SF 303 – Military retirement pay tax exemption/Home Base Iowa initiative
SF 2198 – Authorizes paddle fishing Missouri/Big Sioux Rivers
SF 2337 – Increase child and dependent care tax credit
SF 2338 – Computing tax on compressed & liquefied natural gas used as special fuel
SF 2339 – Brownfields and Grayfields
SF 2340 – Raise solar tax credit cap, expand amount of credit
SF 2341 – Extend sales tax rebate for Iowa Speedway, reflect new ownership
SF 2343 – Renewable energy tax credit qualification dates and eligibility
SF 2344 – Renewable fuels tax credits and providing for the use of biobutanol
SF 2352 – Disabled veterans homestead credit
SF 2359 – IEDA Strategic Infrastructure Program
SF 2360 – Medical Cannabidiol
SF 2364 – Environmental Services sales tax exemption/Motorsport RV registration and operation
SR 103– Federal Wind Energy Production Tax Credit
HF 2273 – Treasurers’ Technical Bill
HF 2435 – Internal Revenue Code update (coupling)
HF 2436 – Streamlined Sales Tax agreement update
HF 2438 – Department of Revenue technical update bill
HF 2444 – Department of Revenue efficiency bill
HF 2446– Sales tax exemption for diesel fuel trailers and seed tenders in ag production
HF 2448– Enterprise Zone Redesign
HF 2453– Historic Tax Credits
HF 2454 – Changes to Beginning Farmer Tax Credit
HF 2456 – Approval and imposition of community college property tax levies (Bill Vetoed)
HF 2459 – Double volunteer firefighter and EMS tax credit
HF 2464 – Knoxville raceway sales tax rebate
HF 2466 – Election to assess Section 42 housing as multi-residential
HF 2468 – Adoption tax credit
HF 2476 – Unified Law Enforcement districts
SF 303 exempts retirement pay of an Iowa resident from federal military service in the armed forces, the military reserve or National Guard, from the state individual income tax, retroactive to the current tax year. It passed the Senate unanimously January 27. The bill was substantially enhanced by House and Senate amendments and became the omnibus Veterans Affairs legislation, including Home Base Iowa initiatives.
Highlights of the bill:
•Exempts federal military retirement pay from state individual income taxes, exempts state individual income taxes from military survivor benefits and specifies that military survivor benefits are not to be included when calculating state income tax filing thresholds (effective upon enactment and retroactive to the tax year beginning January 1, 2014).
•Clarifies that war veteran properties, such as Veterans of Foreign Wars halls, will not lose their tax-exempt status if they rent their facilities for $250 or less and proceeds are used for the purposes of the veterans organization.
•Eliminates the initial fee charged for issuance of motor vehicle license plates associated with military service, and maintains transfer of the annual $5 validation fees to the Veterans License Fee Fund, for use by the Iowa Commission of Veterans Affairs.
•Allows private employers to grant a preference in hiring and promotion to veterans, and to spouses of disabled veterans and service members who died while serving on active duty during a time of military conflict or who died because of such service. As long as the employers comply with federal laws and regulations, granting preferences within these guidelines is not a violation of state law or local ordinances regarding equal employment opportunity.
•Requires Regent universities, private colleges and community colleges to report annually regarding the award of educational credits to veterans for military education and training, and to encourage granting such credits. The initial report to the Legislature and Governor is due December 15, 2015.
•Provides a clear pathway to jobs by matching military occupational training to many of Iowa’s professional and occupational licensure requirements, and studying the feasibility of expedited licensing, certification or registration of military spouses if they have an occupational or professional license from another state.
•Strengthens, streamlines and clarifies provisions applicable to the county commissions of veterans affairs, based on recommendations by stakeholders.
•Expands eligibility and financing options for the Military Home Ownership Assistance program administered by the Iowa Finance Authority (IFA) by: including service members who served during the Persian Gulf Conflict; allowing an eligible veteran to use financing by a participating lender in any of IFA’s first mortgage programs or any lender approved by IFA, if it determines that such financing would be economically feasible and financially advantageous for the veteran; and adds a hardship clause applicable to the surviving spouse if all eligibility requirements other than military service are met for this and other IFA loan and grant programs.
