H.F. 42 Section 1. NEW SECTION . 386A.1 Definitions. 1 As used in this chapter, unless the context requires 2 otherwise: 3 1. “Alcoholic beverage” means the same as defined in section 4 123.3. 5 2. “Council” means the governing body of a city. 6 3. “Cultural or entertainment establishment” means a sporting 7 or concert event venue, performing arts theater, movie theater, 8 museum, convention hall, or enclosed shopping mall. 9 4. “Department” means the department of revenue. 10 5. “Director” means the director of the department of 11 revenue. 12 6. “Entertainment area” or “area” means an area designated 13 by ordinance under this chapter and the cultural or 14 entertainment establishments, food establishments, liquor 15 establishments, and lodging providers therein that are subject 16 to the entertainment surcharge in accordance with section 17 386A.3. 18 7. “Entertainment tickets” means all tickets or admissions 19 subject to taxation pursuant to section 423.2, subsection 3. 20 8. “Food” means the same as defined in section 137F.1. 21 9. “Food establishment” means a food establishment licensed 22 pursuant to chapter 137F, at which food is served or sold at 23 retail. “Food establishment” also includes a temporary food 24 establishment defined in section 137F.1. 25 10. “Licensed premises” means the same as defined in section 26 123.3. 27 11. “Liquor establishment” means a licensed premises in or 28 at which alcoholic beverages are sold at retail. 29 12. “Lodging” means the same as defined in section 423A.2. 30 “Lodging” does not include lodging exempted from tax pursuant 31 to section 423A.5. 32 13. “Lodging provider” means the same as defined in section 33 423A.2. 34 14. “Property owner” or “owner” means the owner of property, 35 -1- LSB 1252YH (4) 90 md/jh 1/ 14

H.F. 42 as shown by the transfer books in the office of the county 1 auditor of the county in which the property is located. 2 15. “Retail sale” means the same as defined in section 3 423.1. 4 16. “Surcharge” means an entertainment surcharge imposed 5 pursuant to this chapter. 6 Sec. 2. NEW SECTION . 386A.2 Authorization. 7 A city that proposes to create an entertainment area and 8 impose an entertainment surcharge must do so in accordance with 9 the provisions of this chapter. 10 Sec. 3. NEW SECTION . 386A.3 Establishment of an 11 entertainment area —— entertainment surcharge —— use of revenues. 12 1. An entertainment area may be created by ordinance of the 13 council in accordance with the provisions of this section. A 14 proposed entertainment area shall meet all of the following 15 requirements: 16 a. The combined attendance at cultural or entertainment 17 establishments, food establishments, liquor establishments, 18 and lodging providers within the proposed entertainment 19 area exceeded two hundred fifty thousand persons during the 20 previous calendar year, or the attendance forecast at such 21 establishments is reasonably expected to exceed two hundred 22 fifty thousand persons per calendar year within two years of 23 the establishment of the entertainment area. 24 b. The proposed entertainment area consists of contiguous 25 parcels wholly within the boundaries of the city and does not 26 exceed seventy-five acres in total. 27 c. The proposed entertainment area does not include the 28 entire incorporated area of the city. 29 d. The proposed entertainment area consists only of 30 properties zoned for commercial uses or properties within a 31 duly designated historic district, and at least seventy-five 32 percent of the properties must be cultural or entertainment 33 establishments, food establishments, liquor establishments, or 34 lodging providers. 35 -2- LSB 1252YH (4) 90 md/jh 2/ 14

H.F. 42 e. The proposed entertainment area must be comprised of 1 property related in some manner, including but not limited 2 to present or potential use, physical location, condition, 3 relationship to the area, or relationship to present or 4 potential commercial or other activity in the area, so as 5 to be benefited in any manner, including but not limited to 6 a benefit from present or potential use or enjoyment of the 7 property, by the condition, development, or maintenance of 8 the area or of any improvement or services provided to the 9 area or be comprised of property the owners of which have a 10 present or potential benefit from the condition, development, 11 or maintenance of the area or of any improvement or services 12 provided to the area. 13 f. The entertainment area shall be given a descriptive name 14 containing the words “entertainment area”. 15 2. The council shall initiate proceedings for the adoption 16 of an ordinance under subsection 6 upon the filing of a 17 petition containing all of the following: 18 a. The signatures of at least twenty-five percent of 19 all owners of property within the proposed entertainment 20 area. These signatures must together represent ownership of 21 at least twenty-five percent or more of the total number of 22 cultural or entertainment establishments, food establishments, 23 liquor establishments, and lodging providers in the proposed 24 entertainment area. 25 b. A description of the boundaries of the proposed 26 entertainment area, or a consolidated description of the 27 property within the proposed area, along with a map depicting 28 the existing parcels of real estate located in the proposed 29 entertainment area. 30 c. The name of the proposed entertainment area. 31 d. Subject to the limitations of subsection 4, paragraph 32 “e” , a statement of the maximum surcharge rate that may be 33 imposed upon retail sales within the entertainment area. 34 e. The purpose of the establishment of the entertainment 35 -3- LSB 1252YH (4) 90 md/jh 3/ 14

