House File 2454 S-5136 Amend House File 2454, as amended, passed, and 1 reprinted by the House, as follows: 2 1. Page 25, after line 13 by inserting: 3 < DIVISION ___ 4 SALES AND USE TAXES AND THE NATURAL RESOURCES AND 5 OUTDOOR RECREATION TRUST FUND 6 Sec. ___. Section 423.2, subsection 1, unnumbered 7 paragraph 1, Code 2016, is amended to read as follows: 8 There is imposed a tax of six percent at the rate 9 specified in subsection 14 upon the sales price of 10 all sales of tangible personal property, consisting 11 of goods, wares, or merchandise, sold at retail in 12 the state to consumers or users except as otherwise 13 provided in this subchapter . 14 Sec. ___. Section 423.2, subsections 2 and 3, Code 15 2016, are amended to read as follows: 16 2. A tax of six percent at the rate specified in 17 subsection 14 is imposed upon the sales price of the 18 sale or furnishing of gas, electricity, water, heat, 19 pay television service, and communication service, 20 including the sales price from such sales by any 21 municipal corporation or joint water utility furnishing 22 gas, electricity, water, heat, pay television service, 23 and communication service to the public in its 24 proprietary capacity, except as otherwise provided in 25 this subchapter , when sold at retail in the state to 26 consumers or users. 27 3. A tax of six percent at the rate specified 28 in subsection 14 is imposed upon the sales price 29 of all sales of tickets or admissions to places of 30 amusement, fairs, and athletic events except those of 31 elementary and secondary educational institutions. A 32 tax of six percent at the rate specified in subsection 33 14 is imposed on the sales price of an entry fee 34 or like charge imposed solely for the privilege of 35 -1- HF2454.3593 (4) 86 da/sc 1/ 20 #1.

participating in an activity at a place of amusement, 1 fair, or athletic event unless the sales price of 2 tickets or admissions charges for observing the same 3 activity are taxable under this subchapter . A tax of 4 six percent at the rate specified in subsection 14 is 5 imposed upon that part of private club membership fees 6 or charges paid for the privilege of participating in 7 any athletic sports provided club members. 8 Sec. ___. Section 423.2, subsection 4, paragraph a, 9 Code 2016, is amended to read as follows: 10 a. A tax of six percent at the rate specified in 11 subsection 14 is imposed upon the sales price derived 12 from the operation of all forms of amusement devices 13 and games of skill, games of chance, raffles, and 14 bingo games as defined in chapter 99B , and card game 15 tournaments conducted under section 99B.7B , that are 16 operated or conducted within the state, the tax to 17 be collected from the operator in the same manner as 18 for the collection of taxes upon the sales price of 19 tickets or admission as provided in this section . 20 Nothing in this subsection shall legalize any games of 21 skill or chance or slot-operated devices which are now 22 prohibited by law. 23 Sec. ___. Section 423.2, subsection 5, Code 2016, 24 is amended to read as follows: 25 5. There is imposed a tax of six percent at the 26 rate specified in subsection 14 upon the sales price 27 from the furnishing of services as defined in section 28 423.1 . 29 Sec. ___. Section 423.2, subsection 7, paragraph a, 30 unnumbered paragraph 1, Code 2016, is amended to read 31 as follows: 32 A tax of six percent at the rate specified in 33 subsection 14 is imposed upon the sales price from the 34 sales, furnishing, or service of solid waste collection 35 -2- HF2454.3593 (4) 86 da/sc 2/ 20

