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Senate File 2434

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  1  1    Section 1.  NEW SECTION.  15E.181  TITLE OF ACT.
  1  2    This division shall be known and may be cited as the
  1  3 "Economic Development Enterprise Zone Act".
  1  4    Sec. 2.  NEW SECTION.  15E.182  PURPOSE.
  1  5    The purpose of the economic development enterprise zone Act
  1  6 is to promote new economic development and create jobs paying
  1  7 family-supporting wages in economically distressed areas by
  1  8 encouraging communities to target resources and planning
  1  9 strategies in ways that attract economically productive
  1 10 private investment.
  1 11    Sec. 3.  NEW SECTION.  15E.183  ELIGIBILITY CRITERIA.
  1 12    1.  A county may create an economic development enterprise
  1 13 zone by designating up to one percent of the county area for
  1 14 that purpose.  A county may establish more than one enterprise
  1 15 zone, however, the total amount of county area designated as
  1 16 enterprise zones shall not exceed one percent of the county
  1 17 area.  An enterprise zone shall only be established on
  1 18 commercial or industrial property or property that is planned
  1 19 for future commercial or industrial development.
  1 20    2.  An enterprise zone shall only be formed in an area of
  1 21 the county which meets at least one of the following criteria:
  1 22    a.  The county has an unemployment rate of at least one
  1 23 hundred fifty percent of the state unemployment rate.
  1 24    b.  The county has experienced a population loss of ten
  1 25 percent or greater between the 1980 and 1990 censuses.
  1 26    c.  At least twenty percent of the population of the county
  1 27 is economically disadvantaged.  For the purposes of this
  1 28 division, "economically disadvantaged" means the same as in
  1 29 section 7B.2, subsection 3.
  1 30    d.  At least fifteen percent of the residents in the area
  1 31 designated as an enterprise zone earn less than the average
  1 32 wage in the state.
  1 33    3.  The county shall do the following regarding an
  1 34 enterprise zone:
  1 35    a.  Certify to the department of revenue and finance that
  2  1 an area designated as an enterprise zone meets at least one of
  2  2 the requirements of subsection 2 and that a business which has
  2  3 entered into an agreement with the county to locate or expand
  2  4 in an enterprise zone is an eligible business under section
  2  5 15E.184.
  2  6    b.  Provide annual recertification to the department of
  2  7 revenue and finance that the area remains eligible for
  2  8 designation as an enterprise zone and that each business
  2  9 receiving assistance remains an eligible business.
  2 10    c.  Monitor the enterprise zone and each eligible business
  2 11 for compliance with the requirements for establishing an
  2 12 enterprise zone or with the agreement between the business and
  2 13 the county.
  2 14    d.  Decertify the enterprise zone when the area no longer
  2 15 meets any of the requirements for an enterprise zone.
  2 16    e.  Notify the department of revenue and finance that an
  2 17 eligible business has not complied with the agreement entered
  2 18 into with the county for the purposes of the sanctions imposed
  2 19 in section 15E.185.
  2 20    4.  A county may enter into an agreement with a local
  2 21 economic development organization for the organization to
  2 22 perform the duties of the county under subsection 3.
  2 23    Sec. 4.  NEW SECTION.  15E.184  ELIGIBLE BUSINESS.
  2 24    Only a business which is or will be located in an
  2 25 enterprise zone and which meets the following requirements
  2 26 shall receive assistance under this division:
  2 27    1.  The business has not closed or substantially reduced
  2 28 its operation in one area of the state and relocated
  2 29 substantially the same operation in the enterprise zone.  This
  2 30 subsection does not prohibit a business from expanding its
  2 31 operation in the enterprise zone if existing operations of a
  2 32 similar nature in the state are not closed or substantially
  2 33 reduced.
  2 34    2.  Provide and pay at least eighty percent of the cost of
  2 35 a standard medical and dental insurance plan for all full-time
  3  1 employees working at the facility in the enterprise zone.
  3  2    3.  The business shall agree to pay, within two years of
  3  3 the date the business begins operations in the facility in the
  3  4 enterprise zone, an average wage for new full-time hourly
  3  5 nonmanagement employees of at least the average state hourly
  3  6 wage.  For the purposes of this division, "begins operations"
  3  7 means the date upon which the business informs the county and
  3  8 the department of revenue and finance that its facility is
  3  9 ready to begin the operations for which it was designed.
