Senate File 410 - Introduced SENATE FILE 410 BY COMMITTEE ON ECONOMIC GROWTH (SUCCESSOR TO SSB 1112) A BILL FOR An Act modifying the innovation fund investment tax credit 1 and including effective date and retroactive applicability 2 provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1204SV (2) 85 mm/sc

S.F. 410 Section 1. Section 15E.52, subsection 1, paragraph c, Code 1 2013, is amended to read as follows: 2 c. “Innovative business” means a business applying novel 3 or original innovative methods to the manufacture of a product 4 or the delivery of a service. “Innovative business” includes 5 but is not limited to a business engaged in the industries 6 of advanced manufacturing, biosciences, and information 7 technology. 8 Sec. 2. Section 15E.52, subsection 3, Code 2013, is amended 9 to read as follows: 10 3. The amount of a tax credit allowed under this section 11 shall equal twenty twenty-five percent of the taxpayer’s equity 12 investment in an innovation fund. 13 Sec. 3. Section 15E.52, subsection 5, paragraph a, Code 14 2013, is amended to read as follows: 15 a. The board shall issue certificates under this section 16 which may be redeemed for tax credits. The board shall issue 17 such certificates so that not more than the amount allocated 18 for such tax credits under section 15.119, subsection 2 , may be 19 claimed. The certificates shall not be transferable. 20 Sec. 4. Section 15E.52, subsection 5, Code 2013, is amended 21 by adding the following new paragraph: 22 NEW PARAGRAPH . c. A certificate issued pursuant to this 23 section cannot pledge the credit of the state and any such 24 certificate so pledged to secure the debt of the original 25 holder or a transferee shall not constitute a contract binding 26 the state. 27 Sec. 5. Section 15E.52, subsection 6, Code 2013, is amended 28 to read as follows: 29 6. A taxpayer shall not redeem a certificate and related tax 30 credit prior to the third tax year following the tax year in 31 which the investment is made. Any tax credit in excess of the 32 taxpayer’s liability for the tax year may be credited to the 33 tax liability for the following five years or until depleted, 34 whichever is earlier. A tax credit shall not be carried back 35 -1- LSB 1204SV (2) 85 mm/sc 1/ 4

S.F. 410 to a tax year prior to the tax year in which the taxpayer claims 1 the tax credit. 2 Sec. 6. Section 15E.52, Code 2013, is amended by adding the 3 following new subsections: 4 NEW SUBSECTION . 8. Tax credit certificates issued pursuant 5 to this section may be transferred, in whole or in part, to any 6 person. A tax credit certificate shall only be transferred 7 once. Within ninety days of transfer, the transferee shall 8 submit the transferred tax credit certificate to the department 9 of revenue along with a statement containing the transferee’s 10 name, tax identification number, and address, the denomination 11 that each replacement tax credit certificate is to carry, and 12 any other information required by the department of revenue. 13 NEW SUBSECTION . 9. Within thirty days of receiving the 14 transferred tax credit certificate and the transferee’s 15 statement, the department of revenue shall issue one or 16 more replacement tax credit certificates to the transferee. 17 Each replacement tax credit certificate must contain the 18 information required for the original tax credit certificate. 19 A replacement tax credit certificate may designate a different 20 tax than the tax designated on the original tax credit 21 certificate. A tax credit shall not be claimed by a transferee 22 under this section until a replacement tax credit certificate 23 identifying the transferee as the proper holder has been 24 issued. 25 NEW SUBSECTION . 10. The transferee may use the amount of 26 the tax credit transferred against the taxes imposed in chapter 27 422, divisions II, III, and V, and in chapter 432, and against 28 the moneys and credits tax imposed in section 533.329, for 29 any tax year the original transferor could have claimed the 30 tax credit. Any consideration received for the transfer of 31 the tax credit shall not be included as income under chapter 32 422, divisions II, III, and V. Any consideration paid for the 33 transfer of the tax credit shall not be deducted from income 34 under chapter 422, divisions II, III, and V. 35 -2- LSB 1204SV (2) 85 mm/sc 2/ 4

S.F. 410 Sec. 7. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 1 immediate importance, takes effect upon enactment. 2 Sec. 8. RETROACTIVE APPLICABILITY. This Act applies 3 retroactively to January 1, 2013, for tax years beginning on 4 or after that date and for equity investments in an innovation 5 fund made on or after that date. 6 EXPLANATION 7 This bill modifies the innovation fund investment tax credit 8 in Code section 15E.52. Under current law, the economic 9 development authority is required to issue nontransferable tax 10 credit certificates equal to 20 percent of a taxpayer’s equity 11 investment in an innovation fund. A tax credit may not be 12 redeemed by a taxpayer until three years after an investment 13 is made. The tax credits available for issuance are under the 14 aggregate tax credit limit for certain economic development 15 programs in Code section 15.119, and are limited to a total of 16 $8 million per fiscal year. 17 The bill amends the definition of “innovative business” for 18 purposes of the innovation fund investment tax credit and, by 19 reference, the innovative business development programs in Code 20 section 15.411. 21 The bill modifies the credit by removing the requirement 22 that a taxpayer wait three years to redeem the credit, 23 by increasing the amount of the credit to 25 percent of a 24 taxpayer’s equity investment, and by making the tax credit 25 certificates transferable one time and establishing procedures 26 for transferring the credit to another person. 27 The bill provides that innovation fund investment tax credit 28 certificates issued by the authority cannot pledge the credit 29 of the state and shall not constitute a contract binding the 30 state if a certificate is pledged to secure the debt of the 31 original holder or a transferee. 32 The bill is effective upon enactment and applies 33 retroactively to January 1, 2013, for tax years beginning on 34 or after that date and for equity investments in an innovation 35 -3- LSB 1204SV (2) 85 mm/sc 3/ 4

S.F. 410 fund made on or after that date. 1 -4- LSB 1204SV (2) 85 mm/sc 4/ 4