House File 2733 - Introduced HOUSE FILE 2733 BY JUDGE , BAETH , LEVIN , WILBURN , KURTH , BROWN-POWERS , MATSON , SCHOLTEN , RAMIREZ , CROKEN , MADISON , KRESSIG , McBURNEY , NIELSEN , WICHTENDAHL , R. JOHNSON , GOSA , EHLERT , GJERDE , OLSON , WESSEL-KROESCHELL , BAGNIEWSKI , B. MEYER , GAINES , COOLING , TUREK , KONFRST , and JACOBY A BILL FOR An Act relating to water quality, including a water quality 1 monitoring network and the water quality initiative, an 2 agricultural best management practices tax credit, an 3 Iowa clean water farm program and property tax credit, and 4 water quality practices loans, making appropriations, and 5 including applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5878YH (6) 91 sb/js

H.F. 2733 DIVISION I 1 WATER QUALITY MONITORING NETWORK 2 Section 1. IOWA FLOOD CENTER —— APPROPRIATION. There 3 is appropriated from the general fund of the state to the 4 state board of regents for the fiscal year beginning July 1, 5 2026, and ending June 30, 2027, the following amount, or so 6 much thereof as is necessary, to be used for the purposes 7 designated: 8 For purposes of supporting a water quality monitoring 9 network under the supervision of the Iowa flood center of the 10 state university of Iowa: 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 600,000 12 DIVISION II 13 WATER QUALITY INITIATIVE 14 Sec. 2. WATER QUALITY INITIATIVE —— DEPARTMENT OF 15 AGRICULTURE AND LAND STEWARDSHIP. 16 1. There is appropriated from the environment first fund 17 created in section 8.57A to the department of agriculture 18 and land stewardship for the fiscal year beginning July 1, 19 2026, and ending June 30, 2027, the following amount, or so 20 much thereof as is necessary, to be used for the purposes 21 designated: 22 For deposit in the water quality initiative fund created in 23 section 466B.45 , for purposes of supporting the water quality 24 initiative administered by the division of soil conservation 25 and water quality as provided in section 466B.42 , including 26 salaries, support, maintenance, and miscellaneous purposes: 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,125,000 28 2. There is appropriated from the rebuild Iowa 29 infrastructure fund created in section 8.57 to the department 30 of agriculture and land stewardship for the fiscal year 31 beginning July 1, 2026, and ending June 30, 2027, the following 32 amounts, or so much thereof as is necessary, to be used for the 33 purposes designated: 34 For deposit in the water quality initiative fund created in 35 -1- LSB 5878YH (6) 91 sb/js 1/ 13

H.F. 2733 section 466B.45 for purposes of supporting the water quality 1 initiative administered by the division of soil conservation 2 and water quality as provided in section 466B.42, including 3 salaries, support, maintenance, and miscellaneous purposes, 4 notwithstanding section 8.57, subsection 3, paragraph “c”: 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,600,000 6 3. a. The moneys appropriated in subsections 1 and 2 shall 7 be used to support projects in subwatersheds as designated 8 by the division that are part of high-priority watersheds 9 identified by the water resources coordinating council 10 established pursuant to section 466B.3 . 11 b. The moneys appropriated in subsections 1 and 2 shall be 12 used to support projects in watersheds generally, including 13 regional watersheds, as designated by the division and 14 high-priority watersheds identified by the water resources 15 coordinating council established pursuant to section 466B.3 . 16 4. In supporting projects in subwatersheds and watersheds 17 as provided in subsection 3, all of the following apply: 18 a. The demonstration projects shall utilize water quality 19 practices as described in the Iowa nutrient reduction strategy 20 as defined in section 455B.171 . 21 b. The division shall implement demonstration projects as 22 provided in paragraph “a” by providing for participation by 23 persons who hold a legal interest in agricultural land used in 24 farming. To every extent practical, the division shall provide 25 for collaborative participation by such persons who hold a 26 legal interest in agricultural land located within the same 27 subwatershed. 28 c. The division shall implement a demonstration project on 29 a cost-share basis as determined by the division. However, 30 except for edge-of-field practices, the state’s share of the 31 amount shall not exceed 50 percent of the estimated cost of 32 establishing the practice as determined by the division or 33 50 percent of the actual cost of establishing the practice, 34 whichever is less. 35 -2- LSB 5878YH (6) 91 sb/js 2/ 13

