House Study Bill 233 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON ECONOMIC GROWTH BILL BY CHAIRPERSON SORENSEN) 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 2605YC (2) 89 ko/jh

H.F. _____ 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 This paragraph 21 is repealed July 1, 2030. 22 DIVISION II 23 STATEWIDE TOURISM MARKETING CAMPAIGN FUNDING 24 Sec. 3.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 2605YC (2) 89 ko/jh 1/ 12

H.F. _____ 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 2605YC (2) 89 ko/jh 2/ 12

H.F. _____ 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. a. Application and agreement. A business seeking 31 approval to claim additional first-year depreciation for an 32 eligible investment shall make application to the authority 33 in the manner prescribed by the authority by rule. The 34 application must include all of the following: 35 -3- LSB 2605YC (2) 89 ko/jh 3/ 12

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

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

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

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

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

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

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

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

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