House File 348 - Introduced HOUSE FILE 348 BY MITCHELL A BILL FOR An Act creating the manufacturer activities tax credit 1 available against the individual and corporate income taxes, 2 and including effective date and applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1695YH (3) 89 jm/jh

H.F. 348 Section 1. NEW SECTION . 422.11X Manufacturer activities 1 tax credit. 2 1. The taxes imposed under this subchapter, less the 3 credits allowed under section 422.12, shall be reduced by a 4 manufacturer activities tax credit. 5 2. The manufacturer activities tax credit shall equal the 6 product of the following: 7 a. Five percent. 8 b. Net income derived from the sale, lease, rental, license, 9 exchange, or other disposition of tangible personal property 10 that is a product of manufacturing on property classified and 11 taxed as industrial property in Iowa. 12 3. Any credit in excess of the tax liability is not 13 refundable but the excess for the tax year may be credited to 14 the tax liability for the following fifteen years or until 15 depleted, whichever is earlier. 16 4. An individual may claim the manufacturer activities tax 17 credit if the business is a partnership, S corporation, limited 18 liability company, or estate or trust which elects to have the 19 income taxed directly to the individual. 20 5. As used in this section: 21 a. (1) “Manufacturer” means a business that primarily 22 purchases, receives, or holds tangible personal property of any 23 description for the purpose of adding to its value by a process 24 of manufacturing with a view to selling the property for gain 25 or profit. 26 (2) “Manufacturer” includes contract manufacturers. A 27 contract manufacturer is a manufacturer that otherwise falls 28 within the definition of manufacturer, except that a contract 29 manufacturer does not sell the tangible personal property 30 the contract manufacturer processes on behalf of other 31 manufacturers. 32 b. (1) “Manufacturing” includes activities commonly 33 understood within the ordinary meaning of the term, and shall 34 include: 35 -1- LSB 1695YH (3) 89 jm/jh 1/ 3

H.F. 348 (a) Refining. 1 (b) Purifying. 2 (c) Combining of different materials. 3 (d) Packing of meats. 4 (e) Activities subsequent to the extractive process of 5 quarrying or mining, such as crushing, washing, sizing, or 6 blending of aggregate materials. 7 (2) “Manufacturing” does not include the following 8 activities: 9 (a) Producing, transmitting, or distributing electricity 10 or natural gas, or distributing water by a piped distribution 11 system to the public for compensation. 12 (b) Agricultural production as defined in section 423.1. 13 (c) Construction contracting. 14 (d) Repair of tangible personal property or real property. 15 (e) Sale of property taxed as industrial property. 16 (f) Transporting for hire. 17 (3) “Manufacturing” does not include activities occurring 18 on premises primarily used to make retail sales, and does not 19 include professions, occupations, and nonprofit organizations. 20 6. The department of revenue shall adopt rules pursuant to 21 chapter 17A to administer this section. 22 Sec. 2. Section 422.33, Code 2021, is amended by adding the 23 following new subsection: 24 NEW SUBSECTION . 23. The taxes imposed under this subchapter 25 shall be reduced by a manufacturer activities tax credit 26 authorized pursuant to section 422.11X. 27 Sec. 3. EFFECTIVE DATE. This Act takes effect January 1, 28 2022. 29 Sec. 4. APPLICABILITY. This Act applies to tax years 30 beginning on or after January 1, 2022. 31 EXPLANATION 32 The inclusion of this explanation does not constitute agreement with 33 the explanation’s substance by the members of the general assembly. 34 This bill creates the manufacturer activities tax credit 35 -2- LSB 1695YH (3) 89 jm/jh 2/ 3

H.F. 348 available against individual and corporate income taxes. 1 The amount of the credit equals the product of the following: 2 5 percent; and net income derived from the sale, lease, rental, 3 license, exchange, or other disposition of tangible personal 4 property manufactured on property classified and taxed as 5 industrial property in Iowa. 6 The bill defines “manufacturer” to mean a business that 7 primarily purchases, receives, or holds tangible personal 8 property of any description for the purpose of adding to its 9 value by a process of manufacturing with a view to selling 10 the property for gain or profit. A manufacturer includes a 11 contract manufacturer. Manufacturing includes activities 12 commonly understood within the meaning of the term, including 13 refining, purifying, combining different materials, packing of 14 meats, and activities subsequent to the extractive process of 15 quarrying or mining. 16 The following activities are not considered manufacturing 17 under the bill: producing, transmitting, or distributing 18 electricity, natural gas, or water; agricultural production; 19 construction contracting; repair of tangible personal property 20 or real property; sale of property taxed as industrial 21 property; and transporting for hire. The bill also excludes 22 the following from manufacturing: activities occurring on 23 premises primarily used to make retail sales, professions, 24 occupations, and nonprofit organizations. 25 The bill takes effect January 1, 2022, and applies to tax 26 years beginning on or after that date. 27 -3- LSB 1695YH (3) 89 jm/jh 3/ 3