HF 656 (LSB 1212HZ (4) 86)

HOUSE FILE 656

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HF 555)
(SUCCESSOR TO HSB 98)

A BILL FOR

An Act relating to the administration of programs by the economic development authority by creating a renewable chemical production tax credit, modifying the tax credit for investments in qualifying businesses and community-based seed capital funds, modifying the entrepreneur investment awards program, modifying the workforce housing tax incentive program, making miscellaneous changes to other economic development authority programs, and including effective date and retroactive and other applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
RENEWABLE CHEMICAL PRODUCTION TAX CREDIT
    Section 1.  Section 15.119, subsection 2, Code 2015, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  h.  The renewable chemical production tax credit program administered pursuant to sections 15.315 through 15.320. In allocating tax credits pursuant to this subsection, the authority shall not allocate more than fifteen million dollars for purposes of this paragraph.
    Sec. 2.  NEW SECTION.  15.315  Short title.

   This part shall be known and may be cited as the “Renewable Chemical Production Tax Credit Program”.
    Sec. 3.  NEW SECTION.  15.316  Definitions.

   As used in this part, unless the context otherwise requires:

   1.  “Biobased content percentage” means, with respect to any renewable chemical, the amount, expressed as a percentage, of renewable organic material present as determined by testing representative samples using the American society for testing and materials standard D6866.
   2.  “Biomass feedstock” means sugar, polysaccharide, glycerin, lignin, fat, grease, or oil derived from a plant or animal, or a protein capable of being converted to a building block chemical by means of a biological or chemical conversion process.
   3.  “Building block chemical” means a molecule converted from biomass feedstock as a first product or a secondarily derived product that can be further refined into a higher-value chemical, material, or consumer product. “Building block chemical” includes but is not limited to glycerol, methanoic or formic acid, arabonic acid, erythonic acid, glyceric acid, glycolic acid, lactic acid, 3-hydroxypropionate, propionic acid, malonic acid, serine, succinic acid, fumaric acid, malic acid, aspartic acid, 3-hydroxybutyrolactone, acetoin, threonine, itaconic acid, furfural, levulinic acid, glutamic acid, xylonic acid, xylaric acid, xylitol, arabitol, citric acid, aconitic acid, 5-hydroxymethylfurfural, lysine, gluconic acid, glucaric acid, sorbitol, gallic acid, ferulic acid, nonfuel butanol, nonfuel ethanol, a polymer or gum that can be produced directly from a protein-based biomass feedstock, or such additional molecules as may be included by the authority by rule.
   4.  “Eligible business” means a business meeting the requirements of section 15.317.
   5.  “Food additive” means a building block chemical that is not primarily consumed as food but which, when combined with other components, improves the taste, appearance, odor, texture, or nutritional content of food. The authority, in its discretion, shall determine whether or not a building block chemical is primarily consumed as food.
   6.  “Program” means the renewable chemical production tax credit program administered pursuant to this part.
   7.  “Renewable chemical” means a building block chemical with a biobased content percentage of at least fifty percent. “Renewable chemical” does not include a chemical sold or used for the production of food, feed, or fuel. “Renewable chemical” includes cellulosic ethanol, starch ethanol, or other ethanol derived from biomass feedstock, fatty acid methyl esters, or butanol, but only to the extent that such molecules are produced and sold for uses other than food, feed, or fuel. “Renewable chemical” also includes a building block chemical that can be a food additive as long as the building block chemical is not primarily consumed as food and is also sold for uses other than food. “Renewable chemical” also includes supplements, vitamins, nutraceuticals, and pharmaceuticals, but only to the extent that such molecules do not provide caloric value so as to be considered sustenance as food or feed.
   8.  “Sugar” means the organic compound glucose, fructose, xylose, arabinose, lactose, sucrose, starch, cellulose, or hemicellulose.
    Sec. 4.  NEW SECTION.  15.317  Eligibility requirements.

   To be eligible to receive the renewable chemical production tax credit pursuant to the program, a business shall meet all of the following requirements:

