Business, Banking and Insurance Legislation

SENATE FILE 2084 - Farm Implement, Motorcycle, and All-Terrain Vehicle Franchises or Dealerships

SENATE FILE 2134 - Security and State Bank Deposit Accounts - Transfer Upon Death of Owner or Depositor

SENATE FILE 2279 - Insurance and Securities Regulation - Miscellaneous Provisions

SENATE FILE 2317 - Tobacco Settlement Agreement - Miscellaneous Provisions - Litigation Costs

HOUSE FILE 608 - Consumer Credit Transactions - Delinquency Charges - VETOED BY THE GOVERNOR

HOUSE FILE 681 - Deposit of Public Funds - Uninsured Funds - Required Collateral

HOUSE FILE 2446 - Proposed Uniform Computer Information Transactions Act - Effect - Intent

HOUSE FILE 2487 - Medical Assistance Program - Disproportionate Share Hospital Payments for Inpatient Children's Hospital Services

HOUSE FILE 2497 - Gift Certificates - Late Claims Charges

HOUSE FILE 2509 - Business Corporations - Miscellaneous Provisions - Other Entities

Related Legislation

SENATE FILE 429 - Local Exchange Carrier Regulation - Rate Changes

SENATE FILE 2192 - Highways and Motor Vehicles - Miscellaneous Provisions

SENATE FILE 2210 - Interests in Agricultural Land - Qualified Enterprises

SENATE FILE 2212 - Secured Transactions - Landlord Liens

SENATE FILE 2272 - Acquisition or Holding of Agricultural Land - Permanent Residents

SENATE FILE 2275 - Substantive Code Corrections

SENATE FILE 2305 - Tax Administration and Related Matters

SENATE FILE 2309 - Regulation of Beef and Pork Processors

SENATE FILE 2318 - Taxation of Insurance Premiums, Assessments, and Fees and Health Service Corporation Subscriber Contract Payments

SENATE FILE 2321 - Sales and Use Taxes - Miscellaneous Provisions

HOUSE FILE 2035 - State Historic Property Rehabilitation Tax Credit

HOUSE FILE 2078 - Business Growth and Development Initiatives - Seed and Venture Capital Investments - Small Business Income Allocation

HOUSE FILE 2271 - Investment Tax Credits - Qualifying Businesses - Community-Based Seed Capital Funds

HOUSE FILE 2475 - Security Interests in Education Loans

HOUSE FILE 2492 - Farm Aid Associations - Termination or Conversion to Nonprofit Corporations

HOUSE FILE 2565 - Residential Real Estate Installment Contracts - Disclosure Statements

HOUSE FILE 2586 - Venture Capital Fund Investment Tax Credits

HOUSE FILE 2592 - Start-Up Businesses - Taxable Income Deferment

HOUSE FILE 2622 - Tax Administration - Additional Related Matters

HOUSE FILE 2627 - Miscellaneous Appropriations, Reductions, Transfers, and Other Provisions - 2002-2003 and Prior Fiscal Years - SECOND EXTRAORDINARY SESSION

SENATE FILE 2084 - Farm Implement, Motorcycle, and All-Terrain Vehicle Franchises or Dealerships Full text of Bill
By Jensen.

This Act provides for agreements for persons merchandising all-terrain vehicles.

Code Chapter 322D governs agricultural equipment and motorcycle franchises. According to Code Section 322D.7, for agricultural equipment franchises, the provisions of Code Chapter 322D are transitional. Code Chapter 322F replaces Code Chapter 322D's authority over franchise relationships based on agreements executed or renewed on or after July 1, 1990, or agreements without any expiration date. Code Chapter 322D still governs motorcycle dealerships and agricultural dealership agreements executed prior to July 1, 1990, that expire on a date certain.

Code Chapter 322D refers to the merchandisers as franchisees and their agreements with franchisers as franchise agreements, while Code Chapter 322F refers to the merchandisers as dealerships and their agreements with suppliers as dealership agreements. For purposes of simplicity, this summary uses the terms contained in Code Chapter 322F when describing both chapters. The Act provides that the term "all-terrain vehicle" means a motorized flotation-tire vehicle with not less than three low-pressure tires, but not more than six low-pressure tires, or a two-wheeled off-road motorcycle, that is limited in engine displacement to less than 800 cubic centimeters and in total dry weight to less than 750 pounds and that has a seat or saddle designed to be straddled by the operator and handlebars for steering control.

The Act provides that for any remaining dealerships of agricultural equipment and for all dealerships of motorcycles governed under Code Chapter 322D, those provisions apply to all-terrain vehicles. For agricultural equipment dealers governed under Code Chapter 322F, the same provisions that apply to agricultural equipment apply to all-terrain vehicles.

Generally, Code Chapters 322D and 322F regulate business relationships between dealers and suppliers by providing for the terms and conditions of dealership agreements. These terms and conditions relate to causes for termination of a dealership agreement, including requiring that good cause exist for the termination. The two Code chapters provide requirements relating to the repurchase and repossession of equipment following termination of a dealership agreement. The Code chapters specify rights and obligations for dealers and suppliers. They place restrictions on supplier practices, provide for supplier liability, and make remedies available to the dealer.

Under both Code chapters as amended by this Act, the provisions governing all-terrain vehicles apply to those dealership agreements in effect that have no expiration date and all other agreements entered into or renewed on or after July 1, 2002. Any such dealership agreement in effect on July 1, 2002, which by its own terms will terminate on a subsequent date, is governed by the law as it existed prior to July 1, 2002.

SENATE FILE 2134 - Security and State Bank Deposit Accounts - Transfer Upon Death of Owner or Depositor Full text of Bill
By Committee on Commerce.

This Act removes a six-month time period requirement during which a deposit account of a deceased depositor was subject to the debts of the deceased depositor and Iowa inheritance tax. The Act provides that the proceeds of the deposit account remain subject to the decedent's debts and inheritance tax after payment of the proceeds by the state bank to the persons designated by the decedent to receive the proceeds, but the state bank is not liable for any debts or taxes as a result of making the payment to the beneficiary.

