HSB 130 (LSB 1264YC (3) 91)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON ECONOMIC GROWTH AND TECHNOLOGY BILL BY CHAIRPERSON SORENSEN)

A BILL FOR

An Act creating the quantum technology tax credit available against the individual and corporate income taxes, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15.381  Quantum technology tax credit.
   1.  As used in this part, unless the context otherwise requires:
   a.  “Consortium” means a group of entities for profit or for nonprofit, or both, that are jointly making qualifying investments in an eligible project to create a shared quantum facility.
   b.  “Department” means the department of revenue.
   c.  “Eligible project” means a capital project undertaken in this state to create a shared quantum facility for which a qualified applicant makes qualifying investments approved by the authority.
   d.  “Qualified applicant” means a nonprofit or for-profit entity including a consortium that submits a successful application to the authority for the reservation or issuance of tax credits.
   e.  (1)  “Qualifying fixed capital asset” means any of the following:
   (a)  Land in this state.
   (b)  Tangible personal property acquired for use exclusively in this state for which a qualified applicant is allowed a deduction for depreciation pursuant to section 167 of the Internal Revenue Code, including furniture, fixtures, and equipment such as outfitting an office, laboratory machines, refrigeration, HVAC systems, piping, measuring, monitoring and instrumentation equipment, and any hardware and software developed by third parties necessary for quantum technology applications.
   (c)  Computer software acquired for use exclusively in this state for which the qualified applicant is allowed a deduction for depreciation pursuant to section 167 of the Internal Revenue Code.
   (2)  “Qualifying fixed capital asset” is limited to property acquired, constructed, reconstructed, or erected as part of a coordinated plan to create a shared quantum facility.
   f.  “Qualifying investment” means the amount paid by a qualified applicant to acquire, construct, reconstruct, or erect qualifying fixed capital assets to the extent such amount is required to be capitalized pursuant to the Internal Revenue Code or such amount is allowed to be deducted under section 179 of the Internal Revenue Code. “Qualifying investment” includes an amount capitalized by a lessee of qualifying fixed capital assets for a lease that is treated as a sale for federal income tax purposes.
   g.  “Quantum business” means a private for-profit business or a nonprofit organization that has quantum technology as a key part of its business model or organizational purpose, including but not limited to manufacturing, testing, production, research and development, or enhancement of hardware or software to perform or use quantum technology as a key input or output of its business model, and companies that produce goods for services that are key inputs for other quantum business.
   h.  “Shared quantum facility” means a primary location in this state where a qualified applicant performs activities and provides economic benefit related to supporting quantum business and a quantum ecosystem.
   2.  a.  An applicant shall submit an application to the authority in a manner prescribed by the authority for the quantum technology tax credit. A successful application by a qualified applicant shall include but not be limited to the following:
   (1)  An eligible project placed in service prior to January 1, 2031.
   (2)  A federal grant from the economic development administration for the regional technology and innovation program or from a comparable federal grant program where the applicant received at least two million dollars in grant funding.
   b.  (1)  If a qualified applicant is a consortium, the amount of the credit allowed by the authority shall include the aggregate qualifying investment by all the members of the consortium.
   (2)  (a)  A consortium shall designate and disclose the representative to act on behalf of the consortium for tax matters. The representative shall provide the name and taxpayer identification number of each member of the consortium.
   (b)  The representative is responsible for representing and binding the consortium with respect to all matters involving the credit, including submitting the application, representing the consortium before the authority, notifying the authority the eligible project has been placed in service, submitting proof of compliance, and submitting any other information required by the authority.
