House File 2453 - Introduced HOUSE FILE 2453 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 2415) (SUCCESSOR TO HSB 624) A BILL FOR An Act relating to the administration of the historic 1 preservation and cultural and entertainment district tax 2 credit program by the department of cultural affairs, 3 providing for fees, and including applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5303HZ (2) 85 mm/sc

H.F. 2453 Section 1. Section 16.188, subsection 3, paragraph b, 1 subparagraph (1), Code 2014, is amended to read as follows: 2 (1) Projects that are eligible for historic preservation 3 and cultural and entertainment district tax credits under 4 section 404A.1 404A.2 . 5 Sec. 2. Section 404A.1, Code 2014, is amended by striking 6 the section and inserting in lieu thereof the following: 7 404A.1 Definitions. 8 For purposes of this chapter, unless the context otherwise 9 requires: 10 1. “Completion date” means the date on which property that 11 is the subject of a qualified rehabilitation project is placed 12 in service, as that term is used in section 47 of the Internal 13 Revenue Code. 14 2. “Department” means the department of cultural affairs. 15 3. “Eligible taxpayer” means the owner of the property 16 that is the subject of a qualified rehabilitation project, or 17 another person who will qualify for the federal rehabilitation 18 credit allowed under section 47 of the Internal Revenue Code 19 with respect to the property that is the subject of a qualified 20 rehabilitation project. 21 4. “Nonprofit organization” means an organization described 22 in section 501 of the Internal Revenue Code unless the 23 exemption is denied under section 501, 502, 503, or 504 of 24 the Internal Revenue Code. “Nonprofit organization” does not 25 include a governmental body, as that term is defined in section 26 362.2. 27 5. “Program” shall mean the historic preservation and 28 cultural and entertainment district tax credit program set 29 forth in this chapter. 30 6. a. “Qualified rehabilitation expenditures” means the 31 same as defined in section 47 of the Internal Revenue Code. 32 Notwithstanding the foregoing sentence, expenditures incurred 33 by an eligible taxpayer that is a nonprofit organization shall 34 be considered “qualified rehabilitation expenditures ” if they 35 -1- LSB 5303HZ (2) 85 mm/sc 1/ 17

H.F. 2453 are any of the following: 1 (1) Expenditures made for structural components, as that 2 term is defined in 26 C.F.R. §1.48-1(e)(2). 3 (2) Expenditures made for architectural and engineering 4 fees, site survey fees, legal expenses, insurance premiums, and 5 development fees. 6 b. “Qualified rehabilitation expenditures” does not include 7 those expenditures financed by federal, state, or local 8 government grants or forgivable loans unless otherwise allowed 9 under section 47 of the Internal Revenue Code. 10 c. “Qualified rehabilitation expenditures” may include 11 expenditures incurred prior to the date an agreement is entered 12 into under section 404A.3, subsection 3. 13 7. “Qualified rehabilitation project” means a project for 14 the rehabilitation of property in this state that meets all of 15 the following criteria: 16 a. The property is at least one of the following: 17 (1) Property listed on the national register of historic 18 places or eligible for such listing. 19 (2) Property designated as of historic significance to a 20 district listed in the national register of historic places or 21 eligible for such designation. 22 (3) Property or district designated a local landmark by a 23 city or county ordinance. 24 (4) A barn constructed prior to 1937. 25 b. The property meets the physical criteria and standards 26 for rehabilitation established by the department by rule. To 27 the extent applicable, the physical standards and criteria 28 shall be consistent with the United States secretary of the 29 interior’s standards for rehabilitation. 30 c. The project has qualified rehabilitation expenditures 31 that meet or exceed the following: 32 (1) In the case of commercial property, expenditures 33 totaling at least fifty thousand dollars or fifty percent of 34 the assessed value of the property, excluding the land, prior 35 -2- LSB 5303HZ (2) 85 mm/sc 2/ 17

