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PAG LIN 1 1 DIVISION I 1 2 INCOME TAX INDEXATION 1 3 Section 1. Section 422.4, subsection 1, paragraph a, Code 1 4 1995, is amended to read as follows: 1 5 a. "Annual inflation factor" means an index, expressed as 1 6 a percentage, determined by the department by October 15 of 1 7 the calendar year preceding the calendar year for which the 1 8 factor is determined, which reflects the purchasing power of 1 9 the dollar as a result of inflation during the fiscal year 1 10 ending in the calendar year preceding the calendar year for 1 11 which the factor is determined. In determining the annual 1 12 inflation factor, the department shall use the annual percent 1 13 change, but not less than zero percent, in theimplicit price1 14deflator for the gross national productgross domestic product 1 15 price deflator computed for the second quarter of the calendar 1 16 year by the bureau of economic analysis of the United States 1 17 department of commerce and shall addone-halfall of that 1 18 percent change to one hundred percent. The annual inflation 1 19 factor and the cumulative inflation factor shall each be 1 20 expressed as a percentage rounded to the nearest one-tenth of 1 21 one percent. The annual inflation factor shall not be less 1 22 than one hundred percent. 1 23 Sec. 2. Section 422.4, subsection 2, paragraph a, Code 1 24 1995, is amended to read as follows: 1 25 a. "Annual standard deduction factor" means an index, 1 26 expressed as a percentage, determined by the department by 1 27 October 15 of the calendar year preceding the calendar year 1 28 for which the factor is determined, which reflects the 1 29 purchasing power of the dollar as a result of inflation during 1 30 the fiscal year ending in the calendar year preceding the 1 31 calendar year for which the factor is determined. In 1 32 determining the annual standard deduction factor, the 1 33 department shall use the annual percent change, but not less 1 34 than zero percent, in theimplicit price deflator for the1 35gross national productgross domestic product price deflator 2 1 computed for the second quarter of the calendar year by the 2 2 bureau of economic analysis of the United States department of 2 3 commerce and shall addone-halfall of that percent change to 2 4 one hundred percent. The annual standard deduction factor and 2 5 the cumulative standard deduction factor shall each be 2 6 expressed as a percentage rounded to the nearest one-tenth of 2 7 one percent. The annual standard deduction factor shall not 2 8 be less than one hundred percent. 2 9 Sec. 3. This division of this Act, being deemed of 2 10 immediate importance, takes effect upon enactment and applies 2 11 to the computation of the annual inflation factor and annual 2 12 standard deduction factor for calendar years beginning on or 2 13 after January 1, 1996. The department of revenue and finance 2 14 shall adjust the annual inflation factor and annual standard 2 15 deduction factor previously computed for the 1996 calendar 2 16 year to reflect the change made in the computation of those 2 17 factors in this Act. 2 18 DIVISION II 2 19 INHERITANCE TAX 2 20 Sec. 4. Section 450.9, subsections 2 and 3, Code 1995, are 2 21 amended to read as follows: 2 22 2. Each son and daughter, including legally adopted sons 2 23 and daughters, or stepsons and stepdaughters, or biological 2 24 sons and daughters entitled to inherit under the law of this 2 25 state,fiftytwo hundred thousand dollars. 2 26 3. Father or motherfifteenfifty thousand dollars. 2 27 Sec. 5. Section 450.9, Code 1995, is amended by adding the 2 28 following new subsection after subsection 3: 2 29 NEW SUBSECTION. 3A. Each grandchild, fifty thousand 2 30 dollars. 2 31 Sec. 6. This division of this Act takes effect July 1 2 32 following enactment of the division and applies to the estates 2 33 of decedents dying on or after that date. 2 34 DIVISION III 2 35 HOMESTEAD, MILITARY, AND LOW-INCOME 3 1 TAX CREDIT AND REIMBURSEMENT 3 2 Sec. 7. Section 8.59, Code 1995, is amended to read as 3 3 follows: 3 4 8.59 APPROPRIATIONS FREEZE. 3 5 Notwithstanding contrary provisions of the Code, the 3 6 amounts appropriated under the applicable sections of the Code 3 7 for fiscal years commencing on or after July 1, 1993, are 3 8 limited to those amounts expended under those sections for the 3 9 fiscal year commencing July 1, 1992. If an applicable section 3 10 appropriates moneys to be distributed to different recipients 3 11 and the operation of this section reduces the total amount to 3 12 be distributed under the applicable section, the moneys shall 3 13 be prorated among the recipients. As used in this section, 3 14 "applicable sections" means the following sections: 53.50, 3 15 229.35, 230.8, 230.11, 405A.8, 411.20,425.1, 425.39, 426A.1,3 16 663.44, and 822.5. 3 17 Sec. 8. Section 425.1, subsection 1, Code 1995, is amended 3 18 to read as follows: 3 19 1. A homestead credit fund is created. There is 3 20 appropriated annually from the general fund of the state to 3 21 the department of revenue and finance to be credited to the 3 22 homestead credit fund,an amount sufficientthe sum of one 3 23 hundred fourteen million four hundred thousand dollars to 3 24 implement this chapter. 3 25 The director of revenue and finance shall issue warrants on 3 26 the homestead credit fund payable to the county treasurers of 3 27 the several counties of the state under this chapter. 3 28 Sec. 9. Section 425.17, subsection 2, paragraph b, Code 3 29 1995, is amended to read as follows: 3 30 b. A person filing a claim forcredit orreimbursement 3 31 under this division who has attained the age of twenty-three 3 32 years on or before December 31 of the base year or was a head 3 33 of household on December 31 of the base year, as defined in 3 34 the Internal Revenue Code, but has not attained the age or 3 35 disability status described in paragraph "a", and was 4 1 domiciled in this state during the entire base year, and is 4 2 domiciled in this state at the time the claim is filed or at 4 3 the time of the person's death in the case of a claim filed by 4 4 the executor or administrator of the claimant's estate, and 4 5 was not claimed as a dependent on any other person's tax 4 6 return for the base year. 4 7 Sec. 10. Section 425.17, subsection 2, unnumbered 4 8 paragraph 2, Code 1995, is amended to read as follows: 4 9 "Claimant" under paragraph "a"or "b"includes a vendee in 4 10 possession under a contract for deed and may include one or 4 11 more joint tenants or tenants in common. In the case of a 4 12 claim for rent constituting property taxes paid, the claimant 4 13 shall have rented the property during any part of the base 4 14 year. If a homestead is occupied by two or more persons, and 4 15 more than one person is able to qualify as a claimant, the 4 16 persons may determine among them who will be the claimant. If 4 17 they are unable to agree, the matter shall be referred to the 4 18 director of revenue and finance not later than June 1 of each 4 19 year and the director's decision is final. 4 20 Sec. 11. Section 425.23, subsection 1, paragrpah b, Code 4 21 1995, is amended by striking the paragraph and inserting in 4 22 lieu thereof the following: 4 23 b. The reimbursement for a claimant described in section 4 24 425.17, subsection 2, paragraph "b", shall be determined as 4 25 follows: 4 26 Percent of rent constituting 4 27 If the household property taxes paid allowed 4 28 income is: as a reimbursement: 4 29 $ 0 - 9,999.99 ............................ 50 4 30 10,000 - 13,999.99 ............................ 42 4 31 14,000 - 17,999.99 ............................ 35 4 32 18,000 - 20,999.99 ............................ 25 4 33 21,000 - 23,999.99 ............................ 17 4 34 24,000 - 26,999.99 ............................ 12 4 35 Sec. 12. Section 425.23, subsection 3, paragraph a, Code 5 1 1995, is amended to read as follows: 5 2 a. A person who is eligible to file a claim for credit for 5 3 property taxes due and who has a household income of six 5 4 thousand dollars or less and who has an unpaid special 5 5 assessment levied against the homestead may file a claim with 5 6 the county treasurer that the claimant had a household income 5 7 of six thousand dollars or less and that an unpaid special 5 8 assessment is presently levied against the homestead. The 5 9 department shall provide to the respective treasurers the 5 10 forms necessary for the administration of this subsection. 