HF 2471 (LSB 5279HZ (5) 84)

HOUSE FILE 2471

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HF 2359)
(SUCCESSOR TO HSB 604)

(As Amended and Passed by the House 2012-04-23)

A BILL FOR

An Act relating to economic development by providing an adjustment to net income for certified suppliers of anchor manufacturers for purposes of state taxation and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15.226  Definitions.
   For purposes of this part:
   1.  “Anchor manufacturer” means a business that meets all of the following:
   a.  Manufactures tangible personal property at a facility in Iowa.
   b.  Exports at least fifty percent of the tangible personal property produced at the facility to markets outside of the state.
   2.  “Certified supplier” means a business certified pursuant to section 15.227.
   3.  “Facility” means a building or buildings located in the state at which tangible personal property is manufactured for sale within or without the state of Iowa.
   4.  “Manufactured” or “Manufactures”means adding value to personal property through a process of manufacturing, refining, purifying, combining of different materials, the packaging of meats, extracting and recovering natural resources, and all processes of fabricating and curing, with a view to selling the property for gain or profit.
   5.  “Tangible personal property” means the same as defined in section 422.33, subsection 2, unnumbered paragraph 2.
    Sec. 2.  NEW SECTION.  15.227  Certification of suppliers.
   1.  A business meeting the requirements of subsection 2 may apply to the authority, no later than ninety days after the end of a tax year of the business, for certification under this section. If a business applying to the authority meets the requirements of subsection 2, the authority shall issue a certificate to the business stating that the business is a certified supplier.
   2.  To receive certification as a certified supplier, a business must meet all of the following for the tax year immediately preceding the tax year for which the requested certificate will be valid:
   a.  The business manufactures tangible personal property at a facility in Iowa.
   b.  The business derives more than ten percent of its gross sales of tangible personal property manufactured at a facility in Iowa from sales to anchor manufacturers. For purposes of the requirement in this paragraph, a business may aggregate gross sales to more than one anchor manufacturer.
   c.  All sales by the business to anchor manufacturers are arm’s length transactions.
   d.  The business provides a statement from an anchor manufacturer, signed by an officer or authorized representative of the anchor manufacturer, attesting that the anchor manufacturer meets the definition of anchor manufacturer under section 15.226, and provides supporting documentation in a form prescribed by the authority.
   e.  The business meets one of the following criteria:
   (1)  At least ten percent of the total payroll of the business is located in the state.
   (2)  The business employs at least fifty employees at a facility in the state.
   f.  The business agrees to annually provide to the authority information and data on jobs created and capital investments made in the state by the business. The information and data shall be in a form prescribed by the authority.
   g.  The business is not an anchor manufacturer.
   3.
  A certificate is valid for one tax year and shall include an expiration date. Reapplication may be made each year for certification under this part. The department of revenue shall accept a validly issued, unexpired certificate issued under this section.
   4.  The authority shall not issue certificates pursuant to this section for tax years beginning on or after January 1, 2015. On or after January 1, 2015, the authority and the department of revenue shall coordinate with the chairpersons of the senate and house standing committees on economic growth and rebuild Iowa to evaluate the effectiveness of this certification process and the related adjustments to net income provided in chapter 422, and the feasibility of continuing both into the future.
    Sec. 3.  NEW SECTION.  15.228  Eligibility for adjustment to net income of certified suppliers.
   1.  A certified supplier shall be eligible to make the adjustment to net income in section 422.35, subsection 26, for a tax year if all the following apply:
   a.  The certified supplier’s net business income for the tax year, allocated and apportioned to this state under section 422.33, subsection 2, paragraph “b”, computed without regard to section 422.35, subsection 26, increased by more than five percent over the certified supplier’s net business income in the prior year, allocated and apportioned to this state under section 422.33, subsection 2, paragraph “b”.
   b.  The certified supplier attaches a copy of a valid, unexpired certificate issued under section 15.227 to the certified supplier’s tax return required under chapter 422.
   2.  A taxpayer who is a shareholder in a subchapter S corporation that is a certified supplier shall be eligible to make the adjustment to net income in section 422.7, subsection 57, for a tax year if all the following apply:
   a.  The certified supplier’s net business income for the tax year, allocated and apportioned to this state under section 422.33, subsection 2, paragraph “b”, computed without regard to section 422.35, subsection 26, increased by more than five percent over the certified supplier’s net business income in the prior year, allocated and apportioned to this state under section 422.33, subsection 2, paragraph “b”, computed with regard to section 422.35, subsection 26, if the subchapter S corporation was a certified supplier in the previous tax year and met the eligibility requirements in this paragraph “a”.
   b.  The shareholder attaches a copy of a valid, unexpired certificate issued under section 15.227 to the shareholder’s tax return required under chapter 422.

