TAXATION

SENATE FILE 424 - Urban Renewal Indebtedness Reporting
SENATE FILE 441 - Enterprise Zone and Property Rehabilitation Tax Credits - Certificates -- Transfer
SENATE FILE 442 - Internal Revenue Code References and Income Tax Revisions - Decoupling of State and Federal Bonus Depreciation Allowances
SENATE FILE 444 - Open Prairie or Wildlife Habitat Restoration Property Tax Credits - Inspection and Certification
HOUSE FILE 304 - Agricultural Land Tax Credits
HOUSE FILE 344 - Motor Fuel Tax Refunds - Benefited Fire Districts
HOUSE FILE 654 - Sales and Use Taxes - Sand Handling and Core and Mold Making Equipment
HOUSE FILE 665 - Taxation of State-Owned Property - Lease to Nonexempt Entity
HOUSE FILE 671 - Taxation of Personal Property - Recycling Property
HOUSE FILE 674 - Military Service and Military Personnel - Education, Employment, Benefits, and Taxation
HOUSE FILE 689 - Ethanol Blended Gasoline Tax Credits
HOUSE FILE 692 - Taxation, Economic Growth and Development, and Other Changes- Liability Reform, Workers' and Unemployment Compensation, and Financing Charges

RELATED LEGISLATION

SENATE FILE 134 - Treasurers - Funds, Records, and Other Responsibilities - Miscellaneous Provisions

SEE LOCAL GOVERNMENT. This Act amends provisions relating to various duties of county treasurers. The Act allows the payment of installments of special assessments for a public improvement against property assessed as agricultural property to be deferred for as long as the assessor continues to classify the property as agricultural land on January 1 of each assessment year and for six months following any January 1 assessment date in which property is no longer classified as agricultural land.

SENATE FILE 155 - Substantive Code Corrections

SEE STATE GOVERNMENT. This Act contains statutory corrections that include changes relating to emergency services funds and annual tax sale information, the repeal of an obsolete Code provision establishing a Domestic Abuse Tax Checkoff, and the repeal of a redundant definition in the Tax List chapter.

SENATE FILE 237 - Water Quality Protection Fund - Private Water Supply Systems - Deposit and Use of Permit Fees

SEE ENVIRONMENTAL PROTECTION. This Act allows the Department of Natural Resources to collect permit fees from private water supply well contractors and appropriates the moneys collected to be used for the purpose of supporting programs established to protect private drinking water supplies.

SENATE FILE 275 - Property Tax and Taxation of Utilities

SEE ENERGY & PUBLIC UTILITIES. This Act primarily amends various provisions of Code Chapter 437A in relation to the utility replacement generation tax on persons generating electricity. The Act makes conforming amendments to provisions relating to new electric power generating plants to be built in Iowa, allocates replacement generation taxes for stand-alone new electric power generating plants and the natural gas delivery tax attributable to those plants, amends certain transmission tax provisions, makes an annual adjustment to the assessed valued for gas and electric utility property, and extends the Utility Replacement Tax Task Force.

SENATE FILE 366 - Estates, Gifts, Trusts, and Related Property Transfers

SEE CIVIL LAW, PROCEDURE & COURT ADMINISTRATION. This Act provides a number of amendments to the Iowa Probate Code, including certain state inheritance and gift tax provisions. Changes made in the area of taxation include defining a stepchild as a child of a person who was married to the decedent at the time of the decedent's death or a child of a person who died while married to the decedent; exempting from tax intangible personal property owned by a decedent who was not domiciled in Iowa; providing that the net market value of property transferred for less than full consideration within three years of the decedent's death shall be determined as of the date of the transfer; specifying that the Iowa Department of Revenue and Finance must keep a separate record of any deferred estate where the tax is not paid on or before the last day of the ninth month after the death of the decedent; and repealing reciprocal transfer tax provisions under which nonresidents are exempt from certain taxes on personal property.

SENATE FILE 445 - Local Sales and Services Taxes - School Infrastructure Funding or Property Tax Relief

SEE EDUCATION. This Act amends the current local option sales and services tax for school infrastructure purposes by establishing a shared financing program. The revenues received by school districts that have imposed the local option tax may be used for property tax relief by reducing property tax levies. These levies and the order to be reduced are: bond levies, physical plant and equipment levy, public educational and recreational levy, and the schoolhouse levy. The Act also provides for the repeal of all local option taxes for school infrastructure purposes on December 31, 2022. The Act takes effect May 30, 2003.

SENATE FILE 453 - State and Local Government Financial and Regulatory Matters - Miscellaneous Provisions

SEE APPROPRIATIONS. This Act addresses state and local government financial and regulatory matters. Legislators referred to this legislation as the "Government Reinvention Bill" during debate and discussion. The Act includes provisions eliminating certain appropriations made for payments to local governments for replacement of property tax revenues and eliminating the sales tax on the gross receipts from the sale of Iowa lottery tickets.

