CHAPTER 71
TARGETED JOBS WITHHOLDING TAX CREDIT PROGRAM
261—71.1(81GA,HF2731) Definitions.
“Act” means 2006 Iowa Acts, House File 2731.
“Board” means the Iowa economic development board created in Iowa Code section 15.103.
“Business” means any professional services or industrial enterprise, including medical treatment facilities, manufacturing facilities, corporate headquarters, and research facilities. “Business” does not include a retail operation or a business which closes or substantially reduces its operation in one area of this state and relocates substantially the same operation to another area of this state.
“Countywide average wage” means the average that the department calculates using the most current four quarters of wage and employment information as provided in the quarterly covered wage and employment data report as provided by the department of workforce development. Agricultural/mining and governmental employment categories are deleted in compiling the wage information.
“Department” means the Iowa department of economic development.
“Employee” means the individual employed in a targeted job that is subject to a withholding agreement.
“Employer” means a business creating or retaining targeted jobs in an urban renewal area of a pilot project city pursuant to a withholding agreement.
“Pilot project city” means a city that has applied and been approved as a pilot project city pursuant to rule 71.2(81GA,HF2731).
“Qualifying investment” means a capital investment in real property including the purchase price of land and existing buildings, site preparation, building construction, and long-term lease costs. “Qualifying investment” also means a capital investment in depreciable assets.
“Targeted job” means a job in a business which is or will be located in an urban renewal area of a pilot project city that pays a wage at least equal to the countywide average wage. “Targeted job” includes new or retained jobs from Iowa business expansions or retentions within the city limits of the pilot project city and those jobs resulting from established out-of-state businesses, as defined by the department, that are moving to or expanding in Iowa.
“Urban renewal area” means the same as defined in Iowa Code section 403.17.
“Withholding agreement” means an agreement authorized in rule 71.4(81GA,HF2731) between a pilot project city and an employer concerning the targeted jobs withholding tax credit.
261—71.2(81GA,HF2731) Eligibility requirements. An eligible city may apply to the department to be designated as a pilot project city. An eligible city is a city that contains three or more census tracts and is located in a county meeting one of the following requirements:
	1.	A county that borders Nebraska.
	2.	A county that borders South Dakota.
	3.	A county that borders a state other than Nebraska or South Dakota.
261—71.3(81GA,HF2731) Application process and review.
	71.3(1) Application. The department shall develop a standardized application and make the application available to eligible cities. The application procedures are as follows:
	a. 	An eligible city seeking approval as a pilot project city will submit an application to the department. The department shall determine if the application is complete.
	b. 	The department will review the application and consider the following criteria:
	(1)	Need for pilot project status. The city shall demonstrate why status as a pilot project city is necessary, including how the city will utilize the program to attract and retain employers.
	(2)	Planned and current projects. The city shall provide information on planned and current economic development projects that are taking place or will take place in an urban renewal area. The city shall demonstrate its ability to enter into a withholding agreement with an eligible business within one year of the city’s approval as a pilot project city.
	(3)	Use of withholding funds. If approved as a pilot project city, the city shall indicate how the city plans to utilize withholding funds generated from the program. The city shall provide an estimate of the number of withholding agreements the city anticipates executing, the amount of withholding funds the city expects to generate as a result of the program, and the investment to be leveraged by use of the program.
	(4)	Urban renewal areas. The city shall identify the number of urban renewal areas in the city and the location of the urban renewal areas where withholding funds may be utilized.
	(5)	Matching funds. The city shall identify its ability to provide matching funds for projects involving withholding credits, including the potential sources of matching funds.
	c. 	A resolution of support from the city applying for approval as a pilot project city is required as part of the application. This resolution shall include approval of the submission of the application to the department for status as a pilot project city.
	d. 	The department may request additional information from a city that is applying for pilot project city status or may use other resources to obtain the needed information.
	e. 	Applications filed on or after October 1, 2006, shall not be considered.
