House Study Bill 168 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON ECONOMIC GROWTH BILL BY CHAIRPERSON HANUSA) A BILL FOR An Act relating to the requirements and administration of the 1 targeted jobs withholding credit pilot project and including 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 2325HC (2) 85 md/sc

H.F. _____ Section 1. Section 403.19A, subsection 1, paragraphs c, e, 1 f, and g, Code 2013, are amended to read as follows: 2 c. “Employer” means a business creating or retaining 3 targeted jobs in an urban renewal area of a pilot project city 4 pursuant to a withholding agreement. 5 e. “Qualifying investment” means a capital investment 6 in real property including the purchase price of land and 7 existing buildings, site preparation, building construction, 8 and long-term lease costs. “Qualifying investment” also means a 9 capital investment in depreciable assets. For purposes of this 10 paragraph, “long-term lease costs” means those costs incurred or 11 expected to be incurred under a lease during the duration of a 12 withholding agreement. 13 f. “Targeted job” means a job in a business which is or 14 will be located in an urban renewal area of a pilot project 15 city that pays a wage at least equal to the countywide average 16 wage. “Targeted job” includes new or retained jobs from Iowa 17 business expansions or retentions within the city limits of the 18 pilot project city and those jobs resulting from established 19 out-of-state businesses, as defined by the economic development 20 authority, moving to or expanding in Iowa. 21 g. “Withholding agreement” means the agreement between a 22 pilot project city , the economic development authority, and 23 an employer concerning the targeted jobs withholding credit 24 authorized in subsection 3 . 25 Sec. 2. Section 403.19A, subsection 1, Code 2013, is amended 26 by adding the following new paragraph: 27 NEW PARAGRAPH . 0f. “Retained job” means a full-time 28 equivalent position in existence at the time an employer enters 29 into a withholding agreement that remains continuously filled 30 or authorized to be filled as soon as possible and that is 31 at risk of elimination if the project for which the employer 32 receives assistance under the withholding agreement does not 33 proceed. 34 Sec. 3. Section 403.19A, subsection 3, paragraphs a, b, c, 35 -1- LSB 2325HC (2) 85 md/sc 1/ 8

H.F. _____ and f, Code 2013, are amended to read as follows: 1 a. A pilot project city may provide by ordinance resolution 2 for the deposit into a designated account in the special 3 withholding project fund described in section 403.19, 4 subsection 2 , of the targeted jobs withholding credit described 5 in this section . The targeted jobs withholding credit shall 6 be based upon the wages paid to employees pursuant to a 7 withholding agreement. 8 b. An amount equal to three percent of the gross wages paid 9 by an employer to each employee under a withholding agreement 10 shall be credited from the payment made by the employer 11 pursuant to section 422.16 . If the amount of the withholding 12 by the employer is less than three percent of the gross wages 13 paid to the employees covered by the withholding agreement, 14 the employer shall receive a credit against other withholding 15 taxes due by the employer or may carry the credit forward for 16 up to ten years or until depleted, whichever is the earlier. 17 The employer shall remit the amount of the credit quarterly, 18 in the same manner as withholding payments are reported to 19 the department of revenue, to the pilot project city to be 20 allocated to and when collected paid into a designated account 21 in the special withholding project fund for the urban renewal 22 area in which the targeted jobs are located project . All 23 amounts so deposited shall be used or pledged by the pilot 24 project city for an urban renewal a project related to the 25 employer pursuant to the withholding agreement. 26 c. (1) The pilot project city and the economic development 27 authority shall enter into a withholding agreement with each 28 employer concerning the targeted jobs withholding credit. The 29 withholding agreement shall provide for the total amount of 30 withholding credits awarded , as negotiated by the economic 31 development authority, the pilot project city, and the 32 employer . An agreement shall not provide for an amount of 33 withholding credits that exceeds the amount of the qualifying 34 investment made in the project. An agreement shall not be 35 -2- LSB 2325HC (2) 85 md/sc 2/ 8

