House Study Bill 98 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED ECONOMIC DEVELOPMENT AUTHORITY BILL) A BILL FOR An Act relating to the administration of programs by the 1 economic development authority by creating a renewable 2 chemical production tax credit, modifying the tax credit for 3 investments in qualifying businesses and community-based 4 seed capital funds, modifying the entrepreneur investment 5 awards program, and including effective date and retroactive 6 and other applicability provisions. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 1212XD (10) 86 mm/sc

S.F. _____ H.F. _____ DIVISION I 1 RENEWABLE CHEMICAL PRODUCTION TAX CREDIT 2 Section 1. Section 15.119, subsection 2, Code 2015, is 3 amended by adding the following new paragraph: 4 NEW PARAGRAPH . h. The renewable chemical production tax 5 credit program administered pursuant to sections 15.315 through 6 15.320. In allocating tax credits pursuant to this subsection, 7 the authority shall not allocate more than fifteen million 8 dollars for purposes of this paragraph. 9 Sec. 2. NEW SECTION . 15.315 Short title. 10 This part shall be known and may be cited as the “Renewable 11 Chemical Production Tax Credit Program” . 12 Sec. 3. NEW SECTION . 15.316 Definitions. 13 As used in this part, unless the context otherwise requires: 14 1. “Biobased content percentage” means, with respect to any 15 renewable chemical, the amount, expressed as a percentage, of 16 renewable organic material present as determined by testing 17 representative samples using the American society for testing 18 and materials standard D6866. 19 2. “Biomass feedstock” means sugar, glycerin, lignin, fat, 20 grease, or oil derived from a plant or animal, or a protein 21 capable of being converted to a building block chemical by 22 means of a biological or chemical conversion process. 23 3. “Building block chemical” means a molecule converted 24 from biomass feedstock as a first product that can be 25 further refined into a higher-value chemical, material, or 26 consumer product. “Building block chemical” includes but is 27 not limited to glycerol, methanoic or formic acid, arabonic 28 acid, erythonic acid, glyceric acid, glycolic acid, lactic 29 acid, 3-hydroxypropionate, propionic acid, malonic acid, 30 serine, succinic acid, fumaric acid, malic acid, aspartic 31 acid, 3-hydroxybutyrolactone, acetoin, threonine, itaconic 32 acid, furfural, levulinic acid, glutamic acid, xylonic acid, 33 xylaric acid, xylitol, arabitol, citric acid, aconitic acid, 34 5-hydroxymethylfurfural, lysine, gluconic acid, glucaric acid, 35 -1- LSB 1212XD (10) 86 mm/sc 1/ 24

S.F. _____ H.F. _____ sorbitol, gallic acid, ferulic acid, nonfuel butanol, nonfuel 1 ethanol, a polymer or gum that can be produced directly from a 2 protein-based biomass feedstock, or such additional molecules 3 as may be included by the authority by rule. 4 4. “Eligible business” means a business meeting the 5 requirements of section 15.317. 6 5. “Program” means the renewable chemical production tax 7 credit program administered pursuant to this part. 8 6. “Renewable chemical” means a building block chemical 9 with a biobased content percentage of at least fifty percent. 10 “Renewable chemical” does not include a chemical sold or used 11 for the production of food, feed, or fuel. “Renewable chemical” 12 includes cellulosic ethanol or butanol, but only to the extent 13 that such molecules are produced and sold for uses other than 14 food, feed, or fuel. 15 7. “Sugar” means the organic compound glucose, fructose, 16 xylose, arabinose, lactose, sucrose, starch, cellulose, or 17 hemicellulose. 18 Sec. 4. NEW SECTION . 15.317 Eligibility requirements. 19 To be eligible to receive the renewable chemical production 20 tax credit pursuant to the program, a business shall meet all 21 of the following requirements: 22 1. The business is physically located in this state. 23 2. The business is operated for profit and under single 24 management. 25 3. The business is not an entity providing professional 26 services, health care services, or medical treatments or an 27 entity engaged primarily in retail operations. 28 4. The business organized, expanded, or located in the state 29 on or after the effective date of this division of this Act. 30 5. The business shall not be relocating or reducing 31 operations as described in section 15.329, subsection 1, 32 paragraph “b” , and as determined under the discretion of the 33 authority. 34 6. The business is in compliance with all agreements entered 35 -2- LSB 1212XD (10) 86 mm/sc 2/ 24