H.F. 2733 d. The demonstration projects shall be used to educate other 1 persons about the feasibility and value of establishing similar 2 water quality practices. The division shall promote field day 3 events for purposes of allowing interested persons to establish 4 water quality practices on their agricultural land. 5 e. The division shall conduct water quality evaluations 6 within supported subwatersheds. Within a reasonable period 7 after accumulating information from such evaluations, the 8 division shall create an aggregated database of water quality 9 practices. Any information identifying a person holding a 10 legal interest in agricultural land or specific agricultural 11 land shall be a confidential record under section 22.7 . 12 5. The moneys appropriated in subsections 1 and 2 shall 13 be used to support education and outreach in a manner that 14 encourages persons who hold a legal interest in agricultural 15 land used for farming to implement water quality practices, 16 including the establishment of such practices in watersheds 17 generally, and not limited to subwatersheds or high-priority 18 watersheds. 19 6. The moneys appropriated in subsections 1 and 2 may be 20 used to contract with persons to coordinate the implementation 21 of efforts provided in this section. 22 7. The moneys appropriated in subsections 1 and 2 may 23 be used by the department to support urban soil and water 24 conservation efforts, which may include but are not limited 25 to management practices related to bioretention, landscaping, 26 the use of permeable or pervious pavement, and soil quality 27 restoration. The moneys shall be allocated on a cost-share 28 basis as provided in chapter 161A . 29 8. Notwithstanding any other provision of law to the 30 contrary, the department may use moneys appropriated in 31 subsections 1 and 2 to carry out the provisions of this 32 section on a cost-share basis in combination with other moneys 33 available to the department from a state or federal source. 34 9. Not more than 10 percent of the moneys appropriated in 35 -3- LSB 5878YH (6) 91 sb/js 3/ 13

H.F. 2733 this section may be used to pay for the costs of administering 1 and implementing the water quality initiative by the 2 department’s division of soil conservation and water quality as 3 provided in section 466B.42 and this section. 4 DIVISION III 5 AGRICULTURAL BEST MANAGEMENT PRACTICES TAX CREDIT 6 Sec. 3. NEW SECTION . 422.12R Agricultural best management 7 practices tax credit. 8 The tax imposed under this subchapter, less the credits 9 allowed under section 422.12, shall be reduced by an 10 agricultural best management practices tax credit authorized 11 pursuant to section 466B.50. 12 Sec. 4. Section 422.33, Code 2026, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 33. The tax imposed under this subchapter 15 shall be reduced by an agricultural best management practices 16 tax credit authorized pursuant to section 466B.50. 17 Sec. 5. NEW SECTION . 466B.50 Agricultural best management 18 practices tax credit. 19 1. As used in this section: 20 a. “Agricultural best management practices plan” means a plan 21 approved by the division that provides significant improvement 22 to water quality in this state utilizing eligible practices, 23 and is consistent with other state and federal programs that 24 address agriculture nonpoint source pollution management. 25 b. “Division” means the division of soil conservation and 26 water quality within the department of agriculture and land 27 stewardship. 28 c. “Eligible practice” means the installation of 29 infrastructure, including conservation structures, practices, 30 or other measures that reduce contributing nutrient loads 31 under section 466B.43. “Eligible practice” also includes other 32 practices used to reduce contributing nutrient loads including 33 but not limited to alternative water systems, stream crossings 34 and hardened access points, stream channel stabilizations, 35 -4- LSB 5878YH (6) 91 sb/js 4/ 13

H.F. 2733 stormwater retention ponds, surface water runoff impoundments, 1 constructed wetlands, wetland restorations, fuel tank storage 2 treatments, capping and plugging abandoned wells, or integrated 3 pest management principles. 4 2. The taxes imposed by chapter 422, subchapters II and 5 III, shall be reduced by an agricultural best management 6 practices tax credit. The credit shall equal fifty percent of 7 any unreimbursed costs incurred by the taxpayer during the tax 8 year for the completion of an eligible practice that is in the 9 approved plan of the taxpayer. 10 3. After completion of any eligible practice, the division 11 shall inspect the completion of the eligible practice, and, if 12 completed, then certify the eligible practice as completed. 13 The taxpayer shall provide the certification to the department 14 of revenue when filing a return in a manner approved by the 15 department of revenue. 16 4. A taxpayer shall not claim the credit for the same 17 eligible practice in the same area more than one time. 18 5. For purposes of this section, an individual may claim 19 a credit incurred by a partnership, S corporation, limited 20 liability company, estate, or trust electing to have the income 21 taxed directly to the individual. The amount claimed by the 22 individual shall be based upon the pro rata share of the 23 individual’s earnings of a partnership, S corporation, limited 24 liability company, estate, or trust. 25 6. The credit shall be available to the taxpayer for a 26 period not to exceed ten consecutive tax years and shall not 27 exceed one hundred fifty thousand dollars in the aggregate per 28 plan. 29 7. Any credit in excess of tax liability is refundable. In 30 lieu of claiming a refund, the taxpayer may elect to have the 31 overpayment shown on the taxpayer’s final, completed return 32 credited to the tax liability for the following tax year. 33 8. The department of agriculture and land stewardship shall 34 adopt rules pursuant to chapter 17A to administer this section. 35 -5- LSB 5878YH (6) 91 sb/js 5/ 13

