H.F. 2446 Section 1. Section 422.10, Code Supplement 2011, is amended 1 by adding the following new subsection: 2 NEW SUBSECTION . 4A. a. To receive the research 3 activities credit under this section, a taxpayer must 4 submit an application in the form and manner prescribed 5 by the department. If the taxpayer meets the criteria for 6 eligibility, the department shall issue to the taxpayer a 7 tax certificate for the research activities credit. The 8 certificate shall contain the taxpayer’s name, address, tax 9 identification number, the amount of the credit, the tax year 10 for which the certificate applies, and an expiration date for 11 the certificate. The tax certificates are nontransferable. 12 The taxpayer must file the tax certificate with the taxpayer’s 13 income tax return in order to claim the tax credit. The 14 department shall not issue for any one fiscal year an aggregate 15 amount of tax credits in excess of the following amounts: 16 (1) For the fiscal year beginning on July 1, 2013, two 17 million four hundred sixteen thousand one hundred seventy-seven 18 dollars. 19 (2) For the fiscal year beginning on July 1, 2014, two 20 million three hundred forty-three thousand six hundred 21 ninety-two dollars. 22 (3) For the fiscal year beginning on July 1, 2015, two 23 million two hundred seventy-one thousand two hundred seven 24 dollars. 25 (4) For the fiscal year beginning on July 1, 2016, two 26 million one hundred ninety-eight thousand seven hundred 27 twenty-two dollars. 28 (5) For the fiscal year beginning on July 1, 2017, 29 two million one hundred twenty-six thousand two hundred 30 thirty-seven dollars. 31 (6) For the fiscal year beginning on July 1, 2018, and for 32 each fiscal year thereafter, two million fifty-three thousand 33 seven hundred fifty-two dollars. 34 b. If the total tax credits claimed under this section 35 -1- LSB 5237YH (4) 84 mm/sc 1/ 5

H.F. 2446 in any fiscal year exceeds the applicable amount in this 1 subsection, the department shall reduce in a prorated fashion 2 all credit claims which exceed the median claim until the 3 total tax credit claims equal the applicable amount in this 4 subsection or until no taxpayer has a claim that exceeds the 5 median claim, whichever occurs first. After that reduction, if 6 the total tax credit claims still exceed the applicable amount 7 in this subsection, the department shall reduce in a prorated 8 fashion all credit claims until the total tax credit claims 9 equal the applicable amount in this subsection. For purposes 10 of this paragraph “b” , the prorated reduction amount on a claim 11 shall be in the same proportion that the amount of the claim 12 bears to the total amount of claims being reduced. 13 c. The department shall adopt rules pursuant to chapter 17A 14 to administer this subsection. 15 Sec. 2. Section 422.10, subsection 6, Code Supplement 2011, 16 is amended to read as follows: 17 6. The department shall by February 15 of each year issue 18 an annual report to the general assembly containing the total 19 amount of all claims made by employers and allowed by the 20 department under this section and the portion of the claims 21 issued as refunds, for all claims processed during the previous 22 calendar year. The report shall contain the name of each 23 claimant for whom a tax credit in excess of five hundred 24 thousand dollars was issued and the amount of the credit 25 received. 26 Sec. 3. Section 422.33, subsection 5, Code Supplement 2011, 27 is amended by adding the following new paragraph: 28 NEW PARAGRAPH . 0e. (1) To receive the research 29 activities credit under this subsection, a taxpayer must 30 submit an application in the form and manner prescribed 31 by the department. If the taxpayer meets the criteria for 32 eligibility, the department shall issue to the taxpayer a 33 tax certificate for the research activities credit. The 34 certificate shall contain the taxpayer’s name, address, tax 35 -2- LSB 5237YH (4) 84 mm/sc 2/ 5

