S.F. 2281 Section 1. Section 16.188, subsection 3, paragraph b, 1 subparagraph (1), Code 2014, is amended to read as follows: 2 (1) Projects that are eligible for historic preservation 3 and cultural and entertainment district tax credits under 4 section 404A.1 404A.2 . 5 Sec. 2. Section 404A.1, Code 2014, is amended by striking 6 the section and inserting in lieu thereof the following: 7 404A.1 Definitions. 8 For purposes of this chapter, unless the context otherwise 9 requires: 10 1. “Completion date” means the date on which property that 11 is the subject of a qualified rehabilitation project is placed 12 in service, as that term is used in section 47 of the Internal 13 Revenue Code. 14 2. “Department” means the department of cultural affairs. 15 3. “Eligible taxpayer” means the owner of the property 16 that is the subject of a qualified rehabilitation project, or 17 another person who will qualify for the federal rehabilitation 18 credit allowed under section 47 of the Internal Revenue Code 19 with respect to the property that is the subject of a qualified 20 rehabilitation project. 21 4. “Nonprofit organization” means an organization described 22 in section 501 of the Internal Revenue Code unless the 23 exemption is denied under section 501, 502, 503, or 504 of 24 the Internal Revenue Code. “Nonprofit organization” does not 25 include a governmental body, as that term is defined in section 26 362.2. 27 5. “Program” shall mean the historic preservation and 28 cultural and entertainment district tax credit program set 29 forth in this chapter. 30 6. a. “Qualified rehabilitation expenditures” means the 31 same as defined in section 47 of the Internal Revenue Code. 32 Notwithstanding the foregoing sentence, expenditures incurred 33 by an eligible taxpayer that is a nonprofit organization shall 34 be considered “qualified rehabilitation expenditures ” if they 35 -1- LSB 5303SV (1) 85 mm/sc 1/ 17

S.F. 2281 are any of the following: 1 (1) Expenditures made for structural components, as that 2 term is defined in 26 C.F.R. §1.48-1(e)(2). 3 (2) Expenditures made for architectural and engineering 4 fees, site survey fees, legal expenses, insurance premiums, and 5 development fees. 6 b. “Qualified rehabilitation expenditures” does not include 7 those expenditures financed by federal, state, or local 8 government grants, forgivable loans, or other forms of public 9 financial assistance that do not require repayment. 10 c. “Qualified rehabilitation expenditures” may include 11 expenditures incurred prior to the date an agreement is entered 12 into under section 404A.3, subsection 3. 13 7. “Qualified rehabilitation project” means a project for 14 the rehabilitation of property that meets all of the following 15 criteria: 16 a. The property is at least one of the following: 17 (1) Property listed on the national register of historic 18 places or eligible for such listing. 19 (2) Property designated as of historic significance to a 20 district listed in the national register of historic places or 21 eligible for such designation. 22 (3) Property or district designated a local landmark by a 23 city or county ordinance. 24 (4) A barn constructed prior to 1937. 25 b. The property meets the physical criteria and standards 26 for rehabilitation established by the department by rule. To 27 the extent applicable, the physical standards and criteria 28 shall be consistent with the United States secretary of the 29 interior’s standards for rehabilitation. 30 c. The project has qualified rehabilitation expenditures 31 that meet or exceed the following: 32 (1) In the case of commercial property, expenditures 33 totaling at least fifty thousand dollars or fifty percent of 34 the assessed value of the property, excluding the land, prior 35 -2- LSB 5303SV (1) 85 mm/sc 2/ 17