H.F. 2453 to rehabilitation, whichever is less. 1 (2) In the case of property other than commercial property, 2 expenditures totaling at least twenty-five thousand dollars or 3 twenty-five percent of the assessed value, excluding the land, 4 prior to rehabilitation, whichever is less. 5 Sec. 3. Section 404A.2, Code 2014, is amended by striking 6 the section and inserting in lieu thereof the following: 7 404A.2 Historic preservation and cultural and entertainment 8 district tax credit. 9 1. An eligible taxpayer who has entered into an agreement 10 under section 404A.3 is eligible to receive a historic 11 preservation and cultural and entertainment district tax credit 12 in an amount not to exceed twenty-five percent of the qualified 13 rehabilitation expenditures of a qualified rehabilitation 14 project. 15 2. The tax credit shall be allowed against the taxes imposed 16 in chapter 422, divisions II, III, and V, and in chapter 17 432. An individual may claim a tax credit under this section 18 of a partnership, limited liability company, S corporation, 19 estate, or trust electing to have income taxed directly to the 20 individual. For an individual claiming a tax credit of an 21 estate or trust, the amount claimed by the individual shall be 22 based upon the pro rata share of the individual’s earnings from 23 the estate or trust. For an individual claiming a tax credit 24 of a partnership, limited liability company, or S corporation, 25 the amount claimed by the partner, member, or shareholder, 26 respectively, shall be based upon the amounts designated by 27 the eligible partnership, S corporation, or limited liability 28 company, as applicable. 29 3. Any credit in excess of the taxpayer’s tax liability for 30 the tax year shall be refunded with interest computed under 31 section 422.25. In lieu of claiming a refund, a taxpayer 32 may elect to have the overpayment shown on the taxpayer’s 33 final, completed return credited to the tax liability for the 34 following year. 35 -3- LSB 5303HZ (2) 85 mm/sc 3/ 17

H.F. 2453 4. a. To claim a tax credit under this section, a taxpayer 1 shall include one or more tax credit certificates with the 2 taxpayer’s tax return. 3 b. The tax credit certificate shall contain the taxpayer’s 4 name, address, tax identification number, the amount of 5 the credit, the name of the eligible taxpayer, any other 6 information required by the department of revenue, and a place 7 for the name and tax identification number of a transferee and 8 the amount of the tax credit being transferred. 9 c. The tax credit certificate, unless rescinded by the 10 department, shall be accepted by the department of revenue 11 as payment for taxes imposed in chapter 422, divisions II, 12 III, and V, and in chapter 432, subject to any conditions or 13 restrictions placed by the department or the department of 14 revenue upon the face of the tax credit certificate and subject 15 to the limitations of this program. 16 5. a. Tax credit certificates issued under section 404A.3 17 may be transferred to any person. Within ninety days of 18 transfer, the transferee shall submit the transferred tax 19 credit certificate to the department of revenue along with a 20 statement containing the transferee’s name, tax identification 21 number, and address, the denomination that each replacement 22 tax credit certificate is to carry, and any other information 23 required by the department of revenue. However, tax credit 24 certificate amounts of less than the minimum amount established 25 by rule of the department of revenue shall not be transferable. 26 b. Within thirty days of receiving the transferred tax 27 credit certificate and the transferee’s statement, the 28 department of revenue shall issue one or more replacement tax 29 credit certificates to the transferee. Each replacement tax 30 credit certificate must contain the information required for 31 the original tax credit certificate and must have the same 32 expiration date that appeared on the transferred tax credit 33 certificate. 34 c. A tax credit shall not be claimed by a transferee 35 -4- LSB 5303HZ (2) 85 mm/sc 4/ 17

