HSB 654 (LSB 6040YC (4) 86)

HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS)

A BILL FOR

An Act relating to water quality by modifying the wastewater treatment financial assistance program, creating a water service excise tax and a related sales tax exemption, making appropriations, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 16.134, Code 2016, is amended to read as follows:
   16.134  Wastewater and drinking water treatment financial assistance program.
   1.  The Iowa finance authority shall establish and administer a wastewater and drinking water treatment financial assistance program. The purpose of the program shall be to provide financial assistance to enhance water quality. The program shall be administered in accordance with rules adopted by the authority pursuant to chapter 17A. For purposes of this section, “program” means the wastewater and drinking water treatment financial assistance program and “committee” means the water quality financing review committee created in subsection 9.
   2.  A wastewater and drinking water treatment financial assistance fund is created and shall consist of appropriations made to the fund and transfers of interest, earnings, and moneys from other funds as provided by law.  Moneys transferred to the fund pursuant to section 423G.6 are appropriated to the authority for purposes of the program. Moneys in the fund are not subject to section 8.33. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys in the fund shall be credited to the fund.
   3.  Financial assistance under the program shall be used to install or upgrade wastewater treatment facilities and systems and drinking water treatment facilities and systems, and for engineering or technical assistance for facility planning and design.
   4.  The authority committee shall distribute approve financial assistance in from the fund in accordance with the following:
   a.  The goal of the program shall be to base awards on the impact of the grant combined with other sources of financing to ensure that sewer rates do not exceed one and one-half percent of a community’s median household income.
   b.  a.  Communities shall be eligible for financial assistance by qualifying as Priority shall be given for projects in which a disadvantaged community and is seeking financial assistance for the installation or upgrade of wastewater treatment facilities due to regulatory activity by the department of natural resources and drinking water treatment facilities. For purposes of this section, the term “disadvantaged community” means the same as defined by the department.
   c.  b.  Priority shall be given to projects in which the financial assistance is used to obtain with financing under the water pollution control works and drinking water facilities financing program pursuant to section 16.131 or other federal or state financing.
   d.  c.  Priority shall also be given to projects whose completion will provide significant improvement to water quality in the relevant watershed.
   e.  d.  Priority shall also be given to communities that employ an alternative wastewater treatment technology pursuant to section 455B.199C.
   f.  e.  Priority shall be also be given to those communities where sewer or water rates are the highest as a percentage of that community’s median household income.
   g.  f.  Financial assistance in the form of grants shall be issued on an annual basis.
   h.  g.  An applicant shall not receive a grant that exceeds five hundred thousand dollars.
   5.  The authority in cooperation with the department of natural resources shall share provide information and resources to the committee when the committee is determining the qualifications of a community for financial assistance from the fund.
   6.  The authority shall enter into agreements with financial assistance recipients and distribute moneys under the program pursuant to financial assistance determinations made by the committee.  The authority may use an amount of not more than four one percent of any moneys appropriated for deposit in the fund for administration purposes.
   7.  By October 1 of each year, the authority shall submit a report to the governor and the general assembly itemizing expenditures under the program during the previous fiscal year.
   8.  a.  Beginning September 1, 2026, and every ten years thereafter, a program review committee is established for purposes of reviewing the wastewater and drinking water treatment financial assistance program. By December 1 of the same year, the review committee shall file a report with the governor and the general assembly that reviews the effectiveness of the program during the prior ten fiscal years.
   b.  The program review committee shall consist of the following members:
   (1)  The governor or the governor’s designee.
   (2)  The secretary of agriculture or the secretary’s designee.
   (3)  The executive director of the authority or the executive director’s designee.
   (4)  The director of the department of natural resources or the director’s designee.
   (5)  Four members of the general assembly, with two from the senate and two from the house of representatives and not more than one member from each chamber being from the same political party. The two senators shall be designated one member each by the president of the senate, after consultation with the majority leader of the senate, and by the minority leader of the senate. The two representatives shall be designated one member each by the speaker of the house of representatives, after consultation with the majority leader of the house of representatives, and by the minority leader of the house of representatives.
   c.  Staffing services shall be provided by the authority.
   9.  a.  A water quality financing review committee is created consisting of the secretary of agriculture or the secretary’s designee, the executive director of the authority or the executive director’s designee, and the director of the department of natural resources or the director’s designee.
   b.  The committee shall review and approve or deny applications for financial assistance under the wastewater and drinking water treatment financial assistance program established in this section.
    Sec. 2.  Section 423.3, Code 2016, is amended by adding the following new subsection:
   NEW SUBSECTION.  103.  a.  The sales price from the sale or furnishing by a water utility of a water service in the state to consumers or users. 
   b.  For purposes of this subsection: 
   (1)  “Water service” means the delivery of water by piped distribution system.
