House Study Bill 228 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED DEPARTMENT OF REVENUE BILL) A BILL FOR An Act relating to the policy administration of the tax and 1 related laws and related programs by the department of 2 revenue, including administration of income taxes, sales 3 and use taxes, the orderly wind-up and eventual repeal of 4 the Iowa fund of funds program, the replacement taxes task 5 force, a study report related to administrative appeals 6 processes for tax matters, and including effective date and 7 retroactive applicability provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 1285XD (18) 85 mm/sc

S.F. _____ H.F. _____ DIVISION I 1 INCOME TAXES 2 Section 1. Section 2.48, subsection 3, paragraph c, 3 subparagraph (4), Code 2013, is amended by striking the 4 subparagraph. 5 Sec. 2. Section 2.48, subsection 3, paragraph e, 6 subparagraph (5), Code 2013, is amended by striking the 7 subparagraph. 8 Sec. 3. Section 15.119, subsection 2, paragraph c, Code 9 2013, is amended by striking the paragraph. 10 Sec. 4. Section 422.5, subsection 1, paragraph j, 11 subparagraph (2), subparagraph division (a), Code 2013, is 12 amended to read as follows: 13 (a) The tax imposed upon the taxable income of a resident 14 shareholder in an S corporation or of an estate or trust with 15 a situs in Iowa that is a shareholder in an S corporation, 16 which S corporation has in effect for the tax year an election 17 under subchapter S of the Internal Revenue Code and carries 18 on business within and without the state , may be computed by 19 reducing the amount determined pursuant to paragraphs “a” 20 through “i” by the amounts of nonrefundable credits under 21 this division and by multiplying this resulting amount by a 22 fraction of which the resident’s or estate’s or trust’s net 23 income allocated to Iowa, as determined in section 422.8, 24 subsection 2 , paragraph “b” , is the numerator and the resident’s 25 or estate’s or trust’s total net income computed under section 26 422.7 is the denominator. If a resident shareholder , or an 27 estate or trust with a situs in Iowa that is a shareholder, 28 has elected to take advantage of this subparagraph (2), and 29 for the next tax year elects not to take advantage of this 30 subparagraph, the resident or estate or trust shareholder shall 31 not reelect to take advantage of this subparagraph for the 32 three tax years immediately following the first tax year for 33 which the shareholder elected not to take advantage of this 34 subparagraph, unless the director consents to the reelection. 35 -1- LSB 1285XD (18) 85 mm/sc 1/ 16

S.F. _____ H.F. _____ This subparagraph also applies to individuals who are residents 1 of Iowa for less than the entire tax year. 2 Sec. 5. Section 422.8, subsection 2, paragraph b, 3 unnumbered paragraph 1, Code 2013, is amended to read as 4 follows: 5 A resident’s income , or the income of an estate or trust with 6 a situs in Iowa, allocable to Iowa is the income determined 7 under section 422.7 reduced by items of income and expenses 8 from an S corporation that carries on business within and 9 without the state when those items of income and expenses pass 10 directly to the shareholders under provisions of the Internal 11 Revenue Code. These items of income and expenses are increased 12 by the greater of the following: 13 Sec. 6. Section 422.15, subsection 2, Code 2013, is amended 14 to read as follows: 15 2. Every partnership , including limited partnerships 16 organized under chapter 488 , having a place of business in 17 the state , doing business in this state, or deriving income 18 from sources within this state as defined in section 422.33, 19 subsection 1, shall make a return, stating specifically the net 20 income and capital gains (or losses) reported on the federal 21 partnership return, the names and addresses of the partners, 22 and their respective shares in said amounts. 23 Sec. 7. Section 422.33, subsections 9 and 27, Code 2013, are 24 amended by striking the subsections. 25 Sec. 8. REPEAL. Sections 16.211, 16.212, and 422.11X, Code 26 2013, are repealed. 27 Sec. 9. EFFECTIVE UPON ENACTMENT. This division of this 28 Act, being deemed of immediate importance, takes effect upon 29 enactment. 30 Sec. 10. RETROACTIVE APPLICABILITY. The following 31 provision or provisions of this division of this Act apply 32 retroactively to January 1, 2013, for tax years beginning on 33 or after that date: 34 1. The section of this division of this Act amending section 35 -2- LSB 1285XD (18) 85 mm/sc 2/ 16

