Text: HSB00615 Text: HSB00617 Text: HSB00600 - HSB00699 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. Section 15.327, Code 1995, is amended by adding 1 2 the following new subsections: 1 3 NEW SUBSECTION. 1A. "Contractor or subcontractor" means a 1 4 person who contracts with the eligible business or a 1 5 supporting business or subcontracts with a contractor for the 1 6 provision of property, materials, or services for the 1 7 construction or equipping of a facility, located within the 1 8 economic development area, of the eligible business or a 1 9 supporting business. 1 10 NEW SUBSECTION. 3A. "Economic development area" means a 1 11 site or sites designated by the department of economic 1 12 development for the purpose of attracting an eligible business 1 13 and supporting businesses to locate facilities within the 1 14 state. 1 15 NEW SUBSECTION. 6. "Project completion" means the first 1 16 date upon which the average annualized production of finished 1 17 product for the preceding ninety-day period at the 1 18 manufacturing facility operated by the eligible business 1 19 within the economic development area is at least fifty percent 1 20 of the initial design capacity of the facility. The eligible 1 21 business shall inform the department of revenue and finance in 1 22 writing within two weeks of project completion. 1 23 NEW SUBSECTION. 7. "Supporting business" means a business 1 24 under contract with the eligible business to provide property, 1 25 materials, or services which are a necessary component of the 1 26 operation of the manufacturing facility. To qualify as a 1 27 supporting business, the business shall have a permanent 1 28 facility or operations located within the economic development 1 29 area and the revenue from fulfilling the contract with the 1 30 eligible business shall constitute at least seventy-five 1 31 percent of the revenue generated by the business from all 1 32 activities undertaken from the facility within the economic 1 33 development area. 1 34 Sec. 2. NEW SECTION. 15.331A SALES, SERVICE, AND USE TAX 1 35 REFUND &endash; CONTRACTOR OR SUBCONTRACTOR. 2 1 The eligible business or a supporting business shall be 2 2 entitled to a refund of the taxes paid under chapters 422 and 2 3 423 for gas, electricity, water, or sewer utility services, 2 4 goods, wares, or merchandise, or on services rendered, 2 5 furnished, or performed to or for a contractor or 2 6 subcontractor and used in the fulfillment of a written 2 7 contract relating to the construction or equipping of a 2 8 facility within the economic development area of the eligible 2 9 business or a supporting business. Taxes attributable to 2 10 intangible property and furniture and furnishings shall not be 2 11 refunded. 2 12 To receive the refund a claim shall be filed by the 2 13 eligible business or a supporting business with the department 2 14 of revenue and finance as follows: 2 15 a. The contractor or subcontractor shall state under oath, 2 16 on forms provided by the department, the amount of the sales 2 17 of goods, wares, or merchandise or services rendered, 2 18 furnished, or performed including water, sewer, gas, and 2 19 electric utility services for use in the economic development 2 20 area upon which sales or use tax has been paid prior to the 2 21 project completion, and shall file the forms with the eligible 2 22 business or supporting business before final settlement is 2 23 made. 2 24 b. The eligible business or a supporting business shall, 2 25 not more than six months after project completion, make 2 26 application to the department for any refund of the amount of 2 27 the taxes paid pursuant to chapter 422 or 423 upon any goods, 2 28 wares, or merchandise, or services rendered, furnished, or 2 29 performed, including water, sewer, gas, and electric utility 2 30 services. The application shall be made in the manner and 2 31 upon forms to be provided by the department, and the 2 32 department shall audit the claim and, if approved, issue a 2 33 warrant to the eligible business or supporting business in the 2 34 amount of the sales or use tax which has been paid to the 2 35 state of Iowa under a contract. A claim filed by the eligible 3 1 business or a supporting business in accordance with this 3 2 subsection shall not be denied by reason of a limitation 3 3 provision set forth in chapter 421, 422, or 423. 3 4 c. A contractor or subcontractor who willfully makes a 3 5 false report of tax paid under the provisions of this 3 6 subsection is guilty of a simple misdemeanor and in addition 3 7 is liable for the payment of the tax and any applicable 3 8 penalty and interest. 3 9 Sec. 3. NEW SECTION. 15.331B EXEMPTION FROM LAND 3 10 OWNERSHIP RESTRICTIONS FOR NONRESIDENT ALIENS. 3 11 1. The eligible business and a supporting business, to the 3 12 extent the eligible business or the supporting business is not 3 13 actively engaged in farming within the economic development 3 14 area, may acquire, own, and lease land in the economic 3 15 development area, notwithstanding the provisions of sections 3 16 9H.4, 9H.5, and 567.3, and shall be exempt from the 3 17 requirements of section 567.4. The eligible business and 3 18 supporting business shall comply with the remaining provisions 3 19 of chapters 9H and 567 to the extent they do not conflict with 3 20 this subsection. 