House Study Bill 274 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON HEIN) A BILL FOR An Act relating to workforce housing tax credits, the high 1 quality jobs program, tax credits administered by the 2 economic development authority for certain investments in 3 qualifying businesses, and including effective date and 4 applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2815YC (3) 89 ko/jh

H.F. _____ DIVISION I 1 HOUSING TRUST FUND 2 Section 1. Section 428A.8, subsection 3, Code 2021, is 3 amended by striking the subsection. 4 DIVISION II 5 WORKFORCE HOUSING TAX INCENTIVES 6 Sec. 2. Section 15.119, subsection 2, paragraph g, Code 7 2021, is amended to read as follows: 8 g. (1) The workforce housing tax incentives program 9 administered pursuant to sections 15.351 through 15.356 . 10 In allocating tax credits pursuant to this subsection , the 11 authority shall not allocate more than twenty-five million 12 dollars for purposes of this paragraph. Of the moneys 13 allocated under this paragraph, ten million dollars shall be 14 reserved for allocation to qualified housing projects in small 15 cities, as defined in section 15.352 , that are registered on 16 or after July 1, 2017. 17 (2) (a) Notwithstanding subparagraph (1), in allocating 18 tax credits pursuant to this subsection for each fiscal 19 year of the period beginning July 1, 2021, and ending June 20 30, 2024, the authority shall not allocate more than fifty 21 million dollars for purposes of this paragraph. Of the moneys 22 allocated under this paragraph for each fiscal year of the 23 period beginning July 1, 2021, and ending June 30, 2024, twenty 24 million dollars shall be reserved for allocation to qualified 25 housing projects in small cities, as defined in section 15.352, 26 that are registered on or after July 1, 2017. 27 (b) This subparagraph is repealed July 1, 2024. 28 Sec. 3. Section 15.353, subsection 3, Code 2021, is amended 29 to read as follows: 30 3. a. Except as provided in paragraph “b” , the The average 31 dwelling unit cost does not exceed two hundred thousand dollars 32 per dwelling unit an amount determined by the authority by 33 rule. In determining the average dwelling unit cost the 34 authority shall consider, at a minimum, building materials, 35 -1- LSB 2815YC (3) 89 ko/jh 1/ 12

H.F. _____ labor, site development, and land or property acquisition 1 costs . 2 b. (1) The average dwelling unit cost does not exceed 3 two hundred fifty thousand dollars per dwelling unit if the 4 project involves the rehabilitation, repair, redevelopment, 5 or preservation of property described in section 404A.1, 6 subsection 8 , paragraph “a” . 7 (2) The average dwelling unit cost for the project does not 8 exceed two hundred fifteen thousand dollars per dwelling unit 9 if the project is located in a small city. 10 Sec. 4. Section 15.354, subsection 3, paragraph d, Code 11 2021, is amended to read as follows: 12 d. Upon completion of a housing project, an a housing 13 business shall submit all of the following to the authority: 14 (1) An examination of the project in accordance with the 15 American institute of certified public accountants’ statements 16 on standards for attestation engagements, completed by a 17 certified public accountant authorized to practice in this 18 state , shall be submitted to the authority . 19 (2) A statement of the final amount of qualifying new 20 investment for the housing project. 21 (3) Any information the authority deems necessary to ensure 22 compliance with the agreement signed by the housing business 23 pursuant to paragraph “a” , the requirements of this part, 24 and rules the authority and the department of revenue adopt 25 pursuant to section 15.356. 26 Sec. 5. Section 15.354, subsection 3, paragraph e, 27 subparagraph (1), Code 2021, is amended to read as follows: 28 (1) Upon review of the examination , and verification of 29 the amount of the qualifying new investment, and review of 30 any other information submitted pursuant to paragraph “d” , 31 subparagraph (3), the authority may notify the housing business 32 of the amount that the housing business may claim as a refund 33 of the sales and use tax under section 15.355, subsection 2 , 34 and may issue a tax credit certificate to the housing business 35 -2- LSB 2815YC (3) 89 ko/jh 2/ 12

