Senate Study Bill 1075 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED ECONOMIC DEVELOPMENT AUTHORITY BILL) A BILL FOR An Act relating to the economic development financial 1 assistance duties and powers of the economic development 2 authority by authorizing and creating fees and a tax 3 rebate, affecting the aggregate tax credit limit for 4 certain economic development programs and the tax credit 5 for the endow Iowa tax credit, authorizing the diversion of 6 withholding tax payments for certain programs, making an 7 appropriation, and including effective date and retroactive 8 applicability provisions. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 10 TLSB 1207XD (2) 85 mm/rj

S.F. _____ H.F. _____ DIVISION I 1 COLLECTION OF FEES 2 Section 1. Section 12.10, Code 2013, is amended to read as 3 follows: 4 12.10 Deposits by state officers. 5 Except as otherwise provided, all elective and appointive 6 state officers, boards, commissions, and departments shall, 7 within ten days succeeding the collection, deposit with the 8 treasurer of state, or to the credit of the treasurer of state 9 in any depository designated by the treasurer of state, ninety 10 percent of all fees, commissions, and moneys collected or 11 received. The balance actually collected in cash, remaining 12 in the hands of any officer, board, or department shall not 13 exceed the sum of five thousand dollars and money collected 14 shall not be held more than thirty days. This section does not 15 apply to the state fair board, the state board of regents, the 16 utilities board of the department of commerce, the director of 17 the department of human services, the Iowa finance authority , 18 the economic development authority, or to the funds received 19 by the state racing and gaming commission under sections 99D.7 20 and 99D.14 . 21 Sec. 2. Section 15.106B, Code 2013, is amended by adding the 22 following new subsection: 23 NEW SUBSECTION . 5. a. The authority may charge fees to 24 businesses or individuals who receive financial assistance 25 under chapter 15 or 15E. The amount of such fees shall be 26 determined based on the costs of the authority associated with 27 its performance of contract administration and compliance 28 duties relating to economic development programs. 29 b. The authority may charge businesses and individuals a fee 30 for the use of the authority’s federal EB-5 immigrant investor 31 regional center. 32 Sec. 3. Section 15.330, Code 2013, is amended by adding the 33 following new subsection: 34 NEW SUBSECTION . 12. a. The imposition of a one-time 35 -1- LSB 1207XD (2) 85 mm/rj 1/ 10

S.F. _____ H.F. _____ compliance cost fee of five hundred dollars to be collected 1 by the authority prior to the issuance of a tax incentive 2 certificate or the disbursement of financial assistance. 3 b. The imposition of a compliance cost fee equal to one-half 4 of one percent of the value of tax incentives claimed pursuant 5 to an agreement that has an aggregate tax incentive value of 6 one hundred thousand dollars or greater. The authority shall 7 collect the fee from the business after the tax incentive is 8 claimed by the business from the department of revenue. 9 Sec. 4. NEW SECTION . 15E.198 Compliance cost fees. 10 The compliance cost fees imposed in 15.330, subsection 12, 11 shall apply to all agreements entered into under this division 12 and shall be collected by the authority in the same manner and 13 to the same extent as described in that subsection. 14 Sec. 5. EFFECTIVE UPON ENACTMENT. This division of this 15 Act, being deemed of immediate importance, takes effect upon 16 enactment. 17 Sec. 6. APPLICABILITY. This division of this Act applies to 18 agreements entered into on or after the effective date of this 19 division of this Act. 20 DIVISION II 21 AGGREGATE TAX CREDIT LIMITATION 22 Sec. 7. Section 15.119, subsection 1, Code 2013, is amended 23 to read as follows: 24 1. a. Notwithstanding any provision to the contrary in 25 any of the programs listed in subsection 2 , the authority, 26 except as provided in paragraph “b” , shall not authorize for 27 any one fiscal year an amount of tax credits for the programs 28 specified in subsection 2 that is in excess of one hundred 29 twenty eighty-five million dollars. 30 b. (1) The authority may authorize an amount of tax credits 31 during a fiscal year that is in excess of the amount specified 32 in paragraph “a” , but the amount of such excess shall be counted 33 against the total amount of tax credits that may be authorized 34 for the next fiscal year. 35 -2- LSB 1207XD (2) 85 mm/rj 2/ 10

