S.F. _____ H.F. _____ Section 1. Section 15.352, subsection 10, Code 2018, is 1 amended to read as follows: 2 10. “Small city” means any city or township located in this 3 state, except those located wholly within one or more of the 4 eleven most populous counties in the state, as determined by 5 the most recent federal decennial census population estimates 6 issued by the United States bureau of census . For the purposes 7 of this part, a small city that is located in more than one 8 county shall be considered to be located in the county having 9 the greatest taxable base within the small city. 10 Sec. 2. Section 15.354, subsection 1, paragraph a, Code 11 2018, is amended to read as follows: 12 a. A housing business seeking workforce housing tax 13 incentives provided in section 15.355 shall make application to 14 the authority in the manner prescribed by the authority. The 15 authority may accept applications on a continuous basis during 16 one or more annual application periods to be determined by the 17 authority by rule . 18 Sec. 3. Section 15.354, subsection 2, Code 2018, is amended 19 to read as follows: 20 2. Registration. Application review —— tax incentive award. 21 a. All completed applications shall be reviewed and scored 22 on a competitive basis by the authority pursuant to rules 23 adopted by the authority. 24 a. b. Upon review of the application, the authority 25 may register the housing project under the program. If the 26 authority registers the housing project, the authority shall 27 make a preliminary determination as to the amount of tax 28 incentives for which the housing project qualifies reviewing 29 and scoring all applications received during an application 30 period, the authority may make a tax incentive award to the 31 housing project, which tax incentive award shall represent 32 the maximum amount of tax incentives the housing project may 33 qualify for under the program . In determining a tax incentive 34 award, the authority shall not use an amount of project costs 35 -1- LSB 5427XD (6) 87 mm/rn 1/ 12

S.F. _____ H.F. _____ that exceeds the amount included in the application of the 1 housing business. Tax incentive awards shall be approved by 2 the director of the authority. 3 b. c. After registering the housing project making a 4 tax incentive award , the authority shall notify the housing 5 business of successful registration under the program its tax 6 incentive award . The notification shall include the amount 7 of tax incentives under section 15.355 for which the housing 8 business has received preliminary approval an award and a 9 statement that the amount is a preliminary determination only 10 housing business has no right to receive a tax incentive 11 certificate or claim a tax incentive until all requirements 12 of the program, including the agreement entered into pursuant 13 to subsection 3, are satisfied . The amount of tax credits 14 included on a tax credit certificate issued pursuant to this 15 section , or a claim for refund of sales and use taxes, shall be 16 contingent upon completion of the requirements in subsection 3 . 17 d. An applicant that is unsuccessful in receiving a 18 tax incentive award during an application period may make 19 additional applications during subsequent application periods. 20 Such applicants shall be required to submit a new application 21 and shall be competitively reviewed and scored in the same 22 manner as other applicants in that application period. 23 Sec. 4. Section 15.354, subsection 3, paragraphs a, c, and 24 e, Code 2018, are amended to read as follows: 25 a. Upon successful registration of receipt of a tax 26 incentive award by the housing project, the housing business 27 shall enter into an agreement with the authority for the 28 successful completion of all requirements of the program. The 29 agreement shall identify the tax incentive award amount, the 30 tax incentive award date, the project completion deadline, and 31 the total costs of the housing project. 32 c. (1) A Except as provided in subparagraph (2), a housing 33 business shall complete its housing project within three 34 years from the date the housing project is registered by the 35 -2- LSB 5427XD (6) 87 mm/rn 2/ 12

