Senate File 2342 - Introduced SENATE FILE 2342 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 3204) A BILL FOR An Act relating to state taxation by providing specified tax 1 credits for the construction and installation of solar 2 energy systems and geothermal heat pumps, modifying sales 3 and use tax provisions related to property purchased for 4 resale, and creating a sales tax exemption for certain items 5 purchased for use in providing vehicle wash and wax services 6 and including effective date and retroactive and other 7 applicability provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 6139SV (3) 84 mm/sc
S.F. 2342 DIVISION I 1 GEOTHERMAL HEAT PUMP TAX CREDITS 2 Section 1. NEW SECTION . 422.11I Geothermal heat pump tax 3 credit. 4 The taxes imposed under this division, less the credits 5 allowed under section 422.12, shall be reduced by a geothermal 6 heat pump tax credit equal to twenty percent of the federal 7 residential energy efficient property tax credit allowed for 8 geothermal heat pumps provided in section 25(D)(a)(5) of the 9 Internal Revenue Code for residential property located in Iowa. 10 Any credit in excess of the tax liability is not refundable 11 but the excess for the tax year may be credited to the tax 12 liability for the following ten years or until depleted, 13 whichever is earlier. The director of revenue shall adopt 14 rules to implement this section. 15 Sec. 2. Section 427.1, Code Supplement 2011, is amended by 16 adding the following new subsection: 17 NEW SUBSECTION . 38. Geothermal heating and cooling system. 18 a. The value added by any new or refitted construction or 19 installation of a geothermal heating or cooling system on or 20 after July 1, 2012, on property classified as residential. 21 The exemption shall be allowed for ten consecutive years. 22 The exemption shall apply to any value added by the addition 23 of mechanical, electrical, plumbing, ductwork, or other 24 equipment, labor, and expenses included in or required for the 25 construction or installation of the geothermal system, as well 26 as the proportionate value of any well field associated with 27 the system and attributable to the owner. 28 b. A person claiming an exemption under this subsection 29 shall obtain the appropriate forms from the assessor. The 30 forms shall be prescribed by the director of revenue. The 31 claim shall be filed no later than February 1 of the first 32 assessment year the exemption is requested and shall contain 33 information pertaining to all costs and other information 34 associated with construction and installation of the system. 35 -1- LSB 6139SV (3) 84 mm/sc 1/ 7
S.F. 2342 Once the exemption is allowed, the exemption shall continue to 1 be allowed for ten consecutive years without further filing as 2 long as the property continues to be classified as residential 3 property. 4 c. The director shall adopt rules to implement this 5 subsection. 6 Sec. 3. IMPLEMENTATION. Section 25B.7 does not apply to the 7 property tax exemption enacted in this division of this Act. 8 Sec. 4. EFFECTIVE UPON ENACTMENT. This division of this 9 Act, being deemed of immediate importance, takes effect upon 10 enactment. 11 Sec. 5. RETROACTIVE APPLICABILITY. The following provision 12 or provisions of this division of this Act apply retroactively 13 to January 1, 2012, for tax years beginning on or after that 14 date: 15 1. The section of this division of this Act enacting section 16 422.11I. 17 Sec. 6. APPLICABILITY. The following provision or 18 provisions of this division of this Act apply to assessment 19 years beginning on or after January 1, 2013: 20 1. The section of this division of this Act enacting section 21 427.1, subsection 38. 22 DIVISION II 23 SOLAR ENERGY SYSTEM TAX CREDITS 24 Sec. 7. NEW SECTION . 422.11L Solar energy system tax 25 credits. 26 1. The taxes imposed under this division, less the credits 27 allowed under section 422.12, shall be reduced by a solar 28 energy system tax credit equal to the sum of the following: 29 a. Twenty-five percent of the federal residential energy 30 efficient property credit related to solar energy provided in 31 section 25D of the Internal Revenue Code, not to exceed three 32 thousand dollars. 33 b. Twenty-five percent of the federal energy credit related 34 to solar energy systems provided in section 48 of the Internal 35 -2- LSB 6139SV (3) 84 mm/sc 2/ 7