H.F. _____ entered into by a pilot project city with a business currently 1 located in this state unless the business either creates or 2 retains ten new jobs or makes a qualifying investment of at 3 least five hundred thousand dollars within the urban renewal 4 area pilot project city . The withholding agreement may 5 have a term of years negotiated by the economic development 6 authority, the pilot project city, and the employer, of up 7 to ten years. A withholding agreement specifying a term of 8 years or a total amount of withholding credits shall terminate 9 upon the expiration of the term of years specified in the 10 agreement or upon the award of the total amount of withholding 11 credits specified in the agreement, whichever occurs first. An 12 employer shall not be obligated to enter into a withholding 13 agreement. An agreement shall not be entered into with an 14 employer not already located in a pilot project city when 15 another Iowa community is competing for the same project and 16 both the pilot project city and the other Iowa community are 17 seeking assistance from the authority. 18 (2) The pilot project city and the economic development 19 authority shall not enter into a withholding agreement after 20 June 30, 2013 2018 . 21 (3) The employer, in conjunction with the pilot project 22 city , shall provide on an annual basis to the economic 23 development authority information documenting the total 24 amount of payments and receipts under a withholding agreement, 25 including all agreements with an employer to suspend, abate, 26 exempt, rebate, refund, or reimburse property taxes, to provide 27 a grant for property taxes paid or a grant not related to 28 property taxes, or to make a direct payment of taxes, with 29 moneys in the special withholding project fund. The economic 30 development authority shall verify the information provided by 31 the pilot project city and determine whether the pilot project 32 city and the employer are in compliance with this section and 33 the rules adopted by the economic development authority to 34 implement this section . 35 -3- LSB 2325HC (2) 85 md/sc 3/ 8

H.F. _____ (4) The economic development authority board, on behalf of 1 the authority, shall have the authority to approve or deny a 2 withholding agreement and according to the provisions of this 3 section. Each withholding agreement, and the total amount of 4 withholding credits allowed under the withholding agreement, 5 shall be approved by the economic development authority board 6 after taking into account the incentives or assistance received 7 by or to be received by the employer under other economic 8 development programs. The economic development authority 9 board shall only deny an agreement if the agreement fails to 10 meet the requirements of this paragraph “c” or the local match 11 requirements in paragraph “j” , or if an employer is not in good 12 standing as to prior or existing agreements with the economic 13 development authority. The authority shall have the authority 14 to negotiate a withholding agreement and may suggest changes to 15 an any of the terms of the agreement. 16 f. If the economic development authority, following an 17 eighteen-month performance period beginning on the date the 18 withholding agreement is approved by the authority board, 19 determines that the employer ceases to meet the requirements 20 of the withholding agreement relating to retaining jobs, if 21 applicable , the agreement shall be terminated by the economic 22 development authority and the pilot project city and any 23 withholding credits for the benefit of the employer shall 24 cease. However, in regard to the number of jobs that are to 25 be created or retained, if the employer has met the number of 26 jobs to be created or retained pursuant to the withholding 27 agreement and subsequently the number of jobs falls below the 28 required level, the employer shall not be considered as not 29 meeting the job requirement until eighteen months after the 30 date of the decrease in the number of jobs created or retained. 31 If the economic development authority, following a three-year 32 performance period beginning on the date the withholding 33 agreement is approved by the authority board, determines 34 that the employer has not or is incapable of meeting the 35 -4- LSB 2325HC (2) 85 md/sc 4/ 8

H.F. _____ requirements of the withholding agreement relating to creating 1 jobs, if applicable, or the requirement of the withholding 2 agreement relating to the qualifying investment prior to the 3 end of the withholding agreement, the economic development 4 authority may reduce the future benefits to the employer under 5 the agreement or negotiate with the other parties to terminate 6 the agreement early. Notice shall be provided promptly by 7 the pilot project city to the department of revenue following 8 termination of a withholding agreement. 9 Sec. 4. Section 403.19A, subsection 3, paragraph d, 10 subparagraph (1), Code 2013, is amended to read as follows: 11 (1) A copy of the adopted local development agreement 12 plan of between the pilot project city and the employer 13 that outlines local incentives or assistance for the project 14 using urban renewal or urban revitalization incentives, if 15 applicable . 16 Sec. 5. Section 403.19A, subsection 3, Code 2013, is amended 17 by adding the following new paragraph: 18 NEW PARAGRAPH . 0f. Pursuant to rules adopted by the 19 economic development authority, the pilot project city 20 shall provide on an annual basis to the economic development 21 authority information documenting the compliance of each 22 employer with each requirement of the withholding agreement, 23 including but not limited to the number of jobs created or 24 retained and the amount of investment made by the employer. 25 The economic development authority shall, in response to 26 receiving such information from the pilot project city, assess 27 the level of compliance by each employer and provide to the 28 pilot project city recommendations for either maintaining 29 employer compliance with the withholding agreement or 30 terminating the agreement for noncompliance under paragraph 31 “f” . The economic development authority shall also provide each 32 such assessment and recommendation report to the department of 33 revenue. 34 Sec. 6. APPLICABILITY. 35 -5- LSB 2325HC (2) 85 md/sc 5/ 8

