House File 112 - Introduced HOUSE FILE 112 BY BRINK A BILL FOR An Act relating to certain tax credits and assistance awarded 1 by the economic development authority, and including 2 effective date provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1180YH (6) 89 ko/jh

H.F. 112 Section 1. Section 15.119, subsection 2, paragraphs d and e, 1 Code 2021, are amended to read as follows: 2 d. The tax credits for investments in qualifying businesses 3 issued pursuant to section 15E.43 . In allocating tax credits 4 pursuant to this subsection , the authority shall allocate at 5 least two million but not more than four million dollars for 6 purposes of this paragraph, unless the authority determines 7 that the tax credits awarded will be less than that amount. 8 e. The tax credits for investments in an innovation fund 9 pursuant to section 15E.52 . In allocating tax credits pursuant 10 to this subsection , the authority shall allocate at least six 11 million but not more than eight million dollars for purposes of 12 this paragraph, unless the authority determines that the tax 13 credits awarded will be less than that amount. 14 Sec. 2. Section 15.119, Code 2021, is amended by adding the 15 following new subsection: 16 NEW SUBSECTION . 2A. On or before June 30 of each year, 17 the authority shall determine the amount of tax credits that 18 shall be issued pursuant to sections 15E.43 and 15E.52 for 19 the following fiscal year. In allocating the amount of tax 20 credits authorized pursuant to subsection 1 among the programs 21 specified in subsection 2, the aggregate amount allocated by 22 the authority for purposes of subsection 2, paragraphs “d” and 23 “e” , shall not exceed ten million dollars. 24 Sec. 3. Section 15.327, Code 2021, is amended by adding the 25 following new subsection: 26 NEW SUBSECTION . 27. “Rural community” means any city 27 located in this state with a population of thirty thousand 28 or less in a county with a population of fifty thousand or 29 less. A rural community located in more than one county shall 30 be considered to be located in the county having the greatest 31 taxable base within the city. 32 Sec. 4. Section 15.335A, subsection 1, unnumbered paragraph 33 1, Code 2021, is amended to read as follows: 34 Tax incentives are available to eligible businesses as 35 -1- LSB 1180YH (6) 89 ko/jh 1/ 7

H.F. 112 provided in this section subsection and subsection 1A . The 1 incentives are based upon the number of jobs created or 2 retained that pay at least one hundred twenty percent of the 3 qualifying wage threshold and the amount of the qualifying 4 investment made according to the following schedule: 5 Sec. 5. Section 15.335A, Code 2021, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 1A. Tax incentives are available to 8 eligible businesses located in rural communities as provided 9 in this subsection. The incentives are based upon the number 10 of jobs created or retained that pay at least one hundred ten 11 percent of the qualifying wage threshold and the amount of the 12 qualifying investment made according to the following schedule: 13 a. The number of jobs is zero and economic activity is 14 furthered by the qualifying investment and the amount of the 15 qualifying investment is one of the following: 16 (1) Less than fifty thousand dollars, then the tax incentive 17 is the investment tax credit of up to two percent. 18 (2) At least fifty thousand dollars but less than two 19 hundred fifty thousand dollars, then the tax incentives are the 20 investment tax credit of up to two percent and the sales tax 21 refund. 22 (3) At least two hundred fifty thousand dollars, then the 23 tax incentives are the investment tax credit of up to two 24 percent, the sales tax refund, and the additional research and 25 development tax credit. 26 b. The number of jobs is one but not more than five and the 27 amount of the qualifying investment is one of the following: 28 (1) Less than fifty thousand dollars, then the tax incentive 29 is the investment tax credit of up to three percent. 30 (2) At least fifty thousand dollars but less than two 31 hundred fifty thousand dollars, then the tax incentives are the 32 investment tax credit of up to three percent and the sales tax 33 refund. 34 (3) At least two hundred fifty thousand dollars, then the 35 -2- LSB 1180YH (6) 89 ko/jh 2/ 7

H.F. 112 tax incentives are the investment tax credit of up to three 1 percent, the sales tax refund, and the additional research and 2 development tax credit. 3 c. The number of jobs is six but not more than ten and the 4 amount of the qualifying investment is one of the following: 5 (1) Less than fifty thousand dollars, then the tax incentive 6 is the investment tax credit of up to four percent. 7 (2) At least fifty thousand dollars but less than two 8 hundred fifty thousand dollars, then the tax incentives are the 9 investment tax credit of up to four percent and the sales tax 10 refund. 11 (3) At least two hundred fifty thousand dollars, then the 12 tax incentives are the investment tax credit of up to four 13 percent, the sales tax refund, and the additional research and 14 development tax credit. 15 d. The number of jobs is eleven but not more than fifteen 16 and the amount of the qualifying investment is one of the 17 following: 18 (1) Less than fifty thousand dollars, then the tax incentive 19 is the investment tax credit of up to five percent. 20 (2) At least fifty thousand dollars but less than two 21 hundred fifty thousand dollars, then the tax incentives are the 22 investment tax credit of up to five percent and the sales tax 23 refund. 24 (3) At least two hundred fifty thousand dollars, then the 25 tax incentives are the investment tax credit of up to five 26 percent, the sales tax refund, and the additional research and 27 development tax credit. 28 e. The number of jobs is sixteen or more and the amount of 29 the qualifying investment is one of the following: 30 (1) Less than fifty thousand dollars, then the tax incentive 31 is the investment tax credit of up to six percent. 32 (2) At least fifty thousand dollars but less than two 33 hundred fifty thousand dollars, then the tax incentives are the 34 investment tax credit of up to six percent and the sales tax 35 -3- LSB 1180YH (6) 89 ko/jh 3/ 7