H.F. 2453 under this section until a replacement tax credit certificate 1 identifying the transferee as the proper holder has been 2 issued. The transferee may use the amount of the tax credit 3 transferred against the taxes imposed in chapter 422, divisions 4 II, III, and V, and in chapter 432, for any tax year the 5 original transferor could have claimed the tax credit. Any 6 consideration received for the transfer of the tax credit shall 7 not be included as income under chapter 422, divisions II, III, 8 and V. Any consideration paid for the transfer of the tax 9 credit shall not be deducted from income under chapter 422, 10 divisions II, III, and V. 11 6. For purposes of the individual and corporate income 12 taxes and the franchise tax, the increase in the basis of the 13 rehabilitated property that would otherwise result from the 14 qualified rehabilitation expenditures shall be reduced by the 15 amount of the credit computed under this section. 16 Sec. 4. Section 404A.3, Code 2014, is amended by striking 17 the section and inserting in lieu thereof the following: 18 404A.3 Application and registration —— agreement —— 19 compliance and examination. 20 1. Application and fees. 21 a. An eligible taxpayer seeking historic preservation and 22 cultural and entertainment district tax credits provided in 23 section 404A.2 shall make application to the department in the 24 manner prescribed by the department. 25 b. The department may accept applications on a continuous 26 basis or may accept applications, or one or more components of 27 an application, during one or more application periods. 28 c. The application shall include any information deemed 29 necessary by the department to evaluate the eligibility under 30 the program of the applicant and the rehabilitation project, 31 the amount of projected qualified rehabilitation expenditures 32 of a rehabilitation project, and the amount and source of all 33 funding for a rehabilitation project. An applicant shall have 34 the burden of proof to demonstrate to the department that 35 -5- LSB 5303HZ (2) 85 mm/sc 5/ 17

H.F. 2453 the applicant is an eligible taxpayer and the project is a 1 qualified rehabilitation project under the program. 2 d. The department may establish criteria for the use of 3 electronic or other alternative filing or submission methods 4 for any application, document, or payment requested or 5 required under this program. Such criteria may provide for the 6 acceptance of a signature in a form other than the handwriting 7 of a person. 8 e. (1) The department may charge application and other fees 9 to eligible taxpayers who apply to participate in the program. 10 The amount of such fees shall be determined based on the costs 11 of the department associated with administering the program. 12 (2) Fees collected by the department pursuant to this 13 paragraph shall be deposited with the department pursuant to 14 section 303.9, subsection 1. 15 2. Registration. 16 a. Upon review of the application, the department may 17 register a qualified rehabilitation project under the program. 18 If the department registers the project, the department shall 19 make a preliminary determination as to the amount of tax 20 credits for which the project qualifies. 21 b. After registering the qualified rehabilitation project, 22 the department shall notify the eligible taxpayer of successful 23 registration under the program. The notification shall include 24 the amount of tax credits under section 404A.2 for which the 25 qualified rehabilitation project has received a tentative award 26 and a statement that the amount is a preliminary determination 27 only. 28 3. Agreement. 29 a. Upon successful registration of a qualified 30 rehabilitation project, the eligible taxpayer shall enter into 31 an agreement with the department for the successful completion 32 of all requirements of the program. 33 b. The agreement shall contain, at a minimum, the following 34 provisions: 35 -6- LSB 5303HZ (2) 85 mm/sc 6/ 17

