Senate Study Bill 1196 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON DAWSON) A BILL FOR An Act relating to investment tax credits and innovation fund 1 tax credits, and including effective date and applicability 2 provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 2579XC (1) 89 ko/jh

S.F. _____ Section 1. Section 15.119, subsection 2, paragraph d, Code 1 2021, is amended to read as follows: 2 d. (1) The tax credits for investments in qualifying 3 businesses issued pursuant to section 15E.43 and for equity 4 investments in an innovation fund pursuant to section 15E.52 . 5 In allocating tax credits pursuant to this subsection , the 6 authority shall allocate two an aggregate of ten million 7 dollars for purposes of this paragraph subparagraph , unless the 8 authority determines that the tax credits awarded will be less 9 than that amount. 10 (2) On or before June 30 of each fiscal year the authority 11 shall determine the amount of tax credits to be allocated 12 for the next fiscal year beginning July 1 to investments 13 in qualifying businesses and to equity investments in an 14 innovation fund under subparagraph (1). Any tax credits 15 allocated for purposes of subparagraph (1) and not awarded 16 in that fiscal year shall be reallocated to a purpose under 17 subparagraph (1) for the next fiscal year and shall not be 18 counted against the aggregate maximum of ten million dollars. 19 Sec. 2. Section 15.119, subsection 2, paragraph e, Code 20 2021, is amended by striking the paragraph. 21 Sec. 3. Section 15E.43, subsection 2, paragraphs b and c, 22 Code 2021, are amended to read as follows: 23 b. The maximum amount of a tax credit that may be issued 24 per calendar fiscal year to a natural person and the person’s 25 spouse or dependent shall not exceed one hundred thousand 26 dollars combined. For purposes of this paragraph, a tax 27 credit issued to a partnership, limited liability company, S 28 corporation, estate, or trust electing to have income taxed 29 directly to the individual shall be deemed to be issued to 30 the individual owners based upon the pro rata share of the 31 individual’s earnings from the entity. For purposes of this 32 paragraph, “dependent” has the same meaning as provided by the 33 Internal Revenue Code. 34 c. The maximum amount of tax credits that may be issued 35 -1- LSB 2579XC (1) 89 ko/jh 1/ 3

S.F. _____ per calendar fiscal year for equity investments in any one 1 qualifying business shall not exceed five hundred thousand 2 dollars. 3 Sec. 4. EFFECTIVE DATE. This Act, being deemed of immediate 4 importance, takes effect upon enactment. 5 Sec. 5. APPLICABILITY. The following applies to tax credits 6 allocated on or after the fiscal year beginning July 1, 2021, 7 and for each fiscal year thereafter: 8 The section of this Act amending section 15.119, subsection 9 2, paragraph “d”. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill relates to investment tax credits and innovation 14 fund tax credits. 15 Under current law the economic development authority 16 (authority) must allocate $2 million to investments in 17 qualifying businesses and $8 million to equity investments 18 in innovation funds (equity investments). The bill limits 19 the authority’s tax credit allocations for investments in 20 qualifying businesses and equity investments to a maximum 21 aggregate of $10 million. The bill requires the authority 22 to determine on or before June 30 of each fiscal year the 23 amount of tax credits to be allocated to each. In addition, 24 any amount of tax credits allocated and not awarded in that 25 fiscal year must be reallocated to either investments in 26 qualifying businesses or to equity investments for the next 27 fiscal year, and those tax credits do not count towards the 28 maximum aggregate of $10 million. This applies to tax credits 29 allocated on or after the fiscal year beginning July 1, 2021, 30 and for each fiscal year thereafter. 31 The bill modifies the maximum amount of an investment tax 32 credit that may be issued to a natural person and the person’s 33 spouse or dependent from a calendar year basis to a fiscal year 34 basis. The maximum amount of tax credits that may be issued 35 -2- LSB 2579XC (1) 89 ko/jh 2/ 3

S.F. _____ for equity investments in any one qualifying business is also 1 modified from a calendar year to a fiscal year. 2 The bill is effective upon enactment. 3 -3- LSB 2579XC (1) 89 ko/jh 3/ 3