  3 10    4.  The business will make a capital investment at a
  3 11 facility in the enterprise zone of at least five hundred
  3 12 thousand dollars.  If the business is occupying a vacant
  3 13 building suitable for industrial use, the fair market value of
  3 14 the building shall be counted toward the capital investment
  3 15 threshold.
  3 16    5.  The business shall agree to create at least twenty-five
  3 17 full-time positions at the facility in the enterprise zone for
  3 18 a specified period of time which will be negotiated with the
  3 19 county, but which shall be at least five years.
  3 20    Sec. 5.  NEW SECTION.  15E.185  AGREEMENT – NONCOMPLIANCE
  3 21 – PENALTIES.
  3 22    A business shall enter into an agreement with the county
  3 23 specifying the requirements which must be met to satisfy the
  3 24 criteria of section 15E.184.  The agreement shall contain the
  3 25 following provisions:
  3 26    1.  If the business has not met more than ninety percent of
  3 27 the job creation requirement in section 15E.184, the business
  3 28 shall pay a percentage of the assistance received under
  3 29 section 15E.190, or if the business does not receive the
  3 30 assistance under section 15E.190, then under section 15E.186
  3 31 as follows:
  3 32    a.  If the business has met fifty percent or less of the
  3 33 requirement, the business shall pay the same percentage in
  3 34 assistance as the business failed to create in jobs.
  3 35    b.  If the business has met more than fifty percent but not
  4  1 more than seventy-five percent of the requirement, the
  4  2 business shall pay one half of the percentage in assistance as
  4  3 the business failed to create in jobs.
  4  4    c.  If the business has met more than seventy-five percent
  4  5 but not more than ninety percent of the requirement, the
  4  6 business shall pay one quarter of the percentage in assistance
  4  7 as the business failed to create in jobs.
  4  8    2.  If a business does not meet the wage requirement of
  4  9 section 15E.184, in any one year, it must meet that
  4 10 requirement in the following year or forfeit the assistance
  4 11 for that year.
  4 12    The department of revenue and finance shall adopt rules for
  4 13 repayment of assistance by the business if the business does
  4 14 not meet the requirements of section 15E.184.
  4 15    Sec. 6.  NEW SECTION.  15E.186  NEW JOBS CREDIT FROM
  4 16 WITHHOLDING.
  4 17    An eligible business may enter into an agreement with the
  4 18 department of revenue and finance and a community college, for
  4 19 a supplemental new jobs credit from withholding from jobs
  4 20 created in the enterprise zone.  The agreement shall be for
  4 21 program services for an additional job training project, as
  4 22 defined in chapter 260E.  The agreement shall provide for the
  4 23 following:
  4 24    1.  That the project shall be administered in the same
  4 25 manner as a project under chapter 260E and that a supplemental
  4 26 new jobs credit from withholding in an amount equal to one and
  4 27 one-half percent of the gross wages paid by the eligible
  4 28 business pursuant to section 422.16 is authorized to fund the
  4 29 program services for the additional project.
  4 30    2.  That the supplemental new jobs credit from withholding
  4 31 shall be collected, accounted for, and may be pledged by the
  4 32 community college in the same manner as described in section
  4 33 260E.5.
  4 34    3.  That the auditor of state shall perform an annual audit
  4 35 regarding the manner in which the training funds are being
  5  1 used.
  5  2    To provide funds for the payment of the costs of the
  5  3 additional project, a community college may borrow money,
  5  4 issue and sell certificates, and secure the payment of the
  5  5 certificates in the same manner as described in section
  5  6 260E.6, including, but not limited to, providing the
  5  7 assessment of an annual levy as described in section 260E.6,
  5  8 subsection 4.  The program and credit authorized by this
  5  9 section is in addition to, and not in lieu of, the program and
  5 10 credit authorized in chapter 260E.
  5 11    Sec. 7.  NEW SECTION.  15E.187  INVESTMENT TAX CREDIT.