5 11 The claim shall be filed not later than September 30 of each 5 12 year. Upon the filing of the claim, interest for late payment 5 13 shall not accrue against the amount of the unpaid special 5 14 assessment due and payable. The claim filed by the claimant 5 15 constitutes a claim for credit of an amount equal to the 5 16 actual amount due upon the unpaid special assessment, plus 5 17 interest, payable during the fiscal year for which the claim 5 18 is filed against the homestead of the claimant.However,5 19where the claimant is an individual described in section5 20425.17, subsection 2, paragraph "b", and the tentative credit5 21is determined according to the schedule in section 425.23,5 22subsection 1, paragraph "b", subparagraph (2), the claim filed5 23constitutes a claim for credit of an amount equal to one-half5 24of the actual amount due and payable during the fiscal year.5 25 The department of revenue and finance shall, upon the filing 5 26 of the claim with the department by the treasurer, pay that 5 27 amount of the unpaid special assessment during the current 5 28 fiscal year to the treasurer. The treasurer shall submit the 5 29 claims to the director of revenue and finance not later than 5 30 October 15 of each year. The director of revenue and finance 5 31 shall certify the amount of reimbursement due each county for 5 32 unpaid special assessment credits allowed under this 5 33 subsection. The amount of reimbursement due each county shall 5 34 be paid by the director of revenue and finance on October 20 5 35 of each year, drawn upon warrants payable to the respective 6 1 treasurer. There is appropriated annually from the general 6 2 fund of the state to the department of revenue and finance an 6 3 amount sufficient to carry out the provisions of this 6 4 subsection. The treasurer shall credit any moneys received 6 5 from the department against the amount of the unpaid special 6 6 assessment due and payable on the homestead of the claimant. 6 7 Sec. 13. Section 425.24, Code 1995, is amended to read as 6 8 follows: 6 9 425.24 MAXIMUM PROPERTY TAX FOR PURPOSE OF CREDIT OR 6 10 REIMBURSEMENT. 6 11 In any case in which property taxes due or rent 6 12 constituting property taxes paid for any household exceeds one 6 13 thousand dollars or six hundred dollars in the case of a 6 14 claimant described in section 425.17, subsection 2, paragraph 6 15 "b", the amount of property taxes due or rent constituting 6 16 property taxes paid shall be deemed to have been one thousand 6 17 dollars or six hundred dollars in the case of a claimant 6 18 described in section 425.17, subsection 2, paragraph "b", for 6 19 purposes of this division. 6 20 Sec. 14. Section 425.39, subsection 1, Code 1995, is 6 21 amended to read as follows: 6 22 1. The extraordinary property tax credit and reimbursement 6 23 fund is created. There is appropriated annually from the 6 24 general fund of the state to the department of revenue and 6 25 finance to be credited to the extraordinary property tax 6 26 credit and reimbursement fund, from funds not otherwise 6 27 appropriated,an amount sufficientthe sum of twelve million 6 28 five hundred thousand dollars to implement this division. 6 29 Sec. 15. Section 425.40, Code 1995, is amended to read as 6 30 follows: 6 31 425.40 LOW-INCOME FUND CREATED. 6 32 1. A low-incometax credit andrent reimbursement fund is 6 33 created. There is appropriated annually from the general fund 6 34 of the state to the low-income rent reimbursement fund the sum 6 35 of thirteen million five hundred thousand dollars to fund rent 7 1 reimbursements under this division. 7 2 2. If the amount appropriated under subsection 1 plus any 7 3 supplemental appropriation made for purposes of this section 7 4 for a fiscal year is insufficient to pay all claims in full, 7 5 the director shall pay, in full, all claims to be paid during7 6the fiscal year for reimbursement of rent constituting7 7property taxes paid or if moneys are insufficient to payall 7 8 such claims on a pro rata basis.If the amount of claims for7 9credit for property taxes due to be paid during the fiscal7 10year exceed the amount remaining after payment to renters, the7 11director of revenue and finance shall prorate the payments to7 12the counties for the property tax credit.In order for the 7 13 director to carry out the requirements of this subsection, 7 14 notwithstanding any provision to the contrary in this 7 15 division, claims for reimbursement for rent constituting 7 16 property taxes paid filed before May 1 of the fiscal year 7 17 shall be eligible to be paid in full during the fiscal year 7 18 and those claims filed on or after May 1 of the fiscal year 7 19 shall be eligible to be paid during the following fiscal year 7 20and the director is not required to make payments to counties7 21for the property tax credit before June 15 of the fiscal year. 7 22 Sec. 16. Section 426A.1, Code 1995, is amended to read as 7 23 follows: 7 24 426A.1 APPROPRIATION. 7 25 There is appropriated from the general fund of the state 7 26 theamounts necessarysum of two million eight hundred 7 27 thousand dollars to fund the credits provided under this 7 28 chapter. 7 29 Sec. 17. This division of this Act takes effect July 1, 7 30 1996, and applies to homestead, military service, and low- 7 31 income tax credit and rent reimbursement claims payable in 7 32 fiscal years beginning on or after July 1, 1996. 7 33 DIVISION IV 7 34 SUBCHAPTER S CORPORATIONS 7 35 Sec. 18. Section 422.4, Code 1995, is amended by adding 8 1 the following new subsection: 8 2 NEW SUBSECTION. 15A. "Subchapter S corporation" or "S 8 3 corporation" means a corporation for which a valid election 8 4 under section 1362(a) of the Internal Revenue Code is in 8 5 effect. 8 6 Sec. 19. Section 422.5, subsection 1, paragraph j, Code 8 7 1995, is amended to read as follows: 8 8 j. (1) The tax imposed upon the taxable income of a 8 9 nonresident shall be computed by reducing the amount 8 10 determined pursuant to paragraphs "a" through "i" by the 8 11 amounts of nonrefundable credits under this division and by 8 12 multiplying this resulting amount by a fraction of which the 8 13 nonresident's net income allocated to Iowa, as determined in 8 14 section 422.8, subsection 2, paragraph "a", is the numerator 8 15 and the nonresident's total net income computed under section 8 16 422.7 is the denominator. This provision also applies to 8 17 individuals who are residents of Iowa for less than the entire 8 18 tax year. 8 19 (2) The tax imposed upon the taxable income of a resident 8 20 shareholder in a subchapter S corporation which makes an 8 21 election pursuant to section 422.36, subsection 5, paragraph 8 22 "b", to be taxed as a regular corporation, shall be computed 8 23 by reducing the amount determined pursuant to paragraphs "a" 8 24 through "i" by the amounts of nonrefundable credits under this 8 25 division and by multiplying this resulting amount by a 8 26 fraction of which the resident's net income allocated to Iowa, 8 27 as determined in section 422.8, subsection 2, paragraph "b", 8 28 is the numerator and the resident's total net income as 8 29 computed under section 422.7 is the denominator. This 8 30 provision also applies to individuals who are residents of 8 31 Iowa for less than the entire tax year. 8 32 (a) In the case of a resident or part-year resident 8 33 shareholder in a subchapter S corporation which makes an 8 34 election under section 422.36, subsection 5, paragraph "b", to 8 35 be taxed as a regular corporation, a taxpayer must completely 9 1 fill out the return, determine the taxpayer's income tax as if 9 2 the taxpayer is not a resident shareholder in a corporation 9 3 which makes an election pursuant to section 422.36, subsection 9 4 5, paragraph "b", and pay the amount of tax which is owed. 9 5 The taxpayer shall then recompute the taxpayer's income tax 9 6 liability pursuant to this subparagraph on a special return. 9 7 This special return shall be filed with the regular return and 9 8 constitutes a claim for refund of the difference between the 9 9 amount of tax the taxpayer paid on the regular return and the 9 10 amount of tax determined on the special return. However, if 9 11 the amount of tax determined on the special return exceeds the 9 12 amount of tax paid on the regular return, the taxpayer shall 9 13 pay the additional amount of tax which is owned on the special 9 14 return. 