Text: HF02270 Text: HF02272 Text: HF02200 - HF02299 Text: HF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN
1 1 HOUSE FILE 2271
1 2
1 3 AN ACT
1 4 CREATING A TAX CREDIT FOR INVESTMENTS IN QUALIFYING BUSINESSES
1 5 AND COMMUNITY-BASED SEED CAPITAL FUNDS AND INCLUDING EFFECTIVE
1 6 AND RETROACTIVE APPLICABILITY DATE PROVISIONS.
1 7
1 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 9
1 10 Section 1. NEW SECTION. 15E.41 PURPOSE.
1 11 The purpose of this division is to enhance the quality of
1 12 life for citizens of this state through the increased
1 13 availability of and accessibility to venture capital,
1 14 particularly at the seed capital investment stage, which
1 15 encourages the creation of wealth through high-paid, new jobs
1 16 that increase the wage base and promote industrial development
1 17 and innovative products that use new technology. The purpose
1 18 of this division is also to encourage individuals to invest
1 19 seed capital in Iowa businesses and in community-based seed
1 20 capital funds.
1 21 Sec. 2. NEW SECTION. 15E.42 DEFINITIONS.
1 22 For purposes of this division, unless the context otherwise
1 23 requires:
1 24 1. "Affiliate" means a spouse, child, or sibling of an
1 25 investor or a corporation, partnership, or trust in which an
1 26 investor has a controlling equity interest or in which an
1 27 investor exercises management control.
1 28 2. "Board" means the Iowa capital investment board, if
1 29 created in House File 2078 as enacted by the Seventy-ninth
1 30 General Assembly.
1 31 3. "Investor" means an individual making a cash investment
1 32 in a qualifying business or a person making a cash investment
1 33 in a community-based seed capital fund. "Investor" does not
1 34 include a person which is a current or previous owner, member,
1 35 or shareholder in a qualified business.
2 1 4. "Near equity" means debt that may be converted to
2 2 equity at the option of the debt holder, and royalty
2 3 agreements.
2 4 5. "Qualifying business" means a business meeting the
2 5 criteria defined in section 15E.44.
2 6 Sec. 3. NEW SECTION. 15E.43 INVESTMENT TAX CREDITS.
2 7 1. a. For tax years beginning on or after January 1,
2 8 2002, a tax credit shall be allowed against the taxes imposed
2 9 in chapter 422, division II, for a portion of an individual
2 10 taxpayer's equity investment, as provided in subsection 2, in
2 11 a qualified business. An individual shall not claim a tax
2 12 credit under this paragraph of a partnership, limited
2 13 liability company, S corporation, estate, or trust electing to
2 14 have income taxed directly to the individual.
2 15 b. For tax years beginning on or after January 1, 2002, a
2 16 tax credit shall be allowed against the taxes imposed in
2 17 chapter 422, divisions II, III, and V, and in chapter 432, and
2 18 against the moneys and credits tax imposed in section 533.24,
2 19 for a portion of a taxpayer's equity investment, as provided
2 20 in subsection 2, in a community-based seed capital fund. An
2 21 individual may claim a tax credit under this paragraph of a
2 22 partnership, limited liability company, S corporation, estate,
2 23 or trust electing to have income taxed directly to the
2 24 individual. The amount claimed by the individual shall be
2 25 based upon the pro rata share of the individual's earnings
2 26 from the partnership, limited liability company, S
2 27 corporation, estate, or trust.
2 28 c. A tax credit shall be allowed only for an investment
2 29 made in the form of cash to purchase equity in a qualifying
2 30 business or in a community-based seed capital fund. A
2 31 taxpayer shall not claim the tax credit prior to the third tax
2 32 year following the tax year in which the investment is made.
2 33 Any tax credit in excess of the taxpayer's liability for the
2 34 tax year may be credited to the tax liability for the
2 35 following five years or until depleted, whichever is earlier.
3 1 A tax credit shall not be carried back to a tax year prior to
3 2 the tax year in which the taxpayer redeems the tax credit.
3 3 2. A tax credit shall equal twenty percent of the
3 4 taxpayer's equity investment. The maximum amount of a tax
3 5 credit for an investment by an investor in any one qualifying
3 6 business shall be fifty thousand dollars. Each year, an
3 7 investor and all affiliates of the investor shall not claim
3 8 tax credits under this section for more than five different
3 9 investments in five different qualifying businesses.
