House File 789 - Introduced HOUSE FILE 789 BY COMMITTEE ON ECONOMIC GROWTH (SUCCESSOR TO HSB 233) A BILL FOR An Act relating to matters under the purview of the economic 1 development authority, including tax credit programs, 2 statewide tourism, incentives for manufacturers to invest in 3 smart technologies, and an energy infrastructure revolving 4 loan program, and making appropriations. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2605HV (2) 89 ko/jh

H.F. 789 DIVISION I 1 HIGH QUALITY JOBS AND OTHER TAX CREDITS 2 Section 1. Section 15.119, subsection 2, paragraph a, 3 subparagraph (3), subparagraph division (a), Code 2021, is 4 amended to read as follows: 5 (a) In allocating tax credits pursuant to this subsection 6 for the fiscal year beginning July 1, 2021, and ending June 30, 7 2022, the authority shall not allocate more than one hundred 8 five eighty million dollars for purposes of this paragraph 9 if the aggregate amount of renewable chemical production tax 10 credits under section 15.319 that were awarded on or after 11 July 1, 2018, but before July 1, 2021, equals or exceeds 12 twenty-seven million dollars. 13 Sec. 2. Section 15.119, subsection 2, paragraph h, Code 14 2021, is amended to read as follows: 15 h. The renewable chemical production tax credit program 16 administered pursuant to sections 15.315 through 15.322 . In 17 allocating tax credits pursuant to this subsection for the 18 fiscal year beginning July 1, 2021, and for each fiscal year 19 thereafter , the authority shall not allocate more than ten five 20 million dollars for purposes of this paragraph. This paragraph 21 is repealed July 1, 2030. 22 DIVISION II 23 STATEWIDE TOURISM MARKETING CAMPAIGN FUNDING 24 Sec. 3. Section 123.17, Code 2021, is amended by adding the 25 following new subsection: 26 NEW SUBSECTION . 6A. After any transfers provided for 27 in subsections 3, 5, and 6, the department of commerce shall 28 transfer to the economic development authority from the beer 29 and liquor control fund and before any other transfer to the 30 general fund, an amount not to exceed five million dollars 31 annually for a statewide tourism marketing campaign under 32 section 15.108, subsection 5. 33 DIVISION III 34 MANUFACTURING 4.0 35 -1- LSB 2605HV (2) 89 ko/jh 1/ 12

H.F. 789 Sec. 4. NEW SECTION . 15.371 Manufacturing 4.0 technology 1 investment program. 2 1. This section shall be known as and may be cited as the 3 “Manufacturing 4.0 Technology Investment Program”. 4 2. For purposes of this section unless the context otherwise 5 requires: 6 a. “Financial assistance” means the same as defined in 7 section 15.102. 8 b. “Manufacturing 4.0 technology investments” means projects 9 that are intended to lead to the adoption of, and integration 10 of, smart technologies into existing manufacturing operations 11 located in the state by mitigating the risk to the manufacturer 12 of significant technology investments. 13 3. a. A manufacturing 4.0 technology investment fund 14 is created within the state treasury under the control of 15 the authority for the purpose of financing manufacturing 4.0 16 technology investments as described in this section. 17 b. The fund may be administered as a revolving fund and 18 may consist of any moneys appropriated by the general assembly 19 for purposes of this section and any other moneys that are 20 lawfully available to the authority. Any moneys appropriated 21 to the fund shall be used for purposes of the manufacturing 22 4.0 technology investment program. The authority may use all 23 other moneys in the fund, including interest, earnings, and 24 recaptures, for purposes of this section. 25 c. Notwithstanding section 8.33, moneys appropriated in this 26 section that remain unencumbered or unobligated at the close of 27 the fiscal year shall not revert but shall remain available for 28 expenditure for the purposes designated until the close of the 29 succeeding fiscal year. 30 d. Notwithstanding any law to the contrary, the authority 31 may transfer any unobligated and unencumbered moneys in the 32 fund, except for moneys appropriated for purposes of this 33 section, to any fund created pursuant to section 15.106A, 34 subsection 1, paragraph “o” . 35 -2- LSB 2605HV (2) 89 ko/jh 2/ 12