9 15 (b) For any tax year, the aggregate amount of refund 9 16 claims that shall be paid pursuant to this subparagraph in 9 17 excess of revenue gains shall not exceed three million five 9 18 hundred thousand dollars. If, for a tax year, the aggregate 9 19 amount of refund claims filed pursuant to this subparagraph in 9 20 excess of revenue gains exceeds three million five hundred 9 21 thousand dollars, each claim for refund shall be paid on a pro 9 22 rata basis so that the aggregate amount of refund claims in 9 23 excess of revenue gains does not exceed three million five 9 24 hundred thousand dollars. For purposes of the calculation of 9 25 the three million five hundred thousand dollar limitation 9 26 provided by this subparagraph subdivision, the department 9 27 shall take into account all revenue gains as well as revenue 9 28 losses resulting from the application of the following 9 29 provisions, including, without limitation, revenue gains 9 30 arising when the tax calculated under this subparagraph is 9 31 greater, revenue gains resulting from the denial of tax 9 32 credits under section 422.8, subsection 6, revenue gains 9 33 resulting from the taxation of additional income under section 9 34 422.7, subsection 35, and revenue gains resulting from the 9 35 imposition of corporate income taxes on corporations making 10 1 the election specified in section 422.36, subsection 5, 10 2 paragraph "b". In the case where refund claims are not 10 3 allowed in full, the amount of the refund to which the 10 4 taxpayer is entitled under this subparagraph is the pro rata 10 5 amount that was paid and the taxpayer is not entitled to a 10 6 refund of the unpaid portion and is not entitled to carry that 10 7 amount forward or backward to another tax year. Taxpayers 10 8 shall not use refunds as estimated payments for the succeeding 10 9 tax year. The department shall determine by July 1 of the tax 10 10 year following the tax year for which the refund claim is 10 11 filed if the aggregate amount of refund claims in excess of 10 12 revenue gains exceeds three million five hundred thousand 10 13 dollars for the tax year. Notwithstanding any provision, 10 14 interest shall not be due on any refund claims that are paid 10 15 by September 1 of the tax year following the tax year for 10 16 which the refund claim is filed. For taxpayers that are 10 17 fiscal year filers, the amount of the refund claim allowed 10 18 shall be in the same ratio as the refund claims allowed for 10 19 the tax year in which the taxpayer's fiscal year began. 10 20 Sec. 20. Section 422.5, subsection 1, paragraph k, 10 21 subparagraph (3), unnumbered paragraph 3, Code 1995, is 10 22 amended to read as follows: 10 23 In the case of a resident, including a resident estate or 10 24 trust, the state's apportioned share of the state alternative 10 25 minimum tax is one hundred percent of the state alternative 10 26 minimum tax computed in this subsection. In the case of a 10 27 resident or part-year resident shareholder in a subchapter S 10 28 corporation which makes an election under section 422.36, 10 29 subsection 5, paragraph "b" to be taxed as a regular 10 30 corporation and a nonresident, including a nonresident estate 10 31 or trust, or an individual, estate, or trust that is domiciled 10 32 in the state for less than the entire tax year, the state's 10 33 apportioned share of the state alternative minimum tax is the 10 34 amount of tax computed under this subsection, reduced by the 10 35 applicable credits in sections 422.10 through 422.12 and this 11 1 result multiplied by a fraction with a numerator of the sum of 11 2 state net income allocated to Iowa as determined in section 11 3 422.8, subsection 2, paragraph "a" or "b", as applicable, plus 11 4 tax preference items, adjustments, and losses under 11 5 subparagraph (1) attributable to Iowa and with a denominator 11 6 of the sum of total net income computed under section 422.7 11 7 plus all tax preference items, adjustments, and losses under 11 8 subparagraph (1). In computing this fraction, those items 11 9 excludable under subparagraph (1) shall not be used in 11 10 computing the tax preference items. Married taxpayers 11 11 electing to file separate returns or separately on a combined 11 12 return must allocate the minimum tax computed in this 11 13 subsection in the proportion that each spouse's respective 11 14 preference items, adjustments, and losses under subparagraph 11 15 (1) bear to the combined preference items, adjustments, and 11 16 losses under subparagraph (1) of both spouses. 11 17 Sec. 21. Section 422.7, Code Supplement 1995, is amended 11 18 by adding the following new subsection: 11 19 NEW SUBSECTION. 35. In determining gain or loss from the 11 20 sale or other disposition of stock of a subchapter S 11 21 corporation which makes an election pursuant to section 11 22 422.36, subsection 5, paragraph "b" to be taxed as a regular 11 23 corporation, the basis of a taxpayer in that stock shall be 11 24 adjusted for Iowa income tax purposes under rules of the 11 25 director to reflect any adjustment in Iowa income taxes paid 11 26 by the taxpayer pursuant to section 422.5, subsection 1, 11 27 paragraph "j", subparagraph (2). 11 28 Sec. 22. Section 422.8, subsection 2, Code 1995, is 11 29 amended to read as follows: 11 30 2. a. Nonresident's net income allocated to Iowa is the 11 31 net income, or portionthereofof the net income, which is 11 32 derived from a business, trade, profession, or occupation 11 33 carried on within this state or income from any property, 11 34 trust, estate, or other source within Iowa. However, income 11 35 derived from a business, trade, profession, or occupation 12 1 carried on within this state and income from any property, 12 2 trust, estate, or other source within Iowa shall not include 12 3 distributions from pensions, including defined benefit or 12 4 defined contribution plans, annuities, individual retirement 12 5 accounts, and deferred compensation plans or any earnings 12 6 attributable thereto so long as the distribution is directly 12 7 related to an individual's documented retirement and received 12 8 while the individual is a nonresident of this state. If a 12 9 business, trade, profession, or occupation is carried on 12 10 partly within and partly without the state, only the portion 12 11 of the net income which is fairly and equitably attributable 12 12 to that part of the business, trade, profession, or occupation 12 13 carried on within the state is allocated to Iowa for purposes 12 14 of section 422.5, subsection 1, paragraph "j", and section 12 15 422.13 and income from any property, trust, estate, or other 12 16 source partly within and partly without the state is allocated 12 17 to Iowa in the same manner, except that annuities, interest on 12 18 bank deposits and interest-bearing obligations, and dividends 12 19 are allocated to Iowa only to the extent to which they are 12 20 derived from a business, trade, profession, or occupation 12 21 carried on within the state. 12 22 b. A resident's income allocated to Iowa is the income 12 23 determined under section 422.7 reduced by items of income, 12 24 loss, and expenses from a subchapter S corporation which makes 12 25 an election pursuant to section 422.36, subsection 5, 12 26 paragraph "b", to be taxed as a regular corporation, which 12 27 pass directly to the shareholders under provisions of the 12 28 Internal Revenue Code, with the following adjustments: 12 29 (1) Add cash or value of property distributions made to 12 30 the extent paid from income upon which Iowa income tax has not 12 31 been paid as determined under rules of the director. 12 32 (2) Subtract the amount of distributions made in 12 33 subparagraph (1) that were, under rules of the director, 12 34 distributed to the shareholder to enable the shareholder to 12 35 pay federal income tax on items of income, loss, and expenses 13 1 from a subchapter S corporation which makes an election 13 2 pursuant to section 422.36, subsection 5, paragraph "b", to be 13 3 taxed as a regular corporation, which pass directly to the 13 4 shareholders under provisions of the Internal Revenue Code. 13 5 Sec. 23. Section 422.8, Code 1995, is amended by adding 13 6 the following new subsection: 13 7 NEW SUBSECTION. 