and disposal service. 1 Sec. ___. Section 423.2, subsection 8, paragraph a, 2 Code 2016, is amended to read as follows: 3 a. A tax of six percent at the rate specified in 4 subsection 14 is imposed on the sales price from sales 5 of bundled transactions. For the purposes of this 6 subsection , a “bundled transaction” is the retail sale 7 of two or more distinct and identifiable products, 8 except real property and services to real property, 9 which are sold for one nonitemized price. A “bundled 10 transaction” does not include the sale of any products 11 in which the sales price varies, or is negotiable, 12 based on the selection by the purchaser of the products 13 included in the transaction. 14 Sec. ___. Section 423.2, subsection 9, Code 2016, 15 is amended to read as follows: 16 9. A tax of six percent at the rate specified in 17 subsection 14 is imposed upon the sales price from 18 any mobile telecommunications service, including 19 all paging services, that this state is allowed to 20 tax pursuant to the provisions of the federal Mobile 21 Telecommunications Sourcing Act, Pub. L. No. 106-252, 22 4 U.S.C. §116 et seq. For purposes of this subsection , 23 taxes on mobile telecommunications service, as defined 24 under the federal Mobile Telecommunications Sourcing 25 Act that are deemed to be provided by the customer’s 26 home service provider, shall be paid to the taxing 27 jurisdiction whose territorial limits encompass the 28 customer’s place of primary use, regardless of where 29 the mobile telecommunications service originates, 30 terminates, or passes through and shall in all other 31 respects be taxed in conformity with the federal Mobile 32 Telecommunications Sourcing Act. All other provisions 33 of the federal Mobile Telecommunications Sourcing Act 34 are adopted by the state of Iowa and incorporated into 35 -3- HF2454.3593 (4) 86 da/sc 3/ 20

this subsection by reference. With respect to mobile 1 telecommunications service under the federal Mobile 2 Telecommunications Sourcing Act, the director shall, if 3 requested, enter into agreements consistent with the 4 provisions of the federal Act. 5 Sec. ___. Section 423.2, subsection 11, paragraph 6 b, subparagraph (2), Code 2016, is amended to read as 7 follows: 8 (2) Transfer from the remaining revenues the 9 amounts required under Article VII, section 10, of 10 the Constitution of the State of Iowa to the natural 11 resources and outdoor recreation trust fund created in 12 section 461.31 , if applicable . 13 Sec. ___. Section 423.2, subsection 14, Code 2016, 14 is amended by striking the subsection and inserting in 15 lieu thereof the following: 16 14. a. For the period beginning July 1, 2017, and 17 ending June 30, 2018, the sales tax rate is six and 18 one-eighth percent. 19 b. For the period beginning July 1, 2018, and 20 ending June 30, 2019, the sales tax rate is six and 21 two-eighths percent. 22 c. For the period beginning July 1, 2019, and 23 ending December 31, 2029, the sales tax rate is six and 24 three-eighths percent. 25 d. Beginning January 1, 2030, the sales tax rate is 26 five and three-eighths percent. 27 Sec. ___. Section 423.5, subsection 1, unnumbered 28 paragraph 1, Code 2016, is amended to read as follows: 29 Except as provided in paragraph “c” , an excise tax 30 at the rate of six percent specified in subsection 5 31 of the purchase price or installed purchase price is 32 imposed on the following: 33 Sec. ___. Section 423.5, subsection 5, Code 2016, 34 is amended by striking the subsection and inserting in 35 -4- HF2454.3593 (4) 86 da/sc 4/ 20

lieu thereof the following: 1 5. a. For the period beginning July 1, 2017, and 2 ending June 30, 2018, the use tax rate is six and 3 one-eighth percent. 4 b. For the period beginning July 1, 2018, and 5 ending June 30, 2019, the use tax rate is six and 6 two-eighths percent. 7 c. For the period beginning July 1, 2019, and 8 ending December 31, 2029, the use tax rate is six and 9 three-eighths percent. 10 d. Beginning January 1, 2030, the use tax rate is 11 five and three-eighths percent. 12 Sec. ___. Section 423.43, subsection 1, paragraph 13 b, Code 2016, is amended to read as follows: 14 b. Subsequent to the deposit into the general fund 15 of the state and after the transfer of such pursuant to 16 paragraph “a” , the department shall do the following in 17 the order prescribed: 18 (1) Transfer the revenues collected under chapter 19 423B , the department shall transfer one-sixth . 20 (2) (a) Transfer the applicable percentage 21 as specified in subparagraph division (b) of such 22 remaining revenues to the secure an advanced vision for 23 education fund created in section 423F.2 . 24 (b) (i) For the period beginning July 1, 2017, 25 and ending June 30, 2018, the applicable percentage 26 is sixteen and three thousand two hundred sixty-five 27 ten-thousandths percent. 28 (ii) For the period beginning July 1, 2018, and 29 ending June 30, 2019, the applicable percentage is 30 sixteen percent. 31 (iii) For the period beginning July 1, 2019, and 32 ending December 31, 2029, the applicable percentage 33 is fifteen and six thousand eight hundred sixty-three 34 ten-thousandths percent. 35 -5- HF2454.3593 (4) 86 da/sc 5/ 20

