House File 2540

                                       HOUSE FILE       
                                       BY  GIPP

                                       (COMPANION TO LSB 6928XS
                                        BY IVERSON)


    Passed House,  Date               Passed Senate, Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act relating to economic development incentives under the new
  2    jobs and income program, the new capital investment program,
  3    and the enterprise zone program and providing an effective
  4    date.
  5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  6 TLSB 6928YH 80
  7 tm/gg/14

PAG LIN

  1  1    Section 1.  Section 15.330, subsection 1, unnumbered
  1  2 paragraph 1, Code 2003, is amended to read as follows:
  1  3    If the business or group of businesses has not met more
  1  4 than ninety percent of the job creation requirement in section
  1  5 15.329, subsection 1, paragraph "f", it shall pay a percentage
  1  6 of the incentive incentives received under section 15.334, or
  1  7 if the business or group of businesses does not receive the
  1  8 incentive under section 15.334, then under section 15.333 as
  1  9 follows:
  1 10    Sec. 2.  Section 15.331A, Code Supplement 2003, is amended
  1 11 to read as follows:
  1 12    15.331A  SALES, SERVICES, AND USE TAX REFUND == CONTRACTOR
  1 13 OR SUBCONTRACTOR.
  1 14    The eligible business or a supporting business shall be
  1 15 entitled to a refund of the taxes paid under chapters 422 and
  1 16 423 for gas, electricity, water, or sewer utility services,
  1 17 goods, wares, or merchandise, or on services rendered,
  1 18 furnished, or performed to or for a contractor or
  1 19 subcontractor and used in the fulfillment of a written
  1 20 contract relating to the construction or equipping of a
  1 21 facility within the economic development area of the eligible
  1 22 business or a supporting business.  Taxes attributable to
  1 23 intangible property and furniture and furnishings shall not be
  1 24 refunded.
  1 25    For purposes of this section, a third=party developer
  1 26 constructing or renovating and leasing a facility to an
  1 27 eligible business shall receive the refund for such taxes paid
  1 28 as authorized under this section in lieu of the receipt of the
  1 29 refund by the eligible business, provided the third=party
  1 30 developer is a party to the agreement described in section
  1 31 15.330.
  1 32    To receive the refund a claim shall be filed by the
  1 33 eligible business, third=party developer, or a supporting
  1 34 business with the department of revenue as follows:
  1 35    1.  The contractor or subcontractor shall state under oath,
  2  1 on forms provided by the department, the amount of the sales
  2  2 of goods, wares, or merchandise or services rendered,
  2  3 furnished, or performed including water, sewer, gas, and
  2  4 electric utility services for use in the economic development
  2  5 area upon which sales or use tax has been paid prior to the
  2  6 project completion, and shall file the forms with the eligible
  2  7 business, third=party developer, or supporting business before
  2  8 final settlement is made.
  2  9    2.  The eligible business, third=party developer, or a
  2 10 supporting business shall, not more than one year after
  2 11 project completion, make application to the department for any
  2 12 refund of the amount of the taxes paid pursuant to chapter 422
  2 13 or 423 upon any goods, wares, or merchandise, or services
  2 14 rendered, furnished, or performed, including water, sewer,
  2 15 gas, and electric utility services.  The application shall be
  2 16 made in the manner and upon forms to be provided by the
  2 17 department, and the department shall audit the claim and, if
  2 18 approved, issue a warrant to the eligible business, third=
  2 19 party developer, or supporting business in the amount of the
  2 20 sales or use tax which has been paid to the state of Iowa
  2 21 under a contract.  A claim filed by the eligible business,
  2 22 third=party developer, or a supporting business in accordance
  2 23 with this section shall not be denied by reason of a
  2 24 limitation provision set forth in chapter 421, 422, or 423.
  2 25    3.  A contractor or subcontractor who willfully makes a
  2 26 false report of tax paid under the provisions of this section
  2 27 is guilty of a simple misdemeanor and in addition is liable
  2 28 for the payment of the tax and any applicable penalty and
  2 29 interest.