S.F. _____ H.F. _____ authority in the case of a housing project registered prior to 1 July 1, 2018, or within three years from the date the housing 2 project receives its tax incentive award from the authority in 3 the case of all other housing projects . 4 (2) Notwithstanding subparagraph (1), the authority 5 may for good cause within the discretion of the authority 6 extend a housing project’s completion deadline once by up 7 to twelve months upon application by the housing business, 8 which application shall be made prior to the expiration of 9 the three-year completion deadline in subparagraph (1) in the 10 manner and form prescribed by the authority. 11 e. (1) Upon review of the examination and verification 12 of the amount of the qualifying new investment, the authority 13 may issue a tax credit incentive certificate to the housing 14 business , which tax incentive certificate shall contain, as 15 applicable, a certificate stating the amount of sales and use 16 tax refunds under section 15.355, subsection 2, the housing 17 business may apply for, and a tax credit certificate stating 18 the amount of workforce housing investment tax credits under 19 section 15.355 , subsection 3, the eligible housing business 20 may claim. The amount of tax incentives for a housing project 21 issued on a tax incentive certificate shall not exceed the 22 amount of the tax incentive award. 23 (2) If upon review of the examination in subparagraph 24 (1) the authority determines that a housing project has 25 incurred project costs in excess of the amount submitted in the 26 application made pursuant to subsection 1 and identified in the 27 agreement , the authority shall do one of the following: 28 (a) If the project costs do not cause the housing project’s 29 average dwelling unit cost to exceed the applicable maximum 30 amount authorized in section 15.353, subsection 3 , the 31 authority may consider the agreement fulfilled and may issue a 32 tax credit incentive certificate. 33 (b) If the project costs cause the housing project’s 34 average dwelling unit cost to exceed the applicable maximum 35 -3- LSB 5427XD (6) 87 mm/rn 3/ 12

S.F. _____ H.F. _____ amount authorized in section 15.353, subsection 3 , but does not 1 cause the average dwelling unit cost to exceed one hundred ten 2 percent of such applicable maximum amount, the authority may 3 consider the agreement fulfilled and may issue a tax credit 4 incentive certificate. In such case, the authority shall 5 reduce the tax incentive award and the corresponding amount of 6 tax incentives the eligible housing project may claim under 7 section 15.355, subsections 2 and 3 , by the same percentage 8 that the housing project’s average dwelling unit cost exceeds 9 the applicable maximum amount under section 15.353, subsection 10 3 , and such tax incentive reduction shall be reflected on 11 the tax credit incentive certificate. If the authority 12 issues a certificate pursuant to this subparagraph division, 13 the department of revenue shall accept the certificate 14 notwithstanding that the housing project’s average dwelling 15 unit costs exceeds the maximum amount specified in section 16 15.353, subsection 3 . 17 (c) If the project costs cause the housing project’s 18 average dwelling unit cost to exceed one hundred ten percent 19 of the applicable maximum amount authorized in section 15.353, 20 subsection 3 , the authority shall determine the eligible 21 housing business to be in default under the agreement , shall 22 revoke the tax incentive award, and shall not issue a tax 23 credit incentive certificate. 24 Sec. 5. Section 15.354, subsection 4, Code 2018, is amended 25 by striking the subsection and inserting in lieu thereof the 26 following: 27 4. Maximum tax incentives amount. 28 a. (1) For fiscal years beginning on or after July 1, 2018, 29 the authority shall not award in any fiscal year an amount of 30 tax incentives for housing projects located in small cities, or 31 for other housing projects, in excess of the amounts allocated 32 for each category in section 15.119, subsection 2, paragraph 33 “g” . This paragraph applies to housing projects awarded tax 34 incentives pursuant to subsection 2 on or after July 1, 2018, 35 -4- LSB 5427XD (6) 87 mm/rn 4/ 12

S.F. _____ H.F. _____ and to housing projects registered prior to July 1, 2018, under 1 section 15.354, subsection 2, Code 2018. 2 (2) Notwithstanding subparagraph (1), and section 15.119, 3 subsection 2, paragraph “g” , if the sum of the amount of tax 4 incentives applied for in valid applications submitted in a 5 given fiscal year beginning on or after July 1, 2018, for 6 housing projects located in small cities, plus the amount 7 of tax incentives eligible for issuance to housing projects 8 located in small cities that were registered prior to July 9 1, 2018, under section 15.254, subsection 2, Code 2018, does 10 not exceed the amount reserved for housing projects located 11 in small cities pursuant to section 15.119, subsection 2, 12 paragraph “g” , the authority may award the remaining amount of 13 tax incentives reserved for housing projects located in small 14 cities to other housing projects during that same fiscal year. 15 (3) Notwithstanding subparagraph (1), and section 15.119, 16 subsection 2, paragraph “g” , the authority may award during a 17 fiscal year an aggregate amount of tax incentives to housing 18 projects located in small cities that is less than the amount 19 reserved for allocation to small cities under section 15.119, 20 subsection 2, paragraph “g” , provided the difference between 21 the amount of the small city reservation and the aggregate 22 amount actually awarded to small cities during that fiscal year 23 is awarded during that same fiscal year to housing projects 24 registered prior to July 1, 2017. 25 b. With regard to a housing project registered prior to 26 July 1, 2018, a tax incentive shall be considered awarded for 27 purposes of paragraph “a” when the authority enters into an 28 agreement with the housing business for that housing project 29 as provided under section 15.354, subsection 3, Code 2018. 30 Notwithstanding any provision of law to the contrary, a housing 31 business shall have no right to enter into an agreement with 32 the authority for a housing project registered prior to July 1, 33 2018, until the authority allocates an amount of tax incentives 34 to the housing project and notifies the housing business 35 -5- LSB 5427XD (6) 87 mm/rn 5/ 12