   1.  The business is physically located in this state.
   2.  The business is operated for profit and under single management.
   3.  The business is not an entity providing professional services, health care services, or medical treatments or an entity engaged primarily in retail operations.
   4.  The business organized, expanded, or located in the state on or after the effective date of this division of this Act.
   5.  The business shall not be relocating or reducing operations as described in section 15.329, subsection 1, paragraph “b”, and as determined under the discretion of the authority.
   6.  The business is in compliance with all agreements entered into under this program or other programs administered by the authority.
    Sec. 5.  NEW SECTION.  15.318  Eligible business application and agreement —— maximum tax credits.
   1.  Application.
   a.  An eligible business that produces a renewable chemical in this state from biomass feedstock during a calendar year may apply to the authority for the renewable chemical production tax credit provided in section 15.319.
   b.  The application shall be made to the authority in the manner prescribed by the authority.
   c.  The application shall be made during the calendar year following the calendar year in which the renewable chemicals are produced.
   d.  The authority may accept applications on a continuous basis or may establish, by rule, an annual application deadline.
   e.  The application shall include all of the following information:
   (1)  The amount of renewable chemicals produced in the state from biomass feedstock by the eligible business during the calendar year, measured in pounds.
   (2)  Any other information reasonably required by the authority in order to establish and verify eligibility under the program.
   2.  Agreement and fees.
   a.  Before being issued a tax credit under section 15.319, an eligible business shall enter into an agreement with the authority for the successful completion of all requirements of the program.
   b.  The compliance cost fees authorized in section 15.330, subsection 12, shall apply to all agreements entered into under this program and shall be collected by the authority in the same manner and to the same extent as described in that subsection.
   c.  An eligible business shall fulfill all the requirements of the program and the agreement before receiving a tax credit or entering into a subsequent agreement under this section. The authority may decline to enter into a subsequent agreement under this section or issue a tax credit if an agreement is not successfully fulfilled.
   d.  Upon establishing that all requirements of the program and the agreement have been fulfilled, the authority shall issue a tax credit and related tax credit certificate to the eligible business stating the amount of renewable chemical production tax credit under section 15.319 the eligible business may claim.
   3.  Maximum tax credit amount.
   a.  The maximum amount of tax credit that may be issued under section 15.319 to an eligible business for the production of renewable chemicals in a calendar year shall not exceed the following:
   (1)  In the case of an eligible business that has been in operation in the state for five years or less at the time of the application, one million dollars.
   (2)  In the case of an eligible business that has been in operation in the state for more than five years at the time of the application, five hundred thousand dollars.
   b.  An eligible business shall not receive a tax credit for renewable chemicals produced before the date the business first qualified as an eligible business pursuant to section 15.317.
   c.  An eligible business shall not receive more than five tax credits under the program.
   d.  The authority shall issue tax credits under the program on a first-come, first-served basis until the maximum amount of tax credits allocated pursuant to section 15.119, subsection 2, paragraph “h”, is reached. The authority shall maintain a list of successful applicants under the program, so that if the maximum aggregate amount of tax credits is reached in a given fiscal year, eligible businesses that successfully applied but for which tax credits were not issued shall be placed on a wait list in the order the eligible businesses applied and shall be given priority for receiving tax credits in succeeding fiscal years. Placement on a wait list pursuant to this paragraph shall not constitute a promise binding the state. The availability of a tax credit and issuance of a tax credit certificate pursuant to this subsection in a future fiscal year is contingent upon the availability of tax credits in that particular fiscal year.
   4.  Termination and repayment.  The failure by an eligible business in fulfilling any requirement of the program or any of the terms and obligations of an agreement entered into pursuant to this section may result in the reduction, termination, or recision of the tax credits under section 15.319 and may subject the eligible business to the repayment or recapture of tax credits claimed. The repayment or recapture of tax credits pursuant to this subsection shall be accomplished in the same manner as provided in section 15.330, subsection 2.
   5.  Confidentiality.
   a.  Except as provided in paragraph “b”, any information or record in the possession of the authority with respect to the program shall be presumed by the authority to be a trade secret protected under chapter 550 or common law and shall be kept confidential by the authority unless otherwise ordered by a court.
   b.  The identity of a tax credit recipient and the amount of the tax credit shall be considered public information under chapter 22.
    Sec. 6.  NEW SECTION.  15.319  Renewable chemical production tax credit.
   1.  An eligible business that has entered into an agreement pursuant to section 15.318 may claim a tax credit equal to the product of five cents multiplied by the number of pounds of renewable chemicals produced in this state from biomass feedstock by the eligible business during the calendar year. However, an eligible business shall not receive a tax credit for the production of a secondarily derived building block chemical if that chemical is also the subject of a credit at the time of production as a first product. The renewable chemical production tax credit shall not be available for any renewable chemical produced after the 2025 calendar year.
   2.  The tax credit shall be allowed against taxes imposed under chapter 422, division II or III.
   3.  The tax credit shall be claimed for the tax year during which the eligible business was issued the tax credit.
   4.  An individual may claim a tax credit under this section of a partnership, limited liability company, S corporation, cooperative organized under chapter 501 and filing as a partnership for federal tax purposes, estate, or trust electing to have income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings from the partnership, limited liability company, S corporation, cooperative, estate, or trust.
   5.  Any tax credit in excess of the tax liability is refundable. In lieu of claiming a refund, the taxpayer may elect to have the overpayment shown on the taxpayer’s final, completed return credited to the tax liability for the following tax year.
   6.  a.  To claim a tax credit under this section, a taxpayer shall include one or more tax credit certificates with the taxpayer’s tax return.
   b.  The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the amount of the credit, the name of the eligible business, and any other information required by the department of revenue.
   c.  The tax credit certificate, unless rescinded by the authority, shall be accepted by the department of revenue as payment for taxes imposed pursuant to chapter 422, divisions II and III, subject to any conditions or restrictions placed by the authority upon the face of the tax credit certificate and subject to the limitations of the program.
   d.  Tax credit certificates issued pursuant to this section shall not be transferred to any other person.
    Sec. 7.  NEW SECTION.  15.320  Rules.

   The authority and the department of revenue shall each adopt rules as necessary for the implementation and administration of this part.
    Sec. 8.  NEW SECTION.  422.10A  Renewable chemical production tax credit.

