House File 2420 - Introduced
HOUSE FILE
BY QUIRK
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act allowing the creation of capital improvement investment
2 accounts for certain small businesses and providing tax
3 credits and exemptions.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 6348HH 81
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PAG LIN
1 1 Section 1. NEW SECTION. 15E.361 CAPITAL IMPROVEMENT
1 2 INVESTMENT ACCOUNTS.
1 3 1. As used in this section, unless the context otherwise
1 4 requires:
1 5 a. "Account" means a capital improvement investment
1 6 account.
1 7 b. "Eligible borrower" means a small business located in
1 8 this state, operated for profit, under the management of an
1 9 individual, which has either fewer than twenty full=time
1 10 employees or an annual gross income of less than three million
1 11 dollars computed as an average over the three fiscal years
1 12 preceding the opening of a capital improvement investment
1 13 account.
1 14 2. An eligible borrower may open a capital improvement
1 15 investment account at a financial institution for the purpose
1 16 of making capital improvements to the borrower's business. A
1 17 tax credit under subsection 3 may be claimed for a
1 18 contribution to an account. State income tax treatment of
1 19 accounts shall be as provided in section 422.7, subsection 45,
1 20 and section 422.35, subsection 22. Assets shall only be
1 21 withdrawn from an account if the assets are to be used for
1 22 improvements to real property. The department shall develop
1 23 and administer a procedure for purposes of verifying that
1 24 withdrawn assets are used for improvements to real property.
1 25 3. An eligible borrower may claim a tax credit equal to
1 26 twenty=five percent of a contribution to an account. The tax
1 27 credit shall be allowed against taxes imposed under chapter
1 28 422, divisions II and III. If the business is a partnership,
1 29 S corporation, limited liability company, cooperative
1 30 organized under chapter 501 and filing as a partnership for
1 31 federal tax purposes, or estate or trust electing to have the
1 32 income taxed directly to the individual, an individual may
1 33 claim the tax credit allowed. The amount claimed by the
1 34 individual shall be based upon the pro rata share of the
1 35 individual's earnings of the partnership, S corporation,
2 1 limited liability company, cooperative organized under chapter
2 2 501 and filing as a partnership for federal tax purposes, or
2 3 estate or trust. Any tax credit in excess of the tax
2 4 liability for the tax year may be credited to the tax
2 5 liability for the following seven years or until depleted,
2 6 whichever occurs first.
2 7 4. The department of economic development, in cooperation
2 8 with the department of revenue, shall adopt rules pursuant to
2 9 chapter 17A for purposes of administering this section.
2 10 Sec. 2. Section 422.7, Code Supplement 2005, is amended by
2 11 adding the following new subsection:
2 12 NEW SUBSECTION. 45. a. Subtract interest and earnings on
2 13 a capital improvement investment account under section
2 14 15E.361.
2 15 b. Add the amount equal to the balance at the time a
2 16 capital improvement investment account under section 15E.361
2 17 is closed.
2 18 Sec. 3. NEW SECTION. 422.11M CAPITAL IMPROVEMENT
2 19 INVESTMENT ACCOUNT CONTRIBUTION TAX CREDIT.
2 20 The taxes imposed under this division, less the credits
2 21 allowed under sections 422.12 and 422.12B, shall be reduced by
2 22 a capital improvement investment account contribution tax
2 23 credit authorized pursuant to section 15E.361.
2 24 Sec. 4. Section 422.33, Code Supplement 2005, is amended
2 25 by adding the following new subsection:
2 26 NEW SUBSECTION. 20. The taxes imposed under this division
2 27 shall be reduced by a capital improvement investment account
2 28 contribution tax credit authorized pursuant to section
2 29 15E.361.
2 30 Sec. 5. Section 422.35, Code Supplement 2005, is amended
2 31 by adding the following new subsection:
2 32 NEW SUBSECTION. 22. a. Subtract interest and earnings on
2 33 a capital improvement investment account under section
2 34 15E.361.
2 35 b. Add the amount equal to the balance at the time a
3 1 capital improvement investment account under section 15E.361
3 2 is closed.
3 3 EXPLANATION
3 4 This bill allows the creation of capital improvement
3 5 investment accounts by certain small businesses and provides
3 6 tax credits and exemptions.
3 7 The bill allows an eligible borrower to open a capital
3 8 improvement investment account at a financial institution for
3 9 the purpose of making capital improvements to the borrower's
3 10 business. An eligible borrower is a small business located in
3 11 this state, operated for profit, under the management of an
3 12 individual, which has either fewer than 20 full=time employees
3 13 or an annual gross income of less than $3 million computed as
3 14 an average over the three fiscal years preceding the opening
3 15 of a capital improvement investment account. The bill allows
3 16 a tax credit to be claimed for a contribution to an account.
3 17 The tax credit is equal to 25 percent of a contribution and
3 18 may be used against personal and corporate tax liabilities.
3 19 The bill provides that assets shall only be withdrawn from an
3 20 account if the assets are to be used for improvements to real
3 21 property. The bill requires the department of economic
3 22 development to develop and administer a procedure for purposes
3 23 of verifying that withdrawn assets are used for improvements
3 24 to real property.
3 25 The bill provides that interest and earnings on accounts
3 26 are exempt from income for purposes of personal and corporate
3 27 tax liabilities. The bill provides that the amount equal to
3 28 the balance at the time a capital improvement investment
3 29 account is closed is added to income for purposes of
3 30 determining personal and corporate income tax liability.
3 31 LSB 6348HH 81
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