   (2)  “Water utility” means a public utility as defined in section 476.1 that furnishes water by piped distribution system to the public for compensation.
    Sec. 3.  NEW SECTION.  423G.1  Short title.
   This chapter may be cited as the “Water Service Tax Act”.
    Sec. 4.  NEW SECTION.  423G.2  Definitions.
   1.  All words and phrases used in this chapter and defined in section 423.1 have the same meaning given them by section 423.1 for purposes of this chapter. 
   2.  As used in this chapter, “water service” and “water utility” mean the same as defined in section 423.3, subsection 103. 
    Sec. 5.  NEW SECTION.  423G.3  Water service tax. 
   An excise tax at the rate of six percent is imposed on the sales price from the sale or furnishing by a water utility of a water service in the state to consumers or users.
    Sec. 6.  NEW SECTION.  423G.4  Exemptions.
   The sales price from transactions exempt from state sales tax under section 423.3, except section 423.3, subsection 103, is also exempt from the tax imposed by this chapter.
    Sec. 7.  NEW SECTION.  423G.5  Administration by director.
   1.  The director of revenue shall administer the water service tax as nearly as possible in conjunction with the administration of the state sales and use tax law, except that portion of the law that implements the streamlined sales and use tax agreement. The director shall provide appropriate forms, or provide on the regular state tax forms, for reporting water service tax liability.
   2.  The director may require all persons who are engaged in the business of deriving any sales price or purchase price subject to tax under this chapter to register with the department. The director may also require a tax permit applicable only to this chapter for any retailer not collecting, or any user not paying, taxes under chapter 423.
   3.  Section 422.25, subsection 4, sections 422.30, 422.67, and 422.68, section 422.69, subsection 1, sections 422.70, 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 1, and sections 423.23, 423.24, 423.25, 423.31 through 423.35, 423.37 through 423.42, and 423.47, consistent with the provisions of this chapter, shall apply with respect to the tax authorized under this chapter, in the same manner and with the same effect as if the excise taxes on the sale or furnishing of a water service were retail sales taxes within the meaning of those statutes. Notwithstanding this subsection, the director shall provide for quarterly filing of returns and for other than quarterly filing of returns both as prescribed in section 423.31. All taxes collected under this chapter by a retailer or any user are deemed to be held in trust for the state of Iowa.
    Sec. 8.  NEW SECTION.  423G.6  Deposit of revenues.
   1.  All moneys received and all refunds shall be deposited in or withdrawn from the general fund of the state.
   2.  Subsequent to the deposit in the general fund of the state, the department shall transfer the following amounts to the wastewater and drinking water treatment financial assistance fund created in section 16.134:
   a.  For revenues collected on or after July 1, 2017, but before August 1, 2018, one-sixth of the revenues.
   b.  For revenues collected on or after August 1, 2018, but before August 1, 2019, one-third of the revenues.
   c.  For revenues collected on or after August 1, 2019, but before August 1, 2020, one-half of the revenues.
   d.  For revenues collected on or after August 1, 2020, but before August 1, 2021, two-thirds of the revenues.
   e.  For revenues collected on or after August 1, 2021, but before August 1, 2022, five-sixths of the revenues.
   f.  For revenues collected on or after August 1, 2022, one hundred percent of the revenues.
    Sec. 9.  NEW SECTION.  423G.7  Future repeal.
   This chapter is repealed July 1, 2037.
    Sec. 10.  EFFECTIVE DATE.  This Act takes effect July 1, 2017.
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 water quality by modifying the wastewater treatment financial assistance program and creating a water service excise tax.
   WATER QUALITY. The bill amends the wastewater treatment financial assistance program (program) administered by the Iowa finance authority. Currently, the program provides financial assistance to install or upgrade wastewater treatment facilities and systems, and for engineering or technical assistance for facility planning and design. Awards of financial assistance are made by the authority. The bill adds drinking water treatment facilities and systems to the program. The bill also adds reporting and review requirements to the program, modifies the permitted use of fund moneys for administrative purposes, and creates a water quality financing review committee to review and approve applications for financial assistance under the program.
   WATER SERVICE EXCISE TAX. The bill exempts from the state sales tax the sales price from the sale or furnishing by a water utility of a water service in the state to consumers or users. “Water service” and “water utility” are defined in the bill.
   By operation of Code section 423.6, an item exempt from the imposition of the sales tax is also exempt from the use tax imposed in Code section 423.5.
   The bill creates an excise tax at the rate of 6 percent on the sales price from the sale or furnishing by a water utility of a water service in the state to consumers or users. Water service tax revenues are deposited in the general fund of the state, and the bill requires an increasing portion of the water service tax revenues collected each year to be transferred to the wastewater and drinking water treatment financial assistance fund, beginning with one-sixth of the revenues collected on or after July 1, 2017, but before August 1, 2018, and increasing to one-third, one-half, two-thirds, and five-sixths over the next four years. All water service tax revenues collected on or after August 1, 2022, will be transferred to the wastewater and drinking water treatment financial assistance fund. Water service tax revenues transferred to the wastewater and drinking water treatment financial assistance fund are appropriated to the Iowa finance authority for purposes of the wastewater and drinking water treatment financial assistance program.
   The director of revenue is required to administer the water service tax as nearly as possible in conjunction with the administration of the state sales and use tax laws, and, to that end, the bill incorporates by reference numerous Code sections that relate to general tax administration and the sales and use tax laws. The water service tax is repealed July 1, 2037.
   The bill takes effect July 1, 2017.