The Act also defines "security account" as part of the Uniform Transfer on Death Security Registration Act, codified as part of Iowa's Probate Code. The effect of adding such bank and trust accounts is to make them eligible for registration in beneficiary form, so that the items in the account pass to the beneficiary at the owner's death. By completing a registration in beneficiary form, the owner may designate a beneficiary, authorizing the custodian of the owner's securities (e.g., a broker) to transfer the securities directly to the beneficiary on the owner's death, bypassing the probate process.

SENATE FILE 2279 - Insurance and Securities Regulation - Miscellaneous Provisions Full text of Bill
By Committee on Commerce.

This Act makes changes to various provisions related to insurance throughout the Code, and certain changes related to securities filings and registration provisions, including Code Chapter 502, the Iowa Uniform Securities Act, administered by the Commissioner of Insurance or the commissioner's deputy (referred to as "the administrator").

The Act strikes provisions of Code Chapter 272C regulating professions and occupations that require reports to be filed with the commissioner by insurance carriers that insure professional and occupational licensees relating to negligent acts and omissions in the practice of a profession or an occupation. The Act requires that the reports be filed with the appropriate licensing board.

The Act amends Code Chapter 502 by substituting a definition for "viatical settlement investment contract," rather than "viatical settlement contract," and makes corresponding changes elsewhere in the Code regarding the change in terminology.

The Act provides that Code Section 17A.18A, regarding emergency adjudicative hearings, shall not apply to summary orders issued by the administrator postponing or suspending registration of an applicant or registrant of a broker-dealer, agent, investment adviser, or investment adviser representative under the Iowa Uniform Securities Act pending final determination of any proceeding for denial, revocation or suspension of registration.

The Act amends Code Chapters 502 and 505 to allow the commissioner and the administrator to keep confidential social security numbers, residence addresses, and residence telephone numbers contained in certain securities and insurance filings, if the disclosure is not required in the performance of any duty or is not otherwise required under law.

The Act amends Code Chapter 507C to provide that the commissioner, without advance notice or hearing, may immediately suspend the certificate of authority of an insurer if the insurance supervisory official of another state has commenced any delinquency proceedings against the insurer.

The Act amends Code Chapter 508, Life Insurance Companies, to provide that a funding agreement may be issued to a person other than a natural person that has assets of at least $25 million. Current Code language provides that the agreement may be issued to a person for specific purposes, including a program of an institution that has assets in excess of $25 million.

The Act amends a provision in the Code relating to individual deferred annuities to provide that the minimum nonforfeiture amount is calculated in part based on prior withdrawals or from partial surrenders of the contract, calculated currently at 3 percent annually. The Act changes this amount to 1.5 percent annually. The amendments to the provision are repealed effective July 1, 2003.

The Act amends Code chapters regarding life insurance, insurance other than life, and state and county mutual associations to provide that insurance producers who are independent contractors but are not exclusive insurance producers have the right to 180 days' notice of termination of contract except in cases of loss of license, fraud, nonpayment of company premiums, or the withdrawal of operations in the state by the insurance company. An "insurance producer" is a person required to be licensed in the state to sell insurance. The Act defines "exclusive insurance producer" in Code Chapter 522B to mean an insurance producer who has an exclusive relationship with an insurer.

The Act amends provisions in Code Chapter 508E regulating viatical settlement investment contracts. The Act provides immunity from liability for any person acting without malice or bad faith who files a report or otherwise furnishes information to certain persons concerning alleged acts in violation of the chapter or the administrative rules implementing the chapter.

The Act amends a provision in Code Chapter 509 requiring a carrier to provide annual information regarding coverage and claims to group health policyholders with 100 or more eligible employees. The Act reduces the threshold to 51 or more eligible employees, and requires that the information include the total amount of claims paid and the total amount of premiums by line of coverage, for current and prior policy years. The Act adds organized delivery systems, multiple employer welfare arrangements, state employee health plans, and association group policies to the list of persons currently required to furnish such information to group health policyholders.

The Act amends provisions in Code Chapter 513B relating to small group health coverage by requiring that adjustments regarding rate adjustments for claims experience, health status, and duration of coverage be applied uniformly to all covered employees and dependents.

The Act amends Code Chapter 513C by providing that loss of eligibility for the hawk-i Program, which provides health insurance coverage to low-income children under Code Chapter 514I, constitutes a "qualifying event" for purposes of the chapter relating to insurance coverage available due to individual market reform.

The Act amends provisions in Code Chapter 514A, regulating accident and health insurance, by providing for coverage in a medical expense policy if a loss is sustained or contracted due to the insured's being intoxicated or under the influence of narcotics. This Code provision replaces one that excludes coverage if the insured is intoxicated or under the influence of any narcotic unless administered on advice of a physician.

The Act amends Code Chapter 515 to provide that a notice of intent not to renew or nonrenewal sent by insurers for insurance other than life is not required if the insured is transferred from an insurer to an affiliate for future coverage as a result of a merger, acquisition, or company restructuring and if the transfer results in the same or greater coverage. The Act makes similar changes in Code Chapter 515D regarding notice of intent not to renew on automobile policies. The Act also changes certain notice periods in those chapters related to cancellation or intent not to renew insurance other than life and automobile insurance from 20 to 30 days.

The Act amends provisions in Code Chapter 515B creating the Iowa Insurance Guaranty Association, by providing that the association's obligation to defend an insured may cease upon the association's tender to an excess insurer an amount which equals the obligation or applicable policy limits, whichever is less. The association may review all settlements, releases and judgments of the insolvent insurer to determine which may be contested.

The Act provides that a person may be excluded from an automobile insurance policy if agreed upon by the named insured and insurer, and a policy may be canceled for any reason permitted under Code Section 515D.4 for which a person may be excluded from the policy.

The Act amends Code Chapter 515F governing casualty insurance by excluding state mutual insurance associations from the scope of the Code chapter. The Code chapter currently excludes county mutual insurance associations.

