S.F. 2329 Section 1. Section 437A.5, subsection 2, Code 2014, is 1 amended to read as follows: 2 2. a. If For tax years beginning on or after January 1, 3 2015, if natural gas is consumed in this state by a consumer 4 who consumed sixty million or more therms of natural gas in the 5 tax year , whether such natural gas is purchased or transferred, 6 and the delivery, purchase, or transference of such natural 7 gas is not subject to the tax imposed under subsection 1 , a 8 tax is imposed on the consumer at the rates prescribed under 9 subsection 1 . 10 b. (1) For the tax year beginning January 1, 2014, if 11 natural gas is consumed in this state by a consumer who 12 consumes less than sixty million therms of natural gas in the 13 tax year, whether such natural gas is purchased or transferred, 14 and the delivery, purchase, or transference of such natural 15 gas is not subject to the tax imposed under subsection 1, a 16 tax is imposed on the consumer at fifty percent of the rates 17 prescribed under subsection 1. 18 (2) For tax years beginning on or after January 1, 2015, 19 if natural gas is consumed in this state by a consumer who 20 consumes less than sixty million therms of natural gas in the 21 tax year, whether such natural gas is purchased or transferred, 22 and the delivery, purchase, or transference of such natural 23 gas is not subject to the tax imposed under subsection 1, a 24 tax shall not be imposed under this section on the consumer’s 25 consumption of natural gas. 26 Sec. 2. Section 437A.5, subsection 8, unnumbered paragraph 27 1, Code 2014, is amended to read as follows: 28 If, for any tax year after calendar year 1998, the total 29 taxable therms of natural gas required to be reported by 30 taxpayers pursuant to section 437A.8, subsection 1 , paragraphs 31 “a” and “b” , with respect to any natural gas competitive 32 service area increases or decreases by more than the threshold 33 percentage from the average of the base year amounts for that 34 natural gas competitive service area during the immediately 35 -1- LSB 5653XS (4) 85 md/sc 1/ 8

S.F. 2329 preceding five calendar years, the tax rate imposed under 1 subsection 1 , paragraph “a” , and subsection 2 for that tax year 2 shall be recalculated by the director for that natural gas 3 competitive service area so that the total of the replacement 4 natural gas delivery taxes required to be reported pursuant to 5 section 437A.8, subsection 1 , paragraph “e” , for that natural 6 gas competitive service area with respect to the tax imposed 7 under subsection 1 , paragraph “a” , and subsection 2 , and the 8 natural gas consumer tax supplement amount for that natural gas 9 competitive service area shall be as follows: 10 Sec. 3. Section 437A.5, subsection 8, paragraphs a and b, 11 Code 2014, are amended to read as follows: 12 a. If the number of therms of natural gas required to be 13 reported increased by more than the threshold percentage, one 14 hundred two percent of the sum of such taxes required to be 15 reported by taxpayers for that natural gas competitive service 16 area for the immediately preceding tax year and the natural gas 17 consumer tax supplement amount for that natural gas competitive 18 service area for the immediately preceding tax year . 19 b. If the number of therms of natural gas required to be 20 reported decreased by more than the threshold percentage, 21 ninety-eight percent of the sum of such taxes required to be 22 reported by taxpayers for that natural gas competitive service 23 area for the immediately preceding tax year and the natural gas 24 consumer tax supplement amount for that natural gas competitive 25 service area for the immediately preceding tax year . 26 Sec. 4. Section 437A.5, subsection 8, paragraph c, 27 subparagraph (4), Code 2014, is amended to read as follows: 28 (4) For purposes of this subsection , “base year amount” 29 means for calendar years prior to tax year 1999, the sum of the 30 therms of natural gas delivered to consumers within a natural 31 gas competitive service area by the taxpayer principally 32 serving such natural gas competitive service area which would 33 have been subject to taxation under this section had this 34 section been in effect for those years; and for tax years 35 -2- LSB 5653XS (4) 85 md/sc 2/ 8

