H.F. 2438 Section 1. Section 423.2, subsection 11, Code Supplement 1 2011, is amended to read as follows: 2 11. a. All revenues arising under the operation of the 3 provisions of this section shall be deposited into the general 4 fund of the state. 5 b. Subsequent to the deposit into the general fund of the 6 state and after the transfer of such pursuant to paragraph “a” , 7 the department shall do the following in the order prescribed: 8 (1) Transfer the revenues collected under chapter 423B , the 9 department shall transfer . 10 (2) Transfer from the remaining revenues the amounts 11 required under Article VII, section 10, of the Constitution 12 of the State of Iowa to the natural resources and outdoor 13 recreation trust fund created in section 461.31, if applicable. 14 (3) Transfer one-sixth of such the remaining revenues to the 15 secure an advanced vision for education fund created in section 16 423F.2 . This paragraph subparagraph (3) is repealed December 17 31, 2029. 18 (4) Beginning the first day of the quarter following July 19 1, 2012, transfer to the qualified new Iowa business sales 20 tax rebate fund created under section 423.4, subsection 10, 21 paragraph “e” , that portion of the sales tax receipts collected 22 and remitted upon sales of tangible personal property or 23 services furnished by a qualified new Iowa business meeting the 24 qualifications of section 423.4, subsection 10, that remains 25 after the transfers required in subparagraphs (1), (2), and (3) 26 of this paragraph “b” . 27 Sec. 2. Section 423.4, Code Supplement 2011, is amended by 28 adding the following new subsection: 29 NEW SUBSECTION . 10. a. For purposes of this subsection: 30 (1) “Change of control” means any change in the ownership 31 of a qualified new Iowa business such that all the equity 32 interests in the qualified new Iowa business ceases to be owned 33 by individuals who are new business owners. 34 (2) “New business” includes any activity engaged in by 35 -1- LSB 5339YH (1) 84 mm/sc 1/ 5

H.F. 2438 any person or caused to be engaged in by the person with 1 the object of gain, benefit, or advantage, either direct or 2 indirect, which activity was not previously engaged in or 3 caused to be engaged in by that person before July 1, 2012. 4 This subparagraph shall not be construed to include activity 5 performed or caused to be performed by a person acting in the 6 capacity of an employee, or activity that meets the definition 7 of “casual sales” in section 423.3. 8 (3) “New business owner” means an individual who meets all 9 the following requirements: 10 (a) The individual acquires an equity interest in a new 11 business on or after July 1, 2012. 12 (b) The individual has not engaged in or caused to be 13 engaged in by the individual any activity with the objective 14 of gain, benefit, or advantage, either direct or indirect, 15 prior to the date on which the individual acquires the equity 16 interest in the new business. This subparagraph division shall 17 not be construed to include activity performed or caused to be 18 performed by a person acting in the capacity of an employee, or 19 activity that meets the definition of “casual sales” in section 20 423.3. 21 (4) “Qualified new Iowa business” means a new business 22 whose equity interests are all owned by new business owners 23 and whose commercial domicile, as defined in section 422.32, 24 is in this state, and includes a sole proprietorship, joint 25 venture, partnership, limited liability company, corporation, 26 association, or any other business entity operated for profit. 27 b. A qualified new Iowa business may apply to the department 28 for a rebate of sales tax imposed and collected by the 29 qualified new Iowa business upon sales of any tangible personal 30 property or services furnished to purchasers by the qualified 31 new Iowa business. 32 c. The rebate may be obtained only in the following amounts 33 and manner and only under the following conditions: 34 (1) The rebate shall be applied for on forms furnished 35 -2- LSB 5339YH (1) 84 mm/sc 2/ 5