(c) This paragraph subparagraph (2) is repealed 1 December 31, 2029. 2 Sec. ___. PURPOSE. The purpose of this division 3 of this Act is to provide for the implementation of 4 Article VII, section 10, of the Constitution of the 5 State of Iowa by fully funding the natural resources 6 and outdoor recreation trust fund as created in section 7 461.31, pursuant to Article VII, section 10, of the 8 Constitution of the State of Iowa. 9 Sec. ___. EFFECTIVE DATE. This division of this 10 Act takes effect July 1, 2017. 11 DIVISION ___ 12 INCOME TAXES 13 Sec. ___. Section 422.5, subsection 1, Code 2016, 14 is amended by adding the following new paragraph: 15 NEW PARAGRAPH . 0j. (1) For each tax year 16 beginning in the period beginning January 1, 2018, and 17 ending December 31, 2029, the department of revenue 18 shall determine the amount of sales and use tax 19 revenues generated for the fiscal year ending June 30 20 during the applicable tax year from the increases in 21 the sales and use tax rates enacted in this Act, and 22 shall certify such amount to the governor and general 23 assembly. 24 (2) For each tax year beginning in the period 25 beginning January 1, 2018, and ending December 31, 26 2029, the rates of tax in paragraphs “a” through “i” 27 shall be reduced as provided in subparagraph (3) by an 28 amount that will in the aggregate reduce the individual 29 income tax revenues for the applicable tax year by the 30 dollar amount certified by the department of revenue 31 pursuant to subparagraph (1) for the relevant fiscal 32 year ending June 30 prior to the start of the tax year. 33 (3) (a) The rate reduction for a tax year shall be 34 accomplished by applying the applicable dollar amount 35 -6- HF2454.3593 (4) 86 da/sc 6/ 20

to a reduction in the rate imposed in paragraph “a” , 1 but not below zero. 2 (b) If such rate reduction in subparagraph division 3 (a) does not accomplish the full rate decrease required 4 by subparagraph (2), the remaining applicable dollar 5 amount shall be applied to a reduction in the rate 6 imposed in paragraph “b” , but not below zero. 7 (c) If such rate reduction in subparagraph 8 divisions (a) and (b) do not accomplish the full rate 9 decrease required by subparagraph (2), the remaining 10 applicable dollar amount shall be applied to a 11 reduction in the rate imposed in paragraph “c” , but not 12 below zero. 13 (d) If such rate reduction in subparagraph 14 divisions (a) through (c) do not accomplish the 15 full rate decrease required by subparagraph (2), the 16 remaining applicable dollar amount shall be applied to 17 a reduction in the rate imposed in paragraph “d” , but 18 not below zero. 19 (e) If such rate reduction in subparagraph 20 divisions (a) through (d) do not accomplish the 21 full rate decrease required by subparagraph (2), the 22 remaining applicable dollar amount shall be applied to 23 a reduction in the rate imposed in paragraph “e” , but 24 not below zero. 25 (f) If such rate reduction in subparagraph 26 divisions (a) through (e) do not accomplish the 27 full rate decrease required by subparagraph (2), the 28 remaining applicable dollar amount shall be applied to 29 a reduction in the rate imposed in paragraph “f” , but 30 not below zero. 31 (g) If such rate reduction in subparagraph 32 divisions (a) through (f) do not accomplish the 33 full rate decrease required by subparagraph (2), the 34 remaining applicable dollar amount shall be applied to 35 -7- HF2454.3593 (4) 86 da/sc 7/ 20

