditor shall include the auditor’s opinion, if any, as to the 26 reason for the deviation. 27 -13- LSB 2681HV (1) 87 mm/rj 13/ 13