House File 2685 - Introduced HOUSE FILE BY COMMITTEE ON AGRICULTURE (SUCCESSOR TO HSB 699) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to state tax benefits for use of soy=based 2 transformer fluid by electric utilities and including 3 effective and applicability date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 6456HV 81 6 mg/gg/14 PAG LIN 1 1 Section 1. NEW SECTION. 422.11M SOY=BASED TRANSFORMER 1 2 FLUID TAX CREDIT. 1 3 The taxes imposed under this division, less the credits 1 4 allowed under sections 422.12 and 422.12B, shall be reduced by 1 5 a soy=based transformer fluid tax credit allowed under chapter 1 6 476D. 1 7 This section is repealed December 31, 2008. 1 8 Sec. 2. Section 422.16, Code Supplement 2005, is amended 1 9 by adding the following new subsection: 1 10 NEW SUBSECTION. 15. An employer or withholding agent in 1 11 possession of a soy=based transformer fluid tax credit 1 12 certificate issued pursuant to chapter 476D who is required to 1 13 deduct and withhold tax under subsections 1 and 12 may receive 1 14 a tax credit from the amount of the tax deducted and withheld 1 15 which is payable to the department equal to the amount of the 1 16 soy=based transformer fluid tax credit certificate. To obtain 1 17 the tax credit, the person shall attach to the return required 1 18 under subsection 2, the soy=based transformer fluid tax credit 1 19 certificate issued to the person pursuant to chapter 476D and 1 20 provide any other information the director may require. The 1 21 amount of the tax deducted and withheld which is not remitted 1 22 to the department under this subsection may be used for any 1 23 purpose of the employer or withholding agent. 1 24 This subsection is repealed December 31, 2008. 1 25 Sec. 3. Section 422.33, Code Supplement 2005, is amended 1 26 by adding the following new subsection: 1 27 NEW SUBSECTION. 20. The taxes imposed under this division 1 28 shall be reduced by a soy=based transformer fluid tax credit 1 29 allowed under chapter 476D. 1 30 This subsection is repealed December 31, 2008. 1 31 Sec. 4. Section 423.4, Code Supplement 2005, is amended by 1 32 adding the following new subsection: 1 33 NEW SUBSECTION. 6. A person in possession of a soy=based 1 34 transformer fluid tax credit certificate issued pursuant to 1 35 chapter 476D may apply to the director for refund of the 2 1 amount of sales or use tax imposed and paid upon purchases 2 2 made by the applicant. 2 3 a. The refunds may be obtained only in the following 2 4 manner and under the following conditions: 2 5 (1) On forms furnished by the department and filed by 2 6 January 31 after the end of the calendar year in which the tax 2 7 credit certificate is to be applied, the applicant shall 2 8 report to the department the total amount of sales and use tax 2 9 paid during the reporting period on purchases made by the 2 10 applicant. 2 11 (2) The applicant shall separately list the amounts of 2 12 sales and use tax paid during the reporting period. 2 13 (3) If required by the department, the applicant shall 2 14 prove that the person making the sale has included the amount 2 15 thereof in the computation of the sales price of such person 2 16 and that such person has paid the tax levied by this 2 17 subchapter or subchapter III, based upon such computation of 2 18 the sales price. 2 19 (4) The applicant shall provide the tax credit 2 20 certificates issued pursuant to chapter 476D to the department 2 21 with the forms required by this paragraph "a". 2 22 b. If satisfied that the foregoing conditions and 2 23 requirements have been complied with, the director shall 2 24 refund the amount claimed by the applicant for an amount not 2 25 greater than the amount of tax credits issued in tax credit 2 26 certificates pursuant to chapter 476D. 2 27 c. This subsection is repealed December 31, 2008. 2 28 Sec. 5. NEW SECTION. 476D.1 DEFINITIONS. 2 29 As used in this chapter, unless the context otherwise 2 30 requires: 2 31 1. "Department" means the department of revenue. 2 32 2. "Electric utility" means a public utility furnishing 2 33 electricity as defined in section 476.1, a city utility as 2 34 defined in section 390.1, and an electric cooperative as 2 35 defined in section 390.1. 3 1 3. "Soy=based transformer fluid" means dielectric fluid 3 2 that contains at least ninety=eight percent soy=based 3 3 products. 3 4 Sec. 6. NEW SECTION. 476D.2 SOY=BASED TRANSFORMER FLUID 3 5 TAX CREDIT == LIMIT. 3 6 1. An electric utility is eligible to receive a soy=based 3 7 transformer fluid tax credit which is equal to the costs 3 8 incurred by the utility during the tax year for the purchase 3 9 and replacement costs relating to the transition from using 3 10 nonsoy=based transformer fluid to using soy=based transformer 3 11 fluid. The costs eligible for the credit are limited to those 3 12 costs meeting all of the following requirements: 3 13 a. The costs were incurred after June 30, 2006, and before 3 14 January 1, 2008. 3 15 b. The costs were incurred in the first eighteen months of 3 16 the transition from using nonsoy=based transformer fluid to 3 17 using soy=based transformer fluid. 3 18 c. The credit for the purchase and replacement of soy= 3 19 based transformer fluid used in the transition is limited to 3 20 two dollars per gallon. The total number of gallons used in 3 21 the transition shall not exceed twenty thousand gallons per 3 22 electric utility. 3 23 If the electric utility elects to take the soy=based 3 24 transformer fluid tax credit, the electric utility shall not 3 25 deduct for Iowa tax purposes any amount of the costs incurred 3 26 in the transition to using soy=based transformer fluid which 3 27 is deductible for federal tax purposes. 