S.F. _____ H.F. _____ (2) Any amount of tax credits authorized and awarded during 1 a fiscal year for a program specified in subsection 2 which are 2 irrevocably declined by the awarded business on or before June 3 30 of the next fiscal year may be reallocated, authorized, and 4 awarded during the fiscal year in which the declination occurs. 5 Tax credits authorized pursuant to this subparagraph shall not 6 be considered for purposes of subparagraph (1). 7 Sec. 8. Section 15.119, subsection 2, paragraphs d and e, 8 Code 2013, are amended to read as follows: 9 d. The tax credits for investments in qualifying businesses 10 and community-based seed capital funds issued pursuant to 11 section 15E.43 . In allocating tax credits pursuant to this 12 subsection , the authority shall allocate two million dollars 13 for purposes of this paragraph , unless the authority determines 14 that the tax credits awarded will be less than that amount . 15 e. The tax credits for investments in an innovation fund 16 pursuant to section 15E.52 . In allocating tax credits pursuant 17 to this subsection , the authority shall allocate eight million 18 dollars for purposes of this paragraph , unless the authority 19 determines that the tax credits awarded will be less than that 20 amount . 21 Sec. 9. EFFECTIVE UPON ENACTMENT. This division of this 22 Act, being deemed of immediate importance, takes effect upon 23 enactment. 24 Sec. 10. RETROACTIVE APPLICABILITY. This division of this 25 Act applies retroactively to July 1, 2012. 26 DIVISION III 27 ENDOW IOWA TAX CREDIT LIMIT 28 Sec. 11. Section 15E.305, subsection 2, Code 2013, is 29 amended to read as follows: 30 2. The aggregate amount of tax credits authorized pursuant 31 to this section shall not exceed a total of three five million 32 five hundred thousand dollars plus such additional credit 33 amount as provided by this section annually. 34 a. The maximum amount of tax credits granted to a taxpayer 35 -3- LSB 1207XD (2) 85 mm/rj 3/ 10

S.F. _____ H.F. _____ shall not exceed five percent of the aggregate amount of tax 1 credits authorized. 2 a. b. Ten percent of the aggregate amount of tax credits 3 authorized in a calendar year shall be reserved for those 4 endowment gifts in amounts of thirty thousand dollars or less. 5 If by September 1 of a calendar year the entire ten percent of 6 the reserved tax credits is not distributed, the remaining tax 7 credits shall be available to any other eligible applicants. 8 b. For purposes of this subsection , the additional credit 9 amount shall be an amount for each applicable calendar year 10 determined by the department of revenue equal to the amount of 11 money credited as provided by section 99F.11, subsection 3 , 12 paragraph “d” , subparagraph (3), for the prior fiscal year. 13 Sec. 12. Section 99F.11, subsection 3, paragraph d, 14 subparagraph (3), Code 2013, is amended by striking the 15 subparagraph. 16 Sec. 13. EFFECTIVE UPON ENACTMENT. This division of this 17 Act, being deemed of immediate importance, takes effect upon 18 enactment. 19 Sec. 14. RETROACTIVE APPLICABILITY. This division of this 20 Act applies retroactively to January 1, 2013, for endow Iowa 21 tax credits authorized on or after that date. 22 DIVISION IV 23 WITHHOLDING TAX DIVERSION 24 Sec. 15. NEW SECTION . 15.331 Withholding tax payment 25 diversion. 26 1. If the authority enters into an agreement pursuant to 27 this part, or pursuant to chapter 15E, division XVIII, for 28 any of the incentives or assistance provided under this part, 29 the authority and the eligible business may agree to credit 30 a portion of the withholding payments required under section 31 422.16 to the authority as provided in this section. 32 2. a. An eligible business entering into a withholding 33 agreement with the authority pursuant to this section shall 34 remit the total amount of withholding payments due pursuant to 35 -4- LSB 1207XD (2) 85 mm/rj 4/ 10

S.F. _____ H.F. _____ section 422.16 to the department of revenue. 1 b. The department of revenue shall quarterly deposit in a 2 fund created pursuant to section 15.106A an amount equal to two 3 and one-half percent of the gross wages paid by the eligible 4 business to each employee holding a created or retained job 5 covered by an agreement entered into pursuant to this part or 6 chapter 15E, division XVIII. Moneys to be deposited pursuant 7 to this paragraph shall not be paid to the authority until 8 the correct amounts have been verified by the department of 9 revenue. 10 3. Withholding payments shall be deposited pursuant to this 11 section by the department of revenue for each employee holding 12 a created or retained job for the duration of the agreement 13 between the eligible business and the authority. 14 4. The authority and the eligible business shall provide 15 to the department of revenue any information necessary to 16 correctly process the diversion of withholding tax payments 17 pursuant to this section. 18 5. An employee holding a created or retained job shall 19 receive full credit for the amount withheld as provided in 20 section 422.16. 21 6. If a portion of the employee’s gross wages are subject 22 to a withholding credit diversion under chapter 260E, chapter 23 260G, or section 403.19A, or a supplemental withholding credit 24 diversion under section 15E.197, when a withholding credit 25 diversion under this section is agreed to, then the withholding 26 payments shall be credited in the following order of priority: 27 a. First, the withholding payments to be credited pursuant 28 to chapters 260E and 260G and section 15E.197. 29 b. Second, the withholding payments to be credited pursuant 30 to this section. 31 c. Third, the withholding payments to be credited pursuant 32 to section 403.19A. 33 7. If a withholding agreement is entered into pursuant to 34 this section before a withholding agreement is entered into 35 -5- LSB 1207XD (2) 85 mm/rj 5/ 10