S.F. 2281 to rehabilitation, whichever is less. 1 (2) In the case of property other than commercial property, 2 expenditures totaling at least twenty-five thousand dollars or 3 twenty-five percent of the assessed value, excluding the land, 4 prior to rehabilitation, whichever is less. 5 Sec. 3. Section 404A.2, Code 2014, is amended by striking 6 the section and inserting in lieu thereof the following: 7 404A.2 Historic preservation and cultural and entertainment 8 district tax credit. 9 1. An eligible taxpayer who has entered into an agreement 10 under section 404A.3 is eligible to receive a historic 11 preservation and cultural and entertainment district tax credit 12 in an amount not to exceed twenty-five percent of the qualified 13 rehabilitation expenditures of a qualified rehabilitation 14 project. 15 2. The tax credit shall be allowed against the taxes imposed 16 in chapter 422, divisions II, III, and V, and in chapter 17 432. An individual may claim a tax credit under this section 18 of a partnership, limited liability company, S corporation, 19 estate, or trust electing to have income taxed directly to the 20 individual. For an individual claiming a tax credit of an 21 estate or trust, the amount claimed by the individual shall be 22 based upon the pro rata share of the individual’s earnings from 23 the estate or trust. For an individual claiming a tax credit 24 of a partnership, limited liability company, or S corporation, 25 the amount claimed by the partner, member, or shareholder, 26 respectively, shall be based upon the amounts designated by 27 the eligible partnership, S corporation, or limited liability 28 company, as applicable. 29 3. Any credit in excess of the taxpayer’s tax liability for 30 the tax year shall be refunded with interest computed under 31 section 422.25. In lieu of claiming a refund, a taxpayer 32 may elect to have the overpayment shown on the taxpayer’s 33 final, completed return credited to the tax liability for the 34 following year. 35 -3- LSB 5303SV (1) 85 mm/sc 3/ 17

S.F. 2281 4. a. To claim a tax credit under this section, a taxpayer 1 shall include one or more tax credit certificates with the 2 taxpayer’s tax return. 3 b. The tax credit certificate shall contain the taxpayer’s 4 name, address, tax identification number, the amount of 5 the credit, the name of the eligible taxpayer, any other 6 information required by the department of revenue, and a place 7 for the name and tax identification number of a transferee and 8 the amount of the tax credit being transferred. 9 c. The tax credit certificate, unless rescinded by the 10 department, shall be accepted by the department of revenue 11 as payment for taxes imposed in chapter 422, divisions II, 12 III, and V, and in chapter 432, subject to any conditions or 13 restrictions placed by the department or the department of 14 revenue upon the face of the tax credit certificate and subject 15 to the limitations of this program. 16 5. a. Tax credit certificates issued under section 404A.3 17 may be transferred to any person. Within ninety days of 18 transfer, the transferee shall submit the transferred tax 19 credit certificate to the department of revenue along with a 20 statement containing the transferee’s name, tax identification 21 number, and address, the denomination that each replacement 22 tax credit certificate is to carry, and any other information 23 required by the department of revenue. However, tax credit 24 certificate amounts of less than the minimum amount established 25 by rule of the department of revenue shall not be transferable. 26 b. Within thirty days of receiving the transferred tax 27 credit certificate and the transferee’s statement, the 28 department of revenue shall issue one or more replacement tax 29 credit certificates to the transferee. Each replacement tax 30 credit certificate must contain the information required for 31 the original tax credit certificate and must have the same 32 expiration date that appeared on the transferred tax credit 33 certificate. 34 c. A tax credit shall not be claimed by a transferee 35 -4- LSB 5303SV (1) 85 mm/sc 4/ 17

S.F. 2281 under this section until a replacement tax credit certificate 1 identifying the transferee as the proper holder has been 2 issued. The transferee may use the amount of the tax credit 3 transferred against the taxes imposed in chapter 422, divisions 4 II, III, and V, and in chapter 432, for any tax year the 5 original transferor could have claimed the tax credit. Any 6 consideration received for the transfer of the tax credit shall 7 not be included as income under chapter 422, divisions II, III, 8 and V. Any consideration paid for the transfer of the tax 9 credit shall not be deducted from income under chapter 422, 10 divisions II, III, and V. 11 6. For purposes of the individual and corporate income 12 taxes and the franchise tax, the increase in the basis of the 13 rehabilitated property that would otherwise result from the 14 qualified rehabilitation expenditures shall be reduced by the 15 amount of the credit computed under this section. 16 Sec. 4. Section 404A.3, Code 2014, is amended by striking 17 the section and inserting in lieu thereof the following: 18 404A.3 Application and registration —— agreement —— 19 compliance and audit. 20 1. Application and fees. 21 a. An eligible taxpayer seeking historic preservation and 22 cultural and entertainment district tax credits provided in 23 section 404A.2 shall make application to the department in the 24 manner prescribed by the department. 25 b. The department may accept applications on a continuous 26 basis or may accept applications, or one or more components of 27 an application, during an annual application period. 28 c. The application shall include any information deemed 29 necessary by the department to evaluate the eligibility under 30 the program of the applicant and the rehabilitation project, 31 the amount of projected qualified rehabilitation expenditures 32 of a rehabilitation project, and the amount and source of all 33 funding for a rehabilitation project. An applicant shall have 34 the burden of proof to demonstrate to the department that 35 -5- LSB 5303SV (1) 85 mm/sc 5/ 17

