HF 60 (LSB 1026YH (8) 85)

HOUSE FILE 60

BY  WATTS

A BILL FOR

An Act relating to the approval and imposition of local option taxes and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 423B.1, subsection 1, Code 2013, is amended to read as follows:
   1.  A
 
city or county may impose by ordinance of the
 
governing body of the city or the board of supervisors local option taxes authorized by this chapter, subject to this section and subject to the exception provided in subsection 2.
    Sec. 2.  Section 423B.1, subsection 2, Code 2013, is amended by striking the subsection.
    Sec. 3.  Section 423B.1, subsection 3, Code 2013, is amended to read as follows:
   3.  A local option tax shall be imposed only after an election at which a majority of those voting on the question favors imposition and shall then be imposed until repealed as provided in subsection 6, paragraph “a”. If the tax is a local vehicle tax imposed by a county, it shall apply to all incorporated and unincorporated areas of the county. If the tax is a local sales and services tax imposed by a county, it shall only apply to those incorporated areas and the unincorporated area of that county in which
 
if a majority of those voting in the
 
unincorporated area on the tax favors its imposition
 
and if the tax is a local sales and services tax imposed by a city it shall only apply to the city if a majority of those voting in the city on the tax favors its imposition. For purposes of the local sales and services tax, all cities contiguous to each other shall be treated as part of one incorporated area and the tax would be imposed in each of those contiguous cities only if the majority of those voting in the total area covered by the contiguous cities favors its imposition. In the case of a local sales and services tax submitted to the registered voters of two or more contiguous counties as provided in subsection 4, paragraph “c”, all cities contiguous to each other shall be treated as part of one incorporated area, even if the corporate boundaries of one or more of the cities include areas of more than one county, and the tax shall be imposed in each of those contiguous cities only if a majority of those voting on the tax in the total area covered by the contiguous cities favored its imposition. For purposes of the local sales and services tax, a city is not contiguous to another city if the only road access between the two cities is through another state.
    Sec. 4.  Section 423B.1, subsection 4, paragraphs a and b, Code 2013, are amended to read as follows:
   a.  A county board of supervisors shall direct within thirty days the county commissioner of elections to submit the question of imposition of a local vehicle tax or a local sales and services tax to the registered voters of the incorporated and unincorporated areas of the county upon receipt
 
by the board of supervisors of a petition, requesting imposition of a local vehicle tax or a local sales and services tax, signed by eligible electors of the whole county equal in number to five percent of the persons in the whole county who voted at the last preceding state general election. A county board of supervisors shall direct within thirty days the county commissioner of elections to submit the question of imposition of a local sales and services tax to the registered voters of a city or of the unincorporated area of the county upon receipt by the board of supervisors of a petition, requesting imposition of a local sales and services tax, signed by eligible electors of the city or of the unincorporated area of the county, as applicable, equal in number to five percent of the persons in the applicable city or unincorporated area of the county who voted at the last preceding general election.

In the case of a local vehicle tax, the petition requesting imposition shall specify the rate of tax and the classes, if any, that are to be exempt.

In the case of a local sales and services tax, the petition requesting imposition shall state the period of time the tax will be imposed, not to exceed ten years. If more than one valid petition is received, the earliest received petition shall be used.
   b.  The question of the imposition of a local sales and services tax shall be submitted to the registered voters of the incorporated and
 
city or of the unincorporated areas
 
area of the county upon receipt by the county commissioner of elections of the
 
a motion or motions, requesting such submission, adopted by the governing body or bodies of the
 
a city or cities located within the county or of the county, for the unincorporated areas
 
area of the county, representing at least one half of the population of the county.

The motion shall state the period of time the tax will be imposed, not to exceed ten years. Upon adoption of such motion, the governing body of the city or county, for the unincorporated areas,
 
area shall submit the motion to the county commissioner of elections and in the case of the governing body of the city shall notify the board of supervisors of the adoption of the motion. The county commissioner of elections shall keep a file on all the motions received and, upon reaching the population requirements, shall publish notice of the ballot proposition concerning the imposition of the local sales and services tax. A motion ceases to be valid at the time of the holding of the regular election for the election of members of the governing body which adopted the motion. The county commissioner of elections shall eliminate from the file any motion that ceases to be valid. The manner provided under this paragraph for the submission of the question of imposition of a local sales and services tax is an alternative to the manner provided in paragraph “a”.
    Sec. 5.  Section 423B.1, subsection 4, paragraph c, Code 2013, is amended by striking the paragraph and inserting in lieu thereof the following:
   c.  A city is considered to be located in a county if over half of the population of the city is located in that county.
    Sec. 6.  Section 423B.1, subsection 5, Code 2013, is amended to read as follows:
   5.  The county commissioner of elections shall submit the question of imposition of a local option tax at an election held on a date specified in section 39.2, subsection 4, paragraph “a”
 