SENATE FILE 458 - Miscellaneous Appropriations, Reductions, Revenue Adjustments, and Other Matters

SEE APPROPRIATIONS. Division VII of this Act makes changes related to the tax credits granted for investments in qualifying businesses, a seed capital fund, and a venture capital investment fund pursuant to Code Sections 15E.41 through 15E.51, exempts automated teller machine service charges from sales and use tax if assessed by a financial institution on a noncustomer point of sale or use, exempts from the use tax the transfer of vehicles subject to registration from one leasing corporation to another if both corporations are part of a controlled group for federal income tax purposes, defines "nonterminal storage facility" for purposes of the motor fuel tax law, and reduces the premiums tax from 2 to 1 percent over four years and increases the prepayment tax for county and state mutual insurance associations.

HOUSE FILE 175 - School Finance - Use of Physical Plant and Equipment Levy Moneys

SEE EDUCATION. This Act is concerned with the permissible uses for physical plant and equipment levy revenue by eliminating conflicting or duplicative language regarding the purchase of buildings and the purchase of equipment or technology exceeding a specified dollar amount.

HOUSE FILE 516 - Petroleum Storage Tank Regulation

SEE ENVIRONMENTAL PROTECTION. This Act repeals Code Chapter 424, relating to the environmental protection charge on petroleum diminution, effective June 30, 2014.

HOUSE FILE 549 - Education - Administration, Regulation, and Other Related Matters

SEE EDUCATION. This Act relates to the duties and operations of the Department of Education, school districts, area education agencies, and the State Board of Regents. The Act also provides for changes relating to school reorganization incentives for specified school districts by allowing a school district with a certified enrollment of 600 pupils or greater to qualify for a reduced foundation property tax rate if the district meets the specified requirements.

HOUSE FILE 615 - Legalizing Act - Urbandale City Council Approval of Partial Property Tax Exemption

SEE LOCAL GOVERNMENT. This Act legalizes acts and proceedings relating to an ordinance passed by the Urbandale City Council on December 10, 2002, approving a partial exemption from property taxation of the actual value added to industrial real estate located in Urbandale in accordance with Code Chapter 427B. The Act takes effect on April 9, 2003, and is retroactively applicable to the date that the city council passed the ordinance.

HOUSE FILE 677 - New Capital Investment Program

SEE ECONOMIC DEVELOPMENT. This Act creates a New Capital Investment Program, which includes various tax refunds and tax credits, eliminates the capital investment waiver, and further defines the definition of "good cause" for the job positions created waiver under the New Jobs and Income Program.

HOUSE FILE 680 - Bait Dealer Licenses

SEE NATURAL RESOURCES & OUTDOOR RECREATION. This Act creates resident and nonresident retail and wholesale bait dealer licenses and sets fees for those licenses. The Act takes effect May 9, 2003.

HOUSE FILE 681 - Cooperatives - Tax Credits and Credit Refunds

SEE AGRICULTURE. This Act eliminates a requirement that a cooperative must be engaged in ethanol production to be eligible to claim a special tax credit or refund available to an eligible business involved in the production of value-added agricultural products under the New Jobs and Income Program.

HOUSE FILE 683 - Miscellaneous Appropriations and Revisions, Sales and Use Tax Revisions, Criminal Code Revisions, and Other Changes

SEE APPROPRIATIONS. This Act creates various tax credits and rewrites the state sales and use taxes by combining Code Chapter 422, Division IV (sales tax), Code Chapter 423 (use tax), and provisions of the Multistate Streamlined Sales and Use Tax Agreement into a new Code Chapter 423.

ECONOMIC DEVELOPMENT

SENATE FILE 424 - Urban Renewal Indebtedness Reporting (full text of bill)
BY COMMITTEE ON APPROPRIATIONS. This Act requires each city and county that has established an urban renewal area to report, on or before April 1, 2003, the amount of loans, advances, indebtedness, or bonds which qualify for payment with tax increment financing revenues in the fiscal year beginning July 1, 2003.

The Act takes effect March 28, 2003.

SENATE FILE 441 - Enterprise Zone and Property Rehabilitation Tax Credits - Certificates - Transfer (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act relates to the transfer of certain property-related tax credits. The Act amends the tax credit provisions for eligible housing businesses under the Enterprise Zone Program. The Act provides that, upon approving the tax credit, the Iowa Department of Economic Development (IDED) shall issue a tax credit certificate to the eligible housing business. The Act provides requirements for using the certificate to claim the tax credit and requirements for information that must be included on the certificate. The certificate shall be transferable to any person or entity if low-income housing tax credits authorized under Section 42 of the Internal Revenue Code are used to assist in the financing of the housing development. Upon the transfer of a certificate, the Act provides a method for the issuance of a replacement tax credit certificate to the transferee identifying the transferee as the proper holder of the certificate. The Act prohibits the transfer of a certificate when the amount of the certificate is less than the minimum amount established by rule of IDED. The Act allows a transferee to claim the tax credit against personal and corporate income taxes, franchise taxes for financial institutions, and insurance premium taxes for any tax year the original transferor could have claimed the tax credit. The Act prohibits any consideration received for the transfer of a tax credit from being included as income and prohibits consideration paid for the transfer of a tax credit from being deducted from income.