S.F. _____ H.F. _____ into under this program or other programs administered by the 1 authority. 2 Sec. 5. NEW SECTION . 15.318 Eligible business application 3 and agreement —— maximum tax credits. 4 1. Application. 5 a. An eligible business that produces a renewable chemical 6 in this state from biomass feedstock during a calendar year may 7 apply to the authority for the renewable chemical production 8 tax credit provided in section 15.319. 9 b. The application shall be made to the authority in the 10 manner prescribed by the authority. 11 c. The application shall be made during the calendar year 12 following the calendar year in which the renewable chemicals 13 are produced. 14 d. The authority may accept applications on a continuous 15 basis or may establish, by rule, an annual application 16 deadline. 17 e. The application shall include all of the following 18 information: 19 (1) The amount of renewable chemicals produced in the state 20 from biomass feedstock by the eligible business during the 21 calendar year, measured in pounds. 22 (2) Any other information reasonably required by the 23 authority in order to establish and verify eligibility under 24 the program. 25 2. Agreement and fees. 26 a. Before being issued a tax credit under section 15.319, 27 an eligible business shall enter into an agreement with the 28 authority for the successful completion of all requirements of 29 the program. 30 b. The compliance cost fees authorized in section 15.330, 31 subsection 12, shall apply to all agreements entered into 32 under this program and shall be collected by the authority in 33 the same manner and to the same extent as described in that 34 subsection. 35 -3- LSB 1212XD (10) 86 mm/sc 3/ 24

S.F. _____ H.F. _____ c. An eligible business shall fulfill all the requirements 1 of the program and the agreement before receiving a tax credit 2 or entering into a subsequent agreement under this section. 3 The authority may decline to enter into a subsequent agreement 4 under this section or issue a tax credit if an agreement is not 5 successfully fulfilled. 6 d. Upon establishing that all requirements of the program 7 and the agreement have been fulfilled, the authority shall 8 issue a tax credit and related tax credit certificate to the 9 eligible business stating the amount of renewable chemical 10 production tax credit under section 15.319 the eligible 11 business may claim. 12 3. Maximum tax credit amount. 13 a. The maximum amount of tax credit that may be issued under 14 section 15.319 to an eligible business for the production of 15 renewable chemicals in a calendar year shall not exceed the 16 following: 17 (1) In the case of an eligible business that has been in 18 operation in the state for five years or less at the time of the 19 application, one million dollars. 20 (2) In the case of an eligible business that has been in 21 operation in the state for more than five years at the time of 22 the application, five hundred thousand dollars. 23 b. An eligible business shall not receive a tax credit for 24 renewable chemicals produced before the date the business first 25 qualified as an eligible business pursuant to section 15.317. 26 c. An eligible business shall not receive more than five tax 27 credits under the program. 28 d. The authority shall issue tax credits under the program 29 on a first-come, first-served basis until the maximum amount of 30 tax credits allocated pursuant to section 15.119, subsection 31 2, paragraph “h” , is reached. The authority shall maintain 32 a list of successful applicants under the program, so that 33 if the maximum aggregate amount of tax credits is reached in 34 a given fiscal year, eligible businesses that successfully 35 -4- LSB 1212XD (10) 86 mm/sc 4/ 24

S.F. _____ H.F. _____ applied but for which tax credits were not issued shall be 1 placed on a wait list in the order the eligible businesses 2 applied and shall be given priority for receiving tax credits 3 in succeeding fiscal years. Placement on a wait list pursuant 4 to this paragraph shall not constitute a promise binding the 5 state. The availability of a tax credit and issuance of a tax 6 credit certificate pursuant to this subsection in a future 7 fiscal year is contingent upon the availability of tax credits 8 in that particular fiscal year. 9 4. Termination and repayment. The failure by an eligible 10 business in fulfilling any requirement of the program or any of 11 the terms and obligations of an agreement entered into pursuant 12 to this section may result in the reduction, termination, 13 or recision of the tax credits under section 15.319 and may 14 subject the eligible business to the repayment or recapture of 15 tax credits claimed. The repayment or recapture of tax credits 16 pursuant to this subsection shall be accomplished in the same 17 manner as provided in section 15.330, subsection 2. 18 5. Confidentiality. 19 a. Except as provided in paragraph “b” , any information 20 or record in the possession of the authority with respect to 21 the program shall be presumed by the authority to be a trade 22 secret protected under chapter 550 or common law and shall be 23 kept confidential by the authority unless otherwise ordered by 24 a court. 25 b. The identity of a tax credit recipient and the amount 26 of the tax credit shall be considered public information under 27 chapter 22. 28 Sec. 6. NEW SECTION . 15.319 Renewable chemical production 29 tax credit. 30 1. An eligible business that has entered into an agreement 31 pursuant to section 15.318 may claim a tax credit equal to 32 the product of five cents multiplied by the number of pounds 33 of renewable chemicals produced in this state from biomass 34 feedstock by the eligible business during the calendar year. 35 -5- LSB 1212XD (10) 86 mm/sc 5/ 24

