Senate Study Bill 3190 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM) 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, the solar energy system tax credit, 3 appeal procedures for certain centrally assessed property, 4 an extension of the utility replacement tax task force, 5 requiring background checks for job applicants and persons 6 performing work for the department of revenue, a sales and 7 use tax exemption for certain items used in performance of 8 a construction contract with designated exempt entities, 9 and including effective date and retroactive applicability 10 provisions. 11 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 12 TLSB 6081XC (6) 86 mm/sc

S.F. _____ Section 1. NEW SECTION . 421.48 Background checks. 1 An applicant for employment with the department of revenue 2 shall be subject to a national criminal history check through 3 the federal bureau of investigation. A contractor, vendor, 4 employee, or any other individual performing work for the 5 department of revenue, shall be subject to a national criminal 6 history check through the federal bureau of investigation 7 at least once every ten years. The department of revenue 8 shall request the national criminal history check and shall 9 provide the individual’s fingerprints to the department 10 of public safety for submission through the state criminal 11 history repository to the federal bureau of investigation. 12 The individual shall authorize release of the results of the 13 national criminal history check to the department of revenue. 14 The department of revenue shall pay the actual cost of the 15 fingerprinting and national criminal history check, if any. 16 The results of a criminal history check conducted pursuant to 17 this section shall not be considered a public record under 18 chapter 22. 19 Sec. 2. Section 422.11L, subsection 3, paragraph d, Code 20 2016, is amended to read as follows: 21 d. (1) A taxpayer must submit an application to the 22 department for each separate and distinct solar installation. 23 The application must be approved by the department in order to 24 claim the tax credit. The application must be filed by May 25 1 following the year of the installation of the solar energy 26 system. 27 (2) The department shall accept and approve applications 28 on a first-come, first-served basis until the maximum amount 29 of tax credits that may be claimed pursuant to subsection 4 30 is reached. If for a tax year the aggregate amount of tax 31 credits applied for exceeds the amount specified in subsection 32 4, the department shall establish a wait list for tax credits. 33 Valid applications filed by the taxpayer by May 1 following the 34 year of the installation but not approved by the department 35 -1- LSB 6081XC (6) 86 mm/sc 1/ 10

S.F. _____ shall be placed on a wait list in the order the applications 1 were received and those applicants shall be given priority 2 for having their applications approved in succeeding years. 3 Placement on a wait list pursuant to this subparagraph shall 4 not constitute a promise binding the state. The availability 5 of a tax credit and approval of a tax credit application 6 pursuant to this section in a future year is contingent upon 7 the availability of tax credits in that particular year. 8 Sec. 3. Section 422.11L, Code 2016, is amended by adding the 9 following new subsection: 10 NEW SUBSECTION . 6. For purposes of this section, “Internal 11 Revenue Code” means the Internal Revenue Code of 1954, prior 12 to the date of its redesignation as the Internal Revenue Code 13 of 1986 by the Tax Reform Act of 1986, or means the Internal 14 Revenue Code of 1986 as amended to and including January 1, 15 2016. 16 Sec. 4. Section 423.3, subsection 80, paragraph a, Code 17 2016, is amended to read as follows: 18 a. For purposes of this subsection , “designated exempt 19 entity” means an any of the following: 20 (1) An entity which is designated in section 423.4, 21 subsection 1 or 6 . 22 (2) An entity which is an instrumentality of a county or 23 municipal government, including an agent of such entity, if 24 the entity was created for the purpose of owning, including 25 pursuant to a lease-purchase agreement, real property located 26 within a reinvestment district established under chapter 15J. 27 Sec. 5. Section 429.2, subsection 2, paragraph c, Code 2016, 28 is amended to read as follows: 29 c. The director of revenue shall consider all evidence and 30 witnesses offered by the taxpayer and the department , including 31 but not limited to evidence relating to the proper valuation of 32 the property involved. 33 Sec. 6. Section 437A.15, subsection 7, paragraph b, Code 34 2016, is amended to read as follows: 35 -2- LSB 6081XC (6) 86 mm/sc 2/ 10