3 10 3. An investment shall be deemed to have been made on the
3 11 same date as the date of acquisition of the equity interest as
3 12 determined by the Internal Revenue Code. An investment made
3 13 prior to January 1, 2002, shall not qualify for a tax credit
3 14 under this division.
3 15 4. The aggregate amount of tax credits issued pursuant to
3 16 this division shall not exceed a total of ten million dollars.
3 17 The total amount of tax credits issued during the fiscal year
3 18 beginning July 1, 2002, shall not exceed three million
3 19 dollars. The total amount of tax credits issued during the
3 20 fiscal year beginning July 1, 2003, shall not exceed three
3 21 million dollars. The total amount of tax credits issued
3 22 during the fiscal year beginning July 1, 2004, shall not
3 23 exceed four million dollars.
3 24 5. A tax credit shall not be redeemed during any tax year
3 25 beginning prior to January 1, 2005. A tax credit shall not be
3 26 transferable to any other taxpayer.
3 27 6. The board shall develop a system for registration and
3 28 authorization of tax credits authorized pursuant to this
3 29 division and shall control distribution of all tax credits
3 30 distributed to investors pursuant to this division. The board
3 31 shall develop rules for the qualification and administration
3 32 of qualifying businesses and community-based seed capital
3 33 funds. The department of revenue and finance shall adopt
3 34 these criteria as administrative rules and any other rules
3 35 pursuant to chapter 17A necessary for the administration of
4 1 this division.
4 2 7. The board may cooperate with the small business
4 3 development centers in an effort to disseminate information
4 4 regarding the availability of tax credits for investments in
4 5 qualifying businesses under this division. The board may also
4 6 cooperate with the small business development centers to
4 7 develop a standard seed capital application form that the
4 8 small business development centers may submit to the board on
4 9 behalf of clients seeking seed capital. The board shall
4 10 distribute copies of the application forms to all community-
4 11 based seed capital funds and potential individual investors.
4 12 Sec. 4. NEW SECTION. 15E.44 QUALIFYING BUSINESSES.
4 13 1. In order for an equity investment to qualify for a tax
4 14 credit, the business in which the equity investment is made
4 15 shall within one hundred twenty days of the date of the first
4 16 investment notify the board of the names, addresses, taxpayer
4 17 identification numbers, shares issued, consideration paid for
4 18 the shares, and the amount of any tax credits, of all
4 19 shareholders who may initially qualify for the tax credits,
4 20 and the earliest year in which the tax credits may be
4 21 redeemed. The list of shareholders who may qualify for the
4 22 tax credits shall be amended as new equity investments are
4 23 sold or as any information on the list shall change.
4 24 2. In order to be a qualifying business, a business must
4 25 meet all of the following criteria:
4 26 a. The principal business operations of the business are
4 27 located in this state.
4 28 b. The business has been in operation for three years or
4 29 less.
4 30 c. The business has an owner who has successfully
4 31 completed one of the following:
4 32 (1) An entrepreneurial venture development curriculum.
4 33 (2) Three years of relevant business experience.
4 34 (3) A four-year college degree in business management,
4 35 business administration, or a related field.
5 1 (4) Other training or experience as the board may specify
5 2 by rule or order as sufficient to increase the probability of
5 3 success of the qualifying business.
5 4 d. The business is not a business engaged primarily in
5 5 retail sales, real estate, or the provision of health care or
5 6 other professional services.
5 7 e. The business shall not have a net worth that exceeds
5 8 three million dollars.
5 9 f. The business shall have secured, within twenty-four
5 10 months following the first date on which the equity
5 11 investments qualifying for tax credits have been made, total
5 12 equity or near equity financing equal to at least two hundred
5 13 fifty thousand dollars.
5 14 3. A qualifying business shall have the burden of proof to
5 15 demonstrate to the board its qualifications under this
5 16 section, and shall have the obligation to notify the board in
5 17 a timely manner of any changes in the qualifications of the
5 18 business or in the eligibility of investors to redeem the
5 19 investment tax credits in any tax year.