H.F. 789 4. The authority shall establish and administer a 1 manufacturing 4.0 technology investment program and shall use 2 moneys in the fund to award financial assistance to eligible 3 manufacturers for manufacturing 4.0 technology investments. 4 5. The authority shall establish by rule a manufacturing 5 4.0 review committee that shall review each application 6 received by the authority for the program, and that shall make 7 recommendations to the board regarding all of the following: 8 a. The completeness of the application. 9 b. Whether the board should approve or deny an application. 10 c. If an application is approved, the type and amount of 11 financial assistance to be awarded to the applicant. 12 6. The authority shall adopt rules pursuant to chapter 17A 13 necessary to implement and administer this section. 14 Sec. 5. NEW SECTION . 15.372 Additional first-year 15 depreciation. 16 1. Overview. The authority may approve a manufacturing 17 business located in this state to claim additional first-year 18 depreciation for certain investments made by the business to 19 transition to a smart manufacturing environment that leverages 20 joint capabilities of hardware, software, and workers in an 21 integrated way. 22 2. Eligibility. To claim additional first-year 23 depreciation, a business must make an eligible investment. 24 For purposes of this section, “eligible investment” means 25 an investment in smart manufacturing equipment that is 26 digitized and interconnected, and that modernizes a business’s 27 operations by supporting interconnectivity, decision support, 28 customization, and flexibility of production runs, or that 29 decentralizes low-level decision making. 30 3. Application and agreement. 31 a. A business seeking approval to claim additional 32 first-year depreciation for an eligible investment shall make 33 application to the authority in the manner prescribed by the 34 authority by rule. The application must include all of the 35 -3- LSB 2605HV (2) 89 ko/jh 3/ 12

H.F. 789 following: 1 (1) A description of the investment the business proposes 2 to make and a statement describing how the investment will 3 transition the business to a smart manufacturing environment. 4 (2) The projected amount of the eligible investment. 5 (3) The projected date that the eligible investment will be 6 placed-in-service. 7 b. Completed applications shall be reviewed pursuant to 8 rules adopted by the authority. Upon review of an application, 9 the board shall determine if the proposed investment is an 10 eligible investment and shall determine the maximum amount of 11 the eligible investment the business is eligible to claim for 12 additional first-year depreciation. 13 c. If an application is approved the authority shall notify 14 the business. The notification shall include the maximum 15 amount of the eligible investment the business is eligible to 16 claim for additional first-year depreciation after all terms 17 and conditions imposed by the agreement entered into pursuant 18 to paragraph “d” have been satisfied. 19 d. After receipt of the notification under paragraph “c” , 20 the business shall enter into an agreement with the authority 21 that specifies the terms and conditions that must be satisfied 22 for the business to claim additional first-year depreciation 23 on its eligible investment. The agreement must include all of 24 the following: 25 (1) A description of the business’s eligible investment. 26 (2) The maximum amount of the eligible investment the 27 business is allowed to claim for additional first-year 28 depreciation. 29 (3) The projected placed-in-service date for the business’s 30 eligible investment. 31 (4) The date by which the business must file a written 32 report with the authority that provides all of the following: 33 (a) The actual date of completion of the business’s eligible 34 investment. 35 -4- LSB 2605HV (2) 89 ko/jh 4/ 12

H.F. 789 (b) The actual dollar amount of the business’s eligible 1 investment. 2 (c) The actual placed-in-service date for the business’s 3 eligible investment. 4 e. Upon review of the report submitted under paragraph “d” , 5 subparagraph (4), and verification by the authority of the 6 actual dollar amount of the business’s eligible investment, the 7 authority shall notify the business of the amount of eligible 8 investment the business may claim as additional first-year 9 depreciation. The authority shall notify the department of 10 revenue of the amount of eligible investment the business may 11 claim as additional first-year depreciation and shall submit a 12 list to the department of the assets deemed to be part of the 13 business’s eligible investment. 14 4. Benefit. Notwithstanding section 422.7, subsection 15 39 or 39A, or section 422.35, subsection 19 or 19A, for a 16 business that is approved by the authority for an eligible 17 investment, section 168(k) of the Internal Revenue Code applies 18 for the computing of net income of the business for state tax 19 purposes up to the amount of eligible investment approved by 20 the authority. 21 5. Compliance. If a business fails to complete the 22 installation of its eligible investment or fails to comply with 23 terms and conditions of the agreement entered under subsection 24 3, paragraph “d” , the authority shall revoke, reduce, 25 terminate, or rescind the additional first-year depreciation 26 the business may claim. If a business has already filed a 27 tax return in which the business computed its net income by 28 applying section 168(k) of the Internal Revenue Code, the 29 business shall file an amended return with the department of 30 revenue without applying section 168(k). 31 6. Rules. The authority and the department of revenue 32 shall adopt rules as necessary for the implementation and 33 administration of this section. 34 DIVISION IV 35 -5- LSB 2605HV (2) 89 ko/jh 5/ 12