6. If the resident or part-year resident 13 8 is a shareholder of a subchapter S corporation which makes an 13 9 election pursuant to section 422.36, subsection 5, paragraph 13 10 "b", to be taxed as a regular corporation, subsections 1 and 3 13 11 do not apply to any income taxes paid to another state or 13 12 foreign country on the income from the subchapter S 13 13 corporation. 13 14 Sec. 24. Section 422.32, subsection 4, Code Supplement 13 15 1995, is amended to read as follows: 13 16 4. "Corporation" includes joint stock companies, and 13 17 associations organized for pecuniary profit, and publicly 13 18 traded partnerships and limited liability companies taxed as 13 19 corporations under the Internal Revenue Code and any 13 20 subchapter S corporation which has in effect an election under 13 21 section 422.36, subsection 5, paragraph "b", to be taxed as a 13 22 regular corporation. 13 23 Sec. 25. Section 422.32, Code Supplement 1995, is amended 13 24 by adding the following new subsection: 13 25 NEW SUBSECTION. 11. The term "value-added corporation" 13 26 means a corporation that purchases, receives, or holds 13 27 personal property of any description and which adds to its 13 28 value by a process of manufacturing, construction, processing, 13 29 or combining of different materials, and shall specifically 13 30 include the economic activity identified in divisions C and D 13 31 of the standard industrial classification codes appearing in 13 32 13 C.F.R. ch. 1(1-1-94 edition), with a view to selling the 13 33 finished product for gain or profit. A corporation engaged in 13 34 more than one business activity is a value-added corporation 13 35 if more than fifty percent of its gross receipts, figured on a 14 1 three-year annual average, or such shorter period as the 14 2 corporation shall have been in existence, are from the 14 3 processes previously identified. 14 4 Sec. 26. Section 422.35, unnumbered paragraph 1, Code 14 5 Supplement 1995, is amended to read as follows: 14 6 The term "net income" means the taxable income before the 14 7 net operating loss deduction, as properly computed for federal 14 8 income tax purposes under the Internal Revenue Code, or in the 14 9 case of subchapter S corporations that make an election 14 10 pursuant to section 422.36, subsection 5, paragraph "b", "net 14 11 income" means the sum of all items of distributive shares of 14 12 income, loss, and expenses of the corporation as determined 14 13 under rules of the director, with the following adjustments: 14 14 Sec. 27. Section 422.36, subsection 5, Code 1995, is 14 15 amended to read as follows: 14 16 5. a.WhereUnless an election is made under paragraph 14 17 "b" to be taxed under this division, where a corporation is 14 18 not subject to income tax and the stockholders ofsuchthe 14 19 corporation are taxed on the corporation's income underthe14 20provisions ofthe Internal Revenue Code, the same tax 14 21 treatmentshall apply to suchapplies to the corporation and 14 22suchthe stockholders for Iowa income tax purposes. 14 23 b. A subchapter S corporation which is a value-added 14 24 corporation which does business both within and without of the 14 25 state may elect to be taxed as a regular corporation under 14 26 this division. The election shall be made not later than the 14 27 due date for filing its return for the first taxable year for 14 28 which the election is to be effective, including any 14 29 extensions beyond that date, on a form provided by the 14 30 director and signed by the shareholders holding more than one- 14 31 half of the shares of stock of the corporation on the last day 14 32 of the first taxable year for which the election is to be 14 33 effective. The election shall be effective for that taxable 14 34 year and for subsequent taxable years until revoked. 14 35 c. The corporation may revoke its election under paragraph 15 1 "b" by a revocation made not later than the due date for 15 2 filing its return for the taxable year for which the 15 3 revocation is to be effective, including any extensions beyond 15 4 that date, on a form provided by the director and signed by 15 5 shareholders holding more than one-half of the shares of stock 15 6 of the corporation on the last day of the first taxable year 15 7 for which the revocation is to be effective. However, a 15 8 corporation that has made an election under paragraph "b" 15 9 shall not be eligible to make an election under this paragraph 15 10 for revocation of the election under paragraph "b" for any 15 11 taxable year before its fourth taxable year following the 15 12 first taxable year for which the election under paragraph "b" 15 13 was effective, unless the director consents to the revocation. 15 14 Sec. 28. This division of this Act, being deemed of 15 15 immediate importance, takes effect upon enactment and applies 15 16 retroactively to January 1, 1996, for tax years of individuals 15 17 beginning on or after that date and for tax years of 15 18 corporations ending on or after that date. 15 19 DIVISION V 15 20 QUALIFIED VENTURE CAPITAL COMPANY 15 21 Sec. 29. NEW SECTION. 15E.175 DEFINITIONS. 15 22 As used in this section and sections 15E.176 and 15E.177: 15 23 1. "Iowa business" means a business or industry, 15 24 incorporated or unincorporated, which meets all the following 15 25 criteria: 15 26 a. Has or will have, within thirty days after a loan or 15 27 investment is made by a qualified venture capital company, at 15 28 least fifty percent of its employees or assets located in Iowa 15 29 and agrees to maintain at least fifty percent of its employees 15 30 or assets in Iowa following investment in the business by a 15 31 qualified venture capital company. 15 32 b. A business which is unable to raise equity capital or 15 33 obtain financing from conventional sources in order to remain 15 34 viable or to commence or expand its ability to provide goods 15 35 or services. 16 1 2. "Qualified venture capital company" means a 16 2 corporation, limited liability company, or a general or 16 3 limited partnership with its principal place of business 16 4 located within this state, which meets all of the following 16 5 requirements: 16 6 a. Has an initial private capitalization of not less than 16 7 twenty million dollars. 16 8 b. Is organized by the Iowa business investment 16 9 corporation, organized under division XV of this chapter, to 16 10 directly or indirectly through its subsidiaries or affiliates 16 11 invest in debt and equity securities of Iowa businesses. 16 12 c. Seeks approval from the federal small business 16 13 administration to establish a small business investment 16 14 company that is incorporated in Iowa and maintains its 16 15 principal place of business in this state the purpose of which 16 16 includes increasing the availability of funds for investment 16 17 in and loans to Iowa businesses. 16 18 d. Will provide or arrange for managerial and other 16 19 advice, assistance, and support for Iowa businesses. 16 20 e. Does not invest funds under this division for the 16 21 expansion of operations of an Iowa business in another state. 16 22 3. "Taxpayer" means an entity subject to tax under chapter 16 23 422, division III, chapter 422, division V, or chapter 432. 16 24 4. "Tax year" means for entities subject to the state 16 25 corporate income tax or the state franchise tax under chapter 16 26 422, division III or V, respectively, the tax year as defined 16 27 for those divisions or means for insurance companies subject 16 28 to the gross premiums tax under chapter 432, the calendar year 16 29 for which the premiums are taxed. 16 30 Sec. 30. NEW SECTION. 15E.176 TAX CREDITS. 16 31 1. For tax years beginning on or after January 1, 1997, 16 32 there is allowed a credit against that tax imposed under the 16 33 corporate income tax in chapter 422, division III, the 16 34 franchise tax in chapter 422, division V, or the gross 16 35 premiums tax in chapter 432, for investments made by the 17 1 taxpayer in a qualified venture capital company whose purpose 17 2 includes establishing or expanding Iowa business. 17 3 2. The amount of credit allowed under subsection 1, 17 4 subject to subsection 4, is computed as follows: 17 5 a. The amount of the qualified venture capital company's 17 6 investment in Iowa businesses is divided by the amount of new 17 7 cash invested in the qualified venture capital company. 17 8 b. The resulting percentage, which shall not exceed fifty 17 9 percent, is multiplied by the amount of the taxpayer's 17 10 investment in the qualified venture capital company. 