H.F. 2453 (1) The amount of the tax credit award. An eligible 1 taxpayer has no right to receive a tax credit certificate or 2 claim a tax credit until all requirements of the agreement and 3 subsections 4 and 5 have been satisfied. The amount of tax 4 credit included on a tax credit certificate issued under this 5 section shall be contingent upon verification by the department 6 of the amount of final qualified rehabilitation expenditures. 7 (2) The rehabilitation work to be performed. 8 (3) The budget of the qualified rehabilitation project, 9 including the projected qualified rehabilitation expenditures 10 and the source and amount of all funding received or 11 anticipated to be received. 12 (4) The commencement date of the qualified rehabilitation 13 project, which shall not be later than the end of the fiscal 14 year in which the agreement is entered into. 15 (5) The completion date of the qualified rehabilitation 16 project, which shall be within thirty-six months of the 17 commencement date. 18 4. Compliance. 19 a. The eligible taxpayer shall, for the length of the 20 agreement, annually certify to the department compliance with 21 the requirements of the agreement. The certification shall 22 be made at such time as the department shall determine in the 23 agreement. 24 b. The eligible taxpayer shall have the burden of proof 25 to demonstrate to the department that all requirements of 26 the agreement are satisfied. The taxpayer shall notify 27 the department in a timely manner of any changes in the 28 qualification of the rehabilitation project or in the 29 eligibility of the taxpayer to claim the tax credit provided 30 under this chapter, or of any other change that may have 31 a negative impact on the eligible taxpayer’s ability to 32 successfully complete any requirement under the agreement. 33 c. If after entering into the agreement the eligible 34 taxpayer or the qualified rehabilitation project no longer 35 -7- LSB 5303HZ (2) 85 mm/sc 7/ 17

H.F. 2453 meets the requirements of the agreement, the department may 1 find the taxpayer in default under the agreement and may 2 revoke the tax credit award. The department of revenue, 3 upon notification by the department of a default, shall seek 4 repayment of the value of any such tax credit already claimed, 5 and the failure to make such a repayment may be treated by the 6 department of revenue in the same manner as a failure to pay 7 the tax shown due or required to be shown due with the filing of 8 a return or deposit form. 9 5. Examination of project by certified public accountant. 10 a. An eligible taxpayer shall engage a certified public 11 accountant authorized to practice in this state to conduct an 12 examination of the project in accordance with the American 13 institute of certified public accountants’ statements on 14 standards for attestation engagements. Upon completion of 15 the qualified rehabilitation project, the eligible taxpayer 16 shall submit the examination to the department, along with 17 a statement of the amount of final qualified rehabilitation 18 expenditures and any other information deemed necessary by the 19 department or the department of revenue in order to verify that 20 all requirements of the agreement have been satisfied. 21 b. Notwithstanding paragraph “a” , the department may waive 22 the examination requirement in this subsection if all the 23 following requirements are satisfied: 24 (1) The final qualified rehabilitation expenditures of 25 the qualified rehabilitation project, as verified by the 26 department, do not exceed one hundred thousand dollars. 27 (2) The qualified rehabilitation project is funded 28 exclusively by private funding sources. 29 c. Upon review of the examination, if applicable, the 30 department shall verify that all requirements of the agreement 31 have been satisfied and shall verify the amount of final 32 qualified rehabilitation expenditures. After consultation 33 with the department of revenue, the department may issue 34 a tax credit certificate to the eligible taxpayer stating 35 -8- LSB 5303HZ (2) 85 mm/sc 8/ 17

H.F. 2453 the amount of tax credit under section 404A.2 the eligible 1 taxpayer may claim. The department shall issue the tax credit 2 certificate not later than 60 days following the completion of 3 the examination review, if applicable, and the verifications 4 and consultation required under this paragraph. 5 6. Notwithstanding any other provision of this chapter to 6 the contrary, the amount of tax credit issued on a tax credit 7 certificate to an eligible taxpayer shall not exceed the amount 8 of tax credit award provided for in the agreement. 9 7. Notwithstanding any other provision of this chapter to 10 the contrary, the department may waive the requirements of 11 subsections 1 through 4 for qualified rehabilitation projects 12 with final qualified rehabilitation expenditures of seven 13 hundred fifty thousand dollars or less and may establish 14 by rule different application, registration, agreement, 15 compliance, or other requirements relating to such projects. 16 8. The department may for good cause amend an agreement. 17 Sec. 5. Section 404A.4, Code 2014, is amended by striking 18 the section and inserting in lieu thereof the following: 19 404A.4 Aggregate tax credit award limit. 20 1. a. Except as provided in subsections 2 and 3, the 21 department shall not award in any one fiscal year an amount of 22 tax credits provided in section 404A.2 in excess of forty-five 23 million dollars. 24 b. Of the tax credits that may be awarded in a fiscal year 25 pursuant to paragraph “a” , at least five percent of the dollar 26 amount of the tax credits shall be allocated for purposes of 27 new qualified rehabilitation projects with final qualified 28 rehabilitation expenditures of seven hundred fifty thousand 29 dollars or less. 30 2. a. The amount of a tax credit that is awarded during 31 a fiscal year beginning on or after July 1, 2016, and that is 32 irrevocably declined or revoked on or before June 30 of the 33 next fiscal year may be awarded under section 404A.3 during the 34 fiscal year in which the declination or revocation occurs. 35 -9- LSB 5303HZ (2) 85 mm/sc 9/ 17

