House Study Bill 658 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS) A BILL FOR An Act relating to the administration of the tax and related 1 laws by the department of revenue, including the renewable 2 energy tax credit, appeal procedures for certain centrally 3 assessed property, an extension of the utility replacement 4 tax task force, a sales and use tax exemption for certain 5 items used in performance of a construction contract with 6 designated exempt entities, and including effective date and 7 retroactive and other applicability provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 6087YC (2) 86 mm/sc

H.F. _____ Section 1. Section 423.3, subsection 80, paragraph a, Code 1 2016, is amended to read as follows: 2 a. For purposes of this subsection , “designated exempt 3 entity” means an any of the following: 4 (1) An entity which is designated in section 423.4, 5 subsection 1 or 6 . 6 (2) An entity which is an instrumentality of a county or 7 municipal government, including an agent of such entity, if 8 the entity was created for the purpose of owning, including 9 pursuant to a lease-purchase agreement, real property located 10 within a reinvestment district established under chapter 15J. 11 Sec. 2. Section 429.2, subsection 2, paragraph c, Code 2016, 12 is amended to read as follows: 13 c. The director of revenue shall consider all evidence and 14 witnesses offered by the taxpayer and the department , including 15 but not limited to evidence relating to the proper valuation of 16 the property involved. 17 Sec. 3. Section 437A.15, subsection 7, paragraph b, Code 18 2016, is amended to read as follows: 19 b. The task force shall study the effects of the replacement 20 taxes under this chapter and chapter 437B on local taxing 21 authorities, local taxing districts, consumers, and taxpayers 22 through January 1, 2016 2019 . If the task force recommends 23 modifications to the replacement tax that will further the 24 purposes of tax neutrality for local taxing authorities, local 25 taxing districts, taxpayers, and consumers, consistent with the 26 stated purposes of this chapter , the department of management 27 shall transmit those recommendations to the general assembly. 28 Sec. 4. Section 437B.11, subsection 7, Code 2016, is amended 29 to read as follows: 30 7. The utility replacement tax task force created in section 31 437A.15 shall study the effects of the replacement tax on 32 local taxing authorities, local taxing districts, consumers, 33 and taxpayers through January 1, 2016 2019 . If the task 34 force recommends modifications to the replacement tax that 35 -1- LSB 6087YC (2) 86 mm/sc 1/ 5

H.F. _____ will further the purposes of tax neutrality for local taxing 1 authorities, local taxing districts, taxpayers, and consumers, 2 consistent with the stated purposes of this chapter , the 3 department of management shall transmit those recommendations 4 to the general assembly. 5 Sec. 5. Section 476C.3, subsection 4, paragraph b, 6 subparagraph (3), Code 2016, is amended to read as follows: 7 (3) (a) Of the maximum amount of energy production capacity 8 equivalent of all other facilities found eligible under this 9 chapter , ten megawatts of nameplate generating capacity or 10 energy production equivalent shall be reserved for solar energy 11 conversion facilities with that meet all of the following 12 requirements: 13 (i) The facility has a generating capacity of one and 14 one-half megawatts or less . 15 (ii) The facility is owned , in whole or in part, directly 16 or indirectly, or is contracted for , by utilities described in 17 section 476C.1, subsection 6 , paragraph “b” , subparagraphs (4) 18 and (5). 19 (iii) The facility is located in this state. 20 (iv) The facility meets the requirements of section 476C.1, 21 subsection 6, paragraphs “d” through “f” . 22 (b) A solar energy conversion facility that meets the 23 requirements of and is found eligible under subparagraph 24 division (a) shall be considered an “eligible renewable energy 25 facility” for purposes of this chapter, notwithstanding any 26 contrary provisions of section 476C.1, subsection 6. 27 Sec. 6. Section 476C.3, subsection 7, Code 2016, is amended 28 to read as follows: 29 7. An owner meeting the requirements of section 476C.1, 30 subsection 6 , paragraph “b” , shall not be an owner of more than 31 two eligible renewable energy facilities. A person that has 32 an equity interest equal to or greater than fifty-one percent 33 in an eligible renewable energy facility shall not have an 34 equity interest greater than ten percent in any other eligible 35 -2- LSB 6087YC (2) 86 mm/sc 2/ 5