H.F. 789 ENERGY INFRASTRUCTURE REVOLVING LOAN PROGRAM 1 Sec. 6. Section 476.10A, subsection 2, Code 2021, is amended 2 to read as follows: 3 2. Notwithstanding section 8.33 , any unexpended moneys 4 remitted to the treasurer of state under this section shall be 5 retained for the purposes designated. Notwithstanding section 6 12C.7, subsection 2 , interest or earnings on investments or 7 time deposits of the moneys remitted under this section shall 8 be retained and used for the purposes designated, pursuant to 9 section 476.46 . 10 Sec. 7. Section 476.46, subsection 2, paragraph e, 11 subparagraph (3), Code 2021, is amended to read as follows: 12 (3) Interest on the fund shall be deposited in the fund. 13 A portion of the interest on the fund, not to exceed fifty 14 percent of the total interest accrued, shall be used for 15 promotion and administration of the fund. 16 Sec. 8. Section 476.46, Code 2021, is amended by adding the 17 following new subsections: 18 NEW SUBSECTION . 3. The Iowa energy center shall not 19 initiate any new loans under this section after June 30, 2021. 20 NEW SUBSECTION . 4. Loan payments received under this 21 section on or after July 1, 2021, and any other moneys in the 22 fund on or after July 1, 2021, shall be deposited in the energy 23 infrastructure revolving loan fund created in section 476.46A. 24 Sec. 9. NEW SECTION . 476.46A Energy infrastructure 25 revolving loan program. 26 1. a. An energy infrastructure revolving loan fund is 27 created in the office of the treasurer of state and shall be 28 administered by the Iowa energy center established in section 29 15.120. 30 b. The fund may be administered as a revolving fund and may 31 consist of any moneys appropriated by the general assembly for 32 purposes of this section and any other moneys that are lawfully 33 directed to the fund. 34 c. Moneys in the fund shall be used to provide financial 35 -6- LSB 2605HV (2) 89 ko/jh 6/ 12

H.F. 789 assistance for the development and construction of energy 1 infrastructure, including projects that support electric or gas 2 generation transmission, storage, or distribution; electric 3 grid modernization; energy-sector workforce development; 4 emergency preparedness for rural and underserved areas; the 5 expansion of biomass, biogas, and renewable natural gas; 6 innovative technologies; and the development of infrastructure 7 for alternative fuel vehicles. 8 d. Notwithstanding section 8.33, moneys appropriated in this 9 section that remain unencumbered or unobligated at the close of 10 the fiscal year shall not revert but shall remain available for 11 expenditure for the purposes designated until the close of the 12 succeeding fiscal year. 13 e. Notwithstanding section 12C.7, subsection 2, interest 14 or earnings on moneys in the fund shall be credited to the 15 fund. A percentage of the total interest credited to the fund, 16 not to exceed fifty percent, shall be used for promotion of 17 the energy infrastructure revolving loan program and for the 18 administration of the fund. 19 2. a. The Iowa energy center shall establish and administer 20 an energy infrastructure revolving loan program to encourage 21 the development of energy infrastructure within the state. 22 b. An individual, business, rural electric cooperative, or 23 municipal utility located and operating in this state shall be 24 eligible for financial assistance under the program. With the 25 approval of the Iowa energy center governing board established 26 under section 15.120, subsection 2, the economic development 27 authority shall determine the amount and the terms of all 28 financial assistance awarded to an individual, business, rural 29 electric cooperative, or municipal utility under the program. 30 All agreements and administrative authority sha11 be vested in 31 the Iowa energy center governing board. 32 c. The economic development authority may use not more than 33 five percent of the moneys in the fund at the beginning of each 34 fiscal year for purposes of administrative costs, marketing, 35 -7- LSB 2605HV (2) 89 ko/jh 7/ 12

