Senate File 122 - IntroducedA Bill ForAn Act 1relating to the construction of child care facilities
2by providing developers with sales and use tax refunds
3and income, franchise, moneys and credits, and gross
4premiums tax credits, providing for a fee, and including
5applicability provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1   Section 1.  NEW SECTION.  15.361  Short title.
   2This part shall be known as the “Workforce Child Care
3Facility Tax Incentives Program”
.
4   Sec. 2.  NEW SECTION.  15.362  Definitions.
   5As used in this part, unless the context otherwise requires:
   61.  “Child care facility” means the same as defined in
7section 237A.1.
   82.  “Child care facility project” means a project located in
9this state meeting the requirements of section 15.363.
   103.  “Developer” means either of the following:
   11a.  A business that constructs a new child care facility
12structure, or rehabilitates, repairs, or redevelops an existing
13structure for use as a child care facility.
   14b.  The legal or equitable titleholder of record who
15furnishes material for or performs labor upon, or who contracts
16with a subcontractor to furnish material for or perform labor
17upon a new child care facility structure, or upon an existing
18structure for use as a child care facility, and who proposes
19to lease the structure for use as a child care facility, or
20intends to offer to sell the structure to a child care facility
21operator without occupying or using the structures as a child
22care facility.
   234.  “Program” means the workforce child care facility tax
24credit program administered pursuant to this part.
   255.  “Qualifying new investment” means costs that are directly
26related to the construction, repair, rehabilitation, or
27redevelopment of a child care facility project.
   286.  “Small city” means any city or township located in this
29state, except those located wholly within one or more of the
30eleven most populous counties in the state, as determined by
31the most recent population estimates issued by the United
32States bureau of the census.
33   Sec. 3.  NEW SECTION.  15.363  Child care facility project
34requirements.
   35To receive workforce child care facility tax incentives
-1-1pursuant to the program, a proposed child care facility project
2must meet all of the following requirements:
   31.  The project includes at least one of the following:
   4a.  The construction of a new structure to be used as a child
5care facility.
   6b.  The rehabilitation, repair, or redevelopment of an
7existing structure to be used as a child care facility.
   82.  The child care facility, when completed, meets all
9applicable safety standards under chapter 237A.
10   Sec. 4.  NEW SECTION.  15.364  Application and agreement.
   111.  Application.
   12a.  A developer seeking workforce child care facility
13tax incentives shall apply to the authority in the manner
14prescribed by the authority. The authority may accept
15applications during one or more annual application periods to
16be determined by the authority by rule.
   17b.  The application must include all of the following:
   18(1)  The following information establishing local
19participation for the child care facility project:
   20(a)  A resolution in support of the child care facility
21project by the community where the child care facility project
22will be located, except in a project where the developer is
23constructing a new structure, or rehabilitating, repairing, or
24redeveloping an existing structure on the grounds of a business
25for exclusive use by the business.
   26(b)  Documentation of local matching funds pledged for the
27child care facility project in an amount equal to at least
28fifty thousand dollars, or in the case of a small city in an
29amount equal to at least twenty-five thousand dollars, and
30including but not limited to a funding agreement between the
31developer and the community where the child care facility
32project will be located. For purposes of this paragraph,
33local matching funds shall be in the form of cash or cash
34equivalents, or in the form of a local property tax exemption,
35rebate, refund, or reimbursement.
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   1(2)  A report that meets the requirements and conditions of
2section 15.330, subsection 9.
   3(3)  Information showing the total costs and funding sources
4of the child care facility project sufficient to allow the
5authority to adequately determine the financing that will be
6utilized for the project, and the amount of the qualifying new
7investment.
   8(4)  Any other information deemed necessary by the authority
9to evaluate the eligibility and financial need of the child
10care facility project under the program.
   112.  Application review — tax incentive award.
   12a.  All completed applications shall be reviewed and scored
13on a competitive basis by the authority pursuant to rules
14adopted by the authority.
   15b.  Upon review and scoring of all applications received
16during an application period, the authority may make a tax
17incentive award to a child care facility project, which tax
18incentive award shall represent the maximum amount of tax
19incentives the child care facility project may qualify for
20under the program. In determining a tax incentive award, the
21authority shall not use an amount of project costs that exceeds
22the amount included in the application of the developer. Tax
23incentive awards shall be approved by the director of the
24authority.