   The taxes imposed under this division, less the credits allowed under section 422.12, shall be reduced by a renewable chemical production tax credit allowed under section 15.319.
    Sec. 9.  Section 422.33, Code 2015, is amended by adding the following new subsection:
   NEW SUBSECTION.  22.  The taxes imposed under this division shall be reduced by a renewable chemical production tax credit allowed under section 15.319.
    Sec. 10.  TRANSITION.  Notwithstanding Code section 15.319, subsection 3, as enacted in this division of this Act, tax credits issued to an eligible business during the 2016 calendar year for renewable chemicals produced during the 2015 calendar year may be claimed by the eligible business for a tax year beginning on or after January 1, 2015.
    Sec. 11.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 12.  APPLICABILITY.  This division of this Act applies to renewable chemicals produced in the state from biomass feedstock on or after the effective date of this division of this Act.
    Sec. 13.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2015, for tax years beginning on or after that date.

DIVISION II
ANGEL INVESTOR TAX CREDITS
    Sec. 14.  Section 2.48, subsection 3, paragraph d, subparagraph (1), Code 2015, is amended to read as follows:
   (1)  Tax credits for investments in qualifying businesses and community-based seed capital funds under chapter 15E, division V.
    Sec. 15.  Section 15.119, subsection 2, paragraph d, Code 2015, is amended to read as follows:
   d.  The tax credits for investments in qualifying businesses and community-based seed capital funds issued pursuant to section 15E.43. In allocating tax credits pursuant to this subsection, the authority shall allocate two million dollars for purposes of this paragraph, unless the authority determines that the tax credits awarded will be less than that amount.
    Sec. 16.  Section 15E.41, Code 2015, is amended by striking the section and inserting in lieu thereof the following:
   15E.41  Purpose.