S.F. _____ H.F. _____ 2. The tax credit shall be allowed against taxes imposed 1 under chapter 422, division II or III. 2 3. The tax credit shall be claimed for the tax year during 3 which the eligible business was issued the tax credit. 4 4. An individual may claim a tax credit under this section 5 of a partnership, limited liability company, S corporation, 6 cooperative organized under chapter 501 and filing as a 7 partnership for federal tax purposes, estate, or trust electing 8 to have income taxed directly to the individual. The amount 9 claimed by the individual shall be based upon the pro rata 10 share of the individual’s earnings from the partnership, 11 limited liability company, S corporation, cooperative, estate, 12 or trust. 13 5. Any tax credit in excess of the tax liability for the tax 14 year is refundable, or, upon the election of the taxpayer, such 15 excess tax credit may be credited to the tax liability for the 16 following five years or until depleted, whichever occurs first. 17 However, a taxpayer shall not elect to carry forward the excess 18 tax credit if the taxpayer claims a refundable tax credit on 19 the same tax return. 20 6. a. To claim a tax credit under this section, a taxpayer 21 shall include one or more tax credit certificates with the 22 taxpayer’s tax return. 23 b. The tax credit certificate shall contain the taxpayer’s 24 name, address, tax identification number, the amount of the 25 credit, the name of the eligible business, and any other 26 information required by the department of revenue. 27 c. The tax credit certificate, unless rescinded by the 28 authority, shall be accepted by the department of revenue as 29 payment for taxes imposed pursuant to chapter 422, divisions II 30 and III, subject to any conditions or restrictions placed by 31 the authority upon the face of the tax credit certificate and 32 subject to the limitations of the program. 33 d. Tax credit certificates issued pursuant to this section 34 shall not be transferred to any other person. 35 -6- LSB 1212XD (10) 86 mm/sc 6/ 24

S.F. _____ H.F. _____ Sec. 7. NEW SECTION . 15.320 Rules. 1 The authority and the department of revenue shall each adopt 2 rules as necessary for the implementation and administration 3 of this part. 4 Sec. 8. NEW SECTION . 422.10A Renewable chemical production 5 tax credit. 6 The taxes imposed under this division, less the credits 7 allowed under section 422.12, shall be reduced by a renewable 8 chemical production tax credit allowed under section 15.319. 9 Sec. 9. Section 422.33, Code 2015, is amended by adding the 10 following new subsection: 11 NEW SUBSECTION . 22. The taxes imposed under this division 12 shall be reduced by a renewable chemical production tax credit 13 allowed under section 15.319. 14 Sec. 10. EFFECTIVE UPON ENACTMENT. This division of this 15 Act, being deemed of immediate importance, takes effect upon 16 enactment. 17 Sec. 11. APPLICABILITY. This division of this Act applies 18 to renewable chemicals produced in the state from biomass 19 feedstock on or after the effective date of this division of 20 this Act. 21 Sec. 12. RETROACTIVE APPLICABILITY. This division of this 22 Act applies retroactively to January 1, 2015, for tax years 23 beginning on or after that date. 24 DIVISION II 25 ANGEL INVESTOR TAX CREDITS 26 Sec. 13. Section 2.48, subsection 3, paragraph d, 27 subparagraph (1), Code 2015, is amended to read as follows: 28 (1) Tax credits for investments in qualifying businesses 29 and community-based seed capital funds under chapter 15E, 30 division V . 31 Sec. 14. Section 15.119, subsection 2, paragraph d, Code 32 2015, is amended to read as follows: 33 d. The tax credits for investments in qualifying businesses 34 and community-based seed capital funds issued pursuant to 35 -7- LSB 1212XD (10) 86 mm/sc 7/ 24

