House File 2460 - Introduced HOUSE FILE BY COMMITTEE ON ECONOMIC GROWTH (SUCCESSOR TO HSB 530) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to a targeted jobs withholding tax credit to be 2 used for funding improvements in certain urban renewal areas. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5535HV 81 5 mg/je/5 PAG LIN 1 1 Section 1. NEW SECTION. 403.19A WITHHOLDING AGREEMENT == 1 2 TAX CREDIT. 1 3 1. For purposes of this section, unless the context 1 4 otherwise requires: 1 5 a. "Business" means any professional services, or 1 6 industrial enterprise, including medical treatment facilities, 1 7 manufacturing facilities, corporate headquarters, and research 1 8 facilities. "Business" does not include a retail operation or 1 9 a business which closes or substantially reduces its operation 1 10 in one area of this state and relocates substantially the same 1 11 operation to another area of this state. 1 12 b. "Employee" means the individual employed in a targeted 1 13 job that is subject to a withholding agreement. 1 14 c. "Employer" means a business creating targeted jobs in 1 15 an urban renewal area of a pilot project city pursuant to a 1 16 withholding agreement. 1 17 d. "Pilot project city" means a city that has applied and 1 18 been approved as a pilot project city pursuant to subsection 1 19 2. 1 20 e. "Qualifying investment" means a capital investment in 1 21 real property including the purchase price of land and 1 22 existing buildings, site preparation, building construction, 1 23 and long=term lease costs. "Qualifying investment" also means 1 24 a capital investment in depreciable assets. 1 25 f. "Targeted job" means a job in a business which is or 1 26 will be located in an urban renewal area of a pilot project 1 27 city that pays a wage at least equal to the countywide average 1 28 wage. "Targeted job" does not include jobs that formerly 1 29 existed in the business in this state unless the business is 1 30 considering in good faith to relocate outside this state or 1 31 unless the relocation is related to an expansion which will 1 32 generate significant new job creation. 1 33 g. "Withholding agreement" means the agreement between a 1 34 pilot project city and an employer concerning the targeted 1 35 jobs withholding credit authorized in subsection 3. 2 1 2. An eligible city may apply to the department of 2 2 economic development to be designated as a pilot project city. 2 3 An eligible city is a city that contains three or more census 2 4 tracts and is located in a county meeting one of the following 2 5 requirements: 2 6 a. A county that borders Nebraska. 2 7 b. A county that borders South Dakota. 2 8 c. A county that borders a state other than Nebraska or 2 9 South Dakota. 2 10 The department of economic development shall approve four 2 11 eligible cities as pilot project cities, one pursuant to 2 12 paragraph "a", one pursuant to paragraph "b", and two pursuant 2 13 to paragraph "c". If more than two cities meeting the 2 14 requirements of paragraph "c" apply to be designated as a 2 15 pilot project city, the department of management, in 2 16 consultation with the department of economic development, 2 17 shall determine which two cities hold the most potential to 2 18 create new jobs or generate the greatest capital within their 2 19 areas. Applications from eligible cities filed on or after 2 20 October 1, 2006, shall not be considered. 2 21 If a pilot project city does not enter into a withholding 2 22 agreement within one year of its approval as a pilot project 2 23 city, the city shall lose its status as a pilot project city. 2 24 Upon such occurrence, the department of economic development 2 25 shall take applications from other eligible cities to replace 2 26 that city. Another city shall be designated within six 2 27 months. 2 28 3. a. A pilot project city may provide by ordinance for 2 29 the deposit into a designated account in the special fund 2 30 described in section 403.19, subsection 2, of the targeted 2 31 jobs withholding credit described in this section. The 2 32 targeted jobs withholding credit shall be based upon the wages 2 33 paid to employees pursuant to a withholding agreement. 2 34 b. An amount equal to three percent of the gross wages 2 35 paid by an employer to each employee under a withholding 3 1 agreement shall be credited from the payment made by the 3 2 employer pursuant to section 422.16. If the amount of the 3 3 withholding by the employer is less than three percent of the 3 4 gross wages paid to the employees covered by the withholding 3 5 agreement, the employer shall receive a credit against other 3 6 withholding taxes due by the employer or may carry the credit 3 7 forward for up to ten years or until depleted, whichever is 3 8 the earlier. The employer shall remit the amount of the 3 9 credit quarterly, in the same manner as withholding payments 3 10 are reported to the department of revenue, to the pilot 3 11 project city to be allocated to and when collected paid into a 3 12 designated account in the special fund for the urban renewal 3 13 area in which the targeted jobs are located. All amounts so 3 14 deposited shall be used or pledged by the pilot project city 3 15 for an urban renewal project related to the employer pursuant 3 16 to the withholding agreement. 3 17 c. (1) The pilot project city shall enter into a 3 18 withholding agreement with each employer concerning the 3 19 targeted jobs withholding credit. However, an agreement shall 3 20 not be entered into by a pilot project city with a business 3 21 currently located in this state unless the business either 3 22 creates ten new jobs or makes a qualifying investment of at 3 23 least five hundred thousand dollars within the urban renewal 3 24 area. The withholding agreement may have a term of up to ten 3 25 years. An employer shall not be obligated to enter into a 3 26 withholding agreement. 3 27 (2) The pilot project city shall not enter into a 3 28 withholding agreement after June 30, 2010. 