a reduction in the rate imposed in paragraph “g” , but 1 not below zero. 2 (h) If such rate reduction in subparagraph 3 divisions (a) through (g) do not accomplish the 4 full rate decrease required by subparagraph (2), the 5 remaining applicable dollar amount shall be applied to 6 a reduction in the rate imposed in paragraph “h” , but 7 not below zero. 8 (i) If such rate reduction in subparagraph 9 divisions (a) through (h) do not accomplish the 10 full rate decrease required by subparagraph (2), the 11 remaining applicable dollar amount shall be applied to 12 a reduction in the rate imposed in paragraph “i” , but 13 not below zero. 14 (4) The rates of tax for paragraphs “a” through 15 “i” , as determined under this paragraph for the tax 16 year beginning January 1, 2029, shall apply to all tax 17 years beginning on or after January 1, 2029. 18 Sec. ___. Section 422.5, subsection 1, paragraph j, 19 Code 2016, is amended to read as follows: 20 j. (1) The tax imposed upon the taxable income 21 of a nonresident shall be computed by reducing the 22 amount determined pursuant to paragraphs “a” through 23 “i” “0j” by the amounts of nonrefundable credits under 24 this division and by multiplying this resulting amount 25 by a fraction of which the nonresident’s net income 26 allocated to Iowa, as determined in section 422.8, 27 subsection 2 , paragraph “a” , is the numerator and the 28 nonresident’s total net income computed under section 29 422.7 is the denominator. This provision also applies 30 to individuals who are residents of Iowa for less than 31 the entire tax year. 32 (2) (a) The tax imposed upon the taxable income 33 of a resident shareholder in an S corporation or of 34 an estate or trust with a situs in Iowa that is a 35 -8- HF2454.3593 (4) 86 da/sc 8/ 20

shareholder in an S corporation, which S corporation 1 has in effect for the tax year an election under 2 subchapter S of the Internal Revenue Code and carries 3 on business within and without the state, may be 4 computed by reducing the amount determined pursuant 5 to paragraphs “a” through “i” “0j” by the amounts 6 of nonrefundable credits under this division and by 7 multiplying this resulting amount by a fraction of 8 which the resident’s or estate’s or trust’s net income 9 allocated to Iowa, as determined in section 422.8, 10 subsection 2 , paragraph “b” , is the numerator and the 11 resident’s or estate’s or trust’s total net income 12 computed under section 422.7 is the denominator. If 13 a resident shareholder, or an estate or trust with 14 a situs in Iowa that is a shareholder, has elected 15 to take advantage of this subparagraph (2), and for 16 the next tax year elects not to take advantage of 17 this` subparagraph, the resident or estate or trust 18 shareholder shall not reelect to take advantage of 19 this subparagraph for the three tax years immediately 20 following the first tax year for which the shareholder 21 elected not to take advantage of this subparagraph, 22 unless the director consents to the reelection. This 23 subparagraph also applies to individuals who are 24 residents of Iowa for less than the entire tax year. 25 (b) This subparagraph (2) shall not affect the 26 amount of the taxpayer’s checkoffs under this division , 27 the credits from tax provided under this division , and 28 the allocation of these credits between spouses if 29 the taxpayers filed separate returns or separately on 30 combined returns. 31 Sec. ___. Section 422.11B, Code 2016, is amended to 32 read as follows: 33 422.11B Minimum tax credit. 34 1. a. There is allowed as a credit against the tax 35 -9- HF2454.3593 (4) 86 da/sc 9/ 20

