Ways & Means – week of May 4, 2015

SF 226 – Fireworks

SF 502 – Commercial breeders of companion animals – inspections and fees

SF 503 – Study of fees collected by the county sheriff

SF 504 – Natural Resources and Outdoor Recreation trust fund sales tax

SF 482 – Social and Charitable Gambling

SSB 1224 – Department of Revenue policy update legislation

HF 617 – Special Plates displaying a decal issued by a Non Profit

HF 622 – Vehicle rental fees

HF 626 – Future Repeal of State Board of Tax Review

HF 632 – IID omnibus

HF 634 – Department of Agriculture code cleanup

HF 638 – Wine gallonage reports

HF 646 – PPEL use for transportation equipment repair

FLOOR & COMMITTEE ACTION:

SF 503 provides for a report to the Ways & Means committees in the House and the Senate on fees collected by county sheriffs for duties they are required to perform, including issuing warrants, evictions notices and summons for jury. The county sheriffs must issue these orders and collect a set fee for the performance of these duties. However, the fees collected have not increased and are not sufficient to cover costs. As a result, property taxpayers end up subsidizing the cost of issuing orders on behalf of private parties. The report would collect information from a sampling of rural and urban counties to help legislators make a proper decision on the fees are necessary to cover the cost of performing these duties. [Committee 4/30: short form; Floor: 5/6: 49-0 (Kraayenbrink absent)]

HF 634 is a technical update to various Code sections relating the Department of Agriculture (IDALS). The changes in the bill will:

• Eliminate the 1985 date used to qualify horses for the “Iowa bred” program.
• Eliminate the reference to a contingent fund that does not exist for the payment of samples.
• Allow the Department to adopt the most recent dairy inspection manuals by rule. The current Code does not reference the most recent manuals.
• Eliminate references to a departmental seed laboratory. The Department has not had a laboratory since 2005 when the labs were moved to Ankeny.
• Move language within the grain provisions. Additionally, the decision to trigger assessments will be made at the end the of the Indemnity Fund’s fiscal year instead of at the end of each quarter.
• Eliminate a 1989 start date for the ban on the sale of the pesticide chlordane.
• Update mining provisions by eliminating the term “general welfare” as one of the purposes and striking a 1977 date. This conforms Iowa Code with federal regulations.
• Include n-butyl in the definition of biobutanol.
• Eliminate the fees charged by the Department for weights and tank calibrations. The Department no longer has a metrology lab.Change the name of the Division of Soil Conservation to the Division of Soil Conservation & Water Quality. [Committee 4/30: short form; Floor 5/5: 50-0]HF 638 is a recommendation of the Alcoholic Beverages Division and makes technical changes for the wine gallonage tax reporting and remitting by wineries that are licensed to sell and ship directly to consumers in Iowa. This legislation does not eliminate the reporting requirement or the tax obligation on these sales, but establishes a new semi-annual filing frequency for Wine Direct Shipper License holders to report and remit wine gallonage taxes. This creates a more business-friendly reporting process for wineries that ship directly to Iowans and reduces the state’s cost in processing the reports. [Committee 4/30: short form; Floor 5/5: 50-0]HF 646 expands the allowable use of a school district’s physical plant and equipment levies (PPEL) for the repair of transportation equipment. Current law authorizes PPEL to be used for the purchase of transportation equipment but not for the repair of such purchases. A common complaint from school superintendents has been that they can buy a new bus for $80,000 but not fix an engine for $10,000. The repair must be paid for with general education funds, which are limited because of instructional obligations. Under the bill, the equipment repair must cost at least $2,500. Effective date is for school budget years after July 1, 2015. [Committee 4/30: short form; Floor 5/5: 50-0]

FLOOR ACTION:

SF 482 is a rewrite of Iowa’s social and charitable gambling laws (Chapter 99B). The bill updates, simplifies and modernizes the Iowa Code to be current with gambling activities while removing out-of-date restrictions. Highlights include:

• Charitable Gambling (current 99B.2 and 99B.7)

• Record Keeping. Updated record keeping requirements with modern transactional practices, such as removing requirement that all expenses must be paid by check.
• Annual Report. Moved annual report to calendar year rather than state fiscal year, as recommended by licensees.
• Raffles. Created category titles for different raffle types (very small, small, large and very large). Exempted very small (under $1,000) from licensure. Cash prizes of $1,000 or less and donated merchandise prize(s) of $5,000 or less are allowed for a very small raffle. Very small raffles are currently limited to prizes (cash or merchandise) of $1,000 or less.