   25c.  After making a tax incentive award, the authority
26shall notify the developer of its tax incentive award. The
27notification shall include the amount of tax incentives under
28section 15.365 for which the developer has received an award
29and a statement that the developer has no right to receive
30a tax incentive certificate or claim a tax incentive until
31all requirements of the program, including all requirements
32imposed by the agreement entered into pursuant to subsection
333, are satisfied. The amount of tax credits included on a tax
34credit certificate issued pursuant to this section, or a claim
35for refund of sales and use taxes, shall be contingent upon
-3-1completion of all requirements in subsection 3.
   2d.  An applicant that does not receive a tax incentive award
3during an application period may make additional applications
4during subsequent application periods. Such applicant shall be
5required to submit a new application and shall be competitively
6reviewed and scored in the same manner as other applicants in
7that application period.
   83.  Agreement and fees.
   9a.  Upon receipt of a tax incentive award by the child care
10facility project, the developer shall enter into an agreement
11with the authority for the successful completion of all
12requirements of the program. The agreement shall identify the
13tax incentive award amount, the tax incentive award date, the
14project completion deadline, and the total costs of the child
15care facility project.
   16b.  The compliance cost fees imposed in section 15.330,
17subsection 12, shall apply to all agreements entered into
18under this program and shall be collected by the authority in
19the same manner and to the same extent as described in that
20subsection.
   21c.  (1)  Except as provided in subparagraph (2), a developer
22shall complete its child care facility project within three
23years from the date the project is registered by the authority.
   24(2)  The authority may for good cause within the discretion
25of the authority extend a child care facility project’s
26completion deadline once by up to twelve months upon
27application by the developer, which application shall be made
28prior to the expiration of the three-year completion deadline
29in subparagraph (1) in the manner and form prescribed by the
30authority.
   31d.  Upon completion of a project, an examination of the
32project in accordance with the American institute of certified
33public accountants’ statements on standards for attestation
34engagements, completed by a certified public accountant
35authorized to practice in this state, shall be submitted to the
-4-1authority.
   2e.  Upon review of the examination and verification of the
3amount of the qualifying new investment, the authority may
4notify the developer of the amount that the developer may claim
5as a refund of the sales and use tax under section 15.365,
6subsection 2, and may issue a tax credit certificate to the
7developer stating the amount of workforce child care facility
8tax credits under section 15.365, subsection 3, the developer
9may claim. The sum of the amount that the developer may claim
10as a refund of the sales and use tax and the amount of the
11tax credit certificate shall not exceed the amount of the tax
12incentive award.
   13f.  (1)  If the authority determines the developer to be in
14default under the agreement, the authority shall revoke the tax
15incentive award, and shall not issue a tax credit certificate.
16The developer shall not be allowed a refund of sales and use
17tax under section 15.365, subsection 2.
   18(2)  The authority shall adopt rules pursuant to chapter 17A
19to specify what constitutes a default of the agreement.
   204.  Maximum tax incentives amount.
   21a.  For fiscal years beginning on or after July 1, 2022, the
22authority shall not award in any fiscal year an amount of tax
23incentives for child care facility projects in excess of three
24million dollars in the aggregate.
   25b.  (1)  Of the maximum tax incentive amounts available each
26fiscal year in paragraph “a”, sixty percent shall be awarded to
27small cities.
   28(2)  If by May 1 of a calendar year the entire sixty
29percent of the reserved tax credits is not distributed, the
30remaining tax credits shall be available to any other eligible
31applicants.
32   Sec. 5.  NEW SECTION.  15.365  Workforce child care facility
33tax incentives.
   341.  A developer that has entered into an agreement pursuant
35to section 15.364 is eligible to receive the tax incentives
-5-1described in subsections 2 and 3, not to exceed two hundred
2thousand dollars in the aggregate per child care facility
3project.
   42.  A developer may claim a refund of the sales and use
5taxes paid under chapter 423 that are directly related to a
6child care facility project and specified in the agreement.
7The refund available pursuant to this subsection shall be as
8provided in section 15.331A, excluding subsection 2, paragraph
9“c”, of that section. For purposes of the program, the term
10“project completion”, as used in section 15.331A, shall mean the
11date on which the authority notifies the department of revenue
12that all applicable requirements of an agreement entered into
13pursuant to section 15.364 are satisfied.
   143.  a.  A developer may claim a tax credit in an amount not
15to exceed the following:
   16(1)  For a child care facility project not located in a small
17city, ten percent of the qualifying new investment of a child
18care facility project specified in the agreement.
   19(2)  For a child care facility project located in a small
20city, twenty percent of the qualifying new investment of a
21child care facility project specified in the agreement.
