Bill Text: IA HF2453 | 2013-2014 | 85th General Assembly | Enrolled

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Bill Title: A bill for An Act relating to the administration of the historic preservation and cultural and entertainment district tax credit program by the department of cultural affairs, providing for fees, and including applicability provisions. Effective 7-1-14.

Spectrum: Committee Bill

Status: (Passed) 2014-05-27 - Signed by Governor. H.J. 896. [HF2453 Detail]

Download: Iowa-2013-HF2453-Enrolled.html

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House File 2453
AN ACT
RELATING TO THE ADMINISTRATION OF THE HISTORIC PRESERVATION AND
CULTURAL AND ENTERTAINMENT DISTRICT TAX CREDIT PROGRAM BY
THE DEPARTMENT OF CULTURAL AFFAIRS, PROVIDING FOR FEES, AND
INCLUDING APPLICABILITY PROVISIONS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
Section 1. Section 16.188, subsection 3, paragraph b,
subparagraph (1), Code 2014, is amended to read as follows:
(1) Projects that are eligible for historic preservation
and cultural and entertainment district tax credits under
section 404A.1 404A.2 .

House File 2453, p. 2
Sec. 2. Section 404A.1, Code 2014, is amended by striking
the section and inserting in lieu thereof the following:
404A.1 Definitions.
For purposes of this chapter, unless the context otherwise
requires:
1. “Completion date” means the date on which property that
is the subject of a qualified rehabilitation project is placed
in service, as that term is used in section 47 of the Internal
Revenue Code.
2. “Department” means the department of cultural affairs.
3. “Eligible taxpayer” means the owner of the property
that is the subject of a qualified rehabilitation project, or
another person who will qualify for the federal rehabilitation
credit allowed under section 47 of the Internal Revenue Code
with respect to the property that is the subject of a qualified
rehabilitation project.
4. “Nonprofit organization” means an organization described
in section 501 of the Internal Revenue Code unless the
exemption is denied under section 501, 502, 503, or 504 of
the Internal Revenue Code. “Nonprofit organization” does not
include a governmental body, as that term is defined in section
362.2.
5. “Program” shall mean the historic preservation and
cultural and entertainment district tax credit program set
forth in this chapter.
6. a. “Qualified rehabilitation expenditures” means the
same as defined in section 47 of the Internal Revenue Code.
Notwithstanding the foregoing sentence, expenditures incurred
by an eligible taxpayer that is a nonprofit organization shall
be considered “qualified rehabilitation expenditures ” if they
are any of the following:
(1) Expenditures made for structural components, as that
term is defined in 26 C.F.R. §1.48-1(e)(2).
(2) Expenditures made for architectural and engineering
fees, site survey fees, legal expenses, insurance premiums, and
development fees.
b. “Qualified rehabilitation expenditures” does not include
those expenditures financed by federal, state, or local
government grants or forgivable loans unless otherwise allowed
under section 47 of the Internal Revenue Code.
c. “Qualified rehabilitation expenditures” may include
expenditures incurred prior to the date an agreement is entered
into under section 404A.3, subsection 3.