The Act amends Code Chapters 518 and 518A by expanding the standard for exposure of surplus to a general benchmark of 15 percent for state and county mutual associations, and amends the required surplus standard in Code Sections 518.25 and 518A.37, removing the redundant word "property."

The Act amends the authorized area of business for a state mutual association under Code Section 518A.2 to the county of its principal place of business, the contiguous counties, and the next tier of contiguous counties. If the association seeks to modify its authorized territory, it must file and have a plan approved by the commissioner for controlled expansion that protects policyholders.

The Act changes the dates in Code Chapter 519A, relating to medical malpractice insurance, to provide that insurance issued under that chapter shall expire two years from the date the commissioner deems an emergency to exist, or earlier, in accordance with the terms of the statute. Current Code language eliminated in the Act provided for the coverage to expire in 1977.

The Act also amends Code Chapter 519A, regulating medical malpractice insurance, by adding nursing facilities licensed pursuant to Code Chapter 135C to the definition of "licensed health care provider."

SENATE FILE 2317 - Tobacco Settlement Agreement - Miscellaneous Provisions - Litigation Costs Full text of Bill
By Committee on Appropriations.

This Act relates to cigarettes and tobacco products, including Tobacco Master Settlement Agreement litigation fees. The Act makes an appropriation for FY 2001-2002 from the Tax?Exempt Bond Proceeds Restricted Capital Funds Account of the Tobacco Settlement Trust Fund to the Treasurer of State to supplement an appropriation made for FY 2001-2002 for payment of litigation fees incurred pursuant to the Tobacco Master Settlement Agreement. This appropriation takes effect May 10, 2002.

THE GOVERNOR ITEM VETOED THE FOLLOWING:

The provision that prohibited a distributor from affixing state tax stamps or causing state tax stamps to be affixed to individual packages of any brand of cigarettes sold or distributed by the distributor in the state and from acting as a distributor for any roll-your-own-tobacco product unless either of the following conditions applied: (1) the tobacco product manufacturer of the brand, or any predecessor tobacco product manufacturer of the brand, is a participating manufacturer under the master settlement agreement; or (2) the tobacco product manufacturer of the brand, or any predecessor tobacco product manufacturer of the brand, has provided the distributor with a current certification that the tobacco product manufacturer and all predecessor tobacco product manufacturers of the brand are in full compliance with the escrow requirements of the master settlement agreement.
1. The provision that prohibited a distributor from affixing or causing to be affixed state tax stamps to individual packages of any brand of cigarettes, subsequent to notice to the distributor by the Department of Revenue and Finance (IDRF) that the tobacco product manufacturer is in violation of Code Chapter 453C with reference to that brand.
2. The provision that required a tobacco product manufacturer whose cigarettes are sold for consumption in the state to quarterly certify, under penalty of perjury, that as of the date of certification, the tobacco product manufacturer and any predecessor of the tobacco product manufacturer are either a participating manufacturer under the Master Settlement Agreement or in full compliance with the escrow requirements under the master settlement agreement.
3. The provision that required that a copy of the certification be delivered to the Director of Revenue and Finance, the Attorney General, and any distributor of the tobacco product manufacturer.
4. The provision that a distributor that violates the provisions of the Act is subject to civil penalties existing in the Code of $200 for a first violation, $500 for a second violation within two years of the first violation, and $1,000 for a third or subsequent violation within two years of the first violation.
5. The provision that authorized that, for the purposes of enforcement of Code Chapter 453C ("Tobacco Product Manufacturers -- Financial Obligations") and the new provisions of the Act, IDRF and the Attorney General may share all information collected under Code Chapter 453C and the provisions of the Act with each other, with the National Association of Attorneys General, and with agencies of other states responsible for enforcement of cigarette and tobacco laws.
6. The provision that required tobacco product manufacturers whose cigarettes are sold for consumption in the state, prior to any such sale, to maintain both a registered office and a registered agent in the state.

HOUSE FILE 608 - Consumer Credit Transactions - Delinquency Charges - VETOED BY THE GOVERNOR Full text of Bill
By Committee on Commerce and Regulation.

This bill would have provided that, with respect to a consumer credit transaction that is not pursuant to an open-end credit arrangement, and other than a consumer lease or consumer rental agreement, a delinquency charge on a current paid-in-full installment associated with a precomputed transaction shall not be collected, even if a delinquency on an earlier installment exists. By limiting the provision's applicability to precomputed transactions, the bill would have allowed a delinquency charge to be collected on an installment not part of a precomputed transaction, where the current installment due is paid in full within 10 days after its scheduled or deferred installment due date but an earlier maturing installment or a delinquency or deferral charge on an earlier installment has not been paid in full. The bill, with respect to such transactions, would have eliminated the requirement that payments be applied first to a current installment and then to delinquent amounts.

The bill likewise would have provided that with respect to delinquency charges related to an open-end credit transaction, a delinquency charge could be collected on a payment associated with a transaction other than a precomputed transaction where the current payment due is paid in full on or before its scheduled or deferred due date but where an earlier maturing payment or a delinquency or deferred charge on an earlier payment has not been paid in full. The bill, with respect to such transactions, would have eliminated the requirement that payments be applied first to a current payment and then to delinquent amounts.

HOUSE FILE 681 - Deposit of Public Funds - Uninsured Funds - Required Collateral Full text of Bill
By Committee on Commerce and Regulation.

This Act amends the regulations regarding public funds deposits in Code Chapter 12C. The Act primarily requires financial institutions to pledge certain types and amounts of financial institutions collateral in order to secure the deposit of public funds in those depositories.

The Act requires that approval of a financial institution as a depository of public funds for a public body shall be by written resolution or order entered in the minutes of the approving board, with the name of each depository and the maximum amount that may be kept on deposit in each depository. Each financial institution seeking to be on the list of financial institutions eligible to accept public funds deposits must annually provide the state with a written statement that includes a statement that the institution has complied with requirements of Code Chapter 12C.

