HF 592 (LSB 2174YH (3) 87)

HOUSE FILE 592

BY  HEARTSILL

A BILL FOR

An Act creating a homeownership development tax credit available for charitable contributions to certain low-income housing developers in this state, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15E.152  Short title.
   This division shall be known and may be cited as the “Homeownership Development Tax Credit Act”.
    Sec. 2.  NEW SECTION.  15E.153  Purpose.
   The purpose of this division is to increase the availability of affordable housing in this state by encouraging taxpayers to make charitable contributions to certain nonprofit housing developers that create affordable single-family housing to be sold to low-income households in this state.
    Sec. 3.  NEW SECTION.  15E.154  Definitions.
   As used in this division, unless the context otherwise requires:
   1.  “Department” means the department of revenue.
   2.  “Eligible housing developer” means an entity meeting the requirements of section 15E.155, subsection 2, and certified as an eligible housing developer by the authority pursuant to that section.
   3.  “Eligible rural housing developer” means an entity meeting the requirements of section 15E.155, subsection 3, and certified as an eligible rural housing developer by the authority pursuant to that section.
   4.  “Low-income household” means a household with income of eighty percent or less of the area median family income by county as determined by the United States department of housing and urban development.
    Sec. 4.  NEW SECTION.  15E.155  Developer certification.
   1.  Application.  An organization may apply to the authority in the manner prescribed by the authority to be certified as an eligible housing developer or an eligible rural housing developer.
   2.  Eligible housing developer.  In order to be certified as an eligible housing developer, an organization shall meet the requirements of paragraph “a” or “b”:
   a.  (1)  The organization is organized under chapter 504 and qualifying under section 501(c)(3) of the Internal Revenue Code as an organization exempt from federal income tax under section 501(a) of the Internal Revenue Code.
   (2)  The organization has, for a minimum of three years prior to the time of the application, been developing single-family housing in this state to be sold to low-income households.
   (3)  The bylaws, articles, or other document relating to the establishment of the organization provide that a purpose of the organization is to develop affordable housing in this state to be sold to low-income households.
   (4)  The organization agrees to provide to the authority information reasonably required by the authority in order to verify the receipt, donor identity, value, and eligibility for the tax credit of contributions received by the organization.
   b.  (1)  The entity is an organization organized under chapter 504 and qualifying under section 501(c)(3) of the Internal Revenue Code as an organization exempt from federal income tax under section 501(a) of the Internal Revenue Code.
   (2)  A purpose of the organization is to serve or support an organization certified as an eligible housing developer pursuant to paragraph “a” of this subsection.
   (3)  The organization accepts contributions on behalf of an organization certified as an eligible housing developer pursuant to paragraph “a” of this subsection, and redistributes any and all such contributions to that organization.
   (4)  The organization agrees to provide to the authority information reasonably required by the authority in order to verify the receipt, donor identity, value, and eligibility for the tax credit of contributions received by the organization.
   3.  Eligible rural housing developer.  In order to be certified as an eligible rural housing developer, an organization shall meet the requirements of paragraph “a” or “b”:
   a.  The organization meets the requirements of subsection 2, paragraph “a”, and for the three years preceding the application, the organization has conducted at least fifty-one percent of its housing development activities in Iowa counties with a population of fewer than fifty thousand as determined by the most recent federal decennial census.
   b.  (1)  The organization is organized under chapter 504 and qualifying under section 501(c)(3) of the Internal Revenue Code as an organization exempt from federal income tax under section 501(a) of the Internal Revenue Code.
   (2)  A purpose of the organization is to serve or support an organization certified as an eligible rural housing developer pursuant to paragraph “a” of this subsection.
   (3)  The organization accepts contributions on behalf of an organization certified as an eligible rural housing developer pursuant to paragraph “a” of this subsection, and redistributes any and all such contributions to that organization.
   (4)  The organization agrees to provide to the authority information reasonably required by the authority in order to verify the receipt, donor identity, value, and eligibility for the tax credit of contributions received by the organization.
   4.  Length of certification and recertification.  Unless certification is revoked pursuant to subsection 5, a certification received pursuant to this section shall be valid for a period of three years, at which time the organization may apply to the authority in the manner prescribed by the authority to become recertified as an eligible housing developer or eligible rural housing developer pursuant to this section.