The Act allows a person receiving a historic property rehabilitation tax credit certificate to transfer the certificate to any person or entity. Upon the transfer of a certificate, the Act provides a method for the issuance of a replacement tax credit certificate to the transferee identifying the transferee as the proper holder of the certificate. The Act prohibits the transfer of a certificate when the amount of the certificate is less than the minimum amount established by rule of the State Historic Preservation Office. The Act allows a transferee to claim the tax credit against personal and corporate income taxes, franchise taxes for financial institutions, and insurance premium taxes for any tax year the original transferor could have claimed the tax credit. The Act prohibits any consideration received for the transfer of a tax credit from being included as income and prohibits consideration paid for the transfer of a tax credit from being deducted from income.

The Act takes effect May 16, 2003, and applies retroactively to January 1, 2003, for tax years beginning on or after that date.

SENATE FILE 442 - Internal Revenue Code References and Income Tax Revisions - Decoupling of State and Federal Bonus Depreciation Allowances (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act updates the references to the Internal Revenue Code to make the federal income tax revisions enacted by Congress in 2002 applicable for Iowa income tax purposes. Code Sections 15.335, 15A.9, 422.10, and 422.33 are amended to update the Iowa Code references to the state research activities credit for individuals, corporations, corporations in economic development areas, and corporations in quality jobs enterprise zones to include the 2002 federal changes in the federal research activities credit.

The Act amends Code Sections 422.5, 422.7 and 422.9 to make adjustments to federal adjusted gross income, and amends Code Section 422.35 to make adjustments to taxable income to disallow, for state income tax purposes, the bonus depreciation deduction enacted in the federal Job Creation and Worker Assistance Act of 2002.

The provisions of the Act updating references to the Internal Revenue Code are retroactively applicable to January 1, 2002, for tax years beginning on or after that date. The provisions of the Act decoupling from the federal bonus depreciation apply retroactively to tax years ending on or after September 10, 2001.

The Act takes effect May 21, 2003.

SENATE FILE 444 - Open Prairie or Wildlife Habitat Restoration Property Tax Credits - Inspection and Certification (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act requires that before property which is a restored or reestablished open prairie or wildlife habitat receives a property tax exemption, the county board of supervisors must provide for certification that the property has adequate ground cover consisting of native species and that all primary and secondary noxious weeds are being controlled to prevent the spread of seeds by wind or water. The Act also provides that if the property does not receive such certification, the owner shall be told of the availability of Resource Enhancement and Protection Fund cost-share moneys and technological assistance for reestablishing native vegetation.

The Act applies to assessment years beginning on or after January 1, 2004.

HOUSE FILE 304 - Agricultural Land Tax Credits (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. As a result of an error in the certification of the total amount of agricultural land tax credits to be allowed on agricultural land in at least one county, the total amount of credits for that county payable during the 2002 2003 fiscal year was reduced. This Act requires the county to pay the amount of the reduction to those qualifying for the agricultural land tax credit. The county will subsequently be reimbursed for the moneys paid from the appropriation made to the Agricultural Land Credit Fund to pay credits during the 2003 2004 fiscal year.

The Act takes effect April 15, 2003.

HOUSE FILE 344 - Motor Fuel Tax Refunds - Benefited Fire Districts (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act allows benefited fire districts to receive a refund of the motor fuel and special fuel taxes paid when the fuel is used for public purposes.

HOUSE FILE 654 - Sales and Use Taxes - Sand Handling and Core and Mold Making Equipment (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act exempts from the sales and use taxes the sale or rental of core and mold making equipment and sand handling equipment directly and primarily used by a foundry in the mold making process. Refunds, as a result of this exemption, are allowed if claims are filed prior to October 1, 2003. The exemption is retroactively applicable to July 1, 1997, for sales or rentals made on or after that date. Refunds for the equipment are limited to $600,000 in the aggregate. If claims in excess of $600,000 are filed, the claims for the equipment are prorated. However, the refund claims shall be paid in five installments, as equal in amount as possible.

The Act takes effect May 30, 2003, and applies retroactively to July 1, 1997.

HOUSE FILE 665 - Taxation of State-Owned Property - Lease to Nonexempt Entity (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act provides that nursery land or farmland leased by the Department of Corrections or the Department of Human Services to an entity other than an entity which is exempt from property taxation is subject to property taxation for the term of the lease.

The Act applies to leases entered into on or after July 1, 2003.

HOUSE FILE 671 - Taxation of Personal Property - Recycling Property (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act expands the definition of "recycling property" for purposes of the exemption from property tax for recycling property. Current law provides that in order for the property to be considered recycling property, the property must be primarily used in the manufacturing process that results directly in the conversion of waste plastic, wastepaper products, or waste paperboard into new raw materials or products. The Act expands this exemption to include property used to convert waste wood products into new raw materials or products.

The Act applies to assessment years beginning on or after January 1, 2004, for property taxes due and payable in fiscal years beginning on or after July 1, 2005.

