House File 246 - Introduced HOUSE FILE BY WISE Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act establishing a tax credit certificate transfer program. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2053HH 82 4 tm/gg/14 PAG LIN 1 1 Section 1. NEW SECTION. 421.58 SALE OR TRANSFER OF NET 1 2 OPERATING LOSS CARRYOVER. 1 3 1. As used in this section, unless the context otherwise 1 4 requires: 1 5 a. "Biotechnology enterprise" means the same as defined in 1 6 section 15E.202. 1 7 b. "Department" means the department of revenue. 1 8 c. "Net operating loss" means the same as defined in 1 9 section 172 of the Internal Revenue Code. "Net operating 1 10 loss" may include up to a maximum salary allocation of one 1 11 hundred thirty percent of the average annual county wage. 1 12 d. "Targeted industry business" means the same as defined 1 13 in section 15E.223. 1 14 2. The department shall establish and administer a tax 1 15 credit certificate transfer program for purposes of allowing a 1 16 biotechnology enterprise or a targeted industry business with 1 17 twenty or fewer employees to transfer a tax credit certificate 1 18 to another taxpayer in return for private financial assistance 1 19 for a net operating loss carryover. 1 20 3. A biotechnology enterprise or a targeted industry 1 21 business with twenty or fewer employees that has a net 1 22 operating loss carryover in a single tax year may apply to the 1 23 department for the issuance of a tax credit certificate in the 1 24 amount of the loss carryover for sale under this section to a 1 25 qualifying, nonaffiliated business. Upon the department's 1 26 approval of an application, a tax credit certificate shall be 1 27 issued containing the taxpayer's name, address, tax 1 28 identification number, the amount of the tax credit, and other 1 29 information required by the department. The proceeds from the 1 30 sale of a tax credit shall be used by the biotechnology 1 31 enterprise or targeted industry business for expenses 1 32 including but not limited to the expenses of fixed assets such 1 33 as the acquisition, development, and construction of real 1 34 property, materials, salaries, and research and development 1 35 expenditures. 2 1 4. A taxpayer willing to enter into an agreement to 2 2 receive a tax credit certificate from a biotechnology 2 3 enterprise or a targeted industry business in exchange for 2 4 providing private financial assistance shall submit an 2 5 application to the department. The application to receive a 2 6 tax credit certificate shall identify the amount of private 2 7 financial assistance that the applicant is willing to provide 2 8 in exchange for a tax credit certificate. 2 9 5. A taxpayer willing to provide private financial 2 10 assistance to a biotechnology enterprise or targeted industry 2 11 business in exchange for a tax credit certificate may use the 2 12 amount of the tax credit transferred against the taxes imposed 2 13 under chapter 422, division II, III, or V, or chapter 432 for 2 14 any tax year the original transferor could have claimed the 2 15 net operating loss carryover. Any consideration received for 2 16 the transfer of the tax credit shall not be included as income 2 17 under chapter 422, division II, III, or V. Any consideration 2 18 paid for the transfer of a tax credit under this section shall 2 19 not be deducted from income under chapter 422, division II, 2 20 III, or V. Any tax credit in excess of the tax liability for 2 21 the tax year may be credited to the tax liability for the 2 22 following seven years or until depleted, whichever occurs 2 23 first. 2 24 6. The department shall adopt rules pursuant to chapter 2 25 17A to establish the procedures for the application, review, 2 26 selection, issuance, and transfer of tax credit certificates 2 27 and to provide for the method to be used to determine for 2 28 which fiscal year the tax credits are available. 2 29 7. The department or a designee shall match applications 2 30 submitted under this section in a manner that can best 2 31 stimulate and encourage the extension of private financial 2 32 assistance to biotechnology enterprises or targeted industry 2 33 businesses in the state. As part of approving an application, 2 34 the department shall require all of the following from 2 35 applicants: 3 1 a. A written agreement concerning the terms and conditions 3 2 of providing private financial assistance in exchange for a 3 3 tax credit certificate issued pursuant to this section. 3 4 b. Private financial assistance supplied by a taxpayer 3 5 must be equal to at least seventy=five percent of the value of 3 6 the tax credit certificate issued pursuant to this section. 3 7 c. Private financial assistance received under this 3 8 section shall be used for the operation or expansion of a 3 9 biotechnology enterprise or a targeted industry business. 3 10 8. The total amount of tax credits that may be approved 3 11 for a fiscal year under this section shall not exceed five 3 12 million dollars. A biotechnology enterprise or a targeted 3 13 industry business shall not receive more than five hundred 3 14 thousand dollars in any fiscal year of private financial 3 15 assistance under the program. Tax credits issued under this 3 16 section shall not be prorated. 3 17 9. A biotechnology enterprise or a targeted industry 3 18 business receiving private financial assistance under the 3 19 program shall not receive a wage=benefits tax credit under 3 20 section 15I.2. 3 21 EXPLANATION 3 22 This bill establishes a tax credit certificate transfer 3 23 program. 3 24 The bill requires the department of revenue to establish 3 25 and administer a tax credit certificate transfer program for 3 26 purposes of allowing a biotechnology enterprise or a targeted 3 27 industry business with 20 or fewer employees to transfer a tax 3 28 credit certificate to another taxpayer in return for private 3 29 financial assistance for a net operating loss carryover. 3 30 The bill allows a biotechnology enterprise or a targeted 3 31 industry business with 20 or fewer employees that has a net 3 32 operating loss carryover in a single tax year to apply to the 3 33 department for the issuance of a tax credit certificate in the 3 34 amount of the loss carryover for sale under the bill to a 3 35 qualifying, nonaffiliated business. The bill provides that 4 1 private financial assistance is to be used for expenses 4 2 including but not limited to the expenses of fixed assets such 4 3 as the acquisition, development, and construction of real 4 4 property, materials, salaries, and research and development 4 5 expenditures. 4 6 The bill requires that a taxpayer willing to provide 4 7 private financial assistance shall submit an application to 4 8 the department identifying the amount of private financial 4 9 assistance that the applicant is willing to provide. 4 10 The bill provides that tax credits transferred under the 4 11 program may be used against personal and corporate income 4 12 taxes, against the franchise tax for financial institutions, 4 13 and against the insurance premium tax. The bill provides that 4 14 any consideration received for the transfer of a tax credit 4 15 shall not be considered income and any consideration paid for 4 16 the transfer shall not be deducted from income. The bill 4 17 allows any tax credit in excess of the tax liability for the 4 18 tax year to be credited to the tax liability for the following 4 19 seven years or until depleted, whichever occurs first. 4 20 The bill requires the department to match applications 4 21 submitted under the program in a manner that can best 4 22 stimulate and encourage the extension of private financial 4 23 assistance in the state. 4 24 The bill provides that the total amount of tax credits that 4 25 may be approved for transfer under the program for a fiscal 4 26 year shall not exceed $5 million and a biotechnology 4 27 enterprise or a targeted industry business shall not receive 4 28 more than $500,000 in any fiscal year of private financial 4 29 assistance under the program. 4 30 The bill prohibits a biotechnology enterprise or a targeted 4 31 industry business that receives private financial assistance 4 32 under the program from receiving a wage=benefits tax credit 4 33 under Code section 15I.2. 4 34 LSB 2053HH 82 4 35 tm:rj/gg/14.1