SENATE/HOUSE FILE _____

BY  (PROPOSED DEPARTMENT OF REVENUE BILL)

A BILL FOR

An Act relating to the technical administration of the tax and related laws by the department of revenue, including the administration of income taxes, sales and use taxes, franchise fees, property taxes, the environmental protection charge, and notification of annexation or severance by cities and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

INCOME TAXES
   Section 1.  Section 2.48, subsection 3, paragraph a, subparagraph (2), Code 2011, is amended to read as follows:
   (2)  The tax credits for increasing research activities available under sections 15.335,15A.9, 422.10, and 422.33.
   Sec. 2.  Section 15.119, subsection 2, paragraph c, Code 2011, is amended by striking the paragraph.
   Sec. 3.  Section 15.293A, subsection 2, paragraph f, Code 2011, is amended to read as follows:
   f.  A tax credit shall not be claimed by a transferee under this section until a replacement tax credit certificate identifying the transferee as the proper holder has been issued. The transferee may use the amount of the tax credit transferred against the taxes imposed in chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, for any tax year the original transferor could have claimed the tax credit. Any consideration received for the transfer of the tax credit shall not be included as income under chapter 422, divisions II, III, and V, under chapter 432, or against the moneys and credits tax imposed in section 533.329. Any consideration paid for the transfer of the tax credit shall not be deducted from income under chapter 422, divisions II, III, and V, under chapter 432, or against the moneys and credits tax imposed in section 533.329.
   Sec. 4.  Section 15.329, subsection 3, Code 2011, is amended by striking the subsection.
   Sec. 5.  Section 15.333, subsection 1, paragraph b, Code 2011, is amended by striking the paragraph.
   Sec. 6.  Section 15.393, subsection 2, paragraph a, subparagraph (3), Code 2011, is amended to read as follows:
   (3)  After verifying the eligibility for a tax credit under this paragraph “a”, the department of economic development shall issue a film, television, and video project promotion program tax credit certificate to be attached to the person’s tax return. The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the date of project completion, the amount of credit, other information required by the department of revenue, and a place for the name and tax identification number of a transferee and the amount of the tax credit being transferred. Tax credit certificates issued under this paragraph“a” may be transferred to any person or entity. Within ninety days of transfer, the transferee shall submit the transferred tax credit certificate to the department of revenue along with a statement containing the transferee’s name, tax identification number, and address, and the denomination that each replacement tax credit certificate is to carry and any other information required by the department of revenue. Within thirty days of receiving the transferred tax credit certificate and the transferee’s statement, the department of revenue shall issue one or more replacement tax credit certificates to the transferee. Each replacement tax credit certificate must contain the information required for the original tax credit certificate and must have the same expiration date that appeared in the transferred tax credit certificate. Tax credit certificate amounts of less than the minimum amount established by rule of the department of economic development shall not be transferable. A tax credit shall not be claimed by a transferee under this paragraph“a” until a replacement tax credit certificate identifying the transferee as the proper holder has been issued. The transferee may use the amount of the tax credit transferred against the taxes imposed in chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, for any tax year the original transferor could have claimed the tax credit. Any consideration received for the transfer of the tax credit shall not be included as income under chapter 422, divisions II, III, and V, under chapter 432, or against the moneys and credits tax imposed in section 533.329. Any consideration paid for the transfer of the tax credit shall not be deducted from income under chapter 422, divisions II, III, and V, under chapter 432, or against the moneys and credits tax imposed in section 533.329.
   Sec. 7.  Section 15.393, subsection 2, paragraph b, subparagraph (2), Code 2011, is amended to read as follows:
   (2)  After verifying the eligibility for a tax credit under this paragraph “b”, the department of economic development shall issue a film, television, and video project promotion program tax credit certificate to be attached to the person’s tax return. The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the date of project completion, the amount of credit, other information required by the department of revenue, and a place for the name and tax identification number of a transferee and the amount of the tax credit being transferred. Tax credit certificates issued under this paragraph“b” may be transferred to any person or entity. Within ninety days of transfer, the transferee shall submit the transferred tax credit certificate to the department of revenue along with a statement containing the transferee’s name, tax identification number, and address, and the denomination that each replacement tax credit certificate is to carry and any other information required by the department of revenue. Within thirty days of receiving the transferred tax credit certificate and the transferee’s statement, the department of revenue shall issue one or more replacement tax credit certificates to the transferee. Each replacement tax credit certificate must contain the information required for the original tax credit certificate and must have the same expiration date that appeared in the transferred tax credit certificate. Tax credit certificate amounts of less than the minimum amount established by rule of the department of economic development shall not be transferable. A tax credit shall not be claimed by a transferee under this paragraph“b” until a replacement tax credit certificate identifying the transferee as the proper holder has been issued. The transferee may use the amount of the tax credit transferred against the taxes imposed in chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, for any tax year the original transferor could have claimed the tax credit. Any consideration received for the transfer of the tax credit shall not be included as income under chapter 422, divisions II, III, and V, under chapter 432, or against the moneys and credits tax imposed in section 533.329. Any consideration paid for the transfer of the tax credit shall not be deducted from income under chapter 422, divisions II, III, and V, under chapter 432, or against the moneys and credits tax imposed in section 533.329.
   Sec. 8.  Section 422.7, subsection 9, Code 2011, is amended to read as follows:
   9.  Subtract the amount of the alcohol fuel and cellulosic biofuels credit allowable for the tax year under section 40 of the Internal Revenue Code to the extent that the credit increased federal adjusted gross income.
   Sec. 9.  Section 422.33, subsection 5, paragraph f, Code 2011, is amended by striking the paragraph.
   Sec. 10.  Section 422.33, subsection 12, paragraph b, Code 2011, is amended to read as follows:
   b.  The taxes imposed under this division shall be reduced by investment tax credits authorized pursuant to sections section 15.333, 15A.9, subsection 4, and section 15E.193B, subsection 6.
   Sec. 11.  Section 422.35, subsection 7, Code 2011, is amended to read as follows:
   7.  Subtract the amount of the alcohol fuel and cellulosic biofuels credit allowable for the tax year under section 40 of the Internal Revenue Code to the extent that the credit increased federal taxable income.
   Sec. 12.  Section 422.36, subsection 4, Code 2011, is amended to read as follows:
   4.  Foreign and domestic corporations shall file a copy of their federal income tax return for the current tax year with the return required by this section.
   Sec. 13.  Section 422.89, subsection 3, unnumbered paragraph 1, Code 2011, is amended to read as follows:
   An amount equal to ninety one hundred percent of the tax for the taxable year computed by placing on an annualized basis the taxable income:
   Sec. 14.  REPEAL.  Section 15A.9, Code 2011, is repealed.
   Sec. 15.  RETROACTIVE APPLICABILITY.  The following provision or provisions of this division of this Act apply retroactively to January 1, 2011, for tax years beginning on or after that date:
   1.  The section of this Act amending section 422.89.