S.F. 2342 Revenue Code, not to exceed fifteen thousand dollars. 1 2. Any credit in excess of the tax liability is not 2 refundable but the excess for the tax year may be credited 3 to the tax liability for the following ten years or until 4 depleted, whichever is earlier. The director of revenue shall 5 adopt rules to implement this section. 6 3. a. An individual may claim the tax credit allowed a 7 partnership, limited liability company, S corporation, estate, 8 or trust electing to have the income taxed directly to the 9 individual. The amount claimed by the individual shall be 10 based upon the pro rata share of the individual’s earnings of 11 the partnership, limited liability company, S corporation, 12 estate, or trust. 13 b. A taxpayer who is eligible to claim a credit under this 14 section shall not be eligible to claim a renewable energy tax 15 credit under chapter 476C. 16 4. The cumulative value of tax credits claimed annually 17 by applicants pursuant to this section shall not exceed one 18 million five hundred thousand dollars. 19 5. On or before January 1, annually, the department shall 20 submit a written report to the governor and the general 21 assembly regarding the number and value of tax credits claimed 22 under this section, and any other information the department 23 may deem relevant and appropriate. 24 Sec. 8. Section 422.33, Code 2011, is amended by adding the 25 following new subsection: 26 NEW SUBSECTION . 29. a. The taxes imposed under this 27 division shall be reduced by a solar energy system tax credit 28 equal to twenty-five percent of the federal energy credit 29 related to solar energy systems provided in section 48 of the 30 Internal Revenue Code, not to exceed fifteen thousand dollars. 31 b. The taxpayer may claim the credit pursuant to this 32 subsection according to the same requirements, conditions, and 33 limitations as provided pursuant to section 422.11L. 34 Sec. 9. Section 476C.2, Code Supplement 2011, is amended by 35 -3- LSB 6139SV (3) 84 mm/sc 3/ 7
S.F. 2342 adding the following new subsection: 1 NEW SUBSECTION . 3. A taxpayer who is eligible to claim 2 a renewable energy tax credit under this chapter shall not 3 be eligible to claim a solar energy system tax credit under 4 section 422.11L or 422.33. 5 Sec. 10. EFFECTIVE UPON ENACTMENT. This division of this 6 Act, being deemed of immediate importance, takes effect upon 7 enactment. 8 Sec. 11. RETROACTIVE APPLICABILITY. This division of this 9 Act applies retroactively to tax years beginning on or after 10 January 1, 2012. 11 DIVISION III 12 SALES TAX EXEMPTIONS 13 Sec. 12. Section 423.1, subsection 39, paragraphs b and c, 14 Code Supplement 2011, are amended to read as follows: 15 b. The property is transferred to the user of the service 16 in connection with the performance of the service in a form 17 or quantity capable of a fixed or definite price value , or 18 the property is entirely consumed in connection with the 19 performance of an auto body repair service purchased by the 20 ultimate user . 21 c. The sale is evidenced by a separate charge for the 22 identifiable piece of property unless the property is entirely 23 consumed in connection with the performance of an auto body 24 repair service purchased by the ultimate user . 25 Sec. 13. Section 423.3, Code Supplement 2011, is amended by 26 adding the following new subsection: 27 NEW SUBSECTION . 96. The sales price from the sale of water, 28 electricity, chemicals, solvents, sorbents, or reagents to a 29 retailer to be used in providing a service that includes a 30 vehicle wash and wax, which vehicle wash and wax service is 31 subject to section 423.2, subsection 6. 32 Sec. 14. EFFECTIVE UPON ENACTMENT. This division of this 33 Act, being deemed of immediate importance, takes effect upon 34 enactment. 35 -4- LSB 6139SV (3) 84 mm/sc 4/ 7
