House File 2610 - Introduced HOUSE FILE BY COMMITTEE ON ECONOMIC GROWTH (SUCCESSOR TO HF 2131) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to historic preservation and cultural and 2 entertainment district tax credits. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5843HV 81 5 tm/je/5 PAG LIN 1 1 Section 1. Section 404A.1, subsection 1, Code Supplement 1 2 2005, is amended to read as follows: 1 3 1. A historic preservation and cultural and entertainment 1 4 district tax credit, subject to the availability of the 1 5 credit, is granted against the tax imposed under chapter 422, 1 6 division II, III, or V, or chapter 432, for the rehabilitation 1 7 of eligible property located in this state as provided in this 1 8 chapter. Tax credits in excess of tax liabilities shall be 1 9 refunded or credited as provided in section 404A.4, subsection 1 10 3. 1 11 Sec. 2. Section 404A.1, Code Supplement 2005, is amended 1 12 by adding the following new subsection: 1 13 NEW SUBSECTION. 3. A historic preservation and cultural 1 14 and entertainment district tax credit shall be limited to 1 15 rehabilitation of depreciable structures used in a trade or 1 16 business or held for the production of income, such as 1 17 commercial or residential rental properties. 1 18 Sec. 3. Section 404A.4, subsection 3, Code Supplement 1 19 2005, is amended to read as follows: 1 20 3. A person receiving a historic preservation and cultural 1 21 and entertainment district tax credit under this chapter which 1 22 is in excess of the person's tax liability for the tax year is 1 23 entitled to a refund of the excess at a discounted value. The 1 24 discounted value of the tax credit refund, as calculated by 1 25 the department of economic development, in consultation with 1 26 the department of revenue, shall be determined based on the 1 27 discounted value of the tax credit five years after the tax 1 28 year of the project completion at an interest rate equivalent 1 29 to the prime rate plus two percent. The refunded tax credit 1 30 shall not exceed seventy=five percent of the allowable tax 1 31 credit. In lieu of claiming a refund, a taxpayer may elect to 1 32 have the excess refund, not to exceed seventy=five percent of 1 33 the allowable tax credit, credited to the tax liability for 1 34 the following seven tax years or until depleted, whichever 1 35 occurs first. A tax credit shall not be carried back to a tax 2 1 year prior to the tax year in which the taxpayer claims the 2 2 tax credit. 2 3 Sec. 4. Section 404A.4, subsection 4, Code Supplement 2 4 2005, is amended to read as follows: 2 5 4. The total amount of tax credits that may be approved 2 6 for a fiscal year under this chapter shall not exceedtwo2 7 twenty millionfour hundred thousanddollars.For the fiscal 2 8 period beginning July 1, 2005, and ending June 30, 2015, an 2 9 additional four million dollars of tax credits may be approved 2 10 each fiscal year for purposes of projects located in cultural 2 11 and entertainment districts certified pursuant to section 2 12 303.3B.Of the tax credits approved for a fiscal year under 2 13 this chapter, not more than four million dollars shall be 2 14 allocated for purposes of projects with a cost of five hundred 2 15 thousand dollars or less located in cities with a population 2 16 of less than twenty=four thousand, and not more than ten 2 17 million dollars shall be allocated for purposes of projects 2 18 located in cultural and entertainment districts certified 2 19 pursuant to section 303B.3B. Any of theadditionaltax 2 20 credits allocated for projects located in certified cultural 2 21 and entertainment districts and for projects with a cost of 2 22 five hundred thousand dollars or less located in cities with a 2 23 population of less than twenty=four thousand that are not 2 24approvedreserved during a fiscal year shall be applied to 2 25 reserved tax credits issued in accordance with section 404A.3 2 26 in order of original reservation. The department of cultural 2 27 affairs shall establish by rule the procedures for the 2 28 application, review, selection, and awarding of certifications 2 29 of completion. The department of cultural affairs shall 2 30 establish by rule a method for the equitable distribution of 2 31 tax credits throughout the state. The departments of economic 2 32 development, cultural affairs, and revenue shall each adopt 2 33 rules to jointly administer this subsection and shall provide 2 34 by rule for the method to be used to determine for which 2 35 fiscal year the tax credits are available. With the exception 3 1 of tax credits issued pursuant to contracts entered into prior 3 2 to July 1, 2005, tax credits shall not be reserved for more 3 3 than five years. 