DIVISION II

SALES TAXES
   Sec. 16.  Section 423.3, subsection 40, Code 2011, is amended to read as follows:
   40.  The sales price from the sale of automotive fluids to a retailer to be used either in providing a service which includes the installation or application of the fluids in or on a motor vehicle, which service is subject to section 423.2, subsection 6, or to be installed in or applied to a motor vehicle which the retailer intends to sell, which sale is subject to section 423.26 321.105A. For purposes of this subsection, automotive fluids are all those which are refined, manufactured, or otherwise processed and packaged for sale prior to their installation in or application to a motor vehicle. They include but are not limited to motor oil and other lubricants, hydraulic fluids, brake fluid, transmission fluid, sealants, undercoatings, antifreeze, and gasoline additives.
   Sec. 17.  Section 423.36, subsection 3, paragraph a, Code 2011, is amended to read as follows:
   a.  The department shall grant and issue to each applicant a permit for each place of business in this state where sales or use tax is collected. A permit is not assignable and is valid only for the person in whose name it is issued and for the transaction of business at the place designated or at a place of relocation within the state same county if the ownership remains the same.
   Sec. 18.  Section 423.57, Code 2011, is amended to read as follows:
   423.57  Statutes applicable.
   The director shall administer this subchapter as it relates to the taxes imposed in this chapter in the same manner and subject to all the provisions of, and all of the powers, duties, authority, and restrictions contained in sections 423.14, 423.15, 423.16, 423.17, 423.19, 423.20, 423.21, 423.22, 423.23, 423.24, 423.25, 423.28, 423.29, 423.31, 423.32, 423.33, 423.34, 423.34A, 423.35, 423.37, 423.38, 423.39, 423.40, 423.41, and 423.42, section 423.43, subsection 1, and sections 423.45, 423.46, and 423.47.
   Sec. 19.  REPEAL.  Section 423.28, Code 2011, is repealed. 

