SSB 1087 (LSB 1164XD (15) 90)

SENATE/HOUSE FILE _____

BY  (PROPOSED ECONOMIC DEVELOPMENT AUTHORITY BILL)

A BILL FOR

An Act relating to the economic development authority, including certain tax credit programs, the Iowa wine, beer, and spirits promotion board, and the beer and liquor control fund, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
TAX CREDITS

    Section 1.  Section 15.119, subsection 2, paragraphs d, e, and h, Code 2023, are amended to read as follows:
   d.  The tax credits for investments in qualifying businesses issued pursuant to section 15E.43, and the tax credits for investments in an innovation fund pursuant to section 15E.52. In allocating tax credits pursuant to this subsection, the authority shall allocate two million an aggregate amount of tax credits that is not more than ten million dollars for purposes of this paragraph, unless the authority determines that the tax credits awarded will be less than that amount.  On or before June 30 of each year, the authority shall determine the amount of the aggregate amount of tax credits that shall be allocated for tax credits issued for investments in qualifying businesses pursuant to section 15E.43, and the amount that shall be allocated for tax credits for investments in an innovation fund pursuant to section 15E.52.
   e.  The tax credits for investments in an innovation fund pursuant to section 15E.52. In allocating tax credits pursuant to this subsection, the authority shall allocate eight million dollars for purposes of this paragraph, unless the authority determines that the tax credits awarded will be less than that amount.
   h.  The renewable chemical production tax credit program administered pursuant to sections 15.315 through 15.322. In allocating tax credits pursuant to this subsection for the fiscal year beginning July 1, 2021, and for each fiscal year thereafter beginning before July 1, 2037, the authority shall not allocate more than five million dollars for purposes of this paragraph. This paragraph is repealed July 1, 2030 2039.
    Sec. 2.  Section 15.316, subsection 3, Code 2023, is amended to read as follows:
   3.  “Building block chemical” means a molecule converted from biomass feedstock as a first product or a secondarily derived product that can be further refined into a higher-value chemical, material, or consumer product. “Building block chemical” includes but is not limited to high-purity glycerol, oleic acid, lauric acid, methanoic or formic acid, arabonic acid, erythonic acid, glyceric acid, glycolic acid, lactic acid, 3-hydroxypropionate, propionic acid, malonic acid, serine, succinic acid, fumaric acid, malic acid, aspartic acid, 3-hydroxybutyrolactone, acetoin, threonine, itaconic acid, furfural, levulinic acid, glutamic acid, xylonic acid, xylaric acid, xylitol, arabitol, citric acid, aconitic acid, 5-hydroxymethylfurfural, lysine, gluconic acid, glucaric acid, sorbitol, gallic acid, ferulic acid, butyric acid, nonfuel butanol, nonfuel ethanol, or such additional molecules as may be included by the authority by rule after consultation with appropriate experts from Iowa state university, including but not limited to the Iowa state university center for biorenewable chemicals.
    Sec. 3.  Section 15.318, subsection 1, Code 2023, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  f.  All complete applications submitted by eligible businesses shall be reviewed and scored on a competitive basis by the authority pursuant to rules adopted by the authority.
    Sec. 4.  Section 15.318, subsection 2, paragraphs c and d, Code 2023, are amended to read as follows:
   c.  An eligible business shall fulfill all the requirements of the program and the agreement before receiving the authority issues the business a tax credit certificate or entering enters into a subsequent agreement with the business under this section. The authority may decline to enter into a subsequent agreement with the business under this section or to issue a tax credit if an agreement is not successfully fulfilled.
   d.  Upon establishing that all requirements of the program and the agreement have been fulfilled, the authority shall issue a tax credit and related tax credit certificate to the eligible business stating the amount of renewable chemical production tax credit the eligible business may claim.
    Sec. 5.  Section 15.318, subsection 3, paragraphs a, d, and e, Code 2023, are amended to read as follows:
   a.  The maximum amount of tax credit that the authority may be issued issue under section 15.319 to an eligible business for the production of renewable chemicals in a calendar year shall not exceed the following:
   (1)  In the case of an eligible business that has been in operation in the state for five years or less at the time of application, is one million dollars.
