House File 641 - Introduced HOUSE FILE 641 BY COMMITTEE ON ECONOMIC GROWTH AND TECHNOLOGY (SUCCESSOR TO HSB 23) A BILL FOR An Act relating to the economic development authority, 1 including certain tax credit programs, the Iowa wine, beer, 2 and spirits promotion board, and the beer and liquor control 3 fund, and including applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1164HV (2) 90 ko/jh

H.F. 641 DIVISION I 1 TAX CREDITS 2 Section 1. Section 15.119, subsection 2, paragraph h, Code 3 2023, is amended to read as follows: 4 h. The renewable chemical production tax credit program 5 administered pursuant to sections 15.315 through 15.322 . In 6 allocating tax credits pursuant to this subsection for the 7 fiscal year beginning July 1, 2021, and for each fiscal year 8 thereafter beginning before July 1, 2037 , the authority shall 9 not allocate more than five million dollars for purposes of 10 this paragraph. This paragraph is repealed July 1, 2030 2039 . 11 Sec. 2. Section 15.316, subsection 3, Code 2023, is amended 12 to read as follows: 13 3. “Building block chemical” means a molecule converted 14 from biomass feedstock as a first product or a secondarily 15 derived product that can be further refined into a higher-value 16 chemical, material, or consumer product. “Building block 17 chemical” includes but is not limited to high-purity glycerol, 18 oleic acid, lauric acid, methanoic or formic acid, arabonic 19 acid, erythonic acid, glyceric acid, glycolic acid, lactic 20 acid, 3-hydroxypropionate, propionic acid, malonic acid, 21 serine, succinic acid, fumaric acid, malic acid, aspartic 22 acid, 3-hydroxybutyrolactone, acetoin, threonine, itaconic 23 acid, furfural, levulinic acid, glutamic acid, xylonic acid, 24 xylaric acid, xylitol, arabitol, citric acid, aconitic acid, 25 5-hydroxymethylfurfural, lysine, gluconic acid, glucaric acid, 26 sorbitol, gallic acid, ferulic acid, butyric acid, nonfuel 27 butanol, nonfuel ethanol, or such additional molecules as may 28 be included by the authority by rule after consultation with 29 appropriate experts from Iowa state university, including 30 but not limited to the Iowa state university center for 31 biorenewable chemicals. 32 Sec. 3. Section 15.318, subsection 1, Code 2023, is amended 33 by adding the following new paragraph: 34 NEW PARAGRAPH . f. All complete applications submitted 35 -1- LSB 1164HV (2) 90 ko/jh 1/ 11

H.F. 641 by eligible businesses shall be reviewed and scored on a 1 competitive basis by the authority pursuant to rules adopted 2 by the authority. 3 Sec. 4. Section 15.318, subsection 2, paragraphs c and d, 4 Code 2023, are amended to read as follows: 5 c. An eligible business shall fulfill all the requirements 6 of the program and the agreement before receiving the authority 7 issues the business a tax credit certificate or entering enters 8 into a subsequent agreement with the business under this 9 section . The authority may decline to enter into a subsequent 10 agreement with the business under this section or to issue a 11 tax credit if an agreement is not successfully fulfilled. 12 d. Upon establishing that all requirements of the program 13 and the agreement have been fulfilled, the authority shall 14 issue a tax credit and related tax credit certificate to the 15 eligible business stating the amount of renewable chemical 16 production tax credit the eligible business may claim. 17 Sec. 5. Section 15.318, subsection 3, paragraphs a, d, and 18 e, Code 2023, are amended to read as follows: 19 a. The maximum amount of tax credit that the authority may 20 be issued issue under section 15.319 to an eligible business 21 for the production of renewable chemicals in a calendar year 22 shall not exceed the following: 23 (1) In the case of an eligible business that has been in 24 operation in the state for five years or less at the time of 25 application, is one million dollars. 26 (2) In the case of an eligible business that has been in 27 operation in the state for more than five years at the time of 28 application, five hundred thousand dollars. 29 d. An The authority shall not issue an eligible business 30 shall not receive more than five tax credits credit 31 certificates under the program. 32 e. The authority shall issue tax credits under the program 33 on a first-come, first-served basis until the maximum amount of 34 tax credits allocated pursuant to section 15.119, subsection 35 -2- LSB 1164HV (2) 90 ko/jh 2/ 11