   5.  Revocation of certification.  An organization shall notify the authority in a timely manner of any changes that affect the organization’s ability to qualify as an eligible housing developer or eligible rural housing developer. The authority shall revoke the certification of an organization certified as an eligible housing developer or eligible rural housing developer if that organization subsequently fails to meet the requirements of subsection 2 or 3, as applicable. The revocation of a certification under this subsection shall not prohibit an organization from subsequently applying to be certified as an eligible housing developer or eligible rural housing developer under this section.
    Sec. 5.  NEW SECTION.  15E.156  Tax credit application —— maximum tax credits.
   1.  Application.
   a.  To receive a tax credit under section 15E.157, a taxpayer must submit an application in the manner and form prescribed by the authority on or after the date of the charitable contribution to the eligible housing developer or eligible rural housing developer for which a tax credit is sought. The eligible housing developer or eligible rural housing developer shall forward the application to the authority.
   b.  The authority shall issue tax credits and related tax credit certificates on a first-come, first-served basis in the order applications are received from eligible housing developers and eligible rural housing developers until the maximum amount of tax credits authorized pursuant to subsection 2 is reached. If for a calendar year the maximum amount of tax credits applied for exceeds the amount specified in subsection 2, the authority shall establish a wait list for tax credits. Valid applications received but not approved by the authority shall be placed on a wait list in the order the applications were received by the authority and those applicants shall be given priority for receiving tax credits in succeeding calendar years. Placement on a wait list pursuant to this paragraph shall not constitute a promise binding the state. The availability of a tax credit and approval of a tax credit application pursuant to this section in a future year is contingent upon the availability of tax credits in that particular year. 
   2.  Maximum tax credit amounts.
   a.  The aggregate amount of tax credits issued pursuant to this section shall not exceed a total of seven million dollars per calendar year.
   b.  Twenty percent of the aggregate amount of tax credits issued in a calendar year shall be reserved for charitable contributions to an eligible rural housing developer.
   c.  (1)  Except as provided in subparagraph (2), the maximum amount of tax credits issued to any one taxpayer for charitable contributions in a tax year shall not exceed two hundred fifty thousand dollars.
   (2)  The maximum amount of tax credits issued to any one taxpayer for charitable contributions in a tax year shall not exceed three hundred thousand dollars if at least twenty percent of the taxpayer’s total charitable contributions made during the tax year that are eligible for the tax credit in section 15E.157 are to one or more eligible rural housing developers.
    Sec. 6.  NEW SECTION.  15E.157  Homeownership development tax credit.
   1.  a.  A tax credit shall be allowed against the taxes imposed in chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, equal to fifty percent of the amount of the voluntary cash or noncash charitable contributions made by a taxpayer during the tax year to an eligible housing developer or eligible rural housing developer. 
   b.  The charitable contribution must equal or exceed five hundred dollars in order to qualify for the tax credit. However, an eligible housing developer or eligible rural housing developer may set a higher minimum qualifying amount pursuant to rules prescribed by the authority.
   2.  The tax credit shall be claimed for the tax year during which the taxpayer was issued the tax credit.
   3.  An individual may claim a tax credit under this section of a partnership, limited liability company, S corporation, estate, or trust electing to have income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings from the partnership, limited liability company, S corporation, estate, or trust.
   4.  Any tax credit in excess of the taxpayer’s tax liability for the tax year may be credited to the tax liability for the following five years or until depleted, whichever occurs first. A tax credit shall not be carried back to a tax year prior to the tax year in which the taxpayer claims the tax credit. 
   5.  a.  To claim a tax credit under this section, a taxpayer shall include one or more tax credit certificates with the taxpayer’s tax return.
   b.  The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the amount of the credit, and any other information required by the department.
   c.  The tax credit certificate, unless rescinded by the authority, shall be accepted by the department as payment for taxes imposed pursuant to chapter 422, divisions II, III, and V, and in chapter 432, and against the moneys and credits tax imposed in section 533.329, subject to any conditions or restrictions placed by the authority upon the face of the tax credit certificate and subject to the limitations of this chapter.
   d.  Tax credit certificates issued pursuant to this division shall not be transferred to any other person.
   6.  The amount of the charitable contribution for which the tax credit is claimed shall not be deductible in determining taxable income for state income tax purposes.
    Sec. 7.  NEW SECTION.  15E.158  Reports to general assembly.