S.F. _____ H.F. _____ section 15E.43 . In allocating tax credits pursuant to this 1 subsection , the authority shall allocate two million dollars 2 for purposes of this paragraph, unless the authority determines 3 that the tax credits awarded will be less than that amount. 4 Sec. 15. Section 15E.41, Code 2015, is amended by striking 5 the section and inserting in lieu thereof the following: 6 15E.41 Purpose. 7 The purpose of this division is to stimulate job growth, 8 create wealth, and accelerate the creation of new ventures by 9 using investment tax credits to incentivize the transfer of 10 capital from investors to entrepreneurs, particularly during 11 early-stage growth. 12 Sec. 16. Section 15E.42, Code 2015, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 2A. “Entrepreneurial assistance 15 program” includes the entrepreneur investment awards program 16 administered under section 15E.362, the receipt of services 17 from a service provider engaged pursuant to section 15.411, 18 subsection 1, or the program administered under section 15.411, 19 subsection 2. 20 Sec. 17. Section 15E.42, subsection 3, Code 2015, is amended 21 to read as follows: 22 3. “Investor” means a person making a cash investment in 23 a qualifying business or in a community-based seed capital 24 fund . “Investor” does not include a person that holds at least 25 a seventy percent ownership interest as an owner, member, or 26 shareholder in a qualifying business. 27 Sec. 18. Section 15E.42, subsection 4, Code 2015, is amended 28 by striking the subsection. 29 Sec. 19. Section 15E.43, subsections 1 and 2, Code 2015, are 30 amended to read as follows: 31 1. a. For tax years beginning on or after January 1, 32 2002 2015 , a tax credit shall be allowed against the taxes 33 imposed in chapter 422, divisions division II, III, and V, 34 and in chapter 432 , and against the moneys and credits tax 35 -8- LSB 1212XD (10) 86 mm/sc 8/ 24

S.F. _____ H.F. _____ imposed in section 533.329 , for a portion of a taxpayer’s 1 equity investment, as provided in subsection 2 , in a qualifying 2 business or a community-based seed capital fund . 3 b. An individual may claim a tax credit under this 4 paragraph section of a partnership, limited liability company, 5 S corporation, estate, or trust electing to have income 6 taxed directly to the individual. The amount claimed by the 7 individual shall be based upon the pro rata share of the 8 individual’s earnings from the partnership, limited liability 9 company, S corporation, estate, or trust. 10 b. c. A tax credit shall be allowed only for an investment 11 made in the form of cash to purchase equity in a qualifying 12 business or in a community-based seed capital fund. A 13 taxpayer that has received a tax credit for an investment in 14 a community-based seed capital fund shall not claim the tax 15 credit prior to the third tax year following the tax year in 16 which the investment is made. Any tax credit in excess of the 17 taxpayer’s liability for the tax year may be credited to the 18 tax liability for the following five years or until depleted, 19 whichever is earlier. A tax credit shall not be carried back 20 to a tax year prior to the tax year in which the taxpayer 21 redeems the tax credit . 22 c. In the case of a tax credit allowed against the taxes 23 imposed in chapter 422, division II , where the taxpayer died 24 prior to redeeming the entire tax credit, the remaining credit 25 can be redeemed on the decedent’s final income tax return. 26 d. Any tax credit in excess of the tax liability for the 27 tax year is refundable, or, upon the election of the taxpayer, 28 such excess tax credit may be credited to the tax liability for 29 the following three years or until depleted, whichever occurs 30 first. However, a taxpayer shall not elect to carry forward 31 the excess tax credit if the taxpayer claims a refundable tax 32 credit on the same tax return. A tax credit shall not be 33 carried back to a tax year prior to the tax year in which the 34 taxpayer redeems the tax credit. 35 -9- LSB 1212XD (10) 86 mm/sc 9/ 24