House File 2453, p. 3
7. “Qualified rehabilitation project” means a project for
the rehabilitation of property in this state that meets all of
the following criteria:
a. The property is at least one of the following:
(1) Property listed on the national register of historic
places or eligible for such listing.
(2) Property designated as of historic significance to a
district listed in the national register of historic places or
eligible for such designation.
(3) Property or district designated a local landmark by a
city or county ordinance.
(4) A barn constructed prior to 1937.
b. The property meets the physical criteria and standards
for rehabilitation established by the department by rule. To
the extent applicable, the physical standards and criteria
shall be consistent with the United States secretary of the
interior’s standards for rehabilitation.
c. The project has qualified rehabilitation expenditures
that meet or exceed the following:
(1) In the case of commercial property, expenditures
totaling at least fifty thousand dollars or fifty percent of
the assessed value of the property, excluding the land, prior
to rehabilitation, whichever is less.
(2) In the case of property other than commercial property,
including but not limited to barns constructed prior to 1937,
expenditures totaling at least twenty-five thousand dollars or
twenty-five percent of the assessed value, excluding the land,
prior to rehabilitation, whichever is less.
Sec. 3. Section 404A.2, Code 2014, is amended by striking
the section and inserting in lieu thereof the following:
404A.2 Historic preservation and cultural and entertainment
district tax credit.
1. An eligible taxpayer who has entered into an agreement
under section 404A.3, subsection 3, is eligible to receive a
historic preservation and cultural and entertainment district
tax credit in an amount equal to twenty-five percent of
the qualified rehabilitation expenditures of a qualified
rehabilitation project that are specified in the agreement.
Notwithstanding any other provision of this chapter or any
provision in the agreement to the contrary, the amount of
the tax credits shall not exceed twenty-five percent of the
final qualified rehabilitation expenditures verified by the
department pursuant to section 404A.3, subsection 5, paragraph

House File 2453, p. 4
“c” .
2. The tax credit shall be allowed against the taxes imposed
in chapter 422, divisions II, III, and V, and in chapter
432. An individual may claim a tax credit under this section
of a partnership, limited liability company, S corporation,
estate, or trust electing to have income taxed directly to the
individual. For an individual claiming a tax credit of an
estate or trust, the amount claimed by the individual shall be
based upon the pro rata share of the individual’s earnings from
the estate or trust. For an individual claiming a tax credit
of a partnership, limited liability company, or S corporation,
the amount claimed by the partner, member, or shareholder,
respectively, shall be based upon the amounts designated by
the eligible partnership, S corporation, or limited liability
company, as applicable.
3. Any credit in excess of the taxpayer’s tax liability for
the tax year shall be refunded with interest computed under
section 422.25. In lieu of claiming a refund, a taxpayer
may elect to have the overpayment shown on the taxpayer’s
final, completed return credited to the tax liability for the
following year.
4. a. To claim a tax credit under this section, a taxpayer
shall include one or more tax credit certificates with the
taxpayer’s tax return.
b. The tax credit certificate shall contain the taxpayer’s
name, address, tax identification number, the amount of
the credit, the name of the eligible taxpayer, any other
information required by the department of revenue, and a place
for the name and tax identification number of a transferee and
the amount of the tax credit being transferred.
c. The tax credit certificate, unless rescinded by the
department, shall be accepted by the department of revenue
as payment for taxes imposed in chapter 422, divisions II,
III, and V, and in chapter 432, subject to any conditions or
restrictions placed by the department or the department of
revenue upon the face of the tax credit certificate and subject
to the limitations of this program.
5. a. Tax credit certificates issued under section 404A.3
may be transferred to any person. Within ninety days of
transfer, the transferee shall submit the transferred tax
credit certificate to the department of revenue along with a
statement containing the transferee’s name, tax identification
number, and address, the denomination that each replacement

