House Study Bill 229 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS) A BILL FOR An Act relating to the state sales tax by exempting the sales 1 price from the sale or furnishing of metered water to 2 residential customers and creating related state and local 3 residential metered water excise taxes. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2207YC (4) 86 mm/sc

H.F. _____ Section 1. Section 423.3, Code 2015, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 101. The sales price from the sale or 3 furnishing of metered water to residential customers for use at 4 residential dwellings and units of apartment and condominium 5 complexes used for human occupancy. 6 Sec. 2. NEW SECTION . 423G.1 Short title. 7 This chapter may be cited as the “Residential Metered Water 8 Tax Act” . 9 Sec. 3. NEW SECTION . 423G.2 Definitions. 10 All words and phrases used in this chapter and defined in 11 section 423.1 have the same meaning given them by section 423.1 12 for purposes of this chapter. 13 Sec. 4. NEW SECTION . 423G.3 State-imposed residential 14 metered water tax. 15 1. A tax at the rate specified in subsection 2 is imposed on 16 the sales price from the sale or furnishing of metered water 17 to residential customers for use at residential dwellings and 18 units of apartment and condominium complexes used for human 19 occupancy. 20 2. a. If the date of the utility billing or meter reading 21 cycle of the residential customer for the sale or furnishing 22 of metered water is on or after July 1, 2015, but before July 23 1, 2016, or if the sale or furnishing of the water and the 24 delivery of the water occurs on or after July 1, 2015, but 25 before July 1, 2016, the rate of tax is six percent. 26 b. If the date of the utility billing or meter reading 27 cycle of the residential customer for the sale or furnishing 28 of metered water is on or after July 1, 2016, but before July 29 1, 2017, or if the sale or furnishing of the water and the 30 delivery of the water occurs on or after July 1, 2016, but 31 before July 1, 2017, the rate of tax is five percent. 32 c. If the date of the utility billing or meter reading 33 cycle of the residential customer for the sale or furnishing 34 of metered water is on or after July 1, 2017, but before July 35 -1- LSB 2207YC (4) 86 mm/sc 1/ 7

H.F. _____ 1, 2018, or if the sale or furnishing of the water and the 1 delivery of the water occurs on or after July 1, 2017, but 2 before July 1, 2018, the rate of tax is four percent. 3 d. If the date of the utility billing or meter reading 4 cycle of the residential customer for the sale or furnishing 5 of metered water is on or after July 1, 2018, but before July 6 1, 2019, or if the sale or furnishing of the water and the 7 delivery of the water occurs on or after July 1, 2018, but 8 before July 1, 2019, the rate of tax is three percent. 9 e. If the date of the utility billing or meter reading 10 cycle of the residential customer for the sale or furnishing 11 of metered water is on or after July 1, 2019, but before July 12 1, 2020, or if the sale or furnishing of the water and the 13 delivery of the water occurs on or after July 1, 2019, but 14 before July 1, 2020, the rate of tax is two percent. 15 f. If the date of the utility billing or meter reading 16 cycle of the residential customer for the sale or furnishing of 17 metered water is on or after July 1, 2020, but before January 18 1, 2021, or if the sale or furnishing of the water and the 19 delivery of the water occurs on or after July 1, 2020, but 20 before July 1, 2021, the rate of tax is one percent. 21 g. If the date of the utility billing or meter reading 22 cycle of the residential customer for the sale or furnishing 23 of metered water, or the date of the sale or furnishing of the 24 water and the delivery of the water, is on or after July 1, 25 2021, the rate of tax is zero percent. 26 3. This section is repealed June 30, 2021. 27 Sec. 5. NEW SECTION . 423G.4 Locally imposed residential 28 metered water tax. 29 1. a. A county that is not subject to subsection 2 may 30 impose a local residential metered water tax at a rate of not 31 more than one percent of the sales price from the sale or 32 furnishing of metered water to residential customers for use at 33 residential dwellings and units of apartment and condominium 34 complexes used for human occupancy. The tax shall be imposed, 35 -2- LSB 2207YC (4) 86 mm/sc 2/ 7

