Senate File 2143 - Introduced SENATE FILE 2143 BY CHELGREN A BILL FOR An Act relating to the liquidation of the Iowa fund of funds 1 and creating an exemption from the computation of the state 2 individual income tax of income from an equity investment in 3 a qualified Iowa business and including effective date and 4 retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5425XS (2) 84 mm/sc

S.F. 2143 DIVISION I 1 LIQUIDATION OF THE IOWA FUND OF FUNDS 2 Section 1. Section 15E.65, subsection 2, paragraph h, Code 3 2011, is amended to read as follows: 4 h. Fifty years after the organization of the Iowa fund of 5 funds After the effective date of this Act , the Iowa capital 6 investment corporation shall stop accepting new designated 7 investors in the Iowa fund of funds and shall cause the 8 Iowa fund of funds to be liquidated with all of its assets 9 distributed to its owners in accordance with the provisions 10 of its organizational documents. The liquidation shall 11 be completed as soon as legally and economically feasible, 12 but done in such a manner as to minimize the administrative 13 expenses, penalties, and investment losses which may result 14 from liquidation. The Iowa capital investment corporation 15 shall notify the economic development authority when 16 liquidation of the Iowa fund of funds is complete. 17 Sec. 2. Section 15E.66, Code 2011, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 8. The board shall not issue new 20 certificates and related tax credits after the effective date 21 of this Act. This subsection shall not apply to certificates 22 and related tax credits issued pursuant to this section 23 prior to the effective date of this Act, and nothing in this 24 subsection shall be construed as a restriction on the right 25 or ability of a taxpayer or transferee to claim, redeem, or 26 transfer a certificate or tax credit that was issued before the 27 effective date of this Act. 28 Sec. 3. EFFECTIVE UPON ENACTMENT. This division of this 29 Act, being deemed of immediate importance, takes effect upon 30 enactment. 31 DIVISION II 32 INCOME TAX EXEMPTION FOR EQUITY INVESTMENT 33 IN QUALIFIED IOWA CORPORATION 34 Sec. 4. Section 422.7, Code Supplement 2011, is amended by 35 -1- LSB 5425XS (2) 84 mm/sc 1/ 3

S.F. 2143 adding the following new subsection: 1 NEW SUBSECTION . 57. a. Subtract, to the extent included, 2 income from, or net capital gain from the sale of, an equity 3 investment in a qualified Iowa business. 4 b. In order to be eligible for the deduction in paragraph 5 “a” , the taxpayer must be a resident of this state and must not 6 claim a tax credit pursuant to section 422.11Q in the same tax 7 year as this deduction. 8 c. For purposes of this subsection: 9 (1) “Equity investment” means an equity interest in a 10 business, which equity interest was received in exchange for 11 a capital contribution or payment in the form of cash, real 12 property, or tangible personal property. 13 (2) “Qualified Iowa business” means a business whose 14 commercial domicile, as defined in section 422.32, is 15 in this state, and includes a sole proprietorship, joint 16 venture, partnership, limited liability company, corporation, 17 association, or any other business entity operated for profit. 18 Sec. 5. EFFECTIVE UPON ENACTMENT. This division of this 19 Act, being deemed of immediate importance, takes effect upon 20 enactment. 21 Sec. 6. RETROACTIVE APPLICABILITY. This division of this 22 Act applies retroactively to January 1, 2012, for tax years 23 beginning on or after that date. 24 EXPLANATION 25 This bill relates to the liquidation of the Iowa fund of 26 funds and the creation of an individual income tax exemption. 27 Division I relates to the liquidation of the Iowa fund of 28 funds. 29 The division amends Code section 15E.65 to provide that 30 the Iowa capital investment corporation shall stop accepting 31 new designated investors in the Iowa fund of funds after the 32 effective date of the bill and shall cause the Iowa fund of 33 funds to be liquidated. The liquidation is to be completed as 34 soon as legally and economically feasible, but done in such a 35 -2- LSB 5425XS (2) 84 mm/sc 2/ 3

S.F. 2143 manner as to minimize the administrative expenses, penalties, 1 and investment losses which may result from liquidation. 2 The division also amends Code section 15E.65 to provide that 3 no new tax credit certificates related to the Iowa fund of 4 funds shall be issued after the effective date of the bill. 5 Division I takes effect upon enactment. 6 Division II relates to the creation of an individual income 7 tax exemption. 8 The division exempts from the computation of net income 9 for the individual income tax all income from, or net capital 10 gain from the sale of, an equity investment in a qualified 11 Iowa business. “Equity investment” is defined as an equity 12 interest in a business that was received in exchange for a 13 capital contribution or payment in the form of cash, real 14 property, or tangible personal property. “Qualified Iowa 15 business” is defined as any business operated for profit whose 16 commercial domicile is in Iowa. In order to be eligible for 17 this exemption, a taxpayer must be a resident of Iowa and must 18 not claim the Iowa fund of funds tax credit provided in Code 19 section 422.11Q. The division takes effect upon enactment 20 and applies retroactively to January 1, 2012, for tax years 21 beginning on or after that date. 22 -3- LSB 5425XS (2) 84 mm/sc 3/ 3