determined in section 422.5, subsection 1 , paragraphs 1 “a” through “j” “0j” for a tax year an amount equal to 2 the minimum tax credit for that tax year. 3 b. The minimum tax credit for a tax year is the 4 excess, if any, of the net minimum tax imposed for 5 all prior tax years beginning on or after January 1, 6 1987, over the amount allowable as a credit under this 7 section for those prior tax years. 8 2. a. The allowable credit under subsection 1 9 for a tax year shall not exceed the excess, if any, 10 of the tax determined in section 422.5, subsection 11 1 , paragraphs “a” through “j” “0j” over the state 12 alternative minimum tax as determined in section 422.5, 13 subsection 2 . 14 b. The net minimum tax for a tax year is the 15 excess, if any, of the tax determined in section 422.5, 16 subsection 2 , for the tax year over the tax determined 17 in section 422.5, subsection 1 , paragraphs “a” through 18 “j” “0j” for the tax year. 19 Sec. ___. EFFECTIVE DATE. This division of this 20 Act takes effect January 1, 2018. 21 Sec. ___. APPLICABILITY. This division of this 22 Act applies to tax years beginning on or after January 23 1, 2018. 24 DIVISION ___ 25 WATER QUALITY AND WATER QUALITY EXCISE TAX 26 Sec. ___. Section 16.134, Code 2016, is amended to 27 read as follows: 28 16.134 Wastewater and drinking water treatment 29 financial assistance program. 30 1. The Iowa finance authority shall establish and 31 administer a wastewater and drinking water treatment 32 financial assistance program. The purpose of the 33 program shall be to provide financial assistance 34 to enhance water quality. The program shall be 35 -10- HF2454.3593 (4) 86 da/sc 10/ 20

administered in accordance with rules adopted by 1 the authority pursuant to chapter 17A . For purposes 2 of this section , “program” means the wastewater and 3 drinking water treatment financial assistance program 4 and “committee” means the water quality financing 5 review committee created in subsection 9 . 6 2. A wastewater and drinking water treatment 7 financial assistance fund is created and shall consist 8 of appropriations made to the fund and transfers 9 of interest, earnings, and moneys from other funds 10 as provided by law. Moneys transferred to the fund 11 pursuant to section 423G.6 are appropriated to the 12 authority for purposes of the program. Moneys in the 13 fund are not subject to section 8.33 . Notwithstanding 14 section 12C.7, subsection 2 , interest or earnings on 15 moneys in the fund shall be credited to the fund. 16 3. Financial assistance under the program shall 17 be used to install or upgrade wastewater treatment 18 facilities and systems and drinking water treatment 19 facilities and systems, including source water 20 protection projects , and for engineering or technical 21 assistance for facility planning and design. 22 4. The authority committee shall distribute approve 23 financial assistance in from the fund in accordance 24 with the following: 25 a. The goal of the program shall be to base awards 26 on the impact of the grant combined with other sources 27 of financing to ensure that sewer rates do not exceed 28 one and one-half percent of a community’s median 29 household income. 30 b. a. Communities shall be eligible for financial 31 assistance by qualifying as Priority shall be given 32 for projects in which a disadvantaged community and 33 is seeking financial assistance for the installation 34 or upgrade of wastewater treatment facilities due 35 -11- HF2454.3593 (4) 86 da/sc 11/ 20

to regulatory activity by the department of natural 1 resources and drinking water treatment facilities . 2 For purposes of this section , the term “disadvantaged 3 community” means the same as defined by the department. 4 c. b. Priority shall be given to projects in which 5 the meeting criteria established in section 455B.199B 6 in which the applicant seeks financial assistance is 7 to be used to obtain with financing under the water 8 pollution control works and drinking water facilities 9 financing program pursuant to section 16.131 or other 10 federal , or state , or private financing. 11 d. c. Priority shall also be given to projects 12 whose completion will provide significant improvement 13 to water quality in the relevant watershed. 14 e. d. Priority shall also be given to communities 15 that employ an alternative wastewater treatment 16 technology pursuant to section 455B.199C . 17 f. e. Priority shall be also be given to those 18 communities where sewer or water rates are the highest 19 as a percentage of that community’s median household 20 income. 21 g. f. Financial assistance in the form of grants 22 shall be issued on an annual basis. 23 h. g. An applicant shall not receive a grant that 24 exceeds five hundred thousand dollars. 25 h. Priority shall also be given to communities that 26 employ technology to address the latest version of the 27 “Iowa Nutrient Reduction Strategy” initially presented 28 in November 2012 by the department of agriculture and 29 land stewardship, the department of natural resources, 30 and Iowa state university of science and technology. 31 4A. A utility management organization formed 32 under chapter 28E or operated by a rural water system 33 organized under chapter 357A or chapter 504 shall be 34 considered eligible for financial assistance under the 35 -12- HF2454.3593 (4) 86 da/sc 12/ 20