3 28 2. Any credit used under chapter 422, division II or III, 3 29 which is in excess of the tax liability shall be refunded with 3 30 interest computed under section 422.25. In lieu of claiming a 3 31 refund, a taxpayer may elect to have the overpayment shown on 3 32 the taxpayer's final, completed return credited to the tax 3 33 liability for the following tax year. 3 34 3. An individual may claim the tax credit under chapter 3 35 422, division II, allowed a partnership, limited liability 4 1 company, S corporation, estate, or trust electing to have the 4 2 income taxed directly to the individual. The amount claimed 4 3 by the individual shall be based upon the pro rata share of 4 4 the individual's earnings of the partnership, limited 4 5 liability company, S corporation, estate, or trust. 4 6 4. The total amount of soy=based transformer fluid 4 7 eligible for a tax credit shall not exceed sixty thousand 4 8 gallons. 4 9 Sec. 7. NEW SECTION. 476D.3 TAX CREDIT CERTIFICATE 4 10 PROCEDURE. 4 11 1. An electric utility may apply to the department for the 4 12 soy=based transformer fluid tax credit by submitting to the 4 13 department all of the following: 4 14 a. A completed application in a form prescribed by the 4 15 department. 4 16 b. A copy of a signed purchase agreement or other 4 17 agreement to purchase soy=based transformer fluid. 4 18 c. Any other information the department deems necessary. 4 19 2. An electric utility may seek assurance of the 4 20 availability of tax credits by getting approval from the 4 21 department for the tax credits by submitting an estimate of 4 22 the soy=based transformer fluid to be used during the 4 23 transition period prior to the utility entering into any 4 24 agreement to purchase the soy=based transformer fluid and 4 25 prior to the start of its transition period. If tax credits 4 26 are available, the department shall reserve the tax credits 4 27 for the electric utility. Prior approval under this 4 28 subsection shall be granted based upon the earliest date of 4 29 application. Prior approval under this subsection does not 4 30 eliminate the requirement for the electric utility to file the 4 31 application under subsection 1. 4 32 3. The department shall calculate the amount of the tax 4 33 credit for which the applicant is eligible and shall issue, or 4 34 in the case of prior approval under subsection 2, shall 4 35 reserve the tax credit certificate for that amount or notify 5 1 the applicant in writing of its refusal to do so. An 5 2 applicant whose application is denied may file an appeal with 5 3 the department within sixty days from the date of the denial 5 4 pursuant to the provisions of chapter 17A. However, the 5 5 denial of an application solely because of the lack of the 5 6 availability of tax credits is not appealable. 5 7 4. Each tax credit certificate shall contain the person's 5 8 name, address, and tax identification number, the amount of 5 9 tax credits, the first taxable year the certificate may be 5 10 used, the type of tax to which the tax credits shall be 5 11 applied, and any other information required by the department. 5 12 The tax credit certificate shall only list one type of tax to 5 13 which the amount of the tax credit may be applied. Once 5 14 issued by the department, the tax credit certificate shall not 5 15 be terminated or rescinded. 5 16 5. Once a tax credit certificate is issued pursuant to 5 17 this section, the tax credit may only be claimed against the 5 18 type of tax reflected on the certificate. 5 19 Sec. 8. NEW SECTION. 476D.4 RULES. 5 20 The department may adopt rules pursuant to chapter 17A for 5 21 the administration and enforcement of this chapter. 5 22 Sec. 9. NEW SECTION. 476D.5 APPLICABILITY == REPEAL. 5 23 1. This chapter applies to tax years ending after June 30, 5 24 2006, and beginning before January 1, 2008. 5 25 2. This chapter is repealed December 31, 2008. 5 26 Sec. 10. EFFECTIVE DATE. This Act, being deemed of 5 27 immediate importance, takes effect upon enactment. 5 28 EXPLANATION 5 29 This bill provides a soy=based transformer fluid tax credit 5 30 under the individual and corporate income, sales and use, and 5 31 withholding taxes. Soy=based transformer fluid is 5 32 nonconductible fluid that contains at least 98 percent soy= 5 33 based products. The tax credit equals the costs incurred for 5 34 the purchase and replacement costs for electric utilities 5 35 related to the transition from using nonsoy=based transformer 6 1 fluid to using soy=based transformer fluid. The costs must 6 2 meet three other requirements: They were incurred after June 6 3 30, 2006, and before January 1, 2008, they were incurred in 6 4 the first 18 months of the transition to using soy=based 6 5 transformer fluid, and the credit of the soy=based transformer 6 6 fluid used in the transition is limited to $2 per gallon, up 6 7 to 20,000 gallons per electric utility. The total amount of 6 8 soy=based transformer fluid eligible for a tax credit is not 6 9 to exceed 60,000 gallons. Any excess credit is refundable. 6 10 In order for an electric utility to know if the tax credits 6 11 are available, it may seek prior approval of the tax credit by 6 12 applying prior to purchase of the soy=based transformer fluid 6 13 and the transition period. If prior approval is granted, the 6 14 estimated amount of tax credits would be reserved for the 6 15 electric utility. The credit applies to tax years ending 6 16 after June 30, 2006, and beginning before January 1, 2008. 6 17 The credit is repealed December 31, 2008. 6 18 LSB 6456HV 81 6 19 mg:nh/gg/14