S.F. _____ H.F. _____ 2. A The amount of the tax credit shall equal twenty 1 twenty-five percent of the taxpayer’s equity investment. The 2 maximum amount of a tax credit for an investment by an investor 3 in any one qualifying business shall be fifty thousand dollars. 4 Each year, an investor and all affiliates of the investor shall 5 not claim tax credits under this section for more than five 6 different investments in five different qualifying businesses 7 that may be claimed per tax year by a natural person and the 8 person’s spouse, child, or sibling shall not exceed one hundred 9 thousand dollars combined . 10 Sec. 20. Section 15E.43, subsections 5 and 7, Code 2015, are 11 amended to read as follows: 12 5. A tax credit shall not be transferable transferred to any 13 other taxpayer person . 14 7. The authority shall develop a system for registration 15 and authorization issuance of tax credits authorized pursuant 16 to this division and shall control distribution of all tax 17 credits distributed credit certificates to investors pursuant 18 to this division . The authority shall develop rules for the 19 qualification and administration of qualifying businesses 20 and community-based seed capital funds . The department of 21 revenue shall adopt these criteria as administrative rules and 22 any other rules pursuant to chapter 17A as necessary for the 23 administration of this division . 24 Sec. 21. Section 15E.43, subsections 6 and 8, Code 2015, are 25 amended by striking the subsections. 26 Sec. 22. Section 15E.44, subsection 2, paragraph c, Code 27 2015, is amended by striking the paragraph and inserting in 28 lieu thereof the following: 29 c. The business is participating in an entrepreneurial 30 assistance program. The authority may waive this requirement 31 if a business establishes that its owners, directors, officers, 32 and employees have an appropriate level of experience such 33 that participation in an entrepreneurial assistance program 34 would not materially change the prospects of the business. 35 -10- LSB 1212XD (10) 86 mm/sc 10/ 24

S.F. _____ H.F. _____ The authority may consult with outside service providers in 1 consideration of such a waiver. 2 Sec. 23. Section 15E.44, subsection 2, paragraphs e and f, 3 Code 2015, are amended to read as follows: 4 e. The business shall not have a net worth that exceeds five 5 ten million dollars. 6 f. The business shall have secured all of the following at 7 the time of application for tax credits: 8 (1) At least two investors. 9 (2) total Total equity financing, near equity financing, 10 binding investment commitments, or some combination thereof, 11 equal to at least two hundred fifty five hundred thousand 12 dollars , from investors. For purposes of this subparagraph, 13 “investor” includes a person who executes a binding investment 14 commitment to a business . 15 Sec. 24. Section 15E.44, subsection 4, Code 2015, is amended 16 to read as follows: 17 4. After verifying the eligibility of a qualifying 18 business, the authority shall issue a tax credit certificate 19 to be included with the equity investor’s tax return. The tax 20 credit certificate shall contain the taxpayer’s name, address, 21 tax identification number, the amount of credit, the name 22 of the qualifying business, and other information required 23 by the department of revenue. The tax credit certificate, 24 unless rescinded by the authority, shall be accepted by the 25 department of revenue as payment for taxes imposed pursuant to 26 chapter 422, divisions division II, III, and V, and in chapter 27 432 , and for the moneys and credits tax imposed in section 28 533.329 , subject to any conditions or restrictions placed by 29 the authority upon the face of the tax credit certificate and 30 subject to the limitations of section 15E.43 . 31 Sec. 25. Section 15E.46, Code 2015, is amended to read as 32 follows: 33 15E.46 Reports Confidentiality —— reports . 34 1. Except as provided in subsection 2, all information or 35 -11- LSB 1212XD (10) 86 mm/sc 11/ 24

S.F. _____ H.F. _____ records in the possession of the authority with respect to 1 this division shall be presumed by the authority to be a trade 2 secret protected under chapter 550 or common law and shall be 3 kept confidential by the authority unless otherwise ordered by 4 a court. 5 2. All of the following shall be considered public 6 information under chapter 22: 7 a. The identity of a qualifying business. 8 b. The identity of an investor and the qualifying business 9 in which the investor made an equity investment. 10 c. The number of tax credit certificates issued by the 11 authority. 12 d. The total dollar amount of tax credits issued by the 13 authority. 14 3. The authority shall publish an annual report of the 15 activities conducted pursuant to this division and shall 16 submit the report to the governor and the general assembly. 17 The report shall include a listing of eligible qualifying 18 businesses and the number of tax credit certificates and the 19 amount of tax credits issued by the authority. 20 Sec. 26. Section 15E.52, subsection 4, Code 2015, is amended 21 to read as follows: 22 4. A taxpayer shall not claim a tax credit under this 23 section if the taxpayer is a venture capital investment fund 24 allocation manager for the Iowa fund of funds created in 25 section 15E.65 or an investor that receives a tax credit for 26 the same investment in a qualifying business as described in 27 section 15E.44 or in a community-based seed capital fund as 28 described in section 15E.45 , Code 2015 . 29 Sec. 27. Section 422.11F, subsection 1, Code 2015, is 30 amended to read as follows: 31 1. The taxes imposed under this division , less the credits 32 allowed under section 422.12 , shall be reduced by an investment 33 tax credit authorized pursuant to section 15E.43 for an 34 investment in a qualifying business or a community-based seed 35 -12- LSB 1212XD (10) 86 mm/sc 12/ 24