5 20 4. After verifying the eligibility of a qualifying
5 21 business, the board shall issue a tax credit certificate to be
5 22 attached to the equity investor's tax return. The tax credit
5 23 certificate shall contain the taxpayer's name, address, tax
5 24 identification number, the amount of credit, the name of the
5 25 qualifying business, and other information required by the
5 26 department of revenue and finance. The tax credit
5 27 certificate, unless rescinded by the board, shall be accepted
5 28 by the department of revenue and finance as payment for taxes
5 29 imposed pursuant to chapter 422, division II, subject to any
5 30 conditions or restrictions placed by the board upon the face
5 31 of the tax credit certificate and subject to the limitations
5 32 of section 15E.43.
5 33 Sec. 5. NEW SECTION. 15E.45 COMMUNITY-BASED SEED CAPITAL
5 34 FUNDS.
5 35 1. An investment in a community seed capital fund shall
6 1 qualify for a tax credit under section 15E.43 provided that
6 2 all requirements of sections 15E.43, 15E.44, and this section
6 3 are met.
6 4 2. In order to be a community-based seed capital fund
6 5 qualifying under this section, a community-based seed capital
6 6 fund must meet all of the following criteria:
6 7 a. The fund is a limited partnership or limited liability
6 8 company.
6 9 b. The fund has, on or after January 1, 2002, a total of
6 10 both capital commitments from investors and investments in
6 11 qualifying businesses of at least five hundred thousand
6 12 dollars, but not more than three million dollars.
6 13 c. The fund has no fewer than ten individual investors who
6 14 are not affiliates, with no single investor and affiliates of
6 15 that investor together owning a total of more than twenty-five
6 16 percent of the ownership interests outstanding in the fund.
6 17 3. In order for an investment in a community-based seed
6 18 capital fund to qualify for a tax credit, the community-based
6 19 seed capital fund in which the investment is made shall within
6 20 one hundred twenty days of the date of the first investment
6 21 notify the board of the names, addresses, taxpayer
6 22 identification numbers, equity interests issued, consideration
6 23 paid for the interests, and the amount of any tax credits, of
6 24 which all limited partners or members who may initially
6 25 qualify for the tax credits, and the earliest year in which
6 26 the tax credits may be redeemed. The list of limited partners
6 27 or members who may qualify for the tax credits shall be
6 28 amended as new equity interests are sold or as any information
6 29 on the list shall change.
6 30 4. After verifying the eligibility of the community-based
6 31 seed capital fund, the board shall issue a tax credit
6 32 certificate to be attached to the taxpayer's tax return. The
6 33 tax credit certificate shall contain the taxpayer's name,
6 34 address, tax identification number, the amount of the tax
6 35 credit, the name of the community-based seed capital fund, and
7 1 other information required by the department of revenue and
7 2 finance. The tax credit certificate, unless rescinded by the
7 3 board, shall be accepted by the department of revenue and
7 4 finance or a local taxing district, as applicable, as payment
7 5 for taxes imposed pursuant to chapter 422, divisions II, III,
7 6 and V, and chapter 432, and as payment for the moneys and
7 7 credits tax imposed pursuant to section 533.24, subject to any
7 8 conditions or restrictions placed by the board on the face of
7 9 the tax credit certificate and subject to the limitations of
7 10 section 15E.43.
7 11 5. The manager of the community-based seed capital fund
7 12 shall have the burden of proof to demonstrate to the board the
7 13 community-based seed capital fund's qualifications under this
7 14 section, and shall have the obligation to notify the board in
7 15 a timely manner of any changes in the qualifications of the
7 16 community-based seed capital fund, in the qualifications of
7 17 any qualifying business in which the fund has invested, or in
7 18 the eligibility of limited partners or members to redeem the
7 19 investment tax credits in any year.
7 20 6. In the event that a community-based seed capital fund
7 21 fails to meet or maintain any requirement set forth in this
7 22 section, or in the event that the community-based seed capital
7 23 fund has not invested at least thirty-three percent of its
7 24 invested capital in no fewer than two separate qualifying
7 25 businesses, measured at the end of the thirty-sixth month
7 26 after commencing the fund's investing activities, the board
7 27 shall rescind any tax credit certificates issued to limited
7 28 partners or members and shall notify the department of revenue
7 29 and finance that it has done so, and the tax credit
7 30 certificates shall be null and void. However, a community-
7 31 based seed capital fund may apply to the board for a one-year
7 32 waiver from the requirements of this subsection.