or “b”, as applicable. The election shall not be held sooner than sixty days after publication of notice of the ballot proposition. The ballot proposition shall specify the type and rate of tax and, in the case of a vehicle tax, the classes that will be exempt and, in the case of a local sales and services tax, the date it will be imposed which date shall not be earlier than ninety days following the election, and the date of its repeal as stated in the petition or motion. The ballot proposition shall also specify the approximate amount of local option tax revenues that will be used for property tax relief and shall contain a statement as to the specific purpose or purposes for which the revenues shall otherwise be expended. If the county board of supervisors
 
or city council, as applicable, decides under subsection 6 to specify a date on which the local option sales and services tax shall automatically be repealed
 
that is less than ten years from the date of the election, the date of the repeal shall also be specified on the ballot. The rate of the vehicle tax shall be in increments of one dollar per vehicle as set by the petition seeking to impose the tax. The rate of a local sales and services tax shall not be more than one percent as set by the governing body. The state commissioner of elections shall establish by rule the form for the ballot proposition which form shall be uniform throughout the state.
    Sec. 7.  Section 423B.1, subsection 6, paragraph a, Code 2013, is amended to read as follows:
   a.
  (1)  If a majority of those voting on the question of imposition of a local option
 
vehicle tax favors imposition of a local option
 
vehicle tax, the governing body of that county shall impose the tax at the rate specified for an unlimited period. However, in the case of a local sales and services tax, the county shall not impose the tax in any incorporated area or the unincorporated area if the majority of those voting on the tax in that area did not favor its imposition. For purposes of the local sales and services tax, all cities contiguous to each other shall be treated as part of one incorporated area and the tax shall be imposed in each of those contiguous cities only if the majority of those voting on the tax in the total area covered by the contiguous cities favored its imposition. In the case of a local sales and services tax submitted to the registered voters of two or more contiguous counties as provided in subsection 4, paragraph “c”, all cities contiguous to each other shall be treated as part of one incorporated area, even if the corporate boundaries of one or more of the cities include areas of more than one county, and the tax shall be imposed in each of those contiguous cities only if a majority of those voting on the tax in the total area covered by the contiguous cities favored its imposition.

If a majority of those voting on the question of imposition of a local option sales and services tax favors imposition of the tax, the governing body of the city or county, as applicable, shall impose by ordinance the tax at the rate specified for a period of ten years, unless a shorter period of time is specified on the ballot.
   (2)  The local option tax may be repealed or the rate increased or decreased or the use thereof changed after an election at which a majority of those voting on the question of repeal or rate or use change favored the repeal or rate or use change. The date on which the repeal, rate, or use change is to take effect shall not be earlier than ninety days following the election. The election at which the question of repeal or rate or use change is offered shall be called and held in the same manner and under the same conditions as provided in subsections 4 and 5 for the election on the imposition of the local option tax. However, in the case of a local sales and services tax where the tax has not been imposed countywide, the question of repeal or imposition or rate or use change shall be voted on only by the registered voters of the areas of the county where the tax has been imposed or has not been imposed, as appropriate. However, the governing body of the incorporated area
 
city or unincorporated area where the local sales and services tax is imposed may, upon its own motion, request the county commissioner of elections to hold an election in the incorporated
 
city or unincorporated area, as appropriate, on the question of the change in use of local sales and services tax revenues. The election may be held at any time but not sooner than sixty days following publication of the ballot proposition. If a majority of those voting in the incorporated
 
city or unincorporated area on the change in use favors the change, the governing body of that
 