S.F. 2281 the applicant is an eligible taxpayer and the project is a 1 qualified rehabilitation project under the program. 2 d. The department may establish criteria for the use of 3 electronic or other alternative filing or submission methods 4 for any application, document, or payment requested or 5 required under this program. Such criteria may provide for the 6 acceptance of a signature in a form other than the handwriting 7 of a person. 8 e. (1) The department may charge application and other fees 9 to eligible taxpayers who apply to participate in the program. 10 The amount of such fees shall be determined based on the costs 11 of the department associated with administering the program. 12 (2) Fees collected by the department pursuant to this 13 paragraph shall be deposited with the department pursuant to 14 section 303.9, subsection 1. 15 2. Registration. 16 a. Upon review of the application, the department may 17 register a qualified rehabilitation project under the program. 18 If the department registers the project, the department shall 19 make a preliminary determination as to the amount of tax 20 credits for which the project qualifies. 21 b. After registering the qualified rehabilitation project, 22 the department shall notify the eligible taxpayer of successful 23 registration under the program. The notification shall include 24 the amount of tax credits under section 404A.2 for which the 25 qualified rehabilitation project has received a tentative award 26 and a statement that the amount is a preliminary determination 27 only. 28 3. Agreement. 29 a. Upon successful registration of a qualified 30 rehabilitation project, the eligible taxpayer shall enter into 31 an agreement with the department for the successful completion 32 of all requirements of the program. 33 b. The agreement shall contain, at a minimum, the following 34 provisions: 35 -6- LSB 5303SV (1) 85 mm/sc 6/ 17

S.F. 2281 (1) The amount of the tax credit award. An eligible 1 taxpayer has no right to receive a tax credit certificate or 2 claim a tax credit until all requirements of the agreement and 3 subsections 4 and 5 have been satisfied. The amount of tax 4 credit included on a tax credit certificate issued under this 5 section shall be contingent upon verification by the department 6 of the amount of final qualified rehabilitation expenditures. 7 (2) The rehabilitation work to be performed. 8 (3) The budget of the qualified rehabilitation project, 9 including the projected qualified rehabilitation expenditures 10 and the source and amount of all funding received or 11 anticipated to be received. 12 (4) The commencement date of the qualified rehabilitation 13 project, which shall not be later than the end of the fiscal 14 year in which the agreement is entered into. 15 (5) The completion date of the qualified rehabilitation 16 project, which shall be within thirty-six months of the 17 commencement date. 18 4. Compliance. 19 a. The eligible taxpayer shall, for the length of the 20 agreement, annually certify to the department compliance with 21 the requirements of the agreement. The certification shall 22 be made at such time as the department shall determine in the 23 agreement. 24 b. The eligible taxpayer shall have the burden of proof 25 to demonstrate to the department that all requirements of 26 the agreement are satisfied. The taxpayer shall notify 27 the department in a timely manner of any changes in the 28 qualification of the rehabilitation project or in the 29 eligibility of the taxpayer to claim the tax credit provided 30 under this chapter, or of any other change that may have 31 a negative impact on the eligible taxpayer’s ability to 32 successfully complete any requirement under the agreement. 33 c. If after entering into the agreement the eligible 34 taxpayer or the qualified rehabilitation project no longer 35 -7- LSB 5303SV (1) 85 mm/sc 7/ 17