  2 30    Sec. 3.  Section 15.333, subsection 1, Code Supplement
  2 31 2003, is amended to read as follows:
  2 32    1.  An eligible business may claim a corporate tax credit
  2 33 up to a maximum of ten percent of the new investment which is
  2 34 directly related to new jobs created by the location or
  2 35 expansion of an eligible business under the program.  Any
  3  1 credit in excess of the tax liability for the tax year may be
  3  2 credited to the tax liability for the following seven years or
  3  3 until depleted, whichever occurs earlier.  Subject to prior
  3  4 approval by the department of economic development in
  3  5 consultation with the department of revenue, an eligible
  3  6 business whose project primarily involves the production of
  3  7 value=added agricultural products may elect to receive a
  3  8 refund of all or a portion of an unused tax credit.  For
  3  9 purposes of this section, an eligible business includes a
  3 10 cooperative described in section 521 of the Internal Revenue
  3 11 Code which is not required to file an Iowa corporate income
  3 12 tax return.  The refund may be used against a tax liability
  3 13 imposed under chapter 422, division II, III, or V.  If the
  3 14 business is a partnership, S corporation, limited liability
  3 15 company, cooperative organized under chapter 501 and filing as
  3 16 a partnership for federal tax purposes, or estate or trust
  3 17 electing to have the income taxed directly to the individual,
  3 18 an individual may claim the tax credit allowed.  The amount
  3 19 claimed by the individual shall be based upon the pro rata
  3 20 share of the individual's earnings of the partnership, S
  3 21 corporation, limited liability company, cooperative organized
  3 22 under chapter 501 and filing as a partnership for federal tax
  3 23 purposes, or estate or trust.
  3 24    1A.  For purposes of this section, "new investment directly
  3 25 related to new jobs created by the location or expansion of an
  3 26 eligible business under the program" means the any of the
  3 27 following:
  3 28    a.  The cost of machinery and equipment, as defined in
  3 29 section 427A.1, subsection 1, paragraphs "e" and "j",
  3 30 purchased for use in the operation of the eligible business,
  3 31 the purchase price of which has been depreciated in accordance
  3 32 with generally accepted accounting principles, and the cost of
  3 33 improvements made to real property which is used in the
  3 34 operation of the eligible business.
  3 35    b.  The annual base rent paid to a third=party developer by
  4  1 an eligible business for a period not to exceed ten years,
  4  2 provided the cumulative cost of the base rent payments for
  4  3 that period does not exceed the cost of the land and the
  4  4 third=party developer's costs to build or renovate the
  4  5 building for the eligible business.  The eligible business
  4  6 shall enter into a lease agreement with the third=party
  4  7 developer for a minimum of ten years.
  4  8    Sec. 4.  Section 15.333A, subsection 1, Code 2003, is
  4  9 amended to read as follows:
  4 10    1.  An eligible business may claim an insurance premium tax
  4 11 credit up to a maximum of ten percent of the new investment
  4 12 directly related to new jobs created by the location or
  4 13 expansion of an eligible business under the program.  Any
  4 14 credit in excess of the tax liability for the tax year may be
  4 15 credited to the tax liability for the following seven years or
  4 16 until depleted, whichever occurs earlier.
  4 17    For purposes of this section, "new investment directly
  4 18 related to new jobs created by the location or expansion of an
  4 19 eligible business under the program" means the cost of
  4 20 machinery and equipment, as defined in section 427A.1,
  4 21 subsection 1, paragraphs "e" and "j", purchased for use in the
  4 22 operation of the eligible business, the purchase price of
  4 23 which has been depreciated in accordance with generally
  4 24 accepted accounting principles, and the cost of improvements
  4 25 made to real property which is used in the operation of the
  4 26 eligible business.
  4 27    For purposes of this section, the purchase price of real
  4 28 property and any buildings and structures located on the real
  4 29 property is considered a new investment in the location or
  4 30 expansion of an eligible business.  However, if within five
  4 31 years of purchase, the eligible business sells, disposes of,
  4 32 razes, or otherwise renders unusable all or a part of the
  4 33 land, buildings, or other existing structures for which an
  4 34 insurance premium tax credit was claimed under this section,
  4 35 the insurance premium tax liability of the eligible business
  5  1 for the year in which all or part of the property is sold,
  5  2 disposed of, razed, or otherwise rendered unusable shall be
  5  3 increased by one of the following amounts:
  5  4    a.  One hundred percent of the tax credit claimed under
  5  5 this section if the property ceases to be eligible for the tax
  5  6 credit within one year after being placed in service.