H.F. 42 area, which may be stated generally, or in terms of the 1 relationship of the property within the entertainment 2 area or the interests of the owners of property within the 3 entertainment area, or in terms of the specific or general 4 categories of improvements proposed to be developed for the 5 purposes of the entertainment area, or in terms of the services 6 to be provided within the entertainment area and supported 7 from the revenues of the surcharge, or a combination of such 8 purposes. 9 f. A statement of the specified length of time the surcharge 10 shall be imposed for the purposes of the entertainment area, 11 along with any option to renew the surcharge. 12 3. Upon receiving a valid petition for establishment of 13 an entertainment area, the council shall set a time and place 14 for a public hearing on the establishment of the entertainment 15 area, and shall publish notice of the public hearing as 16 provided in section 362.3, and the clerk shall send a copy of 17 the notice by certified mail not less than fifteen days before 18 the hearing to each owner of property within the proposed 19 entertainment area at the owner’s address as shown by the 20 records of the county auditor. 21 4. In addition to the time and place of the public hearing 22 on the petition, the notice must state all of the following: 23 a. That a petition has been filed with the council asking 24 that an entertainment area be established. 25 b. The name of the entertainment area. 26 c. The purpose of the entertainment area. 27 d. The property proposed to be included in the entertainment 28 area. 29 e. The maximum surcharge, not to exceed three percent, which 30 may be imposed upon any of the following retail sales within 31 the entertainment area: 32 (1) The retail sales price of food or alcoholic beverages 33 sold at a cultural or entertainment establishment, food 34 establishment, or liquor establishment. 35 -4- LSB 1252YH (4) 90 md/jh 4/ 14

H.F. 42 (2) The retail sales price of entertainment tickets sold at 1 a cultural or entertainment establishment. 2 (3) The retail sales price for the renting of any lodging. 3 5. At the time and place set in the notice the council 4 shall hear all owners of property in the proposed entertainment 5 area or residents of the city desiring to express their 6 views. The council must wait at least thirty days after the 7 public hearing has been held before the council may adopt an 8 ordinance establishing the entertainment area. The established 9 entertainment area must be comprised of all the property in 10 the proposed entertainment area that the council finds has the 11 relationship or whose owners have the interest described in 12 subsection 1, paragraph “e” . Property included in the proposed 13 entertainment area need not be included in the established 14 entertainment area. However, no property may be included in 15 the entertainment area that was not included in the proposed 16 entertainment area until the council has held another hearing 17 after the council has published and mailed the same notice as 18 required in subsections 3 and 4 on the original petition to 19 the owners of the additional property, or has caused a notice 20 of the inclusion of the property to be personally serviced 21 upon each owner of the additional property, or has received 22 a written waiver of notice from each owner of the additional 23 property. 24 6. Adoption of the ordinance establishing the entertainment 25 area requires the affirmative vote of three-fourths of all the 26 members of the council, or in cities having three members of 27 the council, the affirmative vote of two members. However, 28 if a remonstrance has been filed with the clerk signed by at 29 least twenty-five percent of all owners of property within 30 the proposed entertainment area representing ownership of 31 at least twenty-five percent or more of the total number of 32 cultural or entertainment establishments, food establishments, 33 liquor establishments, and lodging providers in the proposed 34 entertainment area, the adoption of the ordinance requires a 35 -5- LSB 1252YH (4) 90 md/jh 5/ 14