H.F. 789 technical assistance, and other program support. 1 3. For the purposes of this section: 2 a. “Energy infrastructure” means land, buildings, physical 3 plant and equipment, and services directly related to the 4 development of projects used for, or useful for, electricity or 5 gas generation, transmission, storage, or distribution. 6 b. “Financial assistance” means the same as defined in 7 section 15.102. 8 Sec. 10. ALTERNATE ENERGY REVOLVING LOAN FUND —— MONEYS 9 TRANSFERRED AND APPROPRIATED. Any unencumbered or unobligated 10 moneys remaining after June 30, 2021, in the alternate energy 11 revolving loan fund created pursuant to section 476.46, are 12 transferred and appropriated to the energy infrastructure 13 revolving loan fund created pursuant to section 476.46A, to be 14 used for purposes of the energy infrastructure revolving loan 15 program. 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanation’s substance by the members of the general assembly. 19 This bill relates to matters under the purview of the 20 economic development authority. The bill is divided into 21 divisions. 22 DIVISION I —— HIGH QUALITY JOBS AND OTHER TAX CREDITS. 23 Division I changes the maximum amount of tax credits that the 24 economic development authority (authority) may allocate to the 25 high quality jobs program for the fiscal year beginning July 26 1, 2021, and ending June 30, 2022, from $105 million to $80 27 million. The maximum amount of tax credits that the authority 28 may allocate to the renewable chemical production tax credit 29 program for the fiscal year beginning July 1, 2021, and ending 30 June 30, 2022, and for each fiscal year thereafter is changed 31 from $10 million to $5 million. 32 DIVISION II —— STATEWIDE TOURISM MARKETING CAMPAIGN FUNDING. 33 The division requires the department of commerce, after other 34 transfers required by Code section 123.17, to transfer to 35 -8- LSB 2605HV (2) 89 ko/jh 8/ 12

H.F. 789 the economic development authority from the beer and liquor 1 control fund and before any other transfer to the general fund, 2 an amount not to exceed $5 million annually for a statewide 3 tourism marketing campaign. 4 DIVISION III —— MANUFACTURING 4.0. The division establishes 5 the manufacturing 4.0 technology investment program (program) 6 and creates the manufacturing 4.0 technology investment fund 7 (fund). “Manufacturing 4.0 technology investments” is defined 8 as projects that are intended to lead to the adoption of, and 9 integration of, smart technologies into existing manufacturing 10 operations located in the state by mitigating the risk to the 11 manufacturer of significant technology investments. 12 The fund may be administered as a revolving fund and 13 may consist of any moneys appropriated for purposes of the 14 program and any other moneys that are lawfully available to 15 the authority. The authority must use moneys in the fund 16 to award financial assistance to eligible manufacturers for 17 manufacturing 4.0 technology investments. Financial assistance 18 may include but is not limited to grants, loans, and forgivable 19 loans. The authority must establish by rule a manufacturing 20 4.0 review committee. The committee must review each 21 application received by the authority and make recommendations 22 to the members of the authority appointed by the governor 23 and in whom the powers of the authority are vested (board), 24 whether the board should approve or deny an application, and 25 the type and amount of financial assistance to be awarded to 26 an applicant. The authority must adopt rules as necessary to 27 implement and administer the program. 28 The division permits the authority to approve a 29 manufacturing business located in this state to claim 30 additional first-year depreciation (depreciation) for certain 31 investments made by the business to transition to a smart 32 manufacturing environment that leverages joint capabilities of 33 hardware, software, and workers in an integrated way. To claim 34 depreciation, a business must make an eligible investment. 35 -9- LSB 2605HV (2) 89 ko/jh 9/ 12

