SF 2310 – Knoxville Raceway
SF 2312 – Baseball/Softball complex sales tax rebate
SF 2317 – Blood bank sales tax exemption
SF 2318 – County mental health levies
SF 2319 – Electric and CNG vehicle fuel infrastructure tax credit
SF 2325 – Sales tax exemption on construction of non-profit hospitals
HF 2443 – Economic Development misc./Historic Tax Credits
HF 2445 – Exclusion of promotional play receipts from wagering tax on gambling
FLOOR & COMMITTEE ACTION
HF 2443 makes changes to programs at Iowa Economic Development Authority (IEDA). The Senate passed this language once earlier this year.
The bill makes minor changes to the life-cycle cost analysis for public facilities. The requirement for life-cycle cost analysis was established more than 30 years ago to ensure that public agencies optimize energy efficiency when constructing or renovating public buildings. The State Building Code Commissioner currently reviews the life cycle cost analysis. The bill places authority for further defining the evaluation methodology with the State Building Code Commissioner instead of the Iowa Economic Development Authority (IEDA).
In addition, the bill:
- Makes technical changes to the definition of a “new investment” under the High Quality Jobs Programs.
- Makes changes to IEDA’s Business Outreach Program to assist with applications to the Federal Small Business Innovation Research and Small Business Technology Transfer Program.
- Allows IEDA to provide financial assistance of up to $100,000 to any single business. Currently, the maximum is $25,000 and may be provided as matching funds for the business to qualify for one of the federal programs.
- Allows a city or county and IEDA — for compliance reasons — to amend Enterprise Zone agreements as long as the changes do not increase the incentives awarded.
The bill also makes these changes to the State Historic Tax Credit Program:
- Transfers administration State Historic Tax Credits to the IEDA. The Department of Cultural Affairs will still do historic compliance for the historic tax credit. There is a fiscal note on the cost of the administration change. The bill requires the Department of Revenue (DOR) to use fee revenue to offset the cost of the modifications.
- Allows any taxpayer to receive a refund of the credit in excess of their liability. Current law and rules do not allow a transferee to receive a refund. This is a clarification. Before the 2014 law change, rules allowed for refundability for transferees.
- Allows a credit in excess of the taxpayer’s (this includes transferees) liability to be carried forward five years or until depleted.
- After registering the project, IEDA must notify the eligible taxpayer of the registration within a period established by rule.
- Removes “audit” from the “examination and audit of project.” Inserts language that IEDA will adopt rules governing required examinations.
- Current law allows the state to recapture the amount of the credit if it is obtained by the way of a prohibited activity. Also, the law allows DOR to get the recaptures from transferees. The bill strikes several liability provisions regarding the transferees. Under the bill, the liability for recapture of tax credits is only for transferees with actual notice of misrepresentation fraud or unlawful acts or omissions by the original holder of the tax credit certificate prior to the transfer is maintained. The bill also eliminates several standards for determining qualifying transferees to determine if the nature of a transfer is a true “arms-length” transaction.
- Current law allows tax credits that are revoked or declined by June 30, 2016, to be awarded to other projects within the fiscal year. The bill extends the deadline to 2019. Fiscal cost over seven years is $28 million.
The committee and the full Senate also adopted an amendment that proposes returning language to the current Code regarding qualifying transferees and liability for recapture, with one change: an entity would have to be both an owner and control a project to be considered a qualifying transferee and therefore subject to recapture provisions if the project is found to have engaged in a prohibited activity under the program. Current law says that a transferee is subject to recapture if they have ownership, even with no control of the project.
The amendment also proposes to change the standard for determining knowledge of a prohibited activity by a transferee to “express or implied” knowledge of the prohibited activity. Current Code provides that the standard of knowledge of a prohibited activity is “constructive or actual” notice of the activity. The bill in its current form strikes the “constructive” standard and provides for recapture only if the transferee has “actual” notice of the prohibited activity at the time of the transfer of the tax credits. Actual notice is a very high standard of proof and generally means there has to be explicit declaration of the prohibited activity at the time of the transfer to be liable for recapture. Those involved in developing projects felt the “constructive” standard was too vague and open to interpretation by a court. “Express or implied” notice is more generally used in Code and is roughly equal to the current standard, and is much more comprehensive than “actual” notice.
In addition, the amendment provides for transition language requiring the Department of Cultural Affairs to cooperate with Iowa Economic Development Authority regarding the transition of powers, duties and funds. The effective date of the bill is changed from July 1, 2016, to August 15, 2016.
[Floor 4/20: 49-0 (Dix absent); Committee 4/19: short form]
HF 2445 would establish a $25.82 million baseline of adjusted gross receipts that is subject to taxation from “promotional play” offered by gambling facilities. If gambling facilities expand promotional play gambling above that baseline amount, the amount above that baseline would not be subject to the wagering tax on those adjusted gross receipts. The baseline was set at the average level of existing promotional play at gambling facilities in the state to ensure that funds generated by the wagering tax would not decline. Promotional play consists of tokens, chips, electronic credits or other forms of cashless wagering provided by a licensee to a customer without an exchange of money.
