House File 114 - Introduced HOUSE FILE 114 BY STAED , STECKMAN , DONAHUE , KURTH , WOLFE , JACOBY , MASCHER , WINCKLER , ANDERSON , B. MEYER , and FORBES A BILL FOR An Act relating to water quality by increasing the sales and 1 use tax rates and conditioning the use of moneys from the 2 natural resources and outdoor recreation trust fund, and 3 including effective date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1686YH (2) 88 jm/jh

H.F. 114 DIVISION I 1 SALES AND USE TAXES AND THE NATURAL RESOURCES AND OUTDOOR 2 RECREATION TRUST FUND 3 Section 1. Section 423.2, subsection 1, unnumbered 4 paragraph 1, Code 2019, is amended to read as follows: 5 There is imposed a tax of six percent at the rate specified 6 in subsection 12 upon the sales price of all sales of tangible 7 personal property, consisting of goods, wares, or merchandise, 8 sold at retail in the state to consumers or users except as 9 otherwise provided in this subchapter . 10 Sec. 2. Section 423.2, subsections 2 and 3, Code 2019, are 11 amended to read as follows: 12 2. A tax of six percent at the rate specified in subsection 13 12 is imposed upon the sales price of the sale or furnishing 14 of gas, electricity, water, heat, pay television service, and 15 communication service, including the sales price from such 16 sales by any municipal corporation or joint water utility 17 furnishing gas, electricity, water, heat, pay television 18 service, and communication service to the public in its 19 proprietary capacity, except as otherwise provided in this 20 subchapter , when sold at retail in the state to consumers or 21 users. 22 3. A tax of six percent at the rate specified in subsection 23 12 is imposed upon the sales price of all sales of tickets 24 or admissions to places of amusement, fairs, and athletic 25 events except those of elementary and secondary educational 26 institutions. A tax of six percent at the rate specified in 27 subsection 12 is imposed on the sales price of an entry fee or 28 like charge imposed solely for the privilege of participating 29 in an activity at a place of amusement, fair, or athletic event 30 unless the sales price of tickets or admissions charges for 31 observing the same activity are taxable under this subchapter . 32 A tax of six percent at the rate specified in subsection 12 33 is imposed upon that part of private club membership fees or 34 charges paid for the privilege of participating in any athletic 35 -1- LSB 1686YH (2) 88 jm/jh 1/ 8

H.F. 114 sports provided club members. 1 Sec. 3. Section 423.2, subsection 4, paragraph a, Code 2019, 2 is amended to read as follows: 3 a. A tax of six percent at the rate specified in subsection 4 12 is imposed upon the sales price derived from the operation 5 of all forms of amusement devices and games of skill, games of 6 chance, raffles, and bingo games as defined in chapter 99B , and 7 card game tournaments conducted under section 99B.27 , that are 8 operated or conducted within the state, the tax to be collected 9 from the operator in the same manner as for the collection of 10 taxes upon the sales price of tickets or admission as provided 11 in this section . Nothing in this subsection shall legalize any 12 games of skill or chance or slot-operated devices which are now 13 prohibited by law. 14 Sec. 4. Section 423.2, subsection 5, Code 2019, is amended 15 to read as follows: 16 5. There is imposed a tax of six percent at the rate 17 specified in subsection 12 upon the sales price from the 18 furnishing of services as defined in section 423.1 . 19 Sec. 5. Section 423.2, subsection 7, paragraph a, 20 unnumbered paragraph 1, Code 2019, is amended to read as 21 follows: 22 A tax of six percent at the rate specified in subsection 12 23 is imposed upon the sales price from the sales, furnishing, or 24 service of solid waste collection and disposal service. 25 Sec. 6. Section 423.2, subsection 8, paragraph a, Code 2019, 26 is amended to read as follows: 27 a. A tax of six percent at the rate specified in subsection 28 12 is imposed on the sales price from sales of bundled 29 transactions. For the purposes of this subsection , a “bundled 30 transaction” is the retail sale of two or more distinct and 31 identifiable products, except real property and services to 32 real property, which are sold for one nonitemized price. A 33 “bundled transaction” does not include the sale of any products 34 in which the sales price varies, or is negotiable, based on 35 -2- LSB 1686YH (2) 88 jm/jh 2/ 8