17 11 c. The amount of the credit is equal to ten percent of the 17 12 product determined in paragraph "b". 17 13 d. The qualified venture capital company shall compute as 17 14 of the end of the qualified venture capital company's tax year 17 15 the amounts under paragraph "c" for each tax year the 17 16 qualified venture capital company is entitled to the credit. 17 17 3. The qualified venture capital company is allowed the 17 18 credit as computed each year in subsection 2 for up to ten 17 19 consecutive years beginning with the first year for which the 17 20 credit is taken. 17 21 If the amount of the credit exceeds the qualified venture 17 22 capital company's tax liability for the tax year, the excess 17 23 may be credited to the tax liability for the following five 17 24 tax years or until depleted, whichever is the earlier, and is 17 25 in addition to any other credit allowed under this section. 17 26 4. Notwithstanding the amount of credit computed in 17 27 subsection 2, the total amount of credits for all qualified 17 28 venture capital companies that shall be allowed under 17 29 subsection 1 for any fiscal year of the qualified venture 17 30 capital company shall not exceed one million two hundred fifty 17 31 thousand dollars and for all fiscal years of the qualified 17 32 venture capital company shall not exceed twelve million five 17 33 hundred thousand dollars. In determining if the credit 17 34 allowed has exceeded the fiscal year limit, credits carried 17 35 over from a previous tax year are not counted. 18 1 5. The credit provided for in subsection 2, to the extent 18 2 not previously utilized, shall be freely transferable to and 18 3 by subsequent transferees for a period of ten years from the 18 4 date the credit is first available to the qualified venture 18 5 capital company. 18 6 Sec. 31. NEW SECTION. 15E.177 COORDINATION OF RESOURCES. 18 7 If a qualified venture capital company is organized by the 18 8 Iowa business investment corporation on or before December 31, 18 9 1997, within ninety days following its organization, the 18 10 qualified venture capital company shall develop and submit a 18 11 written proposal to the shareholders of each business 18 12 development finance corporation organized pursuant to division 18 13 XIII of this chapter, calling for the investment of all the 18 14 assets of each business development finance corporation in 18 15 securities of the qualified venture capital company. A notice 18 16 of a special meeting of the shareholders of the business 18 17 development finance corporation and the written proposal made 18 18 to the business development finance corporation by the 18 19 qualified venture capital company shall be delivered to the 18 20 shareholders of each business development finance corporation 18 21 entitled to vote at the special shareholders meeting not less 18 22 than ten nor more than sixty days before the meeting date 18 23 given by the qualified venture capital company. Action on the 18 24 written proposal by the board of directors of the business 18 25 development finance corporation or any other person shall not 18 26 be required to call the special meeting or authorize voting on 18 27 the written proposal by the shareholders of the business 18 28 development finance corporation. If at the special meeting of 18 29 shareholders of the business development finance corporation 18 30 or any recesses thereof, a majority of the shareholders 18 31 present or represented at the special meeting approve the 18 32 investment proposed by the qualified venture capital company, 18 33 the business development finance corporation shall immediately 18 34 make such an investment of all of its assets. The investment 18 35 by a business development finance corporation of all of its 19 1 assets in the qualified venture capital corporation shall not 19 2 be considered a sale of assets other than in the usual and 19 3 regular course of business and division XIII of the Iowa 19 4 business development finance Act shall not apply to the 19 5 transaction. The qualified venture capital company may make 19 6 additional proposals as often as it desires to the 19 7 shareholders of each business development finance corporation 19 8 that did not approve the initial investment proposal. Except 19 9 for the requirement that a written proposal be presented to 19 10 the shareholders within ninety days of the organization of the 19 11 qualified venture capital company, the provisions of this 19 12 section shall apply to all additional proposals. 19 13 Sec. 32. Section 422.33, Code Supplement 1995, is amended 19 14 by adding the following new subsection: 19 15 NEW SUBSECTION. 9. There is allowed as a credit against 19 16 the tax determined in subsection 1 for a tax year an amount 19 17 equal to the qualified venture capital credit as provided in 19 18 section 15E.176. Notwithstanding any other provision, the 19 19 credit allowed for in this subsection shall be applied prior 19 20 to all other credits allowed the taxpayer. The taxpayer shall 19 21 not receive for the same investment a credit under subsection 19 22 8 and this subsection. 19 23 Sec. 33. Section 422.60, Code Supplement 1995, is amended 19 24 by adding the following new subsection: 19 25 NEW SUBSECTION. 4. There is allowed as a credit against 19 26 the tax determined in this division for a tax year an amount 19 27 equal to the qualified venture capital credit as provided in 19 28 section 15E.176. Notwithstanding any other provision, the 19 29 credit allowed for in this subsection shall be applied prior 19 30 to all other credits allowed the taxpayer. The allocation of 19 31 revenues to a city or county under section 422.65 shall be 19 32 determined as if the credit under this subsection had not been 19 33 taken. 19 34 Sec. 34. Section 432.1, Code 1995, is amended by adding 19 35 the following new subsection: 20 1 NEW SUBSECTION. 5. There is allowed as a credit against 20 2 the tax determined in subsection 1 or 2 for a tax year an 20 3 amount equal to the qualified venture capital credit as 20 4 provided in section 15E.176. Notwithstanding any other 20 5 provision, the credit allowed for in this subsection shall be 20 6 applied prior to all other credits allowed the taxpayer. 20 7 Sec. 35. 1992 Iowa Acts, chapter 1244, section 1, 20 8 subsection 2, paragraph e, unnumbered paragraph 1, as amended 20 9 by 1993 Iowa Acts, chapter 180, section 46, as amended by 1994 20 10 Iowa Acts, chapter 1201, section 29, is amended to read as 20 11 follows: 20 12 For transfer to the treasurer of state for the purpose of 20 13 facilitating the organization and private capitalization of 20 14 the small business investment company or other entity under 20 15 sections 15E.169 through 15E.171. If the small business 20 16 investment company or another entity for which the funds are 20 17 to be used is not organizedwithin thirty-six months of the20 18effective date of this Act, unused funds shall revert to the 20 19 general fund of the state, however, if such an entity is 20 20 organized, the unused funds shall be transferred irrevocably 20 21 to the qualified venture capital company or other entity for 20 22 which the funds are to be used: 20 23 .................................................. $ 200,000 20 24 Sec. 36. APPLICABILITY. This division of this Act applies 20 25 for tax years of entities subject to the state corporate 20 26 income tax or franchise tax which begin on or after January 1, 20 27 1997. This division of this Act applies for calendar years 20 28 beginning on or after January 1, 1997, for entities subject to 20 29 the gross premiums tax under chapter 432. 20 30 DIVISION VI 20 31 FAMILY FARM FEEDING OPERATIONS 20 32 Sec. 37. NEW SECTION. 175A.1 SHORT TITLE. 20 33 This chapter shall be known and may be cited as the "Iowa 20 34 Family Farm Animal Feeding Operations Preservation Act". 20 35 Sec. 38. NEW SECTION. 175A.2 PURPOSE. 21 1 The purpose of this chapter is to address a grave threat to 21 2 traditional farmers who produce animals in this state and who 21 3 face capitalization barriers and the consolidation of animal 21 4 agriculture, which results in fewer individuals engaged in 21 5 farming. These conditions result in a loss in population, 21 6 unemployment and a movement of persons from rural communities 21 7 to urban areas accompanied by added costs to communities for 21 8 the creation of new public facilities and services. It is 21 9 therefore necessary to assist small and medium sized family 21 10 farm animal feeding operations in order to expand such 21 11 operations and preserve a way of life which has traditionally 21 12 supported Iowa's economy and communities. 