   (2)  In the case of an eligible business that has been in operation in the state for more than five years at the time of application, five hundred thousand dollars.
   d.  An The authority shall not issue an eligible business shall not receive more than five tax credits credit certificates under the program.
   e.  The authority shall issue tax credits under the program on a first-come, first-served basis until the maximum amount of tax credits allocated pursuant to section 15.119, subsection 2, paragraph “h”, is reached. The authority shall maintain a list of successful applicants under the program, so that if the maximum aggregate amount of tax credits is reached in a given fiscal year, eligible businesses that successfully applied but for which tax credits were not issued shall be placed on a wait list in the order the eligible businesses applied and shall be given priority for receiving tax credits in succeeding fiscal years. Placement on a wait list pursuant to this paragraph shall not constitute a promise binding the state. The availability of a tax credit and issuance of a tax credit certificate pursuant to this subsection in a future fiscal year is contingent upon the availability of tax credits in that particular fiscal year.  In each fiscal year beginning on or after July 1, 2023, and ending on or before June 30, 2036, the authority may award an amount of tax credits under the program not to exceed the maximum aggregate amount allocated in section 15.119, subsection 2, paragraph “h”.
    Sec. 6.  Section 15.319, subsection 1, Code 2023, is amended to read as follows:
   1.  An eligible business that has entered into an agreement pursuant to section 15.318 may claim a tax credit in an amount equal to the product of five cents multiplied by the number of pounds of renewable chemicals produced in this state from biomass feedstock by the eligible business during the calendar year in excess of the eligible business’s pre-eligibility production threshold. However, an eligible business shall not receive a tax credit for the production of a secondarily derived building block chemical if that chemical is also the subject of a credit at the time of production as a first product. The renewable chemical production tax credit shall not be available for any renewable chemical produced before the 2017 calendar year or after the 2026 2035 calendar year.
    Sec. 7.  Section 15.320, subsection 1, Code 2023, is amended to read as follows:
   1.  For purposes of this section, “successful tax credit applicant” includes, with respect to each calendar year, an eligible business that was issued a tax credit certificate for production of renewable chemicals during that calendar year, and an eligible business that successfully applied for a tax credit for the production of renewable chemicals during that calendar year, but was not issued a tax credit and was instead placed on a wait list pursuant to section 15.318, subsection 3, paragraph “e”.
    Sec. 8.  Section 15.320, subsection 2, Code 2023, is amended by striking the subsection and inserting in lieu thereof the following:
   2.  By January 31 of each year, the board, in cooperation with the department of revenue, shall submit to the general assembly and to the governor a report describing the activities of the program for the most recent calendar year for which the tax credit application period has ended pursuant to section 15.318, subsection 1, paragraph “d”. The report shall, at a minimum, include the following information:
   a.  The aggregate number of pounds, and a list of each type, of renewable chemicals produced in Iowa by all successful tax credit applicants during the calendar year prior to the calendar year for which the successful applicants first applied for a tax credit under the program.
   b.  The aggregate number of pounds, and a list of each type, of renewable chemicals produced in Iowa by all successful tax credit applicants during each calendar year.
   c.  The number of employees located in Iowa of all successful tax credit applicants during the calendar year prior to the calendar year for which the successful applicants first applied for a tax credit under the program.
   d.  The number of employees located in Iowa of all successful tax credit applicants during each calendar year.
   e.  For each eligible business issued a renewable chemical production tax credit during each calendar year:
   (1)  The identity of the eligible business.
   (2)  The amount of the tax credit.
   (3)  The manner in which the eligible business first qualified as an eligible business under section 15.317, subsection 4, whether by organizing, expanding, or locating in the state.
   f.  The total amount of all renewable chemical production tax credits claimed during each calendar year, and the portion of each claim issued as a refund.
    Sec. 9.  Section 15.320, subsection 3, Code 2023, is amended to read as follows:
   3.  To protect the presumption of confidentiality established in section 15.318, subsection 5, the board shall report all information in an aggregate form to prevent, as much as possible, information being attributable to any particular eligible business, except as provided in subsection 2, paragraph “k” “e”.
    Sec. 10.  Section 15.322, Code 2023, is amended to read as follows:
   15.322  Future repeal.
   Section 15.315, 15.316, 15.317, 15.318, 15.319, 15.320, 15.321, and this section, are repealed July 1, 2030 2039.