city or area shall change the use to which the revenues shall be used. The ballot proposition shall list the present use of the revenues, the proposed use, and the date after which revenues received will be used for the new use.
   (3)  When submitting the question of the imposition of a local sales and services tax, the county board of supervisors may direct that the question contain a provision for the repeal, without election, of the local sales and services tax on a specific date, which date shall be as provided in section 423B.6, subsection 1.
    Sec. 8.  Section 423B.1, Code 2013, is amended by adding the following new subsection:
   NEW SUBSECTION.  6A.  If a proposition for the imposition of a local sales and services tax submitted to the voters of a city or unincorporated area of a county under this section fails to gain approval, the proposition shall not be resubmitted to the voters of that jurisdiction in substantially the same form for a period of three years following the date of the election and may only be resubmitted to the voters on a date specified in section 39.2, subsection 4, paragraph “a” or “b”, as applicable.
    Sec. 9.  Section 423B.1, subsection 7, paragraph b, Code 2013, is amended to read as follows:
   b.  Costs of local option tax elections shall be apportioned among jurisdictions within the county voting on the question at the same election on a pro rata basis in proportion to the number of registered voters in each taxing jurisdiction
 
voting on the question and the total number of registered voters in all of the taxing jurisdictions
 
voting on the question.
    Sec. 10.  Section 423B.1, subsection 9, Code 2013, is amended to read as follows:
   9.
  a.  In a county that has imposed a local option sales and services tax
 
in the unincorporated area of the county, the board of supervisors shall, notwithstanding any contrary provision of this chapter, repeal the local option sales and services tax in the unincorporated areas or in an incorporated city area in which the tax has been imposed
 
area upon adoption of its own motion for repeal in the unincorporated areas or upon receipt of a motion adopted by the governing body of that incorporated city area requesting repeal. The board of supervisors shall repeal the local option sales and services tax effective on the later of the date of the adoption of the repeal motion or the earliest date specified in section 423B.6, subsection 1. For purposes of this subsection, incorporated city area includes an incorporated city which is contiguous to another incorporated city.
   b.  In a city that has imposed a local sales and services tax, the governing body of the city shall, notwithstanding any contrary provision of this chapter, repeal the local sales and services tax in the city upon adoption of its own motion for repeal. The governing body of the city shall repeal the local sales and services tax effective on the later of the date of the adoption of the repeal motion or the earliest date specified in section 423B.6, subsection 1.
    Sec. 11.  Section 423B.5, unnumbered paragraph 1, Code 2013, is amended to read as follows:
   A local sales and services tax at the rate of not more than one percent may be imposed by a
 
city or county on the sales price taxed by the state under chapter 423, subchapter II. A local sales and services tax shall be imposed on the same basis as the state sales and services tax or in the case of the use of natural gas, natural gas service, electricity, or electric service on the same basis as the state use tax and shall not be imposed on the sale of any property or on any service not taxed by the state, except the tax shall not be imposed on the sales price from the sale of motor fuel or special fuel as defined in chapter 452A which is consumed for highway use or in watercraft or aircraft if the fuel tax is paid on the transaction and a refund has not or will not be allowed, on the sales price from the sale of equipment by the state department of transportation, or on the sales price from the sale or use of natural gas, natural gas service, electricity, or electric service in a city or county where the sales price from the sale of natural gas or electric energy is subject to a franchise fee or user fee during the period the franchise or user fee is imposed. A local sales and services tax is applicable to transactions within those incorporated and
 
the city or unincorporated areas
 
area of the county where it is imposed and shall be collected by all persons required to collect state sales taxes. All cities contiguous to each other shall be treated as part of one incorporated area and the tax would be imposed in each of those contiguous cities only if the majority of those voting in the total area covered by the contiguous cities favors its imposition. In the case of a local sales and services tax submitted to the registered voters of two or more contiguous counties as provided in section 423B.1, subsection 4, paragraph “c”, all cities contiguous to each other shall be treated as part of one incorporated area, even if the corporate boundaries of one or more of the cities include areas of more than one county, and the tax shall be imposed in each of those contiguous cities only if a majority of those voting on the tax in the total area covered by the contiguous cities favored its imposition.
    Sec. 12.  Section 423B.5, unnumbered paragraph 4, Code 2013, is amended to read as follows:
   If a local sales and services tax is imposed by a
 
city or county pursuant to this chapter, a local excise tax at the same rate shall be imposed by the
 
city or county on the purchase price of natural gas, natural gas service, electricity, or electric service subject to tax under chapter 423, subchapter III, and not exempted from tax by any provision of chapter 423, subchapter III. The local excise tax is applicable only to the use of natural gas, natural gas service, electricity, or electric service within those incorporated and unincorporated areas of the county where it is imposed and, except as otherwise provided in this chapter, shall be collected and administered in the same manner as the local sales and services tax. For purposes of this chapter, “local sales and services tax” shall also include the local excise tax.
    Sec. 13.  Section 423B.6, subsection 1, paragraph b, Code 2013, is amended to read as follows:
   b.  A local sales and services tax shall be repealed only on June 30 or December 31 but not sooner than ninety days following the favorable election if one is held. However, a local sales and services tax shall not be repealed before the tax has been in effect for one year. At least forty days before the imposition or repeal of the tax, a
 