  5  7    b.  Eighty percent of the tax credit claimed under this
  5  8 section if the property ceases to be eligible for the tax
  5  9 credit within two years after being placed in service.
  5 10    c.  Sixty percent of the tax credit claimed under this
  5 11 section if the property ceases to be eligible for the tax
  5 12 credit within three years after being placed in service.
  5 13    d.  Forty percent of the tax credit claimed under this
  5 14 section if the property ceases to be eligible for the tax
  5 15 credit within four years after being placed in service.
  5 16    e.  Twenty percent of the tax credit claimed under this
  5 17 section if the property ceases to be eligible for the tax
  5 18 credit within five years after being placed in service.
  5 19    1A.  For purposes of this section, "new investment directly
  5 20 related to new jobs created by the location or expansion of an
  5 21 eligible business under the program" means any of the
  5 22 following:
  5 23    a.  The cost of machinery and equipment, as defined in
  5 24 section 427A.1, subsection 1, paragraphs "e" and "j",
  5 25 purchased for use in the operation of the eligible business,
  5 26 the purchase price of which has been depreciated in accordance
  5 27 with generally accepted accounting principles, and the cost of
  5 28 improvements made to real property which is used in the
  5 29 operation of the eligible business.
  5 30    b.  The annual base rent paid to a third=party developer by
  5 31 an eligible business for a period not to exceed ten years,
  5 32 provided the cumulative cost of the base rent payments for
  5 33 that period does not exceed the cost of the land and the
  5 34 third=party developer's costs to build or renovate the
  5 35 building for the eligible business.  The eligible business
  6  1 shall enter into a lease agreement with the third=party
  6  2 developer for a minimum of ten years.
  6  3    Sec. 5.  Section 15.385, subsection 3, paragraph b, Code
  6  4 Supplement 2003, is amended to read as follows:
  6  5    b.  For purposes of this subsection, "new investment
  6  6 directly related to new jobs created by the location or
  6  7 expansion of an eligible business under the program" means the
  6  8 cost of machinery and equipment, as defined in section 427A.1,
  6  9 subsection 1, paragraphs "e" and "j", purchased for use in the
  6 10 operation of the eligible business, the purchase price of
  6 11 which has been depreciated in accordance with generally
  6 12 accepted accounting principles, the purchase price of real
  6 13 property and any buildings and structures located on the real
  6 14 property, and the cost of improvements made to real property
  6 15 which is used in the operation of the eligible business.  "New
  6 16 investment directly related to new jobs created by the
  6 17 location or expansion of an eligible business under the
  6 18 program" also means the annual base rent paid to a third=party
  6 19 developer by an eligible business for a period not to exceed
  6 20 ten years, provided the cumulative cost of the base rent
  6 21 payments for that period does not exceed the cost of the land
  6 22 and the third=party developer's costs to build or renovate the
  6 23 building for the eligible business.  The eligible business
  6 24 shall enter into a lease agreement with the third=party
  6 25 developer for a minimum of ten years.  If, however, within
  6 26 five years of purchase, the eligible business sells, disposes
  6 27 of, razes, or otherwise renders unusable all or a part of the
  6 28 land, buildings, or other existing structures for which tax
  6 29 credit was claimed under this section, the income tax
  6 30 liability of the eligible business for the year in which all
  6 31 or part of the property is sold, disposed of, razed, or
  6 32 otherwise rendered unusable shall be increased by one of the
  6 33 following amounts:
  6 34    (1)  One hundred percent of the tax credit claimed under
  6 35 this subsection if the property ceases to be eligible for the
  7  1 tax credit within one full year after being placed in service.
  7  2    (2)  Eighty percent of the tax credit claimed under this
  7  3 subsection if the property ceases to be eligible for the tax
  7  4 credit within two full years after being placed in service.
  7  5    (3)  Sixty percent of the tax credit claimed under this
  7  6 subsection if the property ceases to be eligible for the tax
  7  7 credit within three full years after being placed in service.