• Charitable Gambling in places serving alcohol and with gaming. Eliminated a provision related to alcohol licenses that made holding a raffle difficult in a hotel ballroom or convention center. Also clarified that charitable gambling is only prohibited on the gaming floor of a casino and not in other areas. However, bingo is not allowed in any casino (licensed under 99D or 99F).

• Expense limitation. Changed limitations on expenses from 25 percent to 40 percent, bingo operations in particular have difficulty meeting this limitation.
• Bingo prize restrictions. Clarified prize restrictions with bingo.
• Number of Bingo Occasions. Fixed the number of bingo occasions to allow 15 per month rather than 14, which creates challenges in 31 day months for those places with regular days of the week.
• Bingo Prize Limits. Raised the limit of prizes for bingo games from $100 to $250.
• Additional licenses of qualified organizations. Eliminated additional licenses for games nights, raffle at a fair and certain veterans licenses.
• Electronic raffles. Added section for electronic raffles frequently held at large sport events.
• Forms of payment allowed (99B.17). Deletes gambling on credit section and creates forms of payment section that limits amusement devices, movable amusement concessions and social gambling to cash (current requirement), and allows charitable gambling to accept cash, check and debit card (currently cash only, except bingo can accept check).
• Contests (99B.11). Updates contests section to include current contests and allows for additional activities within the types. Currently, section lists all of the allowable activities but does not allow other similar activities. For example, allows video golf contests, but other types of skilled video game contests are prohibited.

• A licensed qualified organization must not hold bingo within a building or structure that is licensed pursuant to Iowa code chapters 99D or 99F (Gaming Facilities).The maximum allowed to be won or lost in social gambling between individuals is increased from $50 to $200 over a 24-hour period.The definition of “sports betting pool” or “pool” is changed from selecting a square on grid corresponding to numbers on two intersecting sides of the grid to “wagering money for each chance to win based on the outcome of a sports event or series of sports events where the competitors of the sports event or series of sports events are natural persons” (i.e., NCAA bracket pools would be allowed).Electrical or mechanical amusement devices. Increases the number of devices allowed from two to four. Clarifies that additional sanctions beyond the civil penalty for a violation, including the suspension or revocation of any liquor license, are not allowed.

On this passage, the Senate approved a House amendment which deleted the Senate provision which allowed NCAA bracket pools. The House inserted (and the Senate accepted) the original definition of “sports betting pool” or “pool” to “selecting a square or grid corresponding to numbers on two intersecting sides of the grid.” [4/30: 45-0 (Chelgren, Guth, Segebart, Zaun, Zumbach absent)]

HF 622 makes changes to the advertised price of rental cars in Iowa. Current law requires all fees and charges to be included in the advertising prices, except for mandatory charges (e.g., taxes and airport fees). This requirement includes the vehicle recovery fee, which is the fee collected by the rental car company on each vehicle rental to cover the costs of state license, title and registration requirements. The bill would allow rental companies to exclude the vehicle license recovery fee from the advertised price, which would conform Iowa law to that of surrounding states. Instead of being included in the bundled advertised price, the vehicle license recovery fee would be disclosed to the customer when the reservation is made. [5/5: 47-3 (Bisignano, Quirmbach, Taylor “no”)]

HF 626 would provide quicker resolution to tax appeals. The legislation is the result of a Department of Revenue study that found inefficiencies and potential conflicts in the appeal process. Currently, the taxpayer can appeal a review of an Administrative Law Judge’s ruling to the director of the Department of Revenue. After that step, the taxpayer can proceed to the State Board of Tax Review or to district court. If the taxpayer chooses to appeal to the State Board of Tax Review and is not satisfied, the taxpayer still has the option to go to district court. This bill eliminates the State Board of Tax Review from the appeal process and provides a quicker path to the resolution of the tax appeal.