S.F. 2329 after calendar year 1998, the taxable therms of natural gas 1 required to be reported by taxpayers pursuant to section 2 437A.8, subsection 1 , paragraphs “a” and “b” , with respect to 3 any natural gas competitive service area. 4 Sec. 5. NEW SECTION . 437A.5A Natural gas consumer tax 5 supplement —— appropriation. 6 1. a. For the fiscal year beginning July 1, 2015, there 7 is appropriated from the general fund of the state to the 8 department of revenue an amount equal to the number of therms 9 of natural gas subject to tax under section 437A.5, subsection 10 2, paragraph “b” , subparagraph (1), for the tax year beginning 11 January 1, 2014, multiplied by fifty percent of the rates 12 applicable to the therms of natural gas as prescribed under 13 section 437A.5, subsection 1, for that tax year, to be used as 14 provided in subsection 2 of this section. 15 b. For each fiscal year beginning on or after July 1, 2016, 16 there is appropriated from the general fund of the state to 17 the department of revenue an amount equal to the number of 18 therms of natural gas exempted from tax under section 437A.5, 19 subsection 2, paragraph “b” , subparagraph (2), for the tax year 20 beginning January 1 of the calendar year preceding the fiscal 21 year, multiplied by the rates prescribed under section 437A.5, 22 subsection 1, for that tax year, to be used as provided in 23 subsection 2 of this section. 24 c. Moneys appropriated by the general assembly to the 25 department under this subsection are not subject to a uniform 26 reduction in appropriations in accordance with section 8.31. 27 2. a. Moneys appropriated to the department under 28 subsection 1 shall be used by the department for the payment 29 of natural gas consumer tax supplement amounts and shall be 30 allocated among the local taxing districts according to the 31 allocations of replacement taxes made by the director and the 32 department of management pursuant to section 437A.15 for the 33 same tax year. 34 b. Natural gas consumer tax supplement amounts under 35 -3- LSB 5653XS (4) 85 md/sc 3/ 8

S.F. 2329 this section shall, following allocation to the local taxing 1 districts by the director and the department of management, 2 be remitted to the county treasurers each year as provided in 3 section 437A.8, subsection 4. 4 Sec. 6. Section 437A.8, subsection 1, paragraph b, Code 5 2014, is amended to read as follows: 6 b. The total kilowatt-hours of electricity consumed by the 7 taxpayer within each electric competitive service area during 8 the tax year subject to tax under section 437A.4, subsection 2 , 9 and the total therms of natural gas consumed by the taxpayer 10 within each natural gas competitive service area during the tax 11 year that are subject to tax under section 437A.5, subsection 12 2 , paragraph “a” , subject to tax under section 437A.5, 13 subsection 2, paragraph “b” , subparagraph (1), or that are 14 excluded from tax under section 437A.5, subsection 2, paragraph 15 “b” , subparagraph (2) . 16 Sec. 7. Section 437A.8, subsection 4, paragraph a, Code 17 2014, is amended to read as follows: 18 a. At the time of filing the return required by subsection 19 1 with the director, the taxpayer shall calculate the tentative 20 replacement tax due for the tax year. The director shall 21 compute any adjustments to the replacement tax required by 22 subsection 7 and by section 437A.4, subsection 8 , and section 23 437A.5, subsection 8 , and notify the taxpayer of any such 24 adjustments in accordance with the requirements of such 25 provisions. The director and the department of management 26 shall compute the allocation of replacement taxes and 27 natural gas consumer tax supplement amounts determined under 28 section 437A.5A among local taxing districts and report such 29 allocations to county treasurers pursuant to section 437A.15 . 30 Based on such allocations, the treasurer of each county shall 31 notify each taxpayer on or before August 31 following a tax 32 year of its replacement tax obligation to the county treasurer. 33 On or before September 30, 2000, and on or before September 34 30 of each subsequent year, the taxpayer shall remit to the 35 -4- LSB 5653XS (4) 85 md/sc 4/ 8

S.F. 2329 county treasurer of each county to which such replacement tax 1 is allocated pursuant to section 437A.15 , one-half of the 2 replacement tax so allocated, and on or before the succeeding 3 March 31, the taxpayer shall remit to the county treasurers the 4 remaining replacement tax so allocated. On or before September 5 30, 2015, and on or before September 30 of each subsequent 6 year, the department shall remit to the county treasurer of 7 each county to which such natural gas consumer tax supplement 8 amounts under section 437A.5A are allocated pursuant to section 9 437A.15, one-half of the supplement amount so allocated, and 10 on or before the succeeding March 31, the department shall 11 remit to the county treasurers the remaining supplement amount 12 so allocated. If notification of a taxpayer’s replacement tax 13 obligation is not mailed by a county treasurer on or before 14 August 31 following a tax year, such taxpayer shall have thirty 15 days from the date the notification is mailed to remit one-half 16 of the replacement tax otherwise required by this subsection 17 to be remitted to such county treasurer on or before September 18 30. If a taxpayer fails to timely remit replacement taxes 19 as provided in this subsection , the county treasurer of each 20 affected county shall notify the director of such failure. 21 Sec. 8. Section 437A.8, subsection 6, Code 2014, is amended 22 to read as follows: 23 6. Notwithstanding subsections 1 through 5 , a taxpayer 24 shall not be required to file a return otherwise required by 25 this section or remit any replacement tax for any tax year 26 in which the taxpayer’s replacement tax liability before 27 credits is three hundred dollars or less, provided that all 28 electric companies, electric cooperatives, municipal utilities, 29 consumers described in section 437A.5, subsection 2, paragraph 30 “b” , and natural gas companies shall file a return, regardless 31 of the taxpayer’s replacement tax liability. 32 Sec. 9. Section 437A.15, subsections 1 and 2, Code 2014, are 33 amended to read as follows: 34 1. The director and the department of management shall 35 -5- LSB 5653XS (4) 85 md/sc 5/ 8