DIVISION III

PROPERTY TAXES
   Sec. 20.  Section 427B.4, Code 2011, is amended to read as follows:
   427B.4  Application for exemption by property owner.
   1.
  a.  An application shall be filed for each project resulting in actual value added for which an exemption is claimed. The first application for exemption shall be filed by the owner of the property with the local assessor governing body of the city or county in which the property is located by February 1 of the assessment year in which the value added is first assessed for taxation for which the exemption is first claimed, but not later than the year in which all improvements included in the project are first assessed for taxation, or the following two assessment years.
   b.  Applications for exemption shall be made on forms prescribed by the director of revenue and shall contain information pertaining to the nature of the improvement, its cost, the estimated or actual date of completion, whether the exemption schedules described in section 427B.3 or an alternate schedule adopted pursuant to section 427B.1 will be elected, and any other information deemed necessary by the director of revenue.
   2.
  a.  A person may submit a proposal to the city council of the city or the board of supervisors of a county to receive prior approval for eligibility for a tax exemption on new construction. The city council or the board of supervisors, by ordinance, may give its prior approval of a tax exemption for new construction if the new construction is in conformance with the zoning plans for the city or county. The prior approval shall also be subject to the hearing requirements of section 427B.1.
   b.  Prior approval received under this subsection does not entitle the owner to exemption from taxation until the new construction has been completed and found to be qualified real estate. However, if the tax exemption for new construction is not approved, the person may submit an amended proposal to the city council or board of supervisors to approve or reject.
   Sec. 21.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2011, for assessment years beginning on or after that date.

