Senate File 2193 - Introduced SENATE FILE BY WARNSTADT and WIECK (COMPANION TO LSB 5706HH BY RANTS) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to qualified historic property located in 2 designated enterprise zones and other historic property, 3 taxation of such property and its owners, developers, and 4 investors, and including effective and applicability date 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5706SS 81 8 mg/cf/24 PAG LIN 1 1 Section 1. Section 15E.192, Code Supplement 2005, is 1 2 amended by adding the following new subsection: 1 3 NEW SUBSECTION. 0A. For the purposes of this division, 1 4 "qualified historic property" means property that is at least 1 5 fifty years old and is listed on the national register of 1 6 historic places or eligible for such listing and has been 1 7 rehabilitated without significant changes to the original 1 8 exterior of the property and without affecting its status with 1 9 regard to the national register of historic places. 1 10 Sec. 2. Section 15E.193B, subsection 2, Code Supplement 1 11 2005, is amended to read as follows: 1 12 2. An eligible housing business under this section 1 13 includesaeither of the following: 1 14 a. A housing developer, housing contractor, or nonprofit 1 15 organization that builds or rehabilitates a minimum of four 1 16 single=family homes located in that part of a city or county 1 17 in which there is a designated enterprise zone or one multiple 1 18 dwelling unit building containing three or more individual 1 19 dwelling units located in that part of a city or county in 1 20 which there is a designated enterprise zone. 1 21 b. An owner or developer that rehabilitates a qualified 1 22 historic property to be used for dwelling purposes which is 1 23 located in that part of a city or county in which there is a 1 24 designated enterprise zone. 1 25 Sec. 3. Section 15E.193B, subsection 6, paragraph a, Code 1 26 Supplement 2005, is amended to read as follows: 1 27 a. An eligible housing business may claim a tax credit up 1 28 to a maximum of ten percent of the new investment which is 1 29 directly related to the building or rehabilitating of a 1 30 minimum of four single=family homes located in that part of a 1 31 city or county in which there is a designated enterprise zone, 1 32orone multiple dwelling unit building containing three or 1 33 more individual dwelling units located in that part of a city 1 34 or county in which there is a designated enterprise zone, or 1 35 qualified historic property located in that part of a city or 2 1 county in which there is a designated enterprise zone. The 2 2 new investment that may be used to compute the tax credit 2 3 shall not exceed the new investment used for the first one 2 4 hundred forty thousand dollars of value for each single=family 2 5 home,orfor each unit of a multiple dwelling unit building 2 6 containing three or more units, or for each dwelling unit 2 7 located in the qualified historic property. The tax credit 2 8 may be used to reduce the tax liability imposed under chapter 2 9 422, division II, III, or V, or chapter 432. Any credit in 2 10 excess of the tax liability for the tax year may be credited 2 11 to the tax liability for the following seven years or until 2 12 depleted, whichever occurs earlier. If the business is a 2 13 partnership, S corporation, limited liability company, or 2 14 estate or trust electing to have the income taxed directly to 2 15 the individual, an individual may claim the tax credit 2 16 allowed. The amount claimed by the individual shall be based 2 17 upon the pro rata share of the individual's earnings of the 2 18 partnership, S corporation, limited liability company, or 2 19 estate or trust except as allowed for under subsection 8 when 2 20 low=income housing tax credits authorized under section 42 of 2 21 the Internal Revenue Code are used to assist in the financing 2 22 of the housing development. 2 23 Sec. 4. Section 15E.195, subsections 1, 2, and 4, Code 2 24 2005, are amended to read as follows: 2 25 1. A county which designates an enterprise zone pursuant 2 26 to section 15E.194, subsection 1, and in which an eligible 2 27 enterprise zone is certified shall establish an enterprise 2 28 zone commission to review applications from qualified 2 29 businesses located within or requesting to locate within an 2 30 enterprise zone designated pursuant to section 15E.194, 2 31 subsection 1, to receive incentives or assistance as provided 2 32 in section 15E.196. The enterprise zone commission shall also 2 33 review applications from qualified housing businesses 2 34 requesting to receive incentives or assistance as provided in 2 35 section 15E.193B. The enterprise zone commission shall review 3 1 applications from owners or developers of qualified historic 3 2 properties to receive incentives or assistance as provided in 3 3 section 15E.193B or 15E.196, as applicable. The