H.F. 114 the selection by the purchaser of the products included in the 1 transaction. 2 Sec. 7. Section 423.2, subsection 9, Code 2019, is amended 3 to read as follows: 4 9. A tax of six percent at the rate specified in 5 subsection 12 is imposed upon the sales price from any mobile 6 telecommunications service, including all paging services, 7 that this state is allowed to tax pursuant to the provisions 8 of the federal Mobile Telecommunications Sourcing Act, Pub. 9 L. No. 106-252, 4 U.S.C. §116 et seq. For purposes of this 10 subsection , taxes on mobile telecommunications service, as 11 defined under the federal Mobile Telecommunications Sourcing 12 Act that are deemed to be provided by the customer’s home 13 service provider, shall be paid to the taxing jurisdiction 14 whose territorial limits encompass the customer’s place of 15 primary use, regardless of where the mobile telecommunications 16 service originates, terminates, or passes through and 17 shall in all other respects be taxed in conformity with 18 the federal Mobile Telecommunications Sourcing Act. All 19 other provisions of the federal Mobile Telecommunications 20 Sourcing Act are adopted by the state of Iowa and incorporated 21 into this subsection by reference. With respect to mobile 22 telecommunications service under the federal Mobile 23 Telecommunications Sourcing Act, the director shall, if 24 requested, enter into agreements consistent with the provisions 25 of the federal Act. 26 Sec. 8. Section 423.2, subsection 12, Code 2019, is amended 27 by striking the subsection and inserting in lieu thereof the 28 following: 29 12. a. For the period beginning January 1, 2020, and ending 30 December 31, 2020, the sales tax rate is six and one-eighth 31 percent. 32 b. For the period beginning January 1, 2021, and ending 33 December 31, 2021, the sales tax rate is six and one-fourth 34 percent. 35 -3- LSB 1686YH (2) 88 jm/jh 3/ 8

H.F. 114 c. For the period beginning January 1, 2022, and ending 1 December 31, 2029, the sales tax rate is six and three-eighths 2 percent. 3 d. Beginning January 1, 2030, the sales tax rate is five and 4 three-eighths percent. 5 Sec. 9. Section 423.2A, subsection 2, paragraph b, Code 6 2019, is amended to read as follows: 7 b. Transfer from the remaining revenues the amounts required 8 under Article VII, section 10, of the Constitution of the State 9 of Iowa to the natural resources and outdoor recreation trust 10 fund created in section 461.31 , if applicable . 11 Sec. 10. Section 423.5, subsection 1, unnumbered paragraph 12 1, Code 2019, is amended to read as follows: 13 Except as provided in paragraph “c” , an excise tax at the 14 rate of six percent specified in subsection 4 of the purchase 15 price or installed purchase price is imposed on the following: 16 Sec. 11. Section 423.5, subsection 4, Code 2019, is amended 17 by striking the subsection and inserting in lieu thereof the 18 following: 19 4. a. For the period beginning January 1, 2020, and ending 20 December 31, 2020, the use tax rate is six and one-eighth 21 percent. 22 b. For the period beginning January 1, 2021, and ending 23 December 31, 2021, the use tax rate is six and one-fourth 24 percent. 25 c. For the period beginning January 1, 2022, and ending 26 December 31, 2029, the use tax rate is six and three-eighths 27 percent. 28 d. Beginning January 1, 2030, the use tax rate is five and 29 three-eighths percent. 30 Sec. 12. Section 423.43, subsection 1, paragraph b, Code 31 2019, is amended to read as follows: 32 b. Subsequent to the deposit into the general fund of the 33 state and after the transfer of such pursuant to paragraph “a” , 34 the department shall do the following in the order prescribed: 35 -4- LSB 1686YH (2) 88 jm/jh 4/ 8

H.F. 114 (1) Transfer the revenues collected under chapter 423B , the 1 department shall transfer one-sixth . 2 (2) (a) Transfer the applicable percentage as specified 3 in subparagraph division (b) of such remaining revenues to the 4 secure an advanced vision for education fund created in section 5 423F.2 . 6 (b) (i) For the period beginning January 1, 2020, and 7 ending December 31, 2020, the applicable percentage is sixteen 8 and three thousand two hundred sixty-five ten-thousandths 9 percent. 10 (ii) For the period beginning January 1, 2021, and ending 11 December 31, 2021, the applicable percentage is sixteen 12 percent. 13 (iii) For the period beginning January 1, 2022, and ending 14 December 31, 2029, the applicable percentage is fifteen and six 15 thousand eight hundred sixty-three ten-thousandths percent. 16 (c) This paragraph subparagraph (2) is repealed December 17 31, 2029. 18 Sec. 13. PURPOSE. The purpose of this division of this Act 19 is to provide for the implementation of Article VII, section 20 10, of the Constitution of the State of Iowa by fully funding 21 the natural resources and outdoor recreation trust fund as 22 created in section 461.31, pursuant to Article VII, section 10, 23 of the Constitution of the State of Iowa. 24 Sec. 14. EFFECTIVE DATE. This division of this Act takes 25 effect January 1, 2020. 26 DIVISION II 27 NATURAL RESOURCES AND OUTDOOR RECREATION 28 Sec. 15. Section 461.2, Code 2019, is amended by adding the 29 following new subsection: 30 NEW SUBSECTION . 3A. “Iowa nutrient reduction strategy” 31 means the latest version of the Iowa nutrient reduction 32 strategy initially presented in November 2012 by the department 33 of agriculture and land stewardship, the department of natural 34 resources, and Iowa state university of science and technology. 35 -5- LSB 1686YH (2) 88 jm/jh 5/ 8