3 29 d. A withholding agreement shall contain but is not 3 30 limited to all of the following: 3 31 (1) A copy of the adopted development agreement plan of 3 32 the employer. 3 33 (2) A list of any other amounts of incentives or 3 34 assistance the employer may be receiving from other economic 3 35 development programs, including grants, loans, forgivable 4 1 loans, and tax credits. 4 2 (3) The approval of local participating authorities. 4 3 (4) The amount of local incentives or assistance received 4 4 for each project of the employer. 4 5 e. (1) The employer shall certify to the department of 4 6 revenue that the targeted jobs withholding credit is in 4 7 accordance with the withholding agreement and shall provide 4 8 other information the department may require. Notice of any 4 9 withholding agreement shall be provided promptly to the 4 10 department of revenue following its execution by the pilot 4 11 project city and the employer. 4 12 (2) Following termination of the withholding agreement, 4 13 the employer credits shall cease and any money received by the 4 14 pilot project city after termination shall be remitted to the 4 15 treasurer of state to be deposited into the general fund of 4 16 the state. Notice shall be provided promptly to the 4 17 department of revenue following termination. 4 18 f. A pilot project city shall certify to the department of 4 19 revenue the amount of the targeted jobs withholding credit an 4 20 employer has remitted to the city and shall provide other 4 21 information the department may require. 4 22 g. An employee whose wages are subject to a withholding 4 23 agreement shall receive full credit for the amount withheld as 4 24 provided in section 422.16. 4 25 h. An employer may participate in a new jobs credit from 4 26 withholding under section 260E.5 or a supplemental new jobs 4 27 credit from withholding under section 15E.197 or section 4 28 15.331, Code 2005, at the same time as the employer is 4 29 participating in the withholding credit under this section. 4 30 Notwithstanding any other provision in this section, the new 4 31 jobs credit from withholding under section 260E.5 and the 4 32 supplemental new jobs credit from withholding under section 4 33 15E.197 or section 15.331, Code 2005, shall be collected and 4 34 disbursed prior to the withholding credit under this section. 4 35 i. A pilot project city that enters into a withholding 5 1 agreement shall arrange for a match of at least one dollar for 5 2 each withholding credit dollar received by the city. The 5 3 local match may come from the pilot project city, a private 5 4 donor, or the business, or a combination of all three. The 5 5 local match may be in cash or in kind to be used for the 5 6 business project. 5 7 j. At the time of submitting its budget to the department 5 8 of management, the pilot project city shall submit to the 5 9 department of management and the department of economic 5 10 development a description of the activities involving the use 5 11 of withholding agreements. The description shall include, but 5 12 is not limited to, the following: 5 13 (1) The total number of targeted jobs and a breakdown as 5 14 to those that are Iowa business expansions or retentions 5 15 within the city limits of the pilot project city and those 5 16 that are jobs resulting from established out=of=state 5 17 businesses moving to or expanding in Iowa. 5 18 (2) The number of withholding agreements and the amount of 5 19 withholding credits involved. 5 20 (3) The types of businesses that entered into the 5 21 agreements, and the types of businesses that declined the 5 22 city's proposal to enter into the agreement. 5 23 k. The department of economic development in consultation 5 24 with the department of revenue shall coordinate the pilot 5 25 project program with the pilot project cities under this 5 26 section. The department of economic development is authorized 5 27 to adopt, amend, and repeal rules to implement the pilot 5 28 project program under this section. The department of 5 29 economic development shall prepare an annual report for the 5 30 governor, the general assembly, and the legislative services 5 31 agency on the pilot project program. 5 32 EXPLANATION 5 33 This bill allows four pilot project cities to assist in 5 34 funding projects in their urban renewal areas by means of a 5 35 targeted jobs credit from withholding. This credit is 6 1 available to businesses that are or will locate in an urban 6 2 renewal area. Businesses already located in the area must 6 3 either create 10 new jobs or make at least $500,000 in capital 6 4 investment within the area. The credit is 3 percent of the 6 5 amount of gross wages paid to the employees of the targeted 6 6 jobs by the business. The credit is paid to the pilot project 6 7 city to be used to pay for debts incurred or assistance 6 8 provided by the city for urban renewal projects related to the 6 9 business in the urban renewal area. Presently, property tax 6 10 imposed on the increase in value as a result of the business's 6 11 arrival is used to provide such financing. The withholding 6 12 credit is available to each targeted job of the business in 6 13 the area provided the job's wage is equal to at least the 6 14 average county wage. A withholding agreement shall be for a 6 15 period of up to 10 years but may not be entered into after 6 16 June 30, 2010. A pilot project city must arrange for a match 6 17 of at least $1 for each dollar of withholding credit dollar it 6 18 receives. The match is to be used for the business project. 6 19 The four pilot project cities are cities with three or more 6 20 census tracts and include one located in a county that borders 6 21 Nebraska, one located in a county that borders South Dakota, 6 22 and two located in counties that border states other than 6 23 Nebraska or South Dakota. To be eligible to be designated as 6 24 a pilot project city, a city must apply by October 1, 2006. A 6 25 pilot project city will lose its status if it does not enter 6 26 into a withholding tax agreement within a year of being 6 27 approved as a pilot project city. 6 28 LSB 5535HV 81 6 29 mg:rj/je/5.1