program. 1 5. The authority in cooperation with the department 2 of natural resources shall share provide information 3 and resources to the committee when the committee is 4 determining the qualifications of a community for 5 financial assistance from the fund. 6 6. The authority shall enter into agreements with 7 financial assistance recipients and distribute moneys 8 under the program pursuant to financial assistance 9 determinations made by the committee. The authority 10 may use an amount of not more than four one percent of 11 any moneys appropriated for deposit in the fund for 12 administration purposes. 13 7. By October 1 of each year, the authority shall 14 submit a report to the governor and the general 15 assembly itemizing expenditures under the program 16 during the previous fiscal year. 17 8. a. Beginning September 1, 2026, and every 18 ten years thereafter, a program review committee is 19 established for purposes of reviewing the wastewater 20 and drinking water treatment financial assistance 21 program. By December 1 of the same year, the review 22 committee shall file a report with the governor and the 23 general assembly that reviews the effectiveness of the 24 program during the prior ten fiscal years. 25 b. The program review committee shall consist of 26 the following members: 27 (1) The governor or the governor’s designee. 28 (2) The secretary of agriculture or the secretary’s 29 designee. 30 (3) The executive director of the authority or the 31 executive director’s designee. 32 (4) The director of the department of natural 33 resources or the director’s designee. 34 (5) Four members of the general assembly, with 35 -13- HF2454.3593 (4) 86 da/sc 13/ 20 #7.

two from the senate and two from the house of 1 representatives and not more than one member from each 2 chamber being from the same political party. The two 3 senators shall be designated one member each by the 4 president of the senate, after consultation with the 5 majority leader of the senate, and by the minority 6 leader of the senate. The two representatives shall 7 be designated one member each by the speaker of the 8 house of representatives, after consultation with the 9 majority leader of the house of representatives, and by 10 the minority leader of the house of representatives. 11 c. Staffing services shall be provided by the 12 authority. 13 9. a. A water quality financing review committee 14 is created consisting of the secretary of agriculture 15 or the secretary’s designee, the executive director of 16 the authority or the executive director’s designee, and 17 the director of the department of natural resources or 18 the director’s designee. 19 b. The committee shall review and approve or 20 deny applications for financial assistance under the 21 wastewater and drinking water treatment financial 22 assistance program established in this section. 23 Sec. ___. Section 423.3, Code 2016, is amended by 24 adding the following new subsection: 25 NEW SUBSECTION . 103. a. The sales price from 26 the sale or furnishing by a water utility of a water 27 service in the state to consumers or users. 28 b. For purposes of this subsection: 29 (1) “Water service” means the delivery of water by 30 piped distribution system. 31 (2) “Water utility” means a public utility as 32 defined in section 476.1 that furnishes water by piped 33 distribution system to the public for compensation. 34 Sec. ___. NEW SECTION . 423G.1 Short title. 35 -14- HF2454.3593 (4) 86 da/sc 14/ 20