H.F. 2733 Sec. 6. CODE EDITOR DIRECTIVE. The Code editor shall 1 designate section 466B.50, as enacted in this division of this 2 Act, as chapter 466B, subchapter V, entitled “Agricultural Best 3 Management Practices Tax Credit”. 4 Sec. 7. APPLICABILITY. This division of this Act applies to 5 tax years beginning on or after January 1, 2027. 6 DIVISION IV 7 CLEAN WATER FARM PROGRAM AND PROPERTY TAX CREDIT 8 Sec. 8. NEW SECTION . 426D.1 Definitions. 9 As used in this chapter: 10 1. “Agricultural land” means the same as defined in section 11 425A.2. 12 2. “Department” means the department of revenue. 13 3. “Division” means the division of soil conservation and 14 water quality within the department of agriculture and land 15 stewardship. 16 4. “Owner” means an owner as defined in section 425A.2. 17 5. “Program” means the Iowa clean water farm program. 18 Sec. 9. NEW SECTION . 426D.2 Iowa clean water farm property 19 tax credit. 20 1. A qualifying owner shall be allowed an Iowa clean water 21 farm property tax credit on agricultural land that has been 22 certified by the division and placed in the program. 23 2. The amount of the credit under this section shall be 24 equal to five dollars per certified acre placed in the program. 25 Sec. 10. NEW SECTION . 426D.3 Iowa clean water farm program 26 —— fund —— appropriation. 27 1. The division shall establish an Iowa clean water farm 28 program to determine whether agricultural land meets the 29 criteria for the credit under this chapter and the goal of 30 preserving and protecting Iowa’s water resources by reducing 31 contributing nutrient loads. 32 2. An Iowa clean water farm fund is created in the state 33 treasury under the control of the department. For each fiscal 34 year beginning on or after July 1, 2028, there is appropriated 35 -6- LSB 5878YH (6) 91 sb/js 6/ 13

H.F. 2733 annually from the general fund of the state to the department 1 of revenue to be credited to the Iowa clean water farm fund an 2 amount sufficient to implement this chapter. 3 Sec. 11. NEW SECTION . 426D.4 Qualifying for the credit. 4 1. In order to qualify for the credit, an owner must 5 first apply to the division for certification of the acres 6 of agricultural land placed in the program. The application 7 shall be in a manner and filed by the deadline prescribed by 8 the division. 9 2. Upon application, the division shall conduct a 10 comprehensive review of the nutrient loads associated 11 with the acres of agricultural land proposed to be placed 12 into the program, including conservation structures, best 13 practices, or other measures that have been implemented to 14 reduce contributing nutrient loads in Iowa’s water resources. 15 After the comprehensive review, the division shall make 16 a determination whether to certify the proposed acres of 17 agricultural land as meeting the program goal of preserving 18 and protecting Iowa’s water resources by reducing contributing 19 nutrient loads. 20 3. Upon certification of acres in the program, the credit 21 shall be allowed on the certified acres for successive years 22 without further application as long as the certified acres are 23 legally and equitably owned by the qualifying owner or the 24 spouse of the qualifying owner on January 1 of each successive 25 assessment year. 26 Sec. 12. NEW SECTION . 426D.5 Notification by department and 27 computation by county auditor. 28 1. On an annual basis, the division shall provide the 29 department the number of certified acres in the program by 30 county. 31 2. Annually, the department of revenue shall certify to 32 the county auditor of each county the credit and its amount 33 in dollars. Each county auditor shall then enter the credit 34 against the property tax levied on each certified acre in each 35 -7- LSB 5878YH (6) 91 sb/js 7/ 13