S.F. _____ H.F. _____ 422.5. 1 2. The section of this division of this Act amending section 2 422.8. 3 3. The section of this division of this Act amending section 4 422.15. 5 DIVISION II 6 SALES AND USE TAXES 7 Sec. 11. Section 421.26, Code 2013, is amended to read as 8 follows: 9 421.26 Personal liability for tax due. 10 If a licensee or other person under section 452A.65 , a 11 retailer or purchaser under chapter 423A , 423B , or 423E , or 12 section 423.31 or 423.33 , or a retailer or purchaser under 13 section 423.32 , a user under section 423.34 , or a permit holder 14 or licensee under section 453A.13 , 453A.16 , or 453A.44 fails 15 to pay a tax under those sections when due or is subject 16 to repayment of a sales and use tax refund received under 17 section 15.331A , an officer of a corporation or association, 18 notwithstanding section 489.304 , a member or manager of a 19 limited liability company, or a partner of a partnership, 20 having control or supervision of or the authority for remitting 21 the tax payments or receiving sales and use tax refunds 22 and having a substantial legal or equitable interest in the 23 ownership of the corporation, association, limited liability 24 company, or partnership, who has intentionally failed to pay 25 the tax or whose corporation, association, limited liability 26 company, or partnership is subject to repayment of a sales and 27 use tax refund received under section 15.331A, is personally 28 liable for the payment of the tax, interest, and penalty due 29 and unpaid or repayment of the sales and use tax refund . 30 However, this section shall not apply to taxes on accounts 31 receivable. The dissolution of a corporation, association, 32 limited liability company, or partnership shall not discharge a 33 person’s liability for failure to remit the tax due or repay a 34 sales and use tax refund . 35 -3- LSB 1285XD (18) 85 mm/sc 3/ 16

S.F. _____ H.F. _____ Sec. 12. Section 423.3, subsection 47, paragraph a, 1 unnumbered paragraph 1, Code 2013, is amended to read as 2 follows: 3 The sales price from the sale or rental of computers, 4 machinery, and equipment, including replacement parts and 5 consumable supplies , and materials used to construct or 6 self-construct computers, machinery, and equipment if such 7 items are any of the following: 8 Sec. 13. Section 423.3, subsection 47, paragraph c, Code 9 2013, is amended by adding the following new subparagraph: 10 NEW SUBPARAGRAPH . (5) Machinery and equipment, including 11 replacement parts, and materials used to construct or 12 self-construct computers, machinery, and equipment if such 13 items are used at a location that is primarily used to conduct 14 activities that immediately precede the sale of products 15 directly to the final consumer. This section shall not 16 apply to activities that are an integrated step in a larger 17 manufacturing process. 18 Sec. 14. Section 423.3, subsection 47, paragraph d, Code 19 2013, is amended by adding the following new subparagraph: 20 NEW SUBPARAGRAPH . (02) “Consumable supplies” means tangible 21 personal property, other than computers, machinery, equipment, 22 or raw materials, that is consumed or expended during the 23 manufacture of other tangible personal property. The term 24 “consumable supplies” includes but is not limited to oils, 25 greases, hydraulic fluids, coolants, and lubricants. 26 Sec. 15. Section 423.3, subsection 47, paragraph d, 27 subparagraph (4), Code 2013, is amended to read as follows: 28 (4) “Manufacturer” means as defined in section 428.20 a 29 person who purchases, receives, or holds personal property 30 of any description for the purpose of adding to its value by 31 a process of manufacturing, refining, purifying, combining 32 of different materials, or by the packing of meats, with a 33 view to selling the property for gain or profit , but also 34 includes contract manufacturers. A contract manufacturer is 35 -4- LSB 1285XD (18) 85 mm/sc 4/ 16