   22b.  The tax credit shall be allowed against the taxes imposed
23in chapter 422, subchapters II, III, and V, and in chapter
24432, and against the moneys and credits tax imposed in section
25533.329.
   26c.  An individual may claim a tax credit under this
27subsection of a partnership, limited liability company,
28S corporation, estate, or trust electing to have income
29taxed directly to the individual. The amount claimed by the
30individual shall be based upon the pro rata share of the
31individual’s earnings from the partnership, limited liability
32company, S corporation, estate, or trust.
   33d.  Any tax credit in excess of the taxpayer’s liability
34for the tax year is not refundable but may be credited to the
35tax liability for the following five years or until depleted,
-6-1whichever is earlier.
   2e.  (1)  To claim a tax credit under this subsection, a
3taxpayer shall include one or more tax credit certificates with
4the taxpayer’s tax return.
   5(2)  The tax credit certificate shall contain the taxpayer’s
6name, address, tax identification number, the amount of
7the credit, the name of the eligible developer, any other
8information required by the department of revenue, and a place
9for the name and tax identification number of a transferee and
10the amount of the tax credit being transferred.
   11(3)  The tax credit certificate, unless rescinded by the
12authority, shall be accepted by the department of revenue as
13payment for taxes imposed pursuant to chapter 422, subchapters
14II, III, and V, and in chapter 432, and for the moneys and
15credits tax imposed in section 533.329, subject to any
16conditions or restrictions placed by the authority upon
17the face of the tax credit certificate and subject to the
18limitations of this program.
   19(4)  Tax credit certificates issued under section 15.364,
20subsection 3, paragraph “e”, may be transferred to any person.
21Within ninety days of transfer, the transferee shall submit the
22transferred tax credit certificate to the department of revenue
23along with a statement containing the transferee’s name, tax
24identification number, and address, the denomination that each
25replacement tax credit certificate is to carry, and any other
26information required by the department of revenue. However,
27tax credit certificate amounts of less than the minimum amount
28established by rule of the authority shall not be transferable.
   29(5)  Within thirty days of receiving the transferred
30tax credit certificate and the transferee’s statement, the
31department of revenue shall issue one or more replacement tax
32credit certificates to the transferee. Each replacement tax
33credit certificate must contain the information required for
34the original tax credit certificate and must have the same
35expiration date that appeared on the transferred tax credit
-7-1certificate.
   2(6)  A tax credit shall not be claimed by a transferee
3under this section until a replacement tax credit certificate
4identifying the transferee as the proper holder has been
5issued. The transferee may use the amount of the tax credit
6transferred against the taxes imposed in chapter 422,
7subchapters II, III, and V, and in chapter 432, and against the
8moneys and credits tax imposed in section 533.329, for any tax
9year the original transferor could have claimed the tax credit.
10Any consideration received for the transfer of the tax credit
11shall not be included as income under chapter 422, subchapters
12II, III, and V. Any consideration paid for the transfer of the
13tax credit shall not be deducted from income under chapter 422,
14subchapters II, III, and V.
   15f.  For purposes of the individual and corporate income
16taxes and the franchise tax, the increase in the basis of the
17property that would otherwise result from the qualifying new
18investment shall be reduced by the amount of the tax credit
19computed under this subsection.
20   Sec. 6.  NEW SECTION.  422.12O  Workforce child care facility
21tax credit.
   22The taxes imposed under this subchapter, less the credits
23allowed under section 422.12, shall be reduced by a workforce
24child care facility tax credit received pursuant to section
2515.365.
26   Sec. 7.  Section 422.33, Code 2021, is amended by adding the
27following new subsection:
28   NEW SUBSECTION.  31.  The taxes imposed under this subchapter
29shall be reduced by a workforce child care facility tax credit
30received pursuant to section 15.365.
31   Sec. 8.  Section 422.60, Code 2021, is amended by adding the
32following new subsection:
33   NEW SUBSECTION.  14.  The taxes imposed under this subchapter
34shall be reduced by a workforce child care facility tax credit
35received pursuant to section 15.365.
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1   Sec. 9.  NEW SECTION.  432.12N  Workforce child care facility
2tax credit.
   3The taxes imposed under this chapter shall be reduced by a
4workforce child care facility tax credit received pursuant to
5section 15.365.
6   Sec. 10.  Section 533.329, subsection 2, Code 2021, is
7amended by adding the following new paragraph:
8   NEW PARAGRAPH.  l.  The moneys and credits tax imposed
9under this section shall be reduced by a workforce child care
10facility tax credit received pursuant to section 15.365.