This chapter may be cited as the “Water Service Tax 1 Act” . 2 Sec. ___. NEW SECTION . 423G.2 Definitions. 3 1. All words and phrases used in this chapter and 4 defined in section 423.1 have the same meaning given 5 them by section 423.1 for purposes of this chapter. 6 2. As used in this chapter, “water service” and 7 “water utility” mean the same as defined in section 8 423.3, subsection 103. 9 Sec. ___. NEW SECTION . 423G.3 Water service tax. 10 An excise tax at the rate of six percent is imposed 11 on the sales price from the sale or furnishing by 12 a water utility of a water service in the state to 13 consumers or users. 14 Sec. ___. NEW SECTION . 423G.4 Exemptions. 15 The sales price from transactions exempt from state 16 sales tax under section 423.3, except section 423.3, 17 subsection 103, is also exempt from the tax imposed by 18 this chapter. 19 Sec. ___. NEW SECTION . 423G.5 Administration by 20 director. 21 1. The director of revenue shall administer the 22 water service tax as nearly as possible in conjunction 23 with the administration of the state sales and use tax 24 law, except that portion of the law that implements the 25 streamlined sales and use tax agreement. The director 26 shall provide appropriate forms, or provide on the 27 regular state tax forms, for reporting water service 28 tax liability. 29 2. The director may require all persons who are 30 engaged in the business of deriving any sales price or 31 purchase price subject to tax under this chapter to 32 register with the department. The director may also 33 require a tax permit applicable only to this chapter 34 for any retailer not collecting, or any user not 35 -15- HF2454.3593 (4) 86 da/sc 15/ 20

paying, taxes under chapter 423. 1 3. Section 422.25, subsection 4, sections 422.30, 2 422.67, and 422.68, section 422.69, subsection 1, 3 sections 422.70, 422.71, 422.72, 422.74, and 422.75, 4 section 423.14, subsection 1, and sections 423.23, 5 423.24, 423.25, 423.31 through 423.35, 423.37 through 6 423.42, and 423.47, consistent with the provisions 7 of this chapter, shall apply with respect to the tax 8 authorized under this chapter, in the same manner and 9 with the same effect as if the excise taxes on the 10 sale or furnishing of a water service were retail 11 sales taxes within the meaning of those statutes. 12 Notwithstanding this subsection, the director shall 13 provide for quarterly filing of returns and for other 14 than quarterly filing of returns both as prescribed in 15 section 423.31. All taxes collected under this chapter 16 by a retailer or any user are deemed to be held in 17 trust for the state of Iowa. 18 Sec. ___. NEW SECTION . 423G.6 Deposit of revenues. 19 1. All moneys received and all refunds shall be 20 deposited in or withdrawn from the general fund of the 21 state. 22 2. Subsequent to the deposit in the general fund 23 of the state, the department shall first transfer 24 one-sixth of the revenues collected under 423G.3 to 25 the secure an advanced vision fund created in section 26 423F.2, and then from the remaining revenues shall 27 transfer the following amounts to the wastewater and 28 drinking water financial assistance fund created in 29 section 16.134: 30 a. For revenues collected on or after July 1, 2017, 31 but before August 1, 2018, one-sixth of the revenues. 32 b. For revenues collected on or after August 1, 33 2018, but before August 1, 2019, one-third of the 34 revenues. 35 -16- HF2454.3593 (4) 86 da/sc 16/ 20

c. For revenues collected on or after August 1, 1 2019, but before August 1, 2020, one-half of the 2 revenues. 3 d. For revenues collected on or after August 1, 4 2020, but before August 1, 2021, two-thirds of the 5 revenues. 6 e. For revenues collected on or after August 1, 7 2021, but before August 1, 2022, five-sixths of the 8 revenues. 9 f. For revenues collected on or after August 1, 10 2022, one hundred percent of the revenues. 11 Sec. ___. NEW SECTION . 423G.7 Future repeal. 12 This chapter is repealed July 1, 2029. 13 Sec. ___. EFFECTIVE DATE. This division of this 14 Act takes effect July 1, 2017. 15 DIVISION ___ 16 NATURAL RESOURCES AND OUTDOOR RECREATION 17 Sec. ___. Section 461.2, Code 2016, is amended by 18 adding the following new subsection: 19 NEW SUBSECTION . 3A. “Iowa nutrient reduction 20 strategy” means the latest version of the “Iowa 21 Nutrient Reduction Strategy” initially presented in 22 November 2012 by the department of agriculture and land 23 stewardship, the department of natural resources, and 24 Iowa state university of science and technology. 25 Sec. ___. Section 461.11, Code 2016, is amended by 26 adding the following new subsections: 27 NEW SUBSECTION . 3. When collaborating in making 28 funding decisions for a subsequent fiscal year, the 29 heads of the departments receiving trust fund moneys 30 shall give a preference to supporting those initiatives 31 which are research-based water quality initiatives 32 that at least meet the state water quality objective 33 provided in section 461.31, subsection 1A. 34 NEW SUBSECTION . 4. When collaborating in making 35 -17- HF2454.3593 (4) 86 da/sc 17/ 20