S.F. _____ H.F. _____ capital fund . 1 Sec. 28. Section 422.33, subsection 12, paragraph a, Code 2 2015, is amended by striking the paragraph. 3 Sec. 29. Section 422.60, subsection 5, paragraph a, Code 4 2015, is amended by striking the paragraph. 5 Sec. 30. Section 432.12C, subsection 1, Code 2015, is 6 amended by striking the subsection. 7 Sec. 31. Section 533.329, subsection 2, paragraph f, Code 8 2015, is amended by striking the paragraph. 9 Sec. 32. REPEAL. Section 15E.45, Code 2015, is repealed. 10 Sec. 33. EFFECTIVE UPON ENACTMENT. This division of this 11 Act, being deemed of immediate importance, takes effect upon 12 enactment. 13 Sec. 34. APPLICABILITY. Unless otherwise provided in this 14 division of this Act, this division of this Act applies to 15 equity investments in a qualifying business made on or after 16 the effective date of this division of this Act, and equity 17 investments made in a qualifying business or community-based 18 seed capital fund prior to the effective date of this division 19 of this Act shall be governed by sections 15E.41 through 20 15E.46, 422.11F, 422.33, 422.60, 432.12C, and 533.329, Code 21 2015. 22 Sec. 35. APPLICABILITY. The sections of this division 23 of this Act amending section 15E.44, subsection 2, apply 24 to businesses that submit an application to the economic 25 development authority to be registered as a qualifying business 26 on or after the effective date of this division of this Act, 27 and businesses that submit an application to the economic 28 development authority to be registered as a qualifying business 29 before the effective date of this division of this Act shall be 30 governed by section 15E.44, subsection 2, Code 2015. 31 DIVISION III 32 ENTREPRENEUR INVESTMENT AWARDS PROGRAM 33 Sec. 36. Section 15E.362, Code 2015, is amended by striking 34 the section and inserting in lieu thereof the following: 35 -13- LSB 1212XD (10) 86 mm/sc 13/ 24

S.F. _____ H.F. _____ 15E.362 Entrepreneur investment awards program. 1 1. For purposes of this division, unless the context 2 otherwise requires: 3 a. “Business development services” includes but is not 4 limited to corporate development services, business model 5 development services, business planning services, marketing 6 services, financial strategies and management services, 7 mentoring and management coaching, and networking services. 8 b. “Eligible entrepreneurial assistance provider” means a 9 person meeting the requirements of subsection 3. 10 c. “Financial assistance” means the same as defined in 11 section 15.327. 12 d. “Program” means the entrepreneur investment awards 13 program administered pursuant to this division. 14 2. The authority shall establish and administer an 15 entrepreneur investment awards program for purposes of 16 providing financial assistance to eligible entrepreneurial 17 assistance providers that provide technical and financial 18 assistance to entrepreneurs and start-up companies seeking to 19 create, locate, or expand a business in the state. Financial 20 assistance under the program shall be provided from the 21 entrepreneur investment awards program fund created in section 22 15E.363. 23 3. In order to be eligible for financial assistance under 24 the program an entrepreneurial assistance provider must meet 25 all of the following requirements: 26 a. The provider must have its principal place of operations 27 located in this state. 28 b. The provider must offer a comprehensive set of business 29 development services to emerging and early-stage innovation 30 companies to assist in the creation, location, growth, and 31 long-term success of the company in this state. 32 c. The business development services may be performed at the 33 physical location of the provider or the company. 34 d. The business development services may be provided in 35 -14- LSB 1212XD (10) 86 mm/sc 14/ 24