H.F. 641 2 , paragraph “h” , is reached. The authority shall maintain a 1 list of successful applicants under the program, so that if the 2 maximum aggregate amount of tax credits is reached in a given 3 fiscal year, eligible businesses that successfully applied 4 but for which tax credits were not issued shall be placed on 5 a wait list in the order the eligible businesses applied and 6 shall be given priority for receiving tax credits in succeeding 7 fiscal years. Placement on a wait list pursuant to this 8 paragraph shall not constitute a promise binding the state. 9 The availability of a tax credit and issuance of a tax credit 10 certificate pursuant to this subsection in a future fiscal year 11 is contingent upon the availability of tax credits in that 12 particular fiscal year. In each fiscal year beginning on or 13 after July 1, 2023, and ending on or before June 30, 2036, the 14 authority may award an amount of tax credits under the program 15 not to exceed the maximum aggregate amount allocated in section 16 15.119, subsection 2, paragraph “h” . 17 Sec. 6. Section 15.319, subsection 1, Code 2023, is amended 18 to read as follows: 19 1. An eligible business that has entered into an agreement 20 pursuant to section 15.318 may claim a tax credit in an amount 21 equal to the product of five cents multiplied by the number 22 of pounds of renewable chemicals produced in this state from 23 biomass feedstock by the eligible business during the calendar 24 year in excess of the eligible business’s pre-eligibility 25 production threshold. However, an eligible business shall 26 not receive a tax credit for the production of a secondarily 27 derived building block chemical if that chemical is also the 28 subject of a credit at the time of production as a first 29 product. The renewable chemical production tax credit shall 30 not be available for any renewable chemical produced before the 31 2017 calendar year or after the 2026 2035 calendar year. 32 Sec. 7. Section 15.320, subsection 1, Code 2023, is amended 33 to read as follows: 34 1. For purposes of this section , “successful tax credit 35 -3- LSB 1164HV (2) 90 ko/jh 3/ 11

H.F. 641 applicant” includes, with respect to each calendar year, an 1 eligible business that was issued a tax credit certificate for 2 production of renewable chemicals during that calendar year , 3 and an eligible business that successfully applied for a tax 4 credit for the production of renewable chemicals during that 5 calendar year, but was not issued a tax credit and was instead 6 placed on a wait list pursuant to section 15.318, subsection 7 3 , paragraph “e” . 8 Sec. 8. Section 15.320, subsection 2, Code 2023, is amended 9 by striking the subsection and inserting in lieu thereof the 10 following: 11 2. By January 31 of each year, the board, in cooperation 12 with the department of revenue, shall submit to the general 13 assembly and to the governor a report describing the activities 14 of the program for the most recent calendar year for which the 15 tax credit application period has ended pursuant to section 16 15.318, subsection 1, paragraph “d” . The report shall, at a 17 minimum, include the following information: 18 a. The aggregate number of pounds, and a list of each type, 19 of renewable chemicals produced in Iowa by all successful 20 tax credit applicants during the calendar year prior to the 21 calendar year for which the successful applicants first applied 22 for a tax credit under the program. 23 b. The aggregate number of pounds, and a list of each type, 24 of renewable chemicals produced in Iowa by all successful tax 25 credit applicants during each calendar year. 26 c. The number of employees located in Iowa of all successful 27 tax credit applicants during the calendar year prior to the 28 calendar year for which the successful applicants first applied 29 for a tax credit under the program. 30 d. The number of employees located in Iowa of all successful 31 tax credit applicants during each calendar year. 32 e. For each eligible business issued a renewable chemical 33 production tax credit during each calendar year: 34 (1) The identity of the eligible business. 35 -4- LSB 1164HV (2) 90 ko/jh 4/ 11

H.F. 641 (2) The amount of the tax credit. 1 (3) The manner in which the eligible business first 2 qualified as an eligible business under section 15.317, 3 subsection 4, whether by organizing, expanding, or locating in 4 the state. 5 f. The total amount of all renewable chemical production tax 6 credits claimed during each calendar year, and the portion of 7 each claim issued as a refund. 8 Sec. 9. Section 15.320, subsection 3, Code 2023, is amended 9 to read as follows: 10 3. To protect the presumption of confidentiality 11 established in section 15.318, subsection 5 , the board shall 12 report all information in an aggregate form to prevent, 13 as much as possible, information being attributable to any 14 particular eligible business, except as provided in subsection 15 2 , paragraph “k” “e” . 16 Sec. 10. Section 15.322, Code 2023, is amended to read as 17 follows: 18 15.322 Future repeal. 19 Section 15.315 , 15.316 , 15.317 , 15.318 , 15.319 , 15.320 , 20 15.321 , and this section , are repealed July 1, 2030 2039 . 21 Sec. 11. Section 15E.52, subsection 1, paragraph c, Code 22 2023, is amended to read as follows: 23 c. “Innovative business” means a business applying novel 24 or original methods to the manufacture of a product or the 25 delivery of a service. “Innovative business” includes but is 26 not limited to a business engaged in the industries of advanced 27 manufacturing, biosciences, and information technology , or 28 educational technology . 29 Sec. 12. Section 15E.52, subsection 5, paragraph a, Code 30 2023, is amended to read as follows: 31 a. To receive a tax credit, a taxpayer must submit an 32 application to the board. The board shall issue certificates 33 under this section on a first-come, first-served basis, which 34 certificates may be redeemed for tax credits. The board shall 35 -5- LSB 1164HV (2) 90 ko/jh 5/ 11