H.F. 2453 b. The amount of a tax credit that was reserved prior to 1 the effective date of this Act under section 404A.4, Code 2014, 2 for use in a fiscal year beginning before July 1, 2016, that 3 is irrevocably declined or revoked on or after the effective 4 date of this Act, but before July 1, 2016, may be awarded under 5 section 404A.3 during the fiscal year in which such declination 6 or revocation occurs. Such tax credits awarded shall not be 7 claimed by a taxpayer in a fiscal year that is earlier than the 8 fiscal year for which the tax credits were originally reserved. 9 c. The amount of a tax credit that was available for 10 approval by the state historical preservation office of the 11 department under section 404A.4, Code 2014, in a fiscal year 12 beginning on or after July 1, 2010, but before July 1, 2014, 13 that was required to be allocated to new projects with final 14 qualified rehabilitation costs of five hundred thousand dollars 15 or less, or seven hundred fifty thousand dollars or less, as 16 the case may be, and that was not finally approved by the state 17 historical preservation office, may be awarded under section 18 404A.3 during the fiscal years beginning on or after July 1, 19 2014, but before July 1, 2016. 20 d. Tax credits awarded pursuant to this subsection shall 21 not be considered for purposes of calculating the aggregate tax 22 credit award limit in subsection 1. 23 3. a. If during the fiscal year beginning July 1, 2016, or 24 any fiscal year thereafter, the department awards an amount of 25 tax credits that is less than the maximum aggregate tax credit 26 award limit specified in subsection 1, the difference between 27 the amount so awarded and the amount specified in subsection 1, 28 not to exceed ten percent of the amount specified in subsection 29 1, may be carried forward to the succeeding fiscal year and 30 awarded during that fiscal year. 31 b. Tax credits awarded pursuant to this subsection shall 32 not be considered for purposes of calculating the aggregate tax 33 credit award limit in subsection 1. 34 Sec. 6. Section 404A.5, Code 2014, is amended to read as 35 -10- LSB 5303HZ (2) 85 mm/sc 10/ 17

H.F. 2453 follows: 1 404A.5 Economic impact —— recommendations. 2 1. The department of cultural affairs , in consultation with 3 the department of revenue, shall be responsible for keeping 4 the general assembly and the legislative services agency 5 informed on the overall economic impact to the state of the 6 rehabilitation of eligible properties qualified rehabilitation 7 projects . 8 2. An annual report shall be filed which shall include 9 but is not limited to data on the number and potential value 10 of qualified rehabilitation projects begun during the latest 11 twelve-month period, the total historic preservation and 12 cultural and entertainment district tax credits originally 13 granted awarded or tax credit certificates originally issued 14 during that period, the potential reduction in state tax 15 revenues as a result of all awarded or issued tax credits still 16 unused unclaimed and eligible for refund, and the potential 17 increase in local property tax revenues as a result of the 18 qualified rehabilitated projects. 19 3. The department of cultural affair s, to the extent it 20 is able, shall provide recommendations on whether a the limit 21 on tax credits should be established changed , the need for a 22 broader or more restrictive definition of eligible property 23 qualified rehabilitation project , and other adjustments to the 24 tax credits under this chapter . 25 Sec. 7. NEW SECTION . 404A.6 Rules. 26 The department and the department of revenue shall each 27 adopt rules to jointly administer this chapter. 28 Sec. 8. Section 422.11D, Code 2014, is amended by striking 29 the section and inserting in lieu thereof the following: 30 422.11D Historic preservation and cultural and entertainment 31 district tax credit. 32 The taxes imposed under this division, less the credits 33 allowed under section 422.12, shall be reduced by a historic 34 preservation and cultural and entertainment district tax credit 35 -11- LSB 5303HZ (2) 85 mm/sc 11/ 17

