Senate File 2370 - Introduced SENATE FILE 2370 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 3152) A BILL FOR An Act relating to aircraft, including special certificates 1 issued to aircraft manufacturers, transporters, and dealers, 2 and sales tax exemptions associated with aircraft, providing 3 fees, making penalties applicable, and including effective 4 date and applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5658SV (2) 89 th/ns

S.F. 2370 DIVISION I 1 SPECIAL CERTIFICATES 2 Section 1. Section 328.28, subsection 1, Code 2022, is 3 amended to read as follows: 4 1. A manufacturer or dealer owning an aircraft otherwise 5 required to be registered under this chapter may operate the 6 aircraft for up to three years for purposes of transporting, 7 testing, demonstrating, or selling the aircraft without 8 registering the aircraft, upon condition that a special 9 certificate be obtained by the owner for each year the owner 10 operates the aircraft as provided in this section and sections 11 328.29 through 328.33 . 12 Sec. 2. Section 328.29, Code 2022, is amended to read as 13 follows: 14 328.29 Application for special certificate —— fee. 15 A manufacturer, transporter, or dealer may, upon payment 16 of a one four hundred dollar fee, make application to the 17 department upon such forms as the department may prescribe 18 for a special certificate. The applicant shall also submit 19 such reasonable proof of the applicant’s status as a bona fide 20 manufacturer, transporter, or dealer as the department may 21 require. Dealers in new aircraft shall furnish satisfactory 22 evidence of a valid franchise with the manufacturer or 23 distributor of such aircraft authorizing such dealership. 24 Sec. 3. Section 328.32, Code 2022, is amended to read as 25 follows: 26 328.32 Expiration of special certificate. 27 A special certificate expires at midnight on June 30 October 28 31 , and a new special certificate for the ensuing year may be 29 obtained by the person to whom the expired special certificate 30 was issued, upon application to the department and payment of 31 the fee provided in section 328.29 . 32 Sec. 4. Section 328.34, Code 2022, is amended by adding the 33 following new subsection: 34 NEW SUBSECTION . 7. That the person making application for, 35 -1- LSB 5658SV (2) 89 th/ns 1/ 4

S.F. 2370 or holding, a special certificate operated an aircraft for 1 purposes of transporting, testing, demonstrating, or selling 2 the aircraft, without registering the aircraft, after three 3 years of holding a special certificate for the aircraft in 4 violation of section 328.28. 5 Sec. 5. Section 328.36, subsection 1, Code 2022, is amended 6 to read as follows: 7 1. All moneys received by the department pursuant to section 8 sections 328.21 and 328.29 shall be deposited into the state 9 aviation fund created in section 328.56 . 10 Sec. 6. EFFECTIVE DATE. This division of this Act takes 11 effect June 30, 2022. 12 Sec. 7. APPLICABILITY. This division of this Act applies to 13 special certificates issued by the department of transportation 14 that are valid for a period beginning after midnight on June 15 30, 2022. Special certificates issued by the department of 16 transportation that are valid for a period beginning after 17 midnight on June 30, 2022, but beginning before midnight on 18 October 31, 2022, shall expire at midnight on October 31, 19 2023, and the validity period for such special certificates 20 shall count as only one year for purposes of section 328.28, 21 subsection 1, as amended in this division of this Act, and 22 section 328.34, subsection 7, as enacted in this division of 23 this Act. 24 DIVISION II 25 SALES AND USE TAX EXEMPTIONS 26 Sec. 8. Section 423.3, subsection 76, Code 2022, is amended 27 to read as follows: 28 76. The sales price from the sale of tangible personal 29 property permanently affixed or attached as a component 30 part of the aircraft, including but not limited to repair or 31 replacement materials or parts; and the sales price of all 32 services used for aircraft repair, remodeling, and maintenance 33 services when such services are performed on aircraft, aircraft 34 engines, or aircraft component materials or parts. For the 35 -2- LSB 5658SV (2) 89 th/ns 2/ 4

S.F. 2370 purposes of this exemption, “aircraft” means aircraft used 1 in nonscheduled interstate federal aviation administration 2 certificated air carrier operation operating under 14 C.F.R. 3 ch. 1, pt. 135 the same as defined in section 328.1 . 4 Sec. 9. Section 423.3, subsection 75, Code 2022, is amended 5 by striking the subsection. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 SPECIAL CERTIFICATES. Under current law, an aircraft 10 manufacturer or dealer may operate an aircraft for purposes of 11 transporting, testing, demonstrating, or selling the aircraft 12 without registering the aircraft by obtaining a special 13 certificate from the department of transportation (DOT). This 14 bill limits the period a manufacturer or dealer may operate 15 the aircraft under a special certificate to three years. The 16 bill increases the annual fee for a special certificate from 17 $100 to $400, and provides that a special certificate expires 18 at midnight on October 31 rather than midnight on June 30. 19 The bill provides that the DOT may refuse to issue, or may 20 revoke or suspend, a special certificate if the person making 21 application for, or holding, the special certificate operated 22 such an aircraft after three years of holding a special 23 certificate for the aircraft in violation of the bill. 24 Under current law, aircraft registration fees collected 25 under Code section 328.21 are required to be deposited in the 26 state aviation fund. The bill specifies that fees received by 27 the DOT for the issuance of special certificates must also be 28 deposited in the state aviation fund, in accordance with the 29 current practice. 30 These provisions take effect June 30, 2022, and apply to 31 special certificates issued by the DOT that are valid for a 32 period beginning after midnight on June 30, 2022. The bill 33 provides that special certificates issued by the DOT that are 34 valid for a period beginning after midnight on June 30, 2022, 35 -3- LSB 5658SV (2) 89 th/ns 3/ 4

S.F. 2370 but beginning before midnight on October 31, 2022, shall expire 1 at midnight on October 31, 2023, and the validity period for 2 such special certificates shall count as only one year for 3 purposes of the bill. 4 Under current law, Code section 328.40 provides that any 5 person who violates any of the provisions of Code chapter 6 328 shall be guilty of a fraudulent practice. A fraudulent 7 practice is punishable by criminal penalties under Code 8 sections 714.9 through 714.13. 9 SALES AND USE TAX EXEMPTIONS. Under current law, Code 10 section 423.3 exempts from the Iowa sales and use tax, among 11 other things, the sale or use of aircraft component parts 12 permanently attached to an aircraft, including repair or 13 replacement materials or parts, and repair, remodeling, and 14 maintenance services used on an aircraft, aircraft engine, or 15 aircraft component materials or parts, provided the aircraft is 16 used in either a scheduled or nonscheduled interstate federal 17 aviation administration (FAA) certified air carrier operation 18 (scheduled or nonscheduled FAA operation). The bill removes 19 the requirement that the aircraft be used in a scheduled or 20 nonscheduled FAA operation to qualify for the exemption. The 21 sale or use of the component parts and services described above 22 will be exempt from the sales and use tax when permanently 23 attached to or performed on any aircraft. The bill defines 24 “aircraft” to mean the same as it does for purposes of Code 25 chapter 328 (aeronautics), which includes any contrivance now 26 known, or hereafter invented, used or designed for navigation 27 of or flight in the air, for the purpose of transporting 28 persons or property, or both. 29 The bill also makes nonsubstantive changes to Code section 30 423.3(75) to strike similar language relating to the sales and 31 use tax exemption described in the bill. 32 -4- LSB 5658SV (2) 89 th/ns 4/ 4