H.F. 641 issue such certificates so that not more than the amount 1 allocated for such tax credits under section 15.119, subsection 2 2 , may be claimed. The board shall not issue a certificate 3 before September 1, 2014. 4 Sec. 13. Section 15E.52, subsection 5, paragraph b, Code 5 2023, is amended by striking the paragraph. 6 Sec. 14. Section 15E.52, subsection 8, Code 2023, is amended 7 to read as follows: 8 8. The board shall not certify an innovation fund after June 9 30, 2023 2028 . 10 Sec. 15. Section 15E.52, subsection 10, paragraph b, Code 11 2023, is amended by striking the paragraph. 12 Sec. 16. Section 422.10B, Code 2023, is amended to read as 13 follows: 14 422.10B Renewable chemical production tax credit. 15 The taxes imposed under this subchapter , less the credits 16 allowed under section 422.12 , shall be reduced by a renewable 17 chemical production tax credit allowed under section 15.319 . 18 This section is repealed January 1, 2033 2041 . 19 Sec. 17. Section 422.33, subsection 22, Code 2023, is 20 amended to read as follows: 21 22. The taxes imposed under this subchapter shall be reduced 22 by a renewable chemical production tax credit allowed under 23 section 15.319 . This subsection is repealed January 1, 2033 24 2041 . 25 Sec. 18. APPLICABILITY. 26 1. The following apply to all applications submitted to the 27 renewable chemical production tax credit program on or after 28 July 1, 2023: 29 a. The section of this division of this Act amending section 30 15.316, subsection 3. 31 b. The section of this division of this Act amending section 32 15.318, subsection 1. 33 c. The section of this division of this Act amending section 34 15.318, subsection 3, paragraphs “a”, “d”, and “e”. 35 -6- LSB 1164HV (2) 90 ko/jh 6/ 11

H.F. 641 2. The following apply to all eligible businesses placed on 1 a wait list pursuant to section 15.318, subsection 3, paragraph 2 “e”, on or before June 30, 2023: 3 a. The portion of the section of this division of this Act 4 amending section 15.318, subsection 3, paragraph “e”. 5 b. The section of this division of this Act amending section 6 15.320, subsection 1. 7 3. The following applies to all applications submitted 8 to the economic development authority’s board for innovation 9 fund investment tax credits, administered pursuant to section 10 15E.52, on or after July 1, 2023: 11 The section of this division of this Act amending section 12 15E.52, subsection 1, paragraph “c”. 13 4. The following applies to all applications submitted for 14 innovation fund tax credits, administered pursuant to section 15 15E.52, placed on a wait list pursuant to section 15E.52, 16 subsection 5, paragraph “b”: 17 The section of this division of this Act amending section 18 15E.52, subsection 5, paragraph “b”. 19 DIVISION II 20 IOWA WINE, BEER, AND SPIRITS PROMOTION BOARD 21 Sec. 19. Section 15E.116, Code 2023, is amended to read as 22 follows: 23 15E.116 Iowa wine , and beer , and spirits promotion board. 24 An Iowa wine , and beer , and spirits promotion board is 25 created. The board consists of three four members appointed 26 by the director of the economic development authority. Each 27 member shall serve a term of two years on the board. One member 28 shall represent the authority, one member shall represent the 29 Iowa wine makers, and one member shall represent the Iowa beer 30 makers , and one member shall represent Iowa distilleries . The 31 board shall advise the authority on the best means to promote 32 wine , and beer , and spirits made in Iowa. 33 Sec. 20. Section 15E.117, Code 2023, is amended to read as 34 follows: 35 -7- LSB 1164HV (2) 90 ko/jh 7/ 11

H.F. 641 15E.117 Promotion of Iowa wine , and beer , and spirits . 1 1. The economic development authority shall consult with 2 the Iowa wine , and beer , and spirits promotion board on the 3 best means to promote wine , and beer , and spirits made in Iowa. 4 2. The authority has shall have the authority to contract 5 with private persons for the promotion of beer , and wine , and 6 spirits made in Iowa. 7 3. Moneys appropriated to the authority pursuant to 8 sections 123.143 and 123.183 , and moneys transferred to the 9 authority pursuant to section 123.17, subsection 8A, may 10 be used by the authority for the purposes of this section , 11 including administrative expenses incurred under this section . 12 Sec. 21. Section 123.17, Code 2023, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 8A. After any transfers provided for 15 in subsections 3, 5, 6, 7, and 8 are made, and before any 16 other transfer to the general fund, the department of commerce 17 shall transfer to the economic development authority from the 18 beer and liquor control fund the lesser of two hundred fifty 19 thousand dollars or one percent of the gross sales of native 20 distilled spirits by all class “A” native distilled spirits 21 license holders made by the division for the purposes of 22 promoting Iowa wine, beer, and spirits. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill relates to the economic development authority, 27 including certain tax credit programs, the Iowa wine, beer, and 28 spirits promotion board, and the beer and liquor control fund. 29 The bill is divided into two divisions. 30 DIVISION I —— TAX CREDITS. The bill extends the future 31 repeal date for the renewable chemical program from July 1, 32 2030, to July 1, 2036. The bill also extends the availability 33 of the renewable chemical program credit for any renewable 34 chemical produced prior to the end of calendar year 2035, 35 -8- LSB 1164HV (2) 90 ko/jh 8/ 11