H.F. _____ 1. Except as provided in subsection 2, this Act applies to 1 withholding agreements entered into on or after the effective 2 date of this Act and withholding agreements entered into by 3 a pilot project city prior to the effective date of this Act 4 shall be governed by section 403.19A, Code 2013. 5 2. The section of this Act enacting section 403.19A, 6 subsection 3, paragraph “0f”, applies to withholding agreements 7 entered into prior to the effective date of this Act or entered 8 into on or after the effective date of this Act. 9 EXPLANATION 10 This bill modifies the targeted jobs withholding tax credit 11 program, which is a pilot program enacted in 2006 to allow 12 the diversion of withholding funds paid by an employer to be 13 matched by a designated pilot project city to create economic 14 incentives that can be directed toward businesses located 15 within urban renewal areas in the city pursuant to the terms of 16 a withholding agreement with a business and after approval of 17 the agreement by the Iowa economic development authority. 18 The bill removes the requirement that an employer that is a 19 party to a withholding agreement with a pilot project city be 20 located in an urban renewal area. The bill removes a similar 21 requirement relating to the definition of targeted job. The 22 bill makes corresponding changes to Code section 403.19A to 23 reflect the removal of the urban renewal area requirement, 24 including providing that the targeted jobs withholding credits 25 be deposited in a withholding project fund rather than the 26 special fund established for urban renewal purposes. 27 The bill allows a pilot project city to provide for the 28 deposit of the amount of the targeted jobs withholding credit 29 into the city’s withholding project fund by resolution, rather 30 than by ordinance. 31 The bill provides a definition of long-term lease costs as 32 part of the definition of qualifying investment under the pilot 33 program and provides a definition of retained job. 34 Under current law, a pilot project city may not enter into a 35 -6- LSB 2325HC (2) 85 md/sc 6/ 8

H.F. _____ withholding agreement after June 30, 2013. The bill adds the 1 economic development authority to the list of required parties 2 to a withholding agreement and prohibits a pilot project city 3 and the economic development authority from entering into a 4 withholding agreement after June 30, 2018. The bill specifies 5 subject areas of a withholding agreement that may be negotiated 6 by the parties and provides that a withholding agreement that 7 specifies a term of years or a total amount of withholding 8 credits shall terminate upon expiration of the term of years 9 or upon the award of the total amount of withholding credits, 10 whichever occurs first. 11 The bill requires the reporting of certain withholding 12 agreement payment and receipt information by the employer, 13 in conjunction with the pilot project city, and requires the 14 economic development authority to verify such information and 15 determine whether the pilot project city and the employer are 16 in compliance with Code section 403.19A and rules adopted to 17 implement that Code section. 18 The bill provides that the economic development authority 19 board approves or denies a withholding agreement on behalf of 20 the authority and specifies considerations to be made by the 21 board in deciding whether to approve or deny a withholding 22 agreement. 23 The bill establishes an 18-month performance period 24 following which the economic development authority determines 25 compliance with the job retention requirements of the 26 withholding agreement, if applicable, establishes a three-year 27 performance period following which the authority determines 28 compliance with the job creation and investment requirements 29 of the withholding agreement, and specifies the actions to 30 be taken by the authority and the pilot project city after a 31 determination of noncompliance. 32 Except as otherwise provided in the bill, the bill applies 33 to withholding agreements entered into by a pilot project city 34 on or after the effective date of the bill. The bill provides 35 -7- LSB 2325HC (2) 85 md/sc 7/ 8

H.F. _____ that withholding agreements entered into by a pilot project 1 city prior to the effective date of the bill shall be governed 2 by Code section 403.19A, Code 2013. However, the section of 3 the bill enacting Code section 403.19A(3)(0f), relating to 4 compliance reporting, applies to withholding agreements entered 5 into prior to, on, or after the effective date of the bill. 6 -8- LSB 2325HC (2) 85 md/sc 8/ 8