  7  8    (4)  Forty percent of the tax credit claimed under this
  7  9 subsection if the property ceases to be eligible for the tax
  7 10 credit within four full years after being placed in service.
  7 11    (5)  Twenty percent of the tax credit claimed under this
  7 12 subsection if the property ceases to be eligible for the tax
  7 13 credit within five full years after being placed in service.
  7 14    Sec. 6.  Section 15.385, subsection 4, paragraph b, Code
  7 15 Supplement 2003, is amended to read as follows:
  7 16    b.  For purposes of this subsection, "new investment
  7 17 directly related to new jobs created by the location or
  7 18 expansion of an eligible business under the program" means the
  7 19 cost of machinery and equipment, as defined in section 427A.1,
  7 20 subsection 1, paragraphs "e" and "j", purchased for use in the
  7 21 operation of the eligible business, the purchase price of
  7 22 which has been depreciated in accordance with generally
  7 23 accepted accounting principles, the purchase price of real
  7 24 property and any buildings and structures located on the real
  7 25 property, and the cost of improvements made to real property
  7 26 which is used in the operation of the eligible business.  "New
  7 27 investment directly related to new jobs created by the
  7 28 location or expansion of an eligible business under the
  7 29 program" also means the annual base rent paid to a third=party
  7 30 developer by an eligible business for a period not to exceed
  7 31 ten years, provided the cumulative cost of the base rent
  7 32 payments for that period does not exceed the cost of the land
  7 33 and the third=party developer's costs to build or renovate the
  7 34 building for the eligible business.  The eligible business
  7 35 shall enter into a lease agreement with the third=party
  8  1 developer for a minimum of ten years.  If, however, within
  8  2 five years of purchase, the eligible business sells, disposes
  8  3 of, razes, or otherwise renders unusable all or a part of the
  8  4 land, buildings, or other existing structures for which tax
  8  5 credit was claimed under this section, the income tax
  8  6 liability of the eligible business for the year in which all
  8  7 or part of the property is sold, disposed of, razed, or
  8  8 otherwise rendered unusable shall be increased by one of the
  8  9 following amounts:
  8 10    (1)  One hundred percent of the tax credit claimed under
  8 11 this subsection if the property ceases to be eligible for the
  8 12 tax credit within one full year after being placed in service.
  8 13    (2)  Eighty percent of the tax credit claimed under this
  8 14 subsection if the property ceases to be eligible for the tax
  8 15 credit within two full years after being placed in service.
  8 16    (3)  Sixty percent of the tax credit claimed under this
  8 17 subsection if the property ceases to be eligible for the tax
  8 18 credit within three full years after being placed in service.
  8 19    (4)  Forty percent of the tax credit claimed under this
  8 20 subsection if the property ceases to be eligible for the tax
  8 21 credit within four full years after being placed in service.
  8 22    (5)  Twenty percent of the tax credit claimed under this
  8 23 subsection if the property ceases to be eligible for the tax
  8 24 credit within five full years after being placed in service.
  8 25    Sec. 7.  Section 15E.195, Code 2003, is amended to read as
  8 26 follows:
  8 27    15E.195  ENTERPRISE ZONE COMMISSION.
  8 28    1.  A county which designates an enterprise zone pursuant
  8 29 to section 15E.194, subsection 1, and in which an eligible
  8 30 enterprise zone is certified shall establish an enterprise
  8 31 zone commission to review applications from qualified
  8 32 businesses located within or requesting to locate within an
  8 33 enterprise zone designated pursuant to section 15E.194,
  8 34 subsection 1, to receive incentives or assistance as provided
  8 35 in section 15E.196.  The enterprise zone commission shall also
  9  1 review applications from qualified housing businesses
  9  2 requesting to receive incentives or assistance as provided in
  9  3 section 15E.193B.  The enterprise zone commission shall also
  9  4 review applications from qualified development businesses
  9  5 requesting to receive incentives or assistance as provided in
  9  6 section 15E.193C.  The commission shall consist of nine
  9  7 members.  Five of these members shall consist of one
  9  8 representative of the board of supervisors, one member with
  9  9 economic development expertise chosen by the department of
  9 10 economic development, one representative of the county zoning
  9 11 board, one member of the local community college board of
  9 12 directors, and one representative of the local workforce
  9 13 development center.  These five members shall select the
  9 14 remaining four members.  If the enterprise zone consists of an
  9 15 area meeting the requirements for eligibility for an urban or
  9 16 rural enterprise community under Title XIII of the federal
  9 17 Omnibus Budget Reconciliation Act of 1993, one of the
  9 18 remaining four members shall be a representative of that
  9 19 community.  A county shall have only one enterprise zone
  9 20 commission to review applications for incentives and
  9 21 assistance for businesses located within or requesting to
  9 22 locate within a certified enterprise zone designated pursuant
  9 23 to section 15E.194, subsection 1.