•Allows cities and counties to administer a civil service examination specifically for recently discharged military service members. If a veteran has been honorably discharged between 45 days before and 60 days after the examination is administered, the civil service commission may allow the veteran to take the examination up to 90 days following the date the original examination was administered and, if appropriate, will add the veteran’s name to the list. [4/25: 48-0 (Johnson, Segebart absent)]
SF 2198 establishes resident and nonresident paddlefish fishing licenses for use on the Missouri and Big Sioux rivers. The licenses will cost $20 for a resident and $40 for a nonresident. The Department of Natural Resources is proposing this license because paddlefish populations on those rivers have achieved a sustainable level and there is sufficient interest in a season. The license fees are similar to those in Nebraska and South Dakota. [3/17: 47-0 (Bertrand, Greiner, Houser excused)]
SF 2337 increases the state child and dependent care tax credit by increasing the percentage of the federal credit an Iowa taxpayer may claim on their taxes. Currently, an eligible taxpayer can claim up to 75 percent of the federal credit based on their income; the bill increases that percentage to up to 93.75 percent. Additionally, the bill raises income thresholds and indexes them to grow with inflation. Current law caps eligibility to those making less than $45,000; this would increase eligibility to $67,410, expanding the tax credit to more than 40,000 additional households. The bill takes effect January 1, 2015.
SF 2338 revises the method of calculating the excise tax on compressed natural gas used as a special fuel and establishes an excise tax on liquefied petroleum gas used as a special fuel. Both rates are calculated to be equivalent to the motor fuel tax. For compressed natural gas used as a special fuel, the rate is 21 cents per gasoline gallon. A gasoline gallon equivalent of compressed natural gas is 5.66 pounds. For liquefied natural gas used as a special fuel, the tax rate equivalent is 22.5 cents per diesel gallon. A diesel gallon equivalent of liquefied natural gas is 6.06 pounds of liquefied natural gas. The bill updates references throughout the Code. [3/18: 45-0 (Ernst, Greiner, Hatch, Houser, Zumbach excused)]
SF 2339makes several changes to the Redevelopment Tax Credits program administered by the Iowa Economic Development Authority. The bill makes abandoned public buildings eligible for the tax credits; allows tax credits to be refundable for nonprofit, tax-exempt organizations; and changes the program to a competitive award rather than the current first-come, first-served basis. The Economic Development Authority will negotiate the awards and score each application based on such factors as financial need, project quality and project feasibility. The bill eliminates the future repeal of the program. The overall tax credit cap of up to $10 million is not changed, and the maximum amount a project may receive remains 10 percent of the overall amount of tax credits available. The Department of Transportation representative on the Brownfield Development Advisory Council is replaced with a representative from the Professional Developers of Iowa. [3/26: 48-0 (Ernst, Houser excused)]
SF 2340 lifts the total amount of solar tax credits available for residential or business installations from $1.5 million to $4.5 million. The bill also increases the maximum business tax credit to 60 percent of the federal credit instead of the current 50 percent and raises the $15,000 tax credit cap per project to $20,000. The bill also increases the maximum residential tax credit to 60 percent of the federal credit instead of the current 50 percent and raises the $3,000 cap per project to $5,000.