   The purpose of this division is to stimulate job growth, create wealth, and accelerate the creation of new ventures by using investment tax credits to incentivize the transfer of capital from investors to entrepreneurs, particularly during early-stage growth.
    Sec. 17.  Section 15E.42, Code 2015, is amended by adding the following new subsection:
   NEW SUBSECTION.  2A.  “Entrepreneurial assistance program” includes the entrepreneur investment awards program administered under section 15E.362, the receipt of services from a service provider engaged pursuant to section 15.411, subsection 1, or the program administered under section 15.411, subsection 2.
    Sec. 18.  Section 15E.42, subsection 3, Code 2015, is amended to read as follows:
   3.  “Investor” means a person making a cash investment in a qualifying business or in a community-based seed capital fund. “Investor” does not include a person that holds at least a seventy percent ownership interest as an owner, member, or shareholder in a qualifying business.
    Sec. 19.  Section 15E.42, subsection 4, Code 2015, is amended by striking the subsection.
    Sec. 20.  Section 15E.43, subsections 1 and 2, Code 2015, are amended to read as follows:
   1.  a.  For tax years beginning on or after January 1, 2002 2015, a tax credit shall be allowed against the taxes imposed in chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, for a portion of a taxpayer’s equity investment, as provided in subsection 2, in a qualifying business or a community-based seed capital fund.
   b.  An individual may claim a tax credit under this paragraph section of a partnership, limited liability company, S corporation, estate, or trust electing to have income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings from the partnership, limited liability company, S corporation, estate, or trust.
   b.  c.  A tax credit shall be allowed only for an investment made in the form of cash to purchase equity in a qualifying business or in a community-based seed capital fund. A taxpayer that has received a tax credit for an investment in a community-based seed capital fund shall not claim the tax credit prior to the third tax year following the tax year in which the investment is made. Any tax credit in excess of the taxpayer’s liability for the tax year may be credited to the tax liability for the following five years or until depleted, whichever is earlier. A tax credit shall not be carried back to a tax year prior to the tax year in which the taxpayer redeems the tax credit.
   c.  In the case of a tax credit allowed against the taxes imposed in chapter 422, division II, where the taxpayer died prior to redeeming the entire tax credit, the remaining credit can be redeemed on the decedent’s final income tax return.
   d.  For a tax credit claimed against the taxes imposed in chapter 422, division II, any tax credit in excess of the tax liability is refundable. In lieu of claiming a refund, the taxpayer may elect to have the overpayment shown on the taxpayer’s final, completed return credited to the tax liability for the following tax year. For a tax credit claimed against the taxes imposed in chapter 422, divisions III and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, any tax credit in excess of the taxpayer’s liability for the tax year may be credited to the tax liability for the following three years or until depleted, whichever is earlier. A tax credit shall not be carried back to a tax year prior to the tax year in which the taxpayer redeems the tax credit.
   2.  a.  A The amount of the tax credit shall equal twenty twenty-five percent of the taxpayer’s equity investment.
   b.  The maximum amount of a tax credit for an investment by an investor in any one qualifying business shall be fifty thousand dollars. Each year, an investor and all affiliates of the investor shall not claim tax credits under this section for more than five different investments in five different qualifying businesses that may be issued per calendar year to a natural person and the person’s spouse or dependent shall not exceed one hundred thousand dollars combined. For purposes of this paragraph, a tax credit issued to a partnership, limited liability company, S corporation, estate, or trust electing to have income taxed directly to the individual shall be deemed to be issued to the individual owners based upon the pro rata share of the individual’s earnings from the entity. For purposes of this paragraph, “dependent” has the same meaning as provided by the Internal Revenue Code.
   c.  The maximum amount of tax credits that may be issued per calendar year for equity investments in any one qualifying business shall not exceed five hundred thousand dollars.
    Sec. 21.  Section 15E.43, subsections 5 and 7, Code 2015, are amended to read as follows:
   5.  A tax credit shall not be transferable transferred to any other taxpayer person.
   7.  The authority shall develop a system for registration and authorization issuance of tax credits authorized pursuant to this division and shall control distribution of all tax credits distributed credit certificates to investors pursuant to this division. The authority shall develop rules for the qualification and administration of qualifying businesses and community-based seed capital funds. The department of revenue shall adopt these criteria as administrative rules and any other rules pursuant to chapter 17A as necessary for the administration of this division.
    Sec. 22.  Section 15E.43, subsections 6 and 8, Code 2015, are amended by striking the subsections.
    Sec. 23.  Section 15E.44, subsection 2, paragraph c, Code 2015, is amended by striking the paragraph and inserting in lieu thereof the following:
   c.  The business is participating in an entrepreneurial assistance program. The authority may waive this requirement if a business establishes that its owners, directors, officers, and employees have an appropriate level of experience such that participation in an entrepreneurial assistance program would not materially change the prospects of the business. The authority may consult with outside service providers in consideration of such a waiver.
    Sec. 24.  Section 15E.44, subsection 2, paragraphs e and f, Code 2015, are amended to read as follows:
   e.  The business shall not have a net worth that exceeds five ten million dollars.
   f.  The business shall have secured all of the following at the time of application for tax credits: 
   (1)  At least two investors.
   (2)  total Total equity financing, near equity financing, binding investment commitments, or some combination thereof, equal to at least two hundred fifty five hundred thousand dollars, from investors. For purposes of this subparagraph, “investor” includes a person who executes a binding investment commitment to a business.
    Sec. 25.  Section 15E.46, Code 2015, is amended to read as follows:
   15E.46  Reports Confidentiality —— reports.
   1.  Except as provided in subsection 2, all information or records in the possession of the authority with respect to this division shall be presumed by the authority to be a trade secret protected under chapter 550 or common law and shall be kept confidential by the authority unless otherwise ordered by a court.
   2.  All of the following shall be considered public information under chapter 22:
   a.  The identity of a qualifying business.
   b.  The identity of an investor and the qualifying business in which the investor made an equity investment.
   c.  The number of tax credit certificates issued by the authority.
   d.  The total dollar amount of tax credits issued by the authority.
   3.  The authority shall publish an annual report of the activities conducted pursuant to this division and shall submit the report to the governor and the general assembly. The report shall include a listing of eligible qualifying businesses and the number of tax credit certificates and the amount of tax credits issued by the authority.
    Sec. 26.  Section 15E.52, subsection 4, Code 2015, is amended to read as follows:
   4.  A taxpayer shall not claim a tax credit under this section if the taxpayer is a venture capital investment fund allocation manager for the Iowa fund of funds created in section 15E.65 or an investor that receives a tax credit for the same investment in a qualifying business as described in section 15E.44 or in a community-based seed capital fund as described in section 15E.45, Code 2015.
    Sec. 27.  Section 422.11F, subsection 1, Code 2015, is amended to read as follows:
   1.  The taxes imposed under this division, less the credits allowed under section 422.12, shall be reduced by an investment tax credit authorized pursuant to section 15E.43 for an investment in a qualifying business or a community-based seed capital fund.
    Sec. 28.  Section 422.33, subsection 12, paragraph a, Code 2015, is amended to read as follows:
   a.  The taxes imposed under this division shall be reduced by an investment tax credit authorized pursuant to section 15E.43 for an investment in a qualifying business or a community-based seed capital fund.
    Sec. 29.  Section 422.60, subsection 5, paragraph a, Code 2015, is amended to read as follows:
   a.  The taxes imposed under this division shall be reduced by an investment tax credit authorized pursuant to section 15E.43 for an investment in a qualifying business or a community-based seed capital fund.
    Sec. 30.  Section 432.12C, subsection 1, Code 2015, is amended to read as follows:
   1.  The tax imposed under this chapter shall be reduced by an investment tax credit authorized pursuant to section 15E.43 for an investment in a qualifying business or a community-based seed capital fund.
    Sec. 31.  REPEAL.  Section 15E.45, Code 2015, is repealed.
    Sec. 32.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 33.  APPLICABILITY.  Unless otherwise provided in this division of this Act, this division of this Act applies to equity investments in a qualifying business made on or after the effective date of this division of this Act, and equity investments made in a qualifying business or community-based seed capital fund prior to the effective date of this division of this Act shall be governed by sections 15E.41 through 15E.46, 422.11F, 422.33, 422.60, 432.12C, and 533.329, Code 2015.
    Sec. 34.  APPLICABILITY.  The sections of this division of this Act amending section 15E.44, subsection 2, apply to businesses that submit an application to the economic development authority to be registered as a qualifying business on or after the effective date of this division of this Act, and businesses that submit an application to the economic development authority to be registered as a qualifying business before the effective date of this division of this Act shall be governed by section 15E.44, subsection 2, Code 2015.