  9 24    2.  A city with a population of twenty=four thousand or
  9 25 more which designates an enterprise zone pursuant to section
  9 26 15E.194, subsection 2, and in which an eligible enterprise
  9 27 zone is certified shall establish an enterprise zone
  9 28 commission to review applications from qualified businesses
  9 29 located within or requesting to locate within an enterprise
  9 30 zone to receive incentives or assistance as provided in
  9 31 section 15E.196.  The enterprise zone commission shall review
  9 32 applications from qualified housing businesses requesting to
  9 33 receive incentives or assistance as provided in section
  9 34 15E.193B.  The enterprise zone commission shall also review
  9 35 applications from qualified development businesses requesting
 10  1 to receive incentives or assistance as provided in section
 10  2 15E.193C.  The commission shall consist of nine members.  Six
 10  3 of these members shall consist of one representative of an
 10  4 international labor organization, one member with economic
 10  5 development expertise chosen by the department of economic
 10  6 development, one representative of the city council, one
 10  7 member of the local community college board of directors, one
 10  8 member of the city planning and zoning commission, and one
 10  9 representative of the local workforce development center.
 10 10 These six members shall select the remaining three members.
 10 11 If the enterprise zone consists of an area meeting the
 10 12 requirements for eligibility for an urban enterprise community
 10 13 under Title XIII of the federal Omnibus Budget Reconciliation
 10 14 Act of 1993, one of the remaining three members shall be a
 10 15 representative of that community.  If a city contiguous to the
 10 16 city designating the enterprise zone is included in an
 10 17 enterprise zone, a representative of the contiguous city,
 10 18 chosen by the city council, shall be a member of the
 10 19 commission.  A city in which an eligible enterprise zone is
 10 20 certified shall have only one enterprise zone commission.  If
 10 21 a city has established an enterprise zone commission prior to
 10 22 July 1, 1998, the city may petition to the department of
 10 23 economic development to change the structure of the existing
 10 24 commission.
 10 25    3.  The commission may adopt more stringent requirements,
 10 26 including requirements related to compensation and benefits,
 10 27 for a business to be eligible for incentives or assistance
 10 28 than provided in sections 15E.193, and 15E.193B, and 15E.193C.
 10 29 The commission may develop as an additional requirement that
 10 30 preference in hiring be given to individuals who live within
 10 31 the enterprise zone.  The commission shall work with the local
 10 32 workforce development center to determine the labor
 10 33 availability in the area.  The commission shall examine and
 10 34 evaluate building codes and zoning in the enterprise zone and
 10 35 make recommendations to the appropriate governing body in an
 11  1 effort to promote more affordable housing development.
 11  2    4.  If the enterprise zone commission determines that a
 11  3 business qualifies and is eligible to receive incentives or
 11  4 assistance as provided in section 15E.193B, 15E.193C, or
 11  5 15E.196, the commission shall submit an application for
 11  6 incentives or assistance to the department of economic
 11  7 development.  The department may approve, defer, or deny the
 11  8 application.