3 21 2. "Actively engaged in farming" means any of the 3 22 following: 3 23 a. Inspecting agricultural production activities within 3 24 the economic development area periodically and furnishing at 3 25 least half of the value of the tools and paying at least half 3 26 the direct cost of production. 3 27 b. Regularly and frequently making or taking an important 3 28 part in making management decisions substantially contributing 3 29 to or affecting the success of the farm operations within the 3 30 economic development area. 3 31 c. Performing physical work which significantly 3 32 contributes to crop or livestock production. 3 33 Sec. 4. NEW SECTION. 15.332A SALES AND USE TAX 3 34 EXEMPTION. 3 35 An eligible business may claim an exemption from sales and 4 1 use taxation under section 422.45, subsection 27, for property 4 2 which is exempt from taxation under section 15.332, 4 3 notwithstanding the requirements of section 422.45, subsection 4 4 27, or any other provision of the Code to the contrary. 4 5 Sec. 5. Section 15.335, unnumbered paragraph 2, Code 1995, 4 6 is amended by striking the unnumbered paragraph and inserting 4 7 in lieu thereof the following: 4 8 Any credit in excess of the tax liability for the taxable 4 9 year shall be refunded with interest computed under section 4 10 422.25. In lieu of claiming a refund, a taxpayer may elect to 4 11 have the overpayment shown on its final, completed return 4 12 credited to the tax liability for the following year. 4 13 Sec. 6. NEW SECTION. 15.337 WAIVER OF PROGRAM 4 14 QUALIFICATION REQUIREMENTS. 4 15 A community may request the waiver of the capital 4 16 investment requirement or the requirement for number of 4 17 positions created under section 15.329. The department may 4 18 grant a waiver for good cause shown and approve the program 4 19 application. 4 20 As used in this section, "good cause shown" includes but is 4 21 not limited to a demonstrated lack of growth in the community, 4 22 a significant percentage of persons in the community who have 4 23 incomes at or below the poverty level, community unemployment 4 24 rate higher than the state average, or an immediate threat 4 25 posed to the community's workforce due to business downsizing 4 26 or closure. 4 27 Sec. 7. Section 422.45, subsection 27, unnumbered 4 28 paragraph 1, Code Supplement 1995, is amended to read as 4 29 follows: 4 30 The gross receipts from the sale or rental, on or after4 31July 1, 1987 or on or after July 1, 1985, in the case of an4 32industry which has entered into an agreement under chapter4 33260E prior to the sale or lease,of industrial machinery, 4 34 equipment and computers, including replacement parts which are 4 35 depreciable for state and federal income tax purposes, if the 5 1 following conditions are met: 5 2 Sec. 8. Section 422.45, subsection 27, paragraph b, Code 5 3 Supplement 1995, is amended to read as follows: 5 4 b. The industrial machinery, equipment and computers must 5 5 be real property within the scope of section 427A.1, 5 6 subsection 1, paragraphs "e" or "j", and must. For sales 5 7 occurring on or after January 1, 1994, the property is not 5 8 required to be subject to taxation as real property.This5 9paragraph does not apply to machinery and equipment used in5 10the recycling or reprocessing of waste products qualifying for5 11an exemption under paragraph "a".5 12However, the provisions of chapters 404 and 427B which5 13result in the exemption from taxation of property for property5 14tax purposes do not preclude the property from receiving this5 15exemption if the property otherwise qualifies.5 16 The gross receipts from the sale or rental of hand tools 5 17 are not exempt. The gross receipts from the sale or rental of 5 18 pollution control equipment qualifying under paragraph "a" 5 19 shall be exempt. 5 20 The gross receipts from the sale or rental of industrial 5 21 machinery, equipment, and computers, including pollution 5 22 control equipment, within the scope of section 427A.1, 5 23 subsection 1, paragraphs "h" and "i", shall not be exempt. 5 24 EXPLANATION 5 25 This bill creates additional benefits which are available 5 26 to businesses which participate in the new jobs and income 5 27 program administered by the department of economic development 5 28 and authorizes the department to waive eligibility 5 29 requirements in certain circumstances. 5 30 Specifically, the bill provides as follows: 5 31 1. The bill defines the terms, contractor or 5 32 subcontractor, project completion, supporting business, and 5 33 economic development area for the purposes of certain benefits 5 34 under the new jobs and income program. 5 35 2. That the business participating in the new jobs and 6 1 income program or a supporting business is entitled to a 6 2 refund of sales, service, and use taxes paid by a contractor 6 3 or subcontractor in the performance of a written contract 6 4 relating to the construction or equipping of a facility within 6 5 an economic development area. 6 6 3. That an eligible business and supporting businesses are 6 7 exempt from the limitations on ownership by foreign 6 8 corporations of agricultural land in Iowa so long as the 6 9 business owning the land is not actively engaged in farming. 6 10 4. That the eligible business may claim as exempt from 6 11 sales and use taxation, machinery and equipment which is 6 12 subject to the value-added property tax exemption under the 6 13 program. 