S.F. 2281 meets the requirements of the agreement, the department may 1 find the taxpayer in default under the agreement and may 2 revoke the tax credit award. The department of revenue, 3 upon notification by the department of a default, shall seek 4 repayment of the value of any such tax credit already claimed, 5 and the failure to make such a repayment may be treated by the 6 department of revenue in the same manner as a failure to pay 7 the tax shown due or required to be shown due with the filing of 8 a return or deposit form. 9 5. Audit. 10 a. Upon completion of the qualified rehabilitation project, 11 an audit of the project completed by an independent certified 12 public accountant licensed in this state shall be submitted to 13 the department along with a statement of the amount of final 14 qualified rehabilitation expenditures and any other information 15 deemed necessary by the department or the department of revenue 16 in order to verify that all requirements of the agreement have 17 been satisfied. 18 b. Notwithstanding paragraph “a” , the department may waive 19 the audit requirement in this subsection if all the following 20 requirements are satisfied: 21 (1) The final qualified rehabilitation expenditures of 22 the qualified rehabilitation project, as verified by the 23 department, do not exceed one hundred thousand dollars. 24 (2) The qualified rehabilitation project is funded 25 exclusively by private funding sources. 26 c. Upon review of the audit, if applicable, the department 27 shall verify that all requirements of the agreement have been 28 satisfied and shall verify the amount of final qualified 29 rehabilitation expenditures. After consultation with the 30 department of revenue, the department may issue a tax credit 31 certificate to the eligible taxpayer stating the amount of tax 32 credit under section 404A.2 the eligible taxpayer may claim. 33 The department shall issue the tax credit certificate not later 34 than 60 days following the completion of the audit review, if 35 -8- LSB 5303SV (1) 85 mm/sc 8/ 17

S.F. 2281 applicable, and the verifications and consultation required 1 under this paragraph. 2 6. Notwithstanding any other provision of this chapter to 3 the contrary, the amount of tax credit issued on a tax credit 4 certificate to an eligible taxpayer shall not exceed the amount 5 of tax credit award provided for in the agreement. 6 Sec. 5. Section 404A.4, Code 2014, is amended by striking 7 the section and inserting in lieu thereof the following: 8 404A.4 Aggregate tax credit award limit. 9 1. Except as provided in subsections 2 and 3, the department 10 shall not award in any one fiscal year an amount of tax credits 11 provided in section 404A.2 in excess of forty-five million 12 dollars. 13 2. a. The amount of a tax credit that is awarded during 14 a fiscal year beginning on or after July 1, 2016, and that is 15 irrevocably declined or revoked on or before June 30 of the 16 next fiscal year may be awarded under section 404A.3 during the 17 fiscal year in which the declination or revocation occurs. 18 b. The amount of a tax credit that was reserved prior to 19 the effective date of this Act under section 404A.4, Code 2014, 20 for use in a fiscal year beginning before July 1, 2016, that 21 is irrevocably declined or revoked on or after the effective 22 date of this Act, but before July 1, 2016, may be awarded under 23 section 404A.3 during the fiscal year in which such declination 24 or revocation occurs. Such tax credits awarded shall not be 25 claimed by a taxpayer in a fiscal year that is earlier than the 26 fiscal year for which the tax credits were originally reserved. 27 c. The amount of a tax credit that was available for 28 approval by the state historical preservation office of the 29 department under section 404A.4, Code 2014, in a fiscal year 30 beginning on or after July 1, 2010, but before July 1, 2014, 31 that was required to be allocated to new projects with final 32 qualified rehabilitation costs of five hundred thousand dollars 33 or less, or seven hundred fifty thousand dollars or less, as 34 the case may be, and that was not finally approved by the state 35 -9- LSB 5303SV (1) 85 mm/sc 9/ 17