funding decisions for a subsequent fiscal year, the 1 heads of the departments receiving trust fund moneys 2 shall determine the amount of trust fund moneys 3 required to be expended to support research-based water 4 quality initiatives in order to at least meet the state 5 water quality objective provided in section 461.31, 6 subsection 1A. 7 Sec. ___. Section 461.21, Code 2016, is amended by 8 adding the following new subsection: 9 NEW SUBSECTION . 1A. The auditor of state shall 10 notify the heads of the departments receiving trust 11 fund moneys whether the amount of trust fund moneys 12 expended to support research-based water quality 13 initiatives under this chapter for the fiscal year 14 subject to the audit has at least met the state 15 water quality objective provided in section 461.31, 16 subsection 1A. If the amount of trust fund moneys 17 expended to support research-based water quality 18 initiatives does not at least meet that state water 19 quality objective, the auditor of state shall notify 20 the heads of the departments of the percentage 21 shortfall. 22 Sec. ___. Section 461.22, Code 2016, is amended by 23 adding the following new subsection: 24 NEW SUBSECTION . 1A. The expenditures used to 25 support initiatives which are research-based water 26 quality initiatives that at least meet the state 27 water quality objective provided in section 461.31, 28 subsection 1A. 29 Sec. ___. Section 461.31, subsection 2, paragraph 30 d, Code 2016, is amended to read as follows: 31 d. Trust fund moneys shall only be used to 32 support voluntary initiatives and shall not be used 33 for regulatory efforts, enforcement actions, or 34 litigation. Trust fund moneys shall not be used as 35 -18- HF2454.3593 (4) 86 da/sc 18/ 20

part of an activity which involves condemning property 1 or otherwise exercising the power of eminent domain. 2 Sec. ___. Section 461.31, Code 2016, is amended by 3 adding the following new subsection: 4 NEW SUBSECTION . 1A. a. For each fiscal year, at 5 least sixty percent of the trust fund moneys credited 6 to the trust fund shall be exclusively expended to 7 support research-based water quality initiatives 8 under this chapter. A research-based water quality 9 initiative, includes but is not limited to a practice 10 described in the Iowa nutrient reduction strategy. In 11 addition, a research-based water quality initiative 12 must satisfy all the following: 13 (1) Have a life expectancy of more than twenty-four 14 months. 15 (2) Provide for multiple natural resource benefits. 16 b. If the auditor of state notifies the heads 17 of the departments receiving trust fund moneys of a 18 percentage shortfall as provided in section 461.21, 19 the percentage of trust fund moneys to support 20 research-based water quality initiatives shall be 21 adjusted for the fiscal year following the fiscal 22 year that the auditor provides the notification. The 23 amount of the adjustment shall be an amount necessary 24 to reach the sixty percent required to meet the water 25 quality objective as described in paragraph “a” plus a 26 percentage shortfall for each prior fiscal year that 27 has not been previously added to the sixty percent. 28 Sec. ___. Section 461.32, subsection 3, Code 2016, 29 is amended to read as follows: 30 3. The department of natural resources shall to 31 every extent possible consider its comprehensive 32 plan provided in section 456A.31 when making funding 33 decisions. > 34 2. Title page, line 1, by striking < and > and 35 -19- HF2454.3593 (4) 86 da/sc 19/ 20

inserting < state and local finances by > 1 3. Title page, line 3, after < protection, > by 2 inserting < and providing for regulatory, taxation, and 3 properly related matters, > 4 4. Title page, line 4, after < date > by inserting 5 < and retroactive and other applicability > 6 5. By renumbering, redesignating, and correcting 7 internal references as necessary. 8 ______________________________ DAVID JOHNSON -20- HF2454.3593 (4) 86 da/sc 20/ 20 #3. #4. #5.