6 14 5. That the research activities credit provided under the 6 15 program is a refundable credit. In lieu of receiving a refund 6 16 of corporate taxes paid, the business may have the amount of 6 17 the overpaid taxes credited against next year's tax liability. 6 18 6. That the department may waive the eligibility 6 19 requirements for the program for good cause. Good cause 6 20 includes, high unemployment in the community, a high poverty 6 21 level in the community, and lack of community growth. 6 22 The bill provides that for sales of machinery and equipment 6 23 occurring on or after July 1, 1994, the machinery and 6 24 equipment does not have to be taxable as real property to 6 25 qualify for the exemption from the sales and use tax. 6 26 BACKGROUND STATEMENT 6 27 SUBMITTED BY THE AGENCY 6 28 New section 15.332A allows companies which receive 6 29 assistance under the new jobs and income program (program) and 6 30 opt for the complete exemption from property taxation on 6 31 machinery and equipment to also receive the sales and use tax 6 32 exemption for the machinery and equipment. This provides 6 33 program participants the same machinery and equipment tax 6 34 treatment as other manufacturers in the state have. 6 35 The amendment to section 15.335 allows a company to take 7 1 the full 13 percent refundable tax credit for qualifying 7 2 research and development activities under the program. The 7 3 credit is based on federal tax guidelines. Currently, Iowa 7 4 law states that only 6.5 percent of the credit is refundable, 7 5 with the other 6.5 percent carried forward against future 7 6 corporate tax liability over the next seven years. This 7 7 provision inhibits Iowa's ability to compete for and attract 7 8 those innovative companies which otherwise would desire to 7 9 locate and develop their cutting-edge technologies here. 7 10 Iowa business stands on the threshold of becoming a world 7 11 leader in the manufacture and export of value-added 7 12 agricultural products. Iowa farmers stand to gain enormously 7 13 as these businesses' product lines and markets grow. 7 14 Agricultural producers will be counted on to provide the raw 7 15 materials and basic commodities needed in the manufacturing 7 16 process, thereby significantly enhancing the value of their 7 17 products and labor. For this opportunity to occur, the state 7 18 must allow for a tax credit which makes it worthwhile for a 7 19 business to invest in research and development, technology 7 20 transfer, and new product development. 7 21 The department strategic plan and the Iowa futures project 7 22 have both identified technology as a key to Iowa's future 7 23 growth and prosperity. Allowing for the full 13 percent tax 7 24 credit provides a strong signal that Iowa is serious about 7 25 encouraging new research and development and technology 7 26 transfer within its borders. This initiative will also have a 7 27 positive effect on capital investment, job creation, graduate 7 28 retention, product development, and business diversification. 7 29 It should also revitalize many of Iowa's more mature 7 30 industries with new products and technological innovations. 7 31 The proposal to allow an eligible business or supporting 7 32 business to receive a full or partial refund of sales tax on 7 33 the gross receipts or rental price of property purchased or 7 34 rented prior to completion of the work on the project under 7 35 the program provides program participants the same benefits as 8 1 those businesses in quality jobs enterprise zones. The 8 2 department can use this benefit as a distinct incentive within 8 3 the program when competing with other states for qualified 8 4 large economic development projects. 8 5 The limitation which now exists in the Code severely 8 6 restricting foreign ownership of agricultural land has 8 7 inhibited the department's ability to attract high-quality, 8 8 foreign-owned manufacturing or processing facilities to the 8 9 state. With the passage of the North American free trade 8 10 agreement and the general agreement on tariffs and trade, the 8 11 world is becoming ever smaller in regard to business ownership 8 12 and partnership. The state needs to remain competitive in its 8 13 attempts to attract those multinational corporations that 8 14 create and offer high paying jobs to our college graduates in 8 15 biosciences and engineering. Many of these foreign-based 8 16 companies have joint ventures with American partners. Under 8 17 our existing law, however, they are considered aliens and are 8 18 unable to acquire the land they need for their operations. 8 19 The physical site needs of such companies can run from 500 to 8 20 3,000 acres and up, especially those agriculturally oriented 8 21 businesses that purchase and process large amounts of Iowa's 8 22 raw materials, e.g., corn and soybeans. Large silicon chip 8 23 and auto manufacturing and assembly plants also have this kind 8 24 of site need. Such companies do not desire to farm the land 8 25 and will hold any excess land only for future expansion needs 8 26 or as a buffer zone for auto and truck traffic noise. 8 27 LSB 3416DP 76 8 28 mk/sc/14.1
Text: HSB00615 Text: HSB00617 Text: HSB00600 - HSB00699 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
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