S.F. _____ H.F. _____ consideration of equity participation in the company, a fee 1 for services, a membership agreement with the company, or any 2 combination thereof. 3 4. Entrepreneurial assistance providers may apply for 4 financial assistance under the program in the manner and form 5 prescribed by the authority. 6 5. The economic development authority board in its 7 discretion may approve, deny, or defer each application 8 for financial assistance under the program from persons 9 it determines to be an eligible entrepreneurial assistance 10 provider. 11 6. Subject to subsection 7, the amount of financial 12 assistance awarded to an eligible entrepreneurial assistance 13 provider shall be within the discretion of the authority. 14 7. a. The maximum amount of financial assistance awarded 15 to an eligible entrepreneurial assistance provider shall not 16 exceed two hundred thousand dollars. 17 b. The maximum amount of financial assistance provided under 18 the program shall not exceed one million dollars in a fiscal 19 year. 20 8. The authority shall award financial assistance on a 21 competitive basis. In making awards of financial assistance, 22 the authority may develop scoring criteria and establish 23 minimum requirements for the receipt of financial assistance 24 under the program. In making awards of financial assistance, 25 the authority may consider all of the following: 26 a. The business experience of the professional staff 27 employed or retained by the eligible entrepreneurial assistance 28 provider. 29 b. The business plan review capacity of the professional 30 staff of the eligible entrepreneurial assistance provider. 31 c. The expertise in all aspects of business disciplines 32 of the professional staff of the eligible entrepreneurial 33 assistance provider. 34 d. The access of the eligible entrepreneurial assistance 35 -15- LSB 1212XD (10) 86 mm/sc 15/ 24

S.F. _____ H.F. _____ provider to external service providers, including legal, 1 accounting, marketing, and financial services. 2 e. The service model and likelihood of success of the 3 eligible entrepreneurial assistance provider and its similarity 4 to other successful entrepreneurial assistance providers in the 5 country. 6 f. The financial need of the eligible entrepreneurial 7 assistance provider. 8 9. Financial assistance awarded to an eligible 9 entrepreneurial assistance provider shall only be used for 10 the purpose of operating costs incurred by the eligible 11 entrepreneurial assistance provider in providing business 12 development services to emerging and early-stage innovation 13 companies in this state. Such financial assistance shall not 14 be distributed to owners or investors of the company to which 15 business development services are provided and shall not be 16 distributed to other persons assisting with the provision of 17 business development services to the company. 18 10. The authority may contract with outside service 19 providers for assistance with the program or may delegate 20 the administration of the program to the Iowa innovation 21 corporation pursuant to section 15.106B. 22 11. The authority may make client referrals to eligible 23 entrepreneurial assistance providers. 24 Sec. 37. Section 15E.363, subsection 3, Code 2015, is 25 amended to read as follows: 26 3. The Moneys credited to the fund are appropriated to 27 the authority and shall be used to provide grants under the 28 entrepreneur investment awards program established in section 29 15E.362 financial assistance under the program . 30 EXPLANATION 31 The inclusion of this explanation does not constitute agreement with 32 the explanation’s substance by the members of the general assembly. 33 This bill relates to the administration of programs by the 34 economic development authority (EDA) by creating a renewable 35 -16- LSB 1212XD (10) 86 mm/sc 16/ 24

S.F. _____ H.F. _____ chemical production tax credit, modifying the tax credit for 1 investments in qualifying businesses and community-based seed 2 capital funds, and modifying the entrepreneur investment awards 3 program. 4 DIVISION I —— RENEWABLE CHEMICAL PRODUCTION TAX CREDIT. 5 Division I creates a renewable chemical production tax credit 6 program (program) that will be administered by the EDA and that 7 will provide tax credits to eligible businesses that produce 8 renewable chemicals in Iowa from biomass feedstock. “Renewable 9 chemical”, “biomass feedstock”, and other related terms are 10 defined in the division. 11 In order to qualify for the tax credit, a business must 12 meet several requirements. First, the business must be 13 physically located in Iowa and operated for profit under 14 single management. Second, the business must not be an 15 entity providing professional services, health care services, 16 or medical treatments, or be engaged primarily in retail 17 operations. Third, the business must have organized, expanded, 18 or located in Iowa on or after the effective date of the 19 division. Fourth, the business must not be, in the discretion 20 of the EDA, ineligible under certain provisions relating to the 21 relocation or reduction of business operations within Iowa. 22 Fifth, the business must be in compliance with all agreements 23 entered into under the program or other programs administered 24 by the EDA. 25 An eligible business seeking a tax credit is required 26 to apply to the EDA during the calendar year following the 27 calendar year in which the renewable chemicals are produced. 28 The application must include the amount of renewable chemicals 29 produced in Iowa from biomass feedstock by the eligible 30 business during the calendar year, measured in pounds, and any 31 other information reasonably required by the EDA in order to 32 establish and verify eligibility under the program. The EDA 33 may accept applications on a continuous basis or may establish 34 an annual application deadline. 35 -17- LSB 1212XD (10) 86 mm/sc 17/ 24

