House File 157 HOUSE FILE BY JENKINS Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act creating a university=based research utilization program, 2 providing tax credits, and making appropriations. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1937HH 80 5 tm/sh/8 PAG LIN 1 1 Section 1. Section 262B.2, Code 2003, is amended by 1 2 striking the section and inserting in lieu thereof the 1 3 following: 1 4 262B.2 LEGISLATIVE INTENT. 1 5 It is the intent of the general assembly that the three 1 6 universities under the control of the state board of regents 1 7 have as a part of their mission the use of their universities' 1 8 expertise to facilitate economic development within the state. 1 9 This facilitation may be accomplished through a wide variety 1 10 of partnership and cooperative endeavors, primarily in the 1 11 area of high technology, and may result in investments by the 1 12 private sector for commercialization of the technology. It is 1 13 envisioned that the investments and job creation will be in 1 14 Iowa, but need not be in the proximity of the universities. 1 15 It is also the intent of the general assembly that real or 1 16 virtual research parks will be established and maintained by 1 17 the universities in close enough proximity that cooperation 1 18 between the academic, research, and commercialization phases 1 19 will be encouraged. It is the intent of the general assembly 1 20 that satellites of the research parks will encourage economic 1 21 development in other areas of the state. 1 22 Sec. 2. NEW SECTION. 262B.6 UNIVERSITY=BASED RESEARCH 1 23 UTILIZATION PROGRAM. 1 24 1. The department of economic development shall establish 1 25 and administer a university=based research utilization program 1 26 for purposes of encouraging the utilization of university= 1 27 based research, primarily in the area of high technology, in 1 28 new or existing businesses. 1 29 2. A new or existing business that utilizes a technology 1 30 developed by an employee at a university under the control of 1 31 the state board of regents may apply to the department of 1 32 economic development for approval to participate in the 1 33 university=based research utilization program. The department 1 34 shall approve an applicant if the applicant meets all of the 1 35 following criteria: 2 1 a. The applicant utilizes a technology developed by an 2 2 employee at a university under the control of the state board 2 3 of regents. 2 4 b. The applicant develops a five=year business plan 2 5 approved by the department. 2 6 c. The applicant meets a minimum=size business standard 2 7 determined by the department. 2 8 3. A business approved under the program and the 2 9 university employee responsible for the development of the 2 10 technology utilized by the approved business shall be eligible 2 11 for a tax credit. The credit shall be allowed against the 2 12 taxes imposed in chapter 422, divisions II and III. An 2 13 individual may claim a tax credit under this section of a 2 14 partnership, limited liability company, S corporation, estate, 2 15 or trust electing to have income taxed directly to the 2 16 individual. The amount claimed by the individual shall be 2 17 based upon the pro rata share of the individual's earnings 2 18 from the partnership, limited liability company, S 2 19 corporation, estate, or trust. A tax credit shall not be 2 20 claimed under this subsection unless a tax credit certificate 2 21 issued by the department of economic development is attached 2 22 to the taxpayer's tax return for the tax year for which the 2 23 tax credit is claimed. The amount of a tax credit allowed 2 24 under this subsection shall equal the amount listed on a tax 2 25 credit certificate issued by the department of economic 2 26 development pursuant to subsection 4. A tax credit 2 27 certificate shall not be transferable. Any tax credit in 2 28 excess of the taxpayer's liability for the tax year may be 2 29 credited to the taxpayer's tax liability for the following 2 30 five years or until depleted, whichever occurs first. A tax 2 31 credit shall not be carried back to a tax year prior to the 2 32 tax year in which the taxpayer redeems the tax credit. 2 33 4. For the five tax years following the tax year in which 2 34 the business is approved under the program, the business shall 2 35 file a copy of the tax return for the business with the 3 1 department of economic development. Upon receiving a copy of 3 2 a tax return from an approved business, the department shall 3 3 do all of the following: 3 4 a. Issue a tax credit certificate to the approved business 3 5 and the university employee responsible for the development of 3 6 the technology utilized by the approved business in an amount 3 7 determined pursuant to subsection 5. A tax credit certificate 3 8 shall contain the taxpayer's name, address, tax identification 3 9 number, the amount of the tax credit, and other information 3 10 required by the department of revenue and finance. 3 11 b. (1) Determine the university share which is equal to 3 12 the value of thirty percent of the tax liability of the 3 13 approved business for purposes of making an appropriation 3 14 pursuant to subsection 7 to the university where the 3 15 technology utilized by the approved business was developed. 3 16 (2) The department shall maintain records for each 3 17 university during each fiscal year regarding the university 3 18 share each university is entitled to receive through the 3 19 appropriation in subsection 7. A university shall be entitled 3 20 to receive the total university share for that particular 3 21 university during the previous fiscal year. 3 22 5. The tax credit certificates issued by the department 3 23 shall be for the following amounts: 3 24 a. For the approved business, the value of the tax credit 3 25 certificate shall equal thirty percent of the tax liability of 3 26 the approved business. 