H.F. 505 Section 1. Section 423B.1, subsection 1, Code 2013, is 1 amended to read as follows: 2 1. A city or county may impose by ordinance of the governing 3 body of the city or the board of supervisors local option taxes 4 authorized by this chapter , subject to this section and subject 5 to the exception provided in subsection 2 . 6 Sec. 2. Section 423B.1, subsection 2, Code 2013, is amended 7 by striking the subsection. 8 Sec. 3. Section 423B.1, subsection 3, Code 2013, is amended 9 to read as follows: 10 3. A local option tax shall be imposed only after an 11 election at which a majority of those voting on the question 12 favors imposition and shall then be imposed until repealed 13 as provided in subsection 6 , paragraph “a” . If the tax is 14 a local vehicle tax imposed by a county, it shall apply to 15 all incorporated and unincorporated areas of the county. 16 If the tax is a local sales and services tax imposed by a 17 county, it shall only apply to those incorporated areas and 18 the unincorporated area of that county in which if a majority 19 of those voting in the unincorporated area on the tax favors 20 its imposition and if the tax is a local sales and services 21 tax imposed by a city it shall only apply to the city if a 22 majority of those voting in the city on the tax favors its 23 imposition . For purposes of the local sales and services tax, 24 all cities contiguous to each other shall be treated as part of 25 one incorporated area and the tax would be imposed in each of 26 those contiguous cities only if the majority of those voting 27 in the total area covered by the contiguous cities favors its 28 imposition. In the case of a local sales and services tax 29 submitted to the registered voters of two or more contiguous 30 counties as provided in subsection 4 , paragraph “c” , all cities 31 contiguous to each other shall be treated as part of one 32 incorporated area, even if the corporate boundaries of one or 33 more of the cities include areas of more than one county, and 34 the tax shall be imposed in each of those contiguous cities 35 -1- LSB 1026HV (4) 85 md/sc 1/ 13

H.F. 505 only if a majority of those voting on the tax in the total area 1 covered by the contiguous cities favored its imposition. For 2 purposes of the local sales and services tax, a city is not 3 contiguous to another city if the only road access between the 4 two cities is through another state. 5 Sec. 4. Section 423B.1, subsection 4, paragraphs a and b, 6 Code 2013, are amended to read as follows: 7 a. A county board of supervisors shall direct within 8 thirty days the county commissioner of elections to submit the 9 question of imposition of a local vehicle tax or a local sales 10 and services tax to the registered voters of the incorporated 11 and unincorporated areas of the county upon receipt by the 12 board of supervisors of a petition, requesting imposition of 13 a local vehicle tax or a local sales and services tax , signed 14 by eligible electors of the whole county equal in number to 15 five percent of the persons in the whole county who voted at 16 the last preceding state general election. A county board 17 of supervisors shall direct within thirty days the county 18 commissioner of elections to submit the question of imposition 19 of a local sales and services tax to the registered voters 20 of a city or of the unincorporated area of the county upon 21 receipt by the board of supervisors of a petition, requesting 22 imposition of a local sales and services tax, signed by 23 eligible electors of the city or of the unincorporated area of 24 the county, as applicable, equal in number to five percent of 25 the persons in the applicable city or unincorporated area of 26 the county who voted at the last preceding general election. 27 In the case of a local vehicle tax, the petition requesting 28 imposition shall specify the rate of tax and the classes, if 29 any, that are to be exempt. If more than one valid petition is 30 received, the earliest received petition shall be used. 31 b. The question of the imposition of a local sales and 32 services tax shall be submitted to the registered voters of the 33 incorporated and city or of the unincorporated areas area of 34 the county upon receipt by the county commissioner of elections 35 -2- LSB 1026HV (4) 85 md/sc 2/ 13