S.F. _____ H.F. _____ a manufacturer that otherwise falls within the definition of 1 manufacturer under section 428.20 , except that a contract 2 manufacturer does not sell the tangible personal property 3 the contract manufacturer processes on behalf of other 4 manufacturers. A business engaged in activities subsequent 5 to the extractive process of quarrying or mining, such as 6 crushing, washing, sizing, or blending of aggregate materials, 7 is a manufacturer with respect to these activities. A business 8 primarily engaged in providing personal or professional 9 services or primarily engaged in the operation of a retail 10 outlet, including but not limited to a grocery store, home 11 improvement store, pharmacy, bakery, or restaurant, is not 12 considered a manufacturer for purposes of this subsection. 13 Sec. 16. Section 423.3, subsection 47, paragraph d, Code 14 2013, is amended by adding the following new subparagraph: 15 NEW SUBPARAGRAPH . (7) (a) “Replacement part” means 16 tangible personal property that meets all the following 17 conditions: 18 (i) The tangible personal property replaces a component of 19 a computer, machinery, or equipment, which component is capable 20 of being separated from the computer, machinery, or equipment. 21 (ii) The tangible personal property performs the same or 22 similar function as the component it replaced. 23 (iii) The tangible personal property restores the computer, 24 machinery, or equipment to its original operating condition, or 25 upgrades or improves the efficiency of the computer, machinery, 26 or equipment. 27 (b) “Replacement part” does not include a consumable 28 supply or a jig, die, tool, or other device that is used in 29 conjunction with machinery or equipment and that is specially 30 designed for use in manufacturing specific products and that 31 may be used interchangeably and intermittently on a particular 32 machine or piece of equipment. 33 DIVISION III 34 IOWA FUND OF FUNDS 35 -5- LSB 1285XD (18) 85 mm/sc 5/ 16

S.F. _____ H.F. _____ Sec. 17. Section 15E.62, Code 2013, is amended by adding the 1 following new subsections: 2 NEW SUBSECTION . 03. “Creditor” means a person, including 3 an assignee of or successor to such person, who extends credit 4 or makes a loan to the Iowa fund of funds or to a designated 5 investor, and includes any person who refinances such credit 6 or loan. 7 NEW SUBSECTION . 04. “Fund documents” means all agreements 8 relating to matters under the purview of this division VII 9 entered into prior to the effective date of this division of 10 this Act between or among the state, the Iowa fund of funds, a 11 fund allocation manager or similar manager, the Iowa capital 12 investment corporation, the board, a creditor, a designated 13 investor, and a private seed or venture capital partnership, 14 and includes other documents having the same force and effect 15 between or among such parties, as any of the foregoing may be 16 amended, modified, restated, or replaced from time to time. 17 Sec. 18. Section 15E.65, subsection 2, paragraph h, Code 18 2013, is amended to read as follows: 19 h. Fifty years after the organization of the Iowa fund 20 of funds As soon as practicable after the effective date 21 of this division of this Act , the Iowa capital investment 22 corporation , in conjunction with the department of revenue, 23 the board, and the attorney general, shall wind up the Iowa 24 fund of funds pursuant to section 15E.72 and shall cause the 25 Iowa fund of funds to be liquidated with all of its assets 26 distributed to its owners in accordance with the provisions of 27 its organizational documents and in accordance with the fund 28 documents . In liquidating such assets, the capital investment 29 corporation, the department of revenue, the board, and the 30 attorney general shall act with prudence and caution in order 31 to minimize costs and fees and to preserve investment assets to 32 the extent reasonably possible. 33 Sec. 19. NEW SECTION . 15E.72 Program wind-up and future 34 repeal. 35 -6- LSB 1285XD (18) 85 mm/sc 6/ 16

