Senate File 496 - Introduced SENATE FILE 496 BY DANIELSON A BILL FOR An Act relating to state and local government revenue and 1 finance by requiring the legislative services agency to 2 conduct a biennial tax expenditure study and report to 3 the general assembly and the legislative tax expenditure 4 committee, making the availability of tax expenditures in 5 future fiscal years subject to approval by the general 6 assembly, and limiting appropriations for certain property 7 tax credits in future fiscal years. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 2194SS (8) 87 mm/rn/sc

S.F. 496 DIVISION I 1 TAX EXPENDITURE STUDY 2 Section 1. NEW SECTION . 2A.9 Tax expenditure study and 3 report. 4 1. For purposes of this section, “tax expenditure” means the 5 same as defined in section 2.48, subsection 1, paragraph “a” . 6 2. Beginning in 2018, and every even-numbered year 7 thereafter, the legislative services agency shall conduct a 8 study and prepare a written report on the fiscal impact that 9 tax expenditures have on state and local government capacity 10 to raise revenue. The study shall examine tax expenditures 11 related to the following: 12 a. The individual income tax imposed in chapter 422, 13 division II. 14 b. The corporate income tax imposed in chapter 422, division 15 III. 16 c. Tax credits available against the franchise tax imposed 17 in chapter 422, division V, the insurance companies tax imposed 18 in chapter 432, and the moneys and credits tax imposed in 19 section 533.329. 20 d. The sales and use taxes imposed in chapter 423. 21 e. Property taxes levied by or on behalf of political 22 subdivisions. 23 3. a. The 2018 study shall examine the relevant tax 24 expenditures for the most recent year for which complete tax 25 expenditure data is available. 26 b. Each subsequent study shall examine the relevant tax 27 expenditure data for the year or years for which complete 28 tax expenditure data is available since the last complete 29 year that was the subject of a previous report. However, if 30 there is not a new year for which complete tax expenditure 31 data is available, the study shall examine the available tax 32 expenditure data for the year following the last year for which 33 complete tax expenditure data was included in the previous 34 report. 35 -1- LSB 2194SS (8) 87 mm/rn/sc 1/ 17

S.F. 496 4. The legislative services agency shall submit the written 1 report to the general assembly and the chairpersons of the 2 legislative tax expenditure committee by January 31, 2019, and 3 by January 31 of each odd-numbered year thereafter, containing 4 the results of the study conducted during the previous year. 5 5. The department of revenue and any other state or local 6 agency shall cooperate with the legislative services agency in 7 providing the information necessary to complete each study. 8 DIVISION II 9 TAX EXPENDITURE LIMITATION 10 Sec. 2. NEW SECTION . 421C.1 Tax expenditure defined. 11 Any reference to “tax expenditure” in this chapter includes 12 all of the following: 13 1. Withholding tax credits. 14 a. The accelerated career education program job credit 15 allowed under section 260G.4A. 16 b. The new jobs credit from withholding allowed under 17 section 15A.7, or section 15E.197, Code 2014, or section 18 260E.5. 19 c. The targeted jobs withholding tax credit allowed under 20 chapter 403.19A. 21 2. Tax credits. 22 a. The agricultural assets transfer tax credit allowed under 23 sections 16.80 and 422.11M and section 422.33, subsection 21. 24 b. The custom farming contract tax credit allowed under 25 sections 16.81 and 422.11M and section 422.33, subsection 21. 26 c. The farm to food donation tax credit allowed under 27 chapter 190B, section 422.11R, and section 422.33, subsection 28 30. 29 d. The charitable conservation contribution tax credit 30 allowed under section 422.11W and section 422.33, subsection 31 25. 32 e. The school tuition organization tax credit allowed under 33 section 422.11S and section 422.33, subsection 28. 34 f. The personal exemption credits allowed under section 35 -2- LSB 2194SS (8) 87 mm/rn/sc 2/ 17