    Sec. 11.  Section 15E.43, subsection 2, paragraphs b and c, Code 2023, are amended to read as follows:
   b.  The maximum amount of a tax credit that may be issued per calendar fiscal year to a natural person and the person’s spouse or dependent shall not exceed one hundred thousand dollars combined. For purposes of this paragraph, a tax credit issued to a partnership, limited liability company, S corporation, estate, or trust electing to have income taxed directly to the individual shall be deemed to be issued to the individual owners based upon the pro rata share of the individual’s earnings from the entity. For purposes of this paragraph, “dependent” has the same meaning as provided by the Internal Revenue Code.
   c.  The maximum amount of tax credits that may be issued per calendar fiscal year for equity investments in any one qualifying business shall not exceed five hundred thousand dollars.
    Sec. 12.  Section 15E.44, subsection 1, Code 2023, is amended to read as follows:
   1.  In order for an equity investment to qualify for a tax credit, the business in which the equity investment is made shall, within one hundred twenty sixty days of the date of the first investment, notify the authority of the names, addresses, shares issued, consideration paid for the shares, and the amount of any tax credits, of all shareholders who may initially qualify for the tax credits. The list of shareholders who may qualify for the tax credits shall be amended as new equity investments are sold or as any information on the list shall change.
    Sec. 13.  Section 15E.44, subsection 2, Code 2023, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  0e.  The business is a business engaged primarily in advanced manufacturing, biosciences, finance, insurance, information technology, or educational technology.
    Sec. 14.  Section 15E.44, subsection 4, Code 2023, is amended to read as follows:
   4.  After verifying the eligibility of a qualifying business, and an investor’s investment in the qualifying business, the authority shall issue a tax credit certificate to be included with the equity investor’s tax return. The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the amount of credit, the name of the qualifying business, and other information required by the department of revenue. The tax credit certificate, unless rescinded by the authority, shall be accepted by the department of revenue as payment for taxes imposed pursuant to chapter 422, subchapters II, III, and V, and in chapter 432, and for the moneys and credits tax imposed in section 533.329, subject to any conditions or restrictions placed by the authority upon the face of the tax credit certificate and subject to the limitations of section 15E.43.
    Sec. 15.  Section 15E.52, subsection 1, paragraph c, Code 2023, is amended to read as follows:
   c.  “Innovative business” means a business applying novel or original methods to the manufacture of a product or the delivery of a service. “Innovative business” includes but is not limited to a business engaged in the industries of advanced manufacturing, biosciences, and information technology, or educational technology.
    Sec. 16.  Section 15E.52, subsection 5, paragraph a, Code 2023, is amended to read as follows:
   a.  To receive a tax credit, a taxpayer must submit an application to the board. The board shall issue certificates under this section on a first-come, first-served basis, which certificates may be redeemed for tax credits. The board shall issue such certificates so that not more than the amount allocated for such tax credits under section 15.119, subsection 2, may be claimed. The board shall not issue a certificate before September 1, 2014.
    Sec. 17.  Section 15E.52, subsection 5, paragraph b, Code 2023, is amended by striking the paragraph.
    Sec. 18.  Section 15E.52, subsection 8, Code 2023, is amended to read as follows:
   8.  The board shall not certify an innovation fund after June 30, 2023 2028.
    Sec. 19.  Section 15E.52, subsection 10, paragraph b, Code 2023, is amended by striking the paragraph.
    Sec. 20.  Section 422.10B, Code 2023, is amended to read as follows:
   422.10B  Renewable chemical production tax credit.
   The taxes imposed under this subchapter, less the credits allowed under section 422.12, shall be reduced by a renewable chemical production tax credit allowed under section 15.319. This section is repealed January 1, 2033 2041.
    Sec. 21.  Section 422.33, subsection 22, Code 2023, is amended to read as follows:
   22.  The taxes imposed under this subchapter shall be reduced by a renewable chemical production tax credit allowed under section 15.319. This subsection is repealed January 1, 2033 2041.
    Sec. 22.  APPLICABILITY.
   1.  The following apply to all applications submitted to the renewable chemical production tax credit program on or after July 1, 2023:
   a.  The section of this division of this Act amending section 15.316, subsection 3.
   b.  The section of this division of this Act amending section 15.318, subsection 1.
   c.  The section of this division of this Act amending section 15.318, subsection 3, paragraphs “a”, “d”, and “e”.