H.F. 42 unanimous vote of the council. 1 7. The clerk shall cause a copy of the ordinance to be filed 2 in the office of the county recorder of each county in which 3 any property within the entertainment area is located. 4 8. At any time prior to the final adoption of an ordinance 5 establishing an entertainment area, the entire matter of 6 establishing such entertainment area shall be withdrawn from 7 council consideration if a petition objecting to establishing 8 such entertainment area is filed with the clerk containing 9 signatures of at least forty percent or more of all owners of 10 property in the proposed entertainment area or signatures which 11 together represent ownership of forty percent or more of the 12 total number of cultural or entertainment establishments, food 13 establishments, liquor establishments, and lodging providers 14 within the proposed entertainment area. 15 9. The adoption of an ordinance establishing an 16 entertainment area is a legislative determination that the 17 property within the entertainment area has the relationship 18 or its owners have the interest required under subsection 1, 19 paragraph “e” , and includes all of the property within the 20 entertainment area which has that relationship or the ownership 21 of which has that interest in the entertainment area. 22 10. Any resident or property owner of the city may appeal 23 the action and the decisions of the council, including 24 the creation of the entertainment area and imposition of a 25 surcharge for the entertainment area, to the district court 26 of the county in which any part of the entertainment area 27 is located, within thirty days after the date upon which the 28 ordinance creating the entertainment area becomes effective, 29 but the action and decision of the council are final and 30 conclusive unless the court finds that the council exceeded 31 its authority. An action shall not be brought questioning the 32 regularity of the proceedings pertaining to the establishment 33 of the entertainment area or the validity of the entertainment 34 area, or the propriety of the inclusion or exclusion of 35 -6- LSB 1252YH (4) 90 md/jh 6/ 14

H.F. 42 any property within or from the entertainment area, or the 1 ability of the city to impose the surcharge in accordance 2 with the ordinance establishing the entertainment area, after 3 thirty days from the date on which the ordinance creating the 4 entertainment area becomes effective. 5 11. The surcharge imposed by the ordinance establishing 6 the entertainment area shall be in addition to the state 7 sales tax imposed pursuant to chapter 423, subchapter II, the 8 state-imposed and locally imposed hotel and motel tax pursuant 9 to chapter 423A, and the local sales and services tax imposed 10 pursuant to chapter 423B. 11 12. a. Within ten days of the effective date of the 12 ordinance establishing the area and imposing the surcharge, the 13 county auditor of the county with the largest parcel in the 14 entertainment area shall give written notice to the director by 15 sending a copy of the ordinance to the director. 16 b. A surcharge shall be imposed either January 1 or July 17 1 following the notification of the director but not sooner 18 than ninety days following the effective date of the ordinance 19 imposing the surcharge and not sooner than sixty days following 20 notice to sellers with a place of business, as defined in 21 section 423.1, in the entertainment area and to lodging 22 providers operating lodging in the entertainment area. 23 c. A surcharge shall be repealed only on June 30 or December 24 31 but not sooner than ninety days following repeal of the 25 ordinance. At least forty days before the repeal of the 26 surcharge, the council shall provide notice of the action by 27 certified mail to the director. 28 13. a. An entertainment area may be dissolved and 29 terminated by action of the council rescinding the ordinance 30 creating the area and any subsequent ordinances amending the 31 area by an affirmative vote of three-fourths of all members 32 of the council, or in cities having three members of the 33 council, the affirmative vote of two members. However, if 34 a remonstrance has been filed with the clerk signed by at 35 -7- LSB 1252YH (4) 90 md/jh 7/ 14

H.F. 42 least twenty-five percent of all owners of property within the 1 area representing ownership of at least twenty-five percent 2 or more of the total number of cultural or entertainment 3 establishments, food establishments, liquor establishments, and 4 lodging providers in the area, the rescission of the ordinance 5 creating the area, and any subsequent ordinances amending the 6 area, requires a unanimous vote of the council. 7 b. At any time prior to action of the council rescinding the 8 ordinance creating the entertainment area, and any subsequent 9 ordinances amending the area, the entire matter of dissolving 10 an area shall be withdrawn from council consideration if a 11 petition is filed with its clerk containing the signatures of 12 at least forty percent of all owners of property within the 13 area or signatures which together represent ownership of at 14 least forty percent or more of the total number of cultural 15 or entertainment establishments, food establishments, liquor 16 establishments, and lodging providers within the area. 17 14. The ordinance creating an entertainment area may be 18 amended, including to add property to the area, remove property 19 from the area, extend the duration of the area, or alter the 20 amount of the entertainment surcharge, by the same procedure as 21 for the establishment of the entertainment area and imposition 22 of the surcharge. 23 15. a. Upon the adoption of an ordinance establishing an 24 entertainment area, the city shall establish an entertainment 25 area fund, and upon remittance of the revenues from the state 26 surcharge revenue fund to the city under section 386A.5, the 27 revenues shall be deposited into the city’s entertainment area 28 fund. 29 b. Surcharge revenues deposited into an entertainment area 30 fund of the city shall only be used for the following, as 31 applicable: 32 (1) For deposit into the debt service fund in section 384.4. 33 (2) For deposit into the emergency fund in section 384.8. 34 (3) For deposit into the capital improvements fund in 35 -8- LSB 1252YH (4) 90 md/jh 8/ 14