Additionally, the bill would allow a single taxpayer to claim multiple credits for multiple installations. Currently, a taxpayer is limited to one credit. This change would allow a business with multiple locations to install a solar energy system at more than one location and receive a credit for each installation. The bill would also allow the unused allotment of tax credits for a fiscal year to carry forward and be used the following year if there are not sufficient projects eligible. [3/27: 46-0 (Bertrand, Boettger, Ernst, Houser excused)]
SF 2341 extends the existing sales tax rebate for sales at the Iowa Speedway by 10 years to January 1, 2026. The sales tax rebate was originally set to expire on January 1, 2016, for an amount not to exceed $12.5 million. So far, the sales tax rebated under this mechanism is just under $3.5 million. The bill also changes the definition of a qualified owner to reflect the purchase of the facility by NASCAR last year. [3/24: 36-9 (Behn, Bowman, Chapman, Chelgren, Guth, Quirmbach, Schneider, Smith, Whitver “no”; Greiner, Houser, Kapucian, Segebart, Zumbach excused)]
SF 2343 provides a two-year extension for the in-service date and the end of the tax credit for wind energy and other renewable energy facilities that have been awarded production tax credits under 476C. This will allow facilities that have qualified sufficient time to complete the construction of their facility. The bill also makes changes regarding the 10 megawatts of credits that are reserved for a cogeneration facility that is associated with an ethanol plant. Currently, the only allowed fuel source for the cogeneration facility is natural gas. The bill would allow the facility to use biogas, landfill gas or methane as well. [3/27: 46-0 (Bertrand, Boettger, Ernst, Houser excused)]
SF 2344 extends the existing tax credit for the sale of 15 percent ethanol-blended gasoline (E15) and the tax credit for the production of biodiesel. The E15 tax credit is currently 3 cents per gallon sold until the end of 2014. It would drop to 2 cents per gallon for 2015 through 2017. Under the bill, the tax credit will remain at 3 cents per gallon except for the summer blend period, which extends from June 1 through September 15. During this period, the per-gallon credit will increase to 10 cents per gallon to help with the higher cost of fuel and reducing air pollution during the hotter months. The bill also extends to January 1, 2020, the existing biodiesel production tax credit of 2 cents per gallon, which was set to expire January 1, 2015. The bill also provides that the biodiesel production sales tax rebate would expire in 2018, rather than 2020. This way, all renewable fuel tax incentives will expire in 2018. [4/24: 48-0 (Johnson, Segebart excused)]
SF 2352 expands the disabled veterans property tax credit. Currently, the credit is only available to those who receive special adaptive housing because of a service-connected disability and have an income of $35,000 or less. The bill expands eligibility for the property tax exemption to all homeowners with a 100-percent service-connected disability rating. The surviving spouse or dependent child of a veteran who was killed in action or dies because of a service-connected injury is also eligible for the credit, as long as the individual continues to receive Dependency Indemnity Compensation benefits because of the death of the veteran. [4/15: 50-0]
SF 2359makes several changes to programs administered by the Iowa Economic Development Authority (IEDA). The bill:
• Modifies investment tax credits for community based seed capital funds and qualifying business
• Eliminates the three-year waiting period for an investor to claim a credit that has been awarded for investing in a qualifying business, and makes other changes regarding timing, dates and requirements of investments
• Allows for moneys transferred from the Targeted Small Business Financial Assistance Program to be used to establish a program to assist private entities in increasing the number of female entrepreneurs in the state
• Establishes a Strategic Infrastructure Fund to provide financial assistance for relocation or expansion projects for existing businesses, as well as financial assistance for new businesses. The financial assistance would be used for infrastructure needs.
• Requires the Innovation Council to review and recommend the applications for approval for the infrastructure fund. The IEDA Board will then award projects.
• Requires that recaptures or repayments of the Iowa Values Fund will be transferred to the new Infrastructure Fund.
• Makes changes to the Endow Iowa Program. An Endow Iowa qualified community foundation must attain national standards to qualify, rather than “substantially comply.”
• Changes to the Economic Development Regions, allowing for more flexibility for entities pursuing economic development with a regional focus. [4/25: 48-0 (Johnson, Segebart excused)]
SF 2360 legalizes the possession and medical use of cannabidiol under certain conditions. Cannabidiol is a non-psychoactive component of marijuana that possesses a wide range of therapeutic benefits. The medicine is only allowed to be used to treat intractable epilepsy after the referral of an Iowa neurologist. The Act is repealed July 1, 2017. [4/24: 36-12 (Anderson, Behn, Bertrand, Boettger, Chapman, Feenstra, Garrett, Greiner, Guth, Roozenboom, Smith, Whitver “no”; Segebart, Zumbach excused)]
SF 2364 does two things:
• Establishes a new motorsports recreational vehicle classification for purposes of motor vehicle regulation and licensing and establishes a $400 annual registration fee. There are very few of these vehicles on Iowa roads, but they currently exceed length limits for vehicles. This will reclassify them so they can be driven on roads without being fined.