The Act requires quarterly public funds reports to be filed by each savings and loan and each out-of-state bank with the Superintendent of Banking regarding the amount of public funds on deposit with the savings and loan or at each branch of the bank. The superintendent may also request any bank to certify the amount of public funds on deposit on any day specified by the superintendent. The superintendent may investigate as necessary to verify the information, and must notify the Treasurer of State regarding the collateral that must be pledged by each bank during the previous calendar quarter.

The Act adds requirements regarding the collateral that must be pledged by a bank to the treasurer during each calendar quarter in respect to the bank's uninsured public funds deposits. Specific formulas are provided for both the amount of collateral to be pledged by a bank and for the amount of collateral to be pledged by an out-of-state bank that operates a branch in Iowa. A bank accepting public funds deposits must execute a security agreement with the treasurer as the secured party, and deposit the collateral in restricted accounts at a designated financial institution not owned or controlled by the bank pledging the collateral. The Act also specifies the kinds of collateral that may be used to secure public deposits, and provides that a bank may borrow collateral used for a pledge if the collateral is free of any liens, security interest, claims, or encumbrances.

The Code continues to provide a procedure for validating the amount of public funds on deposit at a closed bank, as well as the applicable amount of deposit insurance. The Act amends the Code in relation to the issue of payment of losses in a closed bank, to address the pledging of collateral and the disposition of collateral pledged by the closed bank. The Act retains Code Section 12C.23A's primary resort to deposit insurance, by providing that loss to the depositors of public funds shall be satisfied first by any federal deposit insurance. The Act adds that the secondary and tertiary sources of compensation to a public funds depositor shall be made by the sale or other disposition of collateral pledged by the closed bank, and then from the assets of the closed bank, respectively. Only if the assets of the closed bank are insufficient to cover the loss shall payments be made from the state sinking fund for public deposits in banks. If that fund is inadequate to compensate public funds depositors, the treasurer shall make an assessment against other banks whose public funds deposits exceed federal deposit insurance coverage. The Act changes certain language regarding the calculation of this assessment, and specifies certain actions that the treasurer and superintendent must take if a bank fails to pay its assessment when due, including by liquidating the bank's pledged collateral and imposing statistical assessments. The Act also amends the procedure for distribution of the funds from an assessment.

The Act amends Code Section 12C.24, which provides an exemption from personal liability for losses resulting from the deposit of public funds for a public body. The Act provides that an agent, employee, officer, or board member of a public funds depositor is exempt from liability provided that the deposit is made in accordance with Code Chapter 12C, and an absence of negligence, malfeasance, misfeasance, or nonfeasance exists on the part of the person.

The Act moves from Code Section 12C.23A to Code Section 12C.25 language that requires the treasurer to invest idle balances in the state sinking fund for public deposits in banks, and to credit earnings to that fund. The Act provides that fees paid by banks for the administration of Code Chapter 12C shall be credited to the state sinking fund for public deposits in banks, and the treasurer may deduct actual costs of administration from the fund.

The Act also provides a formula for refunding a pro rata share of assessments paid by banks for the state sinking fund for public deposits in banks when the balance of the fund exceeds $3.1 million at the end of any calendar year, but the total amount of refunds shall not deplete the balance of the fund beyond $3 million. Another procedure is provided for payment of the reimbursement when assessments remain unreimbursed by reason of the closing of more than one bank. A separate subsection pertaining to the closing of a credit union is retained.

The Act addresses the notification procedures for the Treasurer of State to follow when a bank fails to maintain the required collateral levels under Code Chapter 12C. The treasurer must give the bank notice and opportunity to pledge the additional collateral; otherwise, the treasurer shall notify the Office of Thrift Supervision, the Comptroller of the Currency, or the Superintendent of Banking, as applicable, who may take such action permitted by law.

The Act allows any notice, report, or other communication required by Code Chapter 12C to be deemed effective if sent or given electronically, according to regulation by the superintendent and the treasurer.

The Act also amends parts of Code Chapter 524 relating to the powers and duties of the superintendent. The changes allow the superintendent to issue orders, specifically refer to Code Chapter 12C, and take certain actions in reference to a bank not in compliance with Code Chapter 12C, including requiring that a bank not accept public funds deposits, that a state bank return some or all uninsured public funds, or that it pledge up to 110 percent of the public funds held by the bank for the current quarter and up to the next succeeding eight calendar quarters.

The Act takes effect July 1, 2002, but special applicability provisions are included as follows:

1. Certification to the Superintendent of Banking regarding the amount of public funds on deposit at each savings and loan and each in-state branch of an out-of-state bank, under Code Section 12C.20, subsection 1, is not required until January 31, 2003.
2. Notification by the Superintendent of Banking to the Treasurer of State regarding the amount of collateral required to be pledged at the end of the previous calendar quarter under Code Section 12C.20, subsection 4, is not required until April 30, 2003.
3. The pledging of collateral by banks to the Treasurer of State pursuant to Code Section 12C.22 shall not be required until July 1, 2003.

HOUSE FILE 2446 - Proposed Uniform Computer Information Transactions Act - Effect - Intent Full text of Bill
By Committee on Commerce and Regulation.

This Act amends certain provisions of 2000 Iowa Acts, Chapter 1189, creating a new Code chapter referred to as the Uniform Electronic Transactions Act providing for electronic transactions and electronic records proposed by the National Conference of Commissioners on Uniform State Laws. The 2000 Act eliminates a provision codified in Code Section 554.104 relating to a choice of law clause in a computer information agreement. During the 2001 Legislative Session, the General Assembly amended the 2000 Act to extend the effective date for the repeal from July 1, 2001, to July 1, 2002.

This Act extends the date for repeal to July 1, 2003.

The Act also amends 2000 Iowa Acts, Chapter 1189, as amended in 2001 Iowa Acts, Chapter 34, to provide that it is the intent of the General Assembly to consider the proposed Uniform Computer Information Transactions Act, as proposed by the National Conference of Commissioners on Uniform State Laws, in the 2003 Regular Legislative Session, rather than in the 2002 Regular Legislative Session.

HOUSE FILE 2487 - Medical Assistance Program - Disproportionate Share Hospital Payments for Inpatient Children's Hospital Services Full text of Bill
By Committee on Commerce and Regulation.