S.F. _____ H.F. _____ 1. Findings. The general assembly finds that the Iowa fund 1 of funds program established pursuant to this division has 2 not fulfilled the purposes described in section 15E.61 to the 3 extent necessary to justify the fifty-year timeframe for the 4 program that was originally envisioned in this division VII and 5 that an early and orderly wind-up of the program is desirable. 6 2. Organization of additional funds prohibited. 7 Notwithstanding section 15E.65, an Iowa fund of funds shall not 8 be organized on or after the effective date of this division 9 of this Act. 10 3. New investments by the fund of funds prohibited. 11 Notwithstanding section 15E.65, the Iowa fund of funds shall 12 not make new investments in private seed and venture capital 13 partnerships or entities on or after the effective date of this 14 division of this Act except as required by the fund documents. 15 4. New investments by designated investors prohibited. 16 a. Except as provided in paragraph “b” , and notwithstanding 17 any other provision in this division VII, a designated investor 18 shall not invest in the Iowa fund of funds on or after the 19 effective date of this division of this Act. 20 b. Notwithstanding the prohibition in paragraph “a” , a 21 designated investor may invest in the Iowa fund of funds on or 22 after the effective date of this division of this Act to the 23 extent such investment is required by the fund documents. In 24 addition, the director of revenue, with the approval of the 25 attorney general, may authorize additional investment in the 26 Iowa fund of funds but only if such an investment is necessary 27 to preserve fund assets, repay creditors, pay taxes, or 28 otherwise effectuate an orderly wind-up of the program pursuant 29 to this section. 30 5. Issuance, verification, and redemption of new certificates 31 prohibited. 32 a. Except as provided in paragraph “b” , and notwithstanding 33 any other provision in this division VII, the board shall not 34 issue, verify, or redeem a certificate or a related tax credit 35 -7- LSB 1285XD (18) 85 mm/sc 7/ 16

S.F. _____ H.F. _____ on or after the effective date of this division of this Act. 1 b. Notwithstanding the prohibition in paragraph “a” , the 2 board may issue, redeem, or verify a certificate or a related 3 tax credit under any of the following conditions: 4 (1) The board is required to do so under the terms of the 5 fund documents. 6 (2) The issuance, redemption, or verification is deemed 7 necessary by the director of revenue and the attorney general 8 in order to arrange new financing terms with a creditor. 9 (3) The issuance, redemption, or verification is deemed 10 necessary by the director of revenue and the attorney general 11 to preserve fund assets, repay creditors, or otherwise 12 effectuate an orderly wind-up of the program pursuant to this 13 section. 14 6. New fund allocation managers prohibited. 15 a. Notwithstanding any other provision in this division 16 VII, the Iowa capital investment corporation shall not have 17 authority to solicit, select, terminate, or change a fund 18 allocation manager or similar manager on or after the effective 19 date of this division of this Act. 20 b. On or after the effective date of this division of this 21 Act, all decisions pertaining to relationships with a fund 22 allocation manager or similar manager selected prior to the 23 effective date of this division of this Act shall be made 24 by the director of revenue with the approval of the attorney 25 general. This subsection shall not be construed to impair the 26 terms of the fund documents. 27 7. Pledging of certificates prohibited. 28 a. Except as provided in paragraph “b” , and notwithstanding 29 any other provision of law to the contrary, a certificate and 30 a related tax credit issued by the board shall not be pledged 31 by a designated investor as security for a loan on or after the 32 effective date of this division of this Act. 33 b. Notwithstanding the prohibition in paragraph “a” , a 34 certificate and related tax credit issued by the board may 35 -8- LSB 1285XD (18) 85 mm/sc 8/ 16

S.F. _____ H.F. _____ be pledged by a designated investor as security for a loan 1 to the extent such pledge is required by the fund documents. 2 In addition, the board, with the approval of the director of 3 revenue and the attorney general, may authorize a certificate 4 and related tax credit to be pledged as security for a loan but 5 only if such a pledge is necessary to arrange new financing 6 terms with a creditor or to repay creditors for moneys loaned 7 to a designated investor. 8 8. Rural and small business loan guarantees prohibited. 9 Notwithstanding any other provision in this division VII 10 to the contrary, the Iowa capital investment corporation 11 shall not make rural and small business loan guarantees or 12 otherwise administer a program to provide loan guarantees and 13 other related credit enhancements on loans to rural and small 14 business borrowers within the state of Iowa on or after the 15 effective date of this division of this Act. 16 9. Iowa capital investment corporation purposes amended. 17 Notwithstanding section 15E.64, on or after the effective date 18 of this division of this Act, the purposes of the Iowa capital 19 investment corporation shall be to comply with its obligations 20 under the fund documents and to assist the board, the director 21 of revenue, and the attorney general in effectuating the 22 orderly wind-up of the Iowa fund of funds. In effectuating 23 such a wind-up, the Iowa capital investment corporation shall 24 comply with all reasonable requests by the board, the director 25 of revenue, the attorney general, or the auditor of state. 26 10. Use of revolving fund prohibited. 27 a. Notwithstanding section 15E.65, subsection 2, paragraph 28 “a” , on or after the effective date of this division of this 29 Act, all investment returns received by the Iowa capital 30 investment corporation that are in excess of those payable to 31 designated investors shall be deposited in the general fund of 32 the state. 33 b. This subsection shall not be construed to impair the 34 terms of the fund documents. It is the intent of the general 35 -9- LSB 1285XD (18) 85 mm/sc 9/ 16