S.F. 496 422.12, subsection 2, paragraph “a” . 1 g. The tuition and textbook tax credit allowed under section 2 422.12, subsection 2, paragraph “b” . 3 h. The volunteer fire fighter and emergency medical services 4 personnel tax credit allowed under section 422.12, subsection 5 2, paragraph “c” . 6 i. The reserve peace officer tax credit allowed under 7 section 422.12, subsection 2, paragraph “d” . 8 j. The adoption tax credit allowed under section 422.12A. 9 k. The child and dependent care tax credit allowed under 10 section 422.12C. 11 l. The early childhood development tax credit allowed under 12 section 422.12C. 13 m. The earned income tax credit allowed under section 14 422.12B. 15 n. The geothermal heat pump tax credit allowed under section 16 422.11I. 17 o. The geothermal tax credit allowed under section 422.10A. 18 p. The solar energy system tax credit allowed under section 19 422.11L, section 422.33, subsection 29, section 422.60, 20 subsection 12, and section 533.329, subsection 2, paragraph 21 “l” . 22 q. The wind energy production tax credit and the renewable 23 energy production tax credit allowed under chapters 476B and 24 476C, section 422.llJ, section 422.33, subsection 16, section 25 422.60, subsection 7, section 432.12E, and section 437A.17B. 26 r. The biodiesel blended fuel tax credit allowed under 27 section 422.11P and section 422.33, subsection 11C. 28 s. The E-15 plus gasoline promotion tax credit allowed under 29 section 422.11Y and section 422.33, subsection 11D. 30 t. The E-85 gasoline promotion tax credit allowed under 31 section 422.11O and section 422.33, subsection 11B. 32 u. The ethanol promotion tax credit allowed under section 33 422.11N and section 422.33, subsection 11A. 34 v. The fuel tax credit allowed under sections 422.110 35 -3- LSB 2194SS (8) 87 mm/rn/sc 3/ 17

S.F. 496 through 422.112. 1 w. The renewable chemical production tax credit allowed 2 under sections 15.319 and 422.10B and section 422.33, 3 subsection 22. 4 x. The endow Iowa tax credit allowed under sections 15E.305 5 and 422.11H, section 422.33, subsection 14, section 422.60, 6 subsection 6, section 432.12D, and section 533.329, subsection 7 2, paragraph “h” . 8 y. The investment tax credit allowed under section 15.333, 9 section 422.11F, subsection 2, section 422.33, subsection 12, 10 paragraph “b” , section 422.60, subsection 5, paragraph “b” , and 11 section 533.329, subsection 2, paragraph “e” . 12 z. The insurance premiums tax credit allowed under section 13 15.333A and section 432.12C, subsection 2. 14 aa. The new jobs tax credit allowed under section 422.11A 15 and section 422.33, subsection 6. 16 ab. The innovation fund investment tax credit allowed under 17 sections 15E.52 and 422.11Z, section 422.33, subsection 13, 18 section 422.60, subsection 11, section 432.12M, and section 19 533.329 subsection 2, paragraph “j” . 20 ac. The workforce housing investment tax credit allowed 21 under section 15.355, subsection 3, section 422.11C, section 22 422.33, subsection 15, section 422.60, subsection 13, section 23 432.12G, and section 533.239, subsection 2, paragraph “k” . 24 ad. The research activities credit and supplemental research 25 activities credit allowed under sections 15.335 and 422.10 and 26 section 422.33, subsection 5. 27 ae. The assistive device tax credit allowed under section 28 422.33, subsection 9. 29 af. The corporate tax credit for certain sales taxes paid by 30 third-party developers allowed under section 15.331C, section 31 422.33, subsection 19, section 422.60, subsection 8, section 32 432.12H, and section 533.329, subsection 2, paragraph “d” . 33 ag. The historic preservation and cultural and entertainment 34 district tax credit allowed under chapter 404A, section 35 -4- LSB 2194SS (8) 87 mm/rn/sc 4/ 17