House File 2453, p. 5
tax credit certificate is to carry, and any other information
required by the department of revenue. However, tax credit
certificate amounts of less than the minimum amount established
by rule of the department of revenue shall not be transferable.
b. Within thirty days of receiving the transferred tax
credit certificate and the transferee’s statement, the
department of revenue shall issue one or more replacement tax
credit certificates to the transferee. Each replacement tax
credit certificate must contain the information required for
the original tax credit certificate and must have the same
expiration date that appeared on the transferred tax credit
certificate.
c. A tax credit shall not be claimed by a transferee
under this section until a replacement tax credit certificate
identifying the transferee as the proper holder has been
issued. The transferee may use the amount of the tax credit
transferred against the taxes imposed in chapter 422, divisions
II, III, and V, and in chapter 432, for any tax year the
original transferor could have claimed the tax credit. Any
consideration received for the transfer of the tax credit shall
not be included as income under chapter 422, divisions II, III,
and V. Any consideration paid for the transfer of the tax
credit shall not be deducted from income under chapter 422,
divisions II, III, and V.
6. For purposes of the individual and corporate income
taxes and the franchise tax, the increase in the basis of the
rehabilitated property that would otherwise result from the
qualified rehabilitation expenditures shall be reduced by the
amount of the credit computed under this section.
Sec. 4. Section 404A.3, Code 2014, is amended by striking
the section and inserting in lieu thereof the following:
404A.3 Application and registration —— agreement ——
compliance and examination.
1. Application and fees.
a. An eligible taxpayer seeking historic preservation and
cultural and entertainment district tax credits provided in
section 404A.2 shall make application to the department in the
manner prescribed by the department.
b. The department may accept applications on a continuous
basis or may accept applications, or one or more components of
an application, during one or more application periods.
c. The application shall include any information deemed
necessary by the department to evaluate the eligibility under

House File 2453, p. 6
the program of the applicant and the rehabilitation project,
the amount of projected qualified rehabilitation expenditures
of a rehabilitation project, and the amount and source of all
funding for a rehabilitation project. An applicant shall have
the burden of proof to demonstrate to the department that
the applicant is an eligible taxpayer and the project is a
qualified rehabilitation project under the program.
d. The department may establish criteria for the use of
electronic or other alternative filing or submission methods
for any application, document, or payment requested or
required under this program. Such criteria may provide for the
acceptance of a signature in a form other than the handwriting
of a person.
e. (1) The department may charge application and other fees
to eligible taxpayers who apply to participate in the program.
The amount of such fees shall be determined based on the costs
of the department associated with administering the program.
(2) Fees collected by the department pursuant to this
paragraph shall be deposited with the department pursuant to
section 303.9, subsection 1.
2. Registration.
a. Upon review of the application, the department may
register a qualified rehabilitation project under the program.
If the department registers the project, the department shall
make a preliminary determination as to the amount of tax
credits for which the project qualifies.
b. After registering the qualified rehabilitation project,
the department shall notify the eligible taxpayer of successful
registration under the program. The notification shall include
the amount of tax credits under section 404A.2 for which the
qualified rehabilitation project has received a tentative award
and a statement that the amount is a preliminary determination
only.
3. Agreement.
a. Upon successful registration of a qualified
rehabilitation project, the eligible taxpayer shall enter into
an agreement with the department for the successful completion
of all requirements of the program.
b. The agreement shall contain mutually agreeable terms and
conditions which, at a minimum, provide for the following:
(1) The amount of the tax credit award. An eligible
taxpayer has no right to receive a tax credit certificate or
claim a tax credit until all requirements of the agreement and

House File 2453, p. 7
subsections 4 and 5 have been satisfied. The amount of tax
credit included on a tax credit certificate issued under this
section shall be contingent upon verification by the department
of the amount of final qualified rehabilitation expenditures.
(2) The rehabilitation work to be performed.
(3) The budget of the qualified rehabilitation project,
including the projected qualified rehabilitation expenditures,
allowable cost overruns, and the source and amount of all
funding received or anticipated to be received. The amount of
allowable cost overruns provided for in the agreement shall not
exceed the following amount:
(a) For a qualified rehabilitation project with final
qualified rehabilitation expenditures of not more than
seven hundred fifty thousand dollars, fifteen percent of the
projected qualified rehabilitation expenditures provided for
in the agreement.
(b) For a qualified rehabilitation project with final
qualified rehabilitation expenditures of more than seven
hundred fifty thousand dollars but not more than six million
dollars, ten percent of the projected qualified rehabilitation
expenditures provided for in the agreement.
(c) For a qualified rehabilitation project with final
qualified rehabilitation expenditures of more than six million
dollars, five percent of the projected qualified rehabilitation
expenditures provided for in the agreement.
(4) The commencement date of the qualified rehabilitation
project, which shall not be later than the end of the fiscal
year in which the agreement is entered into.
(5) The completion date of the qualified rehabilitation
project, which shall be within thirty-six months of the
commencement date.
(6) The date on which the agreement terminates, which date
shall not be earlier than five years from the date on which the
tax credit certificate is issued.
4. Compliance.
a. The eligible taxpayer shall, for the length of the
agreement, annually certify to the department compliance with
the requirements of the agreement. The certification shall
be made at such time as the department shall determine in the
agreement.
b. The eligible taxpayer shall have the burden of proof
to demonstrate to the department that all requirements of
the agreement are satisfied. The taxpayer shall notify