S.F. _____ b. The task force shall study the effects of the replacement 1 taxes under this chapter and chapter 437B on local taxing 2 authorities, local taxing districts, consumers, and taxpayers 3 through January 1, 2016 2019 . If the task force recommends 4 modifications to the replacement tax that will further the 5 purposes of tax neutrality for local taxing authorities, local 6 taxing districts, taxpayers, and consumers, consistent with the 7 stated purposes of this chapter , the department of management 8 shall transmit those recommendations to the general assembly. 9 Sec. 7. Section 437B.11, subsection 7, Code 2016, is amended 10 to read as follows: 11 7. The utility replacement tax task force created in section 12 437A.15 shall study the effects of the replacement tax on 13 local taxing authorities, local taxing districts, consumers, 14 and taxpayers through January 1, 2016 2019 . If the task 15 force recommends modifications to the replacement tax that 16 will further the purposes of tax neutrality for local taxing 17 authorities, local taxing districts, taxpayers, and consumers, 18 consistent with the stated purposes of this chapter , the 19 department of management shall transmit those recommendations 20 to the general assembly. 21 Sec. 8. Section 476C.1, subsection 6, paragraph d, Code 22 2016, is amended to read as follows: 23 d. Was initially placed into service on or after July 1, 24 2005, and before January 1, 2017 2018 . 25 Sec. 9. Section 476C.3, subsection 4, paragraph b, 26 unnumbered paragraph 1, Code 2016, is amended to read as 27 follows: 28 The maximum amount of energy production capacity equivalent 29 of all other facilities the board may find eligible under this 30 chapter shall not exceed a combined output of sixty-three 31 seventy-three megawatts of nameplate generating capacity and, 32 annually, one hundred sixty-seven billion British thermal units 33 of heat for a commercial purpose. 34 Sec. 10. Section 476C.3, subsection 4, paragraph b, 35 -3- LSB 6081XC (6) 86 mm/sc 3/ 10

S.F. _____ subparagraph (3), Code 2016, is amended to read as follows: 1 (3) (a) Of the maximum amount of energy production capacity 2 equivalent of all other facilities found eligible under 3 this chapter , ten twenty megawatts of nameplate generating 4 capacity or energy production equivalent shall be reserved for 5 solar energy conversion facilities with that meet all of the 6 following requirements: 7 (i) The facility has a generating capacity of one and 8 one-half megawatts or less . 9 (ii) The facility is owned , in whole or in part, directly 10 or indirectly, or is contracted for , by utilities described in 11 section 476C.1, subsection 6 , paragraph “b” , subparagraphs (4) 12 and (5). 13 (iii) The facility is located in this state. 14 (iv) The facility meets the requirements of section 476C.1, 15 subsection 6, paragraphs “d” through “f” . 16 (b) A solar energy conversion facility that meets the 17 requirements of and is found eligible under subparagraph 18 division (a) shall be considered an “eligible renewable energy 19 facility” for purposes of this chapter, notwithstanding any 20 contrary provisions of section 476C.1, subsection 6. 21 Sec. 11. Section 476C.3, subsection 7, Code 2016, is amended 22 to read as follows: 23 7. An owner meeting the requirements of section 476C.1, 24 subsection 6 , paragraph “b” , shall not be an owner of more than 25 two eligible renewable energy facilities. A person that has 26 an equity interest equal to or greater than fifty-one percent 27 in an eligible renewable energy facility shall not have an 28 equity interest greater than ten percent in any other eligible 29 renewable energy facility. This subsection shall not apply to 30 facilities described in section 476C.3, subsection 4, paragraph 31 “b” , subparagraph (3). 32 Sec. 12. Section 476C.5, Code 2016, is amended to read as 33 follows: 34 476C.5 Certificate issuance period. 35 -4- LSB 6081XC (6) 86 mm/sc 4/ 10