   3.  a.  Upon review of the application and approval by the authority to receive the tax credit, the authority shall issue a tax credit certificate to a qualified business indicating the amount available to be claimed, or reserve tax credits as provided in paragraph “b”. The authority may authorize a tax credit in an amount equal to the qualified applicant’s estimated qualifying investment.
   b.  (1)  The authority may determine that a qualified applicant is entitled to a tax credit reservation. If the authority issues a tax credit reservation for the qualified applicant, the authority shall notify the qualified applicant of the reservation of the tax credit and the amount reserved. The reservation of a tax credit does not entitle the qualified applicant to the issuance of a tax credit certificate until the qualified applicant complies with all other requirements specified in this section for the issuance of the tax credit. When the authority approves a tax credit reservation, the authority may also impose additional requirements on the qualified applicant, which the qualified applicant must satisfy as part of completing the qualifying investment before a tax credit certificate is issued to the qualified applicant.
   (2)  A reserved tax credit shall be provided to the qualified applicant as a tax credit certificate on an ongoing basis as the qualified applicant incurs qualifying expenses, subject to approval by the authority.
   4.  For tax years beginning on or after January 1, 2026, but before January 1, 2033, the quantum technology tax credit is available to a qualified applicant that has been approved for a tax credit by the authority.
   5.  To claim a tax credit under this section, a taxpayer shall include one or more tax credit certificates with the taxpayer’s tax return. The tax credit certificate, unless rescinded by the authority, shall be accepted by the department as payment for taxes imposed pursuant to chapter 422, subchapters II and III, subject to any conditions or restrictions placed by the authority upon the face of the tax credit certificate and subject to any other limitations.
   6.  An individual may claim a quantum technology tax credit incurred by a partnership, S corporation, limited liability company, estate, or trust electing to have the income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings of a partnership, S corporation, limited liability company, estate, or trust.
   7.  Any tax credit in excess of the qualified applicant’s tax liability is refundable. In lieu of claiming a refund, the taxpayer may elect to have the overpayment shown on the taxpayer’s final completed return credited to the tax liability for the following year.
   8.  Tax credit certificates issued pursuant to this section shall not be transferred to any other person.
   9.  a.  In each fiscal year beginning on or after July 1, 2026, the authority may award an amount of tax credits and reserved tax credits under the program not to exceed twenty-four million dollars each fiscal year, subject to paragraph “b”.
   b.  The total tax credits awarded pursuant to this section shall not exceed forty-four million dollars in the aggregate.
   c.  The authority may limit the total amount of tax credits reserved or awarded to a qualified applicant to an amount less than the estimated qualifying investment or the qualifying investment.
   10.  In determining which eligible project to award a tax credit to, the authority may prioritize eligible projects that demonstrate an ability to meet application requirements, have received a substantial federal award for purposes of cultivating and expanding a quantum-related ecosystem within this state, and have provided detailed explanations of the ways the shared quantum facility benefits the quantum industry in this state.
   11.  The failure of a qualified applicant in fulfilling any requirement under this section or any terms and obligations of any agreement entered pursuant to this section may result in the reduction, termination, or rescission of the tax credits claimed. The repayment or recapture of tax credits pursuant to this subsection shall be accomplished in the same manner as provided in section 15.330, subsection 2.
   12.  a.  If, prior to completion of the eligible project, the qualified applicant sells, transfers, or abandons, or repurposes a substantial portion of the qualifying fixed capital assets for which the qualified applicant was allowed a tax credit pursuant to this section, or otherwise ceases to operate the shared quantum facility in this state, the qualified applicant shall notify the authority of such an event, and the authority shall notify the department that the tax credit awarded pursuant to this section is to be rescinded.
   b.  This subsection does not apply if the quantum facility experiences a casualty loss and if the qualifying fixed capital assets are restored within a reasonable amount of time.
   13.  Beginning January 15, 2028, and every two years thereafter through January 15, 2032, the authority shall provide a report to the general assembly detailing the issuance of the tax credits. The report shall include a description of each eligible project placed in service, a description of the uses of each eligible project, the number of jobs supported in the quantum industry in the state as a result of the eligible project, an overview of the types of intellectual property that have been advanced through the eligible project, the qualified applicant’s name, and the amount of credits awarded to the qualified applicant.