H.F. 114 Sec. 16. NEW SECTION . 461.12 Conditions on appropriations. 1 Appropriations of trust fund moneys from the trust fund 2 to the department of natural resources, the department of 3 agriculture and land stewardship, the Iowa finance authority, 4 the economic development authority, or any other public or 5 private entity or person, for any initiative related to the 6 Iowa nutrient reduction strategy or for any other water quality 7 or flood mitigation initiative, shall be made subject to 8 satisfaction of all of the following conditions: 9 1. The Iowa nutrient reduction strategy is updated to 10 include the interim goals and timelines of the gulf hypoxia 11 Mississippi river task force that call for a twenty percent 12 reduction in nitrates and phosphorus by calendar year 2025. 13 2. Each initiative shall require a comprehensive 14 watershed-based assessment and planning process open to all 15 landowners and other stakeholders, with an absolute preference 16 for initiatives recommended or conducted by, or included in 17 the plans of, a watershed management authority, with financial 18 participation by local participants based on principles adopted 19 according to the Iowa smart planning principles in chapter 18B. 20 3. Funding preference shall be given for initiatives that 21 achieve one or more benefits in addition to nutrient reduction, 22 including but not limited to soil health, erosion prevention, 23 flood mitigation, reductions in other pollutants, wildlife 24 habitat creation or preservation, and public recreational 25 access. Trust funds shall not be used for initiatives that are 26 solely demonstration projects or initiatives under the Iowa 27 nutrient reduction strategy. 28 4. The initiative establishes specific benchmarks, 29 priorities, goals, timelines, and milestones, including 30 regular ambient water quality measurements for the initiative, 31 which are consistent with the goals and timelines of the Iowa 32 nutrient reduction strategy, including but not limited to the 33 changes required in subsection 1. 34 5. The initiative has its performance evaluated by a 35 -6- LSB 1686YH (2) 88 jm/jh 6/ 8

H.F. 114 competent and independent third-party entity at least once 1 every two years starting from the beginning of the initiative 2 and again at the conclusion of the initiative. 3 6. The initiative publicly reports participation, progress, 4 and results at least once every two years, which reports shall 5 include, at a minimum, measured changes in water quality. 6 7. The initiative shall require, at a minimum, at least 7 a fifty percent cost share from landowners or other private 8 entities or persons for improvements to private property, 9 including both installation and maintenance, and including 10 regular maintenance in accordance with public easements for a 11 minimum of twenty years. Any public moneys appropriated for 12 improvements that are not maintained or that are removed shall 13 be returned to the trust fund. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill relates to water quality by increasing the sales 18 and use tax rates and conditioning the use of moneys from the 19 natural resources and outdoor recreation trust fund. 20 DIVISION I —— SALES AND USE TAXES. Division I of the bill 21 relates to state sales and use taxes and to an amendment to 22 the Iowa Constitution ratified on November 2, 2010, which 23 created a natural resources and outdoor recreation trust fund 24 (fund) and dedicated a portion of state revenues to the fund 25 for the purposes of protecting and enhancing water quality and 26 natural areas in the state including parks, trails, and fish 27 and wildlife habitat, and conserving agricultural soils in 28 the state (Article VII, section 10). The fund is codified in 29 Code section 461.31. Pursuant to the amendment, the amount 30 credited to the fund will be equal to the amount generated 31 by an increase in the state sales tax rate occurring after 32 the effective date of the constitutional amendment, but shall 33 not exceed the amount that a state sales tax rate of 0.375 34 percent would generate. The state sales tax rate has not 35 -7- LSB 1686YH (2) 88 jm/jh 7/ 8

H.F. 114 been increased since the effective date of the constitutional 1 amendment, so no amounts have been credited to the fund. The 2 division increases the sales tax rate and the use tax rate 3 from 6 percent to 6.125 percent on January 1, 2020, from 6.125 4 percent to 6.25 percent on January 1, 2021, and from 6.25 5 percent to 6.375 percent on January 1, 2022. The division 6 also amends the transfer of use tax revenues to the secure 7 an advanced vision for education fund (SAVE) in Code section 8 423F.2 to ensure that SAVE receives approximately the same 9 proportion of the total use tax revenue as it did prior to the 10 use tax rate increases provided in the division. 11 The division takes effect January 1, 2020. 12 DIVISION II —— NATURAL RESOURCES AND OUTDOOR RECREATION. 13 Division II relates to the natural resources and outdoor 14 recreation trust fund codified in Code chapter 461. The 15 division defines “Iowa nutrient reduction strategy” for 16 purposes of Code chapter 461. The division also prescribes 17 numerous conditions that must be satisfied in order for 18 an appropriation of trust fund moneys to be made from the 19 trust fund to any public or private entity or person for an 20 initiative related to the Iowa nutrient reduction strategy, 21 or for another similar water quality or flood mitigation 22 initiative. The conditions require that the Iowa nutrient 23 reduction strategy be updated to include certain goals and 24 timelines of the gulf hypoxia Mississippi river task force, and 25 in general require initiatives to engage in or include certain 26 assessments, goals, measurements, evaluations, or reports as 27 described in the division, and establishes certain funding 28 preferences and cost-share requirements as described in the 29 division. The conditions also prohibit trust fund moneys 30 from being used for initiatives that are solely demonstration 31 projects, and requires the repayment of certain public moneys 32 appropriated for improvements to private property if the 33 improvements are not maintained or are removed. 34 -8- LSB 1686YH (2) 88 jm/jh 8/ 8