House File 277 - Introduced HOUSE FILE 277 BY MAXWELL A BILL FOR An Act creating a tax credit against the individual and 1 corporate income taxes, the franchise tax, insurance 2 premiums tax, and the moneys and credits tax for a 3 charitable contribution to certain institutions engaged in 4 regenerative medicine research and including applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1902YH (2) 88 jm/jh

H.F. 277 Section 1. LEGISLATIVE FINDINGS AND PURPOSE. The general 1 assembly finds that research on regenerative medicine has the 2 potential to produce valuable advances in the field of medicine 3 and that an increase in such research in this state could 4 result in a substantial benefit to the state and its citizens. 5 The purpose of the regenerative medicine research tax credit 6 enacted in this Act is to induce taxpayers to make monetary 7 contributions to regenerative medicine research institutions 8 above amounts that would have been contributed absent state 9 support, thereby increasing the overall level of funding 10 available for regenerative medicine research in this state. 11 Sec. 2. Section 2.48, subsection 3, paragraph h, Code 2019, 12 is amended to read as follows: 13 h. In 2022, the renewable chemical production tax credit 14 program available under sections 15.315 through 15.322 and 15 the regenerative medicine research tax credit under section 16 422.10C . 17 Sec. 3. NEW SECTION . 422.10C Regenerative medicine research 18 tax credit. 19 1. Definitions. For purposes of this section, “certified 20 regenerative medicine research institution” means an organization 21 meeting the requirements of subsection 2 and certified by the 22 department pursuant to that subsection. 23 2. Regenerative medicine research institution certification. 24 a. An organization may apply to the department in the manner 25 prescribed by the department to be certified as a regenerative 26 medicine research institution. 27 b. In order to be certified as a regenerative medicine 28 research institution, an organization shall meet all of the 29 following requirements: 30 (1) The organization is organized under chapter 504 and 31 qualifying under section 501(c)(3) of the Internal Revenue Code 32 as an organization exempt from federal income tax under section 33 501(a) of the Internal Revenue Code. 34 (2) The organization has a principal place of business in 35 -1- LSB 1902YH (2) 88 jm/jh 1/ 7

H.F. 277 this state. 1 (3) The organization is directly engaged in research in 2 this state solely using adult stem cells, which research is 3 designed to improve patient care through the development and 4 dissemination of novel clinical therapies for the functional 5 repair and replacement of diseased tissues and organs, 6 including research for the treatment of cancer. 7 (4) The organization spends at least fifty-one percent of 8 its annual budget on laboratory or clinical research that is 9 conducted by the organization and that meets the requirements 10 of subparagraph (3). 11 (5) The organization does not operate as a conduit 12 for research by another organization by redistributing a 13 contribution it receives to that other organization. 14 (6) The organization is not a postsecondary institution or 15 an entity receiving twenty-five percent or more of its annual 16 budget from a postsecondary institution. 17 (7) The organization agrees to provide to the department all 18 of the following information: 19 (a) Information to verify that the organization meets the 20 requirements of subparagraphs (1) through (6), including but 21 not limited to information relating to funding received by the 22 organization and expenditures made on research and other items 23 by the organization. 24 (b) Information to verify the receipt, donor identity, 25 value, and tax credit eligibility of contributions received by 26 the organization. 27 (c) Information regarding the amount of charitable 28 contributions received by the organization prior to 29 certification under this section, and the amount of charitable 30 contributions received for each fiscal year the organization is 31 a certified regenerative medicine research institution. 32 (d) Any other information reasonably required by the 33 department in order to properly administer this section. 34 c. Unless certification is revoked pursuant to paragraph 35 -2- LSB 1902YH (2) 88 jm/jh 2/ 7