S.F. _____ H.F. _____ assembly that this subsection only applies in the event that 1 there are investment returns in excess of those necessary to 2 repay creditors and designated investors under the terms of the 3 fund documents. 4 11. Preservation of existing rights. This section is not 5 intended to and shall not limit, modify, or otherwise adversely 6 affect the fund documents, including any certificate or related 7 tax credit issued before the effective date of this division 8 of this Act. 9 12. Future repeal. This division VII is repealed upon the 10 occurrence of one of the following, whichever is earlier: 11 a. The expiration or termination of all fund documents. The 12 director of revenue shall notify the Iowa Code editor upon the 13 occurrence of this condition. 14 b. December 31, 2027. 15 Sec. 20. EFFECTIVE UPON ENACTMENT. This division of this 16 Act, being deemed of immediate importance, takes effect upon 17 enactment. 18 DIVISION IV 19 REPLACEMENT TAXES 20 Sec. 21. Section 437A.15, subsection 7, paragraph b, Code 21 2013, is amended to read as follows: 22 b. The task force shall study the effects of the replacement 23 tax on local taxing authorities, local taxing districts, 24 consumers, and taxpayers through January 1, 2013 2016 . If the 25 task force recommends modifications to the replacement tax that 26 will further the purposes of tax neutrality for local taxing 27 authorities, local taxing districts, taxpayers, and consumers, 28 consistent with the stated purposes of this chapter , the 29 department of management shall transmit those recommendations 30 to the general assembly. 31 DIVISION V 32 STUDY REPORT 33 Sec. 22. ADMINISTRATIVE APPEALS PROCESS FOR TAX MATTERS 34 AND NEW TAX APPEAL BOARD —— REPORT. The department of 35 -10- LSB 1285XD (18) 85 mm/sc 10/ 16

S.F. _____ H.F. _____ revenue, in consultation with the department of management 1 and other interested stakeholders, shall study the 2 independence, effectiveness, and fairness of the state’s 3 current administrative appeals processes for tax matters and 4 shall make recommendations for changes, if necessary, and 5 shall additionally study the desirability, practicality, and 6 feasibility of replacing components of these processes with 7 a new consolidated and independent administrative appeals 8 board for tax matters within the executive branch to resolve 9 disputes between the department of revenue and taxpayers. The 10 department of revenue shall prepare and file a report detailing 11 its findings and recommendations with the chairpersons and 12 ranking members of the ways and means committees of the senate 13 and the house of representatives and with the legislative 14 services agency by January 8, 2014. 15 EXPLANATION 16 This bill relates to the policy administration of the 17 tax and related laws of the department of revenue, including 18 the administration of income taxes, sales and use taxes, the 19 orderly wind-up and eventual repeal of the Iowa fund of funds 20 program, a study report related to the current administrative 21 appeals process for tax matters and the possible creation of 22 a new tax appeal board. 23 DIVISION I —— INCOME TAXES. The division amends the 24 allocation of income provisions in Code sections 422.5 and 25 422.8 to provide that an estate or trust with a situs in Iowa 26 that is a shareholder in an S corporation is eligible to claim 27 the S corporation apportionment credit. 28 The division amends the income tax return filing 29 requirements for partnerships in Code section 422.15. Under 30 current law, partnerships are required to file an Iowa return 31 if they have a place of business in the state. The division 32 provides that partnerships are required to file an Iowa return 33 if they are doing business in the state, or are deriving income 34 from sources within this state. “Income from sources within 35 -11- LSB 1285XD (18) 85 mm/sc 11/ 16