S.F. 496 422.11D, section 422.33, subsection 10, section 422.60, 1 subsection 4, and section 432.12A. 2 ah. The redevelopment tax credit allowed under chapter 3 15, subchapter II, part 9, section 422.11V, section 422.33, 4 subsection 26, section 422.60, subsection 10, section 432.12L, 5 and section 533.329, subsection 2, paragraph “i” . 6 ai. The investment tax credit allowed under section 15E.43, 7 section 422.11F, subsection 1, section 422.33, subsection 12, 8 section 422.60, subsection 5, paragraph “a” , section 432.12C, 9 subsection 1, and section 533.329, subsection 2, paragraph “f” . 10 aj. The Iowa taxpayers trust fund tax credit allowed under 11 section 422.11E. 12 ak. The minimum tax credit allowed under section 422.11B and 13 section 422.33, subsection 7. 14 3. Sales and use tax refunds. 15 a. The high quality jobs program sales and use tax refund 16 allowed under section 15.331A. 17 b. The workforce housing tax incentive program sales and use 18 tax refund allowed under section 15.355, subsection 2. 19 c. The wind energy production tax credit and the renewable 20 energy production tax credit sales and use tax refunds allowed 21 under chapters 476B and 476C and section 423.4, subsection 4. 22 d. The sales and use tax refunds allowed under section 23 423.4. 24 4. Exemptions from the sales and use tax, hotel and motel 25 tax, equipment tax, real estate transfer tax, automobile rental 26 excise tax, fee for new registration, and motor fuel and special 27 fuel taxes. 28 a. The exemptions from the sales tax provided in section 29 423.3, except subsections 1 and 43. 30 b. The exemptions from the use tax provided in section 31 423.6, except subsections 1, 2, and 4. 32 c. The exemptions from the state hotel and motel tax 33 provided in section 423A.5, subsection 1. 34 d. The exemptions from the automobile rental excise tax 35 -5- LSB 2194SS (8) 87 mm/rn/sc 5/ 17

S.F. 496 provided in section 423C.3, subsection 1. 1 e. The exemptions from the equipment tax provided in section 2 423D.3. 3 f. The exemptions from the real estate transfer tax provided 4 in section 428A.2. 5 g. The exemptions from the fee for new registration provided 6 in section 321.105A, subsection 2, paragraphs “a” through “c” . 7 h. The exemptions from the motor fuel and special fuel 8 taxes provided in section 452A.17, subsection 1, paragraph “a” , 9 except subparagraph (1). 10 5. Inheritance tax exemptions and deductions. 11 a. The exemptions from the inheritance tax provided in 12 sections 450.4 and 450.9. 13 b. The deductions of liabilities from the gross value of an 14 estate provided in section 450.12. 15 6. Adjustments to calculation of income taxes, franchise tax, 16 and moneys and credits tax. 17 a. The adjustments allowed in calculating net income for 18 individual income tax purposes under section 422.7, subsections 19 5, 7, 8, 9, 10, 12, 12A, 13, 16, 20, 21, 22, 23, 24, 25, 27, 20 28, 29, 30, 31, 31A, and 31B, subsection 32, paragraph “a” , 21 subsection 33, subsection 34, paragraph “a” , and subsections 22 34A, 35, 37, 38, 40, 42, 42A, 44, 45, 46, 46A, 47, 49, 50, 54, 23 55, 56, 57, and 58. 24 b. The subtractions allowed in section 422.7, subsection 25 2, and section 422.35, subsection 2, in calculating net income 26 for purposes of the individual income tax and the corporate 27 income tax and franchise tax of interest and dividends from 28 certain Iowa bonds exempt from taxation as otherwise provided 29 by law, including those listed in section 422.7, subsection 2, 30 paragraphs “a” through “v” . 31 c. The deductions from net income for individual income tax 32 purposes allowed under section 422.9, subsections 1 and 2. 33 d. The adjustments allowed in calculating net income for 34 corporate income tax and franchise tax purposes under section 35 -6- LSB 2194SS (8) 87 mm/rn/sc 6/ 17