H.F. 789 “Eligible investment” is defined as an investment in smart 1 manufacturing equipment that is digitized and interconnected, 2 and that modernizes a business’s operations by supporting 3 interconnectivity, decision support, customization, and 4 flexibility of production runs, or that decentralizes low-level 5 decision making. 6 The application process and the process for the authority to 7 notify the applicant of its eligibility for depreciation are 8 detailed in the division. An eligible business is required 9 to enter into an agreement with the authority that specifies 10 the terms and conditions that must be satisfied for the 11 business to claim depreciation on its eligible investment. 12 An eligible business is required to file a written report 13 with the authority that states the actual date of completion 14 of the business’s eligible investment, the actual dollar 15 amount of the business’s eligible investment, and the actual 16 placed-in-service date for the business’s eligible investment. 17 After reviewing the report and verifying the actual dollar 18 amount of the business’s eligible investment, the authority 19 must notify the business of the amount of eligible investment 20 the business may claim as depreciation. The authority must 21 also notify the department of revenue of the amount of eligible 22 investment the business may claim as depreciation and submit a 23 list to the department of the assets deemed to be part of the 24 business’s eligible investment. 25 A business that is approved by the authority for an eligible 26 investment may compute its net income in the same manner as 27 depreciation is calculated under section 168(k) of the Internal 28 Revenue Code notwithstanding contradictory provisions in Code 29 sections 422.7 and 422.35. If a business fails to complete 30 the installation of its eligible investment or to comply with 31 the terms and conditions of the agreement, the authority may 32 revoke, reduce, terminate, or rescind the depreciation the 33 business may claim, or if the business has already filed a tax 34 return in which the business computed net income under section 35 -10- LSB 2605HV (2) 89 ko/jh 10/ 12

H.F. 789 168(k), require the business to file an amended return with net 1 income computed without the application of section 168(k). 2 The authority and the department of revenue must adopt rules 3 as necessary for the implementation and administration of the 4 program. 5 DIVISION IV —— ENERGY INFRASTRUCTURE REVOLVING LOAN PROGRAM. 6 The division modifies Code section 476.46, alternate energy 7 revolving loan program, to prohibit the Iowa energy center from 8 initiating any new loans after June 30, 2021. The division 9 also requires that all loan payments received after June 30, 10 2021, be deposited, and any moneys remaining in the alternate 11 energy revolving loan fund after June 30, 2021, be transferred, 12 to the newly created energy infrastructure revolving loan fund. 13 The division creates an energy infrastructure revolving 14 fund (fund) in the office of the treasurer of state to be 15 administered by the Iowa energy center (center). Moneys in 16 the fund are to be used to provide financial assistance for 17 the development and construction of energy infrastructure, 18 including projects that support electric or gas generation 19 transmission, storage, or distribution; electric grid 20 modernization; energy-sector workforce development; emergency 21 preparedness for rural and underserved areas; the expansion 22 of biomass, biogas, and renewable natural gas; innovative 23 technologies; and the development of infrastructure for 24 alternative fuel vehicles. “Energy infrastructure” is defined 25 as land, buildings, physical plant and equipment, and services 26 directly related to the development of projects used for, 27 or useful for, electricity or gas generation, transmission, 28 storage, or distribution. “Financial assistance” is also 29 defined in the bill. 30 The center is required to establish and administer an energy 31 infrastructure revolving loan program (program) to encourage 32 the development of energy infrastructure within the state. An 33 individual, business, rural electric cooperative, or municipal 34 utility located and operating in this state is eligible for 35 -11- LSB 2605HV (2) 89 ko/jh 11/ 12

H.F. 789 financial assistance under the program. With the approval 1 of the center’s governing board, the economic development 2 authority (authority) must determine the amount and the terms 3 of all financial assistance awarded to an individual, business, 4 rural electric cooperative, or municipal utility under the 5 program. All agreements and administrative authority are 6 vested in the center’s governing board. The authority may 7 use not more than 5 percent of the moneys in the fund at the 8 beginning of each fiscal year for purposes of administrative 9 costs, marketing, technical assistance, and other program 10 support. 11 -12- LSB 2605HV (2) 89 ko/jh 12/ 12