7 33 7. An investor in a community-based seed capital fund
7 34 shall receive a tax credit pursuant to this division only for
7 35 the investor's investment in the community-based seed capital
8 1 fund and shall not receive any additional tax credit for the
8 2 investor's share of investments in a qualifying business made
8 3 by the community-based seed capital fund. However, an
8 4 investor in a community-based seed capital fund may receive a
8 5 tax credit under this division with respect to a separate
8 6 direct investment made by the investor in the same qualifying
8 7 business in which the community-based seed capital fund
8 8 invests.
8 9 8. A community-based seed capital fund shall not invest in
8 10 the Iowa fund of funds, if organized pursuant to 2002 Iowa
8 11 Acts, House File 2078, if enacted.
8 12 Sec. 6. NEW SECTION. 15E.46 REPORTS.
8 13 The board shall publish an annual report of the activities
8 14 conducted pursuant to this division and shall submit the
8 15 report to the governor and the general assembly. The report
8 16 shall include a listing of eligible qualifying businesses and
8 17 the number of tax credit certificates and the amount of tax
8 18 credits issued by the board.
8 19 Sec. 7. NEW SECTION. 422.11F INVESTMENT TAX CREDITS.
8 20 The taxes imposed under this division, less the credits
8 21 allowed under sections 422.12 and 422.12B, shall be reduced by
8 22 an investment tax credit authorized pursuant to section
8 23 15E.43.
8 24 Sec. 8. Section 422.33, Code Supplement 2001, is amended
8 25 by adding the following new subsection:
8 26 NEW SUBSECTION. 12. The taxes imposed under this division
8 27 shall be reduced by an investment tax credit authorized
8 28 pursuant to section 15E.43.
8 29 Sec. 9. Section 422.60, Code 2001, is amended by adding
8 30 the following new subsection:
8 31 NEW SUBSECTION. 4. The taxes imposed under this division
8 32 shall be reduced by an investment tax credit authorized
8 33 pursuant to section 15E.43.
8 34 Sec. 10. NEW SECTION. 432.12A INVESTMENT TAX CREDITS.
8 35 The tax imposed under this chapter shall be reduced by an
9 1 investment tax credit authorized pursuant to section 15E.43.
9 2 Sec. 11. Section 533.24, Code 2001, is amended by adding
9 3 the following new unnumbered paragraph:
9 4 NEW UNNUMBERED PARAGRAPH. The moneys and credits tax
9 5 imposed under this section shall be reduced by an investment
9 6 tax credit authorized pursuant to section 15E.43.
9 7 Sec. 12. MONEYS AND CREDITS TAX. Section 25B.7 shall not
9 8 apply to the tax credit authorized pursuant to section 15E.43
9 9 and allowed against the moneys and credits tax.
9 10 Sec. 13. EFFECTIVE AND RETROACTIVE APPLICABILITY DATE
9 11 PROVISIONS. This Act, being deemed of immediate importance,
9 12 takes effect upon enactment and applies retroactively to
9 13 January 1, 2002, for tax years beginning on or after that
9 14 date.
9 15 Sec. 14. 2002 Iowa Acts, House File 2078, is amended by
9 16 adding the following new section:
9 17 SEC. 12. EFFECTIVE DATE. Sections 1 through 9 of this
9 18 Act, being deemed of immediate importance, take effect upon
9 19 the enactment of the Act creating a tax credit for investments
9 20 in qualifying businesses and community-based seed capital
9 21 funds as enacted by the Seventy-ninth General Assembly, 2002
9 22 Regular Session.
9 23
9 24
9 25
9 26 BRENT SIEGRIST
9 27 Speaker of the House
9 28
9 29
9 30
9 31 MARY E. KRAMER
9 32 President of the Senate
9 33
9 34 I hereby certify that this bill originated in the House and
9 35 is known as House File 2271, Seventy-ninth General Assembly.
10 1
10 2
10 3
10 4 MARGARET THOMSON
10 5 Chief Clerk of the House
10 6 Approved , 2002
10 7
10 8
10 9
10 10 THOMAS J. VILSACK
10 11 Governor
Text: HF02270 Text: HF02272 Text: HF02200 - HF02299 Text: HF Index Bills and Amendments: General Index Bill History: General Index
© 2002 Cornell College and League of Women Voters of Iowa
Comments about this site or page?
webmaster@legis.iowa.gov.
Please remember that the person listed above does not vote on bills. Direct all comments concerning legislation to State Legislators.
Last update: Thu Jun 20 03:31:07 CDT 2002
URL: /DOCS/GA/79GA/Legislation/HF/02200/HF02271/020220.html
jhf