H.F. 277 “d” , a certification received pursuant to this subsection shall 1 be valid for one year, at which time the organization may apply 2 to the department in the manner prescribed by the department to 3 become recertified pursuant to this subsection. 4 d. An organization shall notify the department in a timely 5 manner of any changes that affect the organization’s ability 6 to qualify as a certified regenerative medicine research 7 institution. The department shall revoke the certification of 8 an organization certified pursuant to this subsection if that 9 organization subsequently fails to meet the requirements of 10 paragraph “b” . The revocation of a certification under this 11 paragraph shall not prohibit an organization from subsequently 12 applying to be certified under this subsection. 13 3. Application. 14 a. To receive a tax credit under this section, a taxpayer 15 must submit an application to the department in the manner and 16 form prescribed by the department on or after the date of the 17 charitable contribution to the certified regenerative medicine 18 research institution for which the tax credit is sought. 19 b. The department shall issue tax credits and related 20 tax credit certificates on a first-come, first-served basis 21 in the order the applications are received until the maximum 22 amount of tax credits authorized pursuant to subsection 4 23 is reached. If for a fiscal year the maximum amount of tax 24 credits applied for exceeds the amount specified in subsection 25 4, the department shall establish a wait list for tax credits. 26 Valid applications received but not approved by the department 27 shall be placed on a wait list in the order the applications 28 were received and those applicants shall be given priority for 29 receiving tax credits in succeeding fiscal years. Placement 30 on a wait list pursuant to this paragraph shall not constitute 31 a promise binding the state. The availability of a tax 32 credit and approval of a tax credit application pursuant to 33 this section in a future fiscal year is contingent upon the 34 availability of tax credits in that particular year. 35 -3- LSB 1902YH (2) 88 jm/jh 3/ 7

H.F. 277 4. Maximum tax credit amounts. The maximum aggregate amount 1 of tax credits issued in a fiscal year pursuant to this section 2 shall not exceed two million dollars. 3 5. Regenerative medicine research tax credit. 4 a. The taxes imposed under this division, less the credits 5 allowed under section 422.12, or the taxes imposed in division 6 III or V of this chapter, or the taxes imposed in chapter 432, 7 or the moneys and credits tax imposed in section 533.329, shall 8 be reduced by a regenerative medicine research tax credit equal 9 to sixty percent of a taxpayer’s charitable contribution to a 10 certified regenerative medicine research institution. 11 b. An individual may claim the tax credit allowed a 12 partnership, limited liability company, S corporation, estate, 13 or trust electing to have the income taxed directly to the 14 individual. The amount claimed by the individual shall be 15 based upon the pro rata share of the individual’s earnings of 16 the partnership, limited liability company, S corporation, 17 estate, or trust. 18 c. For tax credit certificates issued by the department in 19 the fiscal year during which the charitable contribution is 20 made, the tax credit shall be claimed for the applicant’s tax 21 year during which the charitable contribution is made. For tax 22 credit certificates issued in any fiscal year following the 23 fiscal year during which the charitable contribution is made, 24 the tax credit shall be claimed for the applicant’s tax year 25 during which the tax credit is issued by the department. For 26 an individual claiming the tax credit allowed another entity 27 pursuant to paragraph “b” , the tax credit shall be claimed for 28 the individual’s tax year beginning on or after the first day 29 of the tax year for which the other entity was allowed to claim 30 the tax credit. 31 d. Any tax credit in excess of the taxpayer’s tax liability 32 is not refundable but the excess for the tax year may be 33 credited to the tax liability for the following four years or 34 until depleted, whichever is earlier. A tax credit shall not 35 -4- LSB 1902YH (2) 88 jm/jh 4/ 7

H.F. 277 be carried back to a prior tax year. 1 e. (1) To claim a tax credit under this section, a taxpayer 2 shall include one or more tax credit certificates with the 3 taxpayer’s tax return. 4 (2) The tax credit certificate shall contain the taxpayer’s 5 name, address, tax identification number, the amount of the 6 credit, and any other information required by the department. 7 (3) The tax credit certificate, unless rescinded by the 8 department, shall be accepted by the department as payment 9 for the taxes imposed under this division, division III or V 10 of this chapter, chapter 432, and section 533.329, subject 11 to any conditions or restrictions placed by the department 12 upon the face of the tax credit certificate and subject to the 13 limitations of this section. 14 f. The amount of the charitable contribution for which the 15 tax credit is claimed shall not be deductible in determining 16 taxable income for state tax purposes. 17 Sec. 4. Section 422.33, Code 2019, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 27. The taxes imposed under this division 20 shall be reduced by a regenerative medicine research tax credit 21 in the same manner, for the same amount, and under the same 22 conditions as provided in section 422.10C. 23 Sec. 5. Section 422.60, Code 2019, is amended by adding the 24 following new subsection: 25 NEW SUBSECTION . 14. The taxes imposed under this division 26 shall be reduced by a regenerative medicine research tax credit 27 in the same manner, for the same amount, and under the same 28 conditions as provided in section 422.10C. 29 Sec. 6. NEW SECTION . 432.12N Regenerative medicine research 30 tax credit. 31 The taxes imposed under this chapter shall be reduced by a 32 regenerative medicine research tax credit in the same manner, 33 for the same amount, and under the same conditions as provided 34 in section 422.10C. 35 -5- LSB 1902YH (2) 88 jm/jh 5/ 7

