Senate File 575 - Introduced SENATE FILE 575 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SF 408) (SUCCESSOR TO SSB 1087) A BILL FOR An Act relating to the economic development authority, 1 including renewable chemical production, workforce housing, 2 and innovation fund tax credits, the Iowa wine, beer, and 3 spirits promotion board, and the beer and liquor control 4 fund, and including applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 1164SZ (2) 90 ko/jh

S.F. 575 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 This paragraph is repealed July 1, 2030 2039 . 11 Sec. 2.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 1164SZ (2) 90 ko/jh 1/ 10

S.F. 575 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 1164SZ (2) 90 ko/jh 2/ 10

S.F. 575 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 1164SZ (2) 90 ko/jh 3/ 10

S.F. 575 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 1164SZ (2) 90 ko/jh 4/ 10

S.F. 575 (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 the claims 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 15.353, subsection 2, paragraph d, Code 22 2023, is amended to read as follows: 23 d. For a housing project located in a small city that 24 meets program requirements under subsection 1 , paragraph “a” , 25 development Construction of new dwelling units at a greenfield 26 site. 27 Sec. 12. Section 15E.52, subsection 5, paragraph b, Code 28 2023, is amended by striking the paragraph. 29 Sec. 13. Section 15E.52, subsection 10, paragraph b, Code 30 2023, is amended by striking the paragraph. 31 Sec. 14. Section 422.10B, Code 2023, is amended to read as 32 follows: 33 422.10B Renewable chemical production tax credit. 34 The taxes imposed under this subchapter , less the credits 35 -5- LSB 1164SZ (2) 90 ko/jh 5/ 10

S.F. 575 allowed under section 422.12 , shall be reduced by a renewable 1 chemical production tax credit allowed under section 15.319 . 2 This section is repealed January 1, 2033 2041 . 3 Sec. 15. Section 422.33, subsection 22, Code 2023, is 4 amended to read as follows: 5 22. The taxes imposed under this subchapter shall be reduced 6 by a renewable chemical production tax credit allowed under 7 section 15.319 . This subsection is repealed January 1, 2033 8 2041 . 9 Sec. 16. APPLICABILITY. 10 1. The following apply to all applications submitted to the 11 renewable chemical production tax credit program on or after 12 July 1, 2023: 13 a. The section of this division of this Act amending section 14 15.316, subsection 3. 15 b. The section of this division of this Act amending section 16 15.318, subsection 1. 17 c. The section of this division of this Act amending section 18 15.318, subsection 3, paragraphs “a”, “d”, and “e”. 19 2. The following apply to all eligible businesses placed on 20 a wait list pursuant to section 15.318, subsection 3, paragraph 21 “e”, on or before June 30, 2023: 22 a. The portion of the section of this division of this Act 23 amending section 15.318, subsection 3, paragraph “e”. 24 b. The section of this division of this Act amending section 25 15.320, subsection 1. 26 3. The following applies to all applications submitted for 27 innovation fund tax credits, administered pursuant to section 28 15E.52, placed on a wait list pursuant to section 15E.52, 29 subsection 5, paragraph “b”: 30 The section of this division of this Act amending section 31 15E.52, subsection 5, paragraph “b”. 32 DIVISION II 33 IOWA WINE, BEER, AND SPIRITS PROMOTION BOARD 34 Sec. 17. Section 15E.116, Code 2023, is amended to read as 35 -6- LSB 1164SZ (2) 90 ko/jh 6/ 10

S.F. 575 follows: 1 15E.116 Iowa wine , and beer , and spirits promotion board. 2 An Iowa wine , and beer , and spirits promotion board is 3 created. The board consists of three four members appointed 4 by the director of the economic development authority. Each 5 member shall serve a term of two years on the board. One member 6 shall represent the authority, one member shall represent the 7 Iowa wine makers, and one member shall represent the Iowa beer 8 makers , and one member shall represent Iowa distilleries . The 9 board shall advise the authority on the best means to promote 10 wine , and beer , and spirits made in Iowa. 11 Sec. 18. Section 15E.117, Code 2023, is amended to read as 12 follows: 13 15E.117 Promotion of Iowa wine , and beer , and spirits . 14 1. The economic development authority shall consult with 15 the Iowa wine , and beer , and spirits promotion board on the 16 best means to promote wine , and beer , and spirits made in Iowa. 17 2. The authority has shall have the authority to contract 18 with private persons for the promotion of beer , and wine , and 19 spirits made in Iowa. 20 3. Moneys appropriated to the authority pursuant to 21 sections 123.143 and 123.183 , and moneys transferred to the 22 authority pursuant to section 123.17, subsection 8A, may 23 be used by the authority for the purposes of this section , 24 including administrative expenses incurred under this section . 25 Sec. 19. Section 123.17, Code 2023, is amended by adding the 26 following new subsection: 27 NEW SUBSECTION . 8A. After any transfers provided for 28 in subsections 3, 5, 6, 7, and 8 are made, and before any 29 other transfer to the general fund, the department of commerce 30 shall transfer to the economic development authority from the 31 beer and liquor control fund the lesser of two hundred fifty 32 thousand dollars or one percent of the gross sales of native 33 distilled spirits by all class “A” native distilled spirits 34 license holders made by the division for the purposes of 35 -7- LSB 1164SZ (2) 90 ko/jh 7/ 10