S.F. _____ H.F. _____ under chapter 260E or 260G, or section 15E.197 or 403.19A, the 1 withholding payments shall be credited in the order in which 2 the agreements are entered into. 3 8. The authority, in conjunction with the department of 4 revenue, shall adopt rules for the administration of this 5 section. 6 Sec. 16. EFFECTIVE UPON ENACTMENT. This division of this 7 Act, being deemed of immediate importance, takes effect upon 8 enactment. 9 Sec. 17. RETROACTIVE APPLICABILITY. This division of 10 this Act applies retroactively to July 1, 2012, for high 11 quality jobs program agreements and enterprise zone program 12 agreements entered into on or after that date, and for awards 13 of incentives or assistance made under those programs on or 14 after that date. 15 DIVISION V 16 CITY DEVELOPMENT BOARD FEES 17 Sec. 18. Section 368.10, Code 2013, is amended to read as 18 follows: 19 368.10 Rules —— establishment of filing fees. 20 The board may establish rules for the performance of its 21 duties and the conduct of proceedings before it. The rules 22 may include establishing filing fees for applications and 23 petitions submitted to the board. The amounts collected 24 from the establishment of such fees are appropriated to the 25 board for the purpose of reimbursing the economic development 26 authority for the budgeted costs of covering the board’s 27 expenses as described in section 368.9, subsection 1. Any 28 amounts collected in a fiscal year by the board in excess of 29 such budgeted costs shall be deposited in the general fund of 30 the state. The board’s rules are subject to chapter 17A , as 31 applicable. 32 DIVISION VI 33 HIGH QUALITY JOBS REPLACEMENT TAX REBATE 34 Sec. 19. NEW SECTION . 15.332A Replacement tax rebate. 35 -6- LSB 1207XD (2) 85 mm/rj 6/ 10

S.F. _____ H.F. _____ 1. Subject to the conditions in subsection 2, a community 1 may rebate all or a portion of the tax imposed and collected 2 pursuant to section 437A.5 on natural gas delivered or consumed 3 in completion of a project to the extent that the delivery or 4 consumption is directly related to new jobs created by the 5 start-up, location, or expansion of an eligible business under 6 the program. 7 2. A rebate provided pursuant to this section shall be for 8 a period equal to the length of the agreement executed pursuant 9 to this part or twenty years, whichever is less. 10 Sec. 20. EFFECTIVE UPON ENACTMENT. This division of this 11 Act, being deemed of immediate importance, takes effect upon 12 enactment. 13 Sec. 21. APPLICABILITY. This division of this Act applies 14 to high quality jobs program agreements entered into on or 15 after July 1, 2012. 16 EXPLANATION 17 This bill relates to the financial management of the 18 economic development authority (EDA) by authorizing and 19 creating fees and a tax rebate, affecting the aggregate tax 20 credit limit for certain economic development programs and 21 the tax credit for the endow Iowa tax credit, authorizing the 22 diversion of withholding tax payments for certain programs, and 23 by making an appropriation. 24 COLLECTION OF FEES. Division I amends Code section 25 15.106B, relating to the program powers of the EDA, to allow 26 for the imposition and collection of fees from businesses or 27 individuals who receive financial assistance from the EDA under 28 Code chapter 15 or 15E. The fee amounts are to be determined 29 based on the EDA’s costs of administering contracts under its 30 various economic development programs. The division also 31 allows the EDA to charge a fee for the use of its federal EB-5 32 immigrant investor regional center. Code section 12.10 is 33 amended to allow the EDA to retain the fees it collects by 34 adding the EDA to the list of departments exempted from the 35 -7- LSB 1207XD (2) 85 mm/rj 7/ 10