H.F. 2446 identification number, the amount of the credit, the tax year 1 for which the certificate applies, and an expiration date for 2 the certificate. The tax certificates are nontransferable. 3 The taxpayer must file the tax certificate with the taxpayer’s 4 income tax return in order to claim the tax credit. The 5 department shall not issue for any one fiscal year an aggregate 6 amount of tax credits in excess of the following amounts: 7 (a) For the fiscal year beginning on July 1, 2013, thirty 8 million one hundred twenty-five thousand one hundred sixty-six 9 dollars. 10 (b) For the fiscal year beginning on July 1, 2014, 11 twenty-nine million two hundred twenty-one thousand four 12 hundred eleven dollars. 13 (c) For the fiscal year beginning on July 1, 2015, 14 twenty-eight million three hundred seventeen thousand six 15 hundred fifty-six dollars. 16 (d) For the fiscal year beginning on July 1, 2016, 17 twenty-seven million four hundred thirteen thousand nine 18 hundred one dollars. 19 (e) For the fiscal year beginning on July 1, 2017, 20 twenty-six million five hundred ten thousand one hundred 21 forty-six dollars. 22 (f) For the fiscal year beginning on July 1, 2018, and for 23 each fiscal year thereafter, twenty-five million six hundred 24 six thousand three hundred ninety-one dollars. 25 (2) If the total tax credits claimed under this paragraph in 26 any fiscal year exceed the applicable amount in this paragraph, 27 the department shall reduce in a prorated fashion all credit 28 claims which exceed the median claim until the total tax 29 credit claims equal the applicable amount in this paragraph or 30 until no taxpayer has a claim that exceeds the median claim, 31 whichever occurs first. After that reduction, if the total 32 tax credit claims still exceed the applicable amount in this 33 paragraph, the department shall reduce in a prorated fashion 34 all credit claims until the total tax credit claims equal the 35 -3- LSB 5237YH (4) 84 mm/sc 3/ 5

H.F. 2446 applicable amount in this paragraph. For purposes of this 1 subparagraph (2), the prorated reduction amount on a claim 2 shall be in the same proportion that the amount of the claim 3 bears to the total amount of claims being reduced. 4 (3) The department shall adopt rules pursuant to chapter 17A 5 to administer this paragraph. 6 Sec. 4. Section 422.33, subsection 5, paragraph h, Code 7 Supplement 2011, is amended to read as follows: 8 h. The department shall by February 15 of each year issue 9 an annual report to the general assembly containing the 10 total amount of all claims made by employers and allowed by 11 the department under this subsection and the portion of the 12 claims issued as refunds, for all claims processed during the 13 previous calendar year. The report shall contain the name of 14 each claimant for whom a tax credit in excess of five hundred 15 thousand dollars was issued and the amount of the credit 16 received. 17 Sec. 5. APPLICABILITY. This Act applies to tax years 18 beginning on or after January 1, 2013. 19 EXPLANATION 20 This bill relates to the research activities credit for the 21 individual and corporate income tax. Under current law, the 22 credit is an automatic credit and not capped at any certain 23 amount. The bill amends the credit to make it subject to award 24 by the department of revenue and limited to a certain aggregate 25 total each fiscal year. To receive a research activities 26 credit, a taxpayer must now submit an application to the 27 department of revenue, receive a tax certificate, and file the 28 certificate with the taxpayer’s income tax return. 29 The department is not allowed to issue for any one fiscal 30 year an aggregate amount of tax credits that exceed a certain 31 amount. For the fiscal year beginning on July 1, 2013, the 32 credits are capped at the total credit claims made in the 2009 33 tax year, then reduced a total of 15 percent over the next five 34 fiscal years. 35 -4- LSB 5237YH (4) 84 mm/sc 4/ 5

H.F. 2446 For the individual tax credit the amount of the cap is: 1 1. $2,416,177 for fiscal year 2013-2014. 2 2. $2,343,692 for fiscal year 2014-2015. 3 3. $2,271,207 for fiscal year 2015-2016. 4 4. $2,198,722 for fiscal year 2016-2017. 5 5. $2,126,237 for fiscal year 2017-2018. 6 6. $2,053,752 for fiscal year 2018-2019, and for each fiscal 7 year thereafter. 8 For the corporate tax credit the amount of the cap is: 9 1. $30,125,166 for fiscal year 2013-2014. 10 2. $29,221,411 for fiscal year 2014-2015. 11 3. $28,317,656 for fiscal year 2015-2016. 12 4. $27,413,901 for fiscal year 2016-2017. 13 5. $26,510,146 for fiscal year 2017-2018. 14 6. $25,606,391 for fiscal year 2018-2019, and for each 15 fiscal year thereafter. 16 If the total tax credit claims for a fiscal year exceed 17 the applicable cap, the department shall reduce in a prorated 18 fashion all credit claims which exceed the median claim until 19 the total credit claims equal the applicable cap, or until no 20 taxpayer has a claim that exceeds the median claim, whichever 21 occurs first. After that reduction, if the total tax credit 22 claims still exceed the applicable cap, the department shall 23 reduce in a prorated fashion all credit claims until the total 24 credit claims equal the applicable cap. 25 The bill applies to tax years beginning on or after January 26 1, 2013. 27 -5- LSB 5237YH (4) 84 mm/sc 5/ 5