The bill also contains language relating to the future sunset of the Property Assessment Appeal Board (PAAB), which is where property taxpayers can appeal the assessment of their properties after they contest a case with the local board of review. In 2013, the Legislature made some process changes to PAAB to help reduce the backlog of claims with the board. At that time, the Legislature approved a five-year extension of PAAB until July 1, 2018, to allow for a review of those process changes. A new sunset and review for PAAB is set for 2021. [5/5: 50-0]

COMMITTEE ACTION:

SF 226 allows the possession, sale, transfer purchase and use of fireworks in Iowa. Highlights include:

• The state fire marshal will establish a consumer fireworks seller license. The state fire marshal is required to adopt rules, establishing minimum requirements for a retailer or community group to be issued a consumer fireworks seller license.
• A person is required to possess a consumer fireworks seller license to sell consumer fireworks.
• As amended in committee, the state fire marshal will establish a fee schedule for consumer fireworks seller licenses as follows:
  • An annual fee of $800 for any retailer who devotes 50 percent or more of the retail floor space to the sale or display of first-class consumer fireworks.
  • An annual fee of 400 for any retailer who devotes less than 50 percent of retailer’s retail floor space to the sale or display of first-class consumer fireworks.
  • An annual fee of $200 for any community group that offers for sale, exposes for sale or sells first-class consumer fireworks.
  • An annual fee of $100 for any retailer or community group that offers for sale, exposes for sale or sells second-class consumer fireworks, but not first-class consumer fireworks.
  • A license issued to a retailer or community group will allow the licensee to sell both first-class consumer and second-class consumer fireworks.
  • A new fee of $1,000 for fireworks wholesalers.
• The State fire marshal will adopt rules to:
  • Require that any retailer or community group selling consumer fireworks at retail, do so in accordance with national fire protection association standard 1124, published in the code for the manufacture, transportation, storage and retail sales of fireworks and pyrotechnic articles, 2006 addition.
  • Require a licensed retailer or community group to provide proof of and maintain public liability insurance and product liability insurance with a minimum per occurrence coverage of at least $5 million.
  • Permit a licensed retailer or community group to sell consumer fireworks at these locations:
    • A permanent building that meets the requirements year-round.
    • A temporary structure that meets the requirements from June 13 through July 11 each year.
  • A retailer or community group will not transfer consumer fireworks to a person under 18.
• The state fire marshal will adopt rules providing that a person’s license may be revoked for the intentional violation of this section. Revocation proceedings are before the state fire marshal. The license holder may seek judicial review. If a petition for judicial review is not filed, revocation begins the 31st day following the date of the state fire marshal’s order. If a petition for judicial review is filed, revocation will be from the 31st day following entry of the order of the district court, if the court action is adverse to the licensee.
• A new license will not be issued to a person whose license has been revoked, or to the business in control of the premises where the violation occurred if it is established that the owner of the business had actual knowledge of the violation resulting in the license revocation, for one year following the date of revocation.
• Establishes a consumer fireworks seller license fee fund under the control of the fire marshal. The fund retains interest earned. Moneys from the fund are appropriated to the state fire marshal to be used to fulfill its functions in this act and to provide grants.
• The state fire marshal will establish a local fire protection and emergency medical service providers grant program to provide grants for fireworks safety education programming to the public. The grants may also be for the purchase of necessary enforcement, protection or emergency response equipment related to the sale and use of consumer fireworks in Iowa.
• Violation of a provision in this section is a simple misdemeanor.
• Defines first-class consumer fireworks and second-class consumer fireworks.
• County Home Rule – County Supervisors may, by resolution, suspend the use of display fireworks if the Board determines that the use would constitute a threat to public safety. The Board may provide permits for the use of display fireworks.