S.F. 2281 historical preservation office, may be awarded under section 1 404A.3 during the fiscal years beginning on or after July 1, 2 2014, but before July 1, 2016. 3 d. Tax credits awarded pursuant to this subsection shall 4 not be considered for purposes of calculating the aggregate tax 5 credit award limit in subsection 1. 6 3. a. If during the fiscal year beginning July 1, 2016, or 7 any fiscal year thereafter, the department awards an amount of 8 tax credits that is less than the maximum aggregate tax credit 9 award limit specified in subsection 1, the difference between 10 the amount so awarded and the amount specified in subsection 1, 11 not to exceed ten percent of the amount specified in subsection 12 1, may be carried forward to the succeeding fiscal year and 13 awarded during that fiscal year. 14 b. Tax credits awarded pursuant to this subsection shall 15 not be considered for purposes of calculating the aggregate tax 16 credit award limit in subsection 1. 17 Sec. 6. Section 404A.5, Code 2014, is amended to read as 18 follows: 19 404A.5 Economic impact —— recommendations. 20 1. The department of cultural affairs , in consultation with 21 the department of revenue, shall be responsible for keeping 22 the general assembly and the legislative services agency 23 informed on the overall economic impact to the state of the 24 rehabilitation of eligible properties qualified rehabilitation 25 projects . 26 2. An annual report shall be filed which shall include 27 but is not limited to data on the number and potential value 28 of qualified rehabilitation projects begun during the latest 29 twelve-month period, the total historic preservation and 30 cultural and entertainment district tax credits originally 31 granted awarded or tax credit certificates originally issued 32 during that period, the potential reduction in state tax 33 revenues as a result of all awarded or issued tax credits still 34 unused unclaimed and eligible for refund, and the potential 35 -10- LSB 5303SV (1) 85 mm/sc 10/ 17

S.F. 2281 increase in local property tax revenues as a result of the 1 qualified rehabilitated projects. 2 3. The department of cultural affair s, to the extent it 3 is able, shall provide recommendations on whether a the limit 4 on tax credits should be established changed , the need for a 5 broader or more restrictive definition of eligible property 6 qualified rehabilitation project , and other adjustments to the 7 tax credits under this chapter . 8 Sec. 7. NEW SECTION . 404A.6 Rules. 9 The department and the department of revenue shall each 10 adopt rules to jointly administer this chapter. 11 Sec. 8. Section 422.11D, Code 2014, is amended by striking 12 the section and inserting in lieu thereof the following: 13 422.11D Historic preservation and cultural and entertainment 14 district tax credit. 15 The taxes imposed under this division, less the credits 16 allowed under section 422.12, shall be reduced by a historic 17 preservation and cultural and entertainment district tax credit 18 allowed under section 404A.2. 19 Sec. 9. Section 422.33, subsection 10, Code 2014, is amended 20 by striking the subsection and inserting in lieu thereof the 21 following: 22 10. The taxes imposed under this division shall be reduced 23 by a historic preservation and cultural and entertainment 24 district tax credit allowed under section 404A.2. 25 Sec. 10. Section 422.60, subsection 4, Code 2014, is amended 26 by striking the subsection and inserting in lieu thereof the 27 following: 28 4. The taxes imposed under this division shall be reduced by 29 a historic preservation and cultural and entertainment district 30 tax credit allowed under section 404A.2. 31 Sec. 11. Section 432.12A, Code 2014, is amended by striking 32 the section and inserting in lieu thereof the following: 33 432.12A Historic preservation and cultural and entertainment 34 district tax credit. 35 -11- LSB 5303SV (1) 85 mm/sc 11/ 17

S.F. 2281 The taxes imposed under this chapter shall be reduced by a 1 historic preservation and cultural and entertainment district 2 tax credit allowed under section 404A.2. 3 Sec. 12. APPLICABILITY. Unless otherwise provided in 4 this Act, this Act applies to agreements entered into by the 5 department and an eligible taxpayer on or after the effective 6 date of this Act, and rehabilitation projects for which a 7 project application was approved and tax credits reserved prior 8 to the effective date of this Act shall be governed by sections 9 404A.1 through 404A.5, Code 2014. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill changes the historic preservation and cultural 14 and entertainment district tax credit program (program) 15 administered pursuant to Code chapter 404A. 16 Under current law, a taxpayer may receive a tax credit in 17 an amount equal to 25 percent of the qualified rehabilitation 18 costs incurred in rehabilitating properties eligible to be 19 listed on the national register of historic places, historic 20 properties in areas eligible to be designated local historic 21 districts, local landmarks, or barns constructed prior to 1937. 22 The credit is available against the individual and corporate 23 income tax, the franchise tax, and the insurance companies 24 tax. To be eligible for the tax credit, the rehabilitation 25 costs must exceed certain threshold amounts depending on the 26 type of property involved. The aggregate amount of tax credits 27 that may be approved per fiscal year is $45 million, a certain 28 amount of which is required to be allocated between projects 29 with final qualified rehabilitation costs of $750,000 or less, 30 projects located in certified cultural and entertainment 31 districts or associated with Iowa great places agreements, 32 disaster recovery projects, and projects that involve the 33 creation of more than 500 new permanent jobs. 34 Under current law, a taxpayer is also required to 35 -12- LSB 5303SV (1) 85 mm/sc 12/ 17