HOUSE FILE 674 - Military Service and Military Personnel - Education, Employment, Benefits, and Taxation (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act provides a number of exclusions and deductions in determining Iowa income tax, property tax, and other related benefits for military personnel including the following:

• Provides that a person is considered to be a veteran if the person would have served during specified conflict periods except for the fact of opting to serve five years in the reserve forces. This provision takes effect May 21, 2003.
• Provides that state and local personnel called to state active duty, active state service, or federal service are entitled to a leave of absence for such time and are entitled to return to the same position or classification held prior to such service or duty or to the position or classification that the employee would have attained if not for the interruption in civil service. This provision takes effect May 21, 2003, and applies retroactively to January 1, 2003.
• Provides that money withdrawn from the Iowa Educational Savings Plan Trust created in Code Chapter 12D is not subject to a penalty if the designated beneficiary attends the U.S. Military, Naval, Air Force, Coast Guard, or Merchant Marine Academy.
• Exempts active duty pay received by a member of the Iowa National Guard or U.S. armed forces military reserve for service performed pursuant to military orders related to Operation Iraqi Freedom, Operation Noble Eagle, or Operation Enduring Freedom.
• Allows for the deduction of the unreimbursed expenses for transportation, meals and lodging incurred for travel away from home in the performance of services as a member of the National Guard and military reserve. The deduction may be taken whether the taxpayer itemizes or not. Presently such deduction may only be taken if one itemizes and is then limited to the 2 percent floor.
• Allows a deduction for military student loan repayments received while on active duty.
• Allows a deduction for the amount of the death gratuity payable as a result of the death of military personnel occurring after September 10, 2001. This provision applies retroactively to September 10, 2001, for tax years ending after that date.
• Extends the time for members of the armed forces who are deployed outside the United States while participating in certain contingency operations to file income tax returns, file for tax refunds, file appeals, and file any other tax returns. This provision takes effect May 21, 2003, and applies to the performing of an act that has not expired before the effective date.
• Allows ancestors and lineal descendants of past or present members of the armed forces to be counted in determining if entities described in Section 501(c)(19) of the Internal Revenue Code, e.g., V.F.W., are able to maintain their exemption from income taxation. This provision takes effect May 21, 2003, and applies to tax years beginning after that date.

The Act takes effect May 21, 2003, and applies retroactively to January 1, 2003, for tax years beginning on or after that date unless otherwise provided in the Act.

HOUSE FILE 689 - Ethanol Blended Gasoline Tax Credits (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. In 2001, the General Assembly enacted H.F. 716 (2001 Iowa Acts, Chapter 123), which in part provides a tax credit for retail dealers of gasoline who sell ethanol blended gasoline. Specifically, it provides a tax credit for a retail dealer who operates at least one service station at which more than 60 percent of the total gallons of gasoline sold by the retail dealer is ethanol blended gasoline.

This Act changes when a retail dealer may claim the tax credit. Under H.F. 716, the date is tied to the beginning of the retail dealer's tax year, but it must begin on or after January 1, 2002. The Act allows a retail dealer whose tax year began after January 1, 2002, to be eligible for a tax credit in the period beginning January 1, 2002, and ending just before the retail dealer's next tax year begins. It also provides a refund of taxes which arise from claims resulting from the enactment of the Act.

Finally, the Act strikes a provision that prohibits gasoline from containing a mixture of more than 25 percent ethanol.

The Act takes effect May 30, 2003, and applies retroactively to January 1, 2002.

HOUSE FILE 692 - Taxation, Economic Growth and Development, and Other Changes - Liability Reform, Workers' and Unemployment Compensation, and Financing Charges (full text of bill)
BY COMMITTEE ON WAYS AND MEANS. This Act makes changes concerning regulatory, taxation and statutory requirements affecting individuals and business relating to taxation of property, income and utilities, liability reform, workers' compensation, financial services, unemployment compensation employer surcharges, and economic development.

Division I - Property Tax

Division I of the Act changes the method by which certain property is assessed and taxed for property tax purposes.

The division provides that, for assessment years beginning on or after January 1, 2006, all taxable structures shall be assessed for taxation on a square footage basis. The assessed value per square foot is equal to the valuation of the structure as determined for the assessment year beginning January 1, 2005, prior to application of the assessment limitation (i.e., rollback) for that year divided by the total number of square feet of the structure as of January 1, 2005. The division provides that if an existing structure classified as residential, commercial or industrial is purchased after January 1, 2005, the assessed value per square foot shall be the purchase price divided by a cumulative inflation factor, divided by the total number of square feet of the structure as of January 1 of the assessment year. The division allows the assessor to adjust the purchase price to reflect arm's length transactions and market value. The division further provides that if a structure classified as residential, commercial or industrial is newly constructed after January 1, 2005, the assessed value per square foot of the structure shall be the value of the structure, or of the addition to the structure, as determined by the assessor divided by the cumulative inflation factor, divided by the total number of square feet of the newly constructed structure.