 11  9    5.  In making its decision, the commission or department
 11 10 shall consider the impact of the eligible business on other
 11 11 businesses in competition with it and compare the compensation
 11 12 package of businesses in competition with the business being
 11 13 considered for incentives or assistance.  The commission or
 11 14 department shall make a good faith effort to identify existing
 11 15 Iowa businesses within an industry in competition with the
 11 16 business being considered for incentives or assistance.  The
 11 17 commission or department shall also make a good faith effort
 11 18 to determine the probability that the proposed incentives or
 11 19 assistance will displace employees of existing businesses.  In
 11 20 determining the impact on businesses in competition with the
 11 21 business seeking incentives or assistance, jobs created as a
 11 22 result of other jobs being displaced elsewhere in the state
 11 23 shall not be considered direct jobs created.
 11 24    However, if the commission or department finds that an
 11 25 eligible business has a record of violations of the law,
 11 26 including but not limited to environmental and worker safety
 11 27 statutes, rules, and regulations, over a period of time that
 11 28 tends to show a consistent pattern, the eligible business
 11 29 shall not qualify for incentives or assistance under section
 11 30 15E.193B, 15E.193C, or 15E.196, unless the commission or
 11 31 department finds that the violations did not seriously affect
 11 32 public health or safety or the environment, or if it did that
 11 33 there were mitigating circumstances.  In making the findings
 11 34 and determinations regarding violations, mitigating
 11 35 circumstances, and whether an eligible business is eligible
 12  1 for incentives or assistance under section 15E.193B, 15E.193C,
 12  2 or 15E.196, the commission or department shall be exempt from
 12  3 chapter 17A.  If requested by the commission or department,
 12  4 the business shall provide copies of materials documenting the
 12  5 type of violation, any fees or penalties assessed, court
 12  6 filings, final disposition of any findings, and any other
 12  7 information which would assist the commission or department in
 12  8 assessing the nature of any violation.
 12  9    6.  A business that is approved to receive incentives or
 12 10 assistance shall, for the length of its designation as an
 12 11 enterprise zone business, certify annually to the county or
 12 12 city, as applicable, and the department of economic
 12 13 development its compliance with the requirements of section
 12 14 15E.193, or 15E.193B, or 15E.193C.
 12 15    Sec. 8.  Section 15E.196, subsection 7, Code Supplement
 12 16 2003, is amended by striking the subsection.
 12 17    Sec. 9.  Section 15E.193C, Code Supplement 2003, is
 12 18 repealed.
 12 19    Sec. 10.  EFFECTIVE DATE.  This Act, being deemed of
 12 20 immediate importance, takes effect upon enactment.
 12 21                           EXPLANATION
 12 22    This bill relates to economic development incentives under
 12 23 the new jobs and income program, the new capital investment
 12 24 program, and the enterprise zone program.
 12 25    The bill requires agreements under the new jobs and income
 12 26 program to include payback provisions for all incentives
 12 27 received under the program if job creation requirements are
 12 28 not met.
 12 29    The bill amends the sales, services, and use tax refund
 12 30 under the new jobs and income program.  The bill provides that
 12 31 a third=party developer constructing or renovating and leasing
 12 32 a facility to an eligible business shall receive the refund
 12 33 under the program for taxes paid by the developer in lieu of
 12 34 the receipt of the refund by the eligible business provided
 12 35 that the third=party developer is a party to the new jobs and
 13  1 income program agreement.
 13  2    The bill amends the investment tax credit and the insurance
 13  3 premium tax credit under the new jobs and income program and
 13  4 under the new capital investment program.  The bill provides
 13  5 that, in addition to the current meaning under the programs
 13  6 for "new investment directly related to new jobs created by
 13  7 the location or expansion of an eligible business under the
 13  8 program", the term also means the annual base rent paid to a
 13  9 third=party developer by an eligible business for a period not
 13 10 to exceed 10 years, provided the cumulative cost of the base
 13 11 rent payments for that period does not exceed the cost of the
 13 12 land and the third=party developer's costs to build or
 13 13 renovate the building for the eligible business.  The eligible
 13 14 business shall enter into a lease agreement with the third=
 13 15 party developer for a minimum of 10 years.
 13 16    The bill repeals a portion of the enterprise zone program
 13 17 which allows an eligible development business to receive
 13 18 incentives and assistance under the program.  The bill makes
 13 19 conforming amendments.
 13 20    The bill takes effect upon enactment.
 13 21 LSB 6928YH 80
 13 22 tm/gg/14