H.F. 42 section 384.7. 1 (4) For the purposes described in section 384.3A, 2 subsection 3, paragraph “b” , “c” , “e” , “f” , or “g” , including 3 city operational expenses for public safety services within the 4 entertainment area. 5 Sec. 4. NEW SECTION . 386A.4 Administration of surcharge. 6 1. The director shall administer the surcharge imposed 7 pursuant to this chapter as nearly as possible in conjunction 8 with the administration of state sales tax laws. The director 9 shall provide appropriate forms, or provide space on the 10 regular state tax forms, for reporting surcharge liability. 11 2. a. Section 422.25, subsection 4, sections 422.30, 12 422.67, and 422.68, section 422.69, subsection 1, sections 13 422.70, 422.71, 422.72, 422.74, and 422.75, section 423.14, 14 subsection 1, and sections 423.23, 423.24, 423.25, 423.31, 15 423.33, 423.35, 423.37 through 423.42, and 423.47, consistent 16 with the provisions of this chapter, apply with respect to the 17 surcharge authorized under this chapter, in the same manner and 18 with the same effect as retail sales taxes within the meaning 19 of those statutes. The director may require all persons 20 who are engaged in the business of deriving any sales price 21 subject to a surcharge under this chapter to register with the 22 department. All surcharges collected under this chapter are 23 deemed to be held in trust for the state of Iowa and the cities 24 imposing the surcharges. Local officials shall confer with the 25 director for assistance in drafting the ordinance imposing the 26 surcharge. A certified copy of the ordinance shall be filed 27 with the director as soon as possible after passage. 28 b. Frequency of deposits and quarterly reports of the 29 surcharge with the department of revenue are governed by the 30 provisions in section 423.31. Local surcharge collections 31 shall not be included in computation of the total tax to 32 determine frequency of filing under section 423.31. 33 c. The director shall apply a boundary change of an 34 entertainment area to the imposition or collection of that 35 -9- LSB 1252YH (4) 90 md/jh 9/ 14

H.F. 42 surcharge only on the first day of a calendar quarter which 1 occurs sixty days or more after the director has given notice 2 of the boundary change to sellers with a place of business, 3 as defined in section 423.1, in the entertainment area and to 4 lodging providers operating lodging in the entertainment area. 5 3. a. The director, in consultation with local officials, 6 shall collect and account for the surcharge. The director 7 shall certify each quarter the amount of the surcharge receipts 8 and any interest and penalties to be credited to the city 9 account in the state surcharge revenue fund established in 10 section 386A.5. Local authorities shall not require any permit 11 not required by the director. 12 b. All surcharge revenues and interest and penalties 13 received or refunded one hundred eighty days or more after the 14 date on which the city repeals the surcharge shall be deposited 15 in or withdrawn from the general fund of the state. 16 4. Each city that has established an entertainment area 17 under this chapter shall assist the department in identifying 18 new establishments required to impose the surcharge in the 19 entertainment area. This process shall be ongoing until the 20 surcharge is repealed. 21 Sec. 5. NEW SECTION . 386A.5 State surcharge revenue fund 22 —— accounts. 23 1. A state surcharge revenue fund is established in the 24 state treasury under the control of the department consisting 25 of the surcharge revenues collected within each entertainment 26 area and deposited in the fund pursuant to section 386A.4. 27 Revenues deposited in the fund are appropriated to the 28 department for the purposes of this section. 29 2. An entertainment area account is created within the 30 fund for each city creating an entertainment area under this 31 chapter. 32 3. The department shall deposit the revenues described in 33 subsection 1 that were collected in a quarter beginning on 34 or after the entertainment area’s commencement date into the 35 -10- LSB 1252YH (4) 90 md/jh 10/ 14