  5 12    An eligible business may claim a corporate tax credit up to
  5 13 a maximum of ten percent of the new investment related to the
  5 14 location or expansion of an eligible business in an enterprise
  5 15 zone.  Any credit in excess of the tax liability for the tax
  5 16 year may be credited to the tax liability for the following
  5 17 twenty years or until depleted, whichever occurs earlier.  If
  5 18 the business is a partnership, subchapter S corporation,
  5 19 limited liability company, or estate or trust electing to have
  5 20 the income taxed directly to the individual, an individual may
  5 21 claim the tax credit allowed.  The amount claimed by the
  5 22 individual shall be based upon the pro rata share of the
  5 23 individual's earnings of the partnership, subchapter S
  5 24 corporation, limited liability company, or estate or trust.
  5 25 For purposes of this section, "new investment related to the
  5 26 location or expansion of an eligible business in an enterprise
  5 27 zone" means the cost of machinery and equipment, as defined in
  5 28 section 427A.1, subsection 1, paragraphs "e" and "j",
  5 29 purchased for use in the operation of the eligible business,
  5 30 the purchase price of which has been depreciated in accordance
  5 31 with generally accepted accounting principles, and the cost of
  5 32 improvements made to real property which is used in the
  5 33 operation of the eligible business and which receives the
  5 34 property tax exemption under section 15E.188.
  5 35    Sec. 8.  NEW SECTION.  15E.188  PROPERTY TAX EXEMPTION.
  6  1    The county may exempt from taxation all or a portion of the
  6  2 property upon which an eligible business locates or expands in
  6  3 an enterprise zone and which is used in the operation of the
  6  4 eligible business.  The exemption may be allowed for a period
  6  5 not to exceed ten years beginning the year the eligible
  6  6 business enters into an agreement with the county to locate or
  6  7 expand operations in an enterprise zone.
  6  8    Sec. 9.  NEW SECTION.  15E.189  RESEARCH ACTIVITIES CREDIT.
  6  9    An eligible business may claim a corporate tax credit for
  6 10 increasing research activities in an enterprise zone during
  6 11 the period the eligible business is located in an enterprise
  6 12 zone.  The credit equals thirteen percent of the state's
  6 13 apportioned share of the qualifying expenditures for
  6 14 increasing research activities.  The state's apportioned share
  6 15 of the qualifying expenditures for increasing research
  6 16 activities is a percent equal to the ratio of qualified
  6 17 research expenditures in this state to total qualified
  6 18 research expenditures.  The credit authorized in this section
  6 19 is in lieu of the credit authorized in section 422.33,
  6 20 subsection 5.  If the eligible business is a partnership,
  6 21 subchapter S corporation, limited liability company, or estate
  6 22 or trust electing to have the income taxed directly to the
  6 23 individual, an individual may claim the tax credit allowed.
  6 24 The amount claimed by the individual shall be based upon the
  6 25 pro rata share of the individual's earnings of the
  6 26 partnership, subchapter S corporation, limited liability
  6 27 company, or estate or trust.  Any credit in excess of the tax
  6 28 liability for the tax year shall be refunded with interest
  6 29 computed under section 422.25.  In lieu of claiming a refund,
  6 30 the eligible business may elect to have the overpayment shown
  6 31 on its final return credited to its tax liability for the
  6 32 following tax year.
  6 33    For the purposes of this section, "qualifying expenditures
  6 34 for increasing research activities" means the qualifying
  6 35 expenditures as defined for the federal credit for increasing
  7  1 research activities which would be allowable under section 41
  7  2 of the Internal Revenue Code in effect on January 1, 1996.
  7  3    Sec. 10.  NEW SECTION.  15E.190  SALES, SERVICES, AND USE
  7  4 TAX REFUND – CONTRACTOR OR SUBCONTRACTOR.
  7  5    1.  An eligible business under section 15E.184 shall be
  7  6 entitled to a refund of the taxes paid under chapters 422 and
  7  7 423 for gas, electricity, water, or sewer utility services,
  7  8 goods, wares, or merchandise, or on services rendered,
  7  9 furnished, or performed to or for a contractor or
  7 10 subcontractor and used in the fulfillment of a written
  7 11 contract relating to the construction or equipping of a
  7 12 facility within an enterprise zone.  Taxes attributable to
  7 13 intangible property and furniture and furnishings shall not be
  7 14 refunded.