S.F. 496 422.35, subsections 4, 5, 6, 6A, 7, 11, 12, 17, 22, and 25. 1 e. The adjustments made in calculating net income for 2 franchise tax purposes under section 422.61, subsection 3, 3 paragraph “g” . 4 f. The forty thousand dollar exemption from the moneys and 5 credits tax allowed to a state credit union in section 533.329, 6 subsection 2, paragraph “a” . 7 Sec. 3. NEW SECTION . 421C.2 Tax expenditures limited —— 8 general assembly annual review and approval. 9 1. Findings and purpose. The general assembly finds that 10 the number and amount of credits, refunds, rebates, deductions, 11 and exemptions provided against the taxes imposed by this state 12 are substantial and warrant annual review and approval by the 13 general assembly. The purpose of this chapter is to provide 14 for a systematic review and approval by the general assembly 15 of each tax expenditure on an annual basis in order to promote 16 more sustainable and responsible tax revenue collection, 17 budgeting, and appropriation processes in this state. 18 2. Tax expenditure review and approval —— generally. 19 a. Beginning with the 2018 regular session of the general 20 assembly and during each regular session thereafter, the 21 general assembly shall review each tax expenditure listed 22 in section 421C.1, and shall, if desired, expressly approve 23 through an Act of the general assembly the applicability of the 24 tax expenditure for the forthcoming fiscal year as provided in 25 and subject to the limitations of subsections 3 through 8. 26 b. Notwithstanding any other provision of law to the 27 contrary, the provisions of subsections 3 through 8 apply for 28 each fiscal year beginning on or after July 1, 2018, and a tax 29 expenditure not approved by the general assembly as provided in 30 those subsections shall not be available under Iowa law for a 31 fiscal year beginning on or after July 1, 2018. 32 3. Withholding tax credits. The withholding tax credits 33 listed in section 421C.1, subsection 1, shall not be allowed 34 against any amounts withheld by an employer from wages paid 35 -7- LSB 2194SS (8) 87 mm/rn/sc 7/ 17

S.F. 496 during a fiscal year beginning on or after July 1, 2018, unless 1 the applicability of the withholding tax credit to that fiscal 2 year was expressly approved through an Act of the general 3 assembly during the last regular session beginning prior to 4 July 1 of the applicable fiscal year. 5 4. Tax credits. The tax credits listed in section 421C.1, 6 subsection 2, shall not be allowed for any tax year beginning 7 during a fiscal year beginning on or after July 1, 2018, unless 8 the applicability of the tax credit to tax years beginning 9 during that fiscal year was expressly approved through an 10 Act of the general assembly during the last regular session 11 beginning prior to July 1 of the applicable fiscal year. 12 5. Sales and use tax refunds. The sales and use tax 13 refunds listed in section 421C.1, subsection 3, shall not be 14 allowed for any sales and use tax liability incurred during 15 a fiscal year beginning on or after July 1, 2018, unless the 16 applicability of the sales and use tax refund to that fiscal 17 year was expressly approved through an Act of the general 18 assembly during the last regular session beginning prior to 19 July 1 of the applicable fiscal year. 20 6. Exemptions from the sales and use tax, hotel and motel 21 tax, equipment tax, real estate transfer tax, automobile rental 22 excise tax, fee for new registration, and motor fuel and special 23 fuel taxes. The exemptions listed in section 421C.1, subsection 24 4, shall not be allowed for any sales, purchases, transfers, or 25 uses during a fiscal year beginning on or after July 1, 2018, 26 unless the applicability of the exemption to that fiscal year 27 was expressly approved through an Act of the general assembly 28 during the last regular session beginning prior to July 1 of 29 the applicable fiscal year. 30 7. Inheritance tax exemptions and deductions. The 31 inheritance tax exemptions and deductions listed in section 32 421C.1, subsection 5, shall not be allowed for any estate of a 33 decedent dying during a fiscal year beginning on or after July 34 1, 2018, unless the applicability of the exemption or deduction 35 -8- LSB 2194SS (8) 87 mm/rn/sc 8/ 17

