House File 620 - Introduced HOUSE FILE 620 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 584) (SUCCESSOR TO HSB 132) A BILL FOR An Act relating to the economic development financial 1 assistance duties and powers of the economic development 2 authority by authorizing and creating fees, affecting the 3 aggregate tax credit limit for certain economic development 4 programs and the tax credit for the endow Iowa tax credit, 5 authorizing the diversion of withholding tax payments for 6 certain programs, making an appropriation, and including 7 effective date and retroactive applicability provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 1207HZ (3) 85 mm/rj

H.F. 620 DIVISION I 1 COLLECTION OF FEES 2 Section 1. Section 15.106B, Code 2013, is amended by adding 3 the following new subsection: 4 NEW SUBSECTION . 5. a. The authority may charge fees to 5 businesses or individuals who receive financial assistance 6 under chapter 15 or 15E. The amount of such fees shall be 7 determined based on the costs of the authority associated with 8 its performance of contract administration and compliance 9 duties relating to economic development programs. 10 b. The authority may charge businesses and individuals a fee 11 for the use of the authority’s federal EB-5 immigrant investor 12 regional center. 13 c. Fees collected by the authority pursuant to this 14 subsection shall be deposited in a fund within the state 15 treasury created pursuant to section 15.106A, subsection 1, 16 paragraph “o” , and are appropriated to the authority for the 17 purposes set out in section 15.106A, subsection 1, paragraph 18 “o” . 19 Sec. 2. Section 15.330, Code 2013, is amended by adding the 20 following new subsection: 21 NEW SUBSECTION . 12. a. The imposition of a one-time 22 compliance cost fee of five hundred dollars to be collected 23 by the authority prior to the issuance of a tax incentive 24 certificate or the disbursement of financial assistance. 25 b. The imposition of a compliance cost fee equal to one-half 26 of one percent of the value of tax incentives claimed pursuant 27 to an agreement that has an aggregate tax incentive value of 28 one hundred thousand dollars or greater. The authority shall 29 collect the fee from the business after the tax incentive is 30 claimed by the business from the department of revenue. 31 Sec. 3. NEW SECTION . 15E.198 Compliance cost fees. 32 The compliance cost fees imposed in 15.330, subsection 12, 33 shall apply to all agreements entered into under this division 34 and shall be collected by the authority in the same manner and 35 -1- LSB 1207HZ (3) 85 mm/rj 1/ 9

H.F. 620 to the same extent as described in that subsection. 1 Sec. 4. EFFECTIVE UPON ENACTMENT. This division of this 2 Act, being deemed of immediate importance, takes effect upon 3 enactment. 4 Sec. 5. APPLICABILITY. This division of this Act applies to 5 agreements entered into on or after the effective date of this 6 division of this Act. 7 DIVISION II 8 AGGREGATE TAX CREDIT LIMITATION 9 Sec. 6. Section 15.119, subsection 1, Code 2013, is amended 10 to read as follows: 11 1. a. Notwithstanding any provision to the contrary in 12 any of the programs listed in subsection 2 , the authority, 13 except as provided in paragraph “b” , shall not authorize for 14 any one fiscal year an amount of tax credits for the programs 15 specified in subsection 2 that is in excess of one hundred 16 twenty eighty-five million dollars. 17 b. (1) The authority may authorize an amount of tax credits 18 during a fiscal year that is in excess of the amount specified 19 in paragraph “a” , but the amount of such excess shall be counted 20 against the total amount of tax credits that may be authorized 21 for the next fiscal year. 22 (2) Any amount of tax credits authorized and awarded during 23 a fiscal year for a program specified in subsection 2 which are 24 irrevocably declined by the awarded business on or before June 25 30 of the next fiscal year may be reallocated, authorized, and 26 awarded during the fiscal year in which the declination occurs. 27 Tax credits authorized pursuant to this subparagraph shall not 28 be considered for purposes of subparagraph (1). 29 Sec. 7. Section 15.119, subsection 2, paragraphs d and e, 30 Code 2013, are amended to read as follows: 31 d. The tax credits for investments in qualifying businesses 32 and community-based seed capital funds issued pursuant to 33 section 15E.43 . In allocating tax credits pursuant to this 34 subsection , the authority shall allocate two million dollars 35 -2- LSB 1207HZ (3) 85 mm/rj 2/ 9