H.F. _____ collected, and administered in the same manner as the local 1 sales and services tax in chapter 423B and sections 423B.1 and 2 423B.5 through 423B.10, consistent with the provisions of this 3 chapter, shall apply with respect to the tax authorized under 4 this subsection, in the same manner and with the same effect as 5 if the local residential metered water tax was a local sales 6 and services tax within the meaning of those statutes. 7 b. The question of the imposition of a local residential 8 metered water tax may be submitted at the same election as the 9 local option taxes authorized under chapter 423B and shall be 10 stated on the ballot as questions to be voted on separately. 11 c. This subsection shall not be construed to require a 12 county to impose a local residential metered water tax if the 13 question of imposing a local sales and services tax is approved 14 at election. 15 2. a. If a city or county has in effect a local sales 16 and services tax under chapter 423B on the effective date of 17 this Act, that city or county shall impose on and after the 18 effective date of this Act a local residential metered water 19 tax at the same rate as the local sales and services tax on 20 the sales price from the sale or furnishing of metered water 21 to residential customers for use at residential dwellings and 22 units of apartment and condominium complexes used for human 23 occupancy. The local residential metered water tax shall be 24 imposed, collected, and administered in the same manner and 25 with the same effect as the city’s or county’s local sales 26 and services tax under chapter 423B and sections 423B.1 and 27 423B.5 through 423B.10, consistent with the provisions of this 28 chapter, shall apply with respect to the tax imposed under this 29 subsection, in the same manner and with the same effect as if 30 the local residential metered water tax was a local sales and 31 services tax within the meaning of chapter 423B. 32 b. The city or county shall within sixty days of the 33 effective date of this Act amend its local sales and services 34 tax ordinance to reflect the imposition of the local 35 -3- LSB 2207YC (4) 86 mm/sc 3/ 7

H.F. _____ residential metered water tax under this subsection. 1 c. The city or county shall continue to collect the local 2 residential metered water tax imposed under this subsection 3 until such time as the local sales and services tax in effect 4 on the effective date of this Act is repealed by the city or 5 county. 6 Sec. 6. NEW SECTION . 423G.5 Exemptions. 7 The sales price from transactions exempt from state sales 8 tax under section 423.3, except section 423.3, subsection 101, 9 is also exempt from the tax imposed by this chapter. 10 Sec. 7. NEW SECTION . 423G.6 Administration by director. 11 1. The director of revenue shall administer the state and 12 local residential metered water tax as nearly as possible in 13 conjunction with the administration of the state sales and use 14 tax law, except that portion of the law which implements the 15 streamlined sales and use tax agreement. The director shall 16 provide appropriate forms, or provide on the regular state tax 17 forms, for reporting state and local residential metered water 18 tax liability. 19 2. The director may require all persons who are engaged 20 in the business of deriving any sales price or purchase 21 price subject to tax under this chapter to register with 22 the department. The director may also require a tax permit 23 applicable only to this chapter for any retailer not 24 collecting, or any user not paying, taxes under chapter 423. 25 3. Section 422.25, subsection 4, sections 422.30, 422.67, 26 and 422.68, section 422.69, subsection 1, sections 422.70, 27 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 28 1, and sections 423.23, 423.24, 423.25, 423.31 through 29 423.35, 423.37 through 423.42, and 423.47, consistent with 30 the provisions of this chapter, shall apply with respect to 31 the taxes authorized under this chapter, in the same manner 32 and with the same effect as if the excise taxes on the sale 33 or furnishing of metered water to residential customers were 34 retail sales taxes within the meaning of those statutes. 35 -4- LSB 2207YC (4) 86 mm/sc 4/ 7