S.F. 496 to that fiscal year was expressly approved through an Act of 1 the general assembly during the last regular session beginning 2 prior to July 1 of the applicable fiscal year. 3 8. Adjustments to calculation of income taxes, franchise tax, 4 and moneys and credits tax. The adjustments to the calculation 5 of the income taxes, franchise tax, and moneys and credits tax 6 listed in section 421C.1, subsection 6, shall not be allowed 7 for any tax year beginning during a fiscal year beginning on or 8 after July 1, 2018, unless the applicability of the adjustment 9 to tax years beginning during that fiscal year was expressly 10 approved through an Act of the general assembly during the last 11 regular session beginning prior to July 1 of the applicable 12 fiscal year. 13 Sec. 4. CORRESPONDING AMENDMENTS LEGISLATION. Additional 14 legislation may be required to fully implement this division 15 of this Act. The director of the department of revenue shall, 16 in compliance with section 2.16, prepare draft legislation for 17 submission to the legislative services agency, if necessary, to 18 implement the annual review and approval of tax expenditures 19 under this division of this Act and under other provisions of 20 law. 21 DIVISION III 22 PROPERTY TAX CREDITS AND PAYMENTS LIMITATION 23 Sec. 5. Section 25B.7, subsection 2, Code 2017, is amended 24 to read as follows: 25 2. The requirement for fully funding and the consequences 26 of not fully funding credits and exemptions under subsection 1 27 also apply to all of the following: 28 a. Homestead tax credit pursuant to sections 425.1 through 29 425.15 . 30 b. Low-income property tax credit and elderly and disabled 31 property tax credit pursuant to sections 425.16 through 425.40 . 32 c. Family farm property tax credit pursuant to chapter 425A. 33 d. Agricultural land property tax credit pursuant to chapter 34 426. 35 -9- LSB 2194SS (8) 87 mm/rn/sc 9/ 17

S.F. 496 c. e. Military service property tax credit and exemption 1 pursuant to chapter 426A , to the extent of six dollars and 2 ninety-two cents per thousand dollars of assessed value of the 3 exempt property. 4 f. Business property tax credit pursuant to chapter 426C. 5 g. Manufactured or mobile home tax credit pursuant to 6 section 435.22. 7 Sec. 6. Section 425.1, subsections 1, 2, and 3, Code 2017, 8 are amended to read as follows: 9 1. a. A homestead credit fund is created. There For fiscal 10 years beginning before July 1, 2018, there is appropriated 11 annually from the general fund of the state to the department 12 of revenue to be credited to the homestead credit fund, an 13 amount sufficient to implement this chapter . 14 b. The Subject to the availability of funding, the director 15 of the department of administrative services shall issue 16 warrants on the homestead credit fund payable to the county 17 treasurers of the several counties of the state under this 18 chapter . 19 2. The Subject to the availability of funding, the homestead 20 credit fund shall be apportioned each year so as to give a 21 credit against the tax on each eligible homestead in the 22 state in an amount equal to the actual levy on the first four 23 thousand eight hundred fifty dollars of actual value for each 24 homestead. 25 3. The Subject to the availability of funding, the amount 26 due each county shall be paid in two payments on November 15 27 and March 15 of each fiscal year, drawn upon warrants payable 28 to the respective county treasurers. The two payments shall 29 be as nearly equal as possible. 30 Sec. 7. Section 425.23, subsection 3, paragraph a, Code 31 2017, is amended to read as follows: 32 a. A person who is eligible to file a claim for credit 33 for property taxes due and who has a household income of 34 eight thousand five hundred dollars or less and who has an 35 -10- LSB 2194SS (8) 87 mm/rn/sc 10/ 17