H.F. 2733 county payable during the ensuing year, designating on the tax 1 lists the credit as being from the Iowa clean water farm fund, 2 and credit shall then be given to the several taxing districts 3 in which the certified acres are located in an amount equal to 4 the credits allowed on the taxes of the certified acres. The 5 amount of credits shall be apportioned by each county treasurer 6 to the several taxing districts as provided by law, in the same 7 manner as though the amount of the credit had been paid by the 8 owners of the certified acres. However, the several taxing 9 districts shall not draw the funds so credited until after 10 the semiannual allocations have been received by the county 11 treasurer, as provided in this chapter. Each county treasurer 12 shall show on each tax receipt the amount of credit received 13 from the Iowa clean water farm fund. 14 Sec. 13. NEW SECTION . 426D.6 Verification of claims. 15 1. The assessor shall retain a permanent file of current 16 Iowa clean water farm property tax credit claims in the county. 17 The assessor shall notify the department of transfer of 18 certified acres when notice is received from the office of the 19 county recorder. 20 2. The county recorder shall give notice to the assessor 21 of each transfer of title filed for certified acres in the 22 county. The notice shall describe the property transferred, 23 the name of the person transferring the title to the property, 24 and the name of the person to whom title to the property has 25 been transferred. 26 Sec. 14. APPLICABILITY. This division of this Act applies 27 to assessment years beginning on or after January 1, 2027. 28 DIVISION V 29 WATER QUALITY PRACTICES LOANS AND GRANTS PROGRAM 30 Sec. 15. NEW SECTION . 455B.199E Agricultural water quality 31 practices loans and grants. 32 1. Subject to available funding, the department of natural 33 resources shall establish and administer a water quality 34 practices loans and grants program to provide no-interest loans 35 -8- LSB 5878YH (6) 91 sb/js 8/ 13

H.F. 2733 and grants to any of the following: 1 a. Any person for the construction, renovation, improvement 2 or equipping of facilities or structures to implement 3 agricultural best management practices to prevent pollution of 4 state waters. 5 b. A local government entity that has developed a 6 no-interest loan program to provide loans or other incentives 7 to facilitate the construction, renovation, improvement, or 8 equipping of facilities or structures described in paragraph 9 “a” . 10 c. A financial institution working with a local government 11 to establish a program pursuant to paragraph “b” . 12 2. The department shall adopt rules for the water quality 13 practices loans and grants program and shall determine the 14 terms and conditions of any loan or grant. 15 3. For purposes of this section, “facilities or structures” 16 may include riparian buffers planted in trees and maintained in 17 accordance with the terms and conditions of the loan or grant. 18 EXPLANATION 19 The inclusion of this explanation does not constitute agreement with 20 the explanation’s substance by the members of the general assembly. 21 This bill relates to water quality and appropriates moneys 22 to support a water quality monitoring network and the water 23 quality initiative, creates an agricultural best management 24 practices tax credit (ABMP credit), establishes an Iowa clean 25 water farm program and property tax credit (CWF credit), and 26 establishes a water quality practices loans and grants program. 27 DIVISION I —— WATER QUALITY MONITORING NETWORK. The bill 28 appropriates moneys from the general fund of the state to 29 the state board of regents for FY 2026-2027 for purposes 30 of supporting a water quality monitoring network under the 31 supervision of the Iowa flood center of the state university 32 of Iowa. 33 DIVISION II —— WATER QUALITY INITIATIVE. The bill 34 appropriates moneys from the environment first fund and 35 -9- LSB 5878YH (6) 91 sb/js 9/ 13

H.F. 2733 the rebuild Iowa infrastructure fund to the department of 1 agriculture and land stewardship (DALS) for FY 2026-2027 2 for purposes of supporting the water quality initiative 3 administered by the division of soil conservation and water 4 quality (division). 5 The bill requires the appropriated moneys to be used for 6 watershed projects designated by the division or the water 7 resources coordinating council, education and outreach that 8 encourages persons who hold a legal interest in agricultural 9 land used for farming to implement water quality practices, or 10 contracts to coordinate the implementation of water quality 11 improvement efforts. The bill also allows the appropriated 12 moneys to be used by DALS to support certain urban soil and 13 water conservation efforts. 14 The bill allows DALS to use the appropriated moneys to 15 carry out the purposes of the water quality initiative on a 16 cost-share basis in combination with other available state or 17 federal funds. 18 The bill restricts DALS from using more than 10 percent 19 of the moneys appropriated for administrative costs of 20 administering and implementing the water quality initiative. 21 DIVISION III —— AGRICULTURAL BEST MANAGEMENT PRACTICES 22 TAX CREDIT. The bill defines “agricultural best management 23 practices plan” (plan) to mean a plan approved by the division 24 that provides significant improvement to water quality in this 25 state utilizing eligible practices, and is consistent with 26 other state and federal programs that address agriculture 27 nonpoint source pollution management. 28 The bill defines “eligible practice” to mean the 29 installation of infrastructure, including conservation 30 structures, practices, or other measures that reduce 31 contributing nutrient loads under Code section 466B.43. 32 “Eligible practice” also includes other practices used to 33 reduce contributing nutrient loads including but not limited to 34 alternative water systems, stream crossings and hardened access 35 -10- LSB 5878YH (6) 91 sb/js 10/ 13

