S.F. 2043 Section 1. FINDINGS. The general assembly finds all of the 1 following: 2 1. Nonprofit organizations provide a vital role in society 3 by focusing resources and providing important services to meet 4 community needs without regard to profit, and the United States 5 and Iowa support and recognize these nonprofit organizations in 6 part by providing important and necessary tax benefits. 7 2. The United States and Iowa have a long, honorable history 8 of accommodating religious exercise and establishing conscience 9 protections based on religious and moral convictions. 10 3. Protecting the tax benefits available to nonprofit 11 organizations from being denied based on religious or moral 12 convictions is a state interest of the highest order. The 13 state is obligated to take measures that advance this interest 14 by remedying, deterring, and preventing government interference 15 with religious exercise in a way that complements the 16 protections mandated by the Constitution of the State of Iowa 17 and the Constitution of the United States. 18 4. In 2015, during the course of oral argument at the United 19 States Supreme Court, in Obergefell v. Hodges, 135 S. Ct. 20 2584 (2015), when Justice Alito asked whether an institution 21 could lose its tax-exempt status for maintaining the view that 22 marriage is the union of one man and one woman, the solicitor 23 general of the United States admitted it was “going to be an 24 issue”. 25 5. In the Obergefell v. Hodges opinion, the United States 26 Supreme Court held same-sex couples have a right to marry, but 27 also noted, “Many who deem same-sex marriage to be wrong reach 28 that conclusion based on decent and honorable religious or 29 philosophical premises, and neither they nor their beliefs are 30 disparaged here”. 31 6. In the wake of the Obergefell v. Hodges decision, leading 32 legal scholars concur that conflict between same-sex marriage 33 and religious liberty are inevitable and, therefore, should be 34 addressed through legislation. 35 -1- LSB 5044XS (2) 86 mm/sc 1/ 6

S.F. 2043 7. The state of Iowa has an obligation to refrain from 1 discriminating against those who maintain a belief that 2 marriage is the union of one man and one woman based on 3 religious and moral convictions. 4 8. Laws that protect important and necessary tax benefits 5 from being denied because of the free exercise of religious 6 beliefs and moral convictions about marriage will encourage 7 private citizens and institutions to demonstrate tolerance for 8 those beliefs and convictions and therefore contribute to a 9 more respectful, diverse, and peaceful society. 10 Sec. 2. NEW SECTION . 421.62 Nonprofit organization tax 11 benefits —— protection of the free exercise of religious beliefs 12 and moral convictions. 13 1. For purposes of this section, “tax benefit” means an 14 exclusion from the operation or collection of a tax imposed 15 in this state, including tax credits, exemptions, deductions, 16 rebates, and refunds. 17 2. Notwithstanding any other provision of state law to 18 the contrary, if a provision of the Code grants a tax benefit 19 that applies to, or is dependent upon, an organization that 20 is recognized as nonprofit, or exempt from federal taxation 21 under section 501(a) of the Internal Revenue Code, such tax 22 benefit shall not be disallowed on or after the effective date 23 of this Act because the organization believes, acts, or teaches 24 in accordance with a religious belief or moral conviction that 25 marriage is or should be recognized as the union of one man and 26 one woman, or that sexual relations are properly reserved to 27 such marriage, or because the organization was disallowed a tax 28 exemption under section 501(a) of the Internal Revenue Code on 29 the basis of those beliefs, acts, or teachings. 30 3. The protection of tax benefits provided in this section 31 applies to but is not limited to the following provisions: 32 a. The redevelopment tax credits under sections 15.291 33 through 15.295. 34 b. The workforce housing tax incentives under sections 35 -2- LSB 5044XS (2) 86 mm/sc 2/ 6

S.F. 2043 15.351 through 15.356. 1 c. The exemption from the fee for new registration under 2 section 321.105A, subsection 2, paragraph “c” , subparagraphs 3 (1) and (21), and subsection 3, paragraph “f” . 4 d. The historic preservation and cultural and entertainment 5 district tax credit under chapter 404A. 6 e. The charitable contribution deduction in section 422.9, 7 subsection 2. The amount of contributions that would have 8 been deductible as a charitable contribution under section 9 170 of the Internal Revenue Code but for the fact that the 10 recipient or beneficiary of the contribution was disallowed 11 a tax exemption under section 501(a) of the Internal Revenue 12 Code for the reason described in subsection 2 of this section, 13 shall be allowed as a deductible charitable contribution under 14 section 422.9, subsection 2. 15 f. The school tuition organization tax credit under section 16 422.11S. 17 g. The charitable conservation contribution tax credit under 18 sections 422.11W and 422.33, subsection 25. 19 h. The tuition tax credit under section 422.12, subsection 20 2, paragraph “b” . 21 i. The exemption from corporate income tax under section 22 422.34, subsection 2. 23 j. The charitable contribution deduction in determining 24 federal taxable income of a corporation or financial 25 institution for purposes of the net income computation under 26 section 422.35 or 422.61, as applicable. A corporation or 27 financial institution is allowed an additional subtraction 28 in computing net income equal to the amount of contributions 29 that would have been deductible as a charitable contribution 30 under section 170 of the Internal Revenue Code for purposes 31 of computing federal taxable income but for the fact that the 32 recipient or beneficiary of the contribution was disallowed a 33 tax exemption under section 501(a) of the Internal Revenue Code 34 for the reason described in subsection 2 of this section. 35 -3- LSB 5044XS (2) 86 mm/sc 3/ 6