the city or county, as applicable, shall provide notice of the action by certified mail to the director of revenue.
    Sec. 14.  Section 423B.6, subsection 2, paragraph b, Code 2013, is amended to read as follows:
   b.  The ordinance of a
 
governing body of a city or county board of supervisors imposing a local sales and services tax shall adopt by reference the applicable provisions of the appropriate sections of chapter 423. All powers and requirements of the director to administer the state sales tax law and use tax law are applicable to the administration of a local sales and services tax law and the local excise tax, including but not limited to the provisions of section 422.25, subsection 4, sections 422.30, 422.67, and 422.68, section 422.69, subsection 1, sections 422.70 through 422.75, section 423.14, subsection 1 and subsection 2, paragraphs “b” through “e”, and sections 423.15, 423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 through 423.42, 423.46, and 423.47. Local officials shall confer with the director of revenue for assistance in drafting the ordinance imposing a local sales and services tax. A certified copy of the ordinance shall be filed with the director as soon as possible after passage.
    Sec. 15.  Section 423B.6, subsection 3, paragraph b, Code 2013, is amended to read as follows:
   b.  All local tax moneys and interest and penalties received or refunded one hundred eighty days or more after the date on which the
 
city or county repeals its local sales and services tax shall be deposited in or withdrawn from the state general fund.
    Sec. 16.  Section 423B.7, subsection 1, paragraph a, Code 2013, is amended to read as follows:
   a.  Except as provided in paragraph “b”, the director shall credit the local sales and services tax receipts and interest and penalties from a county-imposed tax to the county’s account in the local sales and services tax fund and from a city-imposed tax under section 423B.1, subsection 2, to the city’s account in the local sales and services tax fund. If the director is unable to determine from which county
 
jurisdiction any of the receipts were collected, those receipts shall be allocated among the possible counties
 
jurisdictions based on allocation rules adopted by the director.
    Sec. 17.  Section 423B.7, subsections 3 and 4, Code 2013, are amended by striking the subsections and inserting in lieu thereof the following:
   3.  Each city or county’s account shall be allocated to and remitted to the city or county imposing the local sales and services tax on the basis of the location where the tax was collected. A city shall receive all such local sales and services tax collected within the corporate boundaries of the city. A county shall receive all such local sales and services tax collected in the unincorporated area of the county.
   4.  Each city or county where a local sales and services tax is imposed pursuant to this chapter shall on an ongoing basis assist the department of revenue in identifying retail establishments within their jurisdiction that are collecting the local sales and services tax. If the director is unable to determine from which jurisdiction any of the receipts were collected, those receipts shall be allocated among the possible cities or counties based on allocation rules adopted by the director.
    Sec. 18.  Section 423B.7, subsection 5, Code 2013, is amended by striking the subsection.
    Sec. 19.  Section 423B.7, subsection 6, Code 2013, is amended to read as follows:
   6.  From each special city account, the revenues shall be remitted to the city council for deposit in the special fund created in section 403.19, subsection 2, to be used by the city as provided in section 423B.10. The distribution from the special city account is not subject to the distribution formula provided in subsections 3, 4, and 5.
    Sec. 20.  Section 423B.10, subsection 1, paragraph b, Code 2013, is amended to read as follows:
   b.  “Eligible city” means a city in which a local sales and services tax imposed by the
 
city or county applies or a city described in section 423B.1, subsection 2, paragraph “a”,
 