	71.3(2) Approval of applications. The department shall approve four eligible pilot project cities: one pursuant to 71.2“1,” one pursuant to 71.2“2,” and two pursuant to 71.2“3.” If more than two cities meeting the requirements of 71.2“3” apply to be designated as a pilot project city, the department of management, in consultation with the department, shall determine which two cities hold the most potential to create new jobs or generate the greatest capital in their areas. Department staff will prepare a recommendation for each of the cities to be approved as pilot project cities. The board will make the final decision to approve, defer or deny applications. Once applications are approved by the board, all communities applying for pilot project city status will be notified of the status of their applications.
	71.3(3) Status as a pilot project city. If a pilot project city does not enter into a withholding agreement within one year of its approval as a pilot project city, the city shall lose its status as a pilot project city. Upon such occurrence, the department shall take applications from other eligible cities to replace that city. Another city shall be designated within six months.
261—71.4(81GA,HF2731) Withholding agreements.
	71.4(1) Designated account. An approved pilot project city may provide by city ordinance for a designated account for the deposit of funds generated through withholding agreements under the targeted jobs withholding tax credit program.
	71.4(2) Entering into an agreement. A pilot project city may enter into a withholding agreement with a business locating to the community from another state that is creating or retaining targeted jobs in an urban renewal area. The pilot project city may enter into a withholding agreement with a business currently located in Iowa only if the business is creating at least ten new jobs or making a qualifying investment of at least $500,000 within the urban renewal area. A business shall not be obligated to enter into a withholding agreement with a pilot project city. A pilot project city shall not enter into a withholding agreement with a business after June 30, 2010.
	71.4(3) Required components of a withholding agreement. A withholding agreement shall be disclosed to the public and shall contain all of the following:
	a. 	A copy of the adopted development agreement between the pilot project city and employer, including how withholding funds generated by the city will be used.
	b. 	A list of all other incentives or financial assistance the business has requested or is receiving from other federal, state, or local economic development programs including loans, grants, forgivable loans, and tax credits.
	c. 	The amount of assistance provided by the pilot project city for the project.
	d. 	Documentation of the approval of the project by local participating authorities.
	71.4(4) Length of withholding agreements. A withholding agreement may have a term of up to ten years.
	71.4(5) Withholding generated through the program.
	a. 	Once a pilot project city and an employer have entered into a withholding agreement, an amount equal to 3 percent of the gross wages paid by the business to each employee under a withholding agreement shall be credited from the payment made by the employer pursuant to Iowa Code Supplement section 422.16. If the amount of withholding by the employer is less than 3 percent of the gross wages paid to the employees covered by the withholding agreement, the employer shall receive a credit against other withholding taxes due by the employer or may carry the credit forward for up to ten years or until depleted, whichever occurs first.
	b. 	The employer shall submit the amount of the credit quarterly, in the same manner as withholding payments are made to the department of revenue, to the pilot project city.
	c. 	An employee whose wages are subject to a withholding agreement shall receive full credit for the amount withheld under the targeted jobs withholding tax credit program as provided in Iowa Code Supplement section 422.16.
	71.4(6) Use of withholding funds. A pilot project city shall allocate the withholding funds into a designated account in the special fund for the urban renewal area in which the targeted jobs are located. All funds deposited shall be used or pledged by the pilot project city for an urban renewal project related to the employer pursuant to the withholding agreement.
	71.4(7) Local match requirement. A pilot project city entering into a withholding agreement shall arrange for a match of at least one dollar for each withholding dollar received by the city. The local match may come from the pilot project city, a private donor, or the employer or a combination of the three. Local matches may be in the form of cash or in-kind contributions to be used for the project.
	71.4(8) Termination of a withholding agreement. Following the termination of a withholding agreement, the employer credits shall cease and any funds received by the pilot project city after the agreement has been terminated shall be remitted to the state treasurer to be deposited in the general fund of the state. The pilot project city shall notify the department of revenue and the department of economic development within 30 days of the termination of the withholding agreement. If the employer does not meet the requirements of the withholding agreement, the agreement shall be terminated and any withholding credits for the employer shall cease. If the employer has created or retained the required number of new jobs under the agreement, and the number of jobs falls below the required level, the employer shall not be considered in default until 18 months after the date of the decrease in new jobs.