The division defines "annual inflation factor," "cumulative inflation factor," "newly constructed," and "structure."

The division provides that agricultural property, including agricultural structures, will continue to be assessed based on productivity. The productivity value of an agricultural structure is divided by the total square feet of the structure to arrive at a square footage value.

The division strikes provisions relating to percentage assessment limitations. The division provides that equalization of values by the Department of Revenue and Finance shall continue for agricultural property and for property newly constructed or purchased.

The division creates a land tax to be imposed on each taxable acre or portion of acre in each county effective for the fiscal year beginning on or after July 1, 2007. The land tax is allocated to the taxing districts in the county in the same proportion that property taxes levied for the fiscal year beginning July 1, 2006, were allocated to the taxing districts. The division provides that the amount of land tax allocated to a taxing district shall be deducted from the property tax dollars certified by a taxing district before the county auditor computes the tax rate per square foot for taxable structures.

The division provides that statutory provisions relating to assessment and listing of property for property tax purposes, the land tax, and computation of the square footage tax are subject to legislative review every five years, with the first report to be submitted to the General Assembly by January 1, 2010.

The division creates a property tax implementation committee to study the provisions of this division and to devise a system for testing data to be provided by three counties and cities within those counties chosen by the Department of Revenue and Finance in consultation with the Department of Management. The committee is to develop computer hardware and software necessary to enable the three counties and the cities to develop projected budgets and square footage rates and land tax rates based on the provisions of the division. The committee is to study and resolve property tax issues relevant to implementation of the division and is to make recommendations to the General Assembly in reports submitted by October 31, 2003, October 31, 2004, and October 31, 2005.

The section of the division creating the property tax implementation committee takes effect June 19, 2003. The division, however, is repealed effective June 30, 2005, unless the repeal is stricken, in which case the division takes effect July 1, 2005, and applies to assessment years beginning on or after January 1, 2006, and applies to tax collections for fiscal years beginning on or after July 1, 2007.

Additional conforming amendments to the Code of Iowa will be necessary to fully implement the provisions of the division.

Division V - Sales and Use Tax Studies

Division V of the Act requires the Department of Revenue and Finance to establish two study committees. The first is to study the industrial processing exemption under the sales and use tax and report to the General Assembly annually through January 2013. The second is to study the entire sales and use tax law and report to the General Assembly with its recommendations by January 1, 2004. Both study committees are intended to consist of representatives of organizations or businesses with interests in the issues.

Division VI - Grow Iowa Values Board

Division VI of the Act creates a Grow Iowa Values Board consisting of 11 voting members and four ex officio, nonvoting members. The division requires the Grow Iowa Values Board to receive advice and recommendations from the Due Diligence Committee, the Economic Development Marketing Board, and the Grow Iowa Values Review Commission. The Grow Iowa Values Board is also required to assist the Department of Economic Development in implementing programs and activities of the department in a manner designed to achieve economic development goals provided for in the division. The Grow Iowa Values Board has reporting requirements and is required to adopt a strategic plan.

The division creates a Due Diligence Committee consisting of five members with expertise in the areas of banking and entrepreneurship. The committee shall determine whether a proposed project using moneys from the Grow Iowa Values Fund is practical and shall provide recommendations to the Grow Iowa Values Board regarding any moneys proposed to be expended from the Grow Iowa Values Fund.

The division creates a Grow Iowa Values Review Commission consisting of three members and located for administrative purposes within the Office of the Auditor of State. The division requires the commission to analyze all the annual reports of the Grow Iowa Values Board for purposes of determining if the economic development goals and performance measures provided in this division have been met. The commission must submit, by January 1, 2007, a report to the Grow Iowa Values Board, the department, and the General Assembly that includes findings on whether the goals and performance measures were met, recommendations regarding the continuation, elimination or modification of programs, and whether moneys should continue to be appropriated to and from the Grow Iowa Values Fund.

The division creates economic development-related goals and performance measures. The goals are to expand and stimulate the state economy, increase the wealth of Iowans, and increase the population of the state. The division provides that goal achievement shall be examined on a regional basis using Grow Iowa Values geographic regions which are designated in the division. The performance of the regions shall be compared to the performance of the state, the upper Midwest region, and the United States. The division provides various performance measures that are designed to determine if the economic development-related goals are met.

The division creates a Grow Iowa Values Fund consisting of moneys appropriated to the Grow Iowa Values Board. Division VI of H.F. 683 (see Appropriations) provides for multi-fiscal-year appropriations from the fund and for deposits in the fund.

The division creates an Economic Development Marketing Board consisting of seven members. The board shall administer and implement the approval process for selecting a marketing strategy for the Department of Economic Development to administer. The board shall submit a recommendation regarding the marketing strategy to the Grow Iowa Values Board. The Grow Iowa Values Board shall either approve or deny the recommendation. The department is required to implement and administer the marketing strategy approved by the Grow Iowa Values Board.