21 13 Sec. 39. NEW SECTION. 175A.3 DEFINITIONS. 21 14 1. "Animal feeding operation" means the same as defined in 21 15 section 455B.161. 21 16 2. "Animal feeding operation structure" means the same as 21 17 defined in section 455B.161. 21 18 3. "Animal weight capacity" means the same as defined in 21 19 section 455B.161. 21 20 4. "Authority" means the agricultural development 21 21 authority established pursuant to section 175.3. 21 22 5. "Family farm animal feeding operation" or "operation" 21 23 means an animal feeding operation located on the land where 21 24 the owner of the operation also engages in farming activities 21 25 other than animal feeding operation activities, if all of the 21 26 following criteria are satisfied: 21 27 a. The total animal weight capacity of all animals other 21 28 than bovine owned by the person is two hundred thousand pounds 21 29 or less, and the total animal weight capacity of bovine owned 21 30 by the person is four hundred thousand pounds or less. 21 31 b. A person holding an interest in the animal feeding 21 32 operation owns all animals confined and fed in the animal 21 33 feeding operation. 21 34 c. The person who owns the animal feeding operation raises 21 35 and harvests crops in the same or an adjoining county where 22 1 the animal feeding operation is located. 22 2 d. The person who owns the animal feeding operation is one 22 3 of the following: 22 4 (1) A natural person. 22 5 (2) A general partnership composed exclusively of natural 22 6 persons. 22 7 e. Each person who holds an interest in the animal feeding 22 8 operation resides in this state. 22 9 f. The animal feeding operation is located entirely within 22 10 the state. 22 11 6. "Farming" means the same as defined in section 175.2. 22 12 7. "Lending institution" means a bank, trust company, 22 13 mortgage company, national banking association, savings and 22 14 loan association, life insurance company, any state or federal 22 15 governmental agency or instrumentality, including without 22 16 limitation the federal land bank or any of its local 22 17 associations, or any other financial institution or entity 22 18 authorized to make farm operating loans in this state. 22 19 8. "Low or moderate net worth" means: 22 20 a. For an individual, an aggregate net worth of the 22 21 individual and the individual's spouse and minor children of 22 22 less than two hundred thousand dollars. 22 23 b. For any general partnership, an aggregate net worth of 22 24 all partners, including each partner's net capital in the 22 25 partnership, and of each partner's spouse and minor children 22 26 of less than three hundred thousand dollars. However, the 22 27 aggregate net worth of each partner and that partner's spouse 22 28 and minor children shall not exceed two hundred thousand 22 29 dollars. 22 30 9. "Net worth" means a person's total assets minus total 22 31 liabilities as determined in accordance with generally 22 32 accepted accounting principles with appropriate exceptions and 22 33 exemptions reasonably related to an equitable determination of 22 34 a person's net worth. Assets shall be valued at fair market 22 35 value. 23 1 10. "Note" means a bond anticipation note or other 23 2 obligation or evidence of indebtedness issued by the authority 23 3 pursuant to this chapter. 23 4 11. "Secured loan" means a financial obligation secured by 23 5 a chattel mortgage, security agreement, or other instrument 23 6 creating a lien on an interest in depreciable agricultural 23 7 property. 23 8 Sec. 40. NEW SECTION. 175A.4 ASSISTANCE PROGRAMS. 23 9 1. The authority shall administer programs under this 23 10 section to assist family farm animal feeding operations. The 23 11 department of revenue and finance shall assist the authority 23 12 in administering this section. 23 13 2. In order to assist a family farm animal feeding 23 14 operation in financing the operation, including by assisting 23 15 in whole or in part the acquisition of animals, or the 23 16 purchase of agricultural land, the purchase of agricultural 23 17 improvements or depreciable agricultural property, the 23 18 construction of buildings, facilities, or animal feeding 23 19 operation structures, related to the operation, the authority 23 20 shall do all of the following: 23 21 a. Cooperate with any other state agency or the federal 23 22 government, including supplementing assistance provided by 23 23 another state agency and the federal government. 23 24 b. Administer other programs provided under chapter 175, 23 25 including supplementing assistance provided by other programs. 23 26 c. Provide certification necessary to allow owners of 23 27 operations to claim an income tax credit as provided in 23 28 section 175A.5, and a property tax exemption pursuant to 23 29 section 427.1. 23 30 d. Administer the following programs: 23 31 (1) A loan guarantee program to provide for guaranteeing 23 32 of all or part of a loan made to the operation. 23 33 (2) An interest buy-down program, in which the authority 23 34 contracts with a participating lending institution to reduce 23 35 the interest rate charged on a loan to the operation. The 24 1 authority shall determine the amount that the rate is reduced 24 2 by considering the lending institution's customary loan rate 24 3 for the type of loan sought as certified to the authority by 24 4 the lending institution. As part of the contract, in order to 24 5 reimburse the lending institution for the reduction of the 24 6 interest rate on the loan, the authority may agree to grant 24 7 the lending institution any amount foregone by reducing the 24 8 interest rate on that portion of the loan which is three 24 9 hundred thousand dollars or less. However, the amount 24 10 reimbursed shall not be more than fifty percent of the amount 24 11 of interest foregone by the lending institution on the loan. 24 12 3. The amount of assistance awarded to a family farm 24 13 animal feeding operation shall be based on the extent to which 24 14 the following apply: 24 15 a. The operation has a low or moderate net worth. 24 16 b. The owner of the family farm animal feeding operation 24 17 utilizes a computer system using an application designed to 24 18 monitor herd performance, as approved by Iowa state 24 19 university. 24 20 c. The person managing the operation is actively engaged 24 21 in improving the management of the operation, which may 24 22 include participating in the livestock producers assistance 24 23 program provided pursuant to section 266.39D, or employing a 24 24 person qualified by the American registry of professional 24 25 animal science, who is actively engaged in the profession of 24 26 consulting with livestock producers for the purpose of 24 27 increasing production or enhancing performance of livestock. 24 28 4. In order to participate in a program administered under 24 29 this section, all of the following must apply: 24 30 a. The family farm animal feeding operation or any person 24 31 holding an interest in the operation is not classified as a 24 32 habitual violator as provided in section 455B.191. 24 33 b. The assistance provided by the authority under this 24 34 section is not used to construct, repair, or expand an 24 35 anaerobic lagoon or earthen manure storage basin as defined in 25 1 section 455B.161. 25 2 5. a. The authority shall adopt rules to administer this 25 3 section, including the enforcement of terms of a contract to 25 4 which the authority is a party. The authority may require a 25 5 lending institution or a family farm animal feeding operation 25 6 to submit evidence satisfactory to the authority that the 25 7 lending institution or operation has complied with the 25 8 authority's requirements. 25 9 b. The authority may inspect any records of a lending 25 10 institution or a family farm animal feeding operation which 25 11 are pertinent to the administration of a program. In order to 25 12 assure compliance with this section and rules adopted pursuant 25 13 to this section, the authority may establish by rule 25 14 appropriate enforcement provisions, including but not limited 25 15 to, the payment of civil penalties by a lending institution or 25 16 operation. The authority may also enforce the provisions of 25 17 this section or terms of the contract by bringing an action in 25 18 any court of competent jurisdiction to recover damages. 