DIVISION IV

MISCELLANEOUS
   Sec. 22.  Section 364.2, subsection 4, paragraph f, Code 2011, is amended to read as follows:
   f.
  (1)  A franchise fee assessed by a city may be based upon a percentage of gross revenues generated from sales of the franchisee within the city not to exceed five percent, without regard to the city’s cost of inspecting, supervising, and otherwise regulating the franchise. Franchise fees collected pursuant to an ordinance in effect on May 26, 2009, shall be deposited in the city’s general fund and such fees collected in excess of the amounts necessary to inspect, supervise, and otherwise regulate the franchise may be used by the city for any other purpose authorized by law. Franchise fees collected pursuant to an ordinance that is adopted or amended on or after May 26, 2009, to increase the percentage rate at which franchise fees are assessed shall be credited to the franchise fee account within the city’s general fund and used pursuant to section 384.3A. If a city franchise fee is assessed to customers of a franchise, the fee shall not be assessed to the city as a customer. Before a city adopts or amends a franchise fee rate ordinance or franchise ordinance to increase the percentage rate at which franchise fees are assessed, a revenue purpose statement shall be prepared specifying the purpose or purposes for which the revenue collected from the increased rate will be expended. If property tax relief is listed as a purpose, the revenue purpose statement shall also include information regarding the amount of the property tax relief to be provided with revenue collected from the increased rate. The revenue purpose statement shall be published as provided in section 362.3.
   (2)  If a city adopts, amends, or repeals an ordinance imposing a franchise fee, the city shall promptly notify the director of revenue of such action.
   Sec. 23.  Section 368.24, Code 2011, is amended to read as follows:
   368.24  Notification to public utilities and to the department of revenue.
   Notwithstanding any other provision of law to the contrary, any city that annexes territory or any city from which territory is severed shall provide written notification consisting of a legal description and map of the annexed or severed territory, each street address within the annexed or severed area, where possible, a statement containing the effective date of the annexation or severance and a copy of the order, resolution, or ordinance proclaiming the annexation or severance to all public utilities operating in the annexed or severed area and to the department of revenue. If the notification of the an annexation is provided to a public utility less than sixty days prior to the effective date of the annexation, the public utility shall have sixty days from the date of notification to adjust its tax and accounting records to reflect the annexation for any tax purpose.
   Sec. 24.  Section 424.2, subsections 6, 10, and 13, Code 2011, are amended to read as follows:
   6.  “Depositor” means the person who deposits petroleum into an underground storage tank subject to regulation under chapter 455G or an aboveground petroleum storage tank as defined in section 101.21, located at a retail motorvehicle fuel outlet if the aboveground storage tank is physically connected directly to pumps which dispense petroleum that is sold at the motorvehicle fuel outlet on a retail basis.
   10.  “Owner or operator” means“owner or operator” of an underground storage tank as used in chapter 455G or the“owner”or“operator” of an aboveground petroleum storage tank as defined in section 101.21, located at a retail motor vehicle fuel outlet if the aboveground storage tank is physically connected directly to pumps which dispense petroleum that is sold at the motorvehicle fuel outlet on a retail basis.
   13.  “Tank” means an underground storage tank subject to regulation under chapter 455G or an aboveground petroleum storage tank as defined in section 101.21, located at a retail motorvehicle fuel outlet if the aboveground storage tank is physically connected directly to pumps which dispense petroleum that is sold at the motorvehicle fuel outlet on a retail basis.
EXPLANATION
   This bill relates to the technical administration of the tax and related laws by the department of revenue. 
   Division I of the bill relates to income taxes. 
   The division repeals Code section 15A.9, which is the quality jobs enterprise zone program. The program, commonly known as the enterprise zone program, is currently administered pursuant to Code sections 15E.191 through 15E.197, and the last contract issued under the quality jobs enterprise zone program is now expired, making Code section 15A.9 no longer necessary. The bill makes changes to Code sections 2.48, 15.119, 15.329, and 422.33 in conformance with the repeal of Code section 15A.9. 
   The division amends Code sections 15.293A and 15.393 to eliminate certain income-related references to the insurance premium tax and moneys and credits tax which are not imposed on an income basis. The amended Code sections relate to the tax credits available for brownfield redevelopment, film expenditures, and film investment. 
   In 2010, the refundability of certain investment tax credits related to value-added agricultural products was repealed. Code section 15.333, subsection 1, paragraph “b”, which contains a related provision, was not amended at that time. The division strikes Code section 15.333, subsection 1, paragraph “b”, to reflect the changes made in 2010. 
   The division amends Code sections 422.7 and 422.35 to update the name of the individual and corporate tax credits for the production of alcohol and biofuels to be the same as the name of the credit available in section 40 of the federal Internal Revenue Code. 
   The division amends Code section 422.36 to provide that domestic corporations must provide a copy of their federal income tax return when filing their state corporation income tax return. 
   In 2009, certain provisions were enacted to increase the standard for the exception to the underpayment of estimated tax penalty for Iowa corporation income tax for annualization of income from 90 percent of the tax liability to 100 percent of the tax liability. Code section 422.89, which contains a similar provision, was not amended at that time. The bill amends Code section 422.89 to reflect the substance of the changes made in 2009. This provision of the bill applies retroactively to January 1, 2011, for tax years beginning on or after that date. 
   Division II of the bill relates to sales taxes.
   The division amends Code section 423.3, relating to sales and use tax exemptions, to correct an internal reference to Code section 321.105A relating to the sale of a motor vehicle and the fee for a new vehicle registration. 
   Code section 423.28 required motor vehicle dealers to file reports related to the payment of sales tax for the sale of motor vehicles. Because such sales are now subject to the fee for new vehicle registration, such reports are no longer required, and the division repeals Code section 423.28 and makes a conforming amendment to Code section 423.57. 
   The division amends Code section 423.36 to provide that a new sales tax permit must be obtained if a place of business is relocated from one county to another rather than from within the state. Without updated sales tax permit information, the distribution of local option sales tax revenue may be impacted.
   Division III of the bill relates to property taxes.
   The division amends Code section 427B.4 to extend by two years the time period for claiming the industrial real estate or cattle facilities property tax exemptions. Currently, a taxpayer cannot claim one of these exemptions unless it is claimed in the first year the property is eligible for the exemption. This provision of the bill applies retroactively to January 1, 2011, for assessment years beginning on or after that date.
   Division IV of the bill contains miscellaneous changes.
    The division amends Code section 364.2, relating to franchise fees imposed by cities, to require a city to notify the department whenever an ordinance imposing a franchise fee is adopted, amended, or repealed. Because the imposition of a franchise fee requires utilities to stop collecting the local option sales and services tax and instead collect the franchise fee, the adoption, amendment, or repeal of such a fee impacts the department’s distribution of local option sales and services tax revenue to local governments. 
   The division amends Code section 368.24 to require cities that annex or sever territory to also notify the department of revenue, in addition to notifying public utilities, in order to facilitate the department’s distribution of local option sales and service tax revenue to local governments. 
   The division amends Code section 424.2, relating to the environmental protection charge, by correcting out-of-date language referring to motor fuel outlets. The division makes language in Code section 424.2 consistent with similar language used in Code chapter 452A, relating to motor fuel and special fuel taxes.