The division requires, not later than February 1, 2007, the Legislative Services Agency to prepare and deliver to the General Assembly bills that repeal the provisions created in this division of the Act. The division requires expeditious action by the General Assembly in considering the legislation.

Division VII - Value-Added Agricultural Products and Processes Financial Assistance Program

Division VII of the Act amends the Value-Added Agricultural Products and Processes Financial Assistance Program. The division allows the Department of Economic Development, in administering the program, to consult with other state agencies regarding any possible future environmental, health or safety issues linked to technology related to the biotechnology industry. The division provides that the department shall prefer producer-owned, value-added businesses and public and private joint ventures involving an institution of higher learning under the control of the State Board of Regents or a private college or university acquiring assets, research facilities, and leveraging moneys in a manner that meets the goals of the Grow Iowa Values Fund. The department may commit resources to assist agricultural business facilities in the agricultural biotechnology industry, agricultural biomass industry, and alternative energy industry; facilities that add value to Iowa agricultural commodities through further processing and development of organic products and emerging markets; and producer-owned, value-added businesses, education of producers and management boards in value-added businesses, and other activities that would support the infrastructure in the development of value-added agriculture.

Division VIII - Endow Iowa Grants

Division VIII of the Act requires the Department of Economic Development to identify a lead philanthropic entity for purposes of encouraging the development of qualified community foundations in this state. A lead philanthropic entity may receive a grant from the department to use to award Endow Iowa Grants to new and existing qualified community foundations and to community affiliate organizations. The division provides that the grants shall not exceed $25,000 per foundation or organization unless the foundation or organization demonstrates a multiple-county or regional approach. The division allows the grants to be awarded on an annual basis and not more than three grants may be awarded to one county in a fiscal year. The division includes annual reporting requirements.

Division X of H.F. 683 (see Appropriations) creates an Endow Iowa Tax Credit under the program.

This division of the Act takes effect June 19, 2003, and is retroactively applicable to January 1, 2003, for tax years beginning on or after that date.

Division IX - Commercialization of Research Issues

Division IX of the Act requires the State Board of Regents to submit an annual report to the Governor and the General Assembly including information regarding patents, research grants, faculty and staff involvement in start-up companies, grant application for research for start-up companies, agreements entered into by faculty and staff with foundations affiliated with the universities relating to business start-ups, accountings of financial gains received by each university relating to patents sold, royalties received, licensing fees, and any other remuneration received related to technology transfer, and the number of employees who assist in the transfer of technology and research to commercial application.

The division amends the University-Based Research and Economic Development Act to require the State Board of Regents, as part of its mission and strategic plan, to establish mechanisms for the purpose of commercialization of research at the three Regents universities and to work with the Department of Economic Development and other state agencies and the private sector to facilitate the commercialization of research.

Division X - Iowa Economic Development Loan and Credit Guarantee Fund

Division X of the Act requires the Department of Economic Development, with the advice of the Loan and Credit Guarantee Advisory Board, to establish and administer a Loan and Credit Guarantee Program. The division provides that the department, pursuant to agreements with financial institutions, shall provide loan and credit guarantees or other forms of credit guarantees for qualified businesses and targeted industry businesses for eligible project costs. The division allows the department to purchase insurance to cover defaulted loans meeting the requirements of the program. The division provides that eligible project costs include expenditures for productive equipment and machinery, working capital for operations and export transactions, research and development, marketing, and such other costs as the department may so designate.

The division provides that a loan or credit guarantee or other form of credit guarantee provided under the program to a participating financial institution for a single qualified business or targeted industry business shall not exceed $1 million in value. The division provides that loan or credit guarantees or other forms of credit guarantees provided to more than one participating financial institution for a single qualified business or targeted industry business shall not exceed $10 million in value.

The division allows the department, with the advice of the Loan and Credit Guarantee Advisory Board, to adopt loan and credit guarantee application procedures that allow a qualified business or targeted industry business to apply directly to the department for a preliminary guarantee commitment.

The division allows the department, with the advice of the Loan and Credit Guarantee Advisory Board, to establish fees and other terms for participation in the program.

The division creates the Loan and Credit Guarantee Advisory Board, consisting of seven members, to provide the department with technical advice regarding the administration of the program and to review and provide recommendations regarding all applications under the program.

Division VIII of H.F. 683 (see Appropriations) creates a Loan and Credit Guarantee Fund for purposes of the program.

Division XI - Economic Development Assistance and Data Collection

Division XI of the Act requires the Department of Economic Development to provide information through an Internet web site and a toll-free telephone service to assist persons interested in establishing a commercial facility or engaging in a commercial activity.

Division XII - Cultural and Entertainment Districts

Division XII of the Act requires the Department of Cultural Affairs to establish and administer a Cultural Entertainment District Certification Program to encourage the growth of communities through the development of areas within a city or county for public and private uses related to cultural and entertainment purposes. Two or more cities or counties may apply jointly for certification of a district that extends across a common boundary. The division requires the department to encourage development projects and activities located in certified cultural and entertainment districts through incentives under cultural grant programs and any other grant programs.