House File 2453, p. 8
the department in a timely manner of any changes in the
qualification of the rehabilitation project or in the
eligibility of the taxpayer to claim the tax credit provided
under this chapter, or of any other change that may have
a negative impact on the eligible taxpayer’s ability to
successfully complete any requirement under the agreement.
c. (1) If after entering into the agreement but before
a tax credit certificate is issued, the eligible taxpayer
or the qualified rehabilitation project no longer meets the
requirements of the agreement, the department may find the
taxpayer in default under the agreement and may revoke the tax
credit award.
(2) If an eligible taxpayer obtains a tax credit certificate
from the department by way of a prohibited activity, the
eligible taxpayer and any transferee shall be jointly and
severally liable to the state for the amount of the tax credits
so issued, interest and penalties allowed under chapter 422,
and reasonable attorney fees and litigation costs, except
that the liability of the transferee shall not exceed an
amount equal to the amount of the tax credits acquired by the
transferee. The department of revenue, upon notification
or discovery that a tax credit certificate was issued to an
eligible taxpayer by way of a prohibited activity, shall revoke
any outstanding tax credit and seek repayment of the value
of any tax credit already claimed, and the failure to make
such a repayment may be treated by the department of revenue
in the same manner as a failure to pay the tax shown due or
required to be shown due with the filing of a return or deposit
form. A qualifying transferee is not subject to the liability,
revocation, and repayment imposed under this subparagraph.
(3) For purposes of this paragraph:
(a) “Prohibited activity” means a breach or default under
the agreement with the department, the violation of any
warranty provided by the eligible taxpayer to the department
or the department of revenue, the claiming of a tax credit
issued under this chapter for expenditures that are not
qualified rehabilitation expenditures, the violation of any
requirements of this chapter or rules adopted pursuant to this
chapter, misrepresentation, fraud, or any other unlawful act
or omission.
(b) “Qualifying transferee” means a transferee who acquires
a tax credit certificate issued under this chapter for value,
in good faith, without actual or constructive notice of a

House File 2453, p. 9
prohibited activity of the eligible taxpayer who was originally
issued the tax credit, and without actual or constructive
notice of any other claim to or defense against the tax credit,
and which transferee is not associated with the eligible
taxpayer by being one or more of the following:
(i) An owner, member, shareholder, or partner of the
eligible taxpayer who directly or indirectly owns or controls,
in whole or in part, the eligible taxpayer.
(ii) A director, officer, or employee of the eligible
taxpayer.
(iii) A relative of the eligible taxpayer or a person listed
in subparagraph subdivision (i) or (ii) or, if the eligible
taxpayer or an owner, member, shareholder, or partner of the
eligible taxpayer is a legal entity, the natural persons who
ultimately own such legal entity.
(iv) A person who is owned or controlled, in whole or in
part, by a person listed in subparagraph subdivision (i) or
(ii).
(c) “Relative” means an individual related by consanguinity
within the second degree as determined by common law, a spouse,
or an individual related to a spouse within the second degree
as so determined, and includes an individual in an adoptive
relationship within the second degree.
5. Examination and audit of project.
a. An eligible taxpayer shall engage a certified public
accountant authorized to practice in this state to conduct an
examination of the project in accordance with the American
institute of certified public accountants’ statements on
standards for attestation engagements. Upon completion of
the qualified rehabilitation project, the eligible taxpayer
shall submit the examination to the department, along with
a statement of the amount of final qualified rehabilitation
expenditures and any other information deemed necessary by the
department or the department of revenue in order to verify that
all requirements of the agreement, this chapter, and all rules
adopted pursuant to this chapter have been satisfied.
b. Notwithstanding paragraph “a” , the department may waive
the examination requirement in this subsection if all the
following requirements are satisfied:
(1) The final qualified rehabilitation expenditures of
the qualified rehabilitation project, as verified by the
department, do not exceed one hundred thousand dollars.
(2) The qualified rehabilitation project is funded

