HF 2774 (LSB 6945HV (1) 91)

HOUSE FILE 2774

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HSB 774)

A BILL FOR

An Act exempting sales and use taxes incurred for constructing a regional water trail system by a nonprofit corporation, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 423.3, subsection 18, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  h.  A nonprofit corporation that is a designated exempt entity under section 423.4, subsection 1, paragraph “a”, subparagraph (11).
    Sec. 2.  Section 423.3, subsection 80, paragraph c, subparagraph (1), Code 2026, is amended to read as follows:
   (1)  With regard to a written construction contract with a designated exempt entity described in paragraph “a”, subparagraph (1), the sales price of building materials, supplies, equipment, or services is exempt from tax by this subsection only to the extent the building materials, supplies, equipment, or services are completely consumed in the performance of the construction contract with the a designated exempt entity, and only if the property that is the subject of the construction project becomes public property or the property of the a designated exempt entity.
    Sec. 3.  Section 423.4, subsection 1, paragraph a, Code 2026, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (11)  A domestic nonprofit corporation organized under chapter 504 that has a majority of voting board members appointed by political subdivisions of the state, implements a regional recreational and dam safety plan, and constructs horizontal and vertical infrastructure on land and within rivers and watersheds as part of a regional water trail system.
    Sec. 4.  EFFECTIVE DATE.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 5.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2025, to all tangible personal property or specified digital products sold, or services furnished, to a designated exempt entity described in section 423.4, subsection 1, paragraph “a”, subparagraph (11), if enacted by this Act, occurring on or after that date.
    Sec. 6.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2025, to building materials, supplies, equipment, or services furnished to a contractor and used in the performance of a written contract with a designated exempt entity described in section 423.4, subsection 1, paragraph “a”, subparagraph (11), if enacted by this Act, occurring on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill exempts sales and use taxes incurred by a nonprofit corporation for the construction of a regional water trail system.
   The bill makes a nonprofit corporation (nonprofit) organized under Code chapter 504 a designated exempt entity, which allows the nonprofit corporation 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 nonprofit. The nonprofit is generally defined to mean an Iowa nonprofit corporation that has a majority of voting board members appointed by political subdivisions of the state, that implements a regional recreational and dam safety plan, and constructs a regional water trail system.
   The bill also exempts from the sales tax the sales price of tangible personal property or specified digital products sold or of services furnished to the nonprofit.
   By designating the nonprofit a designated exempt entity under the bill, construction services provided to the nonprofit also become exempt from the sales tax under Code section 423.3(80). The bill makes changes to Code section 423.3(80)(c)(1) to specify written contracts with an exempt entity for the sales tax exemption even if another designated exempt entity ultimately owns the property subject to the construction project.
   By operation of Code section 423.6, an item exempt from the imposition of the sales tax is also exempt from the use tax imposed in Code section 423.5.
   The bill takes effect upon enactment and applies retroactively to January 1, 2025, to all tangible personal property or specified digital products sold, or services furnished, to the designated exempt entity occurring on or after that date.
   The bill also applies retroactively to January 1, 2025, to building materials, supplies, equipment, or services furnished to a contractor and used in the performance of a written contract with the designated exempt entity occurring on or after that date.