• Exempts the furnishing of environmental testing services from the state’s sales tax. [5/1: 47-0 (Chelgren, Guth, Houser excused)]
SR 103supports the extension of the federal wind energy production tax credit, which expired December 31, 2013. This credit has supported the recent expansion and innovation of the wind energy industry in Iowa. Thousands of jobs in Iowa are connected to the wind industry, including manufacturing, operation and maintenance positions. The expiration of the credit puts many jobs in the state at risk and slows down investments by energy producers in clean, renewable energy. [2/5: 49-0 (Houser excused)]
HF 2273 covers several actions requested by the county treasurers:
• Clearing up inconsistencies with the Department of Revenue’s (DOR) interpretation of use tax exemption on rental trailers (UT05 Exemption). Under DOR’s direction, all 99 county treasurers have said that rental trailers qualify for the use tax exemption. In 2013, rental companies in Iowa began receiving audits stating they owe back use tax, penalties and interest on their rental trailers. This legislation would codify the treasurers’ practice under direction of DOR.
• Cleaning up Code language on destroying drainage and special assessment records in the treasurers’ offices after 10 years. In recent years, legislation took care of how long to keep other kinds of records, but drainage and special assessment records slipped through the cracks.
• Cleaning up Code language for the requirement of cash payment for assessments of less than $20 and for fixing a time within which all assessments in excess of $100 may be paid in cash. [4/1: 49-0 (Houser excused)]
HF 2273 covers several actions requested by the county treasurers:
• Clearing-up inconsistencies with the Department of Revenue’s (DOR) interpretation of use tax exemption on rental trailers (UT05 Exemption). Under DOR’s direction, all 99 county treasurers have said that rental trailers qualify for the use tax exemption. In 2013, rental companies in Iowa began receiving audits stating they owe back use tax, penalties and interest on their rental trailers. This legislation would codify the practice that treasurers have been using under the direction of the DOR.
• Cleaning up Code language on destroying drainage and special assessment records in the treasurers’ offices after 10 years. In recent years, legislation took care of how long to keep other kinds of records and specifically drainage or special assessment records slipped through the cracks.
• Cleaning up Code language for the requirement of cash payment for assessments less than $20 and for fixing a time within which all assessments in excess of $100 may be paid in cash. [4/1: 49-0 Houser excused]
HF 2435 is the Department of Revenue’s “coupling” bill, which updates references in Iowa Code to incorporate federal tax changes in 2013. Since no federal tax legislation was enacted in 2013, there are no associated state changes with this legislation.
The bill repeals the Iowa estate tax and generation skipping transfer tax. These taxes are referred to as “pick-up” taxes because they were established to be equal to the respective federal credit for those taxes. This allowed Iowa to collect estate and generation skipping transfer taxes without increasing the amount of taxes on the estate or transfer. The federal credits those state taxes were based on was phased out under federal tax legislation in 2001. However, the federal repeal of the tax credits was only for a ten-year period.
Because of the 2001 federal legislation, this tax has not been collected in Iowa on any estates for those dying or for generation skipping transfers occurring after December 31, 2004. Iowa originally repealed these taxes in 2008, but reinstated them in 2010 over uncertainty about how the federal government would handle the sunset of the federal tax credit repeal. Federal tax legislation in 2013 made the federal tax credit repeal permanent, thereby removing the need for a state estate tax and generation skipping transfer tax in Code. [3/17: 47-0 (Bertrand, Greiner, Houser excused)]
HF 2436 is the Department of Revenue’s Streamlined Sales Tax bill, which maintains Iowa’s compliance under the Streamlined Sales Tax Governing Board Agreement. By participating in this agreement, Iowa is more effectively able to collect sales tax from out-of-state businesses that sell goods and services in Iowa. The bill simply updates the definition and references to “dietary supplement” to comply with the language in the Agreement. [3/17: 47-0 (Bertrand, Greiner, Houser excused)]
HF 2438 makes several technical changes to state laws on taxes. These changes include:
• Allowing the director of the Department of Revenue to adopt rules to ensure that a geographic area that participates in more than one sales tax increment financing district does not receive more sales tax remittances than the area collects in any given year.
• Updating language to more clearly allow for electronic filing of tax credit information with a taxpayer’s taxes.
• Allowing banks to receive the solar tax credit.
• Removing language regarding alcohol beverage control bonds that had been issued by the Alcoholic Beverages Division from the list of double tax-exempt bonds. Those bonds no longer exist.
• Removing tax-exempt Social Security benefits from the calculation of income when determining whether a taxpayer 65 or older needs to file a tax return.