	71.4(9) Participation in other programs. An employer may participate in the Iowa industrial new jobs training program under Iowa Code Supplement section 260E.5 or may claim a supplemental withholding credit under Iowa Code Supplement section 15E.197, at the same time the employer is participating in the targeted jobs withholding tax credit program. The withholding credit under section 260E.5 and the supplemental withholding credit under section 15E.197 shall be collected and disbursed prior to the collection and disbursement of the withholding credit under the targeted jobs withholding tax credit program.
261—71.5(81GA,HF2731) Project approval.
	71.5(1) Application for project approval.
	a. 	Prior to entering into a withholding agreement with an employer, a pilot project city must receive approval from the department. The department shall develop a standardized application for project approval and shall make the application available to eligible pilot project cities. The application for project approval shall include, but not be limited to, the following information regarding a project:
	(1)	A general description of the project, including how the pilot project city will utilize withholding funds generated by the project.
	(2)	Information regarding the number of targeted jobs in the project, the wages of the targeted jobs, and the types of jobs created by the project.
	(3)	A budget for the project, showing the total project cost, the amount of local matching funds committed to the project, and the amount of withholding funds the city will receive from the project.
	(4)	A copy of the withholding agreement to be entered into between the city and the employer.
	(5)	A letter or resolution of support from the local government showing support for the project.
	b. 	Applications for project approval for the targeted jobs withholding tax credit program may be submitted at any time. The department will review applications for projects in as timely a manner as possible. A pilot project city will be notified in writing of the department’s decision regarding the project.
	71.5(2) Certification to the department of revenue.
	a. 	The employer shall certify to the department of revenue that the targeted jobs withholding tax credit is in accordance with the withholding agreement and shall provide other information the department of revenue may require.
	b. 	A pilot project city shall certify to the department of revenue the amount of the targeted jobs withholding tax credit an employer has remitted to the city and shall provide other information the department of revenue may require.
	c. 	Notice of any withholding agreement shall be provided promptly to the department of revenue following its execution between a pilot project city and an employer.
261—71.6(81GA,HF2731) Reporting requirements.
	71.6(1) Required reports.
	a. 	At the time the pilot project city submits its budget to the department of management, the pilot project city shall submit to the department of management and the department a description of the activities involving the use of withholding agreements. The description shall include, but not be limited to, the following:
	(1)	The total number of targeted jobs associated with withholding agreements and the wages of those targeted jobs.
	(2)	A breakdown of the number of targeted jobs that are associated with Iowa business expansions or retentions within the city limits of the pilot project city and the number of targeted jobs resulting from out-of-state businesses moving to or expanding in Iowa.
	(3)	The number of withholding agreements and the amount of withholding credits associated with those agreements.
	(4)	The types of businesses that entered into withholding agreements with the city and the types of businesses that declined the city’s proposal to enter into a withholding agreement with the city.
	b. 	The department may request additional reports from pilot project cities as necessary to determine the status of the targeted jobs withholding tax credit program.
	71.6(2) Annual report. The department shall prepare an annual report for the governor, the general assembly, and the legislative services agency on the targeted jobs withholding tax credit program. This report shall be due on July 31 of each year. The report shall include but not be limited to the following:
	a. 	The amount of withholding funds each project received.
	b. 	The number of new and retained jobs resulting from the program.
	c. 	The average wage of jobs resulting from the program.
	d. 	An evaluation of the investment made by the state, including but not limited to the terms in paragraphs “a” to “c” of this subrule.
These rules are intended to implement 2006 Iowa Acts, House File 2731.
[Filed emergency 7/19/06—published 8/16/06, effective 7/19/06]
[Filed 9/22/06, Notice 8/16/06—published 10/11/06, effective 11/15/06]