DIVISION III
ENTREPRENEUR INVESTMENT AWARDS PROGRAM
    Sec. 35.  Section 15E.362, Code 2015, is amended by striking the section and inserting in lieu thereof the following:
   15E.362  Entrepreneur investment awards program.
   1.  For purposes of this division, unless the context otherwise requires:
   a.  “Business development services” includes but is not limited to corporate development services, business model development services, business planning services, marketing services, financial strategies and management services, mentoring and management coaching, and networking services.
   b.  “Eligible entrepreneurial assistance provider” means a person meeting the requirements of subsection 3.
   c.  “Financial assistance” means the same as defined in section 15.327.
   d.  “Program” means the entrepreneur investment awards program administered pursuant to this division.
   2.  The authority shall establish and administer an entrepreneur investment awards program for purposes of providing financial assistance to eligible entrepreneurial assistance providers that provide technical and financial assistance to entrepreneurs and start-up companies seeking to create, locate, or expand a business in the state. Financial assistance under the program shall be provided from the entrepreneur investment awards program fund created in section 15E.363.
   3.  In order to be eligible for financial assistance under the program an entrepreneurial assistance provider must meet all of the following requirements:
   a.  The provider must have its principal place of operations located in this state.
   b.  The provider must offer a comprehensive set of business development services to emerging and early-stage innovation companies to assist in the creation, location, growth, and long-term success of the company in this state.
   c.  The business development services may be performed at the physical location of the provider or the company.
   d.  The business development services may be provided in consideration of equity participation in the company, a fee for services, a membership agreement with the company, or any combination thereof.
   4.  Entrepreneurial assistance providers may apply for financial assistance under the program in the manner and form prescribed by the authority.
   5.  The economic development authority board in its discretion may approve, deny, or defer each application for financial assistance under the program from persons it determines to be an eligible entrepreneurial assistance provider.
   6.  Subject to subsection 7, the amount of financial assistance awarded to an eligible entrepreneurial assistance provider shall be within the discretion of the authority.
   7.  a.  The maximum amount of financial assistance awarded to an eligible entrepreneurial assistance provider shall not exceed two hundred thousand dollars.
   b.  The maximum amount of financial assistance provided under the program shall not exceed one million dollars in a fiscal year.
   8.  The authority shall award financial assistance on a competitive basis. In making awards of financial assistance, the authority may develop scoring criteria and establish minimum requirements for the receipt of financial assistance under the program. In making awards of financial assistance, the authority may consider all of the following:
   a.  The business experience of the professional staff employed or retained by the eligible entrepreneurial assistance provider.
   b.  The business plan review capacity of the professional staff of the eligible entrepreneurial assistance provider.
   c.  The expertise in all aspects of business disciplines of the professional staff of the eligible entrepreneurial assistance provider. 
   d.  The access of the eligible entrepreneurial assistance provider to external service providers, including legal, accounting, marketing, and financial services.
   e.  The service model and likelihood of success of the eligible entrepreneurial assistance provider and its similarity to other successful entrepreneurial assistance providers in the country.
   f.  The financial need of the eligible entrepreneurial assistance provider.
   9.  Financial assistance awarded to an eligible entrepreneurial assistance provider shall only be used for the purpose of operating costs incurred by the eligible entrepreneurial assistance provider in providing business development services to emerging and early-stage innovation companies in this state. Such financial assistance shall not be distributed to owners or investors of the company to which business development services are provided and shall not be distributed to other persons assisting with the provision of business development services to the company.
   10.  The authority may contract with outside service providers for assistance with the program or may delegate the administration of the program to the Iowa innovation corporation pursuant to section 15.106B.
   11.  The authority may make client referrals to eligible entrepreneurial assistance providers.
    Sec. 36.  Section 15E.363, subsection 3, Code 2015, is amended to read as follows:
   3.  The Moneys credited to the fund are appropriated to the authority and shall be used to provide grants under the entrepreneur investment awards program established in section 15E.362 financial assistance under the program.

DIVISION IV
WORKFORCE HOUSING TAX INCENTIVES PROGRAM
    Sec. 37.  Section 15.354, subsection 3, paragraph e, Code 2015, is amended to read as follows:
   e.  (1)  Upon review of the examination and verification of the amount of the qualifying new investment, the authority may issue a tax credit certificate to the housing business stating the amount of workforce housing investment tax credits under section 15.355 the eligible housing business may claim.
   (2)  If upon review of the examination in subparagraph (1) the authority determines that a housing project has incurred project costs in excess of the amount submitted in the application made pursuant to subsection 1, the authority shall do one of the following:
   (a)  If the project costs do not cause the housing project’s average dwelling unit cost to exceed the applicable maximum amount authorized in section 15.353, subsection 3, the authority may consider the agreement fulfilled and may issue a tax credit certificate.
   (b)  If the project costs cause the housing project’s average dwelling unit cost to exceed the applicable maximum amount authorized in section 15.353, subsection 3, but does not cause the average dwelling unit cost to exceed one hundred ten percent of such applicable maximum amount, the authority may consider the agreement fulfilled and may issue a tax credit certificate. In such case, the authority shall reduce the amount of tax incentives the eligible housing project may claim under section 15.355, subsections 2 and 3, by the same percentage that the housing project’s average dwelling unit cost exceeds the applicable maximum amount under section 15.353, subsection 3, and such tax incentive reduction shall be reflected on the tax credit certificate. If the authority issues a certificate pursuant to this subparagraph division, the department of revenue shall accept the certificate notwithstanding that the housing project’s average dwelling unit costs exceeds the maximum amount specified in section 15.353, subsection 3.
   (c)  If the project costs cause the housing project’s average dwelling unit cost to exceed one hundred ten percent of the applicable maximum amount authorized in 15.353, subsection 3, the authority shall determine the eligible housing business to be in default under the agreement and shall not issue a tax credit certificate.
    Sec. 38.  Section 15.355, subsection 2, Code 2015, is amended to read as follows:
   2.  A housing business may claim a refund of the sales and use taxes paid under chapter 423 that are directly related to a housing project. The refund available pursuant to this subsection shall be as provided in section 15.331A to the extent applicable for purposes of this program, excluding subsection 2, paragraph “c”, of that section.  For purposes of the program, the term “project completion”, as used in section 15.331A, shall mean the date on which the authority notifies the department of revenue that all applicable requirements of an agreement entered into pursuant to section 15.354 are satisfied.
    Sec. 39.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 40.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to May 30, 2014, for all agreements entered into pursuant to Code section 15.354 on or after that date.