S.F. _____ H.F. _____ requirement to deposit all collected fees with the treasurer of 1 state. 2 The division creates two compliance cost fees to be imposed 3 on all persons or entities that enter into an agreement with 4 the EDA under its high quality jobs program or enterprise zone 5 program. First, a one-time compliance cost fee of $500 due 6 prior to the issuance of a tax incentive certificate or the 7 disbursement of financial assistance. Second, a compliance 8 cost fee equal to 0.5 percent of the value of tax incentives 9 claimed under any agreement that has an aggregate tax incentive 10 value of $100,000 or greater, which fee is due after a tax 11 incentive is claimed from the department of revenue. 12 The division takes effect upon enactment and applies to 13 agreements entered into on or after the effective date of the 14 division. 15 AGGREGATE TAX CREDIT LIMITATION. Division II increases 16 the aggregate tax credit limit on EDA programs listed in 17 Code section 15.119 from $120 million per fiscal year to 18 $185 million per fiscal year. The division allows the EDA 19 to reallocate, authorize, and award for a fiscal year any 20 amount of tax credits that were previously awarded by the EDA, 21 provided the tax credit is irrevocably declined by the awarded 22 business before the close of the fiscal year which follows the 23 fiscal year in which it was awarded. Any amount of tax credits 24 reallocated, authorized, and awarded under this provision shall 25 not be included in the calculation of the aggregate tax credit 26 limit for the fiscal year. 27 The division amends the requirements that $2 million and $8 28 million in tax credits be allocated to the qualifying business 29 and community-based seed capital funds investment tax credits 30 and the innovation fund tax credit, respectively, to allow 31 the EDA to allocate a lesser amount if it determines the tax 32 credits awarded for that fiscal year will be lower. 33 The division takes effect upon enactment and applies 34 retroactively to July 1, 2012. 35 -8- LSB 1207XD (2) 85 mm/rj 8/ 10

S.F. _____ H.F. _____ ENDOW IOWA TAX CREDIT LIMIT. Under current law, the amount 1 of endow Iowa tax credits that may be authorized in a calendar 2 year cannot exceed a total of $3.5 million plus a certain 3 percentage of the wagering tax receipts as provided in Code 4 section 99F.11. Division III amends this annual limit to 5 provide that a maximum of $5 million per calendar year may 6 be authorized and to provide that amounts collected from the 7 wagering tax pursuant to Code section 99F.11 will no longer be 8 used to fund the endow Iowa tax credit. 9 The division takes effect upon enactment and applies 10 retroactively to January 1, 2013, for endow Iowa tax credits 11 authorized on or after that date. 12 WITHHOLDING TAX DIVERSION. Division IV provides for 13 a diversion of withholding tax to the EDA. The division 14 provides that the authority may enter into agreements with 15 recipients of financial assistance under the high quality jobs 16 program and the enterprise zones program that allow for the 17 diversion of withholding tax payments pursuant to Code section 18 422.16 from the department of revenue to the authority. The 19 diversion amount will be 2.5 percent of gross wages paid by 20 eligible businesses to each employee considered to be holding a 21 created or retained job. The division establishes a priority 22 withholding order if the employee’s wages are subject to 23 another withholding diversion. The division provides that the 24 withholding diversion takes effect upon enactment and applies 25 retroactively to high quality jobs program agreements and 26 enterprise zone program agreements entered into on or after 27 July 1, 2012, and awards of incentives and assistance made 28 under those programs on or after July 1, 2012. 29 CITY DEVELOPMENT BOARD FEES. Under current law, the EDA 30 is required to provide office space and staff assistance to 31 the city development board created in Code section 368.9, 32 and to budget funds to cover expenses of the board. Also 33 under current law, the city development board is allowed to 34 impose fees upon applications and petitions submitted to the 35 -9- LSB 1207XD (2) 85 mm/rj 9/ 10

S.F. _____ H.F. _____ board. Division V appropriates the amounts collected from 1 those fees to the city development board for the purpose of 2 reimbursing the EDA for the budgeted costs of covering the 3 board’s expenses. Any fees collected in a fiscal year by the 4 city development board in excess of such budgeted costs shall 5 be deposited in the general fund of the state. 6 HIGH QUALITY JOBS REPLACEMENT TAX REBATE. Division VI 7 provides that a community may rebate all or a portion of the 8 replacement tax imposed on the delivery of natural gas in Code 9 section 437A.5. To qualify for the rebate, the natural gas 10 upon which the replacement tax was paid must be delivered or 11 consumed in completion of a project that is part of a high 12 quality jobs program agreement and must be directly related to 13 new jobs created by the start-up, location, or expansion of an 14 eligible business under the high quality jobs program. 15 The division takes effect upon enactment and applies to high 16 quality jobs program agreements entered into on or after July 17 1, 2012. 18 -10- LSB 1207XD (2) 85 mm/rj 10/ 10