H.F. _____ stating the amount of workforce housing investment tax credits 1 under section 15.355 , subsection 3 , the eligible housing 2 business may claim. The sum of the amount that the housing 3 business may claim as a refund of the sales and use tax and 4 the amount of the tax credit certificate shall not exceed the 5 amount of the tax incentive award. 6 Sec. 6. Section 15.354, subsection 6, paragraphs b and c, 7 Code 2021, are amended to read as follows: 8 b. Notwithstanding subsection 1 , the authority may accept 9 applications for disaster recovery housing projects on a 10 continuous basis establish a disaster recovery application 11 period following the declaration of a major disaster by the 12 president of the United States for a county in Iowa . 13 c. Notwithstanding subsection 2 , paragraphs “a” , “b” , and 14 “d” , upon Upon review of a housing business’s application , 15 and scoring of all applications received during a disaster 16 recovery application period, the authority may make a tax 17 incentive award to a disaster recovery housing project. The 18 tax incentive award shall represent the maximum amount of tax 19 incentives that the disaster recovery housing project may 20 qualify for under the program. In determining a tax incentive 21 award, the authority shall not use an amount of project costs 22 that exceeds the amount included in the application of the 23 housing business. Tax incentive awards shall be approved by 24 the director of the authority. 25 Sec. 7. Section 15.355, subsection 2, Code 2021, is amended 26 to read as follows: 27 2. A housing business may claim a refund of the sales and 28 use taxes paid under chapter 423 that are directly related to 29 a housing project and specified in the agreement. The refund 30 available pursuant to this subsection shall be as provided in 31 section 15.331A , excluding subsection 2 , paragraph “c” , of 32 that section. For purposes of the program, the term “project 33 completion” , as used in section 15.331A , shall mean the date 34 on which the authority notifies the department of revenue that 35 -3- LSB 2815YC (3) 89 ko/jh 3/ 12

H.F. _____ all applicable requirements of an the agreement entered into 1 pursuant to section 15.354 , subsection 3, paragraph “a” , and 2 all applicable requirements of this part, including the rules 3 the authority and the department of revenue adopted pursuant to 4 section 15.356, are satisfied. 5 DIVISION III 6 HIGH QUALITY JOBS PROGRAM —— DAY CARE CENTERS 7 Sec. 8. Section 15.327, Code 2021, is amended by adding the 8 following new subsection: 9 NEW SUBSECTION . 016. “Licensed center” means the same as 10 defined in section 237A.1. 11 Sec. 9. Section 15.329, Code 2021, is amended by adding the 12 following new subsection: 13 NEW SUBSECTION . 3A. In addition to the factors in 14 subsection 3, in determining the eligibility of a business to 15 participate in the program the authority may consider whether a 16 proposed project will provide a licensed center for use by the 17 business’s employees. 18 DIVISION IV 19 HIGH QUALITY JOBS PROGRAM —— RURAL COMMUNITIES 20 Sec. 10. Section 15.327, Code 2021, is amended by adding the 21 following new subsection: 22 NEW SUBSECTION . 27. “Rural community” means any city 23 located in this state with a population of thirty thousand 24 or less in a county with a population of fifty thousand or 25 less. A rural community located in more than one county shall 26 be considered to be located in the county having the greatest 27 taxable base within the city. 28 Sec. 11. Section 15.335A, subsection 1, unnumbered 29 paragraph 1, Code 2021, is amended to read as follows: 30 Tax incentives are available to eligible businesses as 31 provided in this section subsection and subsection 1A . The 32 incentives are based upon the number of jobs created or 33 retained that pay at least one hundred twenty percent of the 34 qualifying wage threshold and the amount of the qualifying 35 -4- LSB 2815YC (3) 89 ko/jh 4/ 12

H.F. _____ investment made according to the following schedule: 1 Sec. 12. Section 15.335A, Code 2021, is amended by adding 2 the following new subsection: 3 NEW SUBSECTION . 1A. Tax incentives are available to 4 eligible businesses located in rural communities as provided 5 in this subsection. The incentives are based upon the number 6 of jobs created or retained that pay at least one hundred ten 7 percent of the qualifying wage threshold and the amount of the 8 qualifying investment made according to the following schedule: 9 a. The number of jobs is zero and economic activity is 10 furthered by the qualifying investment and the amount of the 11 qualifying investment is one of the following: 12 (1) Less than fifty thousand dollars, then the tax incentive 13 is the investment tax credit of up to two percent. 14 (2) At least fifty thousand dollars but less than two 15 hundred fifty thousand dollars, then the tax incentives are the 16 investment tax credit of up to two percent and the sales tax 17 refund. 18 (3) At least two hundred fifty thousand dollars, then the 19 tax incentives are the investment tax credit of up to two 20 percent, the sales tax refund, and the additional research and 21 development tax credit. 22 b. The number of jobs is one but not more than five and the 23 amount of the qualifying investment is one of the following: 24 (1) Less than fifty thousand dollars, then the tax incentive 25 is the investment tax credit of up to three percent. 26 (2) At least fifty thousand dollars but less than two 27 hundred fifty thousand dollars, then the tax incentives are the 28 investment tax credit of up to three percent and the sales tax 29 refund. 30 (3) At least two hundred fifty thousand dollars, then the 31 tax incentives are the investment tax credit of up to three 32 percent, the sales tax refund, and the additional research and 33 development tax credit. 34 c. The number of jobs is six but not more than ten and the 35 -5- LSB 2815YC (3) 89 ko/jh 5/ 12