S.F. 2043 k. The sales tax exemptions in section 423.3, subsections 17 1 through 22, 25, 26, 27 through 30, 78, 80, and 87 through 89. 2 l. The sales tax refunds in section 423.4, subsections 1 3 and 6. 4 m. The property tax exemptions in section 427.1, subsections 5 5, 7, 8, 10, 14, 17, 21, 21A, and 22. 6 n. The inheritance tax exemption in section 450.4, 7 subsection 2. Property that passes for a purpose that would 8 have qualified as a charitable, educational, or religious 9 purpose as defined in sections 170(c) and 2055 of the Internal 10 Revenue Code but for the fact that the recipient or beneficiary 11 of the property was disallowed a tax exemption under section 12 501(a) of the Internal Revenue Code for the reason described in 13 subsection 2 of this section shall be considered exempt from 14 inheritance tax under section 450.4, subsection 2. 15 4. This section shall be construed in favor of a broad 16 protection of free exercise of religious beliefs and moral 17 convictions, to the maximum extent permitted by the terms of 18 this section and the Constitution of the State of Iowa and the 19 Constitution of the United States. 20 5. The protection of free exercise of religious beliefs 21 and moral convictions afforded by this section are in addition 22 to the protections provided under federal law, state law, and 23 the Constitution of the State of Iowa and the Constitution of 24 the United States. This section shall not be construed to 25 preempt or repeal any state or local law that is equally or 26 more protective of free exercise of religious beliefs or moral 27 convictions, and this section shall not be construed to narrow 28 the meaning or application of any state or local law protecting 29 free exercise of religious beliefs or moral convictions. 30 6. If any provision of this section or the application 31 thereof to any person or circumstances is held invalid, the 32 invalidity shall not affect other provisions or applications 33 of this section which can be given effect without the invalid 34 provisions or application and, to this end, the provisions of 35 -4- LSB 5044XS (2) 86 mm/sc 4/ 6

S.F. 2043 this section are severable. 1 Sec. 3. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 2 immediate importance, takes effect upon enactment. 3 EXPLANATION 4 The inclusion of this explanation does not constitute agreement with 5 the explanation’s substance by the members of the general assembly. 6 This bill protects tax benefits of nonprofit organizations 7 from being disallowed because of certain religious beliefs 8 and moral convictions. The bill also makes several findings, 9 including but not limited to findings related to the state 10 interest in protecting tax benefits of nonprofit organizations, 11 and in protecting and promoting the free exercise of religious 12 beliefs and moral convictions about marriage. 13 The bill provides that notwithstanding any other provision 14 of state law to the contrary, if a tax benefit is available 15 under Iowa law that applies to, or is dependent upon, an 16 organization that is recognized as nonprofit, or exempt from 17 federal taxation under Internal Revenue Code (IRC) §501(a), 18 such tax benefit shall not be disallowed on or after the 19 effective date of the bill because the organization believes, 20 acts, or teaches in accordance with a religious belief or moral 21 conviction that marriage is or should be recognized as the 22 union of one man and one woman, or that sexual relations are 23 properly reserved to such marriage, or because the organization 24 was disallowed a tax exemption under IRC §501(a) on the basis 25 of those beliefs, acts, or teachings. “Tax benefit” is defined 26 in the bill. 27 The bill provides a nonexhaustive list of tax benefits to 28 which the protection from disallowance applies and in certain 29 cases provides for how those tax benefits shall be administered 30 when the protection from disallowance becomes applicable. 31 The nonexhaustive list includes the redevelopment tax 32 credits, the workforce housing tax incentives, several 33 exemptions from the fee for new registration, the historic 34 preservation and cultural and entertainment district tax 35 -5- LSB 5044XS (2) 86 mm/sc 5/ 6

S.F. 2043 credit, the school tuition organization tax credit, the 1 charitable conservation contribution tax credit, the tuition 2 tax credit, the exemption from the corporate income tax, 3 several sales tax exemptions and refunds, several property tax 4 exemptions, the charitable contribution deductions under the 5 individual and corporate income tax and franchise tax, and the 6 charitable contribution exemption under the inheritance tax. 7 With regard to charitable contributions, the bill provides 8 that contributions or bequests that would have qualified as 9 tax-deductible charitable contributions under the IRC but for 10 the fact that the recipient or beneficiary of the property was 11 disallowed a tax exemption under IRC §501(a) for believing, 12 acting, or teaching in a way described in the bill, shall be 13 considered deductible contributions under the individual and 14 corporate income tax and franchise tax, and shall be considered 15 exempt under the inheritance tax. 16 The bill is to be construed in favor of a broad protection 17 of free exercise of religious beliefs and moral convictions, 18 to the maximum extent permitted by the terms of the bill and 19 the Constitutions of the State of Iowa and of the United 20 States. The protection of free exercise of religious beliefs 21 and moral convictions afforded by the bill are in addition to 22 the protections provided under federal law, state law, and the 23 Constitutions of the State of Iowa and of the United States, 24 and the bill is not to be construed to preempt or repeal any 25 state or local law that is equally or more protective of free 26 exercise of religious beliefs or moral convictions or to narrow 27 the meaning or application of any state or local law protecting 28 free exercise of religious beliefs or moral convictions. 29 The provisions of the bill are severable. The bill takes 30 effect upon enactment. 31 -6- LSB 5044XS (2) 86 mm/sc 6/ 6