   3.  For purposes of establishing eligibility under this section, “net business income” shall not include any income of a certified supplier that is attributable to an existing trade or business or income-producing contract that was acquired by the certified supplier through merger or acquisition during or after the first year for which the certified supplier becomes eligible pursuant to this section for the adjustments to net income in section 422.7, subsection 57, or section 422.35, subsection 26.
    Sec. 4.  NEW SECTION.  15.229  Rules.
   The authority and the department of revenue may adopt rules for the implementation of this part.
    Sec. 5.  Section 257.21, Code 2011, is amended to read as follows:
   257.21  Computation of instructional support amount.
   1.  The department of management shall establish the amount of instructional support property tax to be levied and the amount of instructional support income surtax to be imposed by a district in accordance with the decision of the board under section 257.19 for each school year for which the instructional support program is authorized. The department of management shall determine these amounts based upon the most recent figures available for the district’s valuation of taxable property, individual state income tax paid, and budget enrollment in the district, and shall certify to the district’s county auditor the amount of instructional support property tax, and to the director of revenue the amount of instructional support income surtax to be imposed if an instructional support income surtax is to be imposed.
   2.  The instructional support income surtax shall be imposed on the state individual income tax for the calendar year during which the school’s budget year begins, or for a taxpayer’s fiscal year ending during the second half of that calendar year and after the date the board adopts a resolution to participate in the program or the first half of the succeeding calendar year, and shall be imposed on all individuals residing in the school district on the last day of the applicable tax year. As used in this section, “state individual income tax” means the taxes computed under section 422.5, without regard to the adjustment to net income in section 422.7, subsection 57, less the amounts of nonrefundable credits allowed under chapter 422, division II.
    Sec. 6.  Section 422.7, Code Supplement 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  57.
  a.  If the adjusted gross income includes income from a subchapter S corporation for which the taxpayer is a shareholder, which subchapter S corporation is a certified supplier that meets the requirements in section 15.228, subsection 2, paragraph “a”, the taxpayer may subtract an amount based on the taxpayer’s pro rata share of the profits or losses from the subchapter S corporation equal to the difference between the subchapter S corporation’s net business income for the tax year, allocated and apportioned to this state under section 422.33, subsection 2, paragraph “b”, computed without regard to section 422.35, subsection 26, and one hundred five percent of the subchapter S corporation’s net business income for the prior tax year, allocated and apportioned under section 422.33, subsection 2, paragraph “b”, computed with regard to section 422.35, subsection 26, if the subchapter S corporation was a certified supplier in the previous tax year and met the requirements in section 15.228, subsection 2, paragraph “a”. A taxpayer who is a resident shall not make the subtraction provided in this subsection unless the taxpayer also makes an election pursuant to section 422.5, subsection 1, paragraph “j”, subparagraph (2).
   b.  For purposes of the adjustment provided in this subsection, “net business income” shall not include any income of a certified supplier that is attributable to an existing trade or business or income-producing contract that was acquired by the certified supplier through merger or acquisition during or after the first year for which the certified supplier becomes eligible for the adjustment in this subsection.
    Sec. 7.  Section 422.35, Code Supplement 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  26.
  a.  If the taxpayer is a certified supplier that meets the requirements in section 15.228, subsection 1, subtract an amount equal to the difference between the taxpayer’s net business income for the tax year, allocated and apportioned under section 422.33, subsection 2, paragraph “b”, computed without regard to this subsection, and one hundred five percent of the taxpayer’s net business income for the prior tax year, allocated and apportioned under section 422.33, subsection 2, paragraph “b”.
   b.  For purposes of the adjustment provided in this subsection, “net business income” shall not include any income of a certified supplier that is attributable to an existing trade or business or income-producing contract which was acquired by the certified supplier through merger or acquisition during or after the first year for which the certified supplier becomes eligible for the adjustment in this subsection.
    Sec. 8.  Section 422D.2, Code 2011, is amended to read as follows:
   422D.2  Local income surtax.
   A county may impose by ordinance a local income surtax as provided in section 422D.1 at the rate set by the board of supervisors, of up to one percent, on the state individual income tax of each individual residing in the county at the end of the individual’s applicable tax year. However, the cumulative total of the percents of income surtax imposed on any taxpayer in the county shall not exceed twenty percent. The reason for imposing the surtax and the amount needed shall be set out in the ordinance. The surtax rate shall be set to raise only the amount needed. For purposes of this section, “state individual income tax” means the tax computed under section 422.5, without regard to the adjustment to net income in section 422.7, subsection 57, less the amounts of nonrefundable credits allowed under chapter 422, division II.
    Sec. 9.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2012, for tax years beginning on or after that date.