H.F. 505 of the a motion or motions , requesting such submission, adopted 1 by the governing body or bodies of the a city or cities located 2 within the county or of the county , for the unincorporated 3 areas area of the county , representing at least one half of the 4 population of the county . Upon adoption of such motion, the 5 governing body of the city or county , for the unincorporated 6 areas, area shall submit the motion to the county commissioner 7 of elections and in the case of the governing body of the city 8 shall notify the board of supervisors of the adoption of the 9 motion . The county commissioner of elections shall keep a file 10 on all the motions received and, upon reaching the population 11 requirements, shall publish notice of the ballot proposition 12 concerning the imposition of the local sales and services tax. 13 A motion ceases to be valid at the time of the holding of the 14 regular election for the election of members of the governing 15 body which adopted the motion. The county commissioner of 16 elections shall eliminate from the file any motion that ceases 17 to be valid. The manner provided under this paragraph for 18 the submission of the question of imposition of a local sales 19 and services tax is an alternative to the manner provided in 20 paragraph “a” . 21 Sec. 5. Section 423B.1, subsection 4, paragraph c, Code 22 2013, is amended by striking the paragraph and inserting in 23 lieu thereof the following: 24 c. A city is considered to be located in a county if over 25 half of the population of the city is located in that county. 26 Sec. 6. Section 423B.1, subsection 5, Code 2013, is amended 27 to read as follows: 28 5. The county commissioner of elections shall submit the 29 question of imposition of a local option tax at an election 30 held on a date specified in section 39.2, subsection 4 , 31 paragraph “a” or “b” , as applicable . The election shall not 32 be held sooner than sixty days after publication of notice of 33 the ballot proposition. The ballot proposition shall specify 34 the type and rate of tax and , in the case of a vehicle tax , the 35 -3- LSB 1026HV (4) 85 md/sc 3/ 13

H.F. 505 classes that will be exempt and , in the case of a local sales 1 and services tax , the date it will be imposed which date shall 2 not be earlier than ninety days following the election. The 3 ballot proposition shall also specify the approximate amount 4 of local option tax revenues that will be used for property 5 tax relief and shall contain a statement as to the specific 6 purpose or purposes for which the revenues shall otherwise 7 be expended. If the county board of supervisors or city 8 council, as applicable, decides under subsection 6 to specify 9 a date on which the local option sales and services tax shall 10 automatically be repealed, the date of the repeal shall also be 11 specified on the ballot. The rate of the vehicle tax shall be 12 in increments of one dollar per vehicle as set by the petition 13 seeking to impose the tax. The rate of a local sales and 14 services tax shall not be more than one percent as set by the 15 governing body . The state commissioner of elections shall 16 establish by rule the form for the ballot proposition which 17 form shall be uniform throughout the state. 18 Sec. 7. Section 423B.1, subsection 6, paragraph a, Code 19 2013, is amended to read as follows: 20 a. (1) If a majority of those voting on the question 21 of imposition of a local option tax favors imposition of a 22 local option tax, the governing body of that county shall 23 impose the tax at the rate specified for an unlimited period. 24 However, in the case of a local sales and services tax, the 25 county shall not impose the tax in any incorporated area or 26 the unincorporated area if the majority of those voting on the 27 tax in that area did not favor its imposition. For purposes 28 of the local sales and services tax, all cities contiguous to 29 each other shall be treated as part of one incorporated area 30 and the tax shall be imposed in each of those contiguous cities 31 only if the majority of those voting on the tax in the total 32 area covered by the contiguous cities favored its imposition. 33 In the case of a local sales and services tax submitted to 34 the registered voters of two or more contiguous counties as 35 -4- LSB 1026HV (4) 85 md/sc 4/ 13

