HF 1033 (LSB 1258HV (1) 91)

HOUSE FILE 1033

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HSB 226)

A BILL FOR

An Act making a rural water district a designated exempt entity for purposes of the sales and use tax.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 423.4, subsection 1, paragraph a, Code 2025, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (11)  A rural water district organized under chapter 504 as provided in chapter 357A.
    Sec. 2.  Section 423.3, subsection 38, Code 2025, is amended by striking the subsection.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill makes a nonprofit rural water district organized under Code chapter 504 as provided in Code chapter 357A a designated exempt entity, which allows the nonprofit rural water district to apply to the department of revenue for the refund of the sales and use tax upon sales of building materials, supplies, and equipment, or from services furnished by a contractor in the performance of a written contract with the rural water district, if certain circumstances relating to the contract are met. By designating a rural water district a designated exempt entity under the bill, construction services provided to the water district also become exempt from the sales tax which is different than the sales tax exemption under current law.
   Under current law, the building materials, supplies, or equipment sold to a rural water district for the construction of facilities are exempt from the sales tax in Code section 423.3(38). The bill strikes the current rural water sales tax exemption in Code section 423.3(38) so two separate and distinct sales tax exemptions do not exist at the same time relating to building materials, supplies, or equipment sold to a rural water district.