   The authority shall publish an annual report of the activities conducted pursuant to this division and shall submit the report to the governor and the general assembly. The report shall include a listing of certified eligible housing developers and certified eligible rural housing developers, the number of tax credit certificates and the amount of tax credits issued by the authority, and the number of taxpayers and the amount of tax applications on the tax credit wait list, if any.
    Sec. 8.  NEW SECTION.  15E.159  Rules.
   The authority and the department shall each adopt rules pursuant to chapter 17A as necessary for the implementation of this division.
    Sec. 9.  APPLICABILITY.  This Act applies to tax years beginning on or after January 1, 2018.
    Sec. 10.  APPLICABILITY.  This Act applies to charitable contributions to eligible housing developers and eligible rural housing developers made on or after January 1, 2018. 
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill creates a homeownership development tax credit that will be administered by the economic development authority (EDA) and that will provide tax credits to taxpayers who make charitable contributions to eligible housing developers or eligible rural housing developers in this state.
   An “eligible housing developer” is defined in the bill to include an Iowa nonprofit, tax-exempt organization that has been developing single-family housing for at least three years in this state to be sold to low-income households, as defined in the bill, that includes the development of such housing in this state for low-income households as a purpose in its bylaws or other organizational documents, and that agrees to provide EDA with certain information in order to properly verify charitable contributions. An “eligible housing developer” also includes an Iowa nonprofit, tax-exempt organization whose purpose is to support an organization described above and who redistributes any charitable contributions received on behalf of that eligible housing developer to the developer.
   An “eligible rural housing developer” is defined in the bill to include an Iowa nonprofit, tax-exempt organization that meets the requirements of an eligible housing developer described above but that additionally has conducted for the last three years at least 51 percent of its housing development activities in Iowa counties with a population of fewer than 50,000 as determined by the most recent federal decennial census. 
   An organization must apply to EDA to be certified as an eligible housing developer or an eligible rural housing developer. A certification by EDA will last for a period of three years, at which time an eligible housing developer or eligible rural housing developer may apply to be recertified. Failure to meet the requirements specified above may cause the organization to lose its certification as an eligible housing developer or eligible rural housing developer, but the loss of such certification does not prohibit an organization from subsequently reapplying to EDA for certification.
   In order to receive a tax credit for a charitable contribution to an eligible housing developer or eligible rural housing developer, a taxpayer is required to apply to the developer in the manner and form prescribed by EDA on or after the date the charitable contribution is made. The developer is then required to forward the application to EDA.
   The tax credit equals 50 percent of the amount of the cash or noncash charitable contribution made to the eligible housing developer or eligible rural housing developer during the tax year. The minimum amount of charitable contribution that may qualify for the tax credit is $500, but each eligible housing developer or eligible rural housing developer is allowed to set a higher minimum contribution amount. The bill provides that EDA shall not issue more than $7 million in tax credits per calendar year. Of that $7 million maximum aggregate amount, 20 percent ($1.4 million) of the tax credits shall be reserved for charitable contributions to eligible rural housing developers. The maximum amount of tax credits that may be issued per taxpayer for charitable contributions in a tax year is $250,000, or $300,000 if at least 20 percent of the taxpayer’s total charitable contributions to the eligible housing development organizations during the tax year were to one or more eligible rural housing developers. 
   The tax credit may be claimed against the individual income tax, the corporate income tax, the franchise tax, the insurance companies tax, and the moneys and credits tax. To claim a tax credit, a taxpayer must include a tax credit certificate with the taxpayer’s tax return. The tax credit is nonrefundable and nontransferable, but any excess may be carried forward for five tax years. The amount of the charitable contribution for which the tax credit is claimed shall not be deductible in determining taxable income for state tax purposes.
   EDA is required to issue tax credits on a first-come, first-served basis until the maximum amount of $7 million per calendar year is reached. If the amount of tax credit applications exceeds $7 million in a calendar year, EDA is required to establish a wait list and give priority in subsequent years to applications on the wait list.
   The bill requires EDA and the department of revenue to adopt rules as necessary for the implementation of the bill, and requires EDA to publish and submit annual reports to the governor and general assembly containing information as described in the bill.
   The bill applies to tax years beginning on or after January 1, 2018, and to charitable contributions to eligible housing developers and eligible rural housing developers on or after that date.