House Study Bill 774 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON NORDMAN) A BILL FOR An Act exempting sales and use taxes incurred for constructing 1 a regional water trail system by a nonprofit corporation, 2 and including effective date and retroactive applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 6945YC (5) 91 jm/jh

H.F. _____ Section 1. Section 423.3, subsection 18, Code 2026, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . h. A nonprofit corporation that is a 3 designated exempt entity under section 423.4, subsection 1, 4 paragraph “a” , subparagraph (11). 5 Sec. 2. Section 423.3, subsection 80, paragraph c, 6 subparagraph (1), Code 2026, is amended to read as follows: 7 (1) With regard to a written construction contract with 8 a designated exempt entity described in paragraph “a” , 9 subparagraph (1), the sales price of building materials, 10 supplies, equipment, or services is exempt from tax by 11 this subsection only to the extent the building materials, 12 supplies, equipment, or services are completely consumed in the 13 performance of the construction contract with the a designated 14 exempt entity, and only if the property that is the subject 15 of the construction project becomes public property or the 16 property of the a designated exempt entity. 17 Sec. 3. Section 423.4, subsection 1, paragraph a, Code 2026, 18 is amended by adding the following new subparagraph: 19 NEW SUBPARAGRAPH . (11) A domestic nonprofit corporation 20 organized under chapter 504 that has a majority of voting board 21 members appointed by political subdivisions of the state, 22 implements a regional recreational and dam safety plan, and 23 constructs horizontal and vertical infrastructure on land and 24 within rivers and watersheds as part of a regional water trail 25 system. 26 Sec. 4. EFFECTIVE DATE. This Act, being deemed of immediate 27 importance, takes effect upon enactment. 28 Sec. 5. RETROACTIVE APPLICABILITY. This Act applies 29 retroactively to January 1, 2025, to all tangible personal 30 property or specified digital products sold, or services 31 furnished, to a designated exempt entity described in section 32 423.4, subsection 1, paragraph “a”, subparagraph (11), if 33 enacted by this Act, occurring on or after that date. 34 Sec. 6. RETROACTIVE APPLICABILITY. This Act applies 35 -1- LSB 6945YC (5) 91 jm/jh 1/ 3

H.F. _____ retroactively to January 1, 2025, to building materials, 1 supplies, equipment, or services furnished to a contractor 2 and used in the performance of a written contract with a 3 designated exempt entity described in section 423.4, subsection 4 1, paragraph “a”, subparagraph (11), if enacted by this Act, 5 occurring on or after that date. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 This bill exempts sales and use taxes incurred by a nonprofit 10 corporation for the construction of a regional water trail 11 system. 12 The bill makes a nonprofit corporation (nonprofit) organized 13 under Code chapter 504 a designated exempt entity, which allows 14 the nonprofit corporation to apply to the department of revenue 15 for the refund of the sales and use tax upon sales of building 16 materials, supplies, and equipment, or from services furnished, 17 by a contractor in the performance of a written contract with 18 the nonprofit. The nonprofit is generally defined to mean an 19 Iowa nonprofit corporation that has a majority of voting board 20 members appointed by political subdivisions of the state, that 21 implements a regional recreational and dam safety plan, and 22 constructs a regional water trail system. 23 The bill also exempts from the sales tax the sales price of 24 tangible personal property or specified digital products sold 25 or of services furnished to the nonprofit. 26 By designating the nonprofit a designated exempt entity 27 under the bill, construction services provided to the 28 nonprofit also become exempt from the sales tax under Code 29 section 423.3(80). The bill makes changes to Code section 30 423.3(80)(c)(1) to specify written contracts with an exempt 31 entity for the sales tax exemption even if another designated 32 exempt entity ultimately owns the property subject to the 33 construction project. 34 By operation of Code section 423.6, an item exempt from the 35 -2- LSB 6945YC (5) 91 jm/jh 2/ 3

H.F. _____ imposition of the sales tax is also exempt from the use tax 1 imposed in Code section 423.5. 2 The bill takes effect upon enactment and applies 3 retroactively to January 1, 2025, to all tangible personal 4 property or specified digital products sold, or services 5 furnished, to the designated exempt entity occurring on or 6 after that date. 7 The bill also applies retroactively to January 1, 2025, to 8 building materials, supplies, equipment, or services furnished 9 to a contractor and used in the performance of a written 10 contract with the designated exempt entity occurring on or 11 after that date. 12 -3- LSB 6945YC (5) 91 jm/jh 3/ 3