25 19 6. A lending institution and the borrower participating in 25 20 a program under this section shall each pay to the authority 25 21 one-half of an origination fee which shall not exceed one 25 22 percent of the loan. In addition, the lending institution 25 23 shall pay a fee equal to twenty-five basis points on the loan 25 24 to the authority on an annual basis. 25 25 Sec. 41. NEW SECTION. 175A.5 INCOME TAX CREDIT. 25 26 1. A family farm animal feeding operation which receives 25 27 at least ten thousand dollars in assistance under section 25 28 175A.4 as certified by the authority under section 175A.4 25 29 shall be entitled to receive a tax credit equal to ten percent 25 30 of all new investments made in the operation not later than 25 31 the tax year following the tax year in which the operation 25 32 receives assistance under section 175A.4. 25 33 2. For purposes of this section, "new investment" means 25 34 the capitalized cost of all real and personal property related 25 35 to the family farm animal feeding operation, including 26 1 animals; buildings and animal feeding operation structures 26 2 qualifying under this section; equipment; and other 26 3 improvements to the operation, purchased or otherwise acquired 26 4 or relocated to the operation. "New investment" does not 26 5 include intangible property, or furniture and furnishings. 26 6 For the purposes of this section, capitalized cost of property 26 7 shall be determined in accordance with accounting methods used 26 8 by the taxpayer in determining the taxpayer's income for state 26 9 tax purposes. 26 10 3. Any credit in excess of the tax liability for the tax 26 11 year may be applied to the tax liability for the following ten 26 12 years or until depleted, whichever occurs first. 26 13 4. The department of revenue and finance shall adopt any 26 14 rules necessary to administer this section. 26 15 Sec. 42. NEW SECTION. 175A.6 FAMILY FARM ANIMAL FEEDING 26 16 OPERATION FUND. 26 17 1. A family farm animal feeding operation fund is created 26 18 within the state treasury under the control of the authority. 26 19 The fund shall consist of any moneys appropriated by the 26 20 general assembly, fees paid to the authority, and any other 26 21 moneys available to and obtained or accepted by the authority 26 22 from the federal government or private sources for placement 26 23 in the fund. Moneys shall be deposited in the fund as 26 24 provided in section 175A.7. Not more than one hundred fifty 26 25 thousand dollars shall be available annually from the fund for 26 26 administration of section 175A.4. The assets of the fund 26 27 shall be used by the authority only for carrying out the 26 28 purposes of section 175A.1 and section 427.1, subsection 28. 26 29 2. In administering the fund the authority may do all of 26 30 the following: 26 31 a. Contract, sue and be sued, and adopt administrative 26 32 rules necessary to administer this section. However, the 26 33 authority shall not in any manner directly or indirectly 26 34 pledge the credit of the state. 26 35 b. Authorize payment from the fund for costs, commissions, 27 1 attorney fees, and other reasonable expenses, including 27 2 expenses related to carrying out duties necessary for 27 3 administering programs provided for under section 175A.4, 27 4 including for guaranteeing loans, and for the recovery of loan 27 5 moneys guaranteed or the management of property acquired in 27 6 connection with such loans. 27 7 3. Payments of interest, recaptures of awards, or 27 8 repayments of moneys provided in assistance under section 27 9 175A.4 shall be deposited into the fund. Section 8.33 does 27 10 not apply to any moneys in the fund until June 30, 2001. 27 11 Notwithstanding section 12C.7, interest or earnings on 27 12 investments or time deposits of the moneys in the fund shall 27 13 be credited to the fund. 27 14 4. The fund is subject to an annual audit as provided by 27 15 the authority. Moneys in the fund, which may be subject to 27 16 warrants written by the director of revenue and finance, shall 27 17 be drawn upon the written requisition of the authority's 27 18 executive director. 27 19 Sec. 43. NEW SECTION. 175A.7 STANDING APPROPRIATION. 27 20 For each fiscal year of the fiscal period beginning July 1, 27 21 1996, and ending June 30, 2002, there is appropriated twelve 27 22 million dollars from the general fund of the state to the 27 23 family farm animal feeding operation fund created in section 27 24 175A.6. 27 25 Sec. 44. Section 427.1, Code Supplement 1995, is amended 27 26 by adding the following new subsection: 27 27 NEW SUBSECTION. 28. The property of a family farm animal 27 28 feeding operation as defined in section 175A.3, which receives 27 29 at least ten thousand dollars in assistance awarded and 27 30 certified by the agricultural development authority under 27 31 section 175A.4 shall be exempt from taxation for a period of 27 32 five years, to the extent provided in this subsection. 27 33 a. The exemption shall apply as follows: 27 34 (1) It begins on January 1 of the year following the year 27 35 in which the family farm animal feeding operation receives 28 1 assistance under section 175A.4. 28 2 (2) It is limited to the market value, as defined in 28 3 section 441.21, of the property of the family farm animal 28 4 feeding operation. If the property of the family farm animal 28 5 feeding operation is assessed with other property as a unit, 28 6 the exemption shall be limited to the net market value of the 28 7 property of the family farm animal feeding operation 28 8 determined as of the assessment date. 28 9 b. In order to receive the exemption, the owner of the 28 10 operation must file for the exemption with the assessing 28 11 authority not later than the first of February of the first 28 12 year for which the exemption applies, on forms provided by the 28 13 agricultural development authority. The application shall 28 14 provide a description of the family farm animal feeding 28 15 operation subject to the exemption. The application shall be 28 16 accompanied by a certificate of assistance provided by the 28 17 agricultural development authority. 28 18 c. The assessing authority shall retain a permanent file 28 19 of current exemptions filed in the assessing authority's 28 20 office. Not later than July 6 of each year, the assessing 28 21 authority shall remit a statement certifying the total amount 28 22 of exemptions allowed under this subsection. After receiving 28 23 the certification, the agricultural development authority 28 24 shall draw warrants on the family farm animal feeding 28 25 operation fund created in section 175A.6 which shall be 28 26 payable to the assessing authority in the amount certified by 28 27 the assessing authority, and shall mail the warrants to the 28 28 assessing authorities on August 15 of each year. However, if 28 29 the family farm animal feeding operation fund does not have 28 30 sufficient moneys available to pay in full the total of the 28 31 amounts certified to the agricultural development authority, 28 32 the authority shall prorate unobligated and unencumbered 28 33 moneys in the fund to the assessing authorities. 28 34 Sec. 45. FUTURE REPEAL. 28 35 1. Sections 175A.5 and 175A.7 are repealed. 29 1 2. Section 427.1, subsection 28, is amended by striking 29 2 the subsection. 29 3 3. This section takes effect on July 1, 2002. 29 4 4. Notwithstanding this section, an income tax credit 29 5 granted pursuant to section 175A.5, or a property tax 29 6 exemption provided under section 427.1, subsection 28, shall 29 7 continue in effect and shall be administered and enforced 29 8 until its expiration as provided in this division of this Act. 29 9 EXPLANATION 29 10 Division I - Under present law the tax brackets and 29 11 standard deduction for the state individual income tax are 29 12 adjusted by an inflation factor that uses 50 percent of the 29 13 change in the implicit price deflator for the gross national 29 14 product. The division increases this to 100 percent of the 29 15 change in the gross domestic product price deflator. The 29 16 division changes the reference from the gross national product 29 17 price deflator to the gross domestic product price deflator 29 18 since the former no longer exists. 29 19 This division of the bill applies retroactively to tax 29 20 years beginning on or after January 1, 1996. 