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