H.F. 505 provided in subsection 4 , paragraph “c” , all cities contiguous 1 to each other shall be treated as part of one incorporated 2 area, even if the corporate boundaries of one or more of the 3 cities include areas of more than one county, and the tax 4 shall be imposed in each of those contiguous cities only if a 5 majority of those voting on the tax in the total area covered 6 by the contiguous cities favored its imposition. If a majority 7 of those voting on the question of imposition of a local 8 option sales and services tax favors imposition of the tax, 9 the governing body of the city or county, as applicable, shall 10 impose by ordinance the tax at the rate of one percent. 11 (2) The local option tax may be repealed or the rate of the 12 local vehicle tax increased or decreased or the use thereof 13 of a local option tax changed after an election at which a 14 majority of those voting on the question of repeal or rate or 15 use change favored the repeal or rate or use change. The date 16 on which the repeal, rate, or use change is to take effect 17 shall not be earlier than ninety days following the election. 18 The election at which the question of repeal or rate or use 19 change is offered shall be called and held in the same manner 20 and under the same conditions as provided in subsections 4 21 and 5 for the election on the imposition of the local option 22 tax. However, in the case of a local sales and services tax 23 where the tax has not been imposed countywide, the question 24 of repeal or imposition or rate or use change shall be voted 25 on only by the registered voters of the areas of the county 26 where the tax has been imposed or has not been imposed, as 27 appropriate. However, the governing body of the incorporated 28 area city or unincorporated area where the local sales and 29 services tax is imposed may, upon its own motion, request the 30 county commissioner of elections to hold an election in the 31 incorporated city or unincorporated area, as appropriate, on 32 the question of the change in use of local sales and services 33 tax revenues. The election may be held at any time but not 34 sooner than sixty days following publication of the ballot 35 -5- LSB 1026HV (4) 85 md/sc 5/ 13

H.F. 505 proposition. If a majority of those voting in the incorporated 1 city or unincorporated area on the change in use favors the 2 change, the governing body of that city or area shall change 3 the use to which the revenues shall be used. The ballot 4 proposition shall list the present use of the revenues, the 5 proposed use, and the date after which revenues received will 6 be used for the new use. 7 (3) When submitting the question of the imposition of a 8 local sales and services tax, the county board of supervisors 9 or the governing body of the city may direct that the question 10 contain a provision for the repeal, without election, of the 11 local sales and services tax on a specific date, which date 12 shall be as provided in section 423B.6, subsection 1. 13 Sec. 8. Section 423B.1, Code 2013, is amended by adding the 14 following new subsection: 15 NEW SUBSECTION . 6A. If a proposition for the imposition 16 of a local sales and services tax submitted to the voters 17 of a city or unincorporated area of a county under this 18 section fails to gain approval, the proposition shall not be 19 resubmitted to the voters of that jurisdiction in substantially 20 the same form for a period of three years following the date 21 of the election and may only be resubmitted to the voters on a 22 date specified in section 39.2, subsection 4, paragraph “a” or 23 “b” , as applicable. 24 Sec. 9. Section 423B.1, subsection 7, paragraph b, Code 25 2013, is amended to read as follows: 26 b. Costs of local option tax elections shall be apportioned 27 among jurisdictions within the county voting on the question 28 at the same election on a pro rata basis in proportion to the 29 number of registered voters in each taxing jurisdiction voting 30 on the question and the total number of registered voters in 31 all of the taxing jurisdictions voting on the question . 32 Sec. 10. Section 423B.1, subsections 8 through 10, Code 33 2013, are amended to read as follows: 34 8. Local option taxes authorized to be imposed as provided 35 -6- LSB 1026HV (4) 85 md/sc 6/ 13

