House File 796 - Introduced
HOUSE FILE
BY COMMITTEE ON ECONOMIC GROWTH
(SUCCESSOR TO HSB 213)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to tax credits for equity investments in
2 qualifying businesses or community=based seed capital funds.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 1984HV 81
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PAG LIN
1 1 Section 1. Section 15E.43, subsection 4, Code 2005, is
1 2 amended to read as follows:
1 3 4. The aggregate amount of tax credits issued pursuant to
1 4 this division shall not exceed a total of ten million dollars.
1 5 The total amount of tax credits issued during the fiscal year
1 6 beginning July 1, 2002, shall not exceed three million
1 7 dollars. The total amount of tax credits issued during the
1 8 fiscal year beginning July 1, 2003, shall not exceed three
1 9 million dollars. The total amount of tax credits issued
1 10 during the fiscal year beginning July 1, 2004, shall not
1 11 exceed four million dollars. Any amount of the maximum
1 12 aggregate limit of tax credits that have not been issued by
1 13 June 30, 2005, may be issued in any subsequent fiscal year.
1 14 Not more than three million dollars of tax credits may be
1 15 issued in any one subsequent fiscal year.
1 16 Sec. 2. Section 15E.44, subsection 2, paragraphs b and e,
1 17 Code 2005, are amended to read as follows:
1 18 b. The business has been in operation for three six years
1 19 or less.
1 20 e. The business shall not have a net worth that exceeds
1 21 three ten million dollars.
1 22 Sec. 3. Section 15E.45, subsection 2, paragraph b, Code
1 23 2005, is amended to read as follows:
1 24 b. The fund has, on or after January 1, 2002, a total of
1 25 both capital commitments from investors and investments in
1 26 qualifying businesses of at least one hundred twenty=five
1 27 thousand dollars, but not more than three million dollars.
1 28 However, if a fund is either a rural business investment
1 29 company under the rural business investment program of the
1 30 federal Farm Security and Rural Investment Act of 2002, Pub.
1 31 L. No. 107=171, or an Iowa=based seed capital fund with at
1 32 least forty percent of its committed capital subscribed by
1 33 community=based seed capital funds, the fund may qualify
1 34 notwithstanding having capital in excess of the limits set
1 35 forth in this paragraph as long as the fund otherwise meets
2 1 the requirements of this subsection.
2 2 Sec. 4. Section 15E.45, subsections 6, 7, and 8, Code
2 3 2005, are amended to read as follows:
2 4 6. In the event that a community=based seed capital fund
2 5 fails to meet or maintain any requirement set forth in this
2 6 section, or in the event that at least thirty=three percent of
2 7 the invested capital of the community=based seed capital fund
2 8 has not been invested at least thirty=three percent of its
2 9 invested capital in one or more separate qualifying
2 10 businesses, measured at the end of the thirty=sixth forty=
2 11 eighth month after commencing the fund's investing activities,
2 12 the board shall rescind any tax credit certificates issued to
2 13 limited partners or members and shall notify the department of
2 14 revenue that it has done so, and the tax credit certificates
2 15 shall be null and void. However, a community=based seed
2 16 capital fund may apply to the board for a one=year waiver of
2 17 the requirements of this subsection.
2 18 7. An investor in a community=based seed capital fund
2 19 shall receive a tax credit pursuant to this division only for
2 20 the investor's investment in the community=based seed capital
2 21 fund and shall not receive any additional tax credit for the
2 22 investor's share of investments in a qualifying business made
2 23 by the community=based seed capital fund in a qualifying
2 24 business or in an Iowa=based seed capital fund with at least
2 25 forty percent of its committed capital subscribed by
2 26 community=based seed capital funds. However, an investor in a
2 27 community=based seed capital fund may receive a tax credit
2 28 under this division with respect to a separate direct
2 29 investment made by the investor in the same qualifying
2 30 business in which the community=based seed capital fund
2 31 invests.
2 32 8. A community=based seed capital fund shall not invest in
2 33 the Iowa fund of funds, if organized pursuant to section
2 34 15E.65, but may invest up to sixty percent of its committed
2 35 capital in an Iowa=based seed capital fund with at least forty
3 1 percent of its committed capital subscribed by community=
3 2 based seed capital funds.
3 3 EXPLANATION
3 4 This bill relates to tax credits for equity investments in
3 5 qualifying businesses or community=based seed capital funds.
3 6 Currently, the aggregate amount of tax credits issued is
3 7 limited to $10 million during the fiscal period beginning July
3 8 1, 2002, and ending June 30, 2005. The bill provides that any
3 9 amount of the maximum aggregate limit of tax credits that have
3 10 not been issued by June 30, 2005, may be issued in any
3 11 subsequent fiscal year. The bill provides that not more than
3 12 $3 million of tax credits may be issued in any one subsequent
3 13 fiscal year.
3 14 Currently, certain criteria must be met for a business to
3 15 be a qualifying business that may receive investments that are
3 16 eligible for tax credits. One of the criteria is that the
3 17 business must have been in operation for three years or less.
3 18 The bill changes the three years to six years. Another
3 19 criteria is that the business shall not have a net worth that
3 20 exceeds $3 million. The bill increases the maximum net worth
3 21 allowed to $10 million.
3 22 Currently, there are capital commitment limits for
3 23 community=based seed capital funds and the requirements may be
3 24 waived if the fund is a rural business investment company
3 25 under the rural business investment program of the federal
3 26 Farm Security and Rural Investment Act of 2002. The bill
3 27 provides that the capital commitment requirements may also be
3 28 waived if the fund is an Iowa=based seed capital fund with at
3 29 least 40 percent of its committed capital subscribed by
3 30 community=based seed capital funds.
3 31 Currently, if a community=based seed capital fund has not
3 32 invested at least 33 percent of its invested capital in one or
3 33 more separate qualifying businesses, measured at the end of
3 34 the 36th month after commencing the fund's investing
3 35 activities, tax credit certificates issued for investments in
4 1 the fund may be rescinded. The bill changes the measurement
4 2 period from the 36th month to the 48th month.
4 3 Currently, an investor in a community=based seed capital
4 4 fund only receives a tax credit for the investor's investment
4 5 in the fund and cannot receive any additional tax credit for
4 6 the investor's share of investments in a qualifying business.
4 7 The bill provides that, in addition, the investor shall not
4 8 receive an additional tax credit for the investor's share of
4 9 investments in an Iowa=based seed capital fund with at least
4 10 40 percent of its committed capital subscribed by community=
4 11 based seed capital funds.
4 12 Currently, a community=based seed capital fund shall not
4 13 invest in the Iowa fund of funds. The bill provides, however,
4 14 that a community=based seed capital fund may invest up to 60
4 15 percent of its committed capital in an Iowa=based seed capital
4 16 fund with at least 40 percent of its committed capital
4 17 subscribed by community=based seed capital funds.
4 18 LSB 1984HV 81
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