S.F. 2329 compute the allocation of all replacement tax revenues other 1 than transfer replacement tax revenues and natural gas consumer 2 tax supplement amounts received pursuant to section 437A.5A 3 among the local taxing districts in accordance with this 4 section and shall report such allocation by local taxing 5 districts to the county treasurers on or before August 15 6 following a tax year. 7 2. a. The director shall determine and report to the 8 department of management the total replacement taxes to be 9 collected from each taxpayer for the tax year on or before July 10 30 following such tax year. 11 b. The director shall also determine and report to the 12 department of management the total natural gas consumer tax 13 supplement amount under section 437A.5A for the tax year on or 14 before July 30 following such tax year. Natural gas consumer 15 tax supplement amounts provided under section 437A.5A shall, 16 for the purposes of this section, be considered replacement 17 taxes owed by a taxpayer and allocated among the local taxing 18 districts as if the supplement amounts were replacement taxes 19 paid by the consumer of the therms of natural gas under section 20 437A.5, subsection 2, used to calculate the supplement amount. 21 Sec. 10. EFFECTIVE UPON ENACTMENT. This Act, being deemed 22 of immediate importance, takes effect upon enactment. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill relates to the tax imposed on certain natural gas 27 consumed in the state by modifying tax rates and providing for 28 a natural gas consumer tax supplement. 29 Current Code section 437A.5(2) provides that if natural 30 gas is consumed in this state and the delivery, purchase, or 31 transference of such natural gas is not subject to the natural 32 gas delivery replacement tax, a tax is imposed on the consumer 33 at the same rate as the natural gas delivery replacement tax 34 for the applicable natural gas competitive service area. 35 -6- LSB 5653XS (4) 85 md/sc 6/ 8

S.F. 2329 The bill continues the imposition of this tax rate on those 1 consumers who consume 60 million or more therms of natural gas 2 in a tax year. For the tax year beginning January 1, 2014, 3 those consumers who consume less than 60 million therms of 4 natural gas in the applicable tax year are subject to a tax 5 rate that is 50 percent of the natural gas delivery replacement 6 tax for the applicable natural gas competitive service area. 7 In tax years beginning on or after January 1, 2015, for those 8 consumers who consume less than 60 million therms of natural 9 gas in a tax year, the therms of natural gas consumed are not 10 subject to tax. 11 The bill establishes a natural gas consumer tax supplement 12 to replace tax revenue reductions that will result from changes 13 in the bill to the imposition of natural gas consumer tax rates 14 under Code section 437A.5(2), establishes the methodology 15 to calculate the amount of the supplement, and for fiscal 16 years beginning on or after July 1, 2015, appropriates the 17 necessary amounts from the general fund of the state to the 18 department of revenue. The bill requires that the natural gas 19 consumer tax supplement amounts be allocated among the local 20 taxing districts according to the allocations of replacement 21 taxes made by the director of revenue and the department of 22 management pursuant to Code section 437A.15 for the same 23 tax year. Following determination of such allocations, the 24 natural gas consumer tax supplement amounts are remitted by 25 the department of revenue to the appropriate county treasurers 26 at the same times of the year as replacement taxes owed by 27 taxpayers. 28 The bill provides that moneys appropriated for the natural 29 gas consumer tax supplement are not subject to a uniform 30 reduction in appropriations in accordance with Code section 31 8.31. 32 The bill also makes changes to provisions in Code chapter 33 437A to provide for the continued reporting by consumers on the 34 amount of natural gas therms that are consumed regardless of 35 -7- LSB 5653XS (4) 85 md/sc 7/ 8