DIVISION V
MISCELLANEOUS CHANGES
    Sec. 41.  Section 15.293B, subsection 4, Code 2015, is amended to read as follows:
   4.  A registered project shall be completed within thirty months of the date the project was registered unless the authority, upon recommendation of the council and approval of the board, provides additional time to complete the project. A project shall not be provided more than twelve months of additional time. If the registered project is not completed within the time required, the project is not eligible to claim a tax credit provided in section 15.293A.
    Sec. 42.  SPECIAL PROJECT EXTENSION.  Notwithstanding any other provision of law to the contrary, the economic development authority may extend the project completion date for a project awarded tax incentives under both the redevelopment tax credit program in sections 15.293A and 15.293B and the housing enterprise zone tax incentives program in section 15E.193B, Code 2014, if the property that is the subject of the project suffered a catastrophic fire during the 2014 calendar year.
    Sec. 43.  EFFECTIVE UPON ENACTMENT.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 44.  RETROACTIVE APPLICABILITY.  The section of this division of this Act amending Code section 15.293B applies retroactively to qualifying redevelopment project agreements entered into on or after July 1, 2010, for which a request for a project extension is submitted to the economic development authority on or after January 1, 2015.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the administration of programs by the economic development authority (EDA) by creating a renewable chemical production tax credit, modifying the tax credit for investments in qualifying businesses and community-based seed capital funds, and modifying the entrepreneur investment awards program.
   DIVISION I —— RENEWABLE CHEMICAL PRODUCTION TAX CREDIT.  Division I creates a renewable chemical production tax credit program (program) that will be administered by the EDA and that will provide tax credits to eligible businesses that produce renewable chemicals in Iowa from biomass feedstock. “Renewable chemical”, “biomass feedstock”, and other related terms are defined in the division.
   In order to qualify for the tax credit, a business must meet several requirements. First, the business must be physically located in Iowa and operated for profit under single management. Second, the business must not be an entity providing professional services, health care services, or medical treatments, or be engaged primarily in retail operations. Third, the business must have organized, expanded, or located in Iowa on or after the effective date of the division. Fourth, the business must not be, in the discretion of the EDA, ineligible under certain provisions relating to the relocation or reduction of business operations within Iowa. Fifth, the business must be in compliance with all agreements entered into under the program or other programs administered by the EDA.
   An eligible business seeking a tax credit is required to apply to the EDA during the calendar year following the calendar year in which the renewable chemicals are produced. The application must include the amount of renewable chemicals produced in Iowa from biomass feedstock by the eligible business during the calendar year, measured in pounds, and any other information reasonably required by the EDA in order to establish and verify eligibility under the program. The EDA may accept applications on a continuous basis or may establish an annual application deadline.
   Before being issued a tax credit, an eligible business is required to enter into an agreement with the EDA for the successful completion of all requirements of the program. The EDA is authorized to impose two compliance cost fees under the program. The first fee equals $500 per agreement. The second fee equals 0.5 percent of the value of the tax credit claimed pursuant to the agreement if the agreement has an aggregate tax credit value of $100,000 or greater.
   An eligible business that fails to comply with the requirements of the program or the terms of an agreement with the EDA may have its tax credits reduced, terminated, or rescinded, and may be subject to the repayment or recapture of claimed tax credits. 
   Upon determining that all requirements of an agreement and the program have been fulfilled, the EDA shall issue a tax credit and related tax credit certificate to the eligible business in an amount equal to the product of $.05 multiplied by the number of pounds of renewable chemicals produced in Iowa from biomass feedstock by the eligible business during the calendar year. Renewable chemicals produced by an eligible business prior to the effective date of the division, or prior to the date the business first qualifies as an eligible business, or after calendar year 2025, shall not qualify for the tax credit.
   The tax credit shall be claimed for the tax year during which the eligible business was issued the tax credit. However, tax credits issued in 2016 for renewable chemicals produced in 2015 may be claimed for a tax year beginning on or after January 1, 2015. The tax credit may be claimed against the individual income tax and the corporate income tax. The credit is refundable or may, at the election of the taxpayer, be carried forward for up to one tax year. The tax credit shall not be transferred to any person. A tax credit issued to a partnership, limited liability company, S corporation, cooperative organized under Code chapter 501 and filing as a partnership for federal tax purposes, estate, or trust electing to have the income taxed directly to the individual may be claimed by the individual based upon the pro rata share of the individual’s earnings from that entity.
   The division provides that the program is subject to the EDA’s maximum aggregate tax credit cap of $170 million per fiscal year in Code section 15.119, and not more than $15 million per fiscal year may be issued by the EDA under the program. In addition, the maximum amount of tax credit that may be issued to an eligible business in any one calendar year shall not exceed $1 million or $500,000, depending on whether the eligible business has been operating in Iowa at the time of application for five or fewer years, or more than five years, respectively. An eligible business shall not receive more than five tax credits under the program. The EDA is required to issue tax credits on a first-come, first-served basis until the maximum amount of $15 million per fiscal year is reached. If the amount of tax credits exceeds this amount in a fiscal year, the EDA is required to establish a wait list and give priority in subsequent years to the eligible businesses on the wait list.
