Senate File 2258 - Introduced SENATE FILE BY WIECK, WARNSTADT, HOUSER, ZIEMAN, SEYMOUR, BRUNKHORST, SHULL, LAMBERTI, JOHNSON, and COURTNEY Passed Senate, Date Passed House, 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: 4 TLSB 5535XS 81 5 mg/je/5 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 commercial, professional services, 1 6 or industrial enterprise, including medical treatment 1 7 facilities, manufacturing facilities, corporate headquarters, 1 8 and research facilities. "Business" does not include a 1 9 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 the largest city in a county 1 18 with a population of at least ninety=five thousand but not 1 19 more than one hundred ten thousand residents or the largest 1 20 city in a county with a population of at least eighty=one 1 21 thousand but not more than eighty=eight thousand five hundred 1 22 residents. The population figures are based upon the 2000 1 23 certified federal census. 1 24 e. "Qualifying investment" means a capital investment in 1 25 real property including the purchase price of land and 1 26 existing buildings, site preparation, building construction, 1 27 and long=term lease costs. "Qualifying investment" also means 1 28 a capital investment in depreciable assets. 1 29 f. "Targeted job" means a job in a business which is or 1 30 will be located in an urban renewal area of a pilot project 1 31 city that pays a wage at least equal to the countywide average 1 32 wage. "Targeted job" does not include jobs that formerly 1 33 existed in the business in this state unless the business is 1 34 considering in good faith to relocate outside this state or 1 35 unless the relocation is related to an expansion which will 2 1 generate significant new job creation. 2 2 g. "Withholding agreement" means the agreement between a 2 3 pilot project city and an employer concerning the targeted 2 4 jobs withholding credit authorized in subsection 2. 2 5 2. a. A pilot project city may provide by ordinance for 2 6 the deposit into a designated account in the special fund 2 7 described in section 403.19, subsection 2, of the targeted 2 8 jobs withholding credit described in this section. The 2 9 targeted jobs withholding credit shall be based upon the wages 2 10 paid to employees pursuant to a withholding agreement. 2 11 b. An amount equal to three percent of the gross wages 2 12 paid by an employer to each employee under a withholding 2 13 agreement shall be credited from the payment made by the 2 14 employer pursuant to section 422.16. If the amount of the 2 15 withholding by the employer is less than three percent of the 2 16 gross wages paid to the employees covered by the withholding 2 17 agreement, the employer shall receive a credit against other 2 18 withholding taxes due by the employer or may carry the credit 2 19 forward for up to ten years or until depleted, whichever is 2 20 the earlier. The employer shall remit the amount of the 2 21 credit quarterly, in the same manner as withholding payments 2 22 are reported to the department of revenue, to the pilot 2 23 project city to be allocated to and when collected paid into a 2 24 designated account in the special fund for the urban renewal 2 25 area in which the targeted jobs are located. All amounts so 2 26 deposited shall be used or pledged by the pilot project city 2 27 for an urban renewal project related to the employer pursuant 2 28 to the withholding agreement. 2 29 c. (1) The pilot project city shall enter into a 2 30 withholding agreement with each employer concerning the 2 31 targeted jobs withholding credit. However, an agreement shall 2 32 not be entered into by a pilot project city with a business 2 33 currently located in this state unless the business either 2 34 creates ten new jobs or makes a qualifying investment of at 2 35 least five hundred thousand dollars within the urban renewal 3 1 area. The withholding agreement may have a term of up to ten 3 2 years. However, the agreement may provide for the extension 3 3 of the agreement for up to an additional ten years or until 3 4 the debt for which the designated account in the special fund 3 5 was established is paid off or is refinanced, or the project 3 6 for which the designated account is established is completed, 3 7 whichever is the earlier. An employer shall not be obligated 3 8 to enter into a withholding agreement. 3 9 (2) The pilot project city shall not enter into a 3 10 withholding agreement after June 30, 2010, except in the case 3 11 of an extension of a previously existing agreement as provided 3 12 in subparagraph (1). 3 13 d. (1) The employer shall certify to the department of 3 14 revenue that the targeted jobs withholding credit is in 3 15 accordance with the withholding agreement and shall provide 3 16 other information the department may require. Notice of any 3 17 withholding agreement shall be provided promptly to the 3 18 department of revenue following its execution by the pilot 3 19 project city and the employer. 3 20 (2) Following termination of the withholding agreement, 3 21 the employer credits shall cease and any money received by the 3 22 pilot project city after termination shall be remitted to the 3 23 treasurer of state to be deposited into the general fund of 3 24 the state. Notice shall be provided promptly to the 3 25 department of revenue following termination. 3 26 e. A pilot project city shall certify to the department of 3 27 revenue the amount of the targeted jobs withholding credit an 3 28 employer has remitted to the city and shall provide other 3 29 information the department may require. 3 30 f. An employee whose wages are subject to a withholding 3 31 agreement shall receive full credit for the amount withheld as 3 32 provided in section 422.16. 3 33 g. An employer may participate in a new jobs credit from 3 34 withholding under section 260E.5 or a supplemental new jobs 3 35 credit from withholding under section 15E.197 or section 4 1 15.331, Code 2005, at the same time as the employer is 4 2 participating in the withholding credit under this section. 4 3 Notwithstanding any other provision in this section, the new 4 4 jobs credit from withholding under section 260E.5 and the 4 5 supplemental new jobs credit from withholding under section 4 6 15E.197 or section 15.331, Code 2005, shall be collected and 4 7 disbursed prior to the withholding credit under this section. 4 8 h. At the time of submitting its budget to the department 4 9 of management, the pilot project city shall submit to the 4 10 department of management and the department of economic 4 11 development a description of the activities involving the use 4 12 of withholding agreements. The description shall include, but 4 13 is not limited to, the following: 4 14 (1) The total number of targeted jobs and a breakdown as 4 15 to those that are Iowa business expansions or retentions and 4 16 those that are jobs resulting from out=of=state businesses 4 17 moving to or expanding in Iowa. 4 18 (2) The number of withholding agreements and the amount of 4 19 withholding credits involved. 4 20 (3) The types of businesses that entered into the 4 21 agreements, and the types of businesses that declined the 4 22 city's proposal to enter into the agreement. 4 23 EXPLANATION 4 24 This bill allows two pilot project cities to assist in 4 25 funding projects in their urban renewal areas by means of a 4 26 targeted jobs credit from withholding. This credit is 4 27 available to businesses that are or will locate in an urban 4 28 renewal area. Businesses already located in the area must 4 29 either create 10 new jobs or make at least $500,000 in capital 4 30 investment within the area. The credit is 3 percent of the 4 31 amount of gross wages paid to the employees of the targeted 4 32 jobs by the business. The credit is paid to the pilot project 4 33 city to be used to pay for debts incurred or assistance 4 34 provided by the city for urban renewal projects related to the 4 35 business in the urban renewal area. Presently, property tax 5 1 imposed on the increase in value as a result of the business's 5 2 arrival is used to provide such financing. The withholding 5 3 credit is available to each targeted job of the business in 5 4 the area provided the job's wage is equal to at least the 5 5 average county wage. A withholding agreement shall not be 5 6 entered into after June 30, 2010, unless it is an extension of 5 7 a previous agreement. 5 8 The two pilot project cities are the largest city located 5 9 in a county with a population of 95,000 to 110,000 and the 5 10 largest city located in a county with a population of 81,000 5 11 to 88,500. 5 12 LSB 5535XS 81 5 13 mg:rj/je/5