H.F. 2453 allowed under section 404A.2. 1 Sec. 9. Section 422.33, subsection 10, Code 2014, is amended 2 by striking the subsection and inserting in lieu thereof the 3 following: 4 10. The taxes imposed under this division shall be reduced 5 by a historic preservation and cultural and entertainment 6 district tax credit allowed under section 404A.2. 7 Sec. 10. Section 422.60, subsection 4, Code 2014, is amended 8 by striking the subsection and inserting in lieu thereof the 9 following: 10 4. The taxes imposed under this division shall be reduced by 11 a historic preservation and cultural and entertainment district 12 tax credit allowed under section 404A.2. 13 Sec. 11. Section 432.12A, Code 2014, is amended by striking 14 the section and inserting in lieu thereof the following: 15 432.12A Historic preservation and cultural and entertainment 16 district tax credit. 17 The taxes imposed under this chapter shall be reduced by a 18 historic preservation and cultural and entertainment district 19 tax credit allowed under section 404A.2. 20 Sec. 12. APPLICABILITY. Unless otherwise provided in 21 this Act, this Act applies to agreements entered into by the 22 department and an eligible taxpayer on or after the effective 23 date of this Act, and rehabilitation projects for which a 24 project application was approved and tax credits reserved prior 25 to the effective date of this Act shall be governed by sections 26 404A.1 through 404A.5, Code 2014. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 This bill changes the historic preservation and cultural 31 and entertainment district tax credit program (program) 32 administered pursuant to Code chapter 404A. 33 Under current law, a taxpayer may receive a tax credit in 34 an amount equal to 25 percent of the qualified rehabilitation 35 -12- LSB 5303HZ (2) 85 mm/sc 12/ 17

H.F. 2453 costs incurred in rehabilitating properties eligible to be 1 listed on the national register of historic places, historic 2 properties in areas eligible to be designated local historic 3 districts, local landmarks, or barns constructed prior to 1937. 4 The credit is available against the individual and corporate 5 income tax, the franchise tax, and the insurance companies 6 tax. To be eligible for the tax credit, the rehabilitation 7 costs must exceed certain threshold amounts depending on the 8 type of property involved. The aggregate amount of tax credits 9 that may be approved per fiscal year is $45 million, a certain 10 amount of which is required to be allocated between projects 11 with final qualified rehabilitation costs of $750,000 or less, 12 projects located in certified cultural and entertainment 13 districts or associated with Iowa great places agreements, 14 disaster recovery projects, and projects that involve the 15 creation of more than 500 new permanent jobs. 16 Under current law, a taxpayer is also required to 17 apply to and receive approval from the state historic 18 preservation office of the department of cultural affairs for a 19 rehabilitation project. The project must meet the statutory 20 requirements and the criteria established in administrative 21 rules by the historic preservation office. Tax credits 22 for an approved rehabilitation project may be reserved by a 23 taxpayer for up to three years, but such reservations shall not 24 exceed an aggregate of $45 million per fiscal year. Approved 25 rehabilitation projects must be started and completed within 26 a certain time period. Upon completion of the rehabilitation 27 project a certificate of completion is obtained from the state 28 historic preservation office and a tax credit certificate is 29 issued. Tax credits are refundable and may be transferred to 30 another person. 31 Under the bill, an eligible taxpayer may receive a tax 32 credit not to exceed 25 percent of the qualified rehabilitation 33 expenditures of a qualified rehabilitation project. 34 A “qualified rehabilitation project” is defined in the bill 35 -13- LSB 5303HZ (2) 85 mm/sc 13/ 17