   2.  The following apply to all eligible businesses placed on a wait list pursuant to section 15.318, subsection 3, paragraph “e”, on or before June 30, 2023:
   a.  The portion of the section of this division of this Act amending section 15.318, subsection 3, paragraph “e”.
   b.  The section of this division of this Act amending section 15.320, subsection 1.
   3.  The following apply to all applications submitted to the economic development authority’s board for investments in qualifying businesses, administered pursuant to sections 15E.41 through 15E.46, on or after July 1, 2023:
   a.  The section of this division of this Act amending section 15E.44, subsection 1.
   b.  The section of this division of this Act enacting section 15E.44, subsection 2, paragraph “0e”.
   4.  The following applies to all applications submitted to the economic development authority’s board for innovation fund investment tax credits, administered pursuant to section 15E.52, on or after July 1, 2023:
   The section of this division of this Act amending section 15E.52, subsection 1, paragraph “c”.
   5.  The following applies to all applications submitted for innovation fund tax credits, administered pursuant to section 15E.52, placed on a wait list pursuant to section 15E.52, subsection 5, paragraph “b”:
   The section of this division of this Act amending section 15E.52, subsection 5, paragraph “b”.
DIVISION II
IOWA WINE, BEER, AND SPIRITS PROMOTION BOARD

    Sec. 23.  Section 15E.116, Code 2023, is amended to read as follows:
   15E.116  Iowa wine, and beer, and spirits promotion board.
   An Iowa wine, and beer, and spirits promotion board is created. The board consists of three four members appointed by the director of the economic development authority. Each member shall serve a term of two years on the board. One member shall represent the authority, one member shall represent the Iowa wine makers, and one member shall represent the Iowa beer makers, and one member shall represent Iowa distilleries. The board shall advise the authority on the best means to promote wine, and beer, and spirits made in Iowa.
    Sec. 24.  Section 15E.117, Code 2023, is amended to read as follows:
   15E.117  Promotion of Iowa wine, and beer, and spirits.
   1.  The economic development authority shall consult with the Iowa wine, and beer, and spirits promotion board on the best means to promote wine, and beer, and spirits made in Iowa.
   2.  The authority has shall have the authority to contract with private persons for the promotion of beer, and wine, and spirits made in Iowa.
   3.  Moneys appropriated to the authority pursuant to sections 123.143 and 123.183, and moneys transferred to the authority pursuant to section 123.17, subsection 8A, may be used by the authority for the purposes of this section, including administrative expenses incurred under this section.
    Sec. 25.  Section 123.17, Code 2023, is amended by adding the following new subsection:
   NEW SUBSECTION.  8A.  After any transfers provided for in subsections 3, 5, 6, 7, and 8 are made, and before any other transfer to the general fund, the department of commerce shall transfer to the economic development authority from the beer and liquor control fund the lesser of two hundred fifty thousand dollars or one percent of the gross sales of native distilled spirits by all class “A” native distilled spirits license holders made by the division for the purposes of promoting Iowa wine, beer, and spirits.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the economic development authority, including certain tax credit programs, the Iowa wine, beer, and spirits promotion board, and the beer and liquor control fund. The bill is divided into two divisions.
   DIVISION I —— TAX CREDITS. Under current law, the economic development authority (authority) is required to allocate $2 million in tax credits (credits) for investments in qualifying businesses and allocate $8 million in credits for investments in an innovation fund. This division of the bill requires the authority to allocate an aggregate amount of credits that is not more than $10 million for both programs. On or before June 30 of each year, the authority shall determine the amount of the aggregate amount of credits that shall be allocated for credits issued for investments in qualifying businesses, and the amount that shall be allocated for credits for investments in an innovation fund.
   The bill extends the future repeal date for the renewable chemical program from July 1, 2030, to July 1, 2036. The bill also extends the availability of the renewable chemical program credit for any renewable chemical produced prior to the end of calendar year 2035, rather than the end of calendar year 2026.