   The division provides for the confidentiality of certain information under the program. The identity of a tax credit recipient and the amount of the tax credit shall be considered public information under Code chapter 22 (examination of public records), but any other information or record in the possession of the EDA with respect to the program shall be presumed by the EDA to be a trade secret protected under Code chapter 550 or common law and shall be kept confidential by the EDA unless otherwise ordered by a court.
   The division takes effect upon enactment and applies to renewable chemicals produced in Iowa from biomass feedstock on or after that date. The division applies retroactively to tax years beginning on or after January 1, 2015.
   DIVISION II —— ANGEL INVESTOR TAX CREDITS. Division II makes several changes to the tax credit for investments in qualifying businesses and community-based seed capital funds, often referred to as the angel investor tax credits. The division amends the purpose of the tax credit in Code section 15E.41. The division excludes investments in community-based seed capital funds from qualifying for the tax credit and makes several conforming amendments to remove references to community-based seed capital funds from the Code.
   The division modifies the amount and dollar limitation of the tax credit for a taxpayer. The tax credit is increased from 20 percent to 25 percent of a taxpayer’s equity investment in a qualifying business. Under current law, a taxpayer cannot claim more than $50,000 of tax credit per investment in a qualifying business, and for each tax year a taxpayer and the taxpayer’s affiliates cannot claim tax credits for more than five investments in five different qualifying businesses. The division amends this dollar limitation to prohibit a natural person and the person’s spouse or dependent from being issued a combined amount of more than $100,000 in tax credits per calendar year. For purposes of this dollar limitation, credits issued to partnerships and other pass-through entities are deemed to be issued to the individual owners.
   The division also provides that no more than $500,000 in tax credits may be issued per calendar year for equity investments in any one qualifying business.
   The division modifies the procedures for claiming the tax credit. Under current law, the tax credit is not refundable but available for carryforward for up to five tax years. The division makes the tax credit refundable if claimed against the individual income tax, and for credits claimed against any other tax, reduces the carryforward period to three years.
   The division strikes a provision permitting the EDA to cooperate with small business development centers to disseminate information regarding the credits and to develop standard application forms, and requiring the EDA to distribute copies of the application forms to all community-based seed capital funds and potential individual investors.
   The division modifies the eligibility requirements for qualifying businesses. The division strikes the requirement that a business have an owner that meets at least one of four qualifications relating to business education or business experience. The division requires that a business be participating in an entrepreneurial assistance program, as defined in the division, but allows the EDA to waive this requirement if the business establishes that its owners, directors, officers, and employees have an appropriate level of experience such that an entrepreneurial assistance program would not materially change the prospects of the business. The EDA is allowed to consult with outside service providers in considering such a waiver. The division increases from $5 million to $10 million the maximum amount of net worth that a business may have to be considered a qualifying business. The division increases from $250,000 to $500,000 the amount of financing that a business must have in order to be considered a qualifying business, removes “near equity” from the types of financing that will be considered in that calculation, requires that the financing be secured at the time of application for the tax credits, and requires that the business have at least two investors at the time of application for the tax credits. These modified eligibility requirements apply to businesses that submit an application to the EDA to be registered as a qualifying business on or after the effective date of this division of the bill, and businesses that submitted such an application to the EDA before the effective date of this division of the bill shall be governed by current law.
   The division provides for the confidentiality of certain information with regard to the tax credit. The identity of a qualifying business, the identity of an investor and the qualifying business in which the investor made an equity investment, and the total number and amount of tax credits issued shall be considered public information under Code chapter 22 (examination of public records), but any other information or record in the possession of the EDA with respect to the program shall be presumed by the EDA to be a trade secret protected under Code chapter 550 or common law and shall be kept confidential by the EDA unless otherwise ordered by a court.
   The division takes effect upon enactment and applies to equity investments in a qualifying business made on or after that date. Equity investments in a qualifying business or community-based seed capital fund made prior to the effective date of the division shall be governed by current law.
   DIVISION III —— ENTREPRENEUR INVESTMENT AWARDS PROGRAM.  Division III amends the entrepreneur investment awards program administered by the EDA. The division strikes provisions that prohibited the EDA from making awards under the program since July 1, 2014, and that required the EDA by December 31, 2014, to conduct a comprehensive review of the program and submit a report with specified information to the governor and the general assembly.
   The division modifies the purpose of the program to be to provide financial assistance to eligible entrepreneurial assistance providers (provider) that provide technical and financial assistance to entrepreneurs and start-up companies seeking to create, locate, or expand a business in Iowa. “Financial assistance” is defined in the division.
