House File 2731 - Introduced
HOUSE FILE
BY COMMITTEE ON WAYS AND MEANS
(SUCCESSOR TO HF 2460)
(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" includes new jobs from Iowa business
1 29 expansions or retentions within the city limits of the pilot
1 30 project city and those jobs resulting from established out=
1 31 of=state businesses, as defined by the department of economic
1 32 development, moving to or expanding in Iowa.
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 be disclosed to the
3 30 public and shall contain but is not limited to all of the
3 31 following:
3 32 (1) A copy of the adopted development agreement plan of
3 33 the employer.
3 34 (2) A list of any other amounts of incentives or
3 35 assistance the employer may be receiving from other economic
4 1 development programs, including grants, loans, forgivable
4 2 loans, and tax credits.
4 3 (3) The approval of local participating authorities.
4 4 (4) The amount of local incentives or assistance received
4 5 for each project of the employer.
4 6 e. (1) The employer shall certify to the department of
4 7 revenue that the targeted jobs withholding credit is in
4 8 accordance with the withholding agreement and shall provide
4 9 other information the department may require. Notice of any
4 10 withholding agreement shall be provided promptly to the
4 11 department of revenue following its execution by the pilot
4 12 project city and the employer.
4 13 (2) Following termination of the withholding agreement,
4 14 the employer credits shall cease and any money received by the
4 15 pilot project city after termination shall be remitted to the
4 16 treasurer of state to be deposited into the general fund of
4 17 the state. Notice shall be provided promptly to the
4 18 department of revenue following termination.
4 19 f. If the employer ceases to meet the requirements of the
4 20 withholding agreement, the agreement shall be terminated and
4 21 any withholding tax credits for the benefit of the employer
4 22 shall cease. However, in regard to the number of new jobs
4 23 that are to be created if the employer has met the number of
4 24 new jobs to be created pursuant to the withholding agreement
4 25 and subsequently the number of new jobs falls below the
4 26 required level, the employer shall not be considered as not
4 27 meeting the new job requirement until eighteen months after
4 28 the date of the decrease in the number of new jobs employed.
4 29 g. A pilot project city shall certify to the department of
4 30 revenue the amount of the targeted jobs withholding credit an
4 31 employer has remitted to the city and shall provide other
4 32 information the department may require.
4 33 h. An employee whose wages are subject to a withholding
4 34 agreement shall receive full credit for the amount withheld as
4 35 provided in section 422.16.
5 1 i. An employer may participate in a new jobs credit from
5 2 withholding under section 260E.5 or a supplemental new jobs
5 3 credit from withholding under section 15E.197 or section
5 4 15.331, Code 2005, at the same time as the employer is
5 5 participating in the withholding credit under this section.
5 6 Notwithstanding any other provision in this section, the new
5 7 jobs credit from withholding under section 260E.5 and the
5 8 supplemental new jobs credit from withholding under section
5 9 15E.197 or section 15.331, Code 2005, shall be collected and
5 10 disbursed prior to the withholding credit under this section.
5 11 j. A pilot project city that enters into a withholding
5 12 agreement shall arrange for a match of at least one dollar for
5 13 each withholding credit dollar received by the city. The
5 14 local match may come from the pilot project city, a private
5 15 donor, or the business, or a combination of all three. The
5 16 local match may be in cash or in kind to be used for the
5 17 business project.
5 18 k. At the time of submitting its budget to the department
5 19 of management, the pilot project city shall submit to the
5 20 department of management and the department of economic
5 21 development a description of the activities involving the use
5 22 of withholding agreements. The description shall include, but
5 23 is not limited to, the following:
5 24 (1) The total number of targeted jobs and a breakdown as
5 25 to those that are Iowa business expansions or retentions
5 26 within the city limits of the pilot project city and those
5 27 that are jobs resulting from established out=of=state
5 28 businesses moving to or expanding in Iowa.
5 29 (2) The number of withholding agreements and the amount of
5 30 withholding credits involved.
5 31 (3) The types of businesses that entered into the
5 32 agreements, and the types of businesses that declined the
5 33 city's proposal to enter into the agreement.
5 34 l. The department of economic development in consultation
5 35 with the department of revenue shall coordinate the pilot
6 1 project program with the pilot project cities under this
6 2 section. The department of economic development is authorized
6 3 to adopt, amend, and repeal rules to implement the pilot
6 4 project program under this section. The department of
6 5 economic development shall prepare an annual report for the
6 6 governor, the general assembly, and the legislative services
6 7 agency on the pilot project program. The pilot project
6 8 program annual report shall include but not be limited to all
6 9 of the following:
6 10 (1) The amount each project received from each state
6 11 economic development and tax credit program.
6 12 (2) The number of new jobs resulting from the pilot
6 13 program.
6 14 (3) The average wage resulting from the pilot project.
6 15 (4) An evaluation of the investment made by the state of
6 16 Iowa, including but not limited to the terms in subparagraphs
6 17 (1) through (3).
6 18 EXPLANATION
6 19 This bill allows four pilot project cities to assist in
6 20 funding projects in their urban renewal areas by means of a
6 21 targeted jobs credit from withholding. This credit is
6 22 available to businesses that are or will locate in an urban
6 23 renewal area. Businesses already located in the state must
6 24 either create 10 new jobs or make at least $500,000 in capital
6 25 investment within the urban renewal area. The credit is 3
6 26 percent of the amount of gross wages paid to the employees of
6 27 the targeted jobs by the business. The credit is paid to the
6 28 pilot project city to be used to pay for debts incurred or
6 29 assistance provided by the city for urban renewal projects
6 30 related to the business in the urban renewal area. Presently,
6 31 property tax imposed on the increase in value as a result of
6 32 the business's arrival is used to provide such financing. The
6 33 withholding credit is available to each targeted job of the
6 34 business in the area provided the job's wage is equal to at
6 35 least the average county wage. A withholding agreement shall
7 1 be for a period of up to 10 years but may not be entered into
7 2 after June 30, 2010. A pilot project city must arrange for a
7 3 match of at least $1 for each dollar of withholding credit
7 4 dollar it receives. The match is to be used for the business
7 5 project.
7 6 The four pilot project cities are cities with three or more
7 7 census tracts and include one located in a county that borders
7 8 Nebraska, one located in a county that borders South Dakota,
7 9 and two located in counties that border states other than
7 10 Nebraska or South Dakota. To be eligible to be designated as
7 11 a pilot project city, a city must apply by October 1, 2006. A
7 12 pilot project city will lose its status if it does not enter
7 13 into a withholding tax agreement within a year of being
7 14 approved as a pilot project city.
7 15 If the employer ceases to meet the requirements of the
7 16 withholding agreement, the agreement shall be terminated and
7 17 any withholding tax credits for the benefit of the employer
7 18 shall cease. However, in regard to the number of new jobs
7 19 that are to be created if the employer has met the number of
7 20 new jobs to be created pursuant to the withholding agreement
7 21 and subsequently the number of new jobs falls below the
7 22 required level, the employer shall not be considered as not
7 23 meeting the new job requirement until eighteen months after
7 24 the date of the decrease in the number of new jobs employed.
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