S.F. _____ A producer or purchaser of renewable energy shall receive 1 renewable energy tax credit certificates for a ten-year period 2 for each eligible renewable energy facility under this chapter . 3 The ten-year period for issuance of the tax credit certificates 4 begins with the date the purchaser of renewable energy first 5 purchases electricity, hydrogen fuel, methane gas or other 6 biogas used to generate electricity, or heat for commercial 7 purposes from the eligible renewable energy facility for 8 which a tax credit is issued under this chapter , or the date 9 the producer of the renewable energy first uses the energy 10 produced by the eligible renewable energy facility for on-site 11 consumption. Renewable energy tax credit certificates shall 12 not be issued for renewable energy purchased or produced for 13 on-site consumption after December 31, 2026 2027 . 14 Sec. 13. EFFECTIVE UPON ENACTMENT. The following 15 provision or provisions of this Act, being deemed of immediate 16 importance, take effect upon enactment: 17 1. The section of this Act enacting section 421.48. 18 2. The section of this Act amending section 429.2. 19 3. The section of this Act amending section 437A.15. 20 4. The section of this Act amending section 437B.11. 21 5. The section of this Act amending section 476C.1. 22 6. The sections of this Act amending section 476C.3. 23 7. The section of this Act amending section 476C.5. 24 Sec. 14. RETROACTIVE APPLICABILITY. The following 25 provision or provisions of this Act apply retroactively to 26 January 1, 2016: 27 1. The section of this Act amending section 437A.15. 28 2. The section of this Act amending section 437B.11. 29 Sec. 15. RETROACTIVE APPLICABILITY. The following 30 provision or provisions of this Act apply retroactively to 31 January 1, 2015, for tax years beginning on or after that date: 32 1. The section of this Act enacting section 422.11L, 33 subsection 6. 34 Sec. 16. RETROACTIVE APPLICABILITY. The following 35 -5- LSB 6081XC (6) 86 mm/sc 5/ 10

S.F. _____ provision or provisions of this Act apply retroactively to 1 January 1, 2016, for tax years beginning on or after that date: 2 1. The section of this Act amending section 476C.1. 3 2. The section of this Act amending section 476C.3, 4 subsection 4, paragraph “b”, unnumbered paragraph 1. 5 3. The section of this Act amending section 476C.5. 6 Sec. 17. RETROACTIVE APPLICABILITY. 7 1. Except as provided in subsection 2, the section of this 8 Act amending section 476C.3, subsection 4, paragraph “b”, 9 subparagraph (3), applies retroactively to January 1, 2015, for 10 tax years beginning on or after that date, and retroactively to 11 June 26, 2015, for applications for the renewable energy tax 12 credit made on or after that date. 13 2. The provision of the section of this Act amending 14 section 476C.3, subsection 4, paragraph “b”, subparagraph (3), 15 increasing from ten megawatts to twenty megawatts the amount 16 of nameplate generating capacity that is reserved for certain 17 solar facilities, applies retroactively to January 1, 2016, for 18 tax years beginning on or after that date. 19 Sec. 18. 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 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill relates to the administration of the tax and 27 related laws by the department of revenue. 28 BACKGROUND CHECKS. The bill requires an applicant for 29 employment with the department of revenue (department) at 30 the time of application, or a contractor, vendor, employee, 31 or any other individual performing work for the department 32 to be subject to a national criminal history check through 33 the federal bureau of investigation (FBI) at least once 34 every 10 years. The bill directs the department to provide 35 -6- LSB 6081XC (6) 86 mm/sc 6/ 10

S.F. _____ fingerprints to the department of public safety for submission 1 through the state criminal history repository to the FBI, and 2 requires individuals to authorize release of the results to 3 the department. The department is required to pay the actual 4 costs of the fingerprinting and the criminal history check. 5 The bill provides that the results of a criminal history check 6 are not considered a public record under Code chapter 22 (open 7 records). This provision takes effect upon enactment. 8 SOLAR ENERGY SYSTEM TAX CREDIT. The bill amends the Iowa 9 solar energy system tax credit in Code section 422.11L, which 10 is provided for the installation of a solar energy system in 11 an amount equal to certain percentages of related federal 12 solar energy tax credits. The bill requires that tax credit 13 applications be accepted and approved by the department on a 14 first-come, first-served basis until the maximum tax credit 15 amount that may be claimed each tax year is reached. If 16 tax credit applications exceed that maximum amount for a tax 17 year, the bill requires the department to establish a tax 18 credit wait list, and applications that were filed by the 19 May 1 deadline but not approved will be placed on the wait 20 list and given priority for having their application approved 21 in succeeding years. The bill states that placement on the 22 wait list does not constitute a promise binding the state, 23 and the availability of a tax credit and approval of a tax 24 credit application in a future year is contingent upon the 25 availability of tax credits in that particular year. 26 The bill also defines “Internal Revenue Code” (IRC) for 27 purposes of the Iowa solar energy system tax credit to mean 28 the IRC in effect on January 1, 2016. Under current law for 29 purposes of the Iowa tax credit, IRC means that in effect on 30 January 1, 2015. This change has the effect of incorporating 31 into the Iowa tax credit changes made by Congress in 2015 32 to the related federal energy system credits for tax years 33 beginning in 2017 or later. In 2015, Congress extended the 34 expiration date for several of the federal energy system 35 -7- LSB 6081XC (6) 86 mm/sc 7/ 10