This Act directs the Department of Human Services to designate a children's hospital that meets the criteria for a voting member of the National Association of Children's Hospitals and Related Institutions and which operates as part of a licensed hospital, as a qualifying hospital for the purpose of receipt of disproportionate share hospital payments for inpatient services under the Medical Assistance Program. Such a children's hospital is eligible for receipt of disproportionate share hospital funds, whether or not the children's hospital has a separate federal Medicare provider number. The Act directs the department to adopt rules and to seek an amendment to the state plan from the Centers for Medicare and Medicaid of the U.S. Department of Health and Human Services, as necessary, to implement the Act.

HOUSE FILE 2497 - Gift Certificates - Late Claims Charges Full text of Bill
By Committee on Commerce and Regulation.

This Act provides that an issuer of a gift certificate shall not deduct any charges from the face value of the gift certificate for the gift certificate remaining outstanding, unless an enforceable written contract exists between the issuer and the owner pursuant to which the issuer regularly imposes such charges and does not regularly reverse or cancel them. The provision is part of a Code section that provides that intangible personal property, including any income earned on the property and deducting any lawful charges, is presumed abandoned if unclaimed after more than three years. The Act also defines "gift certificate" to mean a merchandise certificate generally purchased by a buyer for use by a person other than the buyer.

HOUSE FILE 2509 - Business Corporations - Miscellaneous Provisions - Other Entities Full text of Bill
By Committee on Commerce and Regulation.

This Act amends Code Chapter 490, the Iowa Business Corporation Act, based on recommendations proposed by the Iowa Bar Association's Corporate Laws Committee. The Code chapter regulates for-profit corporations. The following overview highlights the areas of change to the Act:

LIABILITY OF DIRECTORS. Code Section 490.202 is amended to allow a corporation's articles of incorporation to include a provision eliminating or limiting the liability of a corporation's director or shareholders, with certain exceptions.

DIRECTOR CONFLICT OF INTERESTS AND OFFICER CONDUCT. The Act revises and renumbers several Code sections relating to conflicts of interest of directors and officers. The Act revises the general standard of conduct for directors in Code Section 490.830, deleting the current "ordinarily prudent person in a like position" requirement and retaining the good faith and reasonability requirements. The Act also makes other changes to the standard of care in Code Section 490.830. New Code Section 490.831 provides standards of liability. Current Code Section 490.831 is redesignated as new Code Section 490.832, providing for a director's conflict of interest. The Act adds a two-year time limitation on a director's suit for recoupment or contribution in cases of unlawful distribution of corporate assets or indebtedness under Code Section 490.833, and makes other changes consistent with the changes in standards for director conflict of interest.

Code Section 490.842 provides standards of conduct for a corporation's officers. The Act amends Code Section 490.843 regarding the procedure for resignation and removal of officers.

DERIVATIVE PROCEEDINGS. The Act replaces current Code Section 490.740, providing for civil actions brought by shareholders on behalf of the corporation (derivative proceedings), provides a new part that includes definitions, and addresses shareholder demand on the corporation, stay of proceedings, dismissal of the action, settlement, and payment of expenses.

Code Section 490.742 allows a shareholder to commence a derivative proceeding 90 days after the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period. Code Section 490.741 provides for a shareholder's standing.

A litigation committee composed of independent directors may be appointed to investigate and make recommendations concerning derivative proceedings. Code Section 490.744 addresses the issue of independence and provides that by itself, the nomination or election of the director by persons who are defendants in the derivative proceeding or against whom the action is demanded shall not cause a director to be considered as not independent. In addition, the Act allows such investigation and recommendation to be made by a panel appointed either by the independent directors present at a meeting of the board of directors if the independent directors constitute a quorum or, if the independent directors do not constitute a quorum, a committee of two or more independent directors appointed by a majority vote of independent directors present at a meeting of the board of directors.

CLOSELY HELD CORPORATIONS. Code Section 490.732 validates shareholder agreements appearing in the articles of incorporation or signed by all shareholders, and it authorizes wide latitude in their content for closely held corporations whose shares are not listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association.

New Code Section 490.1434 provides an alternative to a closely held corporation and its shareholders where one or more but fewer than all shareholders petition for judicial dissolution on grounds, for example, of deadlock or oppression. The alternative essentially is a buyout of the petitioning shareholders, either for an amount the parties can negotiate or for "fair value" of the shares, with the corporation having the right to do so in the first instance, and, if the corporation does not so elect, due regard for shareholders' relative positions. If the parties cannot reach an agreement, a court, upon application of a party, may determine the fair value of the petitioner's shares.

INDEMNIFICATION AND ADVANCE FOR EXPENSES. The Act expands the authority of a corporation to indemnify a director as provided in the corporation's articles of incorporation pursuant to Code Section 490.202 and as provided in Code Section 490.851. The Act generally permits indemnification with respect to a director's conduct to the same extent that the director's liability for that conduct can be limited under the section (e.g., intentionally inflicting harm on the corporation). Code Sections 490.851 through 490.859 address the procedures for making decisions on granting indemnification and authorizing an advance for expenses, and make a court order available as a remedy to enforce a legal right to indemnification or expense advancement. Code Section 490.854 permits a court to order an advance for expenses as well as indemnification.

SHAREHOLDER MEETINGS AND VOTING. The Act amends Code Section 490.702 regarding the percentage of shares required for a special meeting of shareholders to be granted. The Act provides that the percentage may be established in the corporation's articles of incorporation within parameters. New Code Section 490.704 establishes a procedure for revoking a shareholder's consent to a special meeting. New Code Section 490.708 addresses conduct of a meeting of shareholders, providing that a chairperson shall preside who, unless the articles or bylaws provide otherwise, has the authority to determine the order of business and establish rules for the conduct of the meeting. The rules adopted and the conduct of the meeting must be fair to shareholders. Amendments to Code Section 490.722 provide for the appointment of a proxy by electronic transmission. New Code Section 490.729 requires the appointment of one or more inspectors of election for publicly traded corporations and also delineates the inspector's duties. Any other corporation may appoint inspectors pursuant to Code Section 490.729.