Division XIII - University-Based Research Utilization Program

Division XIII of the Act requires the Department of Economic Development to establish and administer a University-Based Research Utilization Program for purposes of encouraging the utilization of university-based research, primarily in the area of high technology, in new or existing businesses. The division provides that a new or existing business that utilizes a technology developed by an employee at a university under the control of the State Board of Regents may apply to the department for approval to participate in the program.

An approved business and the university employee responsible for the development of the technology utilized by the approved business shall be eligible for a tax credit. The tax credit shall be allowed against personal and corporate income tax liability. The division prohibits the transfer of the tax credit and any tax credit in excess of the taxpayer's liability for the tax year may be credited to the taxpayer's tax liability for the following five years or until depleted, whichever occurs first. The division provides that a tax credit shall not be carried back to a previous tax year.

The division provides that if, after reviewing tax-return-related information of the approved business, the department determines that the business activities of the applicant are not providing the benefits to Iowa employment and economic development projected by the approved business, the department shall not issue tax credits to the approved business or the university employee and shall determine that any related university share to be equal to zero for that year. If the projected benefits are being met, the department shall issue a tax credit certificate to the approved business and the university employee and determine the university share which is equal to the value of 30 percent of the tax liability of the approved business, not to exceed $225,000 per year per technology utilized. For each technology utilized, the aggregate university share over a five-year period shall not exceed $600,000. The division limits the amount of tax credit certificates that may be issued during a particular fiscal year. For an approved business, the amount of a tax credit certificate shall equal 30 percent of the tax liability of the approved business, not to exceed $225,000, with a total aggregate value of the certificates issued over a five-year period not to exceed $600,000. For an employee, the amount of a tax credit certificate shall equal 10 percent of the tax liability of the approved business, not to exceed $75,000, with a total aggregate value of the certificates issued over a five-year period not to exceed $200,000.

Division IX of H.F. 683 (see Appropriations) establishes a standing appropriation for purposes of the program.

Division XIV - Future Repeal

Division XIV of the Act provides that Divisions VI through XIII are repealed effective June 30, 2010.

Division XV - Liability Reform

Division XV of the Act permits the state or any of its political subdivisions to request the district court upon a showing of good cause to stay all the proceedings under the order or judgment being appealed from and waive the requirement that the state or any of its political subdivisions file a supersedeas (appeal) bond upon appeal to the Iowa Supreme Court.

Division XVI - Workers' Compensation

Division XVI of the Act makes several changes to laws relating to workers' compensation.

The division amends Code Section 86.12 to provide that the Workers' Compensation Commissioner may require any employer to file a report required under Code Section 86.13 or required by agency rule; may impose an assessment of $1,000 for each failure to comply with Code Section 86.12 within 30 days, payable into the Second Injury Fund; and may seek judgment upon the order in district court if the assessment is not paid within 30 days. The division also provides that an insurance carrier that possesses the information necessary to file a required report has the same responsibilities as an employer does.

The division adds a new Code Section 86.13A requiring the Workers' Compensation Commissioner to monitor the compliance rate of each employer and insurer with the statutory requirements relating to the commencement of voluntary weekly workers' compensation payments. The division provides that, commencing in any fiscal year after June 30, 2005, the commissioner may impose, for failure to comply with these requirements, an assessment upon an employer or insurer, pursuant to a statutory formula, which is payable to the Second Injury Fund. The assessment shall not be imposed if an employer or insurer commences voluntary weekly compensation benefits in a timely manner for more than 75 percent of the injuries reported by the employer or insurer. The Workers' Compensation Commissioner may waive or reduce an assessment under certain circumstances.

Division XVII - Financial Services

Division XVII of the Act modifies several Code provisions related to financial transactions. Code Section 537.2502 is amended to provide 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 division allows 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 division, with respect to such transactions, eliminates the requirement that payments be applied first to a current installment and then to delinquent amounts.

The amendment likewise provides 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 division, with respect to such transactions, eliminates the requirement that payments be applied first to a current payment and then to delinquent amounts.

Code Section 537.2601 is amended to provide that for transactions other than consumer credit transactions, the parties may contract for any charge permitted by law.

Division XVIII - Unemployment Compensation Surcharge

Division XVIII of the Act extends the repeal of the employment security administrative surcharge from July 1, 2003, to July 1, 2006. In addition, the Act sets the target revenue to be collected from the surcharge in calendar years 2004 and 2005 at the calendar 2003 limit of $6.525 million and reduces this amount to $3.2625 million for calendar year 2006. The division takes effect June 19, 2003.

Division XIX - Targeted Economic Development

Division XIX of the Act relates to site preparation for targeted economic development and coordination of regulatory assistance.

The division provides that a city, county, or region formed by two or more counties, subject to the approval of the property owner, may designate an area within the boundaries of the city, county or region for a specific type of targeted economic development. The type of targeted economic development shall be manufacturing, light industrial, warehouse and distribution, office parks, business and commerce parks, or research and development. The division provides that a city, county or region that designates an area may apply to the Department of Economic Development (IDED) for purposes of certifying the area as a preapproved development site. The division also provides that, prior to a specific project being developed, a city, county or region designating the area may apply for and obtain appropriate licenses, permits and approvals for the type of targeted economic development project desired for the area.