H.F. _____ Notwithstanding this subsection, the director shall provide 1 for quarterly filing of returns and for other than quarterly 2 filing of returns both as prescribed in section 423.31. All 3 taxes collected under this chapter by a retailer or any user 4 are deemed to be held in trust for the state of Iowa. 5 Sec. 8. NEW SECTION . 423G.7 Deposit of revenues. 6 1. All moneys received and all refunds shall be deposited in 7 or withdrawn from the general fund of the state. 8 2. The director, in consultation with local officials, 9 shall collect and account for a local residential metered 10 water tax and shall credit all revenues in the same manner 11 as provided in section 423B.7. Local authorities shall not 12 require any tax permit not required by the director of revenue. 13 3. Subsequent to the deposit in the general fund of the 14 state, the department shall do the following in the order 15 prescribed: 16 a. Transfer the revenues collected under section 423G.3 in 17 the manner prescribed in section 423B.7. 18 b. (1) Transfer one-sixth of the remaining revenues to the 19 secure an advanced vision for education fund created in section 20 423F.2. 21 (2) This paragraph is repealed June 30, 2021. 22 EXPLANATION 23 The inclusion of this explanation does not constitute agreement with 24 the explanation’s substance by the members of the general assembly. 25 This bill relates to the sale of metered water to residential 26 customers. 27 The bill exempts from the state sales tax the sales price 28 from the sale or furnishing of metered water to residential 29 customers for use at residential dwellings and units of 30 apartment and condominium complexes used for human occupancy. 31 By operation of Code section 423.6, an item exempt from the 32 imposition of the sales tax is also exempt from the use tax 33 imposed in Code section 423.5. 34 The bill creates a state excise tax on the sales price 35 -5- LSB 2207YC (4) 86 mm/sc 5/ 7

H.F. _____ from the sale or furnishing of metered water to residential 1 customers for use at residential dwellings and units of 2 apartment and condominium complexes used for human occupancy. 3 The rate of the excise tax begins at 6 percent for fiscal year 4 2015-2016, which is the same rate as the state sales tax, and 5 is reduced one percentage point each fiscal year for the next 6 five fiscal years until it is completely phased out beginning 7 July 1, 2021. 8 The bill requires that one-sixth of the state residential 9 metered water tax revenues collected each year be transferred 10 to the secure an advanced vision for education fund created in 11 Code section 423F.2. 12 The bill also creates a locally imposed residential metered 13 water tax of up to 1 percent that may, at the option of a county 14 that is not imposing a local sales and services tax on July 1, 15 2015, be imposed, collected, and administered by the county in 16 the same manner as the local sales and services tax in Code 17 chapter 423B if approved at election. The bill incorporates 18 by reference many of the provisions of Code chapter 423B. 19 The bill allows an election for the imposition of a local 20 residential metered water tax to occur at the same election 21 as for a local option tax authorized under Code chapter 423B, 22 but the ballot shall state the questions so as to be voted 23 separately. 24 The bill provides that a city or county that has a local 25 sales and services tax in effect on July 1, 2015, is required 26 to impose a local residential metered water tax at the same 27 rate and in the same manner as the city’s or county’s local 28 sales and services tax. The city or county is required to 29 amend its local sales and services tax ordinance within 60 days 30 of the effective date of the bill to reflect the imposition of 31 the local residential metered water tax. The city or county 32 shall continue to collect the required local residential 33 metered water tax until the city’s or county’s sales and 34 services tax in effect on July 1, 2015, is repealed. 35 -6- LSB 2207YC (4) 86 mm/sc 6/ 7

H.F. _____ The director of revenue is required to administer the state 1 and local residential metered water tax as nearly as possible 2 in conjunction with the administration of the state sales 3 and use tax law, and to that end the bill incorporates by 4 reference numerous Code sections that relate to general tax 5 administration and the sales and use tax laws. 6 Revenues collected from the local option residential metered 7 water tax are credited to local governments in the same manner 8 as local option taxes under Code chapter 423B. 9 -7- LSB 2207YC (4) 86 mm/sc 7/ 7