• Public Lands and Waters – The Natural Resources Commission may grant a permit for the use of consumer fireworks, display fireworks and novelties.

• Display fireworks are defined. Display fireworks do not include novelties or consumer fireworks enumerated in chapter 3 of the American Pyrotechnics Association’s standard 87-1.
• Novelties – includes all novelties enumerated in chapter 3 of the American Pyrotechnics Association’s standard 87-1, and that comply with federal labeling regulations.
• Allows a City Council or a Board of Supervisors to grant a permit for display fireworks.
• A person who uses or explodes display fireworks while the use of such devices is suspended by a county resolution or by the state fire marshal, commits is a simple misdemeanor, punishable for a fine of not less than $250.
• Consumer fireworks and novelties – A person, firm, partnership or corporation that sells consumer fireworks to someone under 18 commits a simple misdemeanor, punishable by a fine of not less than $250. A person under 18 who purchases consumer fireworks commits a simple misdemeanor, punishable by a fine of not less than $250. A person who explodes consumer fireworks or novelties while the use of such devices is suspended by an order of the state fire marshal commits a simple misdemeanor, punishable for a fine of not less than $250.
• Limitations – A person will not use or explode consumer fireworks at times other than between 9 a.m. and 10 p.m., except on the following dates when consumer fireworks will not be used at times other than between 9 a.m. and 12:30 a.m. on the immediately following day:
  • Memorial Day and the Saturday and Sunday immediately preceding that day.
  • July 4 and the Saturdays and Sundays immediately preceding and following July 4.
  • Labor Day and the Saturday and Sunday immediately preceding that day.
  • December 31 and the Saturdays and Sundays immediately preceding and following December 31.
• A person will not use consumer fireworks on real property other than their own or on the real property of a person who has consented to the use of consumer fireworks.
• A person who violates this subsection commits a simple misdemeanor punishable by a fine of not less than $50 and not more than $500.
• Applicability – This section does not prohibit the sale by a resident, dealer, manufacturer or jobber of such fireworks as are not prohibited by this section, or the sale of any kind of fireworks if they are to be shipped out of Iowa, or the sale or use of blank cartridges for a show or the theater, or for signal purposes in athletic sports or by railroads or trucks, for signal purposes, or by a recognized military organization.
• This section does not apply to any substance of composition prepared and sold for medicinal or fumigation purposes.
• Unless specifically provided otherwise, this section does not apply to novelties.

• Effective date is June 1, 2015. [5/6: 9-6 (Bolkcom, Hogg, Jochum, McCoy, Petersen, Quirmbach “no”)]

SF 502 addresses regulation by the Iowa Department of Agriculture and Land Stewardship (IDALS) of commercial establishments that possess or control non-agricultural animals. Commercial establishments include animal shelters, pounds and research facilities that are required to obtain a certificate of registration; boarding kennels, commercial kennels and pet shops that are required to obtain a state license; and commercial breeders, dealers and public auctions that are required to obtain a state license or a permit if licensed by the U.S. Department of Agriculture (USDA).

Nationally, Iowa is the second-largest commercial dog-breeding state (with approximately 15,000 dogs). Of the top four, Iowa is the only one without state-level oversight of its 220 USDA-licensed facilities. In 2014, 47 percent of Iowa breeders were cited for violations of the U.S. Animal Welfare Act, and 36 percent do not carry a State Sales Tax permit.

The bill creates direct state oversight of USDA-licensed commercial establishments; updates definitions for animal shelters, rescues and sanctuaries; adjusts and modernizes fees to correlate with the industry and includes exemptions for small breeders (“hobby breeders”) and groomers, keeps current exemptions for hunting dogs, and maintains current laws regarding commercial breeders of greyhound dogs for pari-mutuel wagering at a racetrack.