H.F. 620 for purposes of this paragraph , unless the authority determines 1 that the tax credits awarded will be less than that amount . 2 e. The tax credits for investments in an innovation fund 3 pursuant to section 15E.52 . In allocating tax credits pursuant 4 to this subsection , the authority shall allocate eight million 5 dollars for purposes of this paragraph , unless the authority 6 determines that the tax credits awarded will be less than that 7 amount . 8 Sec. 8. EFFECTIVE UPON ENACTMENT. This division of this 9 Act, being deemed of immediate importance, takes effect upon 10 enactment. 11 Sec. 9. RETROACTIVE APPLICABILITY. This division of this 12 Act applies retroactively to July 1, 2012. 13 DIVISION III 14 ENDOW IOWA TAX CREDIT LIMIT 15 Sec. 10. Section 15E.305, subsection 2, Code 2013, is 16 amended to read as follows: 17 2. The aggregate amount of tax credits authorized pursuant 18 to this section shall not exceed a total of three five million 19 five hundred thousand dollars plus such additional credit 20 amount as provided by this section annually. 21 a. The maximum amount of tax credits granted to a taxpayer 22 shall not exceed five percent of the aggregate amount of tax 23 credits authorized. 24 a. b. Ten percent of the aggregate amount of tax credits 25 authorized in a calendar year shall be reserved for those 26 endowment gifts in amounts of thirty thousand dollars or less. 27 If by September 1 of a calendar year the entire ten percent of 28 the reserved tax credits is not distributed, the remaining tax 29 credits shall be available to any other eligible applicants. 30 b. For purposes of this subsection , the additional credit 31 amount shall be an amount for each applicable calendar year 32 determined by the department of revenue equal to the amount of 33 money credited as provided by section 99F.11, subsection 3 , 34 paragraph “d” , subparagraph (3), for the prior fiscal year. 35 -3- LSB 1207HZ (3) 85 mm/rj 3/ 9

H.F. 620 Sec. 11. Section 99F.11, subsection 3, paragraph d, 1 subparagraph (3), Code 2013, is amended by striking the 2 subparagraph. 3 Sec. 12. EFFECTIVE UPON ENACTMENT. This division of this 4 Act, being deemed of immediate importance, takes effect upon 5 enactment. 6 Sec. 13. RETROACTIVE APPLICABILITY. This division of this 7 Act applies retroactively to January 1, 2012, for endow Iowa 8 tax credits authorized on or after that date and for endow Iowa 9 tax credit applications received on or after that date. 10 DIVISION IV 11 WITHHOLDING TAX DIVERSION 12 Sec. 14. NEW SECTION . 15.331 Withholding tax payment 13 diversion. 14 1. If the authority enters into an agreement pursuant to 15 this part, or pursuant to chapter 15E, division XVIII, for 16 any of the incentives or assistance provided under this part, 17 the authority and the eligible business may agree to credit 18 a portion of the withholding payments required under section 19 422.16 to the authority as provided in this section. 20 2. a. An eligible business entering into a withholding 21 agreement with the authority pursuant to this section shall 22 remit the total amount of withholding payments due pursuant to 23 section 422.16 to the department of revenue. 24 b. The department of revenue shall quarterly deposit in a 25 fund created pursuant to section 15.106A an amount equal to two 26 and one-half percent of the gross wages paid by the eligible 27 business to each employee holding a created or retained job 28 covered by an agreement entered into pursuant to this part or 29 chapter 15E, division XVIII. Moneys to be deposited pursuant 30 to this paragraph shall not be paid to the authority until 31 the correct amounts have been verified by the department of 32 revenue. 33 3. Withholding payments shall be deposited pursuant to this 34 section by the department of revenue for each employee holding 35 -4- LSB 1207HZ (3) 85 mm/rj 4/ 9

H.F. 620 a created or retained job for the duration of the agreement 1 between the eligible business and the authority. 2 4. The authority and the eligible business shall provide 3 to the department of revenue any information necessary to 4 correctly process the diversion of withholding tax payments 5 pursuant to this section. 6 5. An employee holding a created or retained job shall 7 receive full credit for the amount withheld as provided in 8 section 422.16. 9 6. If a portion of the employee’s gross wages are subject 10 to a withholding credit diversion under chapter 260E, chapter 11 260G, or section 403.19A, or a supplemental withholding 12 credit diversion under section 15E.197, then the withholding 13 payments shall be credited in the following order of priority, 14 regardless of when the agreement was entered into under this 15 section: 16 a. First, the withholding payments to be credited pursuant 17 to chapters 260E and 260G and section 15E.197. 18 b. Second, the withholding payments to be credited pursuant 19 to this section. 20 c. Third, the withholding payments to be credited pursuant 21 to section 403.19A. 22 7. The authority, in conjunction with the department of 23 revenue, shall adopt rules for the administration of this 24 section. 25 Sec. 15. EFFECTIVE UPON ENACTMENT. This division of this 26 Act, being deemed of immediate importance, takes effect upon 27 enactment. 28 Sec. 16. RETROACTIVE APPLICABILITY. This division of 29 this Act applies retroactively to July 1, 2012, for high 30 quality jobs program agreements and enterprise zone program 31 agreements entered into on or after that date, and for awards 32 of incentives or assistance made under those programs on or 33 after that date. 34 DIVISION V 35 -5- LSB 1207HZ (3) 85 mm/rj 5/ 9