H.F. 641 rather than the end of calendar year 2026. 1 Under the bill, serine, threonine, lysine, and nonfuel 2 ethanol are removed from the definition of “building block 3 chemical” for purposes of the renewable chemical program 4 (chemical program). All completed applications submitted by 5 eligible businesses to the chemical program must be reviewed 6 and scored on a competitive basis by the authority pursuant to 7 rules adopted by the authority, and $1 million is the maximum 8 amount of credit that may be issued to an eligible business in 9 a calendar year. Under current law, if an eligible business 10 has been in operation in the state for five years or less at 11 the time of application, the maximum credit is $1 million. If 12 the business has been in operation more than five years, the 13 maximum is $500,000. The bill eliminates the wait list the 14 authority must currently maintain for the chemical program. 15 Under the bill, the authority may award an amount of credits 16 under the chemical program not to exceed the maximum aggregate 17 amount allocated in Code section 15.119(2)(h) for each fiscal 18 year beginning on or after July 1, 2023, and ending on or 19 before June 30, 2036. Information regarding the chemical 20 program that must be submitted to the general assembly and 21 to the governor by January 31 each year is detailed in the 22 bill and differs from the requirements under current law. The 23 future repeal of the chemical program is extended from July 1, 24 2030, to July 1, 2039. The bill extends the future repeal of 25 the chemical program credit allowed under Code sections 422.10B 26 and 422.33 from January 1, 2033, to January 1, 2041. 27 For purposes of innovation fund investment credits, the 28 bill adds “educational technology” to the definition of 29 “innovative business”. The bill eliminates the wait list 30 for the innovation fund tax credit and extends the time the 31 authority’s board may certify an innovation fund from June 30, 32 2023, to June 30, 2028. 33 The bill makes conforming changes to Code sections 34 15.318(2)(c)-(d), and 15.354(4)(a)-(f). 35 -9- LSB 1164HV (2) 90 ko/jh 9/ 11

H.F. 641 The sections of this division of the bill amending Code 1 sections 15.316(3), 15.318(1), 15.318(3)(a), 15.318(3)(d), 2 and 15.318(3)(e) apply to all applications submitted to the 3 chemical program on or after July 1, 2023. The sections of the 4 division of the bill amending Code sections 15.318(3)(e) and 5 15.320(1) apply to all eligible businesses placed on a wait 6 list for the program pursuant to Code section 15.318(3)(e) on 7 or before June 30, 2023. 8 The section of this division of the bill amending Code 9 section 15E.52(1)(c) applies to all applications submitted 10 to the authority’s board for innovation fund investment tax 11 credits, administered pursuant to Code section 15E.52, on or 12 after July 1, 2023. The section of this division of the bill 13 amending Code section 15E.52(5)(b) applies to all applications 14 submitted for innovation fund tax credits, administered 15 pursuant to Code section 15E.52, placed on a wait list pursuant 16 to Code section 15E.52(5)(b). 17 DIVISION II —— IOWA WINE, BEER, AND SPIRITS PROMOTION 18 BOARD. This division of the bill modifies the Iowa wine and 19 beer promotion board (promotion board) by adding spirits, and 20 adds a fourth member to the promotion board to represent Iowa 21 distilleries. The current promotion board has three members. 22 In addition to advising the authority on the promotion of 23 Iowa-made beer and wine, the bill requires the promotion board 24 to advise the authority on the promotion of spirits made in 25 Iowa. The authority must consult with the promotion board on 26 the best means to promote spirits made in Iowa, and permits the 27 authority to contract with private persons for the promotion 28 of spirits made in Iowa. 29 The bill requires the department of commerce, after certain 30 other transfers required by current law from the beer and 31 liquor control fund are made, to transfer to the authority the 32 lesser of $250,000 or 1 percent of the gross sales of native 33 distilled spirits by all class “A” native distilled spirits 34 license holders made by the alcoholic beverages division. The 35 -10- LSB 1164HV (2) 90 ko/jh 10/ 11