S.F. 2281 apply to and receive approval from the state historic 1 preservation office of the department of cultural affairs for a 2 rehabilitation project. The project must meet the statutory 3 requirements and the criteria established in administrative 4 rules by the historic preservation office. Tax credits 5 for an approved rehabilitation project may be reserved by a 6 taxpayer for up to three years, but such reservations shall not 7 exceed an aggregate of $45 million per fiscal year. Approved 8 rehabilitation projects must be started and completed within 9 a certain time period. Upon completion of the rehabilitation 10 project a certificate of completion is obtained from the state 11 historic preservation office and a tax credit certificate is 12 issued. Tax credits are refundable and may be transferred to 13 another person. 14 Under the bill, an eligible taxpayer may receive a tax 15 credit not to exceed 25 percent of the qualified rehabilitation 16 expenditures of a qualified rehabilitation project. 17 A “qualified rehabilitation project” is defined in the bill 18 as a project for the rehabilitation of property that meets 19 three requirements. First, it must be property listed on the 20 national register of historic places, historic property in an 21 area eligible to be designated a local historic district, a 22 local landmark, or a barn constructed prior to 1937. Second, 23 the property must meet the physical criteria and standards 24 for rehabilitation established by the department of cultural 25 affairs (department) by administrative rule. To the extent 26 applicable, such criteria and standards are required to be 27 consistent with United States secretary of the interior’s 28 standards for rehabilitation. Third, the project must have 29 qualified rehabilitation expenditures that, in the case of 30 commercial property, equal or exceed the lesser of at least 31 $50,000 or 50 percent of the assessed value of the property, 32 excluding the land, prior to rehabilitation; or in the case of 33 all other property, must equal the lesser of at least $25,000 34 or 25 percent of the assessed value, excluding the land, prior 35 -13- LSB 5303SV (1) 85 mm/sc 13/ 17

S.F. 2281 to rehabilitation. 1 “Qualified rehabilitation expenditures” means the same as 2 defined in section 47 of the Internal Revenue Code (IRC). 3 However, the bill provides that if the eligible taxpayer is 4 a nonprofit corporation, an expenditure will be considered a 5 “qualified rehabilitation expenditure” if it is one made for 6 structural components, as defined in 26 C.F.R. §1.48-1(e)(2), 7 or if it is an architectural or engineering fee, site survey 8 fee, legal expense, insurance premium, or development 9 fee. “Qualified rehabilitation expenditures” may include 10 expenditures incurred prior to the date the agreement is 11 entered into by the eligible taxpayer and the department, but 12 excludes expenditures financed by federal, state, or local 13 government grants, forgivable loans, or other forms of public 14 financial assistance that do not require repayment. “Eligible 15 taxpayer” and “nonprofit corporation” are both defined in the 16 bill. 17 Under the bill, an eligible taxpayer seeking the tax credit 18 must apply to the department. The department may prescribe 19 the timing, form, content, and method of application, and may 20 also establish criteria for the use of electronic or other 21 alternative filing methods for applications, documents, or 22 payments. The application must contain certain information as 23 specified in the bill and the taxpayer making the application 24 has the burden of proof to demonstrate eligibility under the 25 program. The department is allowed to charge application or 26 other fees based on the costs of the department associated with 27 the program. 28 If the project in the application meets the definition of a 29 qualified rehabilitation project, the department may register 30 it under the program. The bill requires the department to 31 notify the eligible taxpayer of successful registration under 32 the program and of the amount of tax credits for which the 33 project has received a tentative award. 34 The bill requires the agreement to cover a number of 35 -14- LSB 5303SV (1) 85 mm/sc 14/ 17