  7 15    2.  To receive the refund a claim shall be filed by the
  7 16 eligible business with the department of revenue and finance
  7 17 as follows:
  7 18    a.  The contractor or subcontractor shall state under oath,
  7 19 on forms provided by the department, the amount of the sales
  7 20 of goods, wares, or merchandise or services rendered,
  7 21 furnished, or performed including water, sewer, gas, and
  7 22 electric utility services for use in the enterprise zone upon
  7 23 which sales or use tax has been paid prior to the date the
  7 24 eligible business begins operations, and shall file the forms
  7 25 with the eligible business before final settlement is made.
  7 26    b.  The eligible business shall, not more than six months
  7 27 after the date the eligible business begins operation, make
  7 28 application to the department of revenue and finance for any
  7 29 refund of the amount of the taxes paid pursuant to chapter 422
  7 30 or 423 upon any goods, wares, or merchandise, or services
  7 31 rendered, furnished, or performed, including water, sewer,
  7 32 gas, and electric utility services.  The application shall be
  7 33 made in the manner and upon forms to be provided by the
  7 34 department, and the department shall audit the claim and, if
  7 35 approved, issue a warrant to the eligible business in the
  8  1 amount of the sales or use tax which has been paid to the
  8  2 state of Iowa under a contract.  A claim filed by the eligible
  8  3 business in accordance with this subsection shall not be
  8  4 denied by reason of a limitation provision set forth in
  8  5 chapter 421, 422, or 423.
  8  6    c.  A contractor or subcontractor who willfully makes a
  8  7 false report of tax paid under the provisions of this
  8  8 subsection is guilty of a simple misdemeanor and in addition
  8  9 is liable for the payment of the tax and any applicable
  8 10 penalty and interest.  
  8 11                           EXPLANATION
  8 12    This bill provides for the establishment of economic
  8 13 development enterprise zones in counties which have an
  8 14 unemployment rate which is one and a half times the state
  8 15 average, which have had a 10 percent population loss between
  8 16 1980 and 1990, which have 15 percent or more of the residents
  8 17 of the area to be designated as an enterprise zone earning
  8 18 less than the state average wage, or which have at least 20
  8 19 percent of the county population classified as economically
  8 20 disadvantaged for purposes of the job training partnership
  8 21 program (chapter 7B).  Economically disadvantaged includes
  8 22 receiving welfare payments, food stamps, or being below the
  8 23 federal poverty level.
  8 24    A county can designate up to one percent of the area of the
  8 25 county as one or more enterprise zones.  Enterprise zones can
  8 26 only be located in areas zoned industrial or commercial or
  8 27 which are planned for use as future business property.
  8 28    A county establishing an enterprise zone would certify its
  8 29 eligibility to the department of revenue and finance and
  8 30 monitor compliance by businesses receiving enterprize zone
  8 31 benefits and continuing eligibility of the counts for
  8 32 enterprize zones.
  8 33    The bill also provides that businesses must agree to meet
  8 34 certain requirements to be eligible for enterprize zone
  8 35 benefits, including paying at least 80 percent of the cost of
  9  1 medical and dental benefits, pay average wages to full-time
  9  2 nonmanagement employees of at least the average state hourly
  9  3 wage, and create at least 25 new jobs.  Businesses which do
  9  4 not meet the agreed to requirements forfeit some of the
  9  5 benefits received by the business.
  9  6    Enterprise zone benefits include a supplemental new jobs
  9  7 credit from income tax withholding of 1.5 percent to be used
  9  8 for job training projects under chapter 260E (industrial new
  9  9 jobs training), an investment tax credit against the business
  9 10 income tax liability equal to 10 percent of the new investment
  9 11 by the business in the enterprize zone, an exemption from
  9 12 property taxes, if agreed to by the county, and a refund of
  9 13 sales, service, and use taxes paid on materials used to
  9 14 construct or equip a facility in the enterprize zone.  
  9 15 LSB 3195SV 76
  9 16 mk/jw/5.2
     

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