S.F. 496 unpaid special assessment levied against the homestead may 1 file a claim for a special assessment credit with the county 2 treasurer. The department shall provide to the respective 3 treasurers the forms necessary for the administration of 4 this subsection . The claim shall be filed not later than 5 September 30 of each year. Upon the filing of the claim, 6 interest for late payment shall not accrue against the amount 7 of the unpaid special assessment due and payable. The claim 8 filed by the claimant constitutes a claim for credit of an 9 amount equal to the actual amount due upon the unpaid special 10 assessment, plus interest, payable during the fiscal year for 11 which the claim is filed against the homestead of the claimant. 12 However, where the claimant is an individual described in 13 section 425.17, subsection 2 , paragraph “a” , subparagraph 14 (2), and the tentative credit is determined according to the 15 schedule in subsection 1 , paragraph “b” , subparagraph (2), 16 of this section , the claim filed constitutes a claim for 17 credit of an amount equal to one-half of the actual amount 18 due and payable during the fiscal year. The treasurer shall 19 certify to the director of revenue not later than October 20 15 of each year the total amount of dollars due for claims 21 allowed. The amount of reimbursement due each county shall 22 be certified by the director of revenue and , subject to the 23 availability of funding, paid by the director of the department 24 of administrative services by November 15 of each year, drawn 25 upon warrants payable to the respective treasurer. There 26 For fiscal years beginning before July 1, 2018, there is 27 appropriated annually from the general fund of the state to the 28 department of revenue an amount sufficient to carry out the 29 provisions of this subsection . The treasurer shall credit any 30 moneys received from the department against the amount of the 31 unpaid special assessment due and payable on the homestead of 32 the claimant. 33 Sec. 8. Section 425.39, Code 2017, is amended to read as 34 follows: 35 -11- LSB 2194SS (8) 87 mm/rn/sc 11/ 17

S.F. 496 425.39 Fund created —— appropriation —— priority. 1 The elderly and disabled property tax credit and 2 reimbursement fund is created. There For fiscal years 3 beginning before July 1, 2018, there is appropriated annually 4 from the general fund of the state to the department of revenue 5 to be credited to the elderly and disabled property tax credit 6 and reimbursement fund, from funds not otherwise appropriated, 7 an amount sufficient to implement this division for claimants 8 described in section 425.17, subsection 2 , paragraph “a” , 9 subparagraph (1). 10 Sec. 9. Section 425A.1, Code 2017, is amended to read as 11 follows: 12 425A.1 Family farm tax credit fund. 13 The family farm tax credit fund is created in the office 14 of the treasurer of state. There For fiscal years beginning 15 before July 1, 2018, there shall be transferred annually to 16 the fund the first ten million dollars of the amount annually 17 appropriated to the agricultural land credit fund, provided in 18 section 426.1 . Any balance in the fund on June 30 shall revert 19 to the general fund. 20 Sec. 10. Section 426.1, Code 2017, is amended to read as 21 follows: 22 426.1 Agricultural land credit fund. 23 There is created as a permanent fund in the office of the 24 treasurer of state a fund to be known as the agricultural 25 land credit fund, and for the purpose of establishing and 26 maintaining this fund for each fiscal year beginning before 27 July 1, 2018, there is appropriated thereto from funds in the 28 general fund not otherwise appropriated the sum of thirty-nine 29 million one hundred thousand dollars of which the first ten 30 million dollars shall be transferred to and deposited into the 31 family farm tax credit fund created in section 425A.1 . Any 32 balance in said fund on June 30 shall revert to the general 33 fund. 34 Sec. 11. Section 426A.1A, Code 2017, is amended to read as 35 -12- LSB 2194SS (8) 87 mm/rn/sc 12/ 17