H.F. 42 appropriate entertainment area account in the fund. 1 4. All revenues in each entertainment area account within 2 the fund shall be remitted quarterly by the department to the 3 city that established the entertainment area for deposit in the 4 entertainment area fund of the city. 5 5. The department shall adopt rules pursuant to chapter 17A 6 necessary to administer the department’s responsibilities under 7 this chapter. 8 Sec. 6. Section 423A.5A, subsection 3, Code 2023, is amended 9 to read as follows: 10 3. Unless otherwise provided in this section , the 11 state-imposed tax under section 423A.3 and any locally 12 imposed tax under section 423A.4 shall be collected by the 13 lodging provider from the user of that lodging and shall be 14 remitted to the department. The lodging provider shall add 15 the state-imposed tax to the sales price of the lodging and 16 the tax, when collected, shall be stated as a distinct item, 17 separate and apart from the sales price of the lodging and from 18 the locally imposed tax under section 423A.4 or entertainment 19 surcharge under chapter 386A , if any. The lodging provider 20 shall add the locally imposed tax, if any, to the sales price 21 of the lodging and the tax, when collected, shall be stated as 22 a distinct item, separate and apart from the sales price of 23 the lodging and from the state-imposed tax or entertainment 24 surcharge under chapter 386A, if any . 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanation’s substance by the members of the general assembly. 28 This bill authorizes cities to establish entertainment areas 29 and to impose an entertainment surcharge within the area. 30 Under the bill, following the filing of a petition for the 31 establishment of an entertainment area (area) and holding a 32 public hearing, a city may establish an area by ordinance for 33 the purpose of imposing an entertainment surcharge (surcharge). 34 The proposed area must meet all of the following requirements: 35 -11- LSB 1252YH (4) 90 md/jh 11/ 14

H.F. 42 (1) the combined attendance at cultural or entertainment 1 establishments, food establishments, liquor establishments, and 2 lodging providers within the proposed area exceeded 250,000 3 persons during the previous calendar year, or the expected 4 attendance forecast at such establishments is expected to 5 exceed 250,000 persons per calendar year within two years; 6 (2) the area consists of contiguous parcels wholly within the 7 boundaries of the city and does not exceed 75 acres; (3) the 8 area does not include the entire incorporated area of the city; 9 (4) the area consists only of properties zoned for commercial 10 uses or properties within a designated historic district, 11 and at least 75 percent of the properties must be cultural 12 or entertainment establishments, food establishments, liquor 13 establishments, or lodging providers; (5) the area must be 14 comprised of property related in some manner; and (6) the area 15 must be given a descriptive name. 16 Adoption of the ordinance establishing the area requires the 17 affirmative vote of three-fourths of all the members of the 18 council, or in cities having three members of the council, the 19 affirmative vote of two members. However, if a remonstrance 20 has been filed with the clerk signed by at least 25 percent of 21 all owners of property within the proposed area representing 22 ownership of at least 25 percent or more of the total number of 23 cultural or entertainment establishments, food establishments, 24 liquor establishments, and lodging providers in the proposed 25 area, the adoption of the ordinance requires a unanimous vote 26 of the council. At any time prior to the final adoption 27 of an ordinance establishing an area, the entire matter 28 of establishing such area shall be withdrawn from council 29 consideration if a petition objecting to establishing such area 30 is filed with the clerk containing signatures of at least 40 31 percent or more of all owners of property in the proposed area 32 or signatures which together represent ownership of 40 percent 33 or more of the total number of cultural or entertainment 34 establishments, food establishments, liquor establishments, and 35 -12- LSB 1252YH (4) 90 md/jh 12/ 14

H.F. 42 lodging providers within the proposed entertainment area. 1 The surcharge authorized under the bill shall be a rate not 2 to exceed 3 percent, which shall be imposed upon any of the 3 following within the area: (1) the retail sales price of food 4 or alcoholic beverages sold at a cultural or entertainment 5 establishment, food establishment, or liquor establishment; (2) 6 the sales price of all sales of entertainment tickets sold at a 7 cultural or entertainment establishment; or (3) the sales price 8 for the renting of any lodging. 9 The bill specifies that the surcharge shall be in addition 10 to the state sales tax imposed pursuant to Code chapter 423, 11 subchapter II, the state-imposed and locally imposed hotel and 12 motel tax pursuant to Code chapter 423A, and the local sales 13 and services tax imposed pursuant to Code chapter 423B. The 14 bill establishes a process and timing for imposition or repeal 15 of the surcharge and for dissolution of the area. 16 The bill specifies the director of the department of 17 revenue shall administer the surcharge as nearly as possible 18 in conjunction with the administration of the state sales tax. 19 The bill specifies that administrative and enforcement laws 20 relating to the sales tax apply to surcharges imposed under the 21 bill. The bill requires each city to assist the department in 22 identifying new establishments required to impose the surcharge 23 in the area. 24 The bill creates a state surcharge revenue fund in the 25 state treasury under the control of the department of revenue 26 consisting of surcharge revenues collected within each area. 27 The bill creates an area account for each city creating an 28 area. The bill requires the revenues be deposited into the 29 appropriate area account. All revenues in each area account 30 shall be remitted quarterly by the department to the city 31 that established the area for deposit in the entertainment 32 area fund of the city. Surcharge revenues deposited into the 33 city’s entertainment area fund may be deposited in any of 34 the following funds: the debt service fund in Code section 35 -13- LSB 1252YH (4) 90 md/jh 13/ 14