ELECTRONIC FILINGS. Code Section 490.140 adds definitions applicable to the chapter, including definitions for "deliver," "electronic transmission," "sign" or "signature," and "voting power." Code Section 490.141 provides that notice required under the chapter may be by electronic transmission, and notice from a corporation to a shareholder may be effective when electronically transmitted in a manner authorized by the shareholder. Code Sections 490.120, 490.123, 490.124, 490.125, and 490.127 all address electronic filings with the Secretary of State.

STANDARDS OF CONDUCT AND STANDARDS OF LIABILITY FOR DIRECTORS. The Act adds new Code Section 490.831 to clarify and distinguish the standard a plaintiff must meet in order to hold a director liable to the corporation for harm suffered by the corporation due to the action or inaction of the director. In general, the articles of incorporation must not preclude liability and the director must have acted in a manner contrary to a fiduciary duty to the corporation.

INSPECTION RIGHTS AND NOTICES. The Act revises Code Section 490.1603, relating to the scope of a shareholder's inspection right, in order to reflect availability of electronic transmissions. New Code Section 490.1605 provides for inspection of records by directors. A court action is authorized in which the corporation has the burden of proof, and the court is directed to dispose of an application of a director for inspection on an expedited basis.

FUNDAMENTAL CHANGES IN GENERAL. The quorum required when corporate action effecting fundamental change is undertaken is that stated in current Code Section 490.725, namely, "a majority of votes entitled to be cast on the matter by the voting group," unless the articles or bylaws require a greater number. Current Code language requires that the votes cast in favor of a proposed change exceed those cast opposing it.

Current Code Section 490.1202 addresses sales of assets other than in the regular course of business and requires shareholder approval of a sale or other disposition of all or substantially all corporate assets where it does not occur in the regular course of business. As amended, Code Section 490.1202 does not utilize the standard "all or substantially all" and the requirement of a shareholder vote instead turns upon whether the disposition will leave the corporation without a significant continuing business activity.

APPRAISAL RIGHTS. The Act makes a number of changes in several Code sections, including sections 490.1301, 490.1302, 490.1303, 490.1320, 490.1321, 490.1322, 490.1323, 490.1324, 490.1325, 490.1326, 490.1330, and 490.1331. Generally, the Act allows corporations, acting through their boards of directors and shareholders, to change the nature and shape of the enterprise and the rights of security holders on the one hand, and, on the other hand, to allow shareholders who object to the change to withdraw from the corporation and obtain the fair value of their investment. This accommodation has been known as "dissenters' rights" or "appraisal rights." The Act amends the title of Division XIII of the Iowa Business Corporation Act and Code provisions within Division XIII and other references in the Code to dissenters' rights to change the name from the former to the latter. Shareholders will not be entitled to appraisal if the terms of the class or series of shares they hold will not be changed.

A shareholder who objects to corporate action effecting fundamental change will receive fair value where the shares are publicly traded and there is a sufficient market for the shares. However, the Act also includes provisions identifying conflict-of-interest transactions in which the market exception will not apply and appraisal rights will be available to shareholders.

DIRECTORS AND OFFICERS. Code Section 490.803 is amended to provide that a variable range for the size of the board of directors may be established by the articles of incorporation or bylaws. The Act amends Code Section 490.825 to allow committees of the board of directors to be given more authority to act, primarily within limits stated by the board, to authorize distributions; to allow the board to appoint one or more directors to serve as alternates on a committee where one or more is absent or disqualified, and unless the articles, bylaws, or resolution of the board creating the committee provide otherwise; and to allow the committee, upon unanimous vote of those present and not disqualified, to appoint another director to serve in place of the absent or disqualified member.

Code Section 490.809, dealing with the judicial removal of directors, is amended to require that action be brought by or in the right of the corporation, rather than by an authorized percentage of a class of shareholders. In addition, the Act amends grounds for removal of directors. Fraudulent conduct remains a basis for removal, but dishonest conduct has been eliminated, and the Act adds grounds that the director "intentionally inflicted harm on the corporation" or "grossly abused the position of director." Code Section 490.821, allowing the board of directors to take action without a meeting, is amended to require that action taken without a meeting by consent must be unanimous, and that action taken by consent is the act of the board of directors when one or more consents signed by all the directors are delivered to the corporation. Consent may be withdrawn by signed revocation delivered to the corporation prior to delivery to the corporation of unrevoked consents signed by all directors.

DISSOLUTION. Current Code Section 490.640 provides that the corporation must satisfy equity and bankruptcy insolvency tests before the board can authorize a distribution. The Act provides that distribution provisions do not apply to distributions in liquidation.

The Act amends Code Section 490.1407 to provide for a three-year period to assert claims against the dissolved corporation, rather than the five years provided under the current section, and adds new Code Sections 490.1408 and 490.1409 that provide directors may anticipate unknown and contingent claims. Critical steps in the new Code provisions include giving notice to known creditors and claimants, general publication of notice, and in claims that are unknown or contingent, a court proceeding pursuant to Code Section 490.1408, which authorizes the corporation's board to file an application in court for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved corporation or that are based on an event occurring after the effective date of dissolution, excluding claims that are or are reasonably anticipated to be barred. The court is authorized to appoint a guardian ad litem to represent such claimants. The court hearing the matter may then determine the amount and form to be provided for payment, and compliance with the court order shall satisfy the dissolved corporation's obligations with respect to claims that are contingent, have not been made known to the dissolved corporation, or are based on an event occurring after the effective date of dissolution, and such claims may not be enforced against a shareholder who received assets in liquidation.

The Act takes effect January 1, 2003.

SENATE FILE 429 - Local Exchange Carrier Regulation - Rate Changes
SEE ENERGY & PUBLIC UTILITIES.
   This Act provides for modification of rates for basic communications services and price-regulation requirements for price-regulated local exchange carriers with fewer than 500,000 access lines in this state, including temporary authority for immediate partial rate increases conditioned upon the filing of a bond by a local exchange carrier. The Act takes effect April 4, 2002.