The bill refers to each type of commercial establishment as a “class” and requires that a person operating one or more commercial establishments of the same class obtain a single license. The bill also creates four new types of licenses: (1) a license for grooming facilities; (2) a license for animal rescues; (3) a license for animal sanctuaries; and (4) a special type of commercial breeder’s license reserved for a small breeder, competitive show breeder or specialized breeder. The bill also recognizes animal foster care homes that temporarily maintain dogs or cats on behalf of animal rescues, animal shelters and pounds. The current fee system is replaced by one that includes the assessment of a base amount and the possible assessment of a scheduled amount based on class.

The updated fee structure will provide IDALS with two inspectors. The legislation includes creation of an Animal Rescue Remediation Fund under control of IDALS. The money from fees continues to be deposited in the current IDALS commercial establishment fund, and an amount is to be transferred to the remediation fund. The remediation fund will be used to help local law enforcement and communities pay for costs incurred by taxpayers in emergency rescue situations of animal neglect or abuse. Statewide groups that support the legislation include the Iowa Veterinary Medical Association, Animal Rescue League of Iowa and Iowa Voters for Companion Animals. [4/30: 10-5 (Anderson, Behn, Breitbach, Feenstra, Schultz “no”)]

SF 504 increases the state sales tax by 3/8 of one percent to provide funding for the Natural Resources & Outdoor Recreation Trust Fund, which was established following the approval of a constitutional amendment in 2010. The fund requires the increase in the state sales tax to provide the funding for the programs promoted by the trust fund. The sales tax increase is estimated to generate approximately $180 million for natural resource enhancements, water quality improvements and recreational opportunities.

Funds derived from the sales tax and allocated to the trust fund are to be distributed according to the formula proposed by the Sustainable Funding Advisory Committee, which is laid out in Iowa Code chapter 461A:

• 23 percent to a Natural Resources account administered by state Department of Natural Resources (DNR);
• 20 percent to a Soil Conservation & Water Protection Account administered by Department of Agriculture (IDALS);
• 14 percent to a watershed protection account jointly administered by DNR and IDALS;
• 13 percent to a Resource Enhancement & Protection (REAP) account administered according to the REAP formula;
• 13 percent to a local conservation partnership account administered through DNR;
• 10 percent to a trails account jointly administered by DNR and Iowa Department of Transportation;
• 7 percent to a lake restoration account administered by DNR in accordance with the DNR’s lake restoration plan and report. [4/30: 8-7 (party line, except Allen voting “no”)]

SSB 1224 is the Department of Revenue’s annual policy update legislation. The first portion of the bill would clarify the sales tax exemption for ATVs and utility vehicles used in agriculture. Current Code language says the ATV or utility vehicle must be used “directly and primarily” for agricultural purposes to receive the exemption. The bill would align the agricultural exemption for ATVS and utility vehicles with the other agricultural exemptions, requiring only that the vehicle be used “primarily” for agricultural use.

The second portion of the bill adds the Department of Revenue as an ex officio member of the Flood Mitigation Program Board. This board has the ability to approve flood mitigation projects that are financed by the incremental sales tax growth in the proposed flood mitigation districts. The Department of Revenue is in charge of administering the collection and remittance of sales tax from the districts approved by the board. Giving the Department of Revenue an ex officio position on the board would help bring them into the process sooner so that it moves along smoother and problems can be addressed earlier.

In committee, an amendment was adopted that would make two additions to the bill:

1. A technical correction to the process for remitting sales tax revenues to approved flood mitigation districts. Because of the timing of how sales tax revenues are collected and remitted, there is a concern that the last remittance from the state to the district would fall outside the 20-year time frame for the project. The change would allow additional time for the Department of Revenue to remit the last payment so the district would receive the full amount of money that had collected for the project.
2. Extending the application filing deadline for the disabled veterans property tax credit, which the Legislature expanded last year. The filing deadline for these credits is July 1, so there was not much time to notify the newly eligible veterans of the change to the credit, meaning those who were eligible would have to wait an additional year to be able to claim the credit on their property taxes. The change in the amendment extends the filing deadline so that those who applied after July 1 would still be able to receive the first year of the expanded credit. [5/6: short form]