   14.  The authority shall adopt rules pursuant to chapter 17A to administer this section.
   15.  This section is repealed January 1, 2038.
    Sec. 2.  NEW SECTION.  422.10C  Quantum technology credit.
   The taxes imposed under this subchapter, less the credits allowed under section 422.12, shall be reduced by a quantum technology credit allowed under section 15.381. This section is repealed January 1, 2038.
    Sec. 3.  Section 422.33, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  27.  The taxes imposed under this subchapter shall be reduced by a quantum technology tax credit allowed under section 15.381. This subsection is repealed January 1, 2038.
    Sec. 4.  APPLICABILITY.  This Act applies to tax years beginning on or after January 1, 2026.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill creates the quantum technology tax credit (credit) available against the individual and corporate income taxes for eligible projects.
   The bill defines “eligible project” to mean a capital project undertaken in this state to create a shared quantum facility for which a qualified applicant makes qualifying investments approved by the Iowa economic development authority (authority).
   An applicant for the credit may include a group of entities for profit or for nonprofit, or both, including a consortium that are jointly making qualifying investments in an eligible project to create a shared quantum facility.
   The bill defines “shared quantum facility” to mean a primary location in this state where a qualified applicant performs activities and provides economic benefit related to supporting quantum business and a quantum ecosystem.
   An applicant for the credit shall submit an application to the authority in a manner prescribed by the authority. The application of a qualified applicant shall include but not be limited to an eligible project placed in service prior to January 1, 2031, and a multimillion dollar federal grant from the economic development administration for the regional technology and innovation program or from a comparable federal grant program. If a qualified applicant is a consortium, the amount of the credit allowed by the authority shall include the aggregate qualifying investment by all the members of the consortium. The bill requires a consortium to designate and disclose the representative to act on behalf of the consortium for tax matters. The representative shall provide the name and taxpayer identification number of each member of the consortium.
   Upon review of the application and approval by the authority to receive the credit, the authority shall issue a tax credit certificate to a qualified business indicating the amount available to be claimed. The authority may authorize a tax credit in an amount equal to the qualified applicant’s estimated qualifying investment.
   The bill defines “qualifying investment” to mean the amount paid by a qualified applicant to acquire, construct, reconstruct, or erect qualifying fixed capital assets to the extent such amount is required to be capitalized pursuant to the Internal Revenue Code or such amount is allowed to be deducted under section 179 of the Internal Revenue Code. The bill defines “qualifying fixed capital assets” to mean land, tangible personal property, and computer software used exclusively in this state as part of a coordinated plan to create a shared quantum facility.
   The authority may determine that a qualified applicant is entitled to a credit reservation. The reservation of a credit does not entitle the qualified applicant to the issuance of a tax credit certificate until the qualified applicant complies with all other requirements specified in the bill for the issuance of the credit. When the authority approves a tax credit reservation under the bill, the authority may also impose additional requirements on the qualified applicant before a tax credit certificate is issued to the qualified applicant.
   The credit is available for tax years beginning on or after January 1, 2026, but before January 1, 2033. The bill limits the aggregate amount of credits and reserved credits awarded each fiscal year to $24 million, and restricts the total tax credits that may be awarded to $44 million in the aggregate.
   In determining which eligible project to award a credit to, the authority may prioritize eligible projects that demonstrate an ability to meet application requirements, have received a substantial federal award for purposes of cultivating and expanding a quantum-related ecosystem within this state, and have provided detailed explanations of the ways the shared quantum facility benefits the quantum industry in the state.
   The failure of a qualified applicant in fulfilling any requirement under the bill or any terms and obligations of any agreement may result in the reduction, termination, or rescission of the tax credits claimed. The bill also specifies the procedures for the repayment or recapture of credits.
   The bill requires the authority to adopt rules to administer the credit. 
   The bill applies to tax years beginning on or after January 1, 2026.