House File 2453, p. 10
exclusively by private funding sources.
c. Upon review of the examination, if applicable, the
department shall verify that all requirements of the agreement,
this chapter, and all rules adopted pursuant to this chapter
have been satisfied and shall verify the amount of final
qualified rehabilitation expenditures. After consultation
with the department of revenue, the department may issue a tax
credit certificate to the eligible taxpayer stating the amount
of tax credit under section 404A.2 the eligible taxpayer may
claim. The department shall issue the tax credit certificate
not later than sixty days following the completion of the
examination review, if applicable, and the verifications and
consultation required under this paragraph.
6. Notwithstanding any other provision of this chapter
to the contrary, the department may waive the requirements
of subsections 1 through 4, except the requirements relating
to allowable cost overruns in subsection 3, paragraph “b” ,
subparagraph (3), and the requirements in subsection 4,
paragraphs “b” and “c” , for qualified rehabilitation projects
with final qualified rehabilitation expenditures of seven
hundred fifty thousand dollars or less and may establish
by rule different application, registration, agreement,
compliance, or other requirements relating to such projects.
7. The department may for good cause amend an agreement.
Sec. 5. Section 404A.4, Code 2014, is amended by striking
the section and inserting in lieu thereof the following:
404A.4 Aggregate tax credit award limit.
1. a. Except as provided in subsections 2 and 3, the
department shall not award in any one fiscal year an amount of
tax credits provided in section 404A.2 in excess of forty-five
million dollars.
b. Of the tax credits that may be awarded in a fiscal year
pursuant to paragraph “a” , at least five percent of the dollar
amount of the tax credits shall be allocated for purposes of
new qualified rehabilitation projects with final qualified
rehabilitation expenditures of seven hundred fifty thousand
dollars or less.
2. a. The amount of a tax credit that is awarded during
a fiscal year beginning on or after July 1, 2016, and that is
irrevocably declined or revoked on or before June 30 of the
next fiscal year may be awarded under section 404A.3 during the
fiscal year in which the declination or revocation occurs.
b. The amount of a tax credit that was reserved prior to