H.F. 2733 points, stream channel stabilizations, stormwater retention 1 ponds, surface water runoff impoundments, constructed wetlands, 2 wetland restorations, fuel tank storage treatments, capping 3 and plugging abandoned wells, or integrated pest management 4 principles. 5 A taxpayer may claim the ABMP credit that is equal to 50 6 percent of any unreimbursed costs incurred by the taxpayer 7 during the tax year for the completion of an eligible practice 8 that is in the plan approved by the division. 9 After completion of any eligible practice, the bill 10 requires the division to inspect the completion of the eligible 11 practice, and, if completed, then certify the eligible practice 12 as completed. The taxpayer shall provide the certification 13 to the department of revenue when filing a return in a manner 14 approved by the department of revenue. 15 The ABMP credit shall be available to the taxpayer for a 16 period not to exceed 10 consecutive tax years and shall not 17 exceed $150,000 in the aggregate per plan. 18 The bill makes the ABMP credit refundable. In lieu 19 of claiming a refund, the taxpayer may elect to have the 20 overpayment shown on the taxpayer’s final, completed return 21 credited to the tax liability for the following tax year. 22 DALS is required to adopt rules pursuant to Code chapter 17A 23 to administer the bill. 24 The Code editor is directed to designate Code section 25 466B.50, created in the bill, as Code chapter 466B, subchapter 26 V, entitled “Agricultural Best Management Practices Tax 27 Credit”. 28 The bill applies to tax years beginning on or after January 29 1, 2027. 30 DIVISION IV —— CLEAN WATER FARM PROGRAM AND PROPERTY TAX 31 CREDIT. The bill defines “agricultural land” to generally mean 32 tracts of 10 acres or more excluding any buildings or other 33 structures used in agricultural or horticultural purposes. 34 The bill specifies a qualifying owner shall be allowed 35 -11- LSB 5878YH (6) 91 sb/js 11/ 13

H.F. 2733 a CWF credit on agricultural land equal to $5 per acre on 1 property placed in the Iowa clean water farm program that has 2 been certified by the division. An “owner” means an owner as 3 defined in Code section 425A.2. 4 Upon application to the division, the bill requires the 5 division to conduct a comprehensive review of the nutrient 6 loads associated with the acres proposed to be placed into the 7 program, including conservation structures, best practices, 8 or other measures that have been implemented to reduce 9 contributing nutrient loads in Iowa’s water resources. After 10 the comprehensive review, the division shall determine whether 11 to certify the proposed acres as meeting the program goal of 12 preserving and protecting Iowa’s water resources by reducing 13 contributing nutrient loads. 14 The administration and apportionment of the CWF credit is 15 similar to the agricultural land credit in Code chapter 426. 16 The CWF credit is allowed on the certified acres for successive 17 years without further application as long as the certified 18 acres are owned by the qualifying owner or the spouse of the 19 qualifying owner. 20 The bill appropriates from the general fund of the state the 21 amounts necessary to fund the CWF credit. 22 The bill applies to assessment years beginning on or after 23 January 1, 2027. 24 DIVISION V —— WATER QUALITY PRACTICES LOANS AND GRANTS 25 PROGRAM. The bill provides that the water quality practices 26 loans and grants program (program) be administered by the 27 department of natural resources (DNR) and that the program is 28 subject to available funding. 29 The bill authorizes DNR to provide no-interest loans 30 and grants to any person for the construction, renovation, 31 improvement, or equipping of facilities or structures that 32 implement agricultural best management practices intended to 33 prevent pollution of state waters. 34 The bill also authorizes DNR to provide no-interest loans 35 -12- LSB 5878YH (6) 91 sb/js 12/ 13

H.F. 2733 and grants to local government entities that have developed 1 no-interest loan programs or other incentives to facilitate 2 the construction, renovation, improvement, or equipping of the 3 facilities or structures. In addition, the bill authorizes 4 assistance to financial institutions that are working with 5 local governments to establish such local loan or incentive 6 programs. 7 The bill requires DNR to adopt rules for the program and to 8 determine the terms and conditions of any loan or grant awarded 9 under the program. 10 -13- LSB 5878YH (6) 91 sb/js 13/ 13