HF 617 eliminates the current process to request a new special plate and eliminates state agency sponsorship of new special plates. The Department of Transportation will begin issuing special plates with a spot for an organization decal to be designed, produced and issued by the organization. The plates will be available without an additional special plate fee at the time of initial registration of a vehicle. The new plates will also be available as personalized plates upon payment of personalized plate fees. A qualifying organization must be a nonprofit with at least 200 members, whose primary activity serves the community or contributes to the welfare of others. A group of such organizations with a common purpose may also be approved to issue a decal. An organization must apply for approval by submitting proof of its nonprofit status, the proposed decal design, proof of legal rights to use the design, and an explanation of the purpose of the decal, eligibility requirements and fees the organization will charge for the decal. The department may establish criteria for decal designs. If the application is approved, the organization is responsible to produce and issue the decal. Fees charged by the organization for the decals will be retained by the organization. The bill takes effect January 1, 2016. Existing special plates are grandfathered in. [4/30: short form (Quirmbach “no”)]

HF 632 is based on recommendations by the Iowa Insurance Division (IID) of the Department of Commerce. The proposal includes technical updates, clarifying and conforming language, and non-controversial changes dealing with regulation of insurance, securities, pre-need contracts for cemetery and funeral home goods and services, and cemeteries. The provisions of this omnibus bill were widely circulated last year, with comments received from interested parties and stakeholders and changes made. The legislation provides clarifying language recommended by IID and the Iowa Economic Development Authority (IEDA) applicable to investment of funds provisions for life companies and for property and casualty companies by adding “an equity interest in any Innovation Fund as defined in section 15E.52.” There is confusion within the insurance industry over whether an investment in the Innovation Fund is legal under current Iowa law, and IEDA believes this could be a contributing issue in getting commitments from some in the industry. This modification is similar to that used to authorize investments in the Fund of Funds several years ago. The legislation also: 1) adds to the definition of  “intermediary” an entity registered with the Administrator as an Iowa Crowdfunding Portal; 2) modifies the definition of “intermediary,” which limits the role of a website operator to a registered broker dealer (it was more restrictive than intended. Most states allow an entity to be a website operator under specified conditions and registration, and the list of rules to be adopted includes specifying the duties of operator); 3) strikes a proposed new subsection on pre-need sellers’ guaranteed funds, which will be further considered over the interim; 4) and requires the Commissioner to adopt rules providing for surety bonds as an alternative to trusting.

The bill requires a company that wants to move business to one of its subsidiaries to send customers a notice of transfer that must include specific items, such as  the name and telephone number of the insured’s insurance producer, agent or agency. In addition, the transfer must result in the same or broader coverage for the customer and cannot result in an interruption in coverage. The notice of the transfer must be delivered  to the insured or sent by first class mail to the insured’s last known address not less than 30 days prior to the transfer. The notice is not required if the customer requests or consents to the transfer.

The bill adds language to the prior authorization form for prescription drugs law that was adopted last year in the Health & Human Services Appropriations, which directed the Insurance Commissioner to develop, by administrative rule, a standard prior authorization process for use by each health carrier and pharmacy benefits manager (PBM) that requires prior authorization for prescription drug benefits pursuant to a health plan benefit. The additional language states  that if a health carrier or PBM fails to use or accept the prior authorization form that has been approved for use by the Insurance Commissioner, or if the carrier or PBM fails to respond to a health care provider’s request for prior authorization within 72 hours of the form’s submission, the request will be considered to be approved. If the request form is incomplete or if more information is needed, the carrier or PBM may request more information within that 72 hour period, and once the additional information is submitted, the 72 hour clock is reset. It also allows the Insurance Commissioner to develop, by administrative rule, minimum response times for carriers or PBMs that are less than 72 hours, as deemed appropriate by the Insurance Commissioner. [5/6: short form (Anderson, Behn, Breitbach, Feenstra, Smith “no”)]