S.F. 2281 provisions, including the amount of the tax credit award, 1 the rehabilitation work to be performed, the budget of 2 the qualified rehabilitation project, and the project’s 3 commencement and completion dates. The commencement date shall 4 not be later than the end of the fiscal year in which the 5 agreement is entered into, and the completion date, which is 6 the date the property is placed in service, must be within 36 7 months of the commencement date. The agreement shall provide 8 that an eligible taxpayer has no right to receive a tax credit 9 certificate or claim a tax credit until all requirements of the 10 agreement and the program have been satisfied, and that the 11 amount of tax credit included on a tax credit certificate shall 12 be contingent upon verification by the department of the amount 13 of final qualified rehabilitation expenditures. The program 14 requires that the eligible taxpayer annually certify to the 15 department the eligible taxpayer’s continuing compliance with 16 the agreement, and timely notify the department of any changes 17 that may negatively impact eligibility under the program. The 18 eligible taxpayer will have the burden of proof to demonstrate 19 that all requirements of the agreement are satisfied. The 20 department may find the eligible taxpayer in default if any of 21 the requirements are not met, and may revoke the tax credit 22 award. Upon default, the department of revenue is required 23 to seek recovery of any tax credit claimed. Finally, upon 24 completion of the qualified rehabilitation project, the 25 program requires the eligible taxpayer to submit an audit of 26 the project from a certified public accountant licensed in 27 this state. The department is allowed to waive the audit 28 requirement if the final qualified rehabilitation expenditures 29 do not exceed $100,000 and the project is exclusively funded by 30 private funding sources. 31 After reviewing the audit, if applicable, the department 32 shall verify the final qualified rehabilitation expenditures 33 and that all requirements of the agreement were satisfied. 34 Following that, the department may issue within 60 days a tax 35 -15- LSB 5303SV (1) 85 mm/sc 15/ 17

S.F. 2281 credit certificate stating the amount of tax credit that may be 1 claimed, but such amount shall not exceed the amount of the tax 2 credit award provided for in the agreement. 3 The bill prohibits the department from awarding more 4 than $45 million in tax credits per fiscal year, with four 5 exceptions. First, any tax credit that is awarded during a 6 fiscal year beginning on or after July 1, 2016, and that is 7 irrevocably declined or revoked on or before June 30 of the 8 next fiscal year, may be awarded during the fiscal year in 9 which the declination or revocation occurs without regard to 10 the $45 million cap. Second, any tax credit that was reserved 11 under current law before the effective date of the bill for use 12 in a fiscal year beginning before July 1, 2016, and that is 13 irrevocably declined or revoked on or after the effective date 14 of the bill, but before July 1, 2016, may be awarded during 15 the fiscal year in which the declination or revocation occurs, 16 without regard to the $45 million cap. However, such credits 17 shall not be claimed before the fiscal year for which they were 18 originally reserved. Third, any amount of tax credit that 19 was available for approval under current law during fiscal 20 years 2010-2011, 2011-2012, 2012-2013, or 2013-2014, that was 21 required to be allocated to new projects with final qualified 22 rehabilitation costs of $500,000 or less, or $750,000 or less, 23 as the case may be, and that was not finally approved, may be 24 awarded during fiscal years 2014-2015 and 2015-2016 without 25 regard to the $45 million cap. Fourth, if the department 26 awards during fiscal year 2016-2017, or any fiscal year 27 thereafter, an amount of tax credits that is less than the $45 28 million cap, the department may carry forward the difference 29 between the amount so awarded and the $45 million cap, not to 30 exceed 10 percent of the cap, to the succeeding fiscal year 31 for award during that fiscal year, without regard to the $45 32 million cap. 33 The bill makes several technical changes to Code section 34 404A.5, which governs the department’s reporting and 35 -16- LSB 5303SV (1) 85 mm/sc 16/ 17

S.F. 2281 recommendation duties, to reference qualified rehabilitation 1 projects and to properly reflect that tax credits will be 2 awarded instead of granted and tax credit certificates issued. 3 The bill requires the department and the department of 4 revenue to adopt rules to jointly administer the program. 5 Unless otherwise provided in the bill, the bill applies 6 to agreements entered into by the department and an eligible 7 taxpayer on or after the effective date of the bill, and 8 rehabilitation projects for which a project application was 9 approved and tax credits reserved prior to the effective date 10 of the bill shall be governed by current law. 11 -17- LSB 5303SV (1) 85 mm/sc 17/ 17