S.F. 575 promoting Iowa wine, beer, and spirits. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanation’s substance by the members of the general assembly. 4 This bill relates to the economic development authority, 5 including renewable chemical production, workforce housing, and 6 innovation fund tax credits, the Iowa wine, beer, and spirits 7 promotion board, and the beer and liquor control fund. The 8 bill is divided into two divisions. 9 DIVISION I —— TAX CREDITS. The bill extends the future 10 repeal date for the renewable chemical production tax credit 11 program (chemical program) from July 1, 2030, to July 1, 2039. 12 The bill also extends the availability of the chemical program 13 credit for any renewable chemical produced prior to the end of 14 calendar year 2035, rather than the end of calendar year 2026. 15 Under the bill, serine, threonine, lysine, and nonfuel 16 ethanol are removed from the definition of “building block 17 chemical” for purposes of the chemical program. All completed 18 applications submitted by eligible businesses to the chemical 19 program must be reviewed and scored on a competitive basis by 20 the economic development authority (authority) pursuant to 21 rules adopted by the authority, and $1 million is the maximum 22 amount of credit that may be issued to an eligible business in 23 a calendar year. Under current law, if an eligible business 24 has been in operation in the state for five years or less at 25 the time of application, the maximum credit is $1 million. If 26 the business has been in operation more than five years, the 27 maximum is $500,000. The bill eliminates the wait list the 28 authority must currently maintain for the chemical program. 29 Under the bill, the authority may award an amount of credits 30 under the chemical program not to exceed the maximum aggregate 31 amount allocated in Code section 15.119(2)(h) for each fiscal 32 year beginning on or after July 1, 2023, and ending on or 33 before June 30, 2036. Information regarding the chemical 34 program that must be submitted to the general assembly and 35 -8- LSB 1164SZ (2) 90 ko/jh 8/ 10

S.F. 575 to the governor by January 31 each year is detailed in the 1 bill and differs from the requirements under current law. The 2 bill extends the future repeal of the chemical program credit 3 allowed under Code sections 422.10B and 422.33 from January 1, 4 2033, to January 1, 2041. 5 Under current law, a proposed housing project must be 6 located in a small city and include two or more single-family 7 dwelling units in order for development at a greenfield site to 8 be eligible for workforce housing tax incentives. Under the 9 bill, construction of new dwellings at a greenfield site may 10 be eligible for workforce housing tax incentives. The bill 11 eliminates the wait list for the innovation fund tax credit. 12 The bill makes conforming changes to Code section 13 15.318(2)(c)-(d). 14 The sections of this division of the bill amending Code 15 sections 15.316(3), 15.318(1), 15.318(3)(a), 15.318(3)(d), 16 and 15.318(3)(e) apply to all applications submitted to the 17 chemical program on or after July 1, 2023. The sections of the 18 division of the bill amending Code sections 15.318(3)(e) and 19 15.320(1) apply to all eligible businesses placed on a wait 20 list for the program pursuant to Code section 15.318(3)(e) on 21 or before June 30, 2023. 22 The section of this division of the bill amending Code 23 section 15E.52(5)(b) applies to all applications submitted for 24 innovation fund tax credits, administered pursuant to Code 25 section 15E.52, placed on a wait list pursuant to Code section 26 15E.52(5)(b). 27 DIVISION II —— IOWA WINE, BEER, AND SPIRITS PROMOTION 28 BOARD. This division of the bill modifies the Iowa wine and 29 beer promotion board (promotion board) by adding spirits, and 30 adds a fourth member to the promotion board to represent Iowa 31 distilleries. The current promotion board has three members. 32 In addition to advising the authority on the promotion of 33 Iowa-made beer and wine, the bill requires the promotion board 34 to advise the authority on the promotion of spirits made in 35 -9- LSB 1164SZ (2) 90 ko/jh 9/ 10

S.F. 575 Iowa. The authority must consult with the promotion board on 1 the best means to promote spirits made in Iowa, and permits the 2 authority to contract with private persons for the promotion 3 of spirits made in Iowa. 4 The bill requires the department of commerce, after certain 5 other transfers required by current law from the beer and 6 liquor control fund are made, to transfer to the authority the 7 lesser of $250,000 or 1 percent of the gross sales of native 8 distilled spirits by all class “A” native distilled spirits 9 license holders made by the alcoholic beverages division. The 10 transferred moneys may be used by the authority to promote 11 wine, beer, and spirits made in Iowa, and for administrative 12 expenses related to such promotion. 13 -10- LSB 1164SZ (2) 90 ko/jh 10/ 10