SENATE FILE 2192 - Highways and Motor Vehicles - Miscellaneous Provisions
SEE TRANSPORTATION.
   This Act makes several Code changes relating to highways and motor vehicles, including provisions relating to motor vehicle and mobile home manufacturers, distributors, franchisees, and dealers, and to motor vehicle registration reciprocity.

SENATE FILE 2210 - Interests in Agricultural Land - Qualified Enterprises
SEE AGRICULTURE.
   This Act permits a qualified entity involved in baby chick and fertilized egg production to hold agricultural land for purposes of farming, notwithstanding general prohibitions contained in Code Chapter 9H that restrict corporate entities from holding an interest in agricultural land for purposes of farming, and in Code Chapter 567, which similarly prohibits nonalien residents and foreign governments from holding such an interest. The Act takes effect March 28, 2002.

SENATE FILE 2212 - Secured Transactions - Landlord Liens
SEE AGRICULTURE.
   This Act amends Code Chapter 570, which provides for landlord liens that now must be perfected as agricultural liens under revised Article 9 of the Uniform Commercial Code (Code Chapter 554). The Act provides that a creditor who has filed a financing statement to perfect a landlord's lien under revised Article 9 is not required to file a continuation statement as otherwise required under Code Section 554.9515 in order to retain a perfected status in the collateral.

SENATE FILE 2272 - Acquisition or Holding of Agricultural Land - Permanent Residents
SEE AGRICULTURE.
   This Act amends Code Chapter 567, which in part prohibits a nonresident alien from acquiring or holding agricultural land in this state. The Act addresses the status of a permanent resident alien who is allowed to hold agricultural land free from the restrictions of the Code chapter, and specifically provides that a "nonresident alien" does not include an individual who is lawfully admitted for permanent residence, regardless of whether the individual's lawful permanent status is conditional.

SENATE FILE 2275 - Substantive Code Corrections
SEE STATE GOVERNMENT.
   This Act contains statutory corrections that adjust language to reflect current practices, insert earlier omissions, delete redundancies and inaccuracies, delete temporary language, resolve inconsistencies and conflicts, update ongoing provisions, or remove ambiguities. A reference to S corporations is updated in language relating to the refunding of unused corporate tax credits for certain new investments and clarifying language is added regarding the tax return to which those tax credit claims must be attached; the word "paragraph" is added to language pertaining to tax exemptions that may be claimed for property within enterprise zones; language relating to the investigation of occupational diseases and the obtaining of special variances from occupational safety and health standards is clarified; language regarding determination of eligibility of special service members for disability benefits under the Iowa Public Employees' Retirement System chapter is clarified; and a change is made in language relating to civil penalties assessed against certain licensees under the alcoholic beverages chapter. Additional clarifications are also made in the following: language describing the renewal of recording of livestock brands; language relating to the operations of the Grape and Wine Development Commission; language relating to the enforcement of custom cattle feedlot liens; language regarding submission of information pertaining to continuing education program attendance by optometrists; and language relating to hearing aid dispensers.
   In other provisions, the statutory prerequisites for in-state travel by unregistered out-of-state commercial motor vehicles are clarified; language relating to petitions regarding the issuance of bonds secured by revenues derived from the local hotel and motel tax is clarified; language describing acquisitions which constitute a "major addition" for purposes of taxation of electricity and natural gas providers is clarified; a reference to the agent of a foreign limited liability company is changed to a reference to the agent of a foreign limited liability partnership in the Uniform Partnership Act; references to the former Individual Health Benefit Reinsurance Board are changed to the Comprehensive Health Insurance Association Board; the procedure for attaching the approval of the Commissioner of Insurance to articles of incorporation and amendments is clarified; language describing the time period for contesting a certification for external review decision by the commissioner and the time period during which the commissioner is to notify an enrollee or the enrollee's treating health care provider of the reasons for refusal of an external review request are clarified; several of the notice provisions relating to external review of health care coverage decisions are clarified; several references to "agent" are replaced with "insurance producer" in provisions relating to the licensing and regulation of insurance producers; and numerous technical changes are also made within the Licensing of Insurance Producers chapter.
   Corrections and clarifications are made in provisions relating to funeral and cemetery services. A correction is made to cover transfer of franchise when ownership interests are exactly 50 percent. Clarifications are made relating to the Uniform Commercial Code chapter. Two clarifications are made in 2001 Iowa Acts, Chapter 55, relating to the regulation of accounting practitioners, and a clerical error is corrected, retroactively to July 1, 2000, in language relating to misrepresentation of a business name by a supplier of a service or product in a local telephone directory or directory assistance database.

SENATE FILE 2305 - Tax Administration and Related Matters
SEE TAXATION.
   This Act amends various tax provisions of state law to apply sales tax to executive search agencies whether or not the agencies are licensed, add the adjective "nonprofit" to private educational institutions for purposes of the sales tax exemption for certain sales where the proceeds are used for or by an educational institution, require consolidated filers to provide sales tax information by business location, and repeal the Code chapter on the property taxation of express companies, because there are no longer any express companies in Iowa.

SENATE FILE 2309 - Regulation of Beef and Pork Processors
SEE AGRICULTURE.
   This Act amends Code Chapter 9H, which in part provides for the regulation of beef and pork processors that own, finance, or exercise control over cattle or swine operations. The Act amends provisions regulating processors having a total annual wholesale value of beef or pork products of $80 million or more. It places restrictions upon a person who holds an interest in a business association that directly or indirectly controls the processing of beef or pork products, who holds an executive position in a processor, or who owes a processor some fiduciary duty. The Act amends provisions requiring reports by processors, and provides that a processor who is in compliance with the law prior to January 1, 2002, and is in violation of the Act, has until June 30, 2004 to comply with the Act's provisions. The Act prohibits a processor from taking an action on or after January 1, 2002, that would be in violation of the Act's provisions. A processor who violates the provisions of the Act is subject to a civil penalty of not more than $25,000.