   Under the bill, serine, threonine, lysine, and nonfuel ethanol are removed from the definition of “building block chemical” for purposes of the renewable chemical program (chemical program). All completed applications submitted by eligible businesses to the chemical program must be reviewed and scored on a competitive basis by the authority pursuant to rules adopted by the authority, and $1 million is the maximum amount of credit that may be issued to an eligible business in a calendar year. Under current law, if an eligible business has been in operation in the state for five years or less at the time of application, the maximum credit is $1 million. If the business has been in operation more than five years, the maximum is $500,000. The bill eliminates the wait list the authority must currently maintain for the chemical program. Under the bill, the authority may award an amount of credits under the chemical program not to exceed the maximum aggregate amount allocated in Code section 15.119(2)(h) for each fiscal year beginning on or after July 1, 2023, and ending on or before June 30, 2036. Information regarding the chemical program that must be submitted to the general assembly and to the governor by January 31 each year is detailed in the bill and differs from the requirements under current law. The future repeal of the chemical program is extended from July 1, 2030, to July 1, 2039. The bill extends the future repeal of the chemical program credit allowed under Code sections 422.10B and 422.33 from January 1, 2033, to January 1, 2041.
   For investments in qualifying businesses, the bill changes the maximum amount of a credit that may be issued to a natural person and the person’s spouse or dependent from a calendar year basis to a fiscal year basis. The maximum amount of credits that may be issued for equity investments in any one qualifying business also changes from a calendar year to a fiscal year. In order for an equity investment to qualify for a credit, the business in which the equity investment is made, within 60 days of the date of the first investment, must provide the authority with information as detailed in the bill. Under current law, the business must do so within 120 days. In order to be a qualifying business in which an equity investment may be made and qualify for a credit, the bill adds an additional requirement that the business must be a business engaged primarily in advanced manufacturing, biosciences, finance, insurance, information technology, or educational technology. The bill requires the authority to verify the eligibility of a qualifying business and an investor’s investment in the qualifying business prior to issuing a credit certificate to the investor.
   For purposes of innovation fund investment credits, the bill adds “educational technology” to the definition of “innovative business”. The bill eliminates the wait list for the innovation fund tax credit and extends the time the authority’s board may certify an innovation fund from June 30, 2023, to June 30, 2028. 
   The bill makes conforming changes to Code sections 15.318(2)(c)-(d), and 15.354(4)(a)-(f).
   The sections of this division of the bill amending Code sections 15.316(3), 15.318(1), 15.318(3)(a), 15.318(3)(d), and 15.318(3)(e) apply to all applications submitted to the chemical program on or after July 1, 2023. The sections of the division of the bill amending Code sections 15.318(3)(e) and 15.320(1) apply to all eligible businesses placed on a wait list for the program pursuant to Code section 15.318(3)(e) on or before June 30, 2023.
   The sections of this division of the bill amending Code section 15E.44(1) and enacting Code section 15E.44(2)(0e) apply to all applications submitted to the authority’s board for investments in qualifying businesses, administered pursuant to Code sections 15E.41 through 15E.46, on or after July 1, 2023.
   The section of this division of the bill amending Code section 15E.52(1)(c) applies to all applications submitted to the authority’s board for innovation fund investment tax credits, administered pursuant to Code section 15E.52, on or after July 1, 2023. The section of this division of the bill amending Code section 15E.52(5)(b) applies to all applications submitted for innovation fund tax credits, administered pursuant to Code section 15E.52, placed on a wait list pursuant to Code section 15E.52(5)(b).
   DIVISION II —— IOWA WINE, BEER, AND SPIRITS PROMOTION BOARD. This division of the bill modifies the Iowa wine and beer promotion board (promotion board) by adding spirits, and adds a fourth member to the promotion board to represent Iowa distilleries. The current promotion board has three members. In addition to advising the authority on the promotion of Iowa-made beer and wine, the bill requires the promotion board to advise the authority on the promotion of spirits made in Iowa. The authority must consult with the promotion board on the best means to promote spirits made in Iowa, and permits the authority to contract with private persons for the promotion of spirits made in Iowa.
   The bill requires the department of commerce, after certain other transfers required by current law from the beer and liquor control fund are made, to transfer to the authority the lesser of $250,000 or 1 percent of the gross sales of native distilled spirits by all class “A” native distilled spirits license holders made by the alcoholic beverages division. The transferred moneys may be used by the authority to promote wine, beer, and spirits made in Iowa, and for administrative expenses related to such promotion.