S.F. 2342 EXPLANATION 1 This bill relates to state taxation by providing specified 2 tax credits and sales and use tax exemptions. 3 Division I provides an income tax credit and property tax 4 exemption for the construction or installation of a geothermal 5 heating or cooling system in connection with residential 6 property located in Iowa. 7 The division provides for an income tax credit for 8 such installations equal to twenty percent of the federal 9 residential energy efficiency property income tax credit 10 allowed for geothermal heat pumps. The division states that 11 any credit in excess of tax liability is not refundable but may 12 be credited to the tax liability for the following 10 years or 13 until depleted, whichever is earlier. 14 The division additionally provides for a property tax 15 exemption equal to the value added by any new or refitted 16 construction or installation of a geothermal heating or cooling 17 system on or after July 1, 2012. The division states that 18 the exemption shall be allowed for 10 consecutive years, and 19 shall apply to any value added by the addition of mechanical, 20 electrical, plumbing, ductwork, or other equipment, labor, 21 and expenses included in or required for the construction or 22 installation of the system, as well as the proportionate value 23 of any well field associated with the system and attributable 24 to the owner. The division specifies procedures regarding 25 claiming the exemption. 26 The division provides for the adoption of rules by the 27 director of the department of revenue, and states that Code 28 section 25B.7, regarding full state funding of property 29 tax credits or exemptions, shall not be applicable to the 30 geothermal heating and cooling system property tax exemption. 31 The division takes effect upon enactment. Provisions in 32 the division enacting the income tax credit for geothermal 33 heat pumps apply retroactively to January 1, 2012, for tax 34 years beginning on or after that date. Provisions enacting 35 -5- LSB 6139SV (3) 84 mm/sc 5/ 7
S.F. 2342 the property tax exemption for geothermal heating and cooling 1 systems apply to assessment years beginning on or after January 2 1, 2013. 3 Division II provides an individual and corporate income tax 4 credit for solar energy systems. The credit is equal to 25 5 percent of the federal residential energy efficient property 6 credit related to solar energy provided in section 25D of the 7 Internal Revenue Code, not to exceed $3,000, and 25 percent 8 of the federal energy credit related to solar energy systems 9 provided in section 48 of the Internal Revenue Code, not to 10 exceed $15,000. The credit is nonrefundable, but may be 11 carried forward for 10 years, or until depleted. 12 The division provides that an individual may claim the tax 13 credit allowed a partnership, limited liability company, S 14 corporation, estate, or trust based upon the individual’s pro 15 rata share of the earnings. The division also provides that 16 a taxpayer may not claim both the solar energy systems tax 17 credit provided in the bill and the renewable energy tax credit 18 provided in Code chapter 476C. Further, the division restricts 19 the cumulative total of solar energy systems tax credits issued 20 for all taxpayers to an amount not exceeding $1.5 million 21 annually. 22 The division contains reporting requirements regarding 23 the number and value of tax credits claimed, and any other 24 information the department may deem relevant and appropriate. 25 The division takes effect upon enactment, and applies 26 retroactively to tax years beginning on or after January 1, 27 2012. 28 Division III amends the definition of “property purchased 29 for resale in connection with the performance of a service” 30 in Code section 423.1. Under current law, property qualifies 31 as “property purchased for resale in connection with the 32 performance of a service” if, among other things, it is 33 transferred during the service in a form or quantity capable 34 of a fixed or definite price value and listed as a separate 35 -6- LSB 6139SV (3) 84 mm/sc 6/ 7
S.F. 2342 charge. The division provides that property which is entirely 1 consumed in connection with the performance of an auto body 2 repair service will also qualify as “property purchased for 3 resale in connection with the performance of a service”, and 4 provides that the property entirely consumed in performance of 5 the service need not be listed as a separate charge. 6 The division also creates a sales tax exemption for sales of 7 water, electricity, chemicals, solvents, sorbents, or reagents 8 made to a retailer for use in providing taxable vehicle wash 9 and wax services. By operation of Code section 423.6, an item 10 exempt from the imposition of the sales tax is also exempt from 11 the use tax imposed in Code section 423.5. 12 The division takes effect upon enactment. 13 -7- LSB 6139SV (3) 84 mm/sc 7/ 7