S.F. _____ H.F. _____ that the authority is prepared to execute the agreement 1 and make a tax incentive award for the housing project. A 2 housing business shall have no right to receive a tax credit 3 certificate or claim a tax incentive for a housing project 4 registered prior to July 1, 2018, until the housing business 5 enters into an agreement with the authority. 6 c. In making tax incentive awards during any fiscal year 7 in which there are housing projects registered prior to July 8 1, 2018, which are eligible to receive tax incentives under 9 the program, the authority shall give priority in making tax 10 incentive awards to housing projects registered prior to July 11 1, 2018. The authority shall create and maintain a wait list 12 of housing projects registered prior to July 1, 2018, and such 13 housing projects shall be placed on the wait list in the order 14 the housing projects were registered. 15 d. The maximum aggregate amount of tax incentives that 16 may be awarded and issued under section 15.355 to a housing 17 business for a housing project shall not exceed one million 18 dollars. 19 e. If a housing business qualifies for a higher amount 20 of tax incentives under section 15.355 than is allowed by 21 the limitation imposed in paragraph “d” , the authority and 22 the housing business may negotiate an apportionment of the 23 reduction in tax incentives between the sales tax refund 24 provided in section 15.355, subsection 2, and the workforce 25 housing investment tax credits provided in section 15.355, 26 subsection 3, provided the total aggregate amount of tax 27 incentives after the apportioned reduction does not exceed the 28 amount in paragraph “d” . 29 Sec. 6. Section 15.354, subsection 5, Code 2018, is amended 30 to read as follows: 31 5. Termination and repayment. The failure by a housing 32 business in completing a housing project to comply with any 33 requirement of this program or any of the terms and obligations 34 of an agreement entered into pursuant to this section may 35 -6- LSB 5427XD (6) 87 mm/rn 6/ 12

S.F. _____ H.F. _____ result in the revocation, reduction, termination, or rescission 1 of the tax incentive award or the approved tax incentives and 2 may subject the housing business to the repayment or recapture 3 of tax incentives claimed under section 15.355 . The repayment 4 or recapture of tax incentives pursuant to this section shall 5 be accomplished in the same manner as provided in section 6 15.330, subsection 2 . 7 Sec. 7. Section 15.355, subsection 2, Code 2018, is amended 8 to read as follows: 9 2. A housing business may claim a refund of the sales and 10 use taxes paid under chapter 423 that are directly related to 11 a housing project and specified in the agreement . The refund 12 available pursuant to this subsection shall be as provided in 13 section 15.331A , excluding subsection 2 , paragraph “c” , of 14 that section. For purposes of the program, the term “project 15 completion” , as used in section 15.331A , shall mean the date on 16 which the authority notifies the department of revenue that all 17 applicable requirements of an agreement entered into pursuant 18 to section 15.354 are satisfied. 19 Sec. 8. Section 15.355, subsection 3, paragraph a, 20 subparagraphs (1) and (2), Code 2018, are amended to read as 21 follows: 22 (1) For a housing project not located in a small city, ten 23 percent of the qualifying new investment of a housing project 24 specified in the agreement . 25 (2) For a housing project located in a small city, twenty 26 percent of the qualifying new investment of a housing project 27 specified in the agreement . 28 Sec. 9. APPLICABILITY. 29 1. Except as provided in subsection 2, this Act applies to 30 housing projects awarded tax incentives by the authority under 31 the program on or after July 1, 2018, and housing projects 32 registered by the authority under the program prior to July 1, 33 2018, shall be governed by sections 15.352, 15.354, and 15.355, 34 Code 2018. 35 -7- LSB 5427XD (6) 87 mm/rn 7/ 12