S.F. _____ H.F. _____ Before being issued a tax credit, an eligible business 1 is required to enter into an agreement with the EDA for the 2 successful completion of all requirements of the program. The 3 EDA is authorized to impose two compliance cost fees under the 4 program. The first fee equals $500 per agreement. The second 5 fee equals 0.5 percent of the value of the tax credit claimed 6 pursuant to the agreement if the agreement has an aggregate tax 7 credit value of $100,000 or greater. 8 An eligible business that fails to comply with the 9 requirements of the program or the terms of an agreement with 10 the EDA may have its tax credits reduced, terminated, or 11 rescinded, and may be subject to the repayment or recapture of 12 claimed tax credits. 13 Upon determining that all requirements of an agreement and 14 the program have been fulfilled, the EDA shall issue a tax 15 credit and related tax credit certificate to the eligible 16 business in an amount equal to the product of $.05 multiplied 17 by the number of pounds of renewable chemicals produced in Iowa 18 from biomass feedstock by the eligible business during the 19 calendar year. Renewable chemicals produced by an eligible 20 business prior to the effective date of the division, or 21 prior to the date the business first qualifies as an eligible 22 business, shall not qualify for the tax credit. 23 The tax credit shall be claimed for the tax year during 24 which the eligible business was issued the tax credit. The 25 tax credit may be claimed against the individual income tax 26 and the corporate income tax. The credit is refundable or 27 may, at the election of the taxpayer, be carried forward for 28 up to five tax years. However, a taxpayer shall not elect to 29 carry forward the excess tax credit if the taxpayer claims a 30 refundable tax credit on the same tax return. The tax credit 31 shall not be transferred to any person. A tax credit issued 32 to a partnership, limited liability company, S corporation, 33 cooperative organized under Code chapter 501 and filing as a 34 partnership for federal tax purposes, estate, or trust electing 35 -18- LSB 1212XD (10) 86 mm/sc 18/ 24

S.F. _____ H.F. _____ to have the income taxed directly to the individual may be 1 claimed by the individual based upon the pro rata share of the 2 individual’s earnings from that entity. 3 The division provides that the program is subject to the 4 EDA’s maximum aggregate tax credit cap of $170 million per 5 fiscal year in Code section 15.119, and not more than $15 6 million per fiscal year may be issued by the EDA under the 7 program. In addition, the maximum amount of tax credit that 8 may be issued to an eligible business in any one calendar year 9 shall not exceed $1 million or $500,000, depending on whether 10 the eligible business has been operating in Iowa at the time of 11 application for five or fewer years, or more than five years, 12 respectively. An eligible business shall not receive more than 13 five tax credits under the program. The EDA is required to 14 issue tax credits on a first-come, first-served basis until the 15 maximum amount of $15 million per fiscal year is reached. If 16 the amount of tax credits exceeds this amount in a fiscal year, 17 the EDA is required to establish a wait list and give priority 18 in subsequent years to the eligible businesses on the wait 19 list. 20 The division provides for the confidentiality of certain 21 information under the program. The identity of a tax credit 22 recipient and the amount of the tax credit shall be considered 23 public information under Code chapter 22 (examination of public 24 records), but any other information or record in the possession 25 of the EDA with respect to the program shall be presumed by 26 the EDA to be a trade secret protected under Code chapter 550 27 or common law and shall be kept confidential by the EDA unless 28 otherwise ordered by a court. 29 The division takes effect upon enactment and applies to 30 renewable chemicals produced in Iowa from biomass feedstock on 31 or after that date. The division applies retroactively to tax 32 years beginning on or after January 1, 2015. 33 DIVISION II —— ANGEL INVESTOR TAX CREDITS. Division II 34 makes several changes to the tax credit for investments in 35 -19- LSB 1212XD (10) 86 mm/sc 19/ 24