S.F. 496 follows: 1 426A.1A Appropriation. 2 There For fiscal years beginning before July 1, 2018, there 3 is appropriated from the general fund of the state the amounts 4 necessary to fund the credits provided under this chapter . 5 Sec. 12. Section 426A.2, Code 2017, is amended to read as 6 follows: 7 426A.2 Military service tax credit. 8 The Subject to the availability of funding, moneys shall 9 be apportioned each year so as to replace all or a portion of 10 the tax which would be due on property eligible for military 11 service tax exemption in the state, if the property were 12 subject to taxation, the amount of the credit to be not more 13 than six dollars and ninety-two cents per thousand dollars of 14 assessed value of property which would be subject to the tax, 15 except for the military service tax exemption. 16 Sec. 13. Section 426C.2, subsection 1, Code 2017, is amended 17 to read as follows: 18 1. A business property tax credit fund is created in the 19 state treasury under the authority of the department. For the 20 fiscal year beginning July 1, 2014, there is appropriated from 21 the general fund of the state to the department to be credited 22 to the fund, the sum of fifty million dollars to be used for 23 business property tax credits authorized in this chapter . For 24 the fiscal year beginning July 1, 2015, there is appropriated 25 from the general fund of the state to the department to be 26 credited to the fund, the sum of one hundred million dollars 27 to be used for business property tax credits authorized in 28 this chapter . For the each fiscal year in the fiscal period 29 beginning July 1, 2016, and each fiscal year thereafter, and 30 ending June 30, 2018, there is appropriated from the general 31 fund of the state to the department to be credited to the fund, 32 the sum of one hundred twenty-five million dollars to be used 33 for business property tax credits authorized in this chapter . 34 Sec. 14. Section 426C.5, subsections 2 and 3, Code 2017, are 35 -13- LSB 2194SS (8) 87 mm/rn/sc 13/ 17

S.F. 496 amended to read as follows: 1 2. The Subject to the availability of funds, the director 2 of revenue shall authorize the department of administrative 3 services to draw warrants on the fund payable to the county 4 treasurers of the several counties of the state in the amounts 5 certified by the department. 6 3. The Subject to the availability of funds, the amount due 7 each county shall be paid in two payments on November 15 and 8 March 15 of each fiscal year, drawn upon warrants payable to 9 the respective county treasurers. The two payments shall be as 10 nearly equal as possible. 11 Sec. 15. Section 435.22, subsection 4, paragraphs e and f, 12 Code 2017, are amended to read as follows: 13 e. The Subject to the availability of funds, the amounts 14 due each county shall be paid by the department of revenue on 15 December 15 of each year, drawn upon warrants payable to the 16 respective county treasurers. The county treasurer in each 17 county shall apportion the payment in accordance with section 18 435.25 . 19 f. There For fiscal years beginning before July 1, 2018, 20 there is appropriated annually from the general fund of the 21 state to the department of revenue an amount sufficient to 22 carry out this subsection . 23 Sec. 16. Section 441.21A, subsection 1, paragraph a, Code 24 2017, is amended to read as follows: 25 a. For each fiscal year beginning on or after July 1, 2014, 26 but before July 1, 2018, there is appropriated from the general 27 fund of the state to the department of revenue an amount 28 necessary for the payment of all commercial and industrial 29 property tax replacement claims under this section for the 30 fiscal year. However, for a fiscal year beginning on or after 31 July 1, 2017, the total amount of moneys appropriated from the 32 general fund of the state to the department of revenue for the 33 payment of commercial and industrial property tax replacement 34 claims in that fiscal year shall not exceed the total amount of 35 -14- LSB 2194SS (8) 87 mm/rn/sc 14/ 17

S.F. 496 money necessary to pay all commercial and industrial property 1 tax replacement claims for the fiscal year beginning July 1, 2 2016. 3 EXPLANATION 4 The inclusion of this explanation does not constitute agreement with 5 the explanation’s substance by the members of the general assembly. 6 This bill relates to state and local government revenue and 7 finance. 8 DIVISION I —— TAX EXPENDITURE STUDY. Division I requires 9 the legislative services agency (LSA) to conduct a study on 10 the fiscal impact that tax expenditures for certain taxes 11 identified in the bill have on the revenue-raising capacity 12 of the state. “Tax expenditure” is defined in the bill, 13 but generally includes any exclusion from the operation or 14 collection of a tax such as a credit, exemption, deduction, 15 rebate, or refund. The first study is required to be 16 completed in 2018, and subsequent studies are required every 17 even-numbered year thereafter. The 2018 study is required to 18 examine the relevant tax expenditures for the most recent year 19 for which complete tax expenditure data is available. Each 20 subsequent study shall examine the relevant tax expenditure 21 data for the year or years for which complete data is available 22 since the last complete year studied. However, if there is 23 no new year with complete tax expenditure data available, LSA 24 shall examine the available data for the year following the 25 last complete year that was the subject of a previous report. 26 Following each study, LSA is required to issue a report to the 27 general assembly and the chairpersons of the legislative tax 28 expenditure committee by January 31 of the following year, 29 with the first report being required by January 31, 2019. The 30 bill requires the department of revenue and any other state or 31 local agency to cooperate with LSA in providing the information 32 necessary to complete each study. 33 DIVISION II —— TAX EXPENDITURE LIMITATION. Division II 34 requires the general assembly to review all tax expenditures 35 -15- LSB 2194SS (8) 87 mm/rn/sc 15/ 17