S.F. _____ tax credits upon which the Iowa tax credit is calculated 1 (IRC §25D(a)(1), §25D(a)(2), and §48(a)(2)(A)(i)(II)) to 2 January 1, 2022, from January 1, 2017. This provision applies 3 retroactively to January 1, 2015, for tax years beginning on 4 or after that date. 5 SALES AND USE TAXES. A sales tax exemption is provided under 6 current law to contractors, subcontractors, and builders for 7 the purchase of building materials, supplies, and equipment 8 for use in the performance of a construction contract with 9 a designated exempt entity. The bill amends the definition 10 of “designated exempt entity” to include an instrumentality 11 of a county or municipal government, including an agent of 12 such entity, if the entity was created for the purpose of 13 owning, including pursuant to a lease-purchase agreement, real 14 property located within a reinvestment district established 15 under the Iowa Reinvestment Act in Code chapter 15J. The 16 Iowa Reinvestment Act, in general, authorizes municipalities 17 to establish reinvestment districts and receive remittances 18 of specified amounts of state sales tax and state hotel and 19 motel tax revenues collected in those districts for use in 20 undertaking projects within the district. 21 By operation of Code section 423.6, an item exempt from the 22 imposition of the sales tax is also exempt from the use tax 23 imposed in Code section 423.5. 24 CENTRALLY ASSESSED PROPERTY. The bill adds the department 25 of revenue to the list of parties for which the director of 26 revenue shall consider all offered evidence and witnesses 27 during an appeal of an assessment of certain property centrally 28 assessed by the department of revenue for purposes of property 29 taxation. This provision takes effect upon enactment and 30 applies retroactively to May 22, 2015. 31 UTILITY REPLACEMENT TAX TASK FORCE. The bill extends the 32 utility replacement tax task force to January 1, 2019, from 33 January 1, 2016. This task force was created to study the 34 effects of the replacement taxes on electricity and natural gas 35 -8- LSB 6081XC (6) 86 mm/sc 8/ 10

S.F. _____ providers and rate-regulated water utilities. This provision 1 takes effect upon enactment and applies retroactively to 2 January 1, 2016. 3 RENEWABLE ENERGY TAX CREDIT. The bill increases to 73 4 megawatts from 63 megawatts the maximum amount of nameplate 5 generating capacity for which renewable energy tax credit 6 certificates may be issued under Code chapter 476C for 7 facilities other than wind conversion facilities, and 8 increases to 20 megawatts from 10 megawatts the amount of that 9 total nameplate generating capacity reserved for tax credit 10 certificates to solar facilities with a generating capacity 11 of 1.5 megawatts or less (small solar facilities) that are 12 owned or contracted for by electric cooperative associations, 13 municipally owned utilities, public utilities subject to rate 14 regulation, or electric cooperative associations (specified 15 utilities). 16 The bill also extends to January 1, 2018, from January 1, 17 2017, the date upon which a renewable energy facility must be 18 placed in service in order to qualify for the renewable energy 19 tax credit under Code chapter 476C, and extends to December 20 31, 2027, from December 31, 2026, the date on which renewable 21 energy tax credit certificates shall no longer be issued. 22 These renewable energy tax credit provisions take effect 23 upon enactment and apply retroactively to January 1, 2016, for 24 tax years beginning on or after that date. 25 For small solar facilities owned by the specified utilities, 26 the bill removes the requirement that the specified utility 27 must own at least 51 percent of the facility and instead 28 provides that the specified utility must own the facility in 29 whole or in part, directly or indirectly. 30 Also under current law for purposes of qualifying for the tax 31 credit, an owner of an eligible renewable energy facility shall 32 not own more than two eligible renewable energy facilities, and 33 a person that has an equity interest of at least 51 percent 34 in an eligible renewable energy facility shall not have an 35 -9- LSB 6081XC (6) 86 mm/sc 9/ 10

S.F. _____ equity interest greater than 10 percent in any other eligible 1 renewable energy facility. The bill provides that these 2 restrictions shall not apply to the small solar facilities 3 described above. 4 These renewable energy tax credit provisions take effect 5 upon enactment and apply retroactively to January 1, 2015, 6 for tax years beginning on or after that date, and apply 7 retroactively to applications for the renewable energy tax 8 credit made on or after June 26, 2015. 9 -10- LSB 6081XC (6) 86 mm/sc 10/ 10