S.F. _____ H.F. _____ 2. The provisions of this Act amending section 15.354, 1 subsection 3, paragraph “c”, and section 15.354, subsection 4, 2 apply to housing projects registered by the authority under the 3 program prior to July 1, 2018, and to housing projects awarded 4 tax incentives by the authority under the program on or after 5 July 1, 2018. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 This bill modifies the workforce housing tax incentives 10 program. 11 BACKGROUND. The workforce housing tax incentive program 12 (program) administered by the economic development authority 13 (authority) provides tax incentives in the form of investment 14 tax credits and sales and use tax refunds to housing businesses 15 that complete certain housing projects in Iowa. In order 16 to receive tax incentives, a housing business must apply to 17 the authority and have its housing project registered by 18 the authority, and then must enter into an agreement with 19 the authority (tax incentive agreement) for the successful 20 completion of all requirements of the program. If the housing 21 project is completed and properly examined by a certified 22 public accountant, and all other requirements of the tax 23 incentive agreement and the program are satisfied, the 24 authority may issue a tax credit certificate and the housing 25 business may claim the tax incentives for which it qualifies 26 under the program. The total tax incentives issued under 27 the program per fiscal year cannot exceed $20 million. Of 28 that $20 million annual cap, $5 million must be reserved for 29 tax incentives issued to housing projects located in small 30 cities, as defined under the program. The program also limits 31 the maximum amount of tax incentives that may be issued per 32 housing project to $1 million. The authority is required 33 to issue tax incentives under the program on a first-come, 34 first-served basis, and in the event the total tax incentives 35 -8- LSB 5427XD (6) 87 mm/rn 8/ 12

S.F. _____ H.F. _____ for all registered housing projects completed in a fiscal year 1 exceeds an annual cap, the authority is required to maintain a 2 wait list of completed housing projects and give those housing 3 projects priority for being issued tax incentives in subsequent 4 fiscal years. 5 BILL CHANGES. The bill amends language relating to the 6 acceptance of housing project applications by the authority. 7 Current law states that the authority may accept applications 8 on a continuous basis. The bill states that the authority may 9 accept applications during one or more application periods, and 10 provides that housing project applications shall be reviewed 11 and scored on a competitive basis by the authority pursuant to 12 rules adopted by the authority. 13 The bill removes registration of housing projects from the 14 program, and provides that the authority may make tax incentive 15 awards to housing projects. Tax incentive awards shall be 16 subject to the approval of the director of the authority. 17 Applicants who are unsuccessful in receiving a tax incentive 18 award are authorized under the bill to make additional 19 applications for that housing project during subsequent 20 application periods. In determining the tax incentive award 21 of a particular housing project, the authority shall not use 22 an amount of housing project costs that exceeds the amount 23 included in the housing project application. 24 The bill requires the authority to notify the housing 25 business of its tax incentive award. The notification must 26 include a statement that the housing business has no right to 27 receive a tax incentive certificate or claim a tax incentive 28 until all requirements of the program and the tax incentive 29 agreement are satisfied. 30 The bill amends the requirements related to the tax 31 incentive agreement entered into by the authority and a 32 housing business to provide that such agreement shall identify 33 the tax incentive award, the tax incentive award date, the 34 project completion deadline, and the total costs of the housing 35 -9- LSB 5427XD (6) 87 mm/rn 9/ 12