H.F. 112 refund. 1 (3) At least two hundred fifty thousand dollars, then the 2 tax incentives are the investment tax credit of up to six 3 percent, the sales tax refund, and the additional research and 4 development tax credit. 5 f. The number of jobs is thirty-one but not more than forty 6 and the amount of the qualifying investment is at least five 7 million dollars, then the tax incentives are the local property 8 tax exemption, the investment tax credit of up to seven 9 percent, the sales tax refund, and the additional research and 10 development tax credit. 11 g. The number of jobs is forty-one but not more than sixty 12 and the amount of the qualifying investment is at least five 13 million dollars, then the tax incentives are the local property 14 tax exemption, the investment tax credit of up to eight 15 percent, the sales tax refund, and the additional research and 16 development tax credit. 17 h. The number of jobs is sixty-one but not more than 18 eighty and the amount of the qualifying investment is at least 19 five million dollars, then the tax incentives are the local 20 property tax exemption, the investment tax credit of up to nine 21 percent, the sales tax refund, and the additional research and 22 development tax credit. 23 i. The number of jobs is eighty-one but not more than one 24 hundred and the amount of the qualifying investment is at least 25 five million dollars, then the tax incentives are the local 26 property tax exemption, the investment tax credit of up to ten 27 percent, the sales tax refund, and the additional research and 28 development tax credit. 29 j. The number of jobs is at least one hundred one and the 30 amount of the qualifying investment is at least ten million 31 dollars, then the tax incentives are the local property 32 tax exemption, the investment tax credit of up to eleven 33 percent, the sales tax refund, and the additional research and 34 development tax credit. 35 -4- LSB 1180YH (6) 89 ko/jh 4/ 7

H.F. 112 Sec. 6. Section 15.335B, subsection 3, paragraph c, Code 1 2021, is amended to read as follows: 2 c. (1) Consider the amount and type of the local community 3 match . The as follows: 4 (a) In a community with a population of less than five 5 thousand, a community match shall not be required. 6 (b) In a community with a population equal to or greater 7 than five thousand, but less than fifteen thousand, a community 8 match of at least five percent of the projected funds to be 9 expended by the eligible business shall be required. 10 (c) In a community with a population equal to or greater 11 than fifteen thousand, but less than thirty thousand, a 12 community match of at least ten percent of the projected funds 13 to be expended by the eligible business shall be required. 14 (d) In a community with a population equal to or greater 15 than thirty thousand, a community match of at least twenty 16 percent of the projected funds to be expended by the eligible 17 business shall be required. 18 (2) Notwithstanding subparagraph (1), the authority may 19 provide assistance to an early-stage business in a high-growth 20 industry regardless of the amount of local match involved. 21 Sec. 7. NEW SECTION . 15.337A Rules. 22 The authority shall adopt rules pursuant to chapter 17A to 23 administer this part. 24 Sec. 8. Section 15E.43, subsection 2, paragraphs b and c, 25 Code 2021, are amended to read as follows: 26 b. The maximum amount of a tax credit that may be issued 27 per calendar fiscal year to a natural person and the person’s 28 spouse or dependent shall not exceed one hundred thousand 29 dollars combined. For purposes of this paragraph, a tax 30 credit issued to a partnership, limited liability company, S 31 corporation, estate, or trust electing to have income taxed 32 directly to the individual shall be deemed to be issued to 33 the individual owners based upon the pro rata share of the 34 individual’s earnings from the entity. For purposes of this 35 -5- LSB 1180YH (6) 89 ko/jh 5/ 7

H.F. 112 paragraph, “dependent” has the same meaning as provided by the 1 Internal Revenue Code. 2 c. The maximum amount of tax credits that may be issued 3 per calendar fiscal year for equity investments in any one 4 qualifying business shall not exceed five hundred thousand 5 dollars. 6 Sec. 9. EFFECTIVE DATE. This Act, being deemed of immediate 7 importance, takes effect upon enactment. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill relates to certain tax credits and assistance 12 awarded by the economic development authority. 13 The bill directs the economic development authority to 14 determine on or before June 30 of each year the amount of tax 15 credits that will be issued for the following fiscal year 16 for equity investments in qualifying businesses pursuant to 17 Code section 15E.43 and in innovation funds pursuant to Code 18 section 15E.52. The bill caps the aggregate amount of these 19 tax credits at $10 million. 20 The bill changes the maximum amount of tax credits that may 21 be issued in a year to a natural person and the person’s spouse 22 or dependant, or for equity investments in any one qualifying 23 business, from a calendar year basis to a fiscal year basis. 24 The bill provides for tax incentives for eligible businesses 25 in rural communities. “Rural community” is defined in the bill 26 as a city located in this state with a population of 30,000 or 27 less in a county with a population of 50,000 or less. If the 28 rural community is located in more than one county, the rural 29 community is considered to be located in the county that has 30 the greatest taxable base within the city. The tax incentives 31 are based upon the number of jobs created or retained that pay 32 at least 110 percent of the qualifying wage threshold and the 33 amount of the qualifying investment. The tax incentives are 34 based upon a schedule as detailed in the bill. 35 -6- LSB 1180YH (6) 89 ko/jh 6/ 7

H.F. 112 The bill also details the requirements for a community 1 match, based on the size of the community, in order for an 2 eligible business to be awarded assistance by the authority 3 from the fund created in Code section 15.335B. 4 The bill directs the authority to adopt rules to administer 5 the high quality jobs program. 6 The bill takes effect upon enactment. 7 -7- LSB 1180YH (6) 89 ko/jh 7/ 7