The division also requires IDED to coordinate all regulatory assistance for the state. Each state agency with regulatory programs for businesses is to designate a regulatory coordinator to work with the department. The department is to submit an annual report to the General Assembly regarding the provision of regulatory assistance by state agencies.

Division XX - Utility Sales Tax Exemption

Division XX of the Act freezes the sales and use tax on residential electricity, gas and fuel at 3 percent from July 1, 2003, through June 30, 2008. The rate then decreases to 2 percent from July 1, 2008, through June 30, 2009; to 1 percent from July 1, 2009, through June 30, 2010; and to zero percent from July 1, 2010, indefinitely. Present law set the rates at 3 percent for the 2003 calendar year, 2 percent for the 2004 calendar year, 1 percent for the 2005 calendar year, and 0 percent for the 2006 calendar year and beyond.

Division XXI - Effective Date

Division XXI of the Act provides that, unless otherwise noted, the Act takes effect July 1, 2003.

THE GOVERNOR ITEM VETOED THE FOLLOWING:

1. Division II of the Act, which would have reduced the individual income tax rates for the 2004, 2005 and 2006 tax years from the rates existing for the 2003 tax year. Each of the nine rates would be reduced nearly the same percentage for each tax year. The reductions are between: 2.8 percent and 3.0 percent of the 2003 tax year rates for the 2004 tax year, 5.2 percent and 5.6 percent of the 2003 tax year rates for the 2005 tax year, and 9.7 percent and 11.1 percent of the 2003 tax year rates for the 2006 tax year.
2. Division III of the Act, which would have reduced the rates existing for the 2003 tax year by between 13.9 percent and 14.1 percent for the 2007 tax year. These rates would continue indefinitely.
3. Division IV of the Act, which would have rewritten the state individual income tax by reducing the rates on taxable income to 1.85 percent on the first $8,000; 4.75 percent on the next $92,000; and 4.99 percent on that over $100,000. The brackets will be adjusted by an inflation factor. Most adjustments to federal adjusted gross income would be eliminated. However, deductions for a portion of social security benefits and pensions received would be maintained. In arriving at the taxable income, the standard deduction and itemized deductions allowed for federal tax purposes would be maintained. The standard deduction amounts would be adjusted by an inflation factor. The present personal credit would be kept. The deduction for federal income taxes paid would be eliminated. The alternative minimum tax would be eliminated. The division also would retain the present credits that are allowed except for the minimum tax credit which is eliminated beginning with the 2010 tax year.
4. The division would have repealed Division III of this Act and would have been contingent upon the passage of a constitutional amendment by January 1, 2007, requiring a 60 percent vote in order to enact legislation that increases the individual income tax rate or rates.
5. From Division IX, a requirement that the governor appoint a director of technology to serve within the Office of the Governor.
6. From Division XI, a requirement that the Department of Economic Development collect data about businesses that considered locating in Iowa but decided to locate elsewhere and businesses that closed major operations in the state or dissolved the business' corporate status.
7. From Division XV, certain provisions that would have limited the liability of an assembler, designer, supplier of specifications, distributor, manufacturer, or seller under a theory of civil conspiracy unless the person knowingly and voluntarily entered into an agreement to participate in a common scheme or plan with the intent to commit a tortious act upon another, and would have provided that a plaintiff seeking punitive damages in a civil case meet a clear and convincing standard of proof in demonstrating that the plaintiff's harm was the result of actual malice. "Actual malice" would have been defined to mean either conduct which is specifically intended by the defendant to cause tangible or intangible serious injury to the plaintiff or conduct that is carried out by the defendant both with a flagrant indifference to the rights of the plaintiff and with a subjective awareness that such conduct would result in tangible serious injury.
8. From Division XVI, a section relating to workers' compensation laws and compensation for permanent partial disabilities, to provide that an employer is not liable for that portion of an employee's present disability caused by a prior work-related injury or illness sustained while the employee was employed by a different employer. The section also would have provided that any portion of an employee's present disability caused by a prior work-related injury or illness sustained while the employee was employed by the same employer that was previously compensated by the employer could be deducted from the employer's obligation to pay benefits for the employee's present disability, and that if an employee's present disability was reduced in this manner, the employee would receive compensation for the remaining disability, plus an additional 10 percent of the amount of the increase in disability.
9. Division XX of the Act, which would have frozen the sales and use tax on residential electricity, gas and fuel at 3 percent from July 1, 2003, through June 30, 2008. The rate then would decrease to 2 percent from July 1, 2008, through June 30, 2009; to 1 percent from July 1, 2009, through June 30, 2010; and to zero percent from July 1, 2010, indefinitely. Present law set the rates at 3 percent for the 2003 calendar year, 2 percent for the 2004 calendar year, 1 percent for the 2005 calendar year, and 0 percent for the 2006 calendar year.