3 4 Sec. 5. Section 422.11D, subsection 1, Code Supplement 3 5 2005, is amended to read as follows: 3 6 1. The taxes imposed under this division, less the credits 3 7 allowed under sections 422.12 and 422.12B, shall be reduced by 3 8 a historic preservation and cultural and entertainment 3 9 district tax credit equal to the amount as computed under 3 10 chapter 404A for rehabilitating eligible property. Any credit 3 11 in excess of the tax liability shall be refunded or credited 3 12 to succeeding tax years as provided in section 404A.4, 3 13 subsection 3. 3 14 Sec. 6. Section 422.33, subsection 10, paragraph a, Code 3 15 Supplement 2005, is amended to read as follows: 3 16 a. The taxes imposed under this division shall be reduced 3 17 by a historic preservation and cultural and entertainment 3 18 district tax credit equal to the amount as computed under 3 19 chapter 404A for rehabilitating eligible property. Any credit 3 20 in excess of the tax liability shall be refunded or credited 3 21 to succeeding tax years as provided in section 404A.4, 3 22 subsection 3. 3 23 Sec. 7. Section 422.60, subsection 4, paragraph a, Code 3 24 Supplement 2005, is amended to read as follows: 3 25 a. The taxes imposed under this division shall be reduced 3 26 by a historic preservation and cultural and entertainment 3 27 district tax credit equal to the amount as computed under 3 28 chapter 404A for rehabilitating eligible property. Any credit 3 29 in excess of the tax liability shall be refunded or credited 3 30 to succeeding tax years as provided in section 404A.4, 3 31 subsection 3. 3 32 Sec. 8. Section 432.12A, subsection 1, Code Supplement 3 33 2005, is amended to read as follows: 3 34 1. The tax imposed under this chapter shall be reduced by 3 35 a historic preservation and cultural and entertainment 4 1 district tax credit equal to the amount as computed under 4 2 chapter 404A for rehabilitating eligible property. Any credit 4 3 in excess of the tax liability shall be refunded or credited 4 4 to succeeding tax years as provided in section 404A.4, 4 5 subsection 3. 4 6 EXPLANATION 4 7 This bill relates to historic preservation and cultural and 4 8 entertainment district tax credits. 4 9 The bill limits historic preservation and cultural and 4 10 entertainment district tax credits to rehabilitation of 4 11 depreciable structures used in a trade or business or held for 4 12 the production of income, such as commercial or residential 4 13 rental properties. 4 14 Currently, a person receiving a historic preservation and 4 15 cultural and entertainment district tax credit may receive a 4 16 tax credit refund at a discounted value for the amount in 4 17 excess of the taxpayer's tax liability in the year that the 4 18 tax credit is claimed. The bill allows a taxpayer, in lieu of 4 19 claiming a refund, to elect to have the excess refund, not to 4 20 exceed 75 percent of the allowable tax credit, credited to the 4 21 taxpayer's tax liability for the following seven tax years or 4 22 until depleted, whichever occurs first. The bill prohibits a 4 23 tax credit from being carried back to a tax year prior to the 4 24 tax year in which the taxpayer claims the tax credit. 4 25 Currently, $2.4 million of historic preservation and 4 26 cultural and entertainment district tax credits may be 4 27 approved in a fiscal year, and for the fiscal period beginning 4 28 July 1, 2005, and ending June 30, 2015, an additional $4 4 29 million of tax credits may be approved each fiscal year for 4 30 purposes of projects located in certified cultural and 4 31 entertainment districts. The bill eliminates the additional 4 32 $4 million of tax credits and increases the $2.4 million of 4 33 tax credits to $20 million of tax credits each fiscal year. 4 34 The bill provides that $4 million of the $20 million of tax 4 35 credits are allocated for projects with a cost of $500,000 or 5 1 less located in cities with a population of less than 24,000. 5 2 The bill provides that $10 million of the $20 million of tax 5 3 credits are allocated for projects located in cultural and 5 4 entertainment districts. The bill provides that any of the 5 5 allocated tax credits that are not reserved during a fiscal 5 6 year shall be applied to reserved tax credits in order of 5 7 original reservation. The bill provides that the department 5 8 of cultural affairs shall establish by rule a method of the 5 9 equitable distribution of tax credits throughout the state. 5 10 LSB 5843HV 81 5 11 tm:nh/je/5