H.F. 2453 as a project for the rehabilitation of property that meets 1 three requirements. First, it must be property listed on the 2 national register of historic places, historic property in an 3 area eligible to be designated a local historic district, a 4 local landmark, or a barn constructed prior to 1937. Second, 5 the property must meet the physical criteria and standards 6 for rehabilitation established by the department of cultural 7 affairs (department) by administrative rule. To the extent 8 applicable, such criteria and standards are required to be 9 consistent with United States secretary of the interior’s 10 standards for rehabilitation. Third, the project must have 11 qualified rehabilitation expenditures that, in the case of 12 commercial property, equal or exceed the lesser of at least 13 $50,000 or 50 percent of the assessed value of the property, 14 excluding the land, prior to rehabilitation; or in the case of 15 all other property, must equal the lesser of at least $25,000 16 or 25 percent of the assessed value, excluding the land, prior 17 to rehabilitation. 18 “Qualified rehabilitation expenditures” means the same as 19 defined in section 47 of the Internal Revenue Code (IRC). 20 However, the bill provides that if the eligible taxpayer is 21 a nonprofit corporation, an expenditure will be considered a 22 “qualified rehabilitation expenditure” if it is one made for 23 structural components, as defined in 26 C.F.R. §1.48-1(e)(2), 24 or if it is an architectural or engineering fee, site survey 25 fee, legal expense, insurance premium, or development 26 fee. “Qualified rehabilitation expenditures” may include 27 expenditures incurred prior to the date the agreement is 28 entered into by the eligible taxpayer and the department, but 29 excludes expenditures financed by federal, state, or local 30 government grants or forgivable loans unless otherwise allowed 31 under IRC §47. “Eligible taxpayer” and “nonprofit corporation” 32 are both defined in the bill. 33 Under the bill, an eligible taxpayer seeking the tax credit 34 must apply to the department. The department may prescribe 35 -14- LSB 5303HZ (2) 85 mm/sc 14/ 17

H.F. 2453 the timing, form, content, and method of application, and may 1 also establish criteria for the use of electronic or other 2 alternative filing methods for applications, documents, or 3 payments. The application must contain certain information as 4 specified in the bill and the taxpayer making the application 5 has the burden of proof to demonstrate eligibility under the 6 program. The department is allowed to charge application or 7 other fees based on the costs of the department associated with 8 the program. 9 If the project in the application meets the definition of a 10 qualified rehabilitation project, the department may register 11 it under the program. The bill requires the department to 12 notify the eligible taxpayer of successful registration under 13 the program and of the amount of tax credits for which the 14 project has received a tentative award. 15 The bill requires the agreement to cover a number of 16 provisions, including the amount of the tax credit award, 17 the rehabilitation work to be performed, the budget of 18 the qualified rehabilitation project, and the project’s 19 commencement and completion dates. The commencement date shall 20 not be later than the end of the fiscal year in which the 21 agreement is entered into, and the completion date, which is 22 the date the property is placed in service, must be within 36 23 months of the commencement date. The agreement shall provide 24 that an eligible taxpayer has no right to receive a tax credit 25 certificate or claim a tax credit until all requirements of the 26 agreement and the program have been satisfied, and that the 27 amount of tax credit included on a tax credit certificate shall 28 be contingent upon verification by the department of the amount 29 of final qualified rehabilitation expenditures. The program 30 requires that the eligible taxpayer annually certify to the 31 department the eligible taxpayer’s continuing compliance with 32 the agreement, and timely notify the department of any changes 33 that may negatively impact eligibility under the program. The 34 eligible taxpayer will have the burden of proof to demonstrate 35 -15- LSB 5303HZ (2) 85 mm/sc 15/ 17