H.F. _____ amount of the qualifying investment is one of the following: 1 (1) Less than fifty thousand dollars, then the tax incentive 2 is the investment tax credit of up to four percent. 3 (2) At least fifty thousand dollars but less than two 4 hundred fifty thousand dollars, then the tax incentives are the 5 investment tax credit of up to four percent and the sales tax 6 refund. 7 (3) At least two hundred fifty thousand dollars, then the 8 tax incentives are the investment tax credit of up to four 9 percent, the sales tax refund, and the additional research and 10 development tax credit. 11 d. The number of jobs is eleven but not more than fifteen 12 and the amount of the qualifying investment is one of the 13 following: 14 (1) Less than fifty thousand dollars, then the tax incentive 15 is the investment tax credit of up to five percent. 16 (2) At least fifty thousand dollars but less than two 17 hundred fifty thousand dollars, then the tax incentives are the 18 investment tax credit of up to five percent and the sales tax 19 refund. 20 (3) At least two hundred fifty thousand dollars, then the 21 tax incentives are the investment tax credit of up to five 22 percent, the sales tax refund, and the additional research and 23 development tax credit. 24 e. The number of jobs is sixteen or more and the amount of 25 the qualifying investment is one of the following: 26 (1) Less than fifty thousand dollars, then the tax incentive 27 is the investment tax credit of up to six percent. 28 (2) At least fifty thousand dollars but less than two 29 hundred fifty thousand dollars, then the tax incentives are the 30 investment tax credit of up to six percent and the sales tax 31 refund. 32 (3) At least two hundred fifty thousand dollars, then the 33 tax incentives are the investment tax credit of up to six 34 percent, the sales tax refund, and the additional research and 35 -6- LSB 2815YC (3) 89 ko/jh 6/ 12

H.F. _____ development tax credit. 1 f. The number of jobs is thirty-one but not more than forty 2 and the amount of the qualifying investment is at least five 3 million dollars, then the tax incentives are the local property 4 tax exemption, the investment tax credit of up to seven 5 percent, the sales tax refund, and the additional research and 6 development tax credit. 7 g. The number of jobs is forty-one but not more than sixty 8 and the amount of the qualifying investment is at least five 9 million dollars, then the tax incentives are the local property 10 tax exemption, the investment tax credit of up to eight 11 percent, the sales tax refund, and the additional research and 12 development tax credit. 13 h. The number of jobs is sixty-one but not more than 14 eighty and the amount of the qualifying investment is at least 15 five million dollars, then the tax incentives are the local 16 property tax exemption, the investment tax credit of up to nine 17 percent, the sales tax refund, and the additional research and 18 development tax credit. 19 i. The number of jobs is eighty-one but not more than one 20 hundred and the amount of the qualifying investment is at least 21 five million dollars, then the tax incentives are the local 22 property tax exemption, the investment tax credit of up to ten 23 percent, the sales tax refund, and the additional research and 24 development tax credit. 25 j. The number of jobs is at least one hundred one and the 26 amount of the qualifying investment is at least ten million 27 dollars, then the tax incentives are the local property 28 tax exemption, the investment tax credit of up to eleven 29 percent, the sales tax refund, and the additional research and 30 development tax credit. 31 Sec. 13. Section 15.335B, subsection 3, paragraph c, Code 32 2021, is amended to read as follows: 33 c. (1) Consider the amount and type of the local community 34 match . The as follows: 35 -7- LSB 2815YC (3) 89 ko/jh 7/ 12