S.F. _____ H.F. _____ project. 1 The bill provides that, upon verification by the authority 2 of the project costs and qualifying new investment as required 3 by current law, the authority may issue a tax incentive 4 certificate which contains the amount of sales and use tax 5 refund the housing business may apply for and a tax credit 6 certificate stating the amount of investment tax credits the 7 housing business may claim. The amount of tax incentives 8 issued on a tax incentive certificate shall not exceed the 9 amount of the tax incentive award. 10 The bill also amends the definition of “small city” for 11 purposes of the program. Under current law, the definition 12 of “small city” includes any city or township not located 13 within the 11 most populous counties in the state. When a 14 city is located in more than one county, it is considered 15 to be located in the county having the greatest taxable base 16 within the city. The bill amends “small city” to include any 17 city or township not located wholly within one or more of the 18 11 most populous counties in the state. In other words, any 19 city or township located in whole or in part in one of the 88 20 least populated counties in Iowa will qualify as a small city 21 under the program. The definition is also amended to provide 22 that population is computed using the most recent population 23 estimates issued by the United States census bureau, instead of 24 the most recent federal decennial census. 25 The bill amends requirements relating to the termination 26 and repayment of tax incentives for failure to comply with the 27 requirements of the program to provide that such failures to 28 comply with the program may also result in the revocation of 29 the tax incentive award. 30 The bill amends language relating to the calculation of the 31 amount of tax incentives for which a housing project qualifies. 32 Under current law, the amount of the sales and use tax refunds 33 is calculated using the taxes directly related to a housing 34 project, and the amount of the investment tax credits is 35 -10- LSB 5427XD (6) 87 mm/rn 10/ 12

S.F. _____ H.F. _____ calculated using a percentage of the qualifying new investment 1 of the housing project. The bill provides that these amounts 2 of taxes or qualifying new investment will only be used in the 3 tax incentive calculation to the extent they were specified in 4 the tax incentive agreement entered into by the authority and 5 the housing business. 6 These program changes described above apply to housing 7 projects that receive a tax incentive award on or after July 1, 8 2018, and housing projects registered prior to July 1, 2018, 9 shall be governed by current law. 10 The bill provides that the authority shall not award more 11 than $20 million in tax incentives each fiscal year beginning 12 on or after July 1, 2018, and $5 million of that total cap 13 shall be reserved each fiscal year for tax incentive awards 14 made to housing projects located in small cities. With regard 15 to housing projects registered prior to July 1, 2018, the bill 16 states that a tax incentive will be considered awarded when 17 the authority enters into a tax incentive agreement for that 18 housing project as provided under current law, and the bill 19 states that a housing business has no right to enter into a 20 tax incentive agreement for such a housing project until the 21 authority allocates tax incentives to that housing project and 22 notifies the housing business that the authority is prepared to 23 execute a tax incentive agreement. The bill also provides that 24 a housing business shall have no right to receive a tax credit 25 certificate or claim a tax incentive for a housing project 26 registered prior to July 1, 2018, until it enters into a tax 27 incentive agreement with the authority. 28 The bill provides two exceptions to the $5 million per year 29 tax incentive reservation for housing projects in small cities. 30 First, if the sum of the amount of tax incentive applications 31 received for housing projects in small cities during a fiscal 32 year, plus the amount of tax incentives eligible for issuance 33 during that same fiscal year to housing projects in small 34 cities registered prior to July 1, 2018, does not exceed $5 35 -11- LSB 5427XD (6) 87 mm/rn 11/ 12

S.F. _____ H.F. _____ million, the authority may award the difference to other 1 housing projects during that same fiscal year. Second, the 2 authority may award less than $5 million of tax incentives to 3 housing projects in small cities during a fiscal year if the 4 difference between the $5 million cap and the amount actually 5 awarded to housing projects in small cities is awarded during 6 the same fiscal year to housing projects registered prior to 7 July 1, 2017. 8 The bill provides that the authority shall give priority 9 in making tax incentive awards to housing projects registered 10 prior to July 1, 2018, and shall create a wait list of housing 11 projects registered prior to July 1, 2018, and place those 12 housing projects on the list in the order the projects were 13 registered. 14 The bill modifies the three-year project completion deadline 15 in current law to specify that the deadline is measured from 16 the registration date for housing projects registered prior to 17 July 1, 2018, and from the date the housing project receives 18 its tax incentive award for all other projects. The bill 19 further modifies the project completion deadline by providing 20 that the authority may for good cause extend this three-year 21 deadline once by up to 12 months. To be eligible for such 22 an extension, a housing business must apply to the authority 23 before the expiration of the three-year project completion 24 deadline. 25 These changes described above to the awarding and issuance 26 of tax incentives and to the project completion deadline under 27 the program apply to housing projects registered prior to July 28 1, 2018, and to housing projects that receive a tax incentive 29 award on or after July 1, 2018. 30 -12- LSB 5427XD (6) 87 mm/rn 12/ 12