H.F. 505 in this chapter are a local sales and services tax and a local 1 vehicle tax. The rate of the tax shall be in increments of one 2 dollar per vehicle for a vehicle tax as set on the petition 3 seeking to impose the vehicle tax. The rate of a local sales 4 and services tax shall not be more than one percent as set by 5 the governing body . 6 9. a. In a county that has imposed a local option sales 7 and services tax in the unincorporated area of the county , 8 the board of supervisors shall, notwithstanding any contrary 9 provision of this chapter , repeal the local option sales and 10 services tax in the unincorporated areas or in an incorporated 11 city area in which the tax has been imposed area upon adoption 12 of its own motion for repeal in the unincorporated areas or 13 upon receipt of a motion adopted by the governing body of 14 that incorporated city area requesting repeal . The board of 15 supervisors shall repeal the local option sales and services 16 tax effective on the later of the date of the adoption of the 17 repeal motion or the earliest date specified in section 423B.6, 18 subsection 1 . For purposes of this subsection , incorporated 19 city area includes an incorporated city which is contiguous to 20 another incorporated city. 21 b. In a city that has imposed a local sales and services 22 tax, the governing body of the city shall, notwithstanding any 23 contrary provision of this chapter, repeal the local sales 24 and services tax in the city upon adoption of its own motion 25 for repeal. The governing body of the city shall repeal the 26 local sales and services tax effective on the later of the 27 date of the adoption of the repeal motion or the earliest date 28 specified in section 423B.6, subsection 1. 29 10. Notwithstanding subsection 9 or any other contrary 30 provision of this chapter , a local option sales and services 31 tax shall not be repealed or reduced in rate if obligations are 32 outstanding which are payable as provided in section 423B.9 , 33 unless funds sufficient to pay the principal, interest, and 34 premium, if any, on the outstanding obligations at and prior 35 -7- LSB 1026HV (4) 85 md/sc 7/ 13

H.F. 505 to maturity have been properly set aside and pledged for that 1 purpose. 2 Sec. 11. Section 423B.5, unnumbered paragraph 1, Code 2013, 3 is amended to read as follows: 4 A local sales and services tax at the rate of not more than 5 one percent may be imposed by a city or county on the sales 6 price taxed by the state under chapter 423, subchapter II . A 7 local sales and services tax shall be imposed on the same basis 8 as the state sales and services tax or in the case of the use 9 of natural gas, natural gas service, electricity, or electric 10 service on the same basis as the state use tax and shall not 11 be imposed on the sale of any property or on any service not 12 taxed by the state, except the tax shall not be imposed on 13 the sales price from the sale of motor fuel or special fuel 14 as defined in chapter 452A which is consumed for highway use 15 or in watercraft or aircraft if the fuel tax is paid on the 16 transaction and a refund has not or will not be allowed, on the 17 sales price from the sale of equipment by the state department 18 of transportation, or on the sales price from the sale or use 19 of natural gas, natural gas service, electricity, or electric 20 service in a city or county where the sales price from the sale 21 of natural gas or electric energy is subject to a franchise 22 fee or user fee during the period the franchise or user fee 23 is imposed. A local sales and services tax is applicable 24 to transactions within those incorporated and the city or 25 unincorporated areas area of the county where it is imposed and 26 shall be collected by all persons required to collect state 27 sales taxes. All cities contiguous to each other shall be 28 treated as part of one incorporated area and the tax would be 29 imposed in each of those contiguous cities only if the majority 30 of those voting in the total area covered by the contiguous 31 cities favors its imposition. In the case of a local sales and 32 services tax submitted to the registered voters of two or more 33 contiguous counties as provided in section 423B.1, subsection 34 4 , paragraph “c” , all cities contiguous to each other shall be 35 -8- LSB 1026HV (4) 85 md/sc 8/ 13