H.F. 620 CITY DEVELOPMENT BOARD FEES 1 Sec. 17. Section 368.10, Code 2013, is amended to read as 2 follows: 3 368.10 Rules —— establishment of filing fees. 4 The board may establish rules for the performance of its 5 duties and the conduct of proceedings before it. The rules 6 may include establishing filing fees for applications and 7 petitions submitted to the board. The amounts collected 8 from the establishment of such fees are appropriated to the 9 board for the purpose of reimbursing the economic development 10 authority for the budgeted costs of covering the board’s 11 expenses as described in section 368.9, subsection 1. Any 12 amounts collected in a fiscal year by the board in excess of 13 such budgeted costs shall be deposited in the general fund of 14 the state. The board’s rules are subject to chapter 17A , as 15 applicable. 16 EXPLANATION 17 This bill relates to the financial management of the 18 economic development authority (EDA) by authorizing and 19 creating fees, affecting the aggregate tax credit limit for 20 certain economic development programs and the tax credit 21 for the endow Iowa tax credit, authorizing the diversion of 22 withholding tax payments for certain programs, and by making 23 an appropriation. 24 COLLECTION OF FEES. Division I amends Code section 25 15.106B, relating to the program powers of the EDA, to allow 26 for the imposition and collection of fees from businesses or 27 individuals who receive financial assistance from the EDA under 28 Code chapter 15 or 15E. The fee amounts are to be determined 29 based on the EDA’s costs of administering contracts under its 30 various economic development programs. The division also 31 allows the EDA to charge a fee for the use of its federal EB-5 32 immigrant investor regional center. The fees are required 33 to be deposited in a fund controlled by the EDA and are 34 appropriated to the EDA for economic development program 35 -6- LSB 1207HZ (3) 85 mm/rj 6/ 9

H.F. 620 administration. 1 The division creates two compliance cost fees to be imposed 2 on all persons or entities that enter into an agreement with 3 the EDA under its high quality jobs program or enterprise zone 4 program. First, a one-time compliance cost fee of $500 due 5 prior to the issuance of a tax incentive certificate or the 6 disbursement of financial assistance. Second, a compliance 7 cost fee equal to 0.5 percent of the value of tax incentives 8 claimed under any agreement that has an aggregate tax incentive 9 value of $100,000 or greater, which fee is due after a tax 10 incentive is claimed from the department of revenue. 11 The division takes effect upon enactment and applies to 12 agreements entered into on or after the effective date of the 13 division. 14 AGGREGATE TAX CREDIT LIMITATION. Division II increases 15 the aggregate tax credit limit on EDA programs listed in 16 Code section 15.119 from $120 million per fiscal year to 17 $185 million per fiscal year. The division allows the EDA 18 to reallocate, authorize, and award for a fiscal year any 19 amount of tax credits that were previously awarded by the EDA, 20 provided the tax credit is irrevocably declined by the awarded 21 business before the close of the fiscal year which follows the 22 fiscal year in which it was awarded. Any amount of tax credits 23 reallocated, authorized, and awarded under this provision shall 24 not be included in the calculation of the aggregate tax credit 25 limit for the fiscal year. 26 The division amends the requirements that $2 million and $8 27 million in tax credits be allocated to the qualifying business 28 and community-based seed capital funds investment tax credits 29 and the innovation fund tax credit, respectively, to allow 30 the EDA to allocate a lesser amount if it determines the tax 31 credits awarded for that fiscal year will be lower. 32 The division takes effect upon enactment and applies 33 retroactively to July 1, 2012. 34 ENDOW IOWA TAX CREDIT LIMIT. Under current law, the amount 35 -7- LSB 1207HZ (3) 85 mm/rj 7/ 9

H.F. 620 of endow Iowa tax credits that may be authorized in a calendar 1 year cannot exceed a total of $3.5 million plus a certain 2 percentage of the wagering tax receipts as provided in Code 3 section 99F.11. Division III amends this annual limit to 4 provide that a maximum of $5 million per calendar year may 5 be authorized and to provide that amounts collected from the 6 wagering tax pursuant to Code section 99F.11 will no longer be 7 used to fund the endow Iowa tax credit. 8 The division takes effect upon enactment and applies 9 retroactively to January 1, 2012, for endow Iowa tax credits 10 authorized on or after that date and for endow Iowa tax credit 11 applications received on or after that date. 12 WITHHOLDING TAX DIVERSION. Division IV provides for 13 a diversion of withholding tax to the EDA. The division 14 provides that the authority may enter into agreements with 15 recipients of financial assistance under the high quality jobs 16 program and the enterprise zones program that allow for the 17 diversion of withholding tax payments pursuant to Code section 18 422.16 from the department of revenue to the authority. The 19 diversion amount will be 2.5 percent of gross wages paid by 20 eligible businesses to each employee considered to be holding a 21 created or retained job. The division establishes a priority 22 withholding order if the employee’s wages are subject to 23 another withholding diversion. The division provides that the 24 withholding diversion takes effect upon enactment and applies 25 retroactively to high quality jobs program agreements and 26 enterprise zone program agreements entered into on or after 27 July 1, 2012, and awards of incentives and assistance made 28 under those programs on or after July 1, 2012. 29 CITY DEVELOPMENT BOARD FEES. Under current law, the EDA 30 is required to provide office space and staff assistance to 31 the city development board created in Code section 368.9, 32 and to budget funds to cover expenses of the board. Also 33 under current law, the city development board is allowed to 34 impose fees upon applications and petitions submitted to the 35 -8- LSB 1207HZ (3) 85 mm/rj 8/ 9