Code 2013, and in which an urban renewal area has been designated.
    Sec. 21.  Section 423B.10, subsection 5, Code 2013, is amended to read as follows:
   5.  In addition to the moneys received pursuant to the ordinance authorized under subsection 2, an eligible city may deposit any other local sales and services tax revenues received by it pursuant to
 
either the distribution formula in section 423B.7, subsections 3, 4, and 5,
 
Code 2013, for local taxes described in section 22, subsection 1, of this Act, or section 423B.7, subsections 3 and 4, to the special fund described in section 403.19, subsection 2.
    Sec. 22.  EFFECT OF ACT —— CURRENT LOCAL OPTION TAXES.
   1.  This Act shall not affect the imposition and collection of a local option tax imposed, or that will take effect, as the result of a petition received or a motion approved under chapter 423B prior to July 1, 2013.
   2.  Local taxes described in subsection 1 shall continue to be collected and disbursed to the relevant tax-imposing jurisdictions pursuant to the provisions of chapter 423B, Code 2013, until ten years after July 1, 2013, the repeal date specified in the ordinance imposing the tax, the date when any bonded indebtedness secured by the tax outstanding on July 1, 2013, is retired, or such time as the tax is repealed according to the provisions of chapter 423B, Code 2013, whichever is sooner.
    Sec. 23.  APPLICABILITY.
   1.  This Act applies to petitions received pursuant to section 423B.1, subsection 4, paragraph “a”, as amended in this Act, on or after July 1, 2013.
   2.  This Act applies to motions adopted pursuant to section 423B.1, subsection 4, paragraph “b”, as amended in this Act, on or after July 1, 2013.
EXPLANATION
   This bill relates to the approval and imposition of local option taxes.
   Current Code chapter 423B authorizes the imposition of local option taxes, including a local option sales and services tax. Currently, such a proposed tax is only presented to the voters of a whole county upon the filing of a petition signed by eligible electors of the county equal in number to five percent of the persons in the county who voted at the last preceding general election or upon receipt by the county commissioner of elections of motions requesting such submission, adopted by the governing bodies of the cities located within the county or the governing body of the county for the unincorporated area of the county, representing at least one-half of the population of the county.
   The bill amends the methods of seeking presentment of the local option sales and services tax to the voters by allowing the eligible electors of individual cities and the unincorporated area of a county to file a petition for an election to be held in the petitioning jurisdiction if such petition is signed by eligible electors of the city or the unincorporated area of the county, as applicable, equal in number to five percent of the persons in the applicable city or unincorporated area of the county who voted at the last preceding general election. 
   The bill also removes the requirement that in order to have the local sales and services tax presented to the voters, motions must be approved by cities or the county for the unincorporated area, representing at least one-half of the county’s population. Instead, the bill allows individual cities or the county for the unincorporated area to approve a motion for an election on the local sales and services tax to be held in only that jurisdiction. 
   The bill consequently removes the requirements related to approval of a ballot question by cities that are contiguous to each other and special provisions related to the approval and imposition of a local sales and services tax in a city that is located in more than one county.
   The bill provides that a local sales and services tax approved by the voters may not be imposed for a period exceeding 10 years. In addition, the bill provides that if a proposition for the imposition of a local sales and services tax submitted to the voters of a city or the unincorporated area of a county fails to gain approval, it shall not be resubmitted to the voters of that jurisdiction in substantially the same form for a period of three years following the election and may only be resubmitted on a day specified in statute for special elections of a city or county.
   Current Code section 423B.7 specifies the allocation formula for local sales and services tax revenue among the jurisdictions imposing the tax within a county. Seventy-five percent of each county’s account containing such tax revenue is remitted to the tax-imposing jurisdictions on the basis of the county’s population residing in the unincorporated area where the tax is imposed and those incorporated areas where the tax is imposed and 25 percent of each county’s account is remitted based on the sum of property tax dollars levied in the incorporated areas and unincorporated area where the tax is imposed.
   The bill strikes this allocation formula for local sales and services taxes newly imposed after July 1, 2013, and provides that each county’s account shall be allocated to and remitted to the jurisdictions imposing the local sales and services tax on the basis of the location where the tax was collected. A city receives all local sales and services tax collected in the city and the county receives all local sales and services tax collected in the unincorporated area of the county. The bill imposes a duty on each city or county where a local sales and services tax is imposed to assist the department of revenue in identifying retail establishments within their jurisdiction that are collecting the local sales and services tax.
   The bill does not affect the imposition and collection of a local tax imposed, or that will take effect, as the result of a petition received or a motion approved before July 1, 2013. Such local taxes will continue to be collected and disbursed to the relevant tax-imposing jurisdictions pursuant to the provisions of Code chapter 423B, Code 2013, until 10 years after July 1, 2013, the repeal date specified in the ordinance imposing the tax, the date when bonded indebtedness secured by the tax is retired, or such time as the tax is repealed, whichever is sooner.
   The bill applies to petitions and motions for the imposition of local option taxes received or adopted under Code chapter 423B, as amended in the bill, on or after July 1, 2013.