S.F. _____ H.F. _____ this state” means income from real, tangible, or intangible 1 property located or having a situs in this state. 2 The division repeals the assistive device tax credit 3 available for the corporate income tax in Code section 422.33 4 and repeals the disaster recovery housing project tax credit 5 for the individual and corporate income tax in Code sections 6 16.211 and 16.212, and makes various conforming amendments to 7 remove references to these credits throughout the Code. 8 The division takes effect upon enactment and the provisions 9 amending Code sections 422.5, 422.8, and 422.15 apply 10 retroactively to January 1, 2013, for tax years beginning on 11 or after that date. 12 DIVISION II —— SALES AND USE TAXES. The division amends Code 13 section 421.16, which relates to the imposition of personal 14 liability against officers of corporations or associations, 15 members or managers of limited liability companies, or partners 16 of partnerships, for certain taxes if the individual has 17 control or supervision of or the authority for remitting the 18 taxes and a substantial equitable interest in the ownership of 19 the business. The division provides that personal liability 20 can also be asserted against these individuals for repayment 21 of a sales and use tax refund received by a business under Code 22 section 15.331A, which repayment can occur when a business 23 fails to meet its contractual obligations under the economic 24 development authority’s enterprise zone program or high quality 25 jobs program. 26 The division makes several amendments to the sales tax 27 exemption in Code section 423.3(47) for the purchase or rental 28 of certain items used in processing by a manufacturer. First, 29 the sales tax exemption is amended to include consumable 30 supplies. “Consumable supplies” is defined as tangible 31 personal property that is consumed or expended during the 32 manufacture of other tangible personal property, and includes 33 but is not limited to oils, greases, hydraulic fluids, 34 coolants, and lubricants. 35 -12- LSB 1285XD (18) 85 mm/sc 12/ 16

S.F. _____ H.F. _____ Second, the sales tax exemption is amended to exclude 1 machinery and equipment, including replacement parts, and 2 materials used to self-construct those items, if such items 3 are used at a location which is primarily used to conduct 4 activities that immediately precede the sale of products 5 directly to the final consumer. However, this exclusion does 6 not apply to activities that are an integrated step in a 7 larger manufacturing process. Third, the sales tax exemption 8 adds the language of the definition of “manufacturer” in 9 Code section 428.20, and strikes the reference to that Code 10 section. The definition of “manufacturer” is further amended 11 to exclude a business primarily engaged in providing personal 12 or professional services or primarily engaged in the operation 13 of a retail outlet, including but not limited to a grocery 14 store, home improvement store, pharmacy, bakery, or restaurant. 15 Finally, “replacement part” is defined for purposes of the 16 sales tax exemption to mean tangible personal property that 17 is not a consumable supply, not a jig, die, tool, or other 18 device that is used in conjunction with machinery or equipment, 19 and that is specially designed for use in manufacturing 20 specific products and that may be used interchangeably and 21 intermittently on a particular machine or piece of equipment, 22 and which further meets the conditions of being property that 23 replaces a separate component of a computer, machinery, or 24 equipment, performs the same function as that component, and 25 restores or improves the computer, machinery, or equipment. 26 DIVISION III —— IOWA FUND OF FUNDS. The division provides 27 for an orderly wind-up and eventual repeal of the Iowa fund 28 of funds program in accordance with the provisions of its 29 organizational documents and with the terms of the fund 30 documents. “Fund documents” is defined as all the agreements 31 entered into prior to the effective date of the division 32 between or among the state, the Iowa fund of funds, a fund 33 allocation manager or similar manager, the Iowa capital 34 investment corporation, the board, a creditor (as defined in 35 -13- LSB 1285XD (18) 85 mm/sc 13/ 16