H.F. _____ (a) In a community with a population of less than five 1 thousand, a community match shall not be required. 2 (b) In a community with a population equal to or greater 3 than five thousand, but less than fifteen thousand, a community 4 match of at least five percent of the projected funds to be 5 expended by the eligible business shall be required. 6 (c) In a community with a population equal to or greater 7 than fifteen thousand, but less than thirty thousand, a 8 community match of at least ten percent of the projected funds 9 to be expended by the eligible business shall be required. 10 (d) In a community with a population equal to or greater 11 than thirty thousand, a community match of at least twenty 12 percent of the projected funds to be expended by the eligible 13 business shall be required. 14 (2) Notwithstanding subparagraph (1), the authority may 15 provide assistance to an early-stage business in a high-growth 16 industry regardless of the amount of local match involved. 17 Sec. 14. NEW SECTION . 15.337A Rules. 18 The authority shall adopt rules pursuant to chapter 17A to 19 administer this part. 20 Sec. 15. EFFECTIVE DATE. This division of this Act, being 21 deemed of immediate importance, takes effect upon enactment. 22 DIVISION V 23 INVESTMENTS IN QUALIFYING BUSINESSES AND EQUITY INVESTMENTS IN 24 INNOVATION FUNDS 25 Sec. 16. Section 15.119, subsection 2, paragraph d, Code 26 2021, is amended to read as follows: 27 d. (1) The tax credits for investments in qualifying 28 businesses issued pursuant to section 15E.43 and for equity 29 investments in an innovation fund pursuant to section 15E.52 . 30 In allocating tax credits pursuant to this subsection , the 31 authority shall allocate two an aggregate of ten million 32 dollars for purposes of this paragraph subparagraph , unless the 33 authority determines that the tax credits awarded will be less 34 than that amount. 35 -8- LSB 2815YC (3) 89 ko/jh 8/ 12

H.F. _____ (2) On or before June 30 of each fiscal year the authority 1 shall determine the amount of tax credits to be allocated 2 for the next fiscal year beginning July 1 to investments 3 in qualifying businesses and to equity investments in an 4 innovation fund under subparagraph (1). Any tax credits 5 allocated for purposes of subparagraph (1) and not awarded 6 in that fiscal year shall be reallocated to a purpose under 7 subparagraph (1) for the next fiscal year and shall not be 8 counted against the aggregate maximum of ten million dollars. 9 Sec. 17. Section 15.119, subsection 2, paragraph e, Code 10 2021, is amended by striking the paragraph. 11 Sec. 18. Section 15E.43, subsection 2, paragraphs b and c, 12 Code 2021, are amended to read as follows: 13 b. The maximum amount of a tax credit that may be issued 14 per calendar fiscal year to a natural person and the person’s 15 spouse or dependent shall not exceed one hundred thousand 16 dollars combined. For purposes of this paragraph, a tax 17 credit issued to a partnership, limited liability company, S 18 corporation, estate, or trust electing to have income taxed 19 directly to the individual shall be deemed to be issued to 20 the individual owners based upon the pro rata share of the 21 individual’s earnings from the entity. For purposes of this 22 paragraph, “dependent” has the same meaning as provided by the 23 Internal Revenue Code. 24 c. The maximum amount of tax credits that may be issued 25 per calendar fiscal year for equity investments in any one 26 qualifying business shall not exceed five hundred thousand 27 dollars. 28 Sec. 19. EFFECTIVE DATE. This division of this Act, being 29 deemed of immediate importance, takes effect upon enactment. 30 Sec. 20. APPLICABILITY. The following applies to tax 31 credits allocated on or after the fiscal year beginning July 1, 32 2021, and for each fiscal year thereafter: 33 The section of this division of this Act amending section 34 15.119, subsection 2, paragraph “d”. 35 -9- LSB 2815YC (3) 89 ko/jh 9/ 12

H.F. _____ EXPLANATION 1 The inclusion of this explanation does not constitute agreement with 2 the explanation’s substance by the members of the general assembly. 3 This bill relates to tax credits and programs administered 4 by the economic development authority (authority). The bill is 5 divided into divisions. 6 DIVISION I —— HOUSING TRUST FUND. The bill removes the $3 7 million cap placed on the transfer of the real estate transfer 8 tax receipts to the housing trust fund by the treasurer of 9 state. Currently, the treasurer of state transfers 30 percent 10 of real estate transfer tax receipts received by the treasurer 11 of state to the housing trust fund up to $3 million. 12 DIVISION II —— WORKFORCE HOUSING TAX INCENTIVES. Code 13 section 15.119 sets an aggregate tax credit amount limit for 14 certain economic development programs. Under current law, 15 workforce housing tax incentive programs administered under 16 Code sections 15.351 through 15.356 shall not be allocated 17 more than $25 million in tax credits, and of the tax credits 18 allocated to these programs, $10 million of the tax credits is 19 reserved for allocation to qualified housing projects in small 20 cities. The bill increases the workforce housing tax credit 21 allocations from $25 million to $50 million. Of the moneys 22 allocated to workforce housing tax credits, the bill increases 23 the tax credits reserved for qualified housing projects in 24 small cities from $10 million to $20 million. The increased 25 amounts for workforce housing and small city tax credit 26 allocations established in the bill are repealed July 1, 2024. 27 The bill strikes the requirement that the average dwelling 28 unit costs of a proposed housing development not exceed certain 29 dollar amounts per dwelling unit in order to receive workforce 30 housing tax incentives. The bill allows the authority to set 31 the average dwelling unit costs by rule as a requirement for a 32 project to receive workforce housing tax incentives, based upon 33 building materials, labor, site development, and acquisition 34 costs. 35 -10- LSB 2815YC (3) 89 ko/jh 10/ 12