S.F. 496 during each regular session beginning in the 2018 regular 1 session. “Tax expenditure” is defined in the bill but 2 generally includes credits, deductions, exemptions, refunds, 3 and rebates available against the income taxes, franchise 4 taxes, moneys and credits tax, inheritance tax, sale and use 5 taxes, and various other special excise taxes imposed by the 6 state. 7 In order for any particular tax expenditure to be applicable 8 for a fiscal year beginning on or after July 1, 2018, the bill 9 requires the applicability of that tax expenditure during 10 the fiscal year to be approved through an Act of the general 11 assembly during the regular session preceding the beginning of 12 the fiscal year. Any such tax expenditure not approved for 13 a fiscal year as provided in the bill shall not be available 14 under Iowa law. 15 The bill provides rules for the applicability of different 16 types of tax expenditures. A withholding tax credit approved 17 for any particular fiscal year shall apply to amounts withheld 18 by an employer from wages paid during that fiscal year. Tax 19 credits approved for any particular fiscal year shall be 20 available for tax years beginning during that fiscal year. 21 Sales and use tax refunds approved for any particular fiscal 22 year shall be available for sales and use tax liability 23 incurred during that fiscal year. Sales and use tax and other 24 specified excise tax exemptions approved for any particular 25 fiscal year shall be available for sales, purchases, transfers, 26 or uses during that fiscal year. Inheritance tax exemptions 27 and deductions approved for any particular fiscal year shall 28 be available for estates of decedents dying during that 29 fiscal year. Exemptions and deductions provided against the 30 calculation of the income taxes, the franchise tax, and the 31 moneys and credits tax that are approved for any particular 32 fiscal year shall be available for tax years beginning during 33 that particular fiscal year. 34 The bill provides that additional legislation may be 35 -16- LSB 2194SS (8) 87 mm/rn/sc 16/ 17

S.F. 496 required to fully implement the review and approval of tax 1 expenditures required under the bill and requires the director 2 of the department of revenue to prepare draft legislation 3 in compliance with Code section 2.16 for submission to the 4 legislative services agency, if necessary, to implement the 5 bill. 6 DIVISION III —— PROPERTY TAX CREDITS AND PAYMENTS 7 LIMITATION. Division III strikes the standing limited or 8 unlimited appropriations in Iowa Code for several property tax 9 credits for fiscal years beginning on or after July 1, 2018. 10 This includes the homestead and disabled veteran property 11 tax credit in division I of Code chapter 425, the property 12 tax credit or rent reimbursement for elderly and disabled in 13 division II of Code chapter 425, the family farm tax credit in 14 Code chapter 425A, the agricultural land tax credit in Code 15 chapter 426, the military service tax credit in Code chapter 16 426A, the business property tax credit in Code chapter 426C, 17 and the manufactured and the mobile home tax credit in Code 18 section 435.22. To the extent these credits were not already 19 included under Code section 25B.7 (funding property tax credits 20 and exemptions), the bill adds these tax credits to the list 21 of tax credits which local governments are only required to 22 provide to the extent such credit will be funded by a state 23 appropriation. 24 Finally, the bill strikes, for fiscal years beginning on or 25 after July 1, 2018, the standing unlimited appropriation in 26 Code section 441.21A for the repayment to local governments of 27 commercial and industrial property tax replacement claims. 28 -17- LSB 2194SS (8) 87 mm/rn/sc 17/ 17