House File 2453, p. 11
the effective date of this Act under section 404A.4, Code 2014,
for use in a fiscal year beginning before July 1, 2016, that
is irrevocably declined or revoked on or after the effective
date of this Act, but before July 1, 2016, may be awarded under
section 404A.3 during the fiscal year in which such declination
or revocation occurs. Such tax credits awarded shall not be
claimed by a taxpayer in a fiscal year that is earlier than the
fiscal year for which the tax credits were originally reserved.
c. The amount of a tax credit that was available for
approval by the state historical preservation office of the
department under section 404A.4, Code 2014, in a fiscal year
beginning on or after July 1, 2010, but before July 1, 2014,
that was required to be allocated to new projects with final
qualified rehabilitation costs of five hundred thousand dollars
or less, or seven hundred fifty thousand dollars or less, as
the case may be, and that was not finally approved by the state
historical preservation office, may be awarded under section
404A.3 during the fiscal years beginning on or after July 1,
2014, but before July 1, 2016.
d. Tax credits awarded pursuant to this subsection shall
not be considered for purposes of calculating the aggregate tax
credit award limit in subsection 1.
3. a. If during the fiscal year beginning July 1, 2016, or
any fiscal year thereafter, the department awards an amount of
tax credits that is less than the maximum aggregate tax credit
award limit specified in subsection 1, the difference between
the amount so awarded and the amount specified in subsection 1,
not to exceed ten percent of the amount specified in subsection
1, may be carried forward to the succeeding fiscal year and
awarded during that fiscal year.
b. Tax credits awarded pursuant to this subsection shall
not be considered for purposes of calculating the aggregate tax
credit award limit in subsection 1.
Sec. 6. Section 404A.5, Code 2014, is amended to read as
follows:
404A.5 Economic impact —— recommendations.
1. The department of cultural affairs , in consultation with
the department of revenue, shall be responsible for keeping
the general assembly and the legislative services agency
informed on the overall economic impact to the state of the
rehabilitation of eligible properties qualified rehabilitation
projects .
2. An annual report shall be filed which shall include

House File 2453, p. 12
but is not limited to data on the number and potential value
of qualified rehabilitation projects begun during the latest
twelve-month period, the total historic preservation and
cultural and entertainment district tax credits originally
granted awarded or tax credit certificates originally issued
during that period, the potential reduction in state tax
revenues as a result of all awarded or issued tax credits still
unused unclaimed and eligible for refund, and the potential
increase in local property tax revenues as a result of the
rehabilitated qualified rehabilitation projects.
3. The department of cultural affair s, to the extent it
is able, shall provide recommendations on whether a the limit
on tax credits should be established changed , the need for a
broader or more restrictive definition of eligible property
qualified rehabilitation project , and other adjustments to the
tax credits under this chapter .
Sec. 7. NEW SECTION . 404A.6 Rules.
The department and the department of revenue shall each
adopt rules to jointly administer this chapter.
Sec. 8. Section 422.11D, Code 2014, is amended by striking
the section and inserting in lieu thereof the following:
422.11D Historic preservation and cultural and entertainment
district tax credit.
The taxes imposed under this division, less the credits
allowed under section 422.12, shall be reduced by a historic
preservation and cultural and entertainment district tax credit
allowed under section 404A.2.
Sec. 9. Section 422.33, subsection 10, Code 2014, is amended
by striking the subsection and inserting in lieu thereof the
following:
10. The taxes imposed under this division shall be reduced
by a historic preservation and cultural and entertainment
district tax credit allowed under section 404A.2.
Sec. 10. Section 422.60, subsection 4, Code 2014, is amended
by striking the subsection and inserting in lieu thereof the
following:
4. The taxes imposed under this division shall be reduced by
a historic preservation and cultural and entertainment district
tax credit allowed under section 404A.2.
Sec. 11. Section 432.12A, Code 2014, is amended by striking
the section and inserting in lieu thereof the following:
432.12A Historic preservation and cultural and entertainment
district tax credit.

House File 2453, p. 13
The taxes imposed under this chapter shall be reduced by a
historic preservation and cultural and entertainment district
tax credit allowed under section 404A.2.
Sec. 12. APPLICABILITY. Unless otherwise provided in
this Act, this Act applies to agreements entered into by the
department and an eligible taxpayer on or after the effective
date of this Act, and rehabilitation projects for which a
project application was approved and tax credits reserved prior
to the effective date of this Act shall be governed by sections
404A.1 through 404A.5, Code 2014.
______________________________
KRAIG PAULSEN
Speaker of the House
______________________________
PAM JOCHUM
President of the Senate
I hereby certify that this bill originated in the House and
is known as House File 2453, Eighty-fifth General Assembly.
______________________________
CARMINE BOAL
Chief Clerk of the House
Approved _______________, 2014
______________________________
TERRY E. BRANSTAD
Governor