3 27 b. For the university employee responsible for the 3 28 development of the technology utilized by the approved 3 29 business, the value of the tax credit certificate shall equal 3 30 ten percent of the tax liability of the approved business. If 3 31 more than one employee is responsible for the development of 3 32 the technology, the value equal to ten percent of the tax 3 33 liability of the approved business shall be divided equally 3 34 and individual tax credit certificates shall be issued to each 3 35 employee responsible for the development of the technology. 4 1 6. The department of economic development shall notify the 4 2 department of revenue and finance when a tax credit 4 3 certificate is issued pursuant to subsection 4. The 4 4 notification shall include the name and tax identification 4 5 number appearing on any tax credit certificate. 4 6 7. On July 1 of each year, there is appropriated from the 4 7 general fund of the state to each university under the control 4 8 of the state board of regents, an amount equal to the amount 4 9 determined by the department of economic development pursuant 4 10 to subsection 4, paragraph "b", subparagraph (2). 4 11 Sec. 3. NEW SECTION. 422.11H UNIVERSITY=BASED RESEARCH 4 12 UTILIZATION PROGRAM TAX CREDIT. 4 13 The taxes imposed under this division, less the credits 4 14 allowed under sections 422.12 and 422.12B, shall be reduced by 4 15 a university=based research utilization program tax credit 4 16 authorized pursuant to section 262B.6. 4 17 Sec. 4. Section 422.33, Code 2003, is amended by adding 4 18 the following new subsection: 4 19 NEW SUBSECTION. 14. The taxes imposed under this division 4 20 shall be reduced by a university=based research utilization 4 21 program tax credit authorized pursuant to section 262B.6. 4 22 EXPLANATION 4 23 This bill creates a university=based research utilization 4 24 program administered by the department of economic 4 25 development. 4 26 The bill rewrites the legislative intent of Code chapter 4 27 262B which relates to university=based research and economic 4 28 development. The rewrite incorporates the new university= 4 29 based research utilization program into the legislative intent 4 30 of the Code chapter. 4 31 The bill establishes a university=based research 4 32 utilization program for purposes of encouraging the 4 33 utilization of university=based research, primarily in the 4 34 area of high technology, in new or existing businesses. The 4 35 bill provides that a new or existing business that utilizes a 5 1 technology developed by an employee at a university under the 5 2 control of the state board of regents may apply to the 5 3 department of economic development for approval to participate 5 4 in the program. The bill provides that the department shall 5 5 approve an applicant if the applicant meets all of the 5 6 following criteria: 5 7 1. The applicant utilizes a technology developed by an 5 8 employee at a university under the control of the state board 5 9 of regents. 5 10 2. The applicant develops a five=year business plan 5 11 approved by the department. 5 12 3. The applicant meets a minimum=size business standard 5 13 determined by the department. 5 14 The bill provides that a business approved under the 5 15 program and the university employee responsible for the 5 16 development of the technology utilized by the approved 5 17 business shall be eligible for a tax credit. The credit shall 5 18 be allowed against personal and corporate income taxes. The 5 19 bill provides that a tax credit shall not be claimed unless a 5 20 tax credit certificate issued by the department of economic 5 21 development is attached to the taxpayer's tax return for the 5 22 tax year for which the tax credit is claimed. The bill 5 23 provides that a tax credit certificate shall not be 5 24 transferable. The bill provides that a tax credit may be 5 25 carried forward, but shall not be carried back to tax years 5 26 prior to the tax year in which the taxpayer redeems the tax 5 27 credit. 5 28 The bill provides that, for the five tax years following 5 29 the tax year in which the business is approved under the 5 30 program, the business shall file a copy of the tax return for 5 31 the business with the department of economic development. The 5 32 bill provides that, upon receiving a copy of a tax return from 5 33 an approved business, the department shall issue a tax credit 5 34 certificate to the approved business and the university 5 35 employee responsible for the development of the technology 6 1 utilized by the approved business. The bill provides that the 6 2 value of the certificate for an approved business shall equal 6 3 30 percent of the tax liability of the approved business. The 6 4 bill provides that the value of the certificate for the 6 5 university employee responsible for the development of the 6 6 technology utilized by the approved business shall equal 10 6 7 percent of the tax liability of the approved business. The 6 8 bill requires the department of economic development to notify 6 9 the department of revenue and finance when a tax credit 6 10 certificate is issued. 6 11 For purposes of making an appropriation to the university 6 12 where the technology utilized by the approved business was 6 13 developed, the bill also requires the department to determine 6 14 the university share which is equal to the value of 30 percent 6 15 of the tax liability of the approved business. The bill 6 16 requires the department to maintain records for each 6 17 university during each fiscal year regarding the university 6 18 share each university is entitled to receive through an 6 19 appropriation. The bill provides that a university shall be 6 20 entitled to receive the total university share for that 6 21 particular university during the previous fiscal year. On 6 22 July 1 of each year, the bill appropriates from the general 6 23 fund of the state to each university under the control of the 6 24 state board of regents an amount equal to the total university 6 25 share for the previous fiscal year for the particular 6 26 university. 6 27 LSB 1937HH 80 6 28 tm/sh/8.1