H.F. 505 treated as part of one incorporated area, even if the corporate 1 boundaries of one or more of the cities include areas of more 2 than one county, and the tax shall be imposed in each of those 3 contiguous cities only if a majority of those voting on the tax 4 in the total area covered by the contiguous cities favored its 5 imposition. 6 Sec. 12. Section 423B.5, unnumbered paragraph 4, Code 2013, 7 is amended to read as follows: 8 If a local sales and services tax is imposed by a city or 9 county pursuant to this chapter , a local excise tax at the same 10 rate shall be imposed by the city or county on the purchase 11 price of natural gas, natural gas service, electricity, or 12 electric service subject to tax under chapter 423, subchapter 13 III , and not exempted from tax by any provision of chapter 423, 14 subchapter III . The local excise tax is applicable only to 15 the use of natural gas, natural gas service, electricity, or 16 electric service within those incorporated and unincorporated 17 areas of the county where it is imposed and, except as 18 otherwise provided in this chapter , shall be collected and 19 administered in the same manner as the local sales and services 20 tax. For purposes of this chapter , “local sales and services 21 tax” shall also include the local excise tax. 22 Sec. 13. Section 423B.6, subsection 1, paragraphs b and c, 23 Code 2013, are amended to read as follows: 24 b. A local sales and services tax shall be repealed only 25 on June 30 or December 31 but not sooner than ninety days 26 following the favorable election if one is held. However, a 27 local sales and services tax shall not be repealed before the 28 tax has been in effect for one year. At least forty days before 29 the imposition or repeal of the tax, a the city or county , as 30 applicable, shall provide notice of the action by certified 31 mail to the director of revenue. 32 c. The imposition of or a rate change for a local sales and 33 services tax shall not be applied to purchases from a printed 34 catalog wherein a purchaser computes the local tax based on 35 -9- LSB 1026HV (4) 85 md/sc 9/ 13

H.F. 505 rates published in the catalog unless a minimum of one hundred 1 twenty days’ notice of the imposition or rate change has been 2 given to the seller from the catalog and the first day of a 3 calendar quarter has occurred on or after the one hundred 4 twentieth day. 5 Sec. 14. Section 423B.6, subsection 2, paragraph b, Code 6 2013, is amended to read as follows: 7 b. The ordinance of a governing body of a city or county 8 board of supervisors imposing a local sales and services 9 tax shall adopt by reference the applicable provisions of 10 the appropriate sections of chapter 423 . All powers and 11 requirements of the director to administer the state sales tax 12 law and use tax law are applicable to the administration of 13 a local sales and services tax law and the local excise tax, 14 including but not limited to the provisions of section 422.25, 15 subsection 4 , sections 422.30 , 422.67 , and 422.68 , section 16 422.69, subsection 1 , sections 422.70 through 422.75 , section 17 423.14, subsection 1 and subsection 2 , paragraphs “b” through 18 “e” , and sections 423.15 , 423.23 , 423.24 , 423.25 , 423.31 19 through 423.35 , 423.37 through 423.42 , 423.46 , and 423.47 . 20 Local officials shall confer with the director of revenue for 21 assistance in drafting the ordinance imposing a local sales and 22 services tax. A certified copy of the ordinance shall be filed 23 with the director as soon as possible after passage. 24 Sec. 15. Section 423B.6, subsection 3, paragraph b, Code 25 2013, is amended to read as follows: 26 b. All local tax moneys and interest and penalties received 27 or refunded one hundred eighty days or more after the date on 28 which the city or county repeals its local sales and services 29 tax shall be deposited in or withdrawn from the state general 30 fund. 31 Sec. 16. Section 423B.7, subsection 1, paragraph a, Code 32 2013, is amended to read as follows: 33 a. Except as provided in paragraph “b” , the director shall 34 credit the local sales and services tax receipts and interest 35 -10- LSB 1026HV (4) 85 md/sc 10/ 13