H.F. _____ Currently, upon completion of a housing project, a housing 1 business (housing developer, contractor, or nonprofit that 2 completes a housing project) submits an examination of the 3 project in accordance with the American institute of certified 4 public accountants to the authority. In addition to an 5 examination by certified public accountants, the bill requires 6 the housing business to submit the following to the authority 7 upon completion of a housing project: a statement of the 8 final amount of the qualifying new investment for the housing 9 project and any information the authority deems necessary to 10 ensure compliance with the agreement between the authority and 11 the housing business including any rules the authority and the 12 department of revenue adopt pursuant to Code section 15.356. 13 The bill also requires the authority to review the information 14 submitted by the housing business prior to notifying the 15 housing business of tax incentive awards. 16 The bill permits the authority to establish a disaster 17 housing recovery period following the declaration of a major 18 disaster by the president of the United States. Currently, the 19 authority may accept applications for disaster recovery housing 20 projects on a continuous basis. 21 DIVISION III —— HIGH QUALITY JOBS PROGRAM —— DAY CARE 22 CENTERS. The bill permits the authority to consider whether 23 a proposed project will provide a licensed child center for 24 use by the business’s employees in determining the business’s 25 eligibility for participation in the high quality jobs program. 26 DIVISION IV —— HIGH QUALITY JOBS PROGRAM —— RURAL 27 COMMUNITIES. The bill provides for tax incentives for eligible 28 businesses in rural communities. “Rural community” is defined 29 in the bill as a city located in this state with a population 30 of 30,000 or less in a county with a population of 50,000 or 31 less. If the rural community is located in more than one 32 county, the rural community is considered to be located in the 33 county that has the greatest taxable base within the city. The 34 tax incentives are based upon the number of jobs created or 35 -11- LSB 2815YC (3) 89 ko/jh 11/ 12

H.F. _____ retained that pay at least 110 percent of the qualifying wage 1 threshold and the amount of the qualifying investment. The tax 2 incentives are based upon a schedule as detailed in the bill. 3 The bill also details the requirements for a community 4 match, based on the size of the community, in order for an 5 eligible business to be awarded assistance by the authority 6 from the fund created in Code section 15.335B. 7 The bill directs the authority to adopt rules to administer 8 the high quality jobs program. 9 This division of the bill takes effect upon enactment. 10 DIVISION V —— INVESTMENTS IN QUALIFYING BUSINESSES AND 11 EQUITY INVESTMENTS IN INNOVATION FUNDS. Under current law 12 the authority must allocate $2 million to investments in 13 qualifying businesses and $8 million to equity investments in 14 innovation funds (equity investments). The division limits 15 the authority’s tax credit allocations for investments in 16 qualifying businesses and equity investments to a maximum 17 aggregate of $10 million. The division requires the authority 18 to determine on or before June 30 of each fiscal year the 19 amount of tax credits to be allocated to each. In addition, 20 any amount of tax credits allocated and not awarded in that 21 fiscal year must be reallocated to either investments in 22 qualifying businesses or to equity investments for the next 23 fiscal year, and those tax credits do not count towards the 24 maximum aggregate of $10 million. This applies to tax credits 25 allocated on or after the fiscal year beginning July 1, 2021, 26 and for each fiscal year thereafter. 27 The division modifies the maximum amount of an investment 28 tax credit that may be issued to a natural person and the 29 person’s spouse or dependent from a calendar year basis to a 30 fiscal year basis. The maximum amount of tax credits that may 31 be issued for equity investments in any one qualifying business 32 is also modified from a calendar year to a fiscal year. 33 The division is effective upon enactment. 34 -12- LSB 2815YC (3) 89 ko/jh 12/ 12