[Floor 4/19: 38-12 (Behn, Bolkcom, Chapman, Costello, Feenstra, Garrett, Guth, Hogg, Petersen, Quirmbach, Rozenboom, Zaun “no”); Committee 4/14: short form (Bolkcom, Hogg, Quirmbach “no”; Behn excused)]
FLOOR ACTION
SF 2310 modifies the existing sales tax rebate program for the Knoxville Raceway. The current program allows the project to receive a rebate of up to $2 million or 25 percent of the project costs associated with the renovation and expansion of the facility. The bill changes the rebate amount to simply state that they are eligible for up to $2 million. The rebate is for sales tax paid at the facility between January 1, 2015, and January 1, 2025.
[4/19: 21-29 (Republicans plus Bowman, Danielson, Dearden, Dotzler, Quirmbach “no”)]
SF 2312 modifies the rebate of state sales tax to the owner or operator of a baseball and softball tournament facility and movie site. The bill changes the name of the qualifying “baseball and softball tournament facility and movie site” to a “baseball and softball complex.” A complex will qualify for the rebate if the project is completed after July 1, 2016, and has a construction cost of at least $10 million (a change from current law). The bill removes the requirement that the owner/operator be for-profit. The bill changes the availability of the rebate for each complex to specify that the rebate only applies to sales tax collected for the 10-year period beginning on or after the completion date. The bill specifies that any one complex cannot receive more than $2.5 million in total rebates. The repeal date of the rebate provision is changed to 30 days after a total of $16.5 million has been rebated.
An amendment requires an entity that wants to be eligible for the baseball and softball complex sales tax rebate to apply the same way a project applies to the Community Attraction & Tourism (CAT) Program. A project does not have to receive a CAT award to be awarded a sales tax rebate. The Iowa Economic Development Authority Board will approve, defer or deny an application for a sales tax rebate. When reviewing the applications, the Authority will consider, at a minimum, the same factors that are consider in CAT projects: (1) whether the wages, benefits, including health benefits, safety and other attributes of the project would improve the quality of life or the quality of attraction or tourism employment in the community; (2) the extent to which such a project would generate additional recreation and cultural attractions or tourism opportunities; (3) the ability of the project to produce a long-term, tax-generating economic impact; (4) location of projects and geographic diversity of the applications; (5) the project is primarily a vertical infrastructure project with demonstrated substantial regional or statewide economic impact.
[4/18: 22-28 (Republicans plus Bowman, Danielson, Dotzler, Quirmbach “no”); 4/20 Motion to Reconsider: 32-18 (Democrats plus Breitbach, Chelgren, Feenstra, Kapucian, Sinclair, Zumbach “yes”); 4/20 Final Passage: 28-22 (Democrats plus Feenstra, Zumbach “yes”)]
COMMITTEE ACTION
SF 2317 provides that certain chemicals and blood testing services used by nonprofit blood collection and processing establishments are exempt from sales taxes.
[4/14: short form (Behn excused)]
SF 2318 removes a statutory dollar cap on the county property tax levy for mental health and mental disability services provided by counties. The dollar cap was established at the historical level generated by the allowed $47.28 per capita county funding model, where a county is able to levy property taxes at a rate that would generate an amount equal to $47.28 per person in the county. As counties have increased in population, this dollar cap has restricted certain counties’ ability to generate enough funds to provide services approved by the state. This dollar cap means that some counties are levying property taxes at a much lower rate than others to provide the same services.
The bill allows counties to generate an amount of funding up to the full $47.28 per capita levy. However, the county may only levy the amount necessary to provide services within their region. This change will allow some counties to generate enough funding to meet service demands in their region.
According to information from counties providing services, the proposal is estimated to lead to eight counties increasing their property tax levies to meet the need for additional funding for approved services. Because of the dollar cap, these counties are restricted from generating sufficient funds and are dependent on other counties within their region to levy higher taxes to supplement the funding for the program. The proposal would further efforts to bring property tax equity within the regions that have formed under the mental redesign effort.
[4/14: short form (Behn excused)]
SF 2319 establishes a tax credit for the costs of purchasing and installing electric, natural gas or liquid propane vehicle fueling infrastructure. The allowed equipment would include pumps and other equipment associated with the dispensing of compressed natural gas or liquid propane and charging equipment for electricity. The amount of tax credit equals 30 percent of the cost to purchase the equipment and 30 percent to complete the installation. For tax credits taken for agricultural or commercial installations, the tax credit must be spread equally over the course of three years, while a residential installation may take the full tax credit amount in one tax year. Tax credits for residential installations can only be for an electronic facility. The tax credit is applicable to qualified installations put in service after January 1, 2017, and before January 1, 2020.
[4/14: short form (Behn excused)]