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:
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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.
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