H.F. 2438 by the department within the time period provided by the 1 department by rule, which time period shall not be longer than 2 quarterly. 3 (2) The qualified new Iowa business shall provide 4 information as deemed necessary by the department. 5 (3) The transactions for which sales tax was collected 6 and the rebate is sought occurred on or after the date the 7 qualified new Iowa business registers with the department and 8 is certified as a qualified new Iowa business pursuant to 9 paragraph “d” . However, not more than five hundred thousand 10 dollars in total rebates shall be provided pursuant to this 11 subsection for each qualified new Iowa business. 12 (4) Notwithstanding subparagraph (3), the rebate of sales 13 tax shall cease for transactions occurring on or after the date 14 of the change of control of the qualified new Iowa business. 15 d. To assist the department in determining taxpayers 16 eligible for the rebate, the owner of a business shall register 17 with the department as a qualified new Iowa business using the 18 forms and procedures prescribed by the department. If the 19 department determines that the business meets the definition of 20 a qualified new Iowa business, the department shall certify the 21 business as a qualified new Iowa business. 22 e. There is established within the state treasury under the 23 control of the department a qualified new Iowa business sales 24 tax rebate fund consisting of the amount of state sales tax 25 revenues transferred pursuant to section 423.2, subsection 11, 26 paragraph “b” , subparagraph (4). An account is created within 27 the fund for each qualified new Iowa business meeting the 28 qualifications of this subsection. Moneys in the fund shall 29 only be used to provide rebates of state sales tax pursuant 30 to this subsection, and only the state sales tax revenues in 31 the qualified new Iowa business sales tax rebate fund are 32 subject to rebate under this subsection. Any moneys in the 33 fund that represent state sales tax revenue for which the time 34 period in paragraph “c” for receiving a rebate has expired, 35 -3- LSB 5339YH (1) 84 mm/sc 3/ 5

H.F. 2438 or that otherwise represent state sales tax revenue that has 1 become ineligible for rebate pursuant to this subsection, shall 2 immediately revert to the general fund of the state. 3 f. Upon determining that the conditions and requirements 4 of this subsection and the department are met, the department 5 shall issue a warrant from the applicable account within the 6 qualified new Iowa business sales tax rebate fund to the 7 qualified new Iowa business in the amount claimed and verified 8 by the department. 9 EXPLANATION 10 This bill authorizes the department of revenue to rebate 11 sales tax collected by a qualified new Iowa business. 12 “Qualified new Iowa business” is defined as any new business 13 owned entirely by new business owners and whose commercial 14 domicile is located in this state. “New business” includes 15 any activity engaged in for the first time by a person after 16 July 1, 2012, with the object of gain, benefit, or advantage, 17 excluding activities performed as an employee or activities 18 that meet the definition of “casual sales” in Code section 19 423.3. “New business owners” are individuals that acquire an 20 equity interest in a new business and that have not previously 21 engaged in any activity with the object of gain, benefit, or 22 advantage, excluding activities performed as an employee or 23 activities that meet the definition of “casual sales” in Code 24 section 423.3. 25 The rebate of sales tax only applies to the sales tax 26 collected on transactions occurring on or after the date a 27 qualified new Iowa business registers with the department of 28 revenue and is certified as a qualified new Iowa business, and 29 shall only be paid from the qualified new Iowa business sales 30 tax rebate fund created in the bill. 31 The bill creates the qualified new Iowa business sales tax 32 rebate fund consisting of the remaining amount of state sales 33 tax revenue collected upon sales of tangible personal property 34 or services furnished by a qualified new Iowa business after 35 -4- LSB 5339YH (1) 84 mm/sc 4/ 5

H.F. 2438 subtracting the local option sales tax under Code chapter 1 423B, the natural resources and outdoor recreation trust 2 fund transfer pursuant to Article VII, section 10, of the 3 Constitution of the State of Iowa if applicable, and the secure 4 an advanced vision for education fund transfer pursuant to Code 5 section 423F.2. Rebates are paid only from this rebate fund 6 and are limited to the amounts in the fund. The total amount 7 that may be rebated from the fund for each qualified new Iowa 8 business is $500,000. 9 The rebate ceases for a qualified new Iowa business if 10 the business has an ownership change wherein all the equity 11 interests cease to be owned by new business owners. 12 -5- LSB 5339YH (1) 84 mm/sc 5/ 5