H.F. 277 Sec. 7. Section 533.329, subsection 2, Code 2019, is amended 1 by adding the following new paragraph: 2 NEW PARAGRAPH . l. The moneys and credits tax imposed 3 under this section shall be reduced by a regenerative medicine 4 research tax credit in the same manner, for the same amount, 5 and under the same conditions as provided in section 422.10C. 6 Sec. 8. APPLICABILITY. This Act applies to charitable 7 contributions to a certified regenerative medicine research 8 institution made on or after January 1, 2020. 9 Sec. 9. TAX CREDIT CERTIFICATE ISSUANCES. Tax credit 10 certificates available pursuant to the regenerative medicine 11 research tax credit enacted in this Act shall not be issued by 12 the department of revenue prior to July 1, 2020. 13 EXPLANATION 14 The inclusion of this explanation does not constitute agreement with 15 the explanation’s substance by the members of the general assembly. 16 This bill provides a tax credit against the individual or 17 corporate income tax, the franchise tax, the insurance premiums 18 tax, and the moneys and credits tax for 60 percent of a 19 taxpayer’s charitable contribution to a certified regenerative 20 medicine research institution. 21 Regenerative medicine research institutions must apply 22 for and receive certification from the department of revenue 23 (department) as described in the bill in order for charitable 24 contributions to that institution to qualify for the tax 25 credit. To qualify for certification, a regenerative medicine 26 research institution must be a tax-exempt organization under 27 section 501(c)(3) of the Internal Revenue Code, must have 28 its principal place of business in Iowa, must be directly 29 engaged in research in this state solely using adult stem 30 cells designed to develop novel clinical therapies for the 31 functional repair and replacement of diseased tissues and 32 organs, including cancer research, must spend at least 51 33 percent of its annual budget on such research, and must agree 34 to provide the department with certain information necessary 35 -6- LSB 1902YH (2) 88 jm/jh 6/ 7

H.F. 277 to verify eligibility for the tax credits. In addition, a 1 regenerative medicine research institution must not be a 2 conduit for research by another organization, and must not be 3 a postsecondary institution or an entity receiving 25 percent 4 or more of its annual budget from a postsecondary institution. 5 Certification by the department is valid for one year, at which 6 time regenerative medicine research institutions may apply for 7 recertification. 8 In order to claim the tax credit, a taxpayer must submit an 9 application to the department as described in the bill on or 10 after the date of the charitable contribution and receive a 11 tax credit certificate. No more than $2 million in tax credit 12 certificates may be issued per fiscal year. If applications 13 for the tax credit exceed that amount in a fiscal year, the 14 department is required to establish a wait list in the order 15 the applications were received and those applications will 16 receive priority for receiving tax credits in succeeding years. 17 The bill provides procedures for when a tax credit shall be 18 claimed by a taxpayer. The tax credit is nonrefundable, but 19 any amount in excess of the taxpayer’s tax liability may be 20 carried forward for up to four years. The tax credit cannot 21 be carried back to a prior tax year. The bill prohibits 22 contributions receiving a tax credit from also being deducted 23 as a charitable contribution. 24 Finally, the bill includes legislative findings and a 25 legislative purpose for the tax credit, and adds the tax 26 credit to the list of tax expenditures to be reviewed by the 27 legislative tax expenditure committee beginning in 2022. 28 The bill applies to charitable contributions to a certified 29 regenerative medicine research institution made on or after 30 January 1, 2020. However, the bill provides that tax credit 31 certificates shall not be issued by the department prior to 32 July 1, 2020. 33 -7- LSB 1902YH (2) 88 jm/jh 7/ 7