H.F. _____ renewable energy facility. This subsection shall not apply to 1 facilities described in section 476C.3, subsection 4, paragraph 2 “b” , subparagraph (3). 3 Sec. 7. EFFECTIVE UPON ENACTMENT. The following 4 provision or provisions of this Act, being deemed of immediate 5 importance, take effect upon enactment: 6 1. The section of this Act amending section 429.2. 7 2. The section of this Act amending section 437A.15. 8 3. The section of this Act amending section 437B.11. 9 4. The sections of this Act amending section 476C.3. 10 Sec. 8. RETROACTIVE APPLICABILITY. The following provision 11 or provisions of this Act apply retroactively to January 1, 12 2016: 13 1. The section of this Act amending section 437A.15. 14 2. The section of this Act amending section 437B.11. 15 Sec. 9. RETROACTIVE APPLICABILITY. The following provision 16 or provisions of this Act apply retroactively to January 1, 17 2015, for tax years beginning on or after that date: 18 1. The sections of this Act amending section 476C.3. 19 Sec. 10. RETROACTIVE APPLICABILITY. The following 20 provision or provisions of this Act apply retroactively to May 21 22, 2015: 22 1. The section of this Act amending section 429.2. 23 Sec. 11. RETROACTIVE APPLICABILITY. The following 24 provision or provisions of this Act apply retroactively to 25 applications for the renewable energy tax credit made on or 26 after June 26, 2015: 27 1. The sections of this Act amending section 476C.3. 28 EXPLANATION 29 The inclusion of this explanation does not constitute agreement with 30 the explanation’s substance by the members of the general assembly. 31 This bill relates to the administration of the tax and 32 related laws by the department of revenue. 33 SALES AND USE TAXES. A sales tax exemption is provided under 34 current law to contractors, subcontractors, and builders for 35 -3- LSB 6087YC (2) 86 mm/sc 3/ 5

H.F. _____ the purchase of building materials, supplies, and equipment 1 for use in the performance of a construction contract with 2 a designated exempt entity. The bill amends the definition 3 of “designated exempt entity” to include an instrumentality 4 of a county or municipal government, including an agent of 5 such entity, if the entity was created for the purpose of 6 owning, including pursuant to a lease-purchase agreement, real 7 property located within a reinvestment district established 8 under the Iowa Reinvestment Act in Code chapter 15J. The 9 Iowa Reinvestment Act, in general, authorizes municipalities 10 to establish reinvestment districts and receive remittances 11 of specified amounts of state sales tax and state hotel and 12 motel tax revenues collected in those districts for use in 13 undertaking projects within the district. 14 By operation of Code section 423.6, an item exempt from the 15 imposition of the sales tax is also exempt from the use tax 16 imposed in Code section 423.5. 17 CENTRALLY ASSESSED PROPERTY. The bill adds the department 18 of revenue to the list of parties for which the director of 19 revenue shall consider all offered evidence and witnesses 20 during an appeal of an assessment of certain property centrally 21 assessed by the department of revenue for purposes of property 22 taxation. This provision takes effect upon enactment and 23 applies retroactively to May 22, 2015. 24 UTILITY REPLACEMENT TAX TASK FORCE. The bill extends the 25 utility replacement tax task force to January 1, 2019, from 26 January 1, 2016. This task force was created to study the 27 effects of the replacement taxes on electricity and natural gas 28 providers and rate-regulated water utilities. This provision 29 takes effect upon enactment and applies retroactively to 30 January 1, 2016. 31 RENEWABLE ENERGY TAX CREDIT. The maximum amount of 32 renewable energy tax credits that may be issued under Code 33 chapter 476C is measured in part by the nameplate generating 34 capacity (NGC) of the eligible renewable energy facilities. 35 -4- LSB 6087YC (2) 86 mm/sc 4/ 5

H.F. _____ Under current law, 10 megawatts out of the total 63 megawatts 1 of NGC for which credits may be issued to facilities other 2 than wind conversion facilities is reserved for small solar 3 facilities owned or contracted for by electric cooperative 4 associations, municipally owned utilities, public utilities 5 subject to rate regulation, or electric cooperative 6 associations (specified utilities). For those small solar 7 facilities owned by the specified utilities, the bill removes 8 the requirement that the specified utility must own at least 51 9 percent of the facility and instead provides that the specified 10 utility must own the facility in whole or in part, directly or 11 indirectly. 12 Also under current law for purposes of qualifying for the tax 13 credit, an owner of an eligible renewable energy facility shall 14 not own more than two eligible renewable energy facilities, and 15 a person that has an equity interest of at least 51 percent 16 in an eligible renewable energy facility shall not have an 17 equity interest greater than 10 percent in any other eligible 18 renewable energy facility. The bill provides that these 19 restrictions shall not apply to the small solar facilities 20 described above. 21 The renewable energy tax credit provisions take effect upon 22 enactment and apply retroactively to January 1, 2015, for tax 23 years beginning on or after that date, and apply retroactively 24 to applications for the renewable energy tax credit made on or 25 after June 26, 2015. 26 -5- LSB 6087YC (2) 86 mm/sc 5/ 5