SENATE FILE 2318 - Taxation of Insurance Premiums, Assessments, and Fees and Health Service Corporation Subscriber Contract Payments
SEE TAXATION.
   This Act phases in a reduction of the state's gross premiums tax rate from 2 percent to 1 percent by .25 percent per year beginning with the 2003 calendar year for life and health insurance companies and associations, and beginning with the 2004 calendar year for insurance companies and associations that are not life and health insurance companies and associations. The Act also increases the amount of prepayment of taxes beginning with the 2003 calendar year until the 2005 calendar year, when the 100 percent requirement of the previous year's tax liability must be paid. The 100 percent requirement continues for subsequent years.

SENATE FILE 2321 - Sales and Use Taxes - Miscellaneous Provisions
SEE TAXATION.
   This Act strikes the repeal of current law that provides that, for the sales tax, a sale of tangible personal property does not occur if the transaction is delivered digitally, electronically, or utilizing cable, or by radio waves, microwaves, or fiber optics, and, for the use tax, that tangible personal property does not include any substance delivered digitally, electronically, or utilizing cable, or by radio waves, microwaves, or fiber optics. The repeal would have taken effect December 31, 2002. The Act takes effect May 10, 2002.

HOUSE FILE 2035 - State Historic Property Rehabilitation Tax Credit
SEE TAXATION.
   This Act provides that the historic property rehabilitation tax credit may be applied against the franchise tax and insurance premiums tax. In addition, the Act provides that for purposes of individual and corporate income taxes and franchise tax, the increase in the basis of the rehabilitated property that would otherwise result from the rehabilitation costs is to be reduced by the amount of the credit. The Act takes effect February 21, 2002, and applies retroactively to January 1, 2001, for tax years beginning on or after that date.

HOUSE FILE 2078 - Business Growth and Development Initiatives - Seed and Venture Capital Investments - Small Business Income Allocation
SEE ECONOMIC DEVELOPMENT.
   This Act authorizes the issuance of a tax credit against personal and corporate income tax, the franchise tax for financial institutions, the insurance premium tax, and the moneys and credits tax for credit unions for investments in the Iowa Fund of Funds, which is created in the Act. The Act also amends the allocation to Iowa, for purposes of the state individual income tax, of income earned by an S corporation that is distributed to a shareholder to pay federal income tax.

HOUSE FILE 2271 - Investment Tax Credits - Qualifying Businesses - Community-Based Seed Capital Funds
SEE ECONOMIC DEVELOPMENT.
   This Act creates a tax credit against personal income tax for investments in qualifying businesses and a tax credit against personal and corporate income tax, the franchise tax for financial institutions, the insurance premium tax, and the moneys and credits tax for credit unions for investments in community-based seed capital funds.

HOUSE FILE 2475 - Security Interests in Education Loans
SEE EDUCATION.
   This Act authorizes a tax-exempt organization that provides or acquires education loans to establish and perfect a security interest in the loans, thereby obtaining priority over other security interests.

HOUSE FILE 2492 - Farm Aid Associations - Termination or Conversion to Nonprofit Corporations
SEE AGRICULTURE.
   This Act provides that farm aid associations organized under Code Chapter 176 have until June 30, 2005, to incorporate under Code Chapter 504A, the Iowa Nonprofit Corporation Act, or be terminated. The Act provides special procedures for a farm aid association to incorporate under Code Chapter 504A.

HOUSE FILE 2565 - Residential Real Estate Installment Contracts - Disclosure Statements
SEE CIVIL LAW, PROCEDURE & COURT ADMINISTRATION.
   This Act requires certain sellers under a residential real estate installment sales contract to prepare and deliver to the contract purchaser a written contract disclosure statement and a copy of the installment sales contract.

HOUSE FILE 2586 - Venture Capital Fund Investment Tax Credits
SEE ECONOMIC DEVELOPMENT.
   This Act allows a tax credit for equity investments in venture capital funds against personal income, corporate income, franchise, insurance premium, and moneys and credits taxes. The Act takes effect May 8, 2002, and applies retroactively to January 1, 2002, for tax years beginning on or after that date.

HOUSE FILE 2592 - Start-Up Businesses - Taxable Income Deferment
SEE ECONOMIC DEVELOPMENT.
   This Act provides a process by which certain start-up businesses may defer taxable income. The Act takes effect April 22, 2002, and is retroactively applicable to January 1, 2002.

HOUSE FILE 2622 - Tax Administration - Additional Related Matters
SEE TAXATION.
   This Act amends various provisions of state and local laws to allow a taxpayer to file for an urban revitalization property tax exemption up to two years after the improvements are first assessed for taxation and still receive the exemption for the total number of years allowed in the exemption schedule; provides for a new collection method that allows the Department of Revenue and Finance to use compensation that is owed to an obligor for payment of wages to be applied against a debt owed by the obligor to the state; authorizes the Director of Revenue and Finance to change the filing and remittance thresholds as they relate to income, sales and use taxes if in the best interest of the state and the taxpayer; changes the method of imposing and refunding the sales and use taxes on building materials, supplies, and equipment used in a construction project for exempt entities; exempts from the sales and use tax imposed on service charges of financial institutions those surcharges assessed with regard to nonproprietary ATM transactions; and provides for the abatement of sales and use taxes and local sales and services taxes owed by foundries located in Lee County or Jefferson County on purchases used by the foundry in making patterns, molds or dies if the purchase was made between July 1, 1997, and May 6, 2002.

HOUSE FILE 2627 - Miscellaneous Appropriations, Reductions, Transfers, and Other Provisions - 2002-2003 and Prior Fiscal Years - SECOND EXTRAORDINARY SESSION
SEE APPROPRIATIONS.
   This Act provides FY 2002-2003 appropriations from the General Fund of the State to the executive and judicial branches of state government, reduces or limits standing appropriations, and transfers appropriations. The Act is organized into divisions corresponding to the General Assembly's joint appropriations subcommittees and includes appropriations for the departments of Commerce, Economic Development, and Workforce Development that provide for regulation and grants associated with business, banking and insurance and includes health and human services programs such as child welfare and child care subsidies to support working families.