S.F. _____ H.F. _____ the division), a designated investor, and a private seed or 1 venture capital partnership, and includes other documents 2 having the same force and effect between or among such parties 3 as any of the foregoing may be amended, modified, restated, or 4 replaced from time to time. The division creates a new Code 5 section 15E.72 that will govern the wind-up and repeal. 6 The division prohibits a new Iowa fund of funds from being 7 organized and prohibits any new investments from being made by 8 the existing Iowa fund of funds in private seed and venture 9 capital partnerships or entities except as required by the 10 fund documents. The division prohibits a new investment by 11 a designated investor in the Iowa fund of funds unless it is 12 required by the fund documents or the director of revenue and 13 attorney general determine such an investment is necessary to 14 preserve fund assets, repay creditors, pay taxes, or otherwise 15 effectuate an orderly wind-up of the program. The division 16 prohibits the Iowa capital investment board from issuing, 17 redeeming, or verifying a certificate or related tax credit 18 unless the board is required to do so under the terms of the 19 fund documents, unless it is deemed necessary by the director 20 of revenue and the attorney general in order to arrange new 21 financing with a creditor, or unless it is deemed necessary by 22 the director of revenue and the attorney general to preserve 23 fund assets, repay creditors, or otherwise effectuate an 24 orderly wind-up of the program. 25 The division prohibits the Iowa capital investment 26 corporation from soliciting, selecting, terminating, or 27 changing a fund allocation manager or similar manager. All 28 decisions pertaining to relationships with a fund allocation 29 manager will now be made by the director of revenue with the 30 approval of the attorney general. 31 The division prohibits a certificate and related tax credit 32 from being pledged as security for a loan unless such a pledge 33 is required by the fund documents or unless the director of 34 revenue and the attorney general authorize such a pledge to be 35 -14- LSB 1285XD (18) 85 mm/sc 14/ 16

S.F. _____ H.F. _____ made because it is necessary to arrange new financing terms 1 with a creditor or repay creditors for moneys loaned to a 2 designated investor. 3 The division prohibits the Iowa capital investment 4 corporation from making rural and small business loan 5 guarantees or from otherwise administering a program to provide 6 such loan guarantees or related credit enhancements on loans to 7 rural and small business borrowers. 8 The division amends the purposes of the Iowa capital 9 investment corporation to provide that its purpose shall be 10 to comply with its obligations under the fund documents and 11 to assist the Iowa capital investment board, the director of 12 revenue, and the attorney general in effectuating an orderly 13 wind-up of the Iowa fund of funds and in doing so shall comply 14 with all reasonable requests of these entities or the auditor 15 of state. 16 The division prohibits the Iowa capital investment 17 corporation from depositing returns in excess of those payable 18 to designated investors in a revolving fund and instead 19 mandates that those amounts be deposited in the general fund of 20 the state. This requirement shall not be construed to impair 21 the terms of the fund documents. 22 The division provides that new Code section 15E.72 is not 23 intended to and shall not limit, modify, or otherwise adversely 24 affect the fund documents, including certificates and related 25 tax credits issued before the effective date of the division. 26 Finally, the division provides that the Iowa fund of funds is 27 repealed upon the earlier of December 31, 2027, or the date all 28 fund documents expire. 29 The division takes effect upon enactment. 30 DIVISION IV —— REPLACEMENT TAXES. The division extends 31 through January 1, 2016, the replacement tax task force which 32 expired on January 1, 2013. 33 DIVISION V —— STUDY REPORT. The division establishes a 34 report to be prepared and filed by the department of revenue. 35 -15- LSB 1285XD (18) 85 mm/sc 15/ 16

S.F. _____ H.F. _____ The department of revenue, in consultation with the department 1 of management and other interested stakeholders, shall study 2 the current administrative appeals processes for tax matters 3 and make recommendations for changes if necessary, and also 4 study the possibility of creating a new consolidated tax 5 appeal board. The report detailing any recommended changes 6 or findings shall be filed with the chairperson and ranking 7 members of the ways and means committees of the senate and the 8 house of representatives and with the legislative services 9 agency by January 8, 2014. 10 -16- LSB 1285XD (18) 85 mm/sc 16/ 16