11   Sec. 11.  APPLICABILITY.  This Act applies to tax years
12beginning on or after January 1, 2022, for qualifying new
13investment costs occurring on or after that date.
14EXPLANATION
15The inclusion of this explanation does not constitute agreement with
16the explanation’s substance by the members of the general assembly.
   17This bill creates a workforce child care facility incentives
18program (program) that will be administered by the economic
19development authority (EDA) and that will provide tax
20incentives to developers that complete child care facility
21projects in the state. A “developer” is defined in the bill.
22In order to qualify for the tax incentives under the program, a
23child care facility project must meet certain requirements.
   24First, the project includes at least one of the following:
25the construction of a new structure to be used as a child care
26facility; or the rehabilitation, repair, or redevelopment of
27an existing structure to be used as a child care facility.
28Second, the child care facility, when completed, meets all
29applicable safety standards under Code chapter 237A.
   30A developer seeking tax incentives for a child care facility
31project under the bill is required to apply to the EDA. The
32application must include a resolution in support of the child
33care facility project by the community where the project will
34be located, except in situations where the child care facility
35will be exclusively used by the employees of a business, and
-9-1include documentation of local matching funds in an amount
2equal to at least $50,000, or in the case of a small city in an
3amount equal to at least $25,000, and other information for the
4EDA to evaluate the eligibility and financial need of the child
5care facility project under the program. The bill defines
6“small city” to mean any city or township located in this
7state, except those located wholly within one or more of the 11
8most populous counties in the state, as determined by the most
9recent population estimates issued by the United States bureau
10of the census.
   11The bill requires the EDA to review and score each
12application on a competitive basis based upon the rules of the
13EDA. The EDA is required to notify a developer of a successful
14application and the amount of tax incentives for which the EDA
15preliminarily determines it qualifies for under the bill. A
16developer is then required to enter into an agreement with the
17EDA for the successful completion of its child care facility
18project within three years from the date it was registered by
19the EDA. The bill also assesses a compliance cost fee in the
20amount of $500.
   21If the EDA determines the developer to be in default under
22the agreement, the bill requires the EDA to revoke the tax
23incentive award, and to not issue the tax credit certificate or
24a sales and use tax refund. The bill requires the EDA to adopt
25rules pursuant to Code chapter 17A to specify what constitutes
26a default of the agreement.
   27Upon completion of a child care facility project, the
28bill requires the developer to have its project audited by
29an independent certified public accountant licensed in this
30state. The EDA will then review the audit, verify the amount
31of workforce child care facility tax credits the developer may
32claim, and issue a tax credit certificate for that amount.
33The bill limits the amount of tax incentives for child care
34facility projects at $3 million in the aggregate per fiscal
35year.
-10-
   1The bill specifies that of the maximum tax incentive amounts
2available each fiscal year, 60 percent shall be awarded to
3small cities. If the amount of tax credits reserved for small
4cities has not been distributed by May 1 of any calendar year,
5the remaining reserved tax credits shall be available to any
6other eligible applicants.
   7The maximum amount of tax incentives that may be awarded by
8the EDA to a developer for a child care facility project shall
9not exceed $200,000.
   10The bill provides two different tax incentives. The first
11is a refund of the sales and use taxes paid that are directly
12related to the child care facility project. The second is
13a workforce child care facility investment tax credit in
14an amount not to exceed 20 percent of the qualifying new
15investment of the child care facility project in a small
16city, and 10 percent of the qualifying new investment of the
17child care facility project in any other area. “Qualifying
18new investment” means the costs directly related to the
19construction, repair, rehabilitation, or redevelopment of the
20child care facility.
   21The workforce child care facility investment tax credit may
22be claimed against the individual income tax, the corporate
23income tax, the franchise tax, the insurance companies tax, and
24the moneys and credits tax. To claim a tax credit, a taxpayer
25must include a tax credit certificate with the taxpayer’s
26tax return. The credit is nonrefundable but may be credited
27to the tax liability for five years. The tax credit may be
28transferred to any person or entity, and the bill establishes
29procedures for the proper transfer of the tax credit. For
30purposes of the individual and corporate income taxes and the
31franchise tax, when the tax basis of property is increased as
32a result of qualifying new investment, that tax basis shall
33be reduced by the amount of the workforce child care facility
34investment tax credit issued under the program.
   35The bill applies to tax years beginning on or after January
-11-11, 2022, for qualifying new investments occurring on or after
2that date.
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