commission 3 4 shall consist of nine members. Five of these members shall 3 5 consist of one representative of the board of supervisors, one 3 6 member with economic development expertise chosen by the 3 7 department of economic development, one representative of the 3 8 county zoning board, one member of the local community college 3 9 board of directors, and one representative of the local 3 10 workforce development center. These five members shall select 3 11 the remaining four members. If the enterprise zone consists 3 12 of an area meeting the requirements for eligibility for an 3 13 urban or rural enterprise community under Title XIII of the 3 14 federal Omnibus Budget Reconciliation Act of 1993, one of the 3 15 remaining four members shall be a representative of that 3 16 community. A county shall have only one enterprise zone 3 17 commission to review applications for incentives and 3 18 assistance for businesses located within or requesting to 3 19 locate within a certified enterprise zone designated pursuant 3 20 to section 15E.194, subsection 1. 3 21 2. A city with a population of twenty=four thousand or 3 22 more which designates an enterprise zone pursuant to section 3 23 15E.194, subsection 2, and in which an eligible enterprise 3 24 zone is certified shall establish an enterprise zone 3 25 commission to review applications from qualified businesses 3 26 located within or requesting to locate within an enterprise 3 27 zone to receive incentives or assistance as provided in 3 28 section 15E.196. The enterprise zone commission shall review 3 29 applications from qualified housing businesses requesting to 3 30 receive incentives or assistance as provided in section 3 31 15E.193B. The enterprise zone commission shall review 3 32 applications from owners or developers of qualified historic 3 33 properties to receive incentives or assistance as provided in 3 34 section 15E.193B or 15E.196, as applicable. The commission 3 35 shall consist of nine members. Six of these members shall 4 1 consist of one representative of an international labor 4 2 organization, one member with economic development expertise 4 3 chosen by the department of economic development, one 4 4 representative of the city council, one member of the local 4 5 community college board of directors, one member of the city 4 6 planning and zoning commission, and one representative of the 4 7 local workforce development center. These six members shall 4 8 select the remaining three members. If the enterprise zone 4 9 consists of an area meeting the requirements for eligibility 4 10 for an urban enterprise community under Title XIII of the 4 11 federal Omnibus Budget Reconciliation Act of 1993, one of the 4 12 remaining three members shall be a representative of that 4 13 community. If a city contiguous to the city designating the 4 14 enterprise zone is included in an enterprise zone, a 4 15 representative of the contiguous city, chosen by the city 4 16 council, shall be a member of the commission. A city in which 4 17 an eligible enterprise zone is certified shall have only one 4 18 enterprise zone commission. If a city has established an 4 19 enterprise zone commission prior to July 1, 1998, the city may 4 20 petition to the department of economic development to change 4 21 the structure of the existing commission. 4 22 4. If the enterprise zone commission determines that a 4 23 business or an owner or developer of a qualified historic 4 24 property qualifies and is eligible to receive incentives or 4 25 assistance as provided in section 15E.193B or 15E.196, the 4 26 commission shall submit an application for incentives or 4 27 assistance to the department of economic development. The 4 28 department may approve, defer, or deny the application. 4 29 Sec. 5. Section 15E.196, unnumbered paragraph 1, Code 4 30 Supplement 2005, is amended to read as follows: 4 31 For purposes of determining the incentives or assistance 4 32 provided in this section, "eligible business" means a business 4 33 or owner or developer of a qualified historic property which 4 34 has been approved to receive incentives and assistance by the 4 35 department of economic development pursuant to application as 5 1 provided in section 15E.195. The incentives and assistance 5 2 provided under this division for businesses or for 5 3 rehabilitating qualified historic property located in 5 4 enterprise zones shall be for a period not to exceed ten years 5 5 and shall include all of the following: 5 6 Sec. 6. Section 15E.196, subsections 3 and 6, Code 5 7 Supplement 2005, are amended to read as follows: 5 8 3. Investment tax credit of up to ten percent, as provided 5 9 in section 15.333. In the case of an owner or developer of 5 10 qualified historic property, the tax credit shall be based 5 11 upon the rehabilitation costs related to the new jobs created 5 12 by the occupant business. 