• Updating language regarding a sales tax exemption for health centers so that the terms match language adopted as part of the Health Care Consolidation Act of 1996.
• Striking language enacted in 2008 regarding the excise tax on heavy highway equipment that had the unintended consequence of negating the tax the language was added to. Without this change, the state would likely have had to refund nearly $30 million in taxes that had been paid since this mistake was made. Republicans voted against this proposal, claiming it was a tax increase. The heavy highway contractors had never requested an exemption from the excise tax on their equipment, and it was never their intent to receive one. All companies had continued to pay this tax after the language was updated in 2008, so there were no taxes added; the tax that was intended to be in place was reinstated. [3/27: 26-21, party-line (Bertrand, Ernst, Houser excused)]
HF 2444 is the Department of Revenue’s efficiency bill. The bill eliminates unnecessary notice provisions in the Code regarding interest calculations for motor fuel taxes and the inheritance tax, and provides the director authority to retain records in an electronic format rather than in paper form. The bill also provides a one-year extension of the special gas tax rate for ethanol-blended fuel, which was set to expire after June 30, 2014. [4/7: 49-0 (Houser excused)]
HF 2446 provides a sales tax exemption for the purchase of diesel fuel trailers and seed tenders primarily used in agricultural production. [4/23: 49-0 (Segebart excused]
HF 2448 eliminates the Enterprise Zone program, makes changes to the High Quality Jobs program and creates a new Workforce Housing Tax Credit. High Quality Jobs (HQJ) and Enterprise Zones (EZ) have many similar incentives. Both programs provide investment tax credits, sales tax refunds, supplemental research and development tax credits, insurance tax credits and property tax exemptions. Both programs require certain wage thresholds, benefits requirements and jobs requirements. HQJ has three capabilities that EZ did not have: statewide eligibility, county level distress criteria, and loan-based assistance. Under the current Enterprise Zone program, zones are limited to 1 percent of a county’s area.
HQJ requires a 120 percent qualifying wage threshold unless a project is in a distressed county. A distressed county, based on short-term and long-term unemployment measures, requires a 100 percent qualifying wage threshold. EZ’s wage threshold requirement was 90 percent qualifying wage threshold. The bill adds the terms “brownfield and “grayfield” into the HQJ program. The bill would allow a 90 percent wage threshold for any project that is developed on a brownfield site and a 100 percent wage threshold for any project that is developed on grayfield site. These sites can be located anywhere in the state.
The new Workforce Housing Tax Credits are available for housing projects that include four or more single-family dwelling units or three or more units of a multi-family dwelling. Tax credits are also available to an upper-story project that consists of two or more dwellings. The housing tax credits are targeted at middle-income housing. The tax credits will be made fully transferrable. The bill caps costs of $200,000 per unit, unless the project is a historic preservation project, in which case it is eligible for $250,000 per unit. New credits are capped at no more than $1 million in benefits per recipient and no more than $20 million aggregate. The $20 million is placed under Iowa Economic Development Authority’s maximum aggregate tax credit cap.
Also, the bill changes the transferability status of outstanding current Housing Enterprise tax credits. Previously, the investment tax credits for housing businesses were transferable if a housing development was located on a brownfield site or in a blighted area, or if they were receiving low-income tax credits. Iowa Economic Development Authority was limited to approving $3 million worth of tax credits in a year for those projects not receiving low-income tax credits. The bill lifted that cap to allow the backlog of requests to be approved for transfer. [4/25: 47-0 (Chelgren “present”; Johnson, Segebart excused]
HF 2453 makes several substantive changes to the Historic Preservation & Cultural and Entertainment District Tax Credit program. The tax credit cannot exceed 25 percent of the final qualified rehabilitation expenditures verified by the Department of Cultural Affairs. The bill provides that an agreement will allow a certain amount of cost overruns based on the size of the project:
• For a project of $750,000 or less, cost overruns cannot exceed 15 percent.
• For a project more than $750,000 but not more than $6 million, cost overruns cannot exceed 10 percent.
• For a project more than $6 million, cost overruns cannot exceed 5 percent.