H.F. 2453 that all requirements of the agreement are satisfied. The 1 department may find the eligible taxpayer in default if any of 2 the requirements are not met, and may revoke the tax credit 3 award. Upon default, the department of revenue is required 4 to seek recovery of any tax credit claimed. Finally, upon 5 completion of the qualified rehabilitation project, the program 6 requires the eligible taxpayer to submit an examination of the 7 project conducted by a certified public accountant authorized 8 to practice in this state. The department is allowed to 9 waive the examination requirement if the final qualified 10 rehabilitation expenditures do not exceed $100,000 and the 11 project is exclusively funded by private funding sources. 12 After reviewing the examination, if applicable, the 13 department shall verify the final qualified rehabilitation 14 expenditures and that all requirements of the agreement were 15 satisfied. Following that, the department may issue within 60 16 days a tax credit certificate stating the amount of tax credit 17 that may be claimed, but such amount shall not exceed the 18 amount of the tax credit award provided for in the agreement. 19 For projects with final qualified rehabilitation 20 expenditures of $750,000 or less, the bill allows the 21 department to waive the application, registration, agreement, 22 compliance, and other requirements established in the bill and 23 establish different requirements by rule. 24 The bill requires the department to allocate at least 5 25 percent of the total amount of tax credits it can award per 26 fiscal year to new projects with final qualified rehabilitation 27 expenditures of $750,000 or less, and prohibits the department 28 from awarding more than $45 million in tax credits per fiscal 29 year, with four exceptions. First, any tax credit that is 30 awarded during a fiscal year beginning on or after July 1, 31 2016, and that is irrevocably declined or revoked on or before 32 June 30 of the next fiscal year, may be awarded during the 33 fiscal year in which the declination or revocation occurs 34 without regard to the $45 million cap. Second, any tax credit 35 -16- LSB 5303HZ (2) 85 mm/sc 16/ 17

H.F. 2453 that was reserved under current law before the effective date 1 of the bill for use in a fiscal year beginning before July 1, 2 2016, and that is irrevocably declined or revoked on or after 3 the effective date of the bill, but before July 1, 2016, may 4 be awarded during the fiscal year in which the declination 5 or revocation occurs, without regard to the $45 million 6 cap. However, such credits shall not be claimed before the 7 fiscal year for which they were originally reserved. Third, 8 any amount of tax credit that was available for approval 9 under current law during fiscal years 2010-2011, 2011-2012, 10 2012-2013, or 2013-2014, that was required to be allocated 11 to new projects with final qualified rehabilitation costs of 12 $500,000 or less, or $750,000 or less, as the case may be, and 13 that was not finally approved, may be awarded during fiscal 14 years 2014-2015 and 2015-2016 without regard to the $45 million 15 cap. Fourth, if the department awards during fiscal year 16 2016-2017, or any fiscal year thereafter, an amount of tax 17 credits that is less than the $45 million cap, the department 18 may carry forward the difference between the amount so awarded 19 and the $45 million cap, not to exceed 10 percent of the cap, to 20 the succeeding fiscal year for award during that fiscal year, 21 without regard to the $45 million cap. 22 The bill makes several technical changes to Code section 23 404A.5, which governs the department’s reporting and 24 recommendation duties, to reference qualified rehabilitation 25 projects and to properly reflect that tax credits will be 26 awarded instead of granted and tax credit certificates issued. 27 The bill requires the department and the department of 28 revenue to adopt rules to jointly administer the program. 29 Unless otherwise provided in the bill, the bill applies 30 to agreements entered into by the department and an eligible 31 taxpayer on or after the effective date of the bill, and 32 rehabilitation projects for which a project application was 33 approved and tax credits reserved prior to the effective date 34 of the bill shall be governed by current law. 35 -17- LSB 5303HZ (2) 85 mm/sc 17/ 17