   The division changes the requirements for receiving an award. To be eligible to receive an award under current law, an entrepreneurial assistance program must have been an Iowa-based business, expended at least $500,000 during the previous fiscal year to provide technical and financial assistance services that meet the broad-based needs of entrepreneurs seeking to create, locate, or expand a business in Iowa that intends to derive more than 10 percent of its gross sales from markets outside Iowa; and must have engaged and communicated with certain other programs, funding sources, and entities for its entrepreneur clients. The division amends the eligibility for receiving financial assistance to require that a provider have its principal place of operations in Iowa and that the provider offer a comprehensive set of business development services to emerging and early-stage innovation companies to assist in the creation, location, growth, and long-term success of the company in Iowa. “Business development services” is defined in the division. Business development services may be performed at the physical location of the provider or the company and may be provided in consideration of equity participation in the company, a fee for services, or a membership agreement with the company.
   Under current law, the EDA board could approve, deny, or defer each application for a grant, and was required to award grants on a first-come, first-served basis. The division specifies that the EDA board has the discretion to approve, deny, or defer each application for financial assistance and that the amount of financial assistance awarded to a provider is within the discretion of the EDA. The division requires the EDA to award financial assistance on a competitive basis and allows the EDA to develop scoring criteria and establish minimum requirements for the receipt of a financial assistance award.
   In addition to the four factors relating to the provider’s professional staff that the EDA may consider under current law in deciding whether to award financial assistance, the division provides that the EDA may also consider the service model and likelihood of success of the provider, the provider’s similarity to other successful providers in the country, and the provider’s financial need.
   The division modifies the maximum award amount for a recipient. Under current law, a grant to an entrepreneur assistance program cannot exceed the lesser of 25 percent of the funds expended by the program during the previous fiscal year, 100 percent of the funds raised from certain persons by the program during the previous fiscal year, or $200,000. The division provides that the amount of financial assistance awarded to any one provider shall not exceed $200,000.
   The division modifies the permitted use of funds received under the program. Under current law, grants are only permitted to be used for the purpose of operating costs incurred by the program. The division specifies that financial assistance awarded to a provider shall only be used for the purpose of operating costs incurred by the provider in the provision of business development services to emerging and early-stage innovation companies in Iowa. The division further requires that such financial assistance shall not be distributed to owners or investors of the company to which the business development services are being provided and shall not be provided to other persons assisting with the provision of the services.
   Under current law, an entrepreneurial assistance provider is required to accept client referrals from the EDA as a condition of receiving a grant. The division provides that the EDA may make client referrals to eligible providers.
   DIVISION IV —— WORKFORCE HOUSING TAX INCENTIVES PROGRAM.  Under current law, a housing project is not eligible for workforce housing tax incentives if the project’s average dwelling unit cost exceeds $200,000, or $250,000 if the project involves certain historic property. The division permits EDA to issue tax credit certificates to housing projects with an average dwelling unit cost in excess of that amount, provided the excess is not greater than 10 percent. In such cases, EDA is required to reduce the housing project’s tax incentives by the same percentage that its average dwelling unit cost exceeds the applicable maximum amount. The division provides that housing projects with an average dwelling unit cost that exceeds 110 percent of the applicable maximum amount shall not be eligible for workforce housing tax incentives. 
   The division also amends the sales and use tax refund available under the workforce housing tax incentive program. That refund is available for sales and use tax paid prior to project completion, which is currently defined to mean the first date upon which the average annualized production of finished product for the preceding 90-day period at the manufacturing facility operated by the eligible business is at least 50 percent of the initial design capacity of the facility. The division amends the definition of “project completion” to mean the date on which the EDA notifies the department of revenue that all applicable requirements of a workforce housing tax incentive program agreement are satisfied. 
   Division IV takes effect upon enactment and applies retroactively to May 30, 2014, for all workforce housing tax incentive agreements entered into on or after that date.
   DIVISION V —— MISCELLANEOUS CHANGES. Division V makes miscellaneous changes to other EDA programs. The division amends the amount of time required to complete a project under the redevelopment tax credit program. Under current law, projects must be completed within 30 months, but EDA is allowed to grant extensions of up to 12 months. The division amends this provision to allow EDA, upon recommendation of the brownfield redevelopment advisory council and approval of the economic development authority board, to grant extensions of any amount of time. This provision applies retroactively to qualifying redevelopment project agreements entered into on or after July 1, 2010, for which a request for project extension is submitted to EDA on or after January 1, 2015.
   The division also allows the EDA to extend the project completion date for a project awarded tax incentives under the redevelopment tax credit program and the housing enterprise zone tax incentives program if the property that is the subject of the project suffered a catastrophic fire during the 2014 calendar year. 
   Division V takes effect upon enactment.