H.F. 505 and penalties from a county-imposed tax or a city-imposed 1 tax to the county’s account in the local sales and services 2 tax fund and from a city-imposed tax under section 423B.1, 3 subsection 2, to the city’s account in the local sales 4 and services tax fund for the county in which the tax was 5 collected . If the director is unable to determine from which 6 county any of the receipts were collected, those receipts shall 7 be allocated among the possible counties based on allocation 8 rules adopted by the director. 9 Sec. 17. Section 423B.7, subsection 5, Code 2013, is amended 10 by striking the subsection. 11 Sec. 18. Section 423B.8, subsection 1, paragraph a, Code 12 2013, is amended to read as follows: 13 a. The goods, wares, or merchandise are incorporated into 14 an improvement to real estate in fulfillment of a written 15 contract fully executed prior to the date of the imposition or 16 increase in rate of a local sales and services tax under this 17 chapter . The refund shall not apply to equipment transferred 18 in fulfillment of a mixed construction contract. 19 Sec. 19. Section 423B.10, subsection 1, paragraph b, Code 20 2013, is amended to read as follows: 21 b. “Eligible city” means a city in which a local sales and 22 services tax imposed by the city or county applies or a city 23 described in section 423B.1, subsection 2 , paragraph “a” , Code 24 2013, and in which an urban renewal area has been designated. 25 Sec. 20. EFFECT OF ACT —— CURRENT LOCAL OPTION TAXES. This 26 Act shall not affect the imposition and collection of a local 27 option tax imposed, or that will take effect, as the result of 28 a petition received or a motion approved under chapter 423B 29 prior to July 1, 2013. 30 Sec. 21. APPLICABILITY. 31 1. This Act applies to petitions received pursuant to 32 section 423B.1, subsection 4, paragraph “a” , as amended in this 33 Act, on or after July 1, 2013. 34 2. This Act applies to motions adopted pursuant to section 35 -11- LSB 1026HV (4) 85 md/sc 11/ 13

H.F. 505 423B.1, subsection 4, paragraph “b” , as amended in this Act, on 1 or after July 1, 2013. 2 EXPLANATION 3 This bill relates to the approval and imposition of local 4 option taxes. 5 Current Code chapter 423B authorizes the imposition of local 6 option taxes, including a local option sales and services tax. 7 Currently, such a proposed tax is only presented to the voters 8 of a whole county upon the filing of a petition signed by 9 eligible electors of the county equal in number to five percent 10 of the persons in the county who voted at the last preceding 11 general election or upon receipt by the county commissioner of 12 elections of motions requesting such submission, adopted by the 13 governing bodies of the cities located within the county or the 14 governing body of the county for the unincorporated area of the 15 county, representing at least one-half of the population of the 16 county. 17 The bill amends the methods of seeking presentment of 18 the local option sales and services tax to the voters by 19 allowing the eligible electors of individual cities and the 20 unincorporated area of a county to file a petition for an 21 election to be held in the petitioning jurisdiction if such 22 petition is signed by eligible electors of the city or the 23 unincorporated area of the county, as applicable, equal in 24 number to five percent of the persons in the applicable city 25 or unincorporated area of the county who voted at the last 26 preceding general election. 27 The bill also removes the requirement that in order to have 28 the local sales and services tax presented to the voters, 29 motions must be approved by cities or the county for the 30 unincorporated area, representing at least one-half of the 31 county’s population. Instead, the bill allows individual 32 cities or the county for the unincorporated area to approve a 33 motion for an election on the local sales and services tax to 34 be held in only that jurisdiction. 35 -12- LSB 1026HV (4) 85 md/sc 12/ 13

H.F. 505 The bill consequently removes the requirements related to 1 approval of a ballot question by cities that are contiguous to 2 each other and special provisions related to the approval and 3 imposition of a local sales and services tax in a city that is 4 located in more than one county. 5 The bill provides that if a proposition for the imposition 6 of a local sales and services tax submitted to the voters of 7 a city or the unincorporated area of a county fails to gain 8 approval, it shall not be resubmitted to the voters of that 9 jurisdiction in substantially the same form for a period of 10 three years following the election and may only be resubmitted 11 on a day specified in statute for special elections of a city 12 or county. 13 Current Code chapter 423B authorizes the imposition of a 14 local sales and services tax at a rate of not more than 1 15 percent. The bill requires a local sales and services tax, if 16 imposed, to be 1 percent. 17 The bill does not affect the imposition and collection of a 18 local tax imposed, or that will take effect, as the result of a 19 petition received or a motion approved before July 1, 2013. 20 The bill applies to petitions and motions for the imposition 21 of local option taxes received or adopted under Code chapter 22 423B, as amended in the bill, on or after July 1, 2013. 23 -13- LSB 1026HV (4) 85 md/sc 13/ 13