29 21 Division II - Increases the inheritance tax exemption for 29 22 children from $50,000 to $200,000 for stepchildren from 29 23 $15,000 to $200,000, and for parents and grandchildren from 29 24 $15,000 to $50,000. 29 25 This division is effective July 1 following enactment for 29 26 estates of decedents dying on or after that date. 29 27 Division III - Fully funds the amounts of the homestead tax 29 28 credit, military service tax credit, and the elderly or 29 29 disabled tax credit and rent reimbursement for the 1996-1997 29 30 fiscal year and these amounts are appropriated annually from 29 31 then on. Under present law these credits were funded only to 29 32 the extent funded in the 1992-1993 fiscal year. The division 29 33 also appropriates $13.5 million for the 1996-1997 fiscal year 29 34 for the low-income nonelderly or nondisabled property tax 29 35 relief for renters. Present law included homeowners but no 30 1 funding was available. The appropriation is continued for 30 2 subsequent fiscal years. 30 3 The division takes effect July 1, 1996, and applies to 30 4 homestead, military service, and low-income homestead tax 30 5 credit and rent reimbursement claims payable in fiscal years 30 6 beginning on or after July 1, 1996. 30 7 Division IV - Involves the taxation of subchapter S 30 8 corporations and their shareholders. A subchapter S 30 9 corporation is a corporation meeting certain federal tax 30 10 criteria that elects to have its income taxed directly to its 30 11 shareholders and thus exempting itself from corporate 30 12 taxation. Present state law allows this for state tax 30 13 purposes. This division allows certain subchapter S 30 14 corporation shareholders to elect to be taxed as regular 30 15 corporations for state tax purposes. These corporations must 30 16 do business both within and without the state and must be in 30 17 the business of adding value to products. By making the 30 18 election it is probable that the resident shareholders will 30 19 have a reduction in their state individual income tax. 30 20 However, the total reduction in resident shareholders' 30 21 individual income tax is limited to $3.5 million. To ensure 30 22 that the total reduction does not exceed $3.5 million special 30 23 calculations need to be made. First the tax is computed as if 30 24 the resident shareholder had not made the election and the tax 30 25 liability must be paid. Second, another special return is 30 26 filled out to compute the tax based upon the fact of the 30 27 election. This return is filed with the regular return and 30 28 the reduction in tax, if any, is claimed as a refund. Any 30 29 increase in tax must be paid. The department of revenue and 30 30 finance shall determine if the claims for refund total more 30 31 than $3.5 million by July 1 of the following tax year and if 30 32 the claims are in excess of $3.5 million each claimant 30 33 receives a pro rata amount. The amount of claim not refunded 30 34 is disregarded and may not be carried forward or backward. 30 35 The division takes effect upon enactment and applies 31 1 retroactively to January 1, 1996, for tax years of individuals 31 2 beginning on or after that date and for tax years of 31 3 corporations ending on or after that date. 31 4 Division V - Allows a corporation, financial institution, 31 5 or insurance company to take a corporate, franchise, or 31 6 insurance premiums tax credit for its investment in a 31 7 qualified venture capital company. The qualified venture 31 8 capital company is an entity formed by the existing Iowa 31 9 business investment corporation with an initial capitalization 31 10 of at least $20 million. The purpose of the qualified venture 31 11 capital company is to invest primarily in debt and equity 31 12 securities of Iowa businesses. The total amount of the tax 31 13 credit for all taxpayers is computed each year based on the 31 14 total amount invested in Iowa businesses by the qualified 31 15 venture capital company as of the end of its fiscal year. The 31 16 amount of the annual tax credit for a single taxpayer is equal 31 17 to up to 10 percent of the taxpayer's investment in the 31 18 qualified venture capital company multiplied by the percentage 31 19 the investments in Iowa businesses represent of the total new 31 20 cash invested in the qualified venture capital company. The 31 21 tax credit is allowed for 10 consecutive years following the 31 22 first year the tax credit is taken by the taxpayer. The 31 23 division limits to $1.25 million the total amount of tax 31 24 credits that can be taken by all taxpayers in any fiscal year 31 25 of the qualified venture capital company. The division also 31 26 limits to $12.5 million the total amount of tax credits that 31 27 can be taken by all taxpayers in all fiscal years of the 31 28 qualified venture capital company. The division applies to 31 29 tax years beginning on or after January 1, 1997. 31 30 Division VI - Creates a new chapter entitled the "Iowa 31 31 Family Farm Animal Feeding Preservation Act". The division 31 32 provides that the purpose of the chapter is to assist 31 33 traditional farmers who produce animals in this state and who 31 34 face capitalization barriers and the consolidation of animal 31 35 agriculture. A family farm animal feeding operation is 32 1 defined to mean a person who is either a natural person or a 32 2 general partnership who owns an animal feeding operation 32 3 located on the land where the person engages in other farming 32 4 activities. Additional requirements relate to the operation's 32 5 animal weight capacity, the extent to which the owner of the 32 6 operation is a party to a contract feeding arrangement, 32 7 whether the owner of the operation raises and harvests crops 32 8 on land where the animal feeding operation is located, and the 32 9 manner in which the operation is organized. 32 10 The division provides for the administration of programs by 32 11 the agricultural development authority to assist family farm 32 12 animal feeding operations, including a loan guarantee program, 32 13 and an interest buy-down program. The authority must award 32 14 assistance based on whether an operation has a low or moderate 32 15 net worth, utilizes an approved computer system for monitoring 32 16 herd performance, and benefits from programs designed to 32 17 improve the management of the operation. In order to 32 18 participate in a program, the operation cannot be owned by a 32 19 person classified as a habitual violator under section 32 20 455B.191. The division prohibits assistance being used to 32 21 construct, repair, or expand an anaerobic lagoon or earthen 32 22 manure storage basin. The division requires the authority to 32 23 adopt rules to administer the programs, including the payment 32 24 of civil penalties by persons violating agreements with the 32 25 authority. 32 26 The division establishes a family farm animal feeding 32 27 operation fund in order to support the assistance programs. 32 28 Not more than $150,000 available from the fund may be used 32 29 annually by the authority for administration. The division 32 30 provides a standing appropriation of $12 million for each year 32 31 until June 30, 2002. 32 32 The division provides for an income tax credit for an 32 33 operation which receives assistance from the authority. The 32 34 tax credit is equal to a maximum of 10 percent of all new 32 35 investment made by the operation not later than one year 33 1 following the year in which the operation received assistance. 33 2 The new investment includes the capitalized cost of all real 33 3 and personal property related to the operation. Any credit in 33 4 excess of the tax liability for the tax year may be applied to 33 5 the tax liability for the following 10 years or until 33 6 depleted, whichever occurs first. 33 7 Finally, the division provides that a family farm animal 33 8 feeding operation which qualifies for assistance is exempt 33 9 from property taxes for five years. The division provides 33 10 procedures for filing for the exemption with the assessing 33 11 authority on a form provided by the department of revenue and 33 12 finance. 33 13 The division provides that the income tax credit and 33 14 appropriation provisions of the division are repealed on July 33 15 1, 2002. 33 16 LSB 4408XC 76 33 17 mg/sc/14
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