The bill also changes the process for application and awards. Previously, applications are submitted during a filing window and then awarded through a “lottery system.” The bill allows for a process in which a taxpayer would apply, then be registered for the program (if the Iowa Department of Cultural Affairs deems it eligible), an agreement, compliance and an examination and audit of the project. Instead of the lottery system, it is more of a competitive, shovel-ready and rules-prescribed process.
Previously, the tax credits were allocated with 10 percent for small projects, 30 percent for projects in cultural and entertainment districts, 20 percent for disaster recovery projects, 20 percent for projects that involve the creation of more than 500 new permanent jobs and 20 percent for any eligible project. The bill removes those allocations. The $45 million overall tax credit cap remains.
An agreement termination will not occur earlier than five years from the date on which the tax credit certificate is issued. Finally, the bill allows for tax credits to be revoked and the state to seek repayment of tax credits if there is default in the agreement. This could mean the state could seek out repayment from certain third-party transferees. [4/21: 48-0 (Behn, Segebart excused)]
HF 2454 extends the carry forward period for claiming the beginning farmer tax credits from five years to ten years. These tax credits are meant to encourage the transfer of assets to beginning farmers and to contract with those beginning farmers to provide farming services. [4/28: 47-1 (Dearden “no”; Houser, Segebart excused)]
Bill Vetoed - HF 2456 would replace the existing public referendum process for levy rates and allow levies to be reauthorized by a vote of the board if the levy has already been approved by the voters in two elections. The bill also provides that voters have the opportunity to petition for a reverse referendum on the continuance of a levy at the time the levy comes up for renewal. If a board wants to increase a levy rate, it would be subject to an election as well. However, all levies are currently issued at the maximum rate. [4/21: 44-4 (Chapman, Garrett, Schneider, Zaun “no”; Behn, Segebart excused)] (Bill Vetoed)
HF 2459 expands the volunteer firefighter and emergency medical services (EMS) tax credit to include reserve peace officers, professional firefighters and EMS personnel who volunteer for another program. The bill also doubles the existing credit from $50 to $100. [4/25: 48-0 (Johnson, Segebart excused)]
HF 2464 provides a sales tax rebate for a period of ten years for the Knoxville racetrack at the Marion County fairgrounds. The value of the rebate is limited to 25 percent of the project cost or a total of $2 million, whichever is less. The project includes upgrades to the existing racetrack facility. The sales taxes subject to the rebate are those collected from sales within the racetrack facility. [4/23: 39-10 (Behn, Bowman, Chapman, Chelgren, Guth, Quirmbach, Schneider, Smith, Whitver, Zaun “no”; Segebart absent)]
HF 2466 allows certain housing that is rented or leased to low-income individuals (Section 42 housing) the chance to elect to be assessed and taxed as multi-residential housing. The Code previously provided a separate assessment procedure for Section 42 housing. Property tax reform legislation from 2013 created a new class of property called “multi-residential” and established a taxable valuation rollback schedule to bring equity between multi-residential housing and residential housing. Section 42 housing was excluded from the multi-residential housing taxable valuation schedule because it is assessed in a different manner than multi-residential housing. However, it appears some Section 42 housing units could be taxed at a higher rate than standard multi-residential housing at some point in the future as the taxable valuation schedule kicks in. To avoid a situation where low-income housing is taxed at a rate higher than the market rate for housing, this bill allows the owner of the property to elect to be assessed as multi-residential housing and be taxed at the applicable rate. [4/23: 49-0 (Segebart excused; Hatch “present”)]
HF 2468 creates a new adoption tax credit. This allows individuals to receive an income tax credit for 25 percent of qualified adoption expenses, with the total credit not to exceed $2,500. Previously, these expenses were allowed to be deducted from an individual’s taxable income for a tax benefit of approximately $500. This credit increases the tax benefit for adoption expenses by about $2,000 for the individual. Expenses used to claim the tax credit cannot be used to claim the tax deduction. [4/28: 48-0 (Houser, Segebart excused)]
HF 2476 allows for an alternate funding formula for unified law enforcement districts. The unified law enforcement district in Osceola County has been using a funding formula that is not one of the two outlined in the Code since 1976. This funding formula is now the subject of a lawsuit. The bill only allows for the formula going forward, and does not do anything to legalize what has happened in the past. [5/1: 43-4 (Courtney, Dearden, Mathis, Taylor “no”; Chelgren, Guth, Houser excused)]