5 13 6. Insurance premium tax credit of up to ten percent, as 5 14 provided in section 15.333A. In the case of an owner or 5 15 developer of qualified historic property, the tax credit shall 5 16 be based upon the rehabilitation costs related to the new jobs 5 17 created by the occupant business. 5 18 Sec. 7. Section 404A.1, subsection 2, Code Supplement 5 19 2005, is amended by adding the following new paragraph: 5 20 NEW PARAGRAPH. e. Property that is at least fifty years 5 21 old and is listed on the national register of historic places 5 22 or eligible for such listing and is located in a designated 5 23 enterprise zone pursuant to chapter 15E, division XVIII. 5 24 Sec. 8. Section 404A.4, subsection 4, Code Supplement 5 25 2005, is amended to read as follows: 5 26 4. a. The total amount of tax credits that may be 5 27 approved for a fiscal year under this chapter shall not exceed 5 28 two million four hundred thousand dollars. For the fiscal 5 29 period beginning July 1, 2005, and ending June 30, 2015, an 5 30 additional four million dollars of tax credits may be approved 5 31 each fiscal year for purposes of projects located in cultural 5 32 and entertainment districts certified pursuant to section 5 33 303.3B. Any of the additional tax credits allocated for 5 34 projects located in certified cultural and entertainment 5 35 districts that are not approved during a fiscal year shall be 6 1 applied to reserved tax credits issued in accordance with 6 2 section 404A.3 in order of original reservation. 6 3 b. For fiscal years beginning on or after July 1, 2006, 6 4 there is not a limit on the amount of tax credits that may be 6 5 approved for a fiscal year for the rehabilitation of eligible 6 6 property as defined in section 404A.1, subsection 2, paragraph 6 7 "e". Such tax credits shall not be counted as part of the 6 8 limitation on the amount of tax credits that may be approved 6 9 under paragraph "a". 6 10 c. The department of cultural affairs shall establish by 6 11 rule the procedures for the application, review, selection, 6 12 and awarding of certifications of completion. The departments 6 13 of economic development, cultural affairs, and revenue shall 6 14 each adopt rules to jointly administer this subsection and 6 15 shall provide by rule for the method to be used to determine 6 16 for which fiscal year the tax credits are available. With the 6 17 exception of tax credits issued pursuant to contracts entered 6 18 into prior to July 1, 2005, tax credits shall not be reserved 6 19 for more than five years. 6 20 Sec. 9. Section 422.7, Code Supplement 2005, is amended by 6 21 adding the following new subsection: 6 22 NEW SUBSECTION. 45. Subtract two thousand dollars for 6 23 each of the first five tax years the taxpayer owns and resides 6 24 in a condominium unit in a qualified historic property located 6 25 in a designated enterprise zone that was redeveloped into a 6 26 multiunit condominium building. This deduction is only 6 27 available for the first five calendar years following the 6 28 calendar year in which the redevelopment of the qualified 6 29 historic property was completed. If the original taxpayer 6 30 sells the condominium unit during the first five calendar 6 31 years, the subsequent owner who resides in that unit is 6 32 eligible for the deduction under this subsection for the 6 33 remainder of the first five calendar years. 6 34 If the taxpayer does not own and reside in the condominium 6 35 unit during the entire tax year, the amount subtracted shall 7 1 be a pro rata amount with any portion of a month considered a 7 2 whole month. The amount subtracted shall be rounded to the 7 3 nearest multiple of fifty dollars. 7 4 For purposes of this subsection, "qualified historic 7 5 property" means the same as defined in section 15E.192, 7 6 subsection 0A. 7 7 Sec. 10. Section 441.21, subsection 2, Code Supplement 7 8 2005, is amended to read as follows: 7 9 2. In the event market value of the property being 7 10 assessed cannot be readily established in the foregoing 7 11 manner, then the assessor may determine the value of the 7 12 property using the other uniform and recognized appraisal 7 13 methods including its productive and earning capacity, if any, 7 14 industrial conditions, its cost, physical and functional 7 15 depreciation and obsolescence and replacement cost, and all 7 16 other factors which would assist in determining the fair and 7 17 reasonable market value of the property but the actual value 7 18 shall not be determined by use of only one such factor. The 7 19 following shall not be taken into consideration: Special 7 20 value or use value of the property to its present owner, and 7 21 the goodwill or value of a business which uses the property as 7 22 distinguished from the value of the property as property. 7 23 However, in assessing property that is rented or leased to 7 24 low=income individuals and families as authorized by section 7 25 42 of the Internal Revenue Code, as amended, and which section 7 26 limits the amount that the individual or family pays for the 7 27 rental or lease of units in the property, the assessor shall 7 28 use the productive and earning capacity from the actual rents 7 29 received as a method of appraisal and shall take into account 7 30 the extent to which that use and limitation reduces the market 7 31 value of the property. The assessor shall not consider any 7 32 tax credit equity or other subsidized financing as income 7 33 provided to the property in determining the assessed value. 7 34 The property owner shall notify the assessor when property is 7 35 withdrawn from section 42 eligibility under the Internal 8 1 Revenue Code. The property shall not be subject to section 42 8 2 assessment procedures for the assessment year for which 8 3 section 42 eligibility is withdrawn. This notification must 8 4 be provided to the assessor no later than March 1 of the 8 5 assessment year or the owner will be subject to a penalty of 8 6 five hundred dollars for that assessment year. The penalty 8 7 shall be collected at the same time and in the same manner as 8 8 regular property taxes. However, in assessing property that 8 9 is qualified historic property, as defined in section 15E.192, 8 10 subsection 0A, which is located in a designated enterprise 8 11 zone, the assessor shall use the productive and earning 8 12 capacity of the property as the method of appraisal. Upon 8 13 adoption of uniform rules by the department of revenue or 8 14 succeeding authority covering assessments and valuations of 8 15 such properties, the valuation on such properties shall be 8 16 determined in accordance with such rules and in accordance 8 17 with forms and guidelines contained in the real property 8 18 appraisal manual prepared by the department as updated from 8 19 time to time for assessment purposes to assure uniformity, but 8 20 such rules, forms, and guidelines shall not be inconsistent 8 21 with or change the foregoing means of determining the actual, 8 22 market, taxable and assessed values. 8 23 Sec. 11. EFFECTIVE AND APPLICABILITY DATES. This Act, 8 24 being deemed of immediate importance, takes effect upon 8 25 enactment and applies as follows: 8 26 1. The sections of this Act amending sections 15E.192, 8 27 15E.193B, 15E.195, and 15E.196 apply to qualified historic 8 28 property where completion of rehabilitation occurs on or after 8 29 the effective date of this Act. 8 30 2. The sections of this Act amending sections 404A.1 and 8 31 404A.4 apply to fiscal years beginning on or after July 1, 8 32 2006. 8 33 3. The section of this Act amending section 422.7 applies 8 34 to tax years beginning on or after January 1, 2007. 8 35 4. The section of this Act amending section 441.21 applies 9 1 to assessment years beginning on or after January 1, 2007. 9 2 EXPLANATION 9 3 This bill relates to qualified historic property that is 50 9 4 years old, is either on the national register of historic 9 5 places or is eligible for such listing, and is located in a 9 6 designated enterprise zone. 9 7 The bill provides that upon approval by the local 9 8 enterprise zone commission and the department of economic 9 9 development, the owner or developer of the qualified historic 9 10 property that is used for business purposes is eligible to 9 11 receive an investment tax credit of up to 10 percent of the 9 12 rehabilitation costs related to the new jobs created by the 9 13 occupant business and a refund of state sales and use taxes 9 14 paid on materials and services used in the rehabilitation. If 9 15 the qualified historic property is used for residential 9 16 purposes, the owner or developer of the property is eligible 9 17 for an investment tax credit of up to 10 percent of the 9 18 rehabilitation costs related to the development of the 9 19 residential units and a refund of state sales and use taxes 9 20 paid on materials and services used in the rehabilitation. 9 21 The bill provides that for property tax purposes, qualified 9 22 historic property located in a designated enterprise zone is 9 23 to be assessed based on its productive and earning capacity. 9 24 The bill provides that under Code chapter 404A, the 9 25 limitations placed on the amount of historic preservation and 9 26 cultural and entertainment district tax credits do not apply 9 27 to the tax credits granted for qualified historic property 9 28 located in a designated enterprise zone. 9 29 The bill also provides an individual income tax deduction 9 30 of up to $2,000 for each of the first five tax years that a 9 31 taxpayer resides in a condominium located in a qualified 9 32 historic property located in a